NBN-ZTE Deal: The Devil is in the Details

Ever since the controversy of the National Broadband Network Project (NBN-ZTE) broke out, there hasn't been any independent study on whether the deal with the Chinese contractor is actually over-priced or not. All we know is that there’s something really fishy about it. About two months ago, after downloading a copy of the Bill of Quantities which is an annex to the contract, I sifted thru the pages and pages of itemized pricing for materials, softwares and manpower. I earlier wrote about my initial observations here. Included in the contract is the proposed plan on how the network will be implemented. I graphed a simple diagram on how it will look like: Essentially, several modes of connectivity will be utilized to roll-out the network – WiMax, Satellite, and Commercial Networks. The Bill of Quantities lists down how much goes to what: These are the Equipment Cost: Transmission Backbone Equipment: $47,649,037 Regional WiMax System: $82,077,545 IP Backbone Equipment: $15,510,251 VoIP System: $15,175,887 DC/NOC Equipment: $8,977,882 Information Security system: $6,743,012 Monitor & Environment Equipment: $3,532,877 Uniform NMS: $2,143,540 DC Power & Diesel Generator: $11,505,187 Sub-Total: $194,051,628 And these are the breakdown of Services Cost: Site Prep & Civil Works: $48,571,040 System Implementation & Engineering: $20,607,490 Site Engineering for Remote Office Site: $28,686,840 Service for IDC Construction & Integration: $8,287,281 Joint Project Management Office: $5,995,000 Link Charges: $6,498,000 Training: $1,948,505 Managed Services: $14,875,507 Sub-Total: $135,429,662 The number don’t mean much because most of us would never really know if these prices are within normal market levels. Still, as the saying goes, the devil is in the details. Digging deeper into the documents, there are some very familiar items we can actually make some reasonable comparison with. The equipments and their prices are as follows: Office Printer : 1 set @ $804.20 Desktop Computer : 1 set @ $2,055.94 Laptop Computer : 1 set @ $3,440.56 Basic E1 Tester : 5 units @ $7,128.41 MS SQL Server 2005 Standard Edition : 1 CPU License @ $6,797.73 Here lies the question -- are these items overpriced? A set of office printer was listed at ~Php41,000 (when ZTE sent in their unsolicited proposal on September 2006, the Peso-Dollar exchange rate was still hovering around 51:1) and a desktop computer costs ~Php105,000. The laptop, on the other hand, was priced at around Php175,000. While we can say that market prices for these items still falls within an acceptable range (although in the upper limit), others might argue that they obviously looked overpriced. In my opinion, at least the printer, laptop and PC can be had for half the quoted price. And, if those items were easily padded, one can only imagine how much the other more expensive equipments went for. - Abe Olandres / YugaTech