Procurement is commonly defined as the acquisition of appropriate goods and/or services at the best possible price to meet the needs of the purchaser in terms of quality and quantity, time and location. The procurement process formally starts from the point where the need to make a purchase to deliver an objective has been identified, and its
process ends when the product has been used up or sold, or the service contract has been delivered completely and the supplier or contractor is paid in full. The procurement function makes it possible for organizations to plan, acquire and distribute their needed resources — from paper and pens, to mobility items, IT systems and applications, security contracts, consultancies— to continue the business operations of the firm. In any organization, procurement is the largest or second-largest category of expenditure. In contemporary business parlance, the term procurement is an “umbrella” term which includes in its sphere concepts such as logistics and inventory management, online transactions, sourcing and outsourcing, supply-chain management and operations, and eBidding. Procurement is an essential function that helps shape corporate strategy and success.
All organizations aim for good procurement practices and that means value for money—that is, buying something that is fit for purpose, taking into account the overall cost. A good procurement process should also be delivered efficiently, to limit the time and expense for the parties involved.
Procurement is also a major activity in the government. In the Philippines, hundreds of billions of pesos is spent by the government to buy the goods and services it needs to operate the bureaucracy, carry out projects and deliver services to its citizens. The World Bank, a development partner, cites that for the past four years, an average of P121 billion worth of infrastructure, equipment, materials, supplies and services pass through government procurement processes each year which accounts for 15 percent of the country’s annual budget.
Procurement plays a central role in delivering all Philippine government priorities—from the free drugs and medicines at public hospitals, the publicschool buildings, desks and chairs, to the guns and ammunitions of the military and police and the electronic systems that supported our recently concluded automated elections.
The Philippines’ procurement system used to be described as cumbersome and prone to corruption as there were many outdated and inconsistent laws and many agencies dealing with issuance of guidelines and procedures in procurement. The public perception was that government procurement was characterized by fraud, inefficiency and lack of transparency. As a result, there was very low trust and confidence in the public procurement system.
The Government Procurement Reform Act (Republic Act 9184, s. 2003)
With the passage in January 2003 of the Government Procurement Reform Act (GPRA), or Republic Act 9184 (RA 9184), the Philippine procurement system was rationalized and harmonized with nternational
standards and best practices.
RA 9184 espoused the principles of transparency, competitiveness and accountability. It also mandates the use of streamlined procurement processes and monitoring of government procurement activities by the public. More important, the GPRA created the Government Procurement Policy Board (GPPB), as the central policy and monitoring body with the following functions:
- Protect national interest in all matters affecting public procurement, having due regard to the country’s regional and international obligations;
- Formulate and amend, whenever necessary, the implementing rules and regulations and the corresponding standard forms for procurement;
- Ensure that Procuring Entities regularly conduct procurement training programs and prepare a Procurement Operations Manual for all offices and agencies of government; and
- Conduct an annual review of the effectiveness of the Government Procurement Reform Act and recommend any amendments thereto, as may be necessary.
The GPPB acts as the oversight authority in all government procurement. It is headed by the secretary of the Department of Budget and Management as chairman and the director general of the National Economic and Development Authority as alternate chairman. The members of the board are comprised of the secretaries or the authorized representatives of the Departments of Public Works and Highways, Finance, Trade and Industry, Health, National Defense, Education, Interior and Local Government, Science and Technology, Transportation and Communications, and Energy. A representative from the private sector appointed by the President also sits as a member of the board. Representatives from the Commission on Audit and from relevant government agencies and professional organizations from the private sector are invited in GPPB meetings to serve as resource persons.
The GPRA, likewise, provided for the creation of the GPPB Technical Support Office (TSO) which provides technical and administrative support to the GPPB. The TSO provides support in the following forms:
- Research-based procurement policy recommendations and ruledrafting;
- Development and updating of generic procurement manuals and standard bidding forms;
- Management and conduct of training on procurement systems and procedures;
- Evaluation of the effectiveness of the government procurement system and recommendation of improvements in systems and procedures;
- Monitoring the compliance to RA 9184 and assisting procuring entities improve their compliance;
- Monitoring the implementation and effectiveness of the PhilGEPS; and
- Secretariat support
Standard bidding documents and generic procurement manuals were developed and anticorruption provisions were incorporated in the law, including provisions for sanctions and penalties for noncompliance with the rules and guidelines. To enhance transparency in government procurement processes, the law also required the invitation of observers from the Commission on Audit, civil
society or professional organizations and from nongovernment organizations to sit in procurement proceedings conducted by government agencies.
