One of the largest groups of electric cooperatives (ECs) in the country has joined the growing number of power sector stakeholders that have hit the Department of Energy’s (DOE) new procurement rules, questioning the arbitrariness of the guidelines in the awarding of various energy projects and their impact on current participants.

The Philippine Rural Electric Cooperatives Association, Inc. (Philreca), which represents 121 ECs all over the country, pointed out the “unfair and disruptive effects” of the DOE’s new procurement rules, particularly with regard to power distribution utility participants in ongoing bidding and compliance processes.

Philreca was referring to DOE Department Circular No. DC2018-02-0003, which became effective on February 10, 2018, as well as a related advisory released later in March.

These issuances now essentially limit the mode of obtaining projects solely through competitive bidding, whereas the so-called “Swiss challenge” mode was previously allowed.

In a Swiss challenge mode of procurement, the offer of the original proponent is subject to a challenge by another supplier. If there is a challenger with a lower bid or offer, the original proponent has the option to match the lowest bid.

With the recent issuance, DOE mandated all distribution utilities with pending or ongoing competitive selection processes (CSP) to start anew, in compliance with the revised procedure. According to the Legal Service of DOE, for ECs with ongoing CSP, the EC or the original proponent in cases of CSP thru Swiss challenge cannot claim any “vested right,” thus there is a need to redo the process.

Philreca President Presley De Jesus said they were questioning the new DOE guidelines “because these are inconsistent with established procurement practices in the power sector.”

“If the Department is determined to adopt this new procurement tact, it should at least be fair and apply the new rules prospectively and not retroactively, as those who are already actively undergoing compliance procedures should not be affected and prejudiced,” stressed De Jesus.

“If the Department is determined to adopt this new procurement tact, it should at least be fair and apply the new rules prospectively and not retroactively.”

“We want clarity and consistency in the power sector procurement policy. We also do not agree with the DOE that we need to start from scratch again. Many of our EC members are already undergoing the selection process. It’s illogical and wasteful in terms of time, energy and precious funds already spent if we are to be told to begin all over,” De Jesus added.

“It’s illogical and wasteful in terms of time, energy and precious funds already spent if we are to be told to begin all over.”

De Jesus added that President Duterte himself is a vocal advocate of the use of the Swiss challenge mode in government projects as a way of avoiding corruption. It was therefore unusual, according to the Philreca head, for the DOE to completely remove that option.
Ealier this year, the President said that he was leery of conducting public bidding for government projects, instead expressing a preference for the Swiss challenge system.

“Huwag na tayong mag-bidding. ‘Pag mag-bidding ganun rin. Mas lalo nang matagal. (Let’s do away with bidding. When there is bidding, things get even slower.) All projects of the Philippines would be something like a Swiss challenge. Ito gawain mo, pagkatapos niyan, if you do it correctly at walang corruption, I will pay you (You do this, and if you do it correctly and corruption-free, I will pay you),” said the President.

De Jesus likewise noted that what they desire is an open and transparent CSP process “because that’s what we’re used to, and its end result is cheaper electricity costs to our customers and constituents.”

Philreca is just the latest power sector stakeholder to raise serious concerns about the DOE’s new procurement policies and its newfound penchant for actively laying down rules, a task usually reserved to other related agencies

Earlier this month, a group of renewable energy developers wrote the Office of the President through Executive Secretary Salvador Medialdea, seeking intervention on what it referred to as the “escalating turf war” between the DOE and the Energy Regulatory Commission. They likewise pointed out the conflicting and confusing policy issuances of the two agencies.

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