DBM Procurement Service cancels P727-million contract with firm linked to blacklisted company

Aika Rey

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The Procurement Service cancels the contract with Ferjan Health Philippines not because of its affiliation with a blacklisted company, but rather due to the delay in delivering the government's order

The Procurement Service under the Department of Budget and Management (PS-DBM) said on Monday, September 14, that a controversial P727-million contract with Ferjan Healthlink Philippines has been canceled.

At the budget hearing of the DBM and its attached agencies at the Senate, PS-DBM chief Undersecretary Lloyd Christopher Lao said Ferjan Healthlink Philippines, a corporation, was not the blacklisted company. Rather, it was the sole proprietorship, Ferjan Healthlink Enterprise. They have different licenses, according to Lao.

After checking with the Securities and Exchange Commission, PS-DBM found that one of the stockholders of the corporation was the sole proprietor of the blacklisted company.

Despite this, Lao said that legally, the agency is not allowed to cancel their contract with the corporation due to current Government Procurement Policy Board (GPPB) rules.

The contract was only cancelled due to the delay in delivering an order of 500,000 sets of personal protective equipment (PPEs). PS-DBM cancelled the contract on September 11.

“There is no basis to cancel the contract with them. It’s not in the GPPB rules that a sole proprietorship company that has been blacklisted will be a ground for the cancellation of another corporation, which is a different corporation,” Lao said.

On top of the delay, Lao added the corporation was charging a “significantly higher price” for the PPEs compared to the market price.

But Lao gave assurances that GPPB will change its rules to include the blacklisting of sole proprietorships, as well as carrying over of the blacklisting to corporations with ownership of at least one stockholder in another blacklisted firm.

Senate Minority Leader Franklin Drilon said these companies should not be allowed to “hide behind the corporate structure” to skirt disqualification from bidding.

“While it is good that the contract was canceled, this begs the question: Why is the proper due diligence not conducted prior to the award of such a huge contract. Despite this being a negotiated/emergency procurement, blacklisted entities should not have been allowed to participate,” Drilon said.

“Considering the lapses in screening Ferjan, it is highly possible that similarly situated suppliers may have also secured contracts with the DBM Procurement Service,” Drilon added.

Overpriced contracts

Drilon also called out PS-DBM for purchasing “overpriced” medical supplies during the early days of the lockdown.

Drilon said that based on his research, the total price for 3 contracts were “jacked up by almost half a billion.”

“We could have saved around P422 million in taxpayers’ money if we exercised due diligence,” the minority leader said.

Drilon said that the P480-million test kit contract awarded to Pharmally Pharmaceutical Corporation, a local supplier, was overpriced by P208 million.

The P73.1-million contract with Lifeline Diagnostic Suppliers for RNA virus prep kits was also overpriced as well according to Drilon, as these could have been bought for only P31.9 million by the private sector, therefore saving P41 million.

In response, Lao said his agency procured the items from local suppliers during the earlier days of lockdown.

“That was the time when we were using our regular modes which is negotiating to local suppliers. When we discovered it is very expensive, we tried contacting through our embassies to contact directly to the manufacturers,” Lao said.

Lao said that the contract with Pharmally was bidded out on April 22, amounting to a total of P688 million for test kits worth P1,720 each.

“While they were delivering because this is urgent, we are negotiating through our embassy in Singapore, as well as directly to ASTAR manufacturing. When we contacted them, we were able to get it at a very cheap price – almost half the price at P925 per test kit,” Lao said.

“That’s how we were able to get a cheaper price. We no longer bidded it open only for local suppliers, but to foreign suppliers as well,” he said.

Lao said that being allowed to negotiate allowed them to get medical supplies at a cheaper price.

“Because we’re allowed to negotiate, we opened our doors not only [to negotiate] to local suppliers but to international suppliers as well, with the help of our ambassadors in China and Singapore. We were able to get it at least at 40% to 50% cheaper than the prices [than when] we are sourcing it locally,” he added.

Drilon asked Lao to submit a report on other contracts where the Philippine government could have saved money by following their new strategy.

“So that I don’t have to ask here the similar procurements where you are able to negotiate at a lower price and why the initial higher price were accepted. You were saying that this was an emergency purchase and from the way you sound or how you relay it to us, you did not know or it would have been better if you got in touch with our embassies abroad,” said Drilon. –

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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