Drilon Sees Overpricing on Government-Purchased COVID-19 Test Kits

MANILA, Philippines – Senate Minority Leader Franklin Drilon on Monday questioned the government’s acquisition of test kits and medical equipment allegedly overpriced for COVID-19, saying the items were more than 400 million pesos. more expensive than those bought by the private sector.

Drilon raised the issue at the 2021 budget hearing and asked the Department of Budget and Management (DBM) to closely examine three contracts awarded by its Procurement Service (PS) and the Department of Health (DOH).

“There are a number of acquisitions made by DBM-PS and based on our investigation, the prices were higher compared to prices in the private sector,” it said in a separate statement.

Taxpayer money

“Only of the three prizes that we have studied, we could estimate that the total price rose by almost 500 million. We could have saved around P422 million in taxpayer money if we had exercised due diligence, ”he added.

One of the disputed transactions was the acquisition of Pharmally Pharmaceutical Corp. for P688 million worth of test kits, which were allegedly overpriced at P208 million.

The DBM-PS purchased 2,000 kits from Pharmally at P344,000 each, with each kit capable of around 200 tests. But Drilon said the kit could be purchased for P240,000 each.

Another purchase that he asked DBM to investigate was a macherey nagel / nucleospin RNA virus prep kit from Lifeline Diagnostics Supplies Inc., valued at P73.1 million, which might be overpriced at P41.25 million.

The items were purchased at P108,304 each, but the private sector could buy them for P47,199 each, he said.

The third transaction was the purchase of Universal Transport Medium’s DOH and Biosite Medical Instruments nasopharyngeal swab for P415.64 million, which was allegedly overvalued at P173 million.

Drilon said the Health Department purchased the items at P258 per set, but the same item had a market price of around P150 per set.

Bid prices

Budget Undersecretary Lloyd Christopher Lao, who is in charge of the department’s Procurement Service, said there were cases where the department bought items at a high price because it was subject to prices quoted by bidders.

Lao said DBM was able to obtain cheaper prices when it was able to negotiate with foreign manufacturers.

In the case of Pharmally, Lao said the P688 million contract awarded in April was for tests worth P1,720 each.

But while Pharmally was delivering the items, the government, through the Philippine Embassy in Singapore, was negotiating directly with the manufacturer of the tests and was able to obtain the tests for each P925.

The P1.19 billion contract for the cheapest test kits was awarded on June 23.

“This is how we were able to obtain a cheaper price with the second offer, because we no longer offer it open only to local suppliers but also to foreign suppliers,” he said.

If all the bidders offered high prices, DBM had no choice but to buy items at a high price, Lao said. But when he was allowed to negotiate with suppliers, including foreign ones, he was able to get lower prices, he added.

Lao also cited DBM’s April purchase of Sansure test kits at P1,464 per test, with the total contract price at P146 million.

During this time, the department followed regular modes of procurement, including negotiating with local suppliers, he said.

“When we discovered that it was very expensive, we tried to contact through our embassies, to contact the manufacturers directly,” he said.

When contacted by the Chinese manufacturer, the DBM-PS was able to purchase the tests at P918 each, for a contract of P3.6 billion, he said.

Blacklisted company

Drilon also questioned DBM-PS awarding contracts to blacklisted companies, including Ferjan Healthlink Philippines Inc., which won a P727.5 million settlement for 500,000 sets of personal protective equipment (PPE).

Lao said that Ferjan Healthlink Philippines Inc. was the winning bidder, while the blacklisted company was called Ferjan Healthlink Enterprise. The two appeared to be different companies on initial verification, as one is a sole proprietorship and the other is a corporation, he said.

Publicly available documents from the Securities and Exchange Commission (SEC) showed that Ferjan Healthlink Philippines was incorporated only in November last year and one incorporator was listed as the owner of Ferjan Healthlink Enterprises, a blacklisted sole proprietorship.

DBM canceled the contract last Friday in part due to delays in delivery and prices that were “significantly [higher]”Compared to current levels, Lao said.

No advance payment was made to the company, he added.

The Public Procurement Policy Board (GPPB) would also change the rules so that the blacklisting of a sole proprietorship is transferred to the corporation where one of the owners of the blacklisted entity is a shareholder, he said.

The GPPB list of blacklisted companies included Ferjan Healthlink Enterprises, based in the city of Muntinlupa, which had been prohibited from participating in government tenders for a period of two years from September 25, 2018 until on September 26, 2020, due to “failure to deliver.” of supplies for medicines and medicines ”to the local government of the city of Zamboanga.

Given that Ferjan Healthlink Philippines registered only at the end of last year, experts say it could not have submitted a financial statement covering a one-year period, a prequalification requirement during the tender, when it participated in the contracting negotiated at the point. height of the closure of COVID-19.

Due diligence

Drilon said the Procurement Service should have exercised due diligence when awarding the contracts. Blacklisted entities, he said, should not be able to hide behind the corporate structure to avoid disqualification.

“While it is nice that the contract has been canceled, this raises the question: Why isn’t due diligence done before the award of such a large contract? Despite this being a negotiated or emergency recruitment, the blacklisted entities should not have been allowed to participate. Considering the failures in Ferjan’s selection, it is quite possible that similarly situated suppliers have also secured contracts with DBM Procurement Service, ”said Drilon.

Charges

Lao said contracts with blacklisted vendors could be canceled, but this would not stop possible cases against contracting entities that failed to ensure they obtain goods and services from eligible companies.

On September 3, GPPB Executive Director Rowena Candice Ruiz told the Inquirer that public officials and offices could face charges if they are found to have dealt with blacklisted providers.

The Republic Law No. 11469 or the Bayanihan Law to heal as one, which came into force from March to June, allowed negotiated contracting to expedite the supply of essential goods “with clear and simple rules on liquidation, a liberal procedure for determine the most advantageous price for the government considering the urgency of the current situation, and measures to reasonably prevent abuse and corruption, but not too restrictive as to delay the process, ”said the GPPB in a resolution in April.

“Under the law and regulations, contracting entities are responsible for blacklisting the wrong providers. Contracting entities must send a copy of said report to the GPPB for publication, to inform other contracting entities. Once blacklisted, suppliers are prohibited from joining any government tender during the blacklist period. Hence the need for contracting entities to be aware of the black lists made by other agencies so that they do not award contracts to suppliers included in the black list. As part of the post-qualification process, the contracting entities are required to verify the qualification of the bidders, including whether they are currently blacklisted, ”said Ruiz.

Safeguards

“The blacklisting rules have been in place even before the passing of the Bayanihan Law. Aside from the publication of blacklisted suppliers, one of the safeguards under the rules is the cancellation / denial of registration in Philgeps of blacklisted suppliers, ”he added, referring to the Electronic Procurement System of the Philippine Government, an online one-stop shop for source of provision of public goods and services.

When the Inquirer checked earlier this month whether any of the 67 entities on the GPPB blacklist won contracts during the emergency acquisition period, it found at least three: Ferjan Healthlink Enterprises, Cebu Business Materials Trading Co. Inc. and Jozeth Trading.

Ruiz said that “contracting entities that awarded contracts to suppliers on the black list have a remedy under the rules on termination of contracts.”

Likewise, “any interested person may also present a case to the Ombudsman’s Office against the responsible officials since the GPPB does not have a quasi-judicial function under the law,” said Ruiz.

“The Audit Commission also has the authority to audit an agency’s financial transactions, and the award of contracts to a blacklisted provider is one of the elements that COA monitors in its audit of agency transactions,” he added. Ruiz.

–With reporting by Ben O. de Vera

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