MANILA, Philippines – Las Piñas-based logistics firm Transpac Cargo Logistics Incorporated (Transpac) has been “holding hostage” billions worth of learning materials of the Department of Education (DepEd), Rappler has learned. 

DepEd chief of staff and spokesman Michael Poa told Rappler on November 23, “We filed a civil case to retrieve or regain the possession of the goods that they are holding hostage.” 

The DepEd official said that negotiations are ongoing between the agency and Transpac to retrieve the learning materials. 

It was the previous administration, under former education secretary Leonor Briones, that entered into a P667-million logistics agreement with Transpac. But facilitation and implementation of the agreement has overlapped with the current DepEd administration of Vice President Sara Duterte.

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The logistics firm has been holding off distribution for supposed still unsettled warehousing fees. DepEd, for its part, according to Poa, could not just pay Transpac because it first needs to distribute the materials to intended beneficiaries, which it has failed to do.

However, according to the DepEd-Transpac contract obtained from the agency’s own website, “logistics services,” which includes warehousing, were supposed to be part of the agreement.

The DepEd spokesperson said that while the contract covers some warehousing, the department could only make payments for specific services outlined in the contract.

“The point of the contract is to pick up from supplier A, and then you deliver all the way to schools, and once you deliver to the schools, that means you have complied with the obligations and we can pay you,” Poa explained in a mix of Filipino and English.

There were only two warehouse agreements in the original call-off contracts valued at P34.5 million for the regional warehouses, and P23 million for the larger central warehouse. A “call-off” is a type of contract that allows a government agency to award a supplier multiple projects without having to hold multiple biddings. Poa explained that the agreements with Transpac were made via a “call-off contract.”

It is unclear if Transpac is asking for payments on warehouses that were not part of its original agreements with DepEd in 2021. Poa did not disclose the amount the firm is demanding from DepEd as payment. 

“Most of those warehouses are subcontracted, right? So our regional directors are always being told that there’s no instruction from Transpac to let them in and haul,” Poa said in a mix of Filipino and English, explaining why they can’t just enter warehouse premises and take control of DepEd equipment.

Rappler reached out to Transpac for comment but they refused, saying on Thursday, November 30, they were not interested to be interviewed. 

Billions worth of undistributed learning materials

According to audit estimates, at least P3 billion in public funds have been wasted due to negligence and corruption linked to the deal awarded to Transpac. The firm proved to be incapable of delivering crucial learning equipment to public schools across the country.

The estimated amount was based on figures cited in an Audit Observation Memorandum (AOM) obtained by Rappler in May 2023 from a reliable source knowledgeable about the department’s auditing and procurement processes. An AOM is a notice sent by the Commission on Audit (COA) to a government agency calling attention to possible deficiencies in the audit of accounts or transactions.

Agency heads are then given an opportunity to explain or correct these possible deficiencies before these are included in the Annual Audit Report (AAR), which is published on the COA website. The initial AOM findings on DepEd were later affirmed by the commission’s AAR published in August 2023.

Poa confirmed that there are learning materials still sitting in warehouses, but he could not yet say as of writing how much their estimated worth is. He disclosed that DepEd has been in touch with Transpac to negotiate recovery of the materials. 

Among the major findings of COA are as follows:

• According to the AAR, as initially pointed out in the AOM, a majority of the undelivered items were science and math equipment, about 5.6 million pieces, worth P1.2 billion. 
• An additional P1 billion in school furniture was also not picked up from the suppliers.
• In addition to the COA findings, the P667-million contract obligated for logistics services was canceled due to poor performance. Also stuck in the warehouses were P79 million worth of technical and vocational equipment.
• An additional P11 million in warehousing expenses were also accrued by furniture suppliers, who want to bill DepEd for the unexpected costs, due to Transpac’s failure to pick up the goods.

According to COA, the science and math equipment pieces, learning tools, and technical vocational equipment that were undelivered include the following, with their corresponding values:

According to COA and a document obtained from an informed source, an additional P1 billion worth of school furniture was also not picked up from suppliers Metro Mobilia Corporation, Nikka Trading, and Top Asia furniture, leaving them with at least P11 million in additional warehousing costs.

Earlier this year, Rappler’s investigation revealed that Transpac subcontractors were selling DepEd laptops in the market at a much lower price after the agency failed to pay Transpac the P34.5 million in unsettled dues for warehousing services. 

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In late May 2023, Rappler received information from a reliable source that public school supplies were stuck in warehouses managed by Transpac and never reached their intended beneficiaries. This was the same provider whose subcontractors allegedly sold off laptops because of an unpaid portion of their P667-million contract awarded to them in 2021.

Rappler checked out in person two of the 15 warehouses – one in San Simon, Pampanga, and another in Mandaue City, Cebu.

Although we were not allowed inside the warehouse in San Simon, in May, July, and October, Rappler saw hundreds of blue boxes labeled “TVL (technical vocational livelihood),” “SME (science and math equipment),” “LTE (learning tools equipment)” and DCP (DepEd computerization program) inside. These were visible from the front door.

