The Procurement Service of DBM

The Procurement Service of the Department of Budget and Management or the PS-DBM has a dual function. First, the PS-DBM acts as the buying agent of other government agencies in the procurement of common-use supplies, materials, and equipment. For this purpose, government agencies “remit in advance to the Procurement Service the funds needed to service their requirements for supplies, materials and equipment.” The PS-DBM holds these funds in trust for the remitting government agency.

Second, the PS-DBM acts as a trading arm of the government, buying stocks of common-use supplies, materials, and equipment for resale to other government agencies. For its “stocking” operations, the PS-DBM uses its own budgetary appropriation for which it received in 1989 an initial amount of “three million pesos (P3,000,000.00) for each regional depot” under Executive Order No. 359. The purpose of this dual function of the PS-DBM is to reduce the cost of government operations “through greater efficiency in the procurement of supplies, materials and equipment.” Today, the PS-DBM discharges its dual function through the online Philippine Government Electronic Procurement System or PhilGEPS.

The dual function of the PS-DBM is circumscribed by two legal provisions. First is the constitutional provision mandating that “no law shall be passed authorizing any transfer of appropriations.” However, the Constitution provides that the President, the Senate President, the House Speaker, the Chief Justice, and the heads of Constitutional Commissions “may, by law, be authorized to augment any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations.” Second, Article 220 of the Revised Penal Code penalizes “any public officer who shall apply any public fund or property under his administration to any public use other than for which such fund or property were appropriated by law.” This is known as technical malversation.

The Senate is now investigating the purchase of allegedly overpriced face masks and face shields by the PS-DBM for its “stocking” operations. What is clear from the Commission on Audit report is that the Department of Health (DOH) transferred P42 billion from its budgetary appropriations to the PS-DBM for the purchase of face masks, face shields, and other supplies. What is not clear is who authorized the transfer of the DOH appropriations. We can, however, draw some conclusions from these facts alone.

First, the P42 billion transferred by the DOH to the PS-DBM can only be used to purchase face masks, face shields, and other supplies for the use of DOH, not for resale to other government agencies. The PS-DBM received the P42 billion in trust for the DOH, for the sole purpose of using the funds to purchase face masks, face shields, and other supplies needed by the DOH. The PS-DBM has no authority to use any part of the P42 billion for its stocking operations, that is, to purchase face masks, face shields, and other supplies for resale to other government agencies.

The DOH itself cannot use the P42 billion to buy face masks and face shields for resale to other agencies. The mandate of the DOH is to buy face masks and face shields for distribution free of charge to government hospitals and clinics. The mandate of the DOH is to safeguard public health, not to buy and sell face masks and face shields. Any other use of the DOH’s P42 billion will constitute technical malversation under Article 220 of the Revised Penal Code.

Second, in the Executive branch of government, only the President has the authority to transfer or “realign” appropriations from one agency to another. The DOH or DBM Secretary has no authority to realign funds. Moreover, the President can only realign “savings.” The P42 billion transferred from the DOH to the PS-DBM are not savings because the amount was needed then, and is still needed now, for the purpose for which it was appropriated by Congress—for the DOH itself to perform its mandate of addressing the pandemic crisis.

If the DOH or DBM authorized the remittance of the P42 billion for the “stocking” operations of the PS-DBM, then such transfer would constitute technical malversation. If the President authorized the realignment of the DOH funds for the stocking operations of the PS-DBM, then such realignment would be unconstitutional since the P42 billion are not savings.

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