COA flags ‘lack of due diligence’ in P1.38-B PPE purchase

Logo and facade of the Commission on Audit (COA) building. STORY: COA flags ‘lack of due diligence’ in P1.38-B PPE purchase

MANILA, Philippines — The Procurement Service of the Department of Budget and Management (PS-DBM) did not exercise due diligence in buying P1.386 billion worth of personal protective equipment (PPE) for COVID-19 front-liners as these were found to be unauthorized for sale or public use, according to the Commission on Audit (COA).

State auditors said the seven contracts for PPE lacked the required documents such as the certificate of medical device notification (CMDN) and a product notification from the Food and Drug Administration (FDA).

In its 2021 audit report on the PS-DBM, the COA said the agency “cannot assure its client-agencies of the safety of the PPEs” meant for health-care workers directly exposed to the COVID-19 virus.

The PS-DBM is an attached agency of the budget department that has been under fire for questionable procurements on behalf of other government agencies, the latest of which involved the purchase of pricey but slow laptops for the Department of Education.

“The [PS-DBM] did not exercise due diligence in procuring the PPE items, neither in crafting the technical specifications nor in the review and evaluation of the technical capacity of the supplier to deliver the goods to be procured using the nondiscretionary criteria,” the COA said.

It added: “In the absence of the CMDN for the PPE items procured, the PPE were not authorized for sale or for public use.”

The contracts were awarded on different dates from Dec. 4, 2020, to May 9, 2021, and were delivered by the supplier and fully paid by the PS-DBM, except for a P505.7-million contract.

The fulfilled and fully paid contracts were: P450 million for PPE sets awarded on Dec. 29, 2020; P225 million for PPE sets on Dec. 29, 2020; P58.83 million for surgical masks on Dec. 29, 2020; P59.84 million for surgical masks on Dec. 29, 2020; P57.41 million for surgical masks on Dec. 4, 2020, and P29.72 million for surgical masks on Dec. 4, 2020.

The only unpaid and undelivered contract was for P505.70 million worth of PPE sets that was awarded on May 19, 2021.

‘Extraordinary times’

The COA found that all seven contracts lacked the CMDN, which is proof that the product has been notified with the FDA prior to its manufacture, importation, export, sale, distribution, transfer, or use in testing, promotion, advertisement and sponsorship.

The CMDN is a requirement under FD Circular 2020-031, which states that importers and manufacturers of PPE should secure a CMDN prior to the commercial sale and distribution of such medical devices.

In response to the audit findings, the PS-DBM said the CMDN was required only if the PPE would be commercially sold in the local market, and that the purchases were made in “extraordinary times.”

“These medical supplies were procured amid shifting quarantine classifications, community lockdowns, shifting work arrangements and persisting effects brought about by COVID-19. Thus, it is important to take into consideration that existing rules and regulations may, if not inapplicable, be very difficult to implement considering the unpredictable and constantly changing situations during those times,” the agency said in its comment to the COA.

“It is also important to consider that there was a need to immediately procure the medical supplies and equipment. The (agency), in order to address such a need, acted with haste in procuring said items,” the PS-DBM added.

The PS-DBM was also at the center of a Senate investigation that started in August 2021 into alleged irregularities in its contracts with Pharmally Pharmaceutical Corp., a small company linked to people close to former President Rodrigo Duterte, involving more than P42 billion in pandemic response funds of the Department of Health (DOH).

Lawmakers have been calling for its abolition since last year for being involved in major procurement anomalies.

The Makabayan bloc in Congress revived this week calls to abolish the PS-DBM by filing on Monday House Bill No. 3270, which seeks to return to government agencies the role of purchasing their own common-use supplies.

Unremitted funds

Meanwhile, in the same 2021 audit report, the PS-DBM was also called out for failing to remit P1.975 billion in funds transferred by the DOH for the purchase of COVID-19 supplies and equipment.

The sum remained unused after the validity of the funds expired in 2021.

The money came from the DOH’s regular fund, provisions under the Bayanihan 1 and 2 laws, and cash donations from the state-run Philippine Amusement and Gaming Corp.

“The validity period of the unexpended/unutilized transferred funds totaling P1.975 billion, intended for COVID-19 supplies and equipment, had lapsed such that no further disbursements could be made therefrom,” state auditors said.

They added that the “nonremittance of the unexpended/unutilized fund transfers to the Bureau of Treasury has not made additional funds available to the national government for its COVID-19 responses, among others.”

The PS-DBM agreed with the COA’s recommendation that it revert the unused funds to the national treasury.


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