The GPPB-TSO also embarked on a comprehensive training program to educate, professionalize and improve the skills of government procurement practitioners.
Another important breakthrough in the Government Procurement Reform Act is the provision mandating all government agencies to utilize the Government Electronic Procurement System (now the PhilGEPS) as the single portal that shall serve as the primary source of information on all government procurement. The procurement process across all government agencies, from all branches of government, to local government units and public schools and universities, now involves announcing and advertising all procurement opportunities, inviting qualified parties to bid, evaluation of bids, awarding
of contracts, monitoring of delivery and performance and payment. The whole process is recorded and posted electronically for others to see.
The Philippine Government Electronic Procurement System (PhilGEPS)
What has become PhilGEPS today had its beginnings as the Pilot Electronic Procurement System (Pilot EPS) in November 2000. With the assistance of the Canadian International Development Agency, a governmentwide and Internet-based system which became a common portal for registration of suppliers and advertisement of bid opportunities by Philippine government agencies was developed and launched.
By utilizing the accessibility of the Internet, the EPS was established as a common portal for registration of suppliers and advertisement of bid opportunities. The EPS also allowed agencies to retain responsibility for and control over their own procurement activities and bids evaluation. The EPS had for its objectives the following:
- To establish an open, transparent, efficient and competitive marketplace for government procurement;
- To get better prices;
- To build the framework to continually improve the procurement processes; and
- To be sustainable over the long term
From December 2000 to May 2006, the Pilot EPS service was based and operated on the MER X system currently used by the Canadian Federal Government and its various levels of government and public agencies. All the forms and processes though, were designed by the Procurement Service to ensure that these were customized according to Philippine procurement requirements. Initially, the EPS
consisted of the following features:
- Electronic Bulletin Board for posting procurement opportunities, notices, awards and reasons for award for government procurement;
- Electronic Catalogue to support purchases of common goods, supplies, materials and equipment by public-sector agencies. The catalogue is a listing of all the items available in the Procurement Service which consist of about 300 items; and
- Supplier Registry for the registration of suppliers who wish to do business with government agencies.
The passage of the GPRA further boosted the importance of PhilGEPS. This law set forth the rules and regulations for government procurement transactions as guided by the principles of transparency,
competitiveness, streamlined procurement processes, accountability and public monitoring. It required all government requirements from goods, consulting services to civil works to be centrally posted through an Internet infrastructure which will be called the Government Electronic Procurement System (GEPS).
With the implementation of RA 9184, all national government agencies, government owned and controlled corporations, government financial institutions, state universities and colleges including local government units are mandated to use the PhilGEPS. Suppliers, manufacturers, contractors, consultants are also required to register, as well. Through the use of the PhilGEPS, transparency
in government procurement is enhanced since opportunities to trade with the government and the ensuing transactions are provided online. Information on changes in terms of references, bid schedules and on the winning bidder and contract amount are all accessible through the system. In addition, the electronic catalogue, which provides information on pre-approved cost of commonly used items, will help government auditors check that supplies purchased by a government agency are not grossly overpriced. Before the enactment of RA 9184, bid opportunities costing P2 million and above for goods and consulting services and P5 million and above for civil works should be advertised twice on two newspapers of general circulation. With the new law, opportunities are now required to be advertised twice in only one newspaper of general circulation and posted in the PhilGEPS. As a result, the government has been able to save close to P600 million in newspaperadvertisement expenses alone as of June 2010.
The GEPS allows suppliers to access government bid opportunities seven days a week/24 hours a day, and no longer have to visit government agencies to monitor the bid notices. With the bid-matching feature of the system, suppliers can also be notified automatically by e-mail if there are newly posted government opportunities that match their line of businesses.
As of June 2010, the PhilGEPS is host to bid opportunities posted by 9,879 government agencies and accessed by 42,975 goods and services providers. Over 1,080,000 bid notices have been posted by various procuring entities in the system.
