Resigned DBM-PS chief backtracks: Due diligence observed in pandemic purchases

Former Budget Undersecretary Lloyd Christopher Lao on Monday, Sept. 13, maintained that he exercised due diligence in selecting contractors for the Department of Health's (DOH) supply requirements for COVID-19 response.

During the Senate Blue Ribbon Committee's sixth hearing on the DOH's purchases thru the Department of Budget and Management's Procurement Service (DBM-PS), Lao was again asked if he checked the financial capability of Pharmally Pharmaceutical Corporation before awarding the contracts for the procurement of personal protective equipment (PPEs), face masks and face shields, as well as test kits.

"Yes," Lao responded when asked by Senator Richard Gordon if he did due diligence in awarding over ₱8 billion in contracts to Pharmally.

But Senator Risa Hontiveros said Lao was contradicting his previous admission to the committee that he failed to exercise due diligence in choosing Pharmally.

"180 degrees doon sa categorical na sinagot nila ngayon (It's a 180-degree turn from what his categorical statement now)," Hontiveros noted.

Senate Minority Leader Franklin Drilon confirmed Hontiveros' recollection, saying Lao responded to his question then.

Lao headed the DBM-PS when the DOH transferred some ₱42 billion in COVID-19 funds to the agency for the purchase of pandemicrelated supplies and equipment.

During the Senate Blue Ribbon panel's hearing last August 27, Lao was repeatedly asked by Drilon if he looked at Pharmally's financial background before awarding the multi-billion peso supply contracts.

"Did you look at how much the paid-up capital of Pharmally [was] to be authorized to a trade of huge supply contract?" Drilon then inquired.

"Did you exercise diligence in doing this?" he asked.

"We failed to check on the articles of incorporation," Lao replied, prompting Drilon to point out that the former Cabinet official, as a lawyer, should have been able to do such a "simple thing."

"During the time, we did our best to exercise due diligence," Lao further explained.

Lao, in the same hearing, also conceded that there may have been negligence on his part in looking for contractors that can provide the government face masks at the lowest cost because they were pressed for time.

"When you say there might be a negligence, or we were not able to exhaustively look for the cheapest supplier...that might be a possibility," he said when Senator Francis Pangilinan asked if he had been negligent.

Still, Lao said on Monday that he "never" said that he failed to do his work diligently, even daring senators to check the transcript of the previous hearings.

He insisted that the expired Bayanihan to Heal as One Act (Republic Act No. 11469) did not include financial capability as a requirement in government procurements.

"The capability basis is the capacity to deliver," he argued.

Timeline

Pharmally was the fastest to provide the DOH's supply needs, he said, noting that the foreign firm was able to deliver the goods on March 25, 2020, a day after he met with interested contractors.

Senators, however, questioned the timeline of the award and deliveries after finding out that Pharmally delivered 500,000 surgical masks ahead of the government's purchase order for the items.

Pharmally's regulatory affairs head Krizle Mago told senators they received the request for quotation on March 25, and purchase order on April 6.

According to the Commission on Audit, however, said the purchase order for 500,000 face masks at a unit price of ₱27.72 was sent to Pharmally only on April 16.

It was also the same day that Pharmally received another order for 2.4 million face masks worth ₱22.50 each.

"Paano niyo madedeliver 'yong 500,000 surgical masks kung ang sinasabi mo ay wala kayong inventory (How will you be able to deliver 500,000 surgical masks when you are saying that you did not have the inventory)? Do not lie to us," Gordon told Pharmally executives.

Senators have suspected that the government gave Pharmally undue preference over local manufacturers of PPEs and face masks since it has ties to President Duterte allies, including former presidential adviser Michael Yang.

One Filipino company previously admitted suffering financial losses when they were forced to bring down their prices to ₱13.50 to just about ₱2.