Philippines: DENR Pays Contractor More than $1 M, Extends Faulty Air Pollution Project

Apr. 17, 2007

Re-electionist administration solon among those in hot water

Metro Manila’s residents have an air monitoring project that is faulty, non-functional and generally useless for the past four years, but which will be inexplicably paid for and even extended.


A cabinet secretary and a re-electionist legislator are among those in hot water due to highly questionable transactions related to an air pollution monitoring project worth more than $6 million.

According to environmental activists, the proponents of the Ambient Air Network Project are the Department of Environment and Natural Resources (DENR) and a private joint venture. They called for an impartial investigation into the project due to what they said were suspicious actions of senior government officials like DENR Secretary Angelo Reyes and Rep. Edcel C. Lagman (1st district, Albay) who is currently seeking re-election.

In a press conference last April 14 organized by the Kalikasan Peoples’ Network for the Environment (Kalikasan PNE), environmental activists Clemente Bautista, Jr. (Kalikasan-PNE National Coordinator) and Joey Papa (Bangon Kalikasan Movement) presented a complaint sent to the Office of the Ombudsman regarding the project which involved the setting up, maintenance, and operation of 10 air monitoring stations meant to measure ambient air (or air outside and surrounding an air pollution source location) and pollutants such as sulfur dioxide, nitrogen oxides, carbon monoxide, ozone, particulate matter and total suspended solids.

The eleven stations are located in the following areas:

1. Ateneo de Manila University, Katipunan Road, Quezon City
2. Bureau of Broadcasting Services, Marulas, Valenzuela City
3. Philippine Air Force, Clark Airfield, San Fernando City, Pampanga
4. Polytechnic University of the Philippines, Sta. Mesa, Manila
5. Cavite State University, Indang, Cavite
6. NAMRIA Compound, Fort Bonifacio, Taguig City
7. Bureau of Plant Industry, Los Baos, Laguna
8. Provincial Veterinary Office, Batangas City
9. New Bilibid Prison, Muntinlupa City
10. Valle Verde Subdivision, Pasig City (mobile van)

Termination Recommended

The contract amounting to $6.163 million was awarded to a joint venture between Emissions Technology Inc., a Guam-based company, and its local partner Industromach Inc. (ETI-IMACH) in November 2002.

DENR already paid $770,376.84 for the Operation & Maintenance portion of the contract. From November 2003 to October 2004, ETI-IMACH received the payment through monthly instalment of $64,198.07. ETI-IMACH continued to receive the monthly payments even during the times when the 10 stations did not operate simultaneously.

On February 14, 2005, IMACH officially withdrew from its partnership with the ETI, citing as reasons the ETI’s misrepresentation with regard to its expertise in ambient air monitoring, its use of unreliable equipment, unilateral deviation of contract obligations, project management conflicts, overcharging local expatriate and local personnel rates and non-payment of IMACH’s project operation and maintenance expenditures.

In November 2004, the Environmental Management Bureau (EMB) recommended the suspension of the payment for the project’s operations and maintenance in light of the contractors failure to complete the rehabilitation and improvement of all 10 stations and to address nagging technical and legal issues.

Contract termination is strongly recommended. The DENR, as purchaser, is allowed to terminate in whole or in part the contract, if in its judgement the ETI-IMACH has engaged in corrupt or fraudulent practices. The misrepresentation that is has foisted upon the DENR is fraudulent and termination is warranted, a memo signed by Engr. Ely Anthony R. Ouano and Luiciano G. Hornilla reads.

The memo continues that the ETI-IMACH has defaulted in its fraudulent misrepresentation, its failure to timely deliver and operationalize the monitoring stations, the poor quality of data generated by these stations, and in general, the failure of the system to function in accordance with the terms of the contract. Atty. Armi Jane Roa Borje, OIC for the DENR Undersecretary for Legal Affairs, concurred with the EMB’s position.

On October 17, 2006, the EMB and the DENR’s legal departments recommended to Secretary Reyes the termination of the contract.

DENR Turnaround

Despite the suspension of payments and recommendations to end the contract, the DENR agreed to continue with its transactions with ETI. On December 13, 2006, the DENR and the ETI agreed that the latter should be paid more than $1 million and that the project could be extended for another year.

The agreement stated that the DENR-EMB shall pay ETI immediately the full amount of $1,027,169.12, representing the November 2004 to February 2006 billings (16 months); $368,780.90 for the annual two-percent completion fee and monthly payment for O&M amounting to $64,198.07 for nine months from April 7, 2007 to December 7, 2007; and $577,782.63 for other expenditures.

This decision drew flak from environmental activists.

