Cheap isn’t cheap

In this life you get what you pay for. Buy cheap, you get cheap. You have to pay for quality.

Republic Act No. 9184, or the Government Procurement Reform Act, doesn’t seem to understand this. It mandates that government agencies must choose the lowest bidder. Mind you, parameters and technical specifications are set, but there can be a wide range of quality that still meets those specifications. It’s probably one of the worst laws Congress has produced. I’ve had complaints on it from almost everyone who’s had to deal with government.

Its problem is it’s too “black and white.” It constricts everything into a narrow alley through which everyone must pass regardless of whether they fit. There’s no room to accommodate the huge differences different projects may require.

Under the law, ALL (caps mine) procurement must be done by competitive bidding, which means: Buy the cheapest. Where this demonstrably fails is in consulting services. It applies the same restrictions as for buying goods. That, quite simply, is absurd. When you have heart problems, you don’t go to your general practitioner because he is cheaper; you go to a heart specialist who has trained extensively in this ailment. When you design an airport terminal, you go to people who’ve shown their skill in functionality, efficiency, design and, importantly, imagination. Intellect can’t be measured by money. You have to pay for expertise.

It’s the same with products. I’ll never forget (in a mind that forgets a lot) the American visiting a Bosch factory in Germany. He asked: “How long will that power drill last?” The German technician didn’t understand the question. It wasn’t the language barrier, it was that German products last forever. Chinese products last till you take them out of the shop door. RA 9184 insists government must buy Chinese power drills — because they’re cheaper. But after replacing them three or four times over the next 10 years, guess which one is cheaper.

I’m all for getting the best deal, but price alone doesn’t determine the best deal. A whole host of factors do. The problem is that’s difficult to put in writing. So Congress didn’t, and took the easy way out. It must all come down to price.

Now, as a taxpayer (paying too much tax), I’m all for government not squandering our money. Because it is our money, not some ephemeral “government.” But that is best done taking all factors into account, not just cost. Yet that’s what RA 9184 mandates when it declares: “All Procurement shall be done through Competitive Bidding, except as provided for in Article XVI of this Act.” The exceptions are too limited to be of much use when you really need to buy the best.

Its other major weakness is its strict adherence to the 60:40 rule—mandated even if it makes no sense. A Filipino equity partner must be found, even if the skills and experience don’t exist, much more one with sufficient capital that can run into multimillions of dollars to meet the 60-percent equity mandate. In today’s fast-moving, high-tech world, such a Filipino company often won’t exist. An exception can be made, but it’s almost impossible to get.

If you’re building a road, you can relatively easily define all the characteristics required: quality of cement and aggregate, thickness, etc. But if you’re putting in place a computerized system to handle government services to replace pen and paper, it’s far more difficult. These electronic systems are new to the world, and few have the expertise to design them. In many cases, there just won’t be a Filipino company that has that experience. This is no denigration of Filipino expertise, which is as good as anybody’s—it’s just that Filipinos haven’t done it before. The design of government electronic services is new to the Philippines. It’s not new to the First World.

So why stumble through trying to design something you have no experience in, when there are people who do have that experience? Because they’re foreigners, so RA 9184 won’t allow them to bid on their own, or even as a majority partner.

Mind you, there are some good things that should be kept. Procurement by electronic means is one of them. It creates a single portal as the primary source of information and allows for changes in the procurement process to “adapt to improvements in modern technology.” Now, that makes good sense. It allows for the Electronic Procurement System to be used to “take advantage of the significant built-in efficiencies of the G-EPS and the volume discounts inherent in bulk purchasing” — something the Department of Health should be doing in its purchase of medicines, instead of ruthlessly slashing their prices.

RA 9184 needs to be more intelligently designed, with some urgency if we want better government services and products. Accompanying it must be the passage of the Freedom of Information Act, so we can also ensure that deals are honestly conducted.

Cheap isn’t cheap.

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