Editorial - Collusion in the Road Sector by: V.T. Lazatin

Last January 14, 2009, the World Bank announced that it had debarred seven (7) construction firms and one individual from participating in World Bank funded projects in the Philippines for having engaged in collusive practices related to a Bank funded project.  The seven firms – three Filipino firms and four foreign firms – were debarred for varying lengths of time from four years to permanent debarment.  Receiving the stiffest penalty of permanent debarment was E.C. de Luna Construction Corporation and its owner and sole proprietor, Eduardo C. de Luna.

As early as 2003, World Bank officials had noticed what it felt was collusive behavior among several firms bidding for two different projects funded by the Bank under the National Road Improvement and Management Program (NRIMP-1).  Those two projects were never funded by the Bank, but instead financed directly by the Philippine government with taxpayers’ money.  As a result of the suspicions of the World Bank, it decided to impose anti-corruption safeguards in the second phase of NRIMP, including the creation of a civil society-private sector-government partnership in the road sector which eventually became known as Bantay Lansangan. (TAN is a member of Bantay Lansangan and acts as its secretariat.)

The strong action by the World Bank against the seven firms is not to be taken lightly.  The Bank’s Vice Presidency for Integrity (INT) investigated the troublesome procurement for several years, collecting circumstantial and testimonial evidence from key confidential sources.  The sanctions were decided upon by the Sanctions Board of the World Bank, an independent body in the World Bank that is composed of, among others, independent legal experts that are not part of the World Bank project team.  According to documents available on the World Bank website, “No World Bank staff, either from the investigation office INT, or from the project team, are involved in the sanctions decision-making process. This ensures the independence of all Sanctions Board decisions.”

So serious are the findings (and subsequent sanctions) of the World Bank, that the Tanzania Public Procurement Regulatory Authority decided to ban three of the international construction firms named in the Bank’s INT report.  As we say in Tagalog, “buti pa ang mga Tanzanians” (“good thing for the Tanzanians”).

Philippine Government Response

Senator Miriam Santiago was rightfully indignant when she discovered that the Department of Finance, Department of Public Works and Highways, and the Office of the Ombudsman knew as early as November 2007 of the possible collusion in NRIMP1 and have thus far done nothing.  During the joint Senate hearing of the Economic Affairs Committee (chaired by Santiago) and Public Works Committee (chaired by Senator Ramon Revilla III) last January 27, it was revealed that the World Bank had sent copies of its report on possible collusion in NRIMP1 to the Department of Finance as early as November 2007, which in turn forwarded it to the Office of the Ombudsman.  If the public perception of corruption in the Philippines is high, it’s not  media’s fault for reporting corruption (the common scapegoat for the poor perception) but government’s because its response to corruption has been so tepid, at best.

The House of Representatives, on the other hand, cleared all firms named in the INT report, saying they found no evidence of collusion among the bidders.  This, after only 2 congressional hearings looking into the matter.  What exactly were the congressmen looking for?

Collusion is a crime that rarely has any “hard” evidence, if at all.  Colluders do not sign memoranda of agreement amongst themselves, there are no minutes of meetings, no paper trail to follow.  They meet in private homes, offices or coffee shops, away from the public eye, to pre-arrange the outcome of the bidding.  Those looking for hard evidence are deceiving the public into thinking hard evidence can be found.  Collusion is indicated by patterns of behavior (circumstantial evidence) and by those willing to talk (testimonial evidence).  Short of wiretapping phone conversations and planting listening devices where colluders meet, circumstantial and testimonial evidence is the best we can hope for.  This is what the World Bank used as the basis for imposing administrative sanctions on the seven contractors.  The Department of Public Works and Highways would do well to get a copy of the report (perhaps from their counterparts in the DOF?) and study it  carefully.

According to recent media reports, Secretary Hermogenes Ebdane has conceded that collusion is part of the way that contractors do business.  We hope this isn’t an admission that such practices are implicitly condoned by the DPWH.  Only strong action on the part of the Department of Public Works and Highways will determine if it is serious in addressing the problem of corruption.