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World Bank finds Korean firm guilty of rigging RP road contracts
The World Bank on Friday imposed sanctions on Korean contractor Dongsung Construction Co. Ltd. for rigging several contracts under a national road project in the Philippines.
In a statement, the bank said it found Dongsung guilty of fraudulent and corrupt practices in relation to the National Roads Improvement and Management Project, which was supported by a $150-million loan from the World Bank. The first phase of the project closed in March 2007.
Through an in-depth quantitative and qualitative analysis of the procurement process that the firm participated in as well as numerous interviews, investigators uncovered evidence of Dongsung's involvement in widespread bid-rigging, the World Bank said.
While the bank did not identify the rigged contracts, its completion report on the project said only 90 percent of the planned 528 kilometers of national roads has been upgraded or rehabilitated under the national roads improvement project.
This was because three contract packages were cancelled after three failed biddings. These included the upgrading of Marihatag-Barobo and Hinatuan Bislig Section of the Surigao-Davao Coastal Road, the 39-kilometer Kabankalan-Basay Road in Negros and the 26-kilometer San Enrique-Vallehermoso Roadin from La Castellana to Negros Occidental.
Controversy over the contracts nearly aborted a $232-million World Bank loan for the second phase of the national road project.
It also forced the Department of Public Works and Highways to remove the three contracts from the first phase of the project and use local funds instead in completing the three road packages, including P1.17 billion for Marihatag-Barobo and Hinatuan Bislig Section, P641 million for the Kabankalan-Basay Road, and P682 million for the San Enrique-Vallehermoso Road.
The bank said the Korean firm is barred from being awarded any World Bank-financed contract in any country in the next four years. It said Dongsung did not contest the accusations.
The World Bank did not identify other companies involved in the bid rigging. Its investigation unit, Integrity Vice Presidency , earlier found that a cartel of contractors had engaged in corrupt and collusive practices in all three rounds of bidding, undermining competition in road construction and inflating prices by up to 30 percent.
Rapid action against colluding companies demonstrates that efforts to combat corruption are working and sends a strong signal across the private sector. Building more and better roads to remote areas is critical for development in the Philippines. But it is also critical to take action against corruption, said World Bank country director for the Philippines, Bert Hofman.
Despite the irregularities, the bank decided to push through with a $232-million loan for the second phase of the national roads improvement project, after including stringent anti-corruption mechanisms, such as the use of an independent procurement evaluator and independent oversight by civil society.
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