Defense Dept should have bid out gasoline supply contract – COA

MANILA, Philippines – Amid soaring oil prices, the Department of National Defense could have gotten a better deal had it followed the law and conducted public bidding when it bought P35.636 million worth of gasoline last year, according to the Commission on Audit.

The COA pointed out that under the government’s procurement reform act, all procurement should undergo competitive bidding, which is something the DND failed to do when it bought gasoline from Petron Corp. in 2010.

The COA noted that in 1997, the DND entered into a memorandum of agreement with Petron Corp. for 10 years for its gasoline needs.

The agreement was extended for another year while a new bidding process was being conducted. But the bidding failed to materialize from 2008 to 2010 because Petron, the lone bidder, had a tax deficiency, as attested to by the Bureau of Internal Revenue.

“Thus, the purpose of bidding to get the most advantageous terms and condition was not achieved, such as the availment of interest-free facility and product rebates/loyalty features of the Petron Fleet Card,” the COA said.

The Petron Fleet Card is a credit or charge card that allows Petron customers, primarily corporate accounts, to enjoy a specific period of interest-free credit without extra cost. It also offers loyalty rewards.

The COA noted that despite the DND buying millions of pesos worth of gasoline from Petron, it did not enjoy the product rebates and loyalty features of the Petron Fleet Card, “which rendered due disadvantage to the Department.”

Since the DND paid Petron P35.636 million in 2010, it could have earned 356,364 points, which was equivalent to five fax machines or printers, it added.

In response, the DND told the COA that in the past, its gasoline requirements were considered critical for its daily operations, which was why the procurement was based on the principle of quantum meruit (what one has earned), or referring to the deserved amount.

But it also agreed with the COA recommendation that officials should be made to comply with the provisions of the procurement law when buying gasoline, and that any related agreements inked should have terms and conditions advantageous to the government.

The COA said the DND should avail itself of the perks from Petron, such as the interest-free facility and the product rebates.