Lao owns up to ‘negligence’ on DBM deals

The former chief of the Department of Budget and Management-Procurement Service (PS-DBM) admitted there might have been negligence on his part in the procurement of overpriced face masks and face shields when the COVID-19 pandemic first broke out in 2020.

During yesterday’s Blue Ribbon committee hearing, Senator Francis Pangilinan asked the former PS-DBM chief, Christopher Lloyd Lao, if there was a difference in the price of face masks it procured, which cost P13 to  P27, and the Philippine Red Cross, which cost only P5 each.

“I cannot explain that. I think the only thing is that maybe the Red Cross has a very good network, they have international ties with the International Red Cross, especially in China so they have faster communication,” Lao said.

Pangilinan then asked Lao if there might have been negligence on his part as chief of the PS-DBM, since a more diligent search on his part might have brought the prices of the face masks and face shields down.

Lao again explained that prices for face masks and face shields at the time were high and they tried to bargain for a lower price. But he also acknowledged that “there might be negligence” as they were unable to exhaustively look for the cheapest supplier, given the limited time and the lack of resources and connections. 

Senator Franklin Drilon said Lao should be investigated by the Office of the Ombudsman for entering into contracts that are “grossly prejudicial to the government. 

Drilon said Lao’s admission that there might be negligence on his part in checking the capability of Pharmally Pharmaceutical Corporation is a ground for violation of the anti-graft law.

“Given the testimony of Mr. Lao that he did not exercise prudence in checking the capability of a six-month corporation with a paid-up capital of less than P600,000 to be awarded negotiated contracts of over P8 billion, which turns out to be overpriced, to me, these are all indications or at the very least a prima facie case for the violation of the anti-graft law,” the Senate Minority Leader said.

“Because by the admission by Mr. Lao, he did not exercise the prudence needed to guard the public funds and he should be investigated by the Ombudsman for possible violation of the anti-graft law for awarding contracts disadvantageous to the government and not exercising necessary prudence to prevent the losses of government funds for having failed to check on simple things,” Drilon added.

Pharmally bagged P8.6 billion in government contracts for the procurement of face masks and RT-PCR tests kits last year.

Blue Ribbon Committee chairperson Sen. Richard Gordon also scored the contractor, which was incorporated only in 2019 with a P599,000 capital, for using fake addresses in its registration documents.

The Senate tried to subpoena Pharmally officials in a high-end condominium in Taguig but Gordon said the guard disclosed that the units indicated in the company’s registration documents have been vacant since 2018.

Lao admitted PS-DBM “failed to check on the articles of incorporation” of Pharmally, something that Senator Panfilo Lacson said was unacceptable.

“Either there was no due diligence for reasons of collusion or you were sloppy. You threw out of the window all of the requirements,” Lacson said.

After cornering P8.68 billion government contracts, Pharmally’s income soared to P284.9 million in 2020 from zero declared income in 2019. Its assets also jumped to P284.9 million in 2020 from P599,000 in 2019.

“Is it all thanks to PS-DBM?” Drilon said.

Health Secretary Francisco Duque III earlier explained the transfer of P42 billion from the DOH to PS-DBM was aimed at speeding up the acquisition of supplies.

Drilon, however, said the fund transfer should raise some alarms.

“I am worried there are so many red flags in the procurement of several medical items. These warning signs indicate possible anomaly, corruption, or fraud,” Drilon said.

“Red flags are all over. We should not ignore these red flags,” he added.

Drilon said that contrary to the law’s clear requirement that negotiated procurement can only be entered into with persons who have the technical, legal, and financial capabilities, PS-DBM entered into contracts with corporations of questionable qualifications.

Drilon reiterated that goods procured from Pharmally were overpriced.

Official records will show that it sold face masks at a whopping P27.72 each when other suppliers sold the same to PS-DBM at P13.5, P16, and P17.50 for the same period. It sold test kits at P1,720 when these could be bought at P925. It sold PPEs at P1,910 each when its market cost was at P945, according to Drilon.

He also questioned why one company cornered almost P2 billion worth of face mask deals with DBM-PS.

“The procurement of face shields is also shocking. The procurement of 1.32 million face shields went to a single company, Philippine Blue Cross Biotech Corporation,” Drilon said.

Aside from face shields, Blue Cross Biotech was able to bag a total of P432.17 million in contracts from DBM-PS.

Amid these revelations, President Rodrigo Duterte assured the Filipino people that their money is being spent correctly to protect the people against the pandemic.

“You can kill me when I am no longer the President, if ever I made any mistake or lied,” Duterte said in his public address late Thursday night.

Duterte issued the statement amid the Senate’s investigation on the deficiencies in the coronavirus disease (COVID-19)-related expenses of the DOH, highlighted in a COA audit report.

“Don't believe these investigations. As you can see, nothing happens. They just keep saying 'we will investigate'," Duterte said.

“I will not betray the Filipino. I am your President, you trusted me, you voted for me so that I would be the last person—I would be the last person to fool you,” he said.

Both the Senate and the House of Representatives have been conducting hearings to investigate how COVID-19 funds are being used.

Topics: Department of Budget and Management , Procurement Service , COVID-19 pandemic
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