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Public finance

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Commentary

Public finance

/ 12:16 AM January 12, 2017

President Duterte recently signed into law Republic Act No. 10924 or the 2017 General Appropriations Act: the P3.35-trillion national budget calculated to finance the operations of the national government and its programs or projects for the current year.

The national budget has four classes of public expenditure: debt servicing, capital outlay, personnel services, and maintenance and other operating expenses or MOOE. The allocation for debt servicing, foreign and domestic, is included in the lumped amount referred to as the Special Purpose Fund, which includes the calamity fund.

Save for funds for debt service, all the three other classes of public expenditure have a common denominator.  Their disbursement must comply with RA 9184 or the Government Procurement Reform Act. The basic requirement of the law is open and competitive public bidding. The rationale for the law is to enable the government to get the cheapest cost for the desired goods or services, and generate savings.

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Funds for personnel services are expended for the salaries, allowances, and bonuses of government officials and employees. Their disbursement traditionally does not require compliance with the procurement law. The usage of funds for personnel services, however, to pay consultants must comply with RA 9184. Otherwise, the heads of agencies, including chief executives of local government units, who hire the services of consultants without the requisite bidding process mandated by the procurement law can be held liable for violation of the antigraft law.  They could be dismissed from government service.  All that the Office of the Ombudsman will need is information from a taxpayer of the name of the government agency or LGU and the consultant.

The MOOE fund the acquisition of supplies and materials and related services with utility value for a relatively short period of time, usually within a year. The disbursement of this fund requires compliance with the procurement law.

Capital outlay comprises the bulk of the national budget because it includes funds for infrastructure projects spread out across the country. Pet projects of lawmakers in their respective legislative districts are funded through line item allocation included in the budget of the implementing department, usually Public Works and Highways.  The disbursement of capital outlay is subject to the procurement law. This aspect of public finance renders competitive public bidding essential and desirable because payola (or “SOP”) to corrupt officials is usually generated in infrastructure projects.  It is satisfied through a rigged bidding of a project with a bloated cost that absorbs the SOP.

There is usually a semblance of public bidding, but more often than not, it is a fixed bidding through collusive or anticompetitive conduct. Proof of collusion is the unwritten rule of territoriality among public works contractors.  They divide geographic spheres of operation preordained by a political overlord.

Public bidding in the public sector is a genuine subject of the antitrust law, the Philippine Competition Act. Anticompetitive conduct is more likely to be prevalent in the public sector with billion-peso infrastructure projects up for perennial bidding than in the private sector. The hands of the Philippine Competition Commission will be full going after the collusive actors in public bidding in the public sector.

Whether in the private or public sector, the antitrust commission will be less effective without the ability to wiretap conversations of collusive actors. Exhibit “A” of this proposition is the 2009 Matt Damon starrer “The Informant.” The Senate might just wish to include in the proposed amendment of the antiwiretapping law a violation of the antitrust law as an exception.

Achieving honest-to-goodness competitive public bidding in the implementation of public infrastructure projects will be a significant realization of the much-vaunted anticorruption policy of the Duterte administration.  It will be a true leadership legacy.

Frank E. Lobrigo practiced law for 20 years. He is a law lecturer and JSD student at San Beda College Graduate School of Law in Manila.

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TAGS: Commentary, Finance, funds, general appropriations act, National budget, opinion
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