WATCH: Red flags in ‘overpriced’ Makati infra projects

MANILA, Philippines – On December 28, 2007, a Friday, the bids and awards secretariat of the Makati City government was on overtime mode. It was the last working day for the year, and the secretariat was under time pressure to finish all the scheduled bidding activities for projects that were to be undertaken the following year.

Covering 16 projects, more than P1.3 billion ($29.5 million) of funds was at stake, including Phase 1 of the controversial Makati City Hall parking building. In fact, with a P400 million ($9 million) approved budget contract (ABC), it was easily the biggest project in the line-up. 

Documents show that 3 contractors supposedly submitted their bids for the parking building project – Hilmarc’s Construction Inc, ITP Construction Inc, and J Bros Construction. These 3 firms also supposedly participated in another project where bids were also opened that day: Phase 1 of the P100 million ($2.27 million), 10-story Makati Science High School.

For the City Hall parking building, Hilmarc’s price tag of P386,998,154.20 ($8.79 million) was considered the lowest bid and was awarded the contract.

Before the day ended, it secured its second project, beating its competitors for the Makati Science High School with a bid of P99,631,205.15 ($2.26 million).

Thus, in less than 24 hours, Hilmarc’s Construction cornered almost half a billion pesos worth of projects from the Makati City government.

This was just the beginning.

The firm, which is one of the top 10 contractors nationwide based on cumulative cost of contracts from 2009 to 2014, would also bag Phases 2, 3, 4 and 5 of the Makati parking building for a total contract price of P2.276 billion ($51.7 million) for the entire parking project.

Hilmarc’s Construction also cornered Phases 2, 3, 4, 5 and 6 of the Makati Science High School for a combined price tag of P1.33 billion ($30 million)

For the 2 projects alone, Hilmarc’s Construction secured almost P3.5 billion ($79 million) worth of projects from the Makati City government alone.

These were supposed to have been won fair and square, on the merits of competitive bidding.

But there are red flags that raise questions about the integrity of the process – foremost of which was the outright denial of one bidder that it was among those who participated in the bidding.

Collusion among bidders

Documents from the  Senate Blue Ribbon committee showed that Hilmarc’s Construction was able to outbid ITP and J Bros Construction for the Makati parking building and the Makati Science High School with the slimmest of margins.

Based on the above, Hilmarc’s Construction beat J Bros Construction for the Makati parking building by a mere P317,000 ($7,204) difference in the bids.

In the case of the Makati Science High School, Hilmarc’s Construction pulled the rug from under ITP Construction by a margin of only P114,000 ($2,590).

An expert on the Procurement Law, who studied the procurement practices of local government units in 20 provinces, said that while close bidding happens, “it is usually a red flag that a collusion could be happening.”

In a particular project for instance, the favored bidder seeks out other bidders “to simulate a semblance of competitive bidding,” the source explained. This favored bidder takes care of everything – from preparing all the required documents to the fees needed for the bidding process. In some cases, as part of the arrangement, the “winning” bidder taps the complicit bidders as subcontractors for the project. 

“On paper, everything appears to be above board. That’s why collusion between or among the bidders is hard to pinpoint,” the source said.

Winner by default?

Former Makati BAC vice chair Mario Hechanova, during a Senate hearing, said bid fixing is “usual practice” in Makati. (READ: Former employee: Fixing bids ‘usual practice’ in Makati)

Vice President Jejomar “Jojo” Binay, in defending the allegedly overpriced Makati parking building, argued that the city government even saved P200 million in implementing the project. He said the estimated cost of the project amounted to P2.4 billion but the total cost amounted to only P2.2 billion. (READ: Binay: Makati even ‘saved’ from building)

Documents show that the Makati parking building (from Phase 1 to 5) has a total estimated cost of P2.55 billion. On the other hand, total project cost awarded to Hilmarc’s Construction amounted to P2.276 billion. 

The documents show that for the succeeding phases of the Makati parking building, only Hilmarc’s Construction participated in the invitation to bid, resulting in its being declared as having the lowest calculated bid. 

Its submitted bid also hewed closely to the approved budget for the contract or ABC, which indicates that the alleged bidding was rigged, lawyer Renato Bondal, in a phone interview said. Bondal, a losing Makati mayoral candidate and a former ally and family friend of the Binays, has filed a plunder complaint against the Vice President and his son, Makati Mayor Jejomar “Junjun” Binay, before the Ombudsman. (READ: Plunder case filed vs VP Binay, Makati officials)

At least in Phases 2, 3 and 4, Hilmarc’s submitted bids were only lower by less than P1 million compared to the project’s ABC.

The expert on procurement law said that one potential indicator that bidding was rigged is the proximity of the bid to the ABC. “Contractors will try to maximize profits by placing their bid close to the ABC.”

Bondal pointed out that the practice of awarding contracts which almost approximated the ABC had been observed in other projects of the Makati City government.

The Makati Science High School contract could be another example.

The company was also the sole bidder for the succeeding phases of the Makati Science High School, winning by default. However, Phase 3 of the project amounting to P149.5 million was awarded on a silver platter. Hilmarc’s Construction cornered the contract through negotiation with the Makati City government in 2009.

“Considering that the contractor’s past performance was highly commendable, the (BAC) board unanimously accepted the offer of P149,505 million, which is lower than the agency (city of Makati) estimate of P149.990 million,” the minutes of the negotiation for Phase 3 showed.   

From the above, it can be seen that Hilmarc’s bids for Phases 1 and 2 were almost similar to the Makati parking building where the variance of the bid to the ABC is less than P1 million.

No participation

Perhaps the clearest indicator that the bidding for the Makati parking building was a sweetheart deal was the confirmation from J Bros Construction that it did not participate in the 2007 bidding for the Phase 1.

In a letter submitted to the Senate Blue Ribbon Thursday, J Bros Construction chief operating officer Alejandro Tengco denied that the company has ever implemented any project with the Makati City government since it was established in 1999.

“Neither have I nor J Bros Construction ever given any form of consent, whether expressly or tacitly, for any person or entity to use the firm’s name, license…in any manner so as to participate or feign participation in the conduct of any or all public biddings undertaken by the LGU of Makati City for its infrastructure projects, including the Makati City Hall Parking Building,” Tengco said.

In the first place Tengco said that at the time of the bidding for the controversial parking building, J Bros was not yet qualified to participate since it had not undertaken any project of similar magnitude as required under the Procurement Law.

J Bros Human Resource head Florence Sibal, in a separate interview, also denied that the company participated in the bid for the Makati Science High School.

For his part, ITP Construction president Antonio Cruz refused to be interviewed when Rappler sought his side.

Favored contractor?

Based on available data, the Makati City government is a regular client of Hilmarc’s Construction. From 1999 to 2004, data showed it cornered projects amounting to P2 billion.

Data scraped from the Philippine Government Procurement Electronic System (PhilGEPS) showed that from 2009 to 2014, the company bagged some P4.5 billion worth of 12 contracts from government agencies and LGUs. Of these, 7 were from the Makati LGU, with a total amount of P3.919 billion. The Makati contracts include the P1.929 billion Emergency Hospital (Ospital ng Makati).

Two months before it cornered the Emergency Hospital project in October 2012, Hilmarc’s sister company, Building Beaver Corporation, bagged a P94- million contract for the construction of an Ospital ng Makati parking building. Hilmarc’s Construction and Building Beaver Construction have identical addresses. – with reports from Wayne Manuel/Rappler.com