PROCUREMENT DURING THE COVID-19 PANDEMIC
By: Atty. Euney Marie Mata-Perez
Because of the serious threat posed by the coronavirus disease 2019 (Covid-19) pandemic to the health, safety and security of Filipinos, a state of national emergency was declared over the country under Section 2 of Republic Act (RA) 11469, or “the Bayanihan to Heal as One Act.”
Under the state of public health emergency, President Rodrigo Duterte is empowered to implement several measures. Relevant government entities, including local government units, were empowered to access funding quickly. And to ensure that these entities can properly and timely respond to this emergency, the process to procure the needed supplies and equipment was eased.
As a result, the strict requirements of public bidding under RA 9184, or the “Government Procurement Reform Act” (“Procurement Act”), were lifted, and the alternative mode of negotiated purchases under Section 53(b) of this law was allowed to be resorted to by government agencies. In general, a negotiated purchase is allowed in case of an imminent danger to life or property during a state of calamity; when time is of the essence that arose from natural or man-made calamities or other causes where immediate action is necessary to prevent damage to property or loss of life; or to restore vital public services, infrastructure facilities and other public utilities.
Among the most important items to be procured, not only by the government, but also by various hospitals and other health facilities, are personal protective equipment (PPE). Shortages of these have been reported, especially in medical facilities in far-flung areas.
PPE is generally defined as equipment that will protect the user from health or safety risks at work. It can include safety helmets, gloves, eye protection, high-visibility clothing, safety footwear and safety harnesses. It also includes respiratory protective equipment. For ordinary citizens, this mean masks and face shields.
In its interim guidelines issued in March 2020, the World Health Organization (WHO) declared that the current global stockpile of PPE and other medical equipment was insufficient, particularly medical masks and respirators. It projected that stocks of medical gowns and goggles would also be insufficient, and that there could be a shortage of PPE globally. The shortage could be due to surging global demand, driven not only by the number of Covid-19 cases, but also by misinformation, panic buying and stockpiling. The WHO also projected that the capacity to expand PPE production was limited, and current demand for respirators and masks would not be met, especially if the widespread inappropriate use of PPE continues.
Thus, WHO did not recommend that asymptomatic persons wear medical masks, as doing so may cause a procurement burden and create a false sense of security that could lead to the neglect of other essential preventive measures.
But everyone is mandated to wear masks now, and the demand for PPE and needed supplies continues to rise as the number of confirmed Covid-19 cases soars. It has been shown that in Asian countries or cities, such as Hong Kong, the wearing of masks helped considerably in curbing the spread of the coronavirus.
The Bayanihan Act also authorized the grant of incentives for the manufacture or importation of critical or needed equipment or supplies to carry out its policy to “mitigate, if not contain, the transmission of Covid-19.” It also exempted their importation from import duties, taxes and other fees. However, the Bayanihan law does not provide for any value-added tax or income tax exemption on domestic sales of PPE. Thus, the local sale and purchase of PPE and supplies would be subject to regular taxes, such as the 12-percent value-added tax and applicable withholding taxes. Any income from their sale is also subject to regular income tax.
Unfortunately, the demand for these equipment and supplies can also lead to unscrupulous practices, such as hoarding, profiteering and manipulation of prices.
The Bayanihan Act empowered the President to enforce measures against these practices, as well as against product deceptions, cartels, monopolies or other ways to restrain trade and other pernicious practices that affect the supply, distribution and movement of needed goods and supplies. The President is mandated to ensure that the donation, acceptance and distribution of health products to respond to the public health emergency are not unnecessarily delayed.
The overall objective is that adequate medical equipment, supplies and PPE are available and distributed to everyone who needs them during the pandemic.
Unfortunately, the mandate to ease and facilitate the procurement of necessary equipment and supplies, including PPE, can also result in injurious practices, as discussed above. It can also lead to abusive practices, including overpricing in negotiated purchases, and graft and corruption among our government officials.
One should bear in mind that even in negotiated purchases, the Procurement Act mandates the supplier to be technically, legally and financially capable, and the procuring entity to ensure that the most advantageous price for the government be obtained (Procurement Act, sec. 48[e]). Thus, overpricing is prohibited.
We hope that the number of Covid-19 cases would decrease and be controlled soon. We also hope that critical medical equipment, PPE and supplies be made available to those who need them. We hope that the goodness of the human spirit shall prevail; that unscrupulous or injurious practices are minimized, if not totally eliminated; and the objectives of the Bayanihan Act shall be conscientiously implemented. In any case, we, as ordinary citizens, should do our part and be vigilant.
Euney Marie J. Mata-Perez is a CPA-lawyer and managing partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer, and current president of the Asia-Oceania Tax Consultants’ Association.