P298.6-M CHED deal anomalous

MANILA, Philippines – Government auditors of the Commission on Higher Education (CHED) have found irregularities in the contract the agency forged last year with a consortium for a multimillion-peso project to establish call centers in six state colleges and universities. 

In a consolidated interim audit report of CHED’s 2007 operations, the in-house Commission on Audit (COA) auditors said that the P298.6-million contract signed by former CHED chairman Carlito Puno with a consortium led by e-Services Global Solutions Inc. (eSGS), contains provisions that are “at the least ambiguous and at the most grossly disadvantageous” to the government.

In their evaluation, auditors noted that while the eSGS consortium will be paid by CHED P298.6 million for setting up six call centers and operating them for five years, the company will only pay P126 million in annual lease rental payment to CHED.

COA said that the contract bore provisions that gave all the advantages to the eSGS consortium at the expense of the government.

“The eSGS as business operator will get all income or revenues generated by the business,” the auditors noted.

“CHED being the owner of the business assets will be paid rentals for using its facilities by eSGS over a period of five years in total amount of P126 million. This is equal to 42 percent of CHED’s total outlay of P298.6 million,” COA added.

COA said there was a provision in the contract stating that eSGS can unilaterally terminate its business contract with CHED anytime and for any reason just by paying CHED a penalty of a maximum amount of P5 million.

“Should the project fail to attain its projected recovery of investment of around P126 million, or 42 percent as return of investment of P298.6 million, then the government will lose a majority of their investment, as well as the opportunity to benefit from the transfer of technology to their intended beneficiary schools and students,” the report said.

The eSGS consortium is made up of eSGS, Drishti Philippines Inc., Information Transmission Computer Control (ITCC), and Hillmarc’s Construction Corp. (HCC).

CHED Secretary Romulo Neri had ordered the suspension of payments to the eSGS consortium last October after receiving a report on the questionable deal.

Neri said he supports the findings of the CHED internal review team that had been formed to look into the project in the last quarter of 2007.

Neri said that they will ask the CHED officials who were responsible for signing such a contract to explain.

“We have to ask the people who signed it to explain to COA and to the CHED why we shouldn’t cancel this contract and (how to) get back whatever we paid,” Neri said.

“In effect, the COA findings sustained our investigation,” Neri also said.

The probe ordered by Neri on the call center project had found early payments made by CHED to eSGS for the supposed completion of different phases of the project, which prompted Neri to suspend payment.

The probe also found numerous irregularities in the bidding process conducted by CHED’s bids and awards committee (BAC) then headed by deputy executive director Julito Vitriolo, to award the contract to eSGS.

The BAC was also found to have questionably prequalified eSGS even after finding member-companies of the consortium to have questionable financial standing and lack of experience.