COA flags Lapu-Lapu City’s P218-M furniture supply deal

Logo and facade of the Commission on Audit (COA) building.

CEBU CITY—The Commission on Audit (COA) flagged the government of Lapu-Lapu City in Cebu province over alleged procurement of materials worth over P218 million from a manufacturer of furniture products that was not qualified to negotiate with the local government.

In its 2021 report posted on the COA’s website, state auditors said Lapu-Lapu City officials bought a total of P218,455,329.90 worth of equipment, furniture, office supplies, grocery items and other materials from Heritage Muebles Mirabile Export Inc. (HMMEI), which COA inspectors found to be housed in a school canteen-cum-store not open to the public, and may not be qualified to transact business with the local government because it was just a “middleman” and not a legitimate supplier.If HMMEI was allowed to transact with the local government, the COA said it would defeat the purpose of Republic Act No. 9184 (Government Procurement Reform Act), particularly on the procurement of goods at prices most advantageous to the government.

Not competitive

State auditors recommended that the members of the Bids and Awards Committee (BAC) be made to explain why it moved for the procurement of the materials from a “seemingly unqualified supplier.” The Lapu-Lapu City government was also asked to explain why it followed the BAC’s recommendations.“Competitiveness is one of the governing principles of government procurement, not only to give equal opportunity to private contracting parties who are eligible and qualified to participate in competitive biddings, but in order to see to it that the government obtains goods and services at prices most advantageous to it,” the COA said.

Under the law, it is the BAC that checks on the eligibility of a prospective supplier. However, in the case of Lapu-Lapu City, the BAC failed to undertake this responsibility in accordance with the procurement law, the COA said.

“We are concerned that due to this practice of purchasing from middlemen in the procurement process, which is a blatant disregard of the law on procurement, it cannot be assured that management (Lapu-Lapu City) secured the lowest possible price for the goods and obtained the best bargain for the government,” the state auditors explained.Incomplete documents

A review of the HMMEI registration with the Securities and Exchange Commission (SEC) indicated that the firm is a manufacturer of furniture products.“Nowhere among its secondary purposes indicated in the SEC registration can we read that it is engaged in the retail of office supplies and goods,” the COA said.

Some vouchers submitted pertinent to the supplier’s transactions with the local government were also not supported with complete documents such as business permit and financial statement stamped by the Bureau of Internal Revenue (BIR).Charles Lim, owner of HMMEI, begged off from issuing a statement, saying he has yet to consult with his lawyer regarding the issue.

The Inquirer also tried but failed to reach Lapu-Lapu Mayor Junard Chan, who was reelected in May. A text message sent to him on Friday was also left unanswered.

Some city employees, who asked not to be named for lack of authority to speak on the matter, said they did not know where these furniture were placed or which offices used the office supplies. The COA report also did not itemized the items for which the P218 million was spent. In its comment submitted to the COA, the Lapu-Lapu City government said HMMEI submitted the necessary eligibility documents and were deemed qualified.

The city said HMMEI’s articles of incorporation showed that on June 5, 2020, it retained its name while also doing business as a general merchandise company, and offering services in general construction, catering, automobile trading, seacraft building and supplying filming needs.Lapu-Lapu City assured the audit team that they conducted due diligence, conducted the necessary ocular inspection, and found that they have displayed items of their different products, and determined that HMMEI is qualified to supply the goods procured by the city.

In its rejoinder, however, the COA said they found out that HMMEI already transacted with the city government for the supply of goods prior to Aug. 19, 2021, its registration date at the BIR.