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COA flags Navy's 'ineffective' procurement outsourcing


The Commission on Audit has deemed "ineffective" the Philippine Navy's outsourcing of a supply and services transaction to the Philippine International Trading Corporation.

According to its recently-released 2018 audit report, COA found that "non-implementation or delayed completion of procurement procedures" resulted in accumulated fund transfers totaling to P2,267,040,511.09 with the PITC.

This, auditors said, deprived the Navy of "the immediate use of the planned projects which may hinder the attainment of its mission."

State auditors recommended that the Navy's management "demand from PITC the immediate delivery of all requisitioned goods and/or equipment, otherwise, request the refund of unspent balances and remit the same to the Bureau of the Treasury."

Navy officials were also asked to "stop transferring funds and refrain from availing the services of PITC unless in extreme circumstances wherein the Philippine Navy Bids and Awards Committee lacks the proficiency or capability to undertake the particular procurement."

COA noted that the Armed Forces of the Philippines and the PITC entered

into a memorandum of agreement (MOA) where the AFP engaged the services of the trading corporation for the procurement of goods, services, and infrastructure projects of the major services including the Philippine Navy.

"Review of the MOA revealed that it did not provide a timeline of delivery or completion of procurement procedures, which is disadvantageous to the AFP," the report said.

Audit report analysis indicates that PITC was not able to perform its obligations even with the fund transfers at P2.2 million in December 2018.

According to COA, management has commented that liaison officers were designated to "constantly coordinate with the PITC for the timely determination of the status and immediate conduct of procurement procedures."

It also said a review and amendment to AORs was facilitated "in order to address the projects with low budget and lacking technical specifications."

Moreover, no CY 2018 fund was transferred to the PITC," it added.

P154M in delayed projects

In the same 2018 report, COA particularly pointed out the delayed completion of over P154 million worth of projects payable through deposit on letters of credit (DLCs).

Citing a December 2018 data, it said a total P154,648,440 worth of the Navy's projects payable through DLCs were "not implemented" thus resulting in "accumulated idle funds and depriving the government of the benefit that could be derived therefrom."

State auditors recommended that the Navy's management "demand the deliveries of goods and services and/or ensure that contracts with suppliers who failed to comply with their obligations are terminated."

COA said this would "prevent the accumulation of idle funds which can be used for other beneficial purposes."'

According to COA, as of December 31, 2018, the Statement of Financial Position showed the DLC balance amounted to P1,258,481,682.83.

Analysis showed that P154,648,440.00 pertains to DLCs that were opened in favor of three "defaulting" suppliers.

Sate auditors noted that the delayed or non-delivery of goods and services is a "breach of contract and can affect the operational tempo of the (Philippine Navy), which may hinder the accomplishment of its mission."

In a rejoinder, COA said the management must be reminded of the validity of appropriations whereas "failure to complete the projects within the statutory time frame will result in mandatory reversal of the related funds to the (Bureau of the Treasury)." —Margaret Claire Layug/LBG, GMA News

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