The PhilGEPS is presently managed by a Director III who reports to the Procurement Service executive director and the Government Procurement Policy Board. The PhilGEPS management office consists of 19 officers and staff who perform the following critical tasks:
- Formulate, recommend and implement long- and short-range plans and strategies relative to the PhilGEPS project;
- Regularly report to the GPPB and PS executive director on the status of the project;
- Manage the contract/service level agreements with Ayala Systems Technologies Inc.;
- Administer the PhilGEPS system, including the registration and provision of help-desk services to the agencies and suppliers;
- Develop and maintain the PhilGEPS business plan;
- Monitor and evaluate the compliance of agencies and suppliers in the use of the PhilGEPS; and
- Update and improve the market research and promote the use of the PhilGEPS for both government and private entities
The PhilGEPS has brought significant benefits to the government in terms of the following:
- Improved transparency in government procurement;
- Increased competition and realization of value-for-money procurement;
- Reduction in procurement costs, including newspaper advertisements;
- Provision of audit trails through information posted in the system; and
- Serves as a medium in implementation of government procurement policies
Suppliers and contractors doing business with the government derive the following gains from using the system:
- Access to government bid opportunities 24 hours a day and 7 days a week;
- Downloading of electronic bid documents;
- Automatic notification, through the user’s e-mail, of bid postings and supplements;
- Savings on newspaper costs, transportation and man-hours;
- Information on government bid projects is important in market research and in making business decisions
The PhilGEPS has been benchmarked and studied by neighboring countries such as Indonesia and Vietnam who envision having their own central e-Procurement system. PhilGEPS officials have been invited
to present the PhilGEPS program and experience in various fora, symposia and other gatherings of worldrenowned e-Procurement organizations and practitioners such as those in the United States, South Korea and Singapore. In all these international gatherings, the efforts of the Philippine government in pushing for reforms in government procurement were admired and commended. Multi lateral
development partners like the World Bank (WB) and the Asian Development Bank (ADB) acknowledge the fact that the PhilGEPS is a viable instrument in the government’s efforts at improving efficiency in the procurement function and has accepted the PhilGEPS for application on ADB and WB- funded procurement projects.
Development of the upcoming functionalities of the PhilGEPS is ongoing. These include a Virtual Store which will enable government agencies nationwide to obtain commonly used items from the Procurement Service. To facilitate payments through the PhilGEPS, an e-Payment facility is being developed including provisions for electronic transfer of funds. To sustain PhilGEPS operations and financial viability, the government will introduce charges and fees. By 2011 the PhilGEPS hopes to fulfill its mandate under RA 9184 to facilitate the electronic submission of bids and the opening of bids through the system.
Cost Philippines-PhilGEPS relationship/support
The Construction Sector Transparency (CoST) Initiative introduces the concepts of transparency and accountability to the construction sector and focuses specifically on public disclosure of information. It aims to enhance the accountability of procuring bodies and construction companies to be responsible for the cost and quality of public-sector construction projects. CoST believes that when there is disclosure of information relating to public construction projects, in particular the basis on which the project was commissioned, the relevant plans and costings, project evaluation and any significant changes from the original tender document along with the reasons, in particular on costs, can help to raise the level of scrutiny and monitoring by the public. An informed public ensures greater awareness and will help reduce wasted opportunities and expenditure.
CoST Philippines is a multi-stakeholder initiative which will carry out the objectives of CoST starting from projects involving infrastructure and civil works. PhilGEPS is honored and pleased to be CO STPHILS’ enabling partner in this effort.
Under the memorandum of agreement (MO A) signed on May 17, PhilGEPS and CoST Philippines made arrangements to work together to attain the objectives of transparency through disclosure of “Material
Project Information” (MPI) following the CoST Initiative Program. Under the MO A, the responsibilities of the parties and collaborative activities in line with CoST objectives were defined. PhilGEPS, being the primary and definitive source of information on government procurement, will host most of the MPI of government agencies in the web site. Public procuring entities (PEs) will be
encouraged to disclose to the public MPI on its infrastructure or civil works projects. These important, meaningful and timely information will be critical in better decision-making.
CoST Philippines will work with PhilGEPS in identifying and implementing strategies that will make more efficient and effective the performance of disclosure and assurance activities. CO STPHILS
intends to assist in the expansion of the capacity of PhilGEPS by supporting the development of a contract execution module in the system and the conduct of baseline study for market research and updating of the business plan for the organization.
Good procurement is essential to ensure good public services, from buying goods and services that work as they are supposed to, to achieving savings that can be ploughed back into front-line services. As we go to work under a new administration and following President Benigno C. Aquino III’s vision for an efficient bureaucracy that will serve the best interests of the Filipino people, the PhilGEPS welcomes the challenge of contributing to procurement reforms by maintaining a safe and secure Internet-based, open and competitive marketplace for government procurement. PhilGEPS also embraces the task in helping develop procurement professionals and partnering with other government agencies to bring about reforms that will reflect our fervor to ensure that procurement drives further advancement in our delivery of public services to match the Filipinos’ rightly held high expectations in the new government.