This recent turnaround by the DENR is a shame and an ethical aberration, considering how scores of rank-and-file and technical personnel have judiciously evaluated the project, found it lacking in merit and have stood by their decisions, as the documents pertaining to this case prove, Bautista said.

What is the justification for the DENR’s major and sudden decision twist? Why does the DENR continue to accommodate the truant ETI, which has continually misrepresented itself, reneged on its contractual obligations, duped its local partner and refused to comply with the DENR’s very own requirements? Who is to gain from the continuation and the extension of an anomalous and obviously non-functional project? he asked.

Highly Prejudicial

These incidents prompted IMACH Managing Director Eduardo L. Mendoza to send a complaint to the Office of the Ombudsman. Mendoza said that the terms of the latest agreement were highly prejudicial to the government.

This transaction should merit a full-blown investigationas it does the payment of millions of dollars allocated for that component of a loan package extended by the Asian Development Bank (ADB) under its Clean Air Program, Mendoza wrote in a complaint received by the General Investigation Bureau-A of the Office of the Ombudsman on March 21, 2007.

Setting aside my company’s interest in this transaction…I have decided to come out and expose the truth about the Ambient Air Project in the hope that those liable would be held to account for their actions and participation, Mendoza wrote. The project was a useless and expensive failure. It clearly did not succeed in producing credible data on air pollution aimed to be used in monitoring and mitigating air pollution plaguing Metro Manila, he said.

The deterioration of air quality in Metro Manila has already been cited as a grave environmental and health problem that should be correctly addressed. Metro Manila’s air is reported to carry a high level of particulate matter which exceeds World Health Organization (WHO) standards by two or three times, according to IBON Foundation.

Conflict of Interest

For his part, Representative Lagman who is currently running for a second term previously served as legal representative for ETI-IMACH during the start of the project and received amounts of $60,000, $63,255, $100,000, $40,000 and $100,000 on various dates from 2002 to 2003. These represented his initial lawyer’s fee, his success fee for the awarding of the contract and the last three amounts as partial payment for marketing expenses, respectively.

After his election to the House of Representatives during the 2004 national elections, Lagman continued to personally attend meetings related to the project in 2005 despite his active participation in two impeachment proceedings in Congress, even stating that it was his intention to mediate between the ETI and EMB on the financial issues of the contract. He even requested the EMB to convey his concern to the DENR top management and to pay what is due ETI before the budget hearing started in October 2005, Bautista noted.

Lagman was also listed as present during the February 14, 2005 meeting at the DENR where IMACH formally announced its withdrawal from the joint venture.

On October 27, 2005, ETI wrote to Undersecretary De Castro to inform him that it has instructed its bank to withhold the processing of the bank guarantee upon the advice of. Lagman who stated that the submission of performance bond can be deferred pending the favorable resolution of concerns stated in his letter dated October 6, 2005.

These actions of Lagman betray his real interest in arguing against the termination of the [project] and securing for ETI this highly prejudicial agreement with the DENR, Mendoza said.

Lagman’s presence at the meetings is questionable and anomalous, as even the Congress’ House Rules state that a solon should not be directly or indirectly financially interested in any contract with a government agency during his term in office, Bautista added.

Bautista cited Part II, Section 8 of House Rules of the House of Representatives on the question of Immunities, Limitations and Disqualifications, which states:

A Member shall not hold any other office or employment in the Government, or any subdivision, agency or instrumentality thereof, including government-owned or controlled corporations or subsidiaries, during his/her term without forfeiting his/her seat in the House. A Member shall not also be appointed to any office created or the emoluments thereof increased during the term of such Member.

A Member shall not personally appear as counsel before any court of justice, the Electoral Tribunals, or any quasi-judicial or administrative body, or be directly or indirectly financially interested in any contract with, or in any franchise or special privilege granted by the Government, or any subdivision, agency or instrumentality thereof, including any government- owned or controlled corporation, or its subsidiaries, during his/her term of office. A Member is similarly prohibited from intervening in any matter before any office of the Government for his/her pecuniary benefit or where he/she may be called upon to act on account of his/her office. (italics ours).

Clean air, Clean Candidates

Kalikasan-PNEs Bautista stressed that the issue was foremost an issue of good governance.

In effect, Metro Manila’s residents have an air monitoring project that has proved to be faulty, non-functional and generally useless for the past four years, but which will be inexplicably paid for and even extended, Bautista said. We want clean air and clean electoral candidates. This case violates the principles of good governance and only reinforces the reality that a project may be approved by government agencies and be even extended for as long as one has powerful backers among the Arroyo administration. If (the latter) cannot even implement an efficient project to monitor air quality, how can we even expect it to solve the greater problems of massive air pollution and climate change? Bulatlat

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