4 China firms, RP contractor linked to RP loan deferred by World Bank

Four Chinese companies and a Filipino firm were involved in the controversial multi-million roads project rejected by the World Bank, according to an official document obtained by the Philippine Center for Investigative Journalism. The road projects, which were originally packaged into two and were later split into three, underwent three successive rounds of bidding but were later rejected because of “strong signs of collusion and excessive pricing," a World Bank official said. All three projects, about $33 million-worth, have not pushed through. The World Bank did not state which companies were under investigation but the Asian Wall Street Journal reported that China State Construction Engineering Corp., after winning a $5.6-million contract in 2002, “tried to rig bids with a cartel of construction firms in two other road contracts, valued at $33 million." In its investigation, the fraud unit of the bank reportedly concluded that China State was involved in bid-rigging, although the East Asia department asked the board to approve the second phase of the National Roads Implementation and Management Program (NRIMP), which was worth $232 million. The World Bank recently decided to defer the implementation of NRIMP-Phase 2 following the procurement problems raised, until after “corruption issues" in the first phase have been resolved. Involved in bidding Based on information obtained from a senior government source, the construction firms involved in the failed biddings under the NRIMP-1 were: China State Construction Engineering Corp., China Road & Bridge Corp., China Geo-engineering Corp., China Wu Yi Co. Ltd, and E.C. De Luna Construction Corp. The first bidding, which was conducted in 2002, involved a P967.01-million approved budget for the contract (ABC) in Surigao del Sur and a P917.43-million contract in Negros Occidental and Oriental. The lowest bidders were China Road, E.C. Luna, and China State Construction. (See table below) The same companies were the lowest bidders in the second round of bidding in 2004, although the prices were already significantly different compared to 2002. The ABC for the Surigao road project was reduced to P901.66 million while the Negros project increased to over P1 billion. By 2006, when the third round was done, the projects were already split into three packages — the Surigao contract went up to P1.7 billion and the two other Negros Oriental/Occidental projects were worth P682.40 million and P640.57 million. China State was no longer among the lowest bidders, which were China Geo-Engineering, China Road, and China Wu Yi.

PROJECTS REJECTED BY WORLD BANK UNDER THE NRIMP PHASE I
NAME OF PROJECT	COST - ABC (in millions)	LOWEST BIDDER
1st bidding, 2002 (under Secretary Simeon Datumanong)
Surigao-Davao-Costal Road, Marihatag-Baroto & Tagbina-Hinatuan Section, Surigao del Sur	967.01	China Road
Rehabilitation of Kabankalan-Basay/San Enrique-Vallehermoso Road, La Castellana-Canlaon Section	917.43	ECLuna/China State
2nd bidding, 2004 (under Secretary Florante Soriquez)
Surigao-Davao-Costal Road, Marihatag-Baroto & Tagbina-Hinatuan Section, Surigao del Sur	901.66	China Road
Rehabilitation of Kabankalan-Basay/San Enrique-Vallehermoso Road, La Castellana-Canlaon Section	1,013.53	ECLuna/China Road
3rd bidding, 2006 (under Sec. Hermogenes Ebdane)
Surigao-Davao-Costal Road, Marihatag-Baroto & Tagbina-Hinatuan Section, Surigao del Sur	1,170.59	China Geo
San Enrique-Vallehermoso Road, La Castellana-Canlaon Section, Negros Occidental/Oriental	682.40	China Road
Kabankalan-Basay Road, Hinobaan-Basay Section, Negros Occidental/Oriental	640.57	China Wu Yi

Based on information from the Internet, China State is one the largest construction firms in the world. It has reportedly engaged in at least 16 projects in the Philippines. China Road, meanwhile, is a “leading construction company" in China and is mainly into roads and bridges. China Geo-engineering, a company primarily into oil and gas field exploration services, built the P2-billion Nueva Vizcaya-Benguet Road project that was inaugurated by the President just last January. The other Chinese company, Wu Yi, is a real estate development company founded in 1994 and has operations in China, Kenya, Australia, Philippines, among others. Public Works Secretary Hermogenes Ebdane said that following the World Bank report, he decided to cancel the bidding of the projects but proceeded to request from the President “possible local funding." The PCIJ was only able to get in touch with local officers of China State, but it has yet to issue a statement regarding the allegations. ‘Unfair’ accusations Budget Secretary Rolando Andaya meanwhile said that the corruption allegations against the government, particularly on the issue of overpricing, are “unfair." “It was for all intents and purposes World Bank bidding," he told reporters. Andaya said that one of the weaknesses of the bank procurement policies is that it allows contractors to bid beyond the ABC (approved budget for the contract). “There is no permanent ceiling to speak (of)." He said the procedure is very much unlike under the country’s procurement law, where a fixed ceiling price for projects cannot be breached. Presidential Management Staff chief Cerge Remonde, meanwhile, dismissed the allegations, saying that the country was a mere “victim" in the change in leadership in the loan agency. A total of 40 firms have been awarded contracts under the NRIMP-I project of World Bank, according to a document posted on its website. In a statement, it reported that 90 percent of the project goals were achieved, with 382 kilometers of road in the provinces and maintenance of 975 kilometers in several areas. The NRIMP-1, with an estimated cost of $305.42 million, was originally designed to upgrade about 528 kms of national roads and improve maintenance of about 1,000 kms. The project was to be implemented from 2000 to 2009 on a $150-million loan (with a maturity period of 20 years) from the World Bank, and the $155.42 million equivalent would be supplied by the government.