Budget Watch

Why is Procurement Service buying on behalf of agencies?

Aika Rey

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Why is Procurement Service buying on behalf of agencies?

WHAT IS PS? A depot of the Procurement Service.

Procurement Service

The Procurement Service is thrust into the spotlight over irregularities raised by the Commission of Audit. But what does the agency do?

What is the Procurement Service and why is it buying supplies and equipment on behalf of other government agencies?

Yes, it could do that. But not all the time.

The PS-DBM or the Procurement Service – Department of Budget and Management is an attached agency of the DBM.

The PS was thrust into the spotlight again as the Commission on Audit (COA) flagged several of its pandemic purchases.

What is the Procurement Service?

PS was created through Letter of Instruction (LOI) No. 755 in 1978, with the primary task of implementing the central procurement system for the use of other government agencies.

Since LOI No. 755, PS has functioned as a grocery for common-use items, so that agencies could buy these from them at a low price without having to look for suppliers themselves.

Examples of common-use supplies are paper, ballpens, and ink cartridges. Items such as mid-range desktops, laptops, and even USB flash drives are also part of PS’ virtual store.

In March 2020, because of the COVID-19 pandemic, medical supplies, like alcohol, sanitizers, face masks, and personal protective equipment, were added to the list of common-use items that the PS could sell to other government agencies.

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P95 million worth of face masks, face shields sitting in government depots

P95 million worth of face masks, face shields sitting in government depots

Aside from these, PS also manages the Philippine Government Electronic Procurement System, also known as PhilGEPS, where bid opportunities and information on suppliers and contracted goods, consulting services, and civil work projects are posted.

PS also conducts price surveys that could be used by agencies.

Is PS an office under DBM?

Since 1978, PS was placed under the administrative supervision of the DBM.

In 2019, claims that the DBM was a “super bidding body” were made. The Government Procurement Policy Board (GPPB) had to clarify that PS is a separate entity from the DBM.

Thus, the DBM supposedly does not interfere with the day-to-day operations of PS.

What else can the PS-DBM do for other agencies?

Aside from procuring common goods to be sold to other agencies, PS also offers buying “non-common-use” supplies, equipment, and services on behalf of other agencies, for a fee.

This is specified under the implementing rules and regulations of Republic Act No. 9184 or the Government Procurement Reform Act:

Section 7.3.3 In order to hasten project implementation, Procuring Entities which may not have the proficiency or capability to undertake a particular procurement (emphasis ours), as determined by the Head of the Procuring Entity concerned, may outsource the procurement tasks by:

a) Requesting other Government of the Philippines agencies to undertake such procurement for them, through the execution of a memorandum of agreement containing specific arrangements, stipulations, and covenants, in accordance with government budgeting, accounting, and auditing rules;

The main point of this provision is to expedite procurement since PS already has the expertise.

In this process, PS only does contracting services. The client-agency is still responsible for the technical know-how on the project that needs to be procured.

For example, in 2018, PS procured P168-billion worth of subway, railway, and airport projects for the Department of Transportation. The DOTr said at the time that it “deemed judicious and prudent” to seek the help of PS for the projects to be implemented swiftly.

This is also supposedly the reason why the Department of Health (DOH) has, for a number of times in the past, asked PS to procure equipment on its behalf.

But PS can also deny clients. On Friday, August 20, PS said it declined DOH’s request for them to buy vaccines.

What is the issue with PS?

While government agencies put PS on the pedestal for procurement practices, COA, in the past, had flagged delays in bidding and the failure of PS to blacklist suppliers with unsatisfactory performance.

But in its 2020 report, state auditors raised several red flags when PS was headed by resigned undersecretary Lloyd Christopher Lao. Lao was PS executive director from January 2020 until June 2021.

COA said that PS has some P95-million worth of supposedly overpriced face shields and surgical masks that were sitting in regional depots as the agency had difficulty in selling them.

COA also said that 43 of 105 contracts and purchase orders, totaling P13.55 billion, awarded under Bayanihan laws 1 and 2 were not posted in the GPPB Online Portal “defeating the purpose of transparency and accountability.”

PS was also tagged in the P41-billion transfer from the DOH for COVID-19 supplies, which COA said lacked documentation.

Lao used to work for Senator Bong Go, when he was an undersecretary of the Office of the Special Assistant to the President. This was Go’s office until 2018, when he decided to run for senator.

Lao is said to be one of Go’s most important aides. In the frigates issue, a Rappler source said Lao’s communications were often interpreted as Go’s direct instructions. 

Officially, Lao said he left PS to take a break from politics and return to private practice. Multiple sources, however, claimed that he was asked to resign because of the anomalous deals. – Rappler.com

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Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at aika.rey@rappler.com.