Revisiting devolution

From provincial governments to barangay units, local officials had initially eagerly welcomed the so-called Mandanas ruling of the Supreme Court, which went into effect this year.

The ruling, which favored a petition filed in 2012 by then Batangas congressman Hermilando Mandanas, gave local government units (LGUs) a larger share in national revenues, to include not just taxes collected by the Bureau of Internal Revenue but also earnings of the Bureau of Customs.

Rodrigo Duterte’s finance chief, Sonny Dominguez, had cited credit rating agencies’ assessment that taking such a large amount out of the hands of the national government would pose “a possible challenge to effective public finance management.”

The executive, through the Department of Budget and Management (DBM), came up with a solution: more national services and other functions were devolved to LGUs.

Even before the Mandanas ruling went into effect, several LGU officials were already grousing that despite the additional share in national revenues, they would be hard-pressed to perform all the devolved functions.

Interior and Local Government Secretary Benhur Abalos says the problem is worse in fourth to sixth-class municipalities that lack legal officers or experts with knowledge about laws on government procurement and auditing, graft and corruption, ease of doing business and even local autonomy.

Inefficiency and corruption can become entrenched in some areas, whether willfully or inadvertently, due to weak capacity for governance.

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To illustrate the problem, Abalos noted that under Republic Act 7160, the Local Government Code of 1991, barangays are in charge of constructing barangay roads, but out of their own coffers.

RA 7160 authorizes barangays to generate their own funds. They can collect local taxes as well as “reasonable fees or charges” for the use of barangay-owned properties such as crop dryers, admission to recreational centers, cockfights and cockpit operations, commercial breeding of fighting cocks, display of billboards and other outdoor ads, and for business clearances. This has been one of the biggest causes of the enormous amount of red tape that drives away investors. Two laws to cut red tape and ease doing business have hardly made a dent.

The Mandanas ruling, as the former economic team noted, also wreaks havoc on long-term and nationally coordinated development planning. Project implementation and service delivery are now calculated in terms of three-year local election cycles, with no certainty that a new LGU team will continue the projects or honor contracts. Worse, projects may end up in court, which can be a death sentence in a country with a record for perpetual litigation.

Like higher LGU units, the barangays are also authorized to obtain their own supplies, in accordance with RA 9184, the Government Procurement Reform Act.

Abalos noted that LGUs are guided by the idea of procuring the lowest bid for a product or service. As even Rodrigo Duterte had often noted during his presidency, however, Abalos said cheapest doesn’t always mean the best. As a consequence, government offices often end up with substandard goods and services.

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The sensible application of the “cheapest” concept should be the procurement of the most affordable or reasonably priced product or service that meets the project specifications set out in the bidding terms of reference or TOR.

For example, the US military pays good money for top-quality, durable supplies that can withstand the heavy wear and tear in conflict zones.

This is not unique to the US. In 2005 when I embedded with the German peacekeeping contingent in Afghanistan, one of the soldiers pointed out to me a huge pile of used tires. He told me they had such a high turnover of tires for their armored vehicles because of the awful state of roads in that country. Cheap tires wouldn’t last a day in that rough terrain.

The intended use must be considered for the product or service being procured, and the specs must be in the TOR. Abalos, however, says that cheapness is a key consideration in the government procurement law.

There’s another problem: companies doing business with the government have pointed out that across the Philippine bureaucracy, especially at the local level, there aren’t enough people who know how to draw up a proper TOR – one that not only accurately sets out the required technical, financial and other specs, but is also compliant with RA 9184. Because of this problem, it’s not unusual for agencies to outsource TOR preparation, paying hefty amounts for the needed expertise.

This lack has made many agencies hand over supply procurement to the DBM, specifically to its scandal-plagued Procurement Service that it refuses to abolish as recommended by lawmakers. The PS-DBM handles the procurement of even pens and paper items for certain offices – a practice that has slowed down the delivery of needed supplies in agencies such as the Department of Education.

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Speaking of education, Abalos pointed out that under the Local Government Code, provincial governments are in charge of constructing tertiary hospitals while cities and municipalities are tasked to provide school buildings and communal irrigation.

The devolved responsibilities might become heavier if a pending bill is passed, promoting early childhood learning for three- to four-year-olds, with LGUs in charge of providing the facilities and services.

Such local responsibilities are fine, Abalos says, for wealthy LGUs such as Quezon City and Makati. But even with the Mandanas ruling, he says there are simply too many low-income LGUs that can’t handle all the devolved functions.

Rolling back devolution, even slightly, and effectively reducing local autonomy will be among the major reforms that the Marcos administration has set out to accomplish.

President Marcos, in his second State of the Nation Address, listed 17 priority measures that he wants the 19th Congress to pass. These include amendments to government procurement and auditing laws as well as the LGU code.

Abalos told “The Chiefs” on Cignal TV’s One News last Tuesday that the administration is currently studying which devolved functions may be reverted to the national government.

While the amendments are not yet in place, the Mandanas status quo will remain in place, with the national government assisting LGUs that are incapable of carrying out their devolved mandates.

The ruling has become an opportunity for the national government to show LGUs that with larger public funds come greater responsibilities. In this experiment with devolution, you can see the wisdom in the admonition to be careful what you wish for.