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WB bars RP, Chinese firms over road project corruption

MANILA, Philippines- Washington-based World Bank on Thursday said it has found evidence of bid-rigging in a Philippine road project involving several Chinese and local construction companies and has decided to bar them from future contracts. The bank said the investigation by Integrity Vice President Leonard McCarthy has uncovered a major cartel involving local and international firms. The World Bank’s Integrity Vice Presidency or INT is responsible for investigating allegations of fraud and corruption in Bank-financed operations, the lender said in a statement posted on its Web site. The INT investigation uncovered evidence of a major cartel involving local and international firms bidding on contracts under phase one of the Philippines National Roads Improvement and Management Program, known as NRIMP 1. INT closely analyzed the procurement process the firms participated in and conducted numerous interviews before closing the investigations and initiating sanctions proceedings against the entities. As a result of swift action when suspicions of collusion in the bidding process were raised by the project team, the World Bank stopped an estimated $33 million from being awarded. No World Bank funds from the NRIMP 1 project were disbursed to the now-sanctioned firms. McCarthy said, “This is one of our most important and far-reaching cases, and it highlights the effectiveness of the World Bank’s investigative and sanctions process. As the World Bank Group continues to ramp up its anti-corruption work, INT will remain vigilant in investigating allegations and holding wrongdoers accountable." McCarthy added that INT was in the process of conducting a worldwide review of the Bank’s activity in the roads sector. Based on INT’s investigation of the NRIMP 1 case, the World Bank’s Sanctions Board, made up of senior Bank officials and external legal experts, decided that the entities had participated in a collusive scheme designed to establish bid prices at artificial, non-competitive levels and to deprive the Borrower of the benefits of free and open competition. This constitutes fraudulent practices under the applicable procurement rules applying to NRIMP 1. The firms and lengths of debarments follow: * E. C. de Luna Construction Corp. and Eduardo C. de Luna, owner and sole proprietor of the firm, were both debarred indefinitely – the first permanent debarments since 2004. * China Road and Bridge Corp. was debarred for eight years. The debarment can be reduced or terminated after five years if the firm puts in place a compliance program satisfactory to the World Bank. * China State Construction Corp. and China Wu Yi Co. Ltd. were each debarred for six years. In the case of each firm, the debarment can be reduced or terminated after four years if that firm puts in place a compliance program satisfactory to the World Bank. * China Geo-Engineering Corp. was debarred for five years. The debarment can be reduced or terminated after three years if the firm puts in place a compliance program satisfactory to the World Bank. * Cavite Ideal International Construction and Development Corp. and CM Pancho Construction Inc. were each debarred for four years. In the case of each firm, the debarment can be reduced or terminated after two years if that firm puts in place a compliance program satisfactory to the World Bank. Another firm, Dongsung Construction Co. Ltd. (Dongsung) was separately debarred in August 2008 for four years for fraudulent and corrupt practices in relation to the NRIMP 1 case, with the debarment subject to reduction or termination after two years if the firm puts in place a compliance program satisfactory to the World Bank. Dongsung did not contest the accusations brought against it in the Notice initiating the Bank’s administrative sanctions proceedings, and the Sanctions Board, as required by the applicable Sanctions Procedures in any uncontested proceeding, imposed the sanction recommended by the Bank’s Evaluation and Suspension Officer (EO) in the Notice without review of the case. The sanctioned entities will have their names listed on the World Bank’s website for the full extent of the sanctioned period and will be ineligible to bid on World Bank Group contracts during this period. NRIMP was designed to assist the Philippines Government to upgrade its roads network and was partially financed by a $150 million loan from the World Bank. It aimed to build roads and address weaknesses in project management, so that future roads projects would deliver more benefit at lower cost. NRIMP 1, which closed in March 2007, built 1,400 kilometers of roads were built or resurfaced and management of money for roads within the Department of Public Works and Highways was improved. World Bank said the second phase of the program, which is now underway, has been designed with even tighter anti-corruption mechanisms, including independent procurement evaluation, stronger internal controls and oversight of road construction by a civil society group known as “Road Watch". The World Bank revised its sanctions procedures in 2006 to allow the Bank to deal with fraud and corruption cases more efficiently. In the first tier of the process, the Bank’s EO reviews the case brought by INT against a respondent, determines whether or not there is sufficient evidence to support the accusations and recommends an appropriate sanction. The EO may also temporarily suspend the firm from bidding during the sanctions process. If a firm chooses not to contest the accusations against it within 90 days, the Sanctions Board will then impose the recommended sanction. If a firm disputes the findings, the Sanctions Board will review the firm’s response and INT’s rejoinder and then makes a decision. If a hearing is requested, the Sanctions Board will allow INT and the firm to argue the case orally before taking a decision. As a result of the temporary suspensions issued by the Bank’s EO against all the entities in July 2008, the companies were prevented from participating in World Bank Group-financed activities pending the outcome of the Sanctions Board proceeding. Based on INT investigations, the World Bank has since 1999 debarred 351 firms and individuals for their involvement in fraud and corruption in Bank-financed projects. C. Arcibal, GMANews.TV/ AP