‘Makati building contracts rigged’

MANILA, Philippines–Makati procurement officials trapped a rival of a favored supplier in an elevator for 20 minutes to ensure that the competitor would be late in submitting bid documents, a former head of the city’s General Services Department told the Senate hearing on the alleged overprice of the Makati City Hall Building II on Thursday.

Mario Hechanova, who worked for the Makati government for 19 years and was involved in procurement, recalled that this supplier, whom he did not name, was with his mother at the time and was pale and “shaking in fear” after the elevator ordeal.

Hechanova said he felt sorry for the supplier and regretted what he had done. “But I was just a soldier who had to follow orders.”

He said none of the procurement personnel had questioned the practice of rigging the bidding.

“That’s our practice in Makati. That is what we do,” he said.

He also said officials fixed the bidding for the controversial P2.3-billion Makati parking building and other projects to favor Hilmarc’s Construction Corp. on the instructions of then Mayor Jejomar Binay, now Vice President.

Even the contractor of the allegedly overpriced P2.28-billion Makati parking building on Thursday admitted it was not claiming it was world-class.

Hilmarc is the general contractor of the 11-story building that was constructed from 2008 to 2013.

“The contractor doesn’t make a claim it’s world-class,” Hilmarc’s assistant vice president for legal Rogelio Peig said when asked by Sen. Alan Peter Cayetano to define world-class.

Cayetano asked the most meticulously researched and merciless questions during the hearing.

He praised Pieg for his honesty and said the latter’s admission flew in the face of claims by Vice President Binay, who was mayor when the building began construction, that this was world-class.

When Sen. Aquilino Pimentel III, blue ribbon subcommittee chair, pressed him to be more categorical if Hilmarc’s built a world-class building, Peig said: “As I said, we can’t make that claim.”

Pimentel then said: “If you don’t make that claim, you’re saying it’s not world-class.”

Makati Mayor Jejomar “Jun-jun” Binay Jr. had justified the cost of the parking building, asserting that this was world-class and the city’s version of a “green building.”

Binay coursed the instructions to the bids and awards committee (BAC) through then city engineer Nelson Morales, said Hechanova, who graduated from the Technological Institute of the Philippines with a degree in electrical engineering.

As for the supplier trapped in the elevator, Hechanova said the tactic was resorted to because procurement officials had received orders that the contract for fire-fighting equipment must be won by a friend of then Councilor Jejomar Erwin “Junjun” Binay, now the mayor.

He did not name the favored contractor for this particular project.

Monthly allowance

Binay, through Morales, also allegedly gave Hechanova and other BAC members P200,000 as a monthly allowance to ensure the bidding would be fixed.

To show some semblance of bidding, Makati procurement personnel sought competitors for Hilmarc’s and prepared their bidding documents, according to Hechanova.

But their proposals would be more expensive than the offer of Hilmarc’s, he told the Senate blue ribbon subcommittee.

For the Makati parking building, Hechanova said Morales had told him to ensure that Hilmarc’s would win the contract for the project. But while it was Morales who gave the order, Hechanova believed the instructions came from Binay.

Morales was killed on Sept. 7, 2012, in an ambush in Malinao, Albay province, where he was planning to run for mayor.

“Before this project was bid out, the city engineer called me to his office and told me, ‘Mario, as before, you know who must win this project,” Hechanova told the Senate subcommittee, quoting the official.

“He told me it was clear that Hilmarc’s Construction must win the project,” he said.

Sen. Antonio Trillanes IV asked: “So, in other words, the bidding was rigged so Hilmarc’s would win?”

Hechanova replied: “It is true, senator, we rigged it.”

Alter ego

Trillanes asked who directed Morales to give that order. Hechanova said Morales was the alter ego of the mayor.

“If he (Morales) gives the order, we know that the order came from the mayor,” Hechanova added.

Upon further questioning, he said Morales had been with Binay for a long time and had his trust.

“If Engineer Morales would do something anomalous, I don’t think that will happen because I am sure the mayor will find out and he will be removed from the job if he does that,” he said.

Mayor knew

Hechanova also said Binay, as the mayor, knew everything that was going on in his city.

“He knows all of that. Being the mayor, he knows what’s happening in his government,” he said.

Asked if he received kickbacks for the parking building project, Hechanova insisted he did not but that he and other BAC members had received a monthly allowance of P200,000.

The allowance was handed out by Morales, who told the BAC members it came from Binay, Hechanova said.

Asked what the allowance was for, he replied: “Maybe senator, that was for us to do what we had to do. Which is, on my part, to fix the bidding.”

All bids fixed

Trillanes asked if this meant that all bidding exercises in Makati were rigged to favor certain contractors.

“That is true, sir. Everything is rigged,” Hechanova reiterated.

But since the invitations for bidding have to be published, other suppliers not in on the alleged racket tried to win the contract.

Hechanova said that to ensure the favored contractor would win, the procurement officers would disqualify the other bidders on technical grounds during postqualification evaluation.

For Hilmarc’s Construction’s contract, he said the BAC asked Hilmarc’s to submit bid documents and checked to see if the documents were in order before sealing these.

After this, the BAC sought competitors for Hilmarc’s and prepared their documents to ensure their bids would be higher than that of Hilmarc’s.

Hechanova also said it was Hilmarc’s that recommended its supposed competitors to the BAC and that these companies knew they were part of the farce.

“We would just prepare their papers and then they would sign these,” he said.

Hilmarc’s bagged other infrastructure projects in Makati, including the Makati City Hall, Ospital ng Makati and Makati Science High School.

Cayetano asked if the mayor would sign anything the BAC gave him.

