COA questions P1.2-B contracts for tourism campaign

MANILA, Philippines - The Commission on Audit (COA) has found irregularities in the P1.2-billion advertising contracts entered into by the government for its tourism promotion campaign “It’s More Fun in the Philippines.”

In a 2014 COA report released over the weekend, state auditors said the advertising contracts were not subjected to public bidding and were renewed and extended in an amount more than what was stated in the original contract in violation of various provisions of Republic Act 9184 or the Procurement Law.

The COA said it would disallow audit expenses amounting to P999.78 million unless the Department of Tourism (DOT) and the Tourism Promotions Board (TPB) can justify their failure to follow procurement rules and regulations.

Records show that on Oct. 12, 2012, the government agencies entered into a contract worth P199.95 million with an advertising consultant to undertake the production of creative materials needed for the implementation of the “It’s More Fun in the Philippines” media campaign.

On Jan. 29, 2013 the contract was renewed for P400 million, which was again extended on Oct. 12, 2013 for P599.78 million.

The COA said its review of the original contract with the advertising consultant together with the amendments, renewal and extension of the same “disclosed several deficiencies/irregularities for violation of various provisions of RA 9184 and other pertinent laws rules and regulations.”

“Entering into a multi-year contract with the extension of contract time that involved additional cost as well as the consideration of a monthly approved budget contract is contrary to RA 9184 and its implementing rules and regulations, especially the necessity of a public bidding,” the COA report said.

“Unless fully justified by management, the renewal of advertising services contract with the advertising consultant… and the extension of advertising services contract… may not be allowed in audit,” it added.

State auditors also said that the procurement of the advertising service was not even included in the Annual Procurement Plan of the TPB and therefore not in accordance with Section 7.2 of RA 9184.

State auditors also took note of how two prospective bidders – the advertising consultant that bagged the project and another bidder – were declared ineligible. Yet the Special Bids and Awards Committee declared both as shortlisted bidders and eventually issued a Notice of Award to the winning advertising consultant.

“TPB entered into an advertising services contract with the advertising consultant, despite its ineligibility, together with its renewal and amendments, without securing first the approval of the Board of Directors. The advertising contract was ratified only by the TPB Board of Directors on June 19, 2014,” the COA report stated.

The audit team further pointed out that the advertising services were implemented through a multi-year contract without the authority of the Department of Budget and Management, contrary to Section 21 of the General Provisions of RA 10155 or the General Appropriations Act of 2012 and DBM Circular Letter No. 2004-12 dated Oct. 27, 2004.

The circular letter provided that no agency shall enter into a multi-year contract without securing a Multi-year Obligational Authority (MYOA). 

The renewal and extension of contract were also not within the approved budget in violation of Sections 6.1.1 and 7 of RA 9184 and the revised implementing rules and regulations.

“The renewal and extension of the contract was not done through public bidding, although the amount was over and above the original service contract of P199.95 million, contrary to Section 4 – Adjacent or Contiguous of Section 53 on Negotiated Procurement of RA 9184, which allows negotiated contracts, provided that the contractor uses the same price or lower unit prices on the original contract,” the COA report said.

“The automatic renewal of the contract was meant to do away with competition through public bidding, which aims to protect the public interest or the very purpose of Republic Act 9184,” it added.