Debarment of Filipino Contractors Sparks Local Controversy

Did seven contractors and one individual

for a $33 million road project in the Philippines that was supposed to be funded by the

? Apparently, it depends on who's looking.

The controversy sparked by the World Bank's debarment of several firms exemplifies just how many (too many?) sides there are to a story, at least in local political circles.

In the middle of January, the bank slapped a permanent ban on Philippine firm E.C. de Luna Construction Corp. and owner Eduardo de Luna from bidding on future bank-financed projects. This was the first such debarment since 2004.

Two other Philippine firms, Cavite Ideal International Construction and Development Corp. and CM Pancho Construction Inc., were likewise debarred for four to eight years, as were four from China: China Road and Bridge Corp., China State Construction Corp., China Wu Yi Co. Ltd. and China Geo-Engineering Corp.

Since 1999, the bank has banned more than 350 firms and individuals from more than 22 countries.

The World Bank's Integrity Vice Presidency found evidence of a major cartel bidding on contracts under the first phase of the Philippine National Roads Improvement and Management Program, also known as NRIMP 1, which was approved in 2000.

The bank spotted signs of collusion, such as excessive pricing, among several construction companies on three successive rounds of bidding for two rehabilitation contracts under the program between 2003 and 2006. As a result, it stopped some $33 million from being awarded. The Philippine government had to bid out and finance the project on its own.

Now, stories on corruption are not new to the Philippines, but it remains news that sells, especially when government officials are implicated. Congress jumped on the matter of the debarment with varying degrees of enthusiasm and ire.

Sen. Miriam Defensor-Santiago, whose economic affairs committee held a hearing on the alleged collusion, railed against a "conspiracy of silence" among resource persons who "stonewalled the committee and refused to say anything." She also accused the Philippine government's ombudsman of sitting on findings instead of running after the alleged offenders.

Meanwhile Sen. Panfilo Lacson, a known administration critic, alleged that de Luna and Jose Miguel Arroyo, husband of President Gloria Macapagal Arroyo, may have ties that backed the contractors' bids. Both have denied this claim, saying they only knew each other casually.

Of course the Philippine House of Representatives, with its many administration allies, would not be upstaged. Congressmen held their own hearing, only from this end, the actors involved were absolved of liability.

Rep. Roger Mercado of the House Public Works Committee said there was no "evidence to support the criminal act of collusion" and the World Bank's findings were "merely recommendatory, [but] they do not pinpoint any liability."

The debarred Philippine firms protested the World Bank's decision, with de Luna claiming it was based on "multiple hearsay." Public works Undersecretary Manuel Bonoan said the Philippine firms were "the most reliable contractors in the country."

But the World Bank is standing by its decision. Bert Hofman, country representative, politely declined invitations by the Senate and House to attend their respective hearings last week. He said, though, that the bank supports actions that aim to improve the country's procurement system and will continue to work with the country on development projects. In fact, the bank has approved a $232 million loan for NRIMP 2.

Hofman reiterated that decision by the bank's Sanctions Board followed "a careful and intensive process of investigation and evaluation."

The Washington-based institution, predictably, is trying to avoid being embroiled in the political quagmire stemming from its actions, but its name has been undeniably implicated in local media, whether as an institution above reproach or one giving unjust punishment, or something in between - depending on who's looking.

About the author

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    Josefa Cagoco

    Sef Cagoco served as one of Devex's international development correspondent from mid-2008 to mid-2009. Her writing focused on social entrepreneurship and multilateral agencies such as the U.N. and Asian Development Bank. She previously worked as senior reporter for the national daily BusinessWorld and a production journalist for the Financial Times.