Budget Watch

Recto hits ‘pasa-buy,’ the gov’t practice of passing funds to PS-DBM

Sofia Tomacruz

‘PASA-BUY.’ Senate President Pro Tempore says the practice of having PS-DBM purchase items on behalf of the agencies allows the latter to bypass accountability in the handling of public funds.  

File photo

Senate President Pro Tempore Ralph Recto says lawmakers will put a provision in the 2022 General Appropriations Act that would prohibit or limit agencies from transferring funds to bodies like the PS-DBM to procure on their behalf

Senate President Pro Tempore Ralph Recto on Tuesday, September 7, expressed concern about the common practice of government agencies of transferring funds to the Procurement Service of the Department of Budget and Management (PS-DBM) for items they could procure themselves.

The system, he said, allowed agencies to bypass accountability in the handling of public funds. 

Ilan taon ko na sinasabi na mali itong pasa-buy’ (How many years have I been saying that this practice of passing funds is wrong)?” Recto said on Tuesday, during the Senate blue ribbon committee’s hearing on the purchase of overpriced COVID-19 items in the early months of the pandemic. 

“Every year we take this up in the budget deliberations, and every year there are accountability issues,” he added. 

Recto had raised two issues on contracts carried out by the PS-DBM for the procurement of COVID-19 items: the lack of transparency on prices, and the lack of accountability in using public funds to purchase supplies of personal protective equipment (PPE).

On the lack of accountability, Recto said the decision of the Department of Health (DOH) to transfer P41 billion to the PS-DBM ended up costing the government more. The PS-DBM not only imported items when local producers were selling medical-grade face masks at lower prices, it also charged the DOH 4% service fee.

“Today, for these PPE, we’re saying that the agency knew and told you: ‘This is the quality that we want. This is the standard. These are our specs.’ If they knew what they needed, then why did they even pass this to the PS-DBM? That is the point,” Recto said in a mix of English and Filipino.

He continued: “My point is, they should have bid it out themselves and not paid the PS-DBM 4%. Now, taxpayers were shortchanged. [The expenses] were doubled. They pay for the salaries [of government], they will pay the 4%, and then they will be surprised now that prices were even doubled.” 

Earlier in the hearing, Perry Ferrer, chairman and chief executive officer of local manufacturer EMS Components Assembly, told senators that the company won a contract with PS-DBM to supply 100 million pieces of face masks for P13.50 per piece. However, the PS-DBM kept delaying the deliveries and later renegotiated that 75 million pieces be sold at P2.35 each. 

EMS was among the companies asked by the Department of Trade and Industry (DTI) at the start of the lockdown to repurpose their factories to manufacture PPEs. It won just one contract to supply the government with medical-grade surgical masks.

Asked if they were made aware of the prices at which government bought masks from Pharmally Pharmaceutical Corporation just days before signing a contract with the PS-DBM, Ferrer said EMS only focused on delivering the 100 million masks to the government. 

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Former PS-DBM chief Lloyd Christopher Lao said EMS was supposedly made aware of the prices in discussions, but Recto said these should have been posted on the DBM’s website. 

“It is not about Mr Ferrer. If it was DOH [doing the procurement], that (prices) would have been present in [its] website,” Recto said.

Double expenses

Upon the questioning by Recto, Lao confirmed that a 4% service fee was charged, supposedly for salaries of PS-DBM staff. Recto said this expense was accounted for in the national budget and should not come from income generated by the PS-DBM.

Responding to Recto, Health Secretary Francisco Duque III said the DOH had to transfer funds to the PS-DBM for the procurement of COVID-19 items early in the pandemic because the agency was stretched for leading the government response to the health crisis, on top of responding to communities’ needs after the Taal Volcano’s sudden eruption in January 2020. 

The DOH’s procurement absorptive capacity was likewise “very poor at the time,” Duque said,  because many of the agency’s staff were in quarantine and isolation.

Talagang walang-wala tayong makuha (We really could not get anything)…. But the President said, ‘No, you have to produce,’” Duque recalled. He added that local manufacturers were also lacking raw materials due to global shortages. 

“We were desperate – that is the word that I’d like to use. We were desperate,” Duque said, adding that funds were downloaded over the span of a year. 

Recto said that he would understand that funds needed to be transferred in the beginning of the pandemic, but said management of funds should have been more prudent in succeeding months. 

“What is the policy today? Shouldn’t we produce some of these (PPE) at least? Shouldn’t we have our own stockpiling of this? Many countries do that right now,” Recto said.

Duque said no one was stopping local companies from producing PPE items and that the DOH had met local producers with the Department of Trade and Industry to discuss purchasing items locally. 

“We share with your sentiment that if there is an opportunity for private manufacturing companies to supply government, that opportunity has to be maximized. But the PS-DBM has their own process, which we are not a part of. So I defer,” Duque said.

Recto underscored this was the problem: “The ‘we are not part of the process’ – again the accountability issue. You’re pointing fingers. The money comes from you but never mind, they are the ones that bid.” 

“That is the point I am driving at,” Recto said. “There must be clear accountabilities. ’Yan ang problema, pag may nagpapasa-buy. (That is the problem when there is passing of funds to buy).”

Duque agreed with Recto and suggested that a law should be passed to prevent this from happening again.

Recto said that, for the 2022 General Appropriations Act, they will put a provision that would prohibit or limit agencies from transferring funds to the PS-DBM and the Philippine International Trading Corporation to procure on their behalf. – Rappler.com

Read the other stories from the September 7, 2021, Senate blue ribbon committee hearing: 

Sofia Tomacruz

Sofia Tomacruz covers foreign affairs and is the lead reporter on the coronavirus pandemic. She also writes stories on the treatment of women and children. Follow her on Twitter via @sofiatomacruz. Email her at sofia.tomacruz@rappler.com.