On Thursday, November 30, Rappler also visited the warehouse being leased by Transpac in Mandaue City, Cebu. No one was standing guard at the warehouse during the unscheduled visit, but the same laptops that were found sold in retail stores were still visible from outside through the windows.

While former DepEd undersecretary Alain Pascua previously defended the deal with Transpac as being above-board, no less than COA called out the “poor performance” of the firm for having failed to pick up and deliver these important materials for students. Transpac was supposed to be the department’s sole logistics provider assigned to deliver millions of pieces of school supplies across the country.

COA flagged the 3rd party logistics program in its AAR for “undelivered goods and non-availment of remedies to protect the interest of the agency.”

It added that “failure to deliver SMEs (science and math equipment) to recipient schools by the service bears on the DepEd’s timely distribution of these much-needed items designed to advance learning in science and math, as well as technical-vocational skills nationwide.” 

Partially-terminated contract

Poa said that while the negotiation with Transpac is still ongoing, they “partially terminated” the DepEd contract with the logistics firm, and coordinated directly with suppliers so their regional units could already get the supplies from them without need for warehousing services. But there are still undelivered materials in the custody of Transpac kept in its own warehouses.

“Why partially terminated? Because they were able to deliver some of the obligations. That’s why only those that they were not able to deliver, we terminated, which also is not easy because we didn’t have an inventory,” he said in a mix of English and Filipino.

The meeting between Transpac and DepEd happened on August 25, 2023, four months after Rappler released its two-part investigative series.

Poa said that DepEd regional units were not allowed to enter the warehouses subcontracted by Transpac. This was also the reason why he couldn’t give an estimated amount of learning materials in the custody of the logistics firm. He added that DepEd is negotiating solely with Transpac and not its subcontractors because it was the logistics firm that the department entered into an agreement with. 

“There are warehouses that allow regional officials to look. But definitely not to take anything out,” Poa said. 

“Everything’s delayed because of the logistics provider’s inability to pick up all these goods. So what did we do now? What we did was, even though the negotiations are ongoing with Transpac on how we can quickly resolve the issues, we’re also talking to suppliers. What we did was we downloaded funds for the regions to procure their own logistics providers to haul all these goods,” he added. 

Who is accountable?

DepEd officials also have yet to explain why Transpac – a cash-strapped company that failed to deliver on its only task – was awarded the contract in the first place when, according to bidding documents obtained by Rappler, it offered the highest bid.

It was XDE, one of Lazada’s logistics partners, that submitted the lowest bid of P587 million, but it was disqualified on technical grounds for “failing to comply with requirements.” There were no details on the failed requirements. 

Airspeed International, a Parañaque-based logistics company with national operations and assets spread across the country, had the next lowest bid at P649 million, but it, too, was disqualified for failing to submit a “financial bid form” – a mere technical requirement. 

Offering the highest bid with the least experience and assets in logistics, Transpac bagged the P667-million DepEd contract under the previous administration of Briones. 

While Transpac was awarded the contract, according to a source involved in DepEd’s procurement process, the department’s contract management and accounting divisions under Duterte, faltered in monitoring and managing the deliveries and payments to its contractors, Transpac in particular.

Meanwhile, Poa said the focus of the current DepEd administration is to retrieve all the department’s learning materials. He said he has never met Pascua, who signed the deals with Transpac. He appeared hesitant to pin accountability for the failed deal that cost government billions of pesos.

“I don’t want to say that they don’t have any accountability, I don’t want to close my doors but I also don’t want to conclude and say there is someone who is accountable. Why? Because right now, our efforts are focused on getting those goods. But there is a need to dig into the records and find out why Transpac failed to comply with its obligations,” he said.

Although no fraud audit on the bidding process of contracting Transpac as a logistics provider was included in the AAR, a former COA executive told Rappler that proving procurement fraud is difficult.

“When the award is done through public bidding, you need to destroy the presumption of faithfulness in public bidding, without that, the case will not prosper,” the former COA employee said.

But whether or not the case will be difficult, it should be filed anyway, the former COA insider said. “Cases should be filed…that means to say, we have the burden to support the evidence.”  

Benjo Basas of the Teachers Dignity Coalition said that private businesses who enter into contracts with the government cannot be exempt from accountability.

“Because this involves public funds, government agencies and personnel involved in the transaction, as well as private business entities that benefited from this transaction, are accountable,” Basas said in Filipino.

He highlighted the fact that there are huge amounts of funds being mismanaged in the department, despite many basic needs of students that are not being met.

“Such incidents should not be overlooked since every school opening, there is a shortage of basic necessities in the Department of Education, and we also see teachers almost begging during Brigada Eskwela. Where are the items that were allocated billions?” Basas asked. – with reports from John Sitchon, Joann Manabat, Ailla dela Cruz, Patrick Cruz/Rappler.com