PSALM reacts to malicious reports in relation to the bidding

04 Dec 2013

PSALM President and CEO Emmanuel R. Ledesma, Jr. is making an appeal to the people behind the malicious reports to set aside their political, business, and/or personal interests relative to the PB 103 oil spill and grounding in Iloilo. PSALM is seeking the support of all groups and government agencies concerned, so that this problem will be resolved as soon as reasonably possible.

The procurement of the contractor for the PB 103 oil spill clean-up and salvaging operations was conducted in accordance with government procurement rules, especially in emergency situations. Procurement rules define an emergency case as follows: "[i]n case of imminent danger to life or property during a state of calamity, or when time is of the essence arising from natural or man-made calamities or other causes where immediate action is necessary to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public utilities". PSALM personnel acted with the diligence required under the particular circumstances at hand, as they were expected to come up as soon as possible with the necessary solutions in the face of an emergency and to mitigate further harm to the typhoon victims and the environment given available information.

In the afternoon of 20 November 2013, the PSALM Bids and Awards Committee (BAC) sent Requests for Proposals (RFPs) to four entities that earlier submitted letters of interest, including Kuan Yu Global Technologies Inc. (Kuan Yu). The procurement rules requires that RFPs be sent to at least three proponents. Days before the bidding, these bidders had already known full well that PSALM is in the process of selecting a contractor relative to the oil spill and grounding of PB 103, as they have previously offered their services to PSALM directly or through NPC or the Government Service Insurance Commission (GSIS). Despite these offers, the BAC proceeded to conduct a negotiated bidding under emergency cases.

The following were the services covered under the RFP, gathered after PSALM's consultation with NPC and the Philippine Coast Guard (PCG), and requisite discussion with GSIS and its reinsurers:

1. Oil spill containment and coastal clean-up of the shoreline of Barangay Botongon, and that of other affected areas (i.e. Zone 1, Estancia; Salong, Banban, Alinsulong, Embarcadero, Tanao and Binon-An, Batad).

2. Removal, transport and treatment/disposal of waste oil and debris.

3. Siphoning of remaining usable fuel oil in PB 103 in Estancia, Iloilo and transport thereof to PB 101-102 located Barrio Obrero, La Paz, Iloilo City.

4. Refloating of PB 103.

5. Towing of refloated PB 103 to a dry dock facility (e.g. Batangas or Subic).

The RFP required the contractor to secure the PCG's approval of its Salvage Plan, obtain all necessary permits and licenses for the environmental clean-up/disposal of waste oil and debris from the appropriate government agency (e.g. Department of Environment and Natural Resources), and submit to PSALM a detailed schedule/timeline of activities.

The submission and opening of bid proposals were held at 6:45 P.M. and 7:00 P.M. respectively. Kuan Yu and another proponent's representatives arrived past the deadline and hence were prohibited by the BAC from submitting a bid despite their request for reconsideration. Bidder No. 1's Total Bid Price of Php 104 million went beyond the Approved Budget for the Contract (ABC) of Php 96.8 million, due its failure to consider the inclusion of the 12% VAT in its Total Bid Price as clearly outlined in the Bid Price Schedule of the RFP. The first paragraph of the RFP specifically emphasized the procurement rule that "[b]ids exceeding the ABC shall not be considered." Bidder No. 2 was disqualified because it did not bid for all the services under the RFP. These grounds for disqualification are by no means mere technicalities that can be downplayed or dispensed with, as they are clear and material violations of procurement rules.

As such, the bidding unfortunately failed. Given that time is of the essence in view of the emergency situation, and it is in the best interest of the government to act with urgency, the BAC was constrained to schedule a second round of bidding with submission and opening of bid proposals set at 8:45 P.M. and 9:00 P.M., respectively. New RFPs were sent to the same four entities, now with an ABC of PhP 100 million (PSALM's maximum Board-approved realigned budget) to prevent a failure of bidding and to avert any prediction relative to the bid submitted for the first round of bidding. The bidders were additionally required, in the second bidding, to mobilize within 48 hours. The change in ABC is allowed under procurement rules. In the second round of bidding, only two (not three) bidders - Bidder No. 1 above and Kuan Yu - submitted bids. Kuan Yu's bid as read was PhP 94,999,888.88, but this was reduced to only PhP 87,213,012.70 as calculated. Bidder No. 1's bid is PhP 99,904,000.00 both as read and as calculated, or PhP 13,000,000.00 more than the winning bid.

Kuan Yu's articles of incorporation states that its purpose is to "provide service in marine management specializing in oil spill response, shoreline and open water clean-up, waste management and environmental remediation", "provide oil spill management, marine pollution management, consultancy, technical advice, remediation and perform actual oil spill clean-up", and "provide waste management and remediation through collection, safe transport and handling as well as proper disposal of oil and chemical wastes". Kuan Yu President Karl Ignatius P. Young and another officer had a participation in the successful oil spill clean-ups in Semirara and Guimaras, the former involving PB 106 of NPC.

PSALM regrets that Senator Franklin Drilon, who allegedly had a hand in the bidding, was dragged in this issue. In addition, PSALM notes that, after the bidding, there was no resolution from the BAC recommending the disapproval of the issuance of the award to Kuan Yu on the basis of alleged financial requirements, as the resolution was in fact for the issuance of the award.
In accordance with the RFP, Kuan Yu was paid a mobilization fee equivalent to 15% of its bid. Kuan Yu would only receive payment for each service based on accomplishment, and 10% of its bid as final payment upon submission of a certificate of completion and PSALM's acceptance. The refloating and towing services are strictly on a no-cure no-pay basis.

The price adjustment in the contract is an Amendment to Order, in technical terms. An Amendment to Order may be issued "only in emergency cases or during fortuitous events requiring necessary adjustments within the general scope of the contract in any one or more of the following is required in order to fully meet the requirements of the project", in accordance with Annex D of the Revised Implementing Rules and Regulations of the Government Procurement Reform Act (R.A. 9184) provides for Amendments to Order. An Amendment to Order refers to any necessary adjustment within the general scope of the contract such as any change affecting the specifications or scope of work of the goods and/or services to be procured in order to fully meet the requirements of the project. An Amendment to Order may also be issued by the concerned procuring entity where there are additional items needed and necessary for the protection of the goods, which were not included in the original contract. PSALM will implement the subject contract within the parameters imposed by R.A. 9184. An Amendment to Order is especially appropriate for the subject procurement because the clean-up and salvage operations involves a scope of work and timeline that tends to be of a flexible or developing nature, in view of the intricacy of the situation. It is well to note that the price adjustment provision in the contract was present in both the RFPs of the first a

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