MANILA - Former Foreign Affairs Secretary Perfecto Yasay blamed the transfer of the procurement system from the Bangko Sentral ng Pilipinas (BSP) to the APO Production Unit for delays in the issuance of passports and the backlog in the online appointment process for applications and renewals.
Yasay told a joint investigation of the House Committees on Foreign Affairs and Good Government and Public Accountability: "Unlike under the present set up, the actual printer and supplier of passports cannot be held answerable by either the Department of Foreign Affairs (DFA) or APO for any problem of breach of contract that may arise."
"With this inability to hold the private enterprise that has assumed virtually all the key responsibilities in the production and printing of passports that include the purchase of materials, control of the online appointment system for the public and the data and information software, without effective government supervision, the DFA is left helpless in swiftly taking measures to correct systematic flaws and situations that persist and result in intolerable difficulties to the public, especially OFWs (overseas Filipino workers)," Yasay said.
Yasay told the committee that in a cabinet meeting in February 2017, President Rodrigo Duterte asked the DFA and the Department of Finance to meet with BSP to discuss the return of the printing of e-passports from the so-called APO-UGEC (United Graphic Expression Corporation) joint venture to the BSP.
However, the president's instructions were preempted.
"A meeting immediately took place on February 9, 2017 between DFA Assistant Secretary Frank R. Cimafranca and the deputy governors of BSP and their chief legal counsel. This preempted the instructions of the president for the SFA and SDF to directly deal with this matter with top BSP officials," he said.
Yasay said Cimafranca informed him in a memo that the BSP decision not to accept the printing of new passports was final.
"The memo also states that the BSP would discuss with the Office of the President together with all stakeholders an amicable settlement," said Yasay.
Yasay added: "I found this posture taken by the BSP alarming as it tended to support a cover up or downplay of a possible fraud against the government or at the very least a conspiracy to violate the law and its implementing rules with regards to the production of accountable forms and other sensitive high quality documents that included passports."
He also pointed to irregularities in the awarding of the e-passport procurement contract to APO. On August 1, 2006, BSP and DFA entered into a memorandum of agreement (MOA) for the procurement of the machine readable electronic passport (MREP) system.
On March 6, 2014, BSP wrote DFA to say that it was not interested in procuring the printing services of a new e-passport with which the DFA was then intending to replace the MREPs.
BSP simply reiterated the commitment to continue providing the e-passport system and booklet requirements it was already doing for DFA. This became the basis for DFA to remove the procurement services from the BSP "to another recognized government printer that was grossly ill-equipped for it."
There was no agreement rescinding or preterminating the DFA-BSP MOA.
Under that MOA, "[t]he BSP cannot refuse the printing of an upgraded version of the MREP that maybe required by the ICAO (International Civil Aviation Organization)."
On November 2014, APO entered into a joint venture agreement (JVA) with UGEC to convert a plant in Lima, Batangas as a high security printing facility. The printing of the improved e-passports through the Lima facility was not and could not have been contemplated under the JVA because APO did not yet have a contract to print the passport needs of the DFA.
Under the JVA, APO acknowledged not to possess the financial and technological resources needed in upgrading its capability to comply with international standards for the production of highly sensitive and secure forms, which included the e-passport system.
"For this reason, it was crucial for APO and UGEC to come up with this JVA prior to the award to APO of the procurement contract as part of the premeditated scheme to circumvent the law and compromise public interest," he said.
Under the JVA, which remains an unregistered entity, UGEC assumes 90 percent control of the equity and assets while APO, only percent. Yasay stressed the JVA has no legal personality.
"Seen in this light, it is clear that the contract for the procurement of the e-passport was effectively sub-contracted or assigned to UGEC under the guise of a JVA," Yasay said.
APO's only obvious qualification to be granted the project was because it was a recognized government printer. However, a key condition pursuant to law that was imposed by the Government Procurement Policy Board (GPPB), is that APO must directly undertake the printing services and cannot engage, subcontract or assign any part of the project.
It was UGEC, as the controlling interest that managed all operational, finance, and accounting requirements under the project and compliance with all delivery schedules, including purchase of materials, the maintenance of books of accounts and records and the determination of net profit that would be distributed to UGEC and APO respectively on the basis of 90 percent and 10 percent sharing.
The BSP continued providing more than a million MREPs up to about September 2016 which the DFA had to pay for but did not use. These passports are now uselessly stored and rotting in the cramped premises of the DFA's main consular office in Pasay City.
Only July 12, 2016, Yasay agreed to the full implementation of the new e-passport production plan as an emergency measure for a period of 6 months under the terms of a letter agreement among the DFA, APO and UGEC, from which the two latter entities reneged. DFA also allowed the payment to APO-UGEC of P920 per passport instead of P650 stipulated in the letter agreement.
Yasay said that in November 2016, he informed the President of the basis of his decision to cancel the MOA and asked him to intervene to assure the immediate cooperation of the PCO, APO and BSP to avert a potentially grave crisis.
Yasay, however, added that the BSP reiterated its refusal, arguing that printing was not a core central banking function.
He also recalled that Chief Presidential Legal Counsel Salvador Panelo issued a legal opinion declaring the JVA as void ab initio for being ultra vires (beyond one's authority).
For Yasay, unless this irregularity is directly addressed and not swept under the rug, "the delays in the processing of passports will continue to victimize our people."
Yasay is, however, curious what pushed the DFA, in connivance with APO and the BSP, to discard the MREPs despite fully complying with international standards.
"The unspoken answer is deeply ingrained in the sad reality that plagues many of our public institutions and engenders corruption and wasteful practices, which is every chance for a new contract or to replace an existing one for the procurement of a product or service is another opportunity to make money, whether rightly or wrongly," he said.