Corruption in Emergency Procurement: Lessons Learned in the Philippines

As numerous observers have noted, in far too many countries the response to the COVID-19 pandemic has been hampered by widespread corruption, particularly in government procurement of medical supplies and other equipment (see, for example, here and here). As the pandemic finally recedes, it is useful to take stock of lessons learned and to implement reforms to emergency procurement procedures that will help mitigate these problems in future emergency situations.

One country where it is particularly important to address emergency procurement deficiencies exposed by COVID is the Philippines, which was mired in corruption scandals from the earliest days of the pandemic. Perhaps the highest profile COVID-19 procurement scandal—though hardly the only one—is the so-called Pharmally scandal. Over 2020-2021, the government of the Philippines entered into a string of multi-billion peso contracts with a company called Pharmally Pharmaceuticals, despite the fact that Pharmally is a small firm that was incorporated only in 2019 and lacked the funds, experience, and credibility to handle major government contracts. It was later revealed that Pharmally has direct ties with Chinese businessman Michael Yang, a close friend and former advisor of President Rodrigo Duterte. While direct corruption in this case has not yet been proven, the circumstances are extremely suspicious. And this is just one high-profile example of questionable COVID-related procurement deals. Speaking more generally, it is quite likely that widespread corruption contributed to the Philippines’ abysmal COVID-19 response (see, for example, here and here). Before the next crisis hits, it is essential that the Philippines learn how to better insulate its emergency procurement system from corruption risks. This is not to say that the procurement rules that apply in ordinary situations—including the usual transparency and integrity safeguards—must apply with full force during emergencies. In states of emergency, acting quickly can make the difference between life and death, and so it is reasonable to alter or relax public procurement rules to some extent, even if this raises the risks of corruption and other problems. But it is possible to design procurement systems so as to limit the ability of corrupt actors to take advantage of emergency procurement rules to enrich themselves. In the Philippines, the experience with corruption during the COVID-19 pandemic suggests the following reforms—influenced by international best practices but tailored to the Philippines’ particular context—to clean up the country’s flawed emergency procurement system:

  • First, there needs to be greater regulation of when emergency procurement procedures can be used. These special procedures should be reserved for those situations when ordinary procedures are genuinely impractical; otherwise, the authorization of “emergency procedures” becomes an easy way for corrupt actors to avoid the usual safeguards. Therefore, the Philippines’ Government Procurement Policy Board (GPPB) should issue a public document specifying the grounds for authorizing emergency procurements. Additionally, government regulations should require that when any government procuring entity (PE) wants to use emergency procurement procedures rather than regular procurement procedures, the PE should be required to issue a public justification for doing so, clearly explaining why the use of emergency procurement procedures is justified under the GPPB guidelines.
  • Second, even in emergency situations, there needs to be an adequate degree of transparency regarding public tenders. At the front end, when invoking emergency procurement procedures for a given transaction, the PE should be required to specify in sufficient detail the goods or services to be procured through those procedures. (As became clear during the COVID-19 pandemic, generic or vague descriptions of the items to be procured make it too difficult for monitors to scrutinize procurement deals by comparing product prices, quality, and delivery.) There should also be a requirement that all public contracts issued pursuant to emergency procurement procedures must be expeditiously published in full—a practice that has been implemented in many other countries. (Currently, the GPPB online portal is the repository of all emergency procurement documents. Unfortunately, the portal has proven to be insufficient: A 2021 study, for example, found that 76 transactions worth around 1 billion pesos have broken weblinks or lack complete information.)
  • Third, even during ongoing emergencies, procurement procedures should not be exempted from the normal requirement that public tenders be consistent with each PE’s Annual Procurement Plan (APP). An APP is a document that consolidates the various Project Procurement Management Plans which will be undertaken by the PE within a calendar year. Under the general law on procurement, every PE is required to submit an APP to its Head for approval at the beginning of the calendar year—right after the General Appropriates Act is passed. Once approved, the APP is posted on a public website. The APP, which informs bidders of the PE’s procurement activities as well as the mechanics of the bidding process, promotes transparency and accountability. Currently, the Philippines’ emergency procurement rules do not require an APP for a PE to proceed with emergency procurement as long as the PE submits proof of availability of funds. But that exemption is far too broad. While there may be some situations where a government agency needs to make purchases outside the scope of the APP, without going through the process of getting formal approval to amend the plan, in most cases, even during ongoing emergencies like the COVID-19 pandemic, there is no good reason to provide a blanket exemption from this standard and important transparency safeguard.
  • Fourth, the Office of the President and its relevant attached agencies, such as the GPPB, should establish streamlined emergency procurement requirements that can adequately assess the financial and production capacities of suppliers. Such requirements should ensure: (1) that the PE has the financial capacity to procure the desired goods within a time period warranted by the emergency situation; (2) that emergency purchases are limited—with respect to things like volume and length of contract—to what is absolutely necessary to address the emergency situation; and (3) that proposed prices for procured goods are comparable to prevalent prices in the regular market. PEs should be required to submit to the GPPB documentation demonstrating compliance with these requirements, which the GPPB should promptly publish in its online portal. The GPPB should also conduct periodic reviews to ensure these requirements are actually being met.

Given the recurring problem of entrenched corruption in procurement proceedings during emergency situations, it is crucial to promulgate and implement mechanisms to ensure that emergency procurement rules are not exploited by unscrupulous actors. The COVID-19 pandemic will not be the last crisis that the world, or the Philippines, will face. By reforming its emergency procurement system, the Philippines will be better positioned to respond to when the next crisis hits.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.