COA: 176 China-made fire trucks defective

MANILA, Philippines -  The Commission on Audit (COA) has noted several irregularities in the procurement deal between the Bureau of Fire Protection (BFP) and a Filipino-Chinese joint venture firm in 2015, which involved P2.577 billion worth of fire trucks, including the delivery of defective ones.

In its 155-page annual audit report posted on its website yesterday, the COA said 37 percent or 176 out of the 469 fire trucks delivered by the joint venture of Kolonwel Trading, the local partner, and Hubei Jiangnan Special Automobile Co. Ltd. of  China, were defective.

“The objective of achieving a set of reliable, fast and efficient fire trucks did not materialize viewed from the various defects noted in the 176 (or 37 percent) out of the 469 fire trucks delivered in 2015, preventing the end-users from the effective use thereof that eventually affect the delivery of public services,” the report read.

Based on COA records, it was on Feb. 2, 2015 when the BFP executed with Kolonwel joint venture the purchase contract amounting to P2,577,275,000 after the BFP Bids and Awards Committee (BAC) “post-disqualified” two other bidders in October 2014 for supposedly being “unresponsive” or failing to meet some technical requirements.

The contract was for the supply of 244 fire trucks with 1,000-gallon capacity worth P6 million each and 225 units with 500-gallon capacity worth P5 million each.

The report listed a total of 39 defects in the 176 fire trucks, ranging from simple faults such as damaged side mirrors, busted front and rear lights to more serious ones such as engine shut-off even during operation, sudden unintended swerving and sudden acceleration of engine.

In a letter sent to the BFP fire chief dated Dec. 16, 2016, the supplier reported that repairs have already been done on the defects observed in the 176 fire trucks after the 469 units were distributed to fire stations from Regions 1 to 13.

A recent validation by state auditors, however, showed otherwise.

“The Audit Team Leaders of the BFP Regional Offices 1, 6 and 11 issued AOMs (Audit Observation Memorandum) on the reported defects in the fire trucks and observed that the defects would hamper the capability of the end-user regions to efficiently respond to emergency cases and effectively carry out BFP’s mission to prevent and suppress destructive fires,” the report read.

“As of May 9, 2017, 107 trucks have not yet been repaired by the supplier,” it added.

The COA questioned BFP’s choice of supplier, noting that Kolonwel Trading, the Filipino majority partner in the joint venture, had questionable 60 percent Filipino ownership/interest.

The audit body noted that Kolonwel’s declared assets only amounted to P1.4 million in 2012 and P1.6 million in 2013. Thus, it is highly unlikely that it can put up the P60-million initial funding share agreed upon in its joint venture agreement with Chinese firm Hubei.

“Under their agreement, the parties shall contribute the amount of P100,000,000 as initial funding requirement of the JV (joint venture) whereby Kolonwel shall put up P60,000,000 or 60 percent thereof,” the COA noted. 

“Considering Kolonwel Trading’s assets in 2012 and 2013, the financial capability to contribute the P60 million to the JV is highly questionable. This cast doubt on the 60 percent Filipino interest in the JV, affecting its eligibility to participate in the public bidding.

The report said the quality evaluation of the delivered fire trucks was done in haste. 

The audit body also took the BFP to task for failing to collect penalties from the joint venture for the delays in the delivery of the units and other violations in the contract.

Lastly, the COA said the delivery of the defective firetrucks could have been prevented had there been “judicious and meticulous planning” on the part of the BFP.

The COA specifically questioned the BFP’s decision to buy cheaper models instead of units of higher price but of proven better quality.

The COA cited as example the 76 fire trucks that the BFP previously bought from Australia at P19.6 per unit “which to date no defects have been reported.”

The audit body said part of the BFP’s lapses in its planning was the low setting of the Approved Budget for the Contract (ABC), which set a cap of P6 million for each unit with 1,000-gallon carrying capacity and P5 million for each unit of the fire truck with 500-gallon capacity.

“The setting of low ABC for the procurement of the fire trucks restricted competition and it did not allow the participation of suppliers of known quality and of international standard. As a consequence of restricted bidding, 176 (or 37 percent) of the 469 delivered fire trucks are defective, which greatly affect the delivery of public services,” the COA said.