Hechanova said that under the procurement law, the head of the procurement entity or local chief executive could choose not to sign the BAC resolution if he found evidence of collusion.

Cayetano said that in the end, the mayor was accountable, which was why there was a requirement that the mayor sign certain documents.

Hechanova said he resigned from the Makati local government after Binay supposedly reneged on his promise to support then Vice Mayor Ernesto Mercado’s bid for mayor.

Witness protection

Trillanes recommended that Hechanova be placed under the government’s Witness Protection Program (WPP). He was seconded by Cayetano.

Pimentel also said the Senate would provide security to Hechanova while the request to include him in the WPP was being processed.

But Peig said Hilmarc’s did not tolerate the practice of giving kickbacks.

He denied that the company had given kickbacks to Binay when he was mayor.

Earlier, Mercado, an ex-Binay ally, admitted that he received kickbacks in connection with the parking building project.

Mercado said that if he received kickbacks, then Binay must have received the same as well since that was the practice in the city government.

The Vice President has denied the allegations.

Comparing costs

Peig said the cost of the parking building, at P69,549 per square meter, or a total of P2.28 billion for some 32,783 sqm, was comparable to the construction cost of other government infrastructure projects of Hilmarc’s.

Some of these projects include the House of Representatives’ Mitra Building that it built in the same period as the parking building. It cost P74,000 per sqm. The House’s south lounge extension and north lounge extension cost P65,000 and P67,000 per sqm, Peig said.

Hilmarc’s vice president for legal also said contracts for government buildings tended to be more expensive than those for private buildings because the former usually represented 100 percent of the cost.

In the private sector, he said it was a matter of practice that the contract of the general contractor be just 35 to 45 percent of the entire cost, and usually, the developers provided the materials, such as cement, steel and tiles.

Cayetano: “Did the price of steel affect the building?”

Peig (Hilmarc’s lawyer): “The fluctuation of prices could already be imputed…”

Cayetano: “That’s irrelevant to us. What’s relevant to us here is why the building is expensive. Either you’re using that as a reason why it’s expensive or not. But if you absorbed it, then good. If you didn’t, good. My question is, why is the building tremendously expensive? The Vice President, his spokesmen, his children, the BBC—the Binay Broadcasting Corp., all those people writing for him said it’s world-class, it’s green and the prices of steel went up. So we will take them to task. Let’s go through it one by one.”

Cayetano: “Did the prices of steel affect the cost or not?”

Pieg: “Probably.”

Cayetano: “A while ago you said it did not. What’s your answer?’’

P350M for office transfer

Senators also questioned a P350-million allocation made in 2011 for the transfer of Makati’s Urban Development Department to the parking building.

Trillanes said the amount was too big for the transfer, which would entail a move from one building that was just adjacent to the parking building.

“You won’t even need to spend for fare. Do you not see a problem there?” he asked.

Makati Urban Development officer Merlina Panganiban said the P350 million was for the transfer of the entire office to the parking building.

The bulk of the amount would be used to transfer the data center, which handles all transactions, and which Panganiban said would not be a simple task since it did not consist only of moving equipment from one place to another.

She said the new equipment had to be up and running in the new office before the old data center could be shut down.

But for Trillanes, what Makati was doing was giving “loose change” to Makati’s people, and spending huge sums in this manner behind their backs.

Cayetano noted that in the experience of Taguig City, where his wife is the mayor, transferring the data center was not an expensive task.

He questioned why the data center was not using the cloud storage system when Makati claimed it was world-class.

Panganiban said that using the cloud storage did not mean a city was world-class. She also said Makati was using servers.

When Cayetano said servers were cheaper at this time, Panganiban said this would depend on the server’s specifications.

Cayetano said there was no need for Makati to buy something “outrageously expensive” when something cheaper and as good would do.

Panganiban said the city had not bought anything yet but Cayetano said it had allotted a huge amount for this.

“Your budget for your one department that will be transferred is a budget already for a 10-story or an 8-story building in other places that are complete. That’s why we’re a little bit aghast,” he added.

On Sen. Joseph Victor Ejercito’s prodding, Peig said a senator approached him and Hilmarc’s president Robert Henson in last week’s hearing, requesting that they withhold their presentation until after former Makati Vice Mayor Ernesto Mercado had dropped his bombshell.

This happened on Thursday last week at the Senate plenary gallery, Peig said.

Peig said they told the senator that they would accede to his request if they were not called to testify that day. Toward the end of the hearing, Henson testified.

“He said something to this effect: ‘Don’t blame me later on. I already cautioned you. We will pour everything…,’” Peig said, quoting Trillanes.

While his name wasn’t mentioned, Trillanes volunteered that he was the senator, but denied exerting any pressure on the Hilmarc executives.

“Attorney Peig, did I ask you to concoct a story? Did I ask you to pin anybody down?” Trillanes asked the Hilmarc executive. Peig nodded in agreement and said that their exchanges with the senator had been “very friendly.”

“What I told you, I was trying to save you. I was trying to save all of you. If you will tell the truth, we will protect you. We will make sure of it. But if you join the cover-up, we can’t do anything about that,” Trillanes said.

“Now, if you’re betting on Vice President Binay becoming President someday, and if he wins, then you’ll get all the contracts of infra projects.

“It’s also a gamble on your part. It’s a risk if you’re willing to take that risk. And if it comes out you’re part of the cover-up, then we will pour all the penalties of the law on you,” he added.

Originally posted at 1:08 am | Friday, September 5, 2014

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TAGS: bidding, Hilmarc, Jun Jun Binay, Makati, Rogelio Peig, Senate probe