The coronavirus pandemic has brought misery and death to millons of Filipinos, affecting their mental health and emptying their wallets as they crowded public and private hospitals.
But for a lucky few, it was an opportunity to earn tons of money; billions of pesos, in fact. They got juicy government contracts to supply medical equipment and materials, perhaps on the basis of political connections.
Pharmally Pharmaceuticals Corporation was set up only in 2019 by a group of Davao City-based Chinese businessmen together with some foreigners, including a Singapore-based Taiwanese businessman.
It has no track record of doing business with the government. It did not manufacture face masks, face shields, RT-PCR testing kits, and personal protective equipment (PPEs). It did not have logistics capabilities, including huge warehouses.
In short, it could not provide billions of pesos worth of medical supplies to the government, and sourced the materials instead from other companies that had manufactured them.
Strictly speaking, Pharmally was just a middle man or a sales agent for companies that produced the medical supplies. It made money based on markup.
Why would the Procurement Service of the Department of Budget and Management (PS-DBM) approve a contract worth nearly P10 billion with a small company that only had hundreds of thousands of pesos in paid-up capital, and did not manufacture the goods it was selling?
The convenient excuse of then undersecretary Lloyd Christopher Lao, who headed the PS-DBM last year, was the coronavirus pandemic.
In the midst of confusion and chaos to acquire testing kits, face masks, face shields, and protective personal equipment at the onset of the coronavirus disease (Covid-19), it had to procure supplies right away and at all costs.
The coronavirus pandemic was the most convenient excuse to throw away due diligence in scrutinizing suppliers’ capacities and capability to deliver, as well as time-honored procurement processes, to protect government resources.
In fact, Pharmally delivered 500,000 face masks the next day after it offered to sell them to the PS-DBM. The face masks were delivered even before the government could issue a purchase order.
This was highly irregular. How could Pharmally supply materials when it did not know the specifications based on the purchase order?
Before the pandemic, it took time for a supplier to get a contract from the government. The government scrutinized every supplier’s capability to deliver the products, inspecting factories and warehouses and its resources before qualifying them to become a government contractor. There were also voluminous documents to be accomplished.
Even if there were no tenders and the supply contracts were negotiated, the processes would take weeks or months, not a single day.
Lao said a Pharmally director, Lincoln Ong, came offering face masks and brought a sample, but the next day he delivered 500,000 face masks, which turned out to have been sourced from another company that manufactured the product.
Lao was impressed but it appeared that government procurement rules were violated when he accepted the delivery even before his office could issue a purchase order. It appeared there was no due diligence because it only took a day for the delivery to be accepted and after an offer was made.
The pandemic is not an excuse to fast-track the procurement of face masks. The PS-DBM has to observe the processes and procedures to buy the face masks.
Former undersecretary Lao has to do a lot of explaining on why he took the shortcut. He also has to explain why a small company with no track record was awarded the contract.
What was his main consideration in giving Pharmally the contract? Could it be because Lincoln Ong is also from Davao City? Could it be because the two are long-time acquaintances? Why would he accept an unsolicited offer to supply medical products from a person who suddenly showed up at his office? Is it normal for PS-DBM to entertain suppliers who just showed up at the door?
The Senate Blue Ribbon Committee, which has been digging into the Pharmally contract, has uncovered a possible link to the deal — Michael Yang.
The Chinese businessman, who has been living in the country for two decades, is a personal friend of President Rodrigo Duterte and his long-time personal assistant, Sen. Christopher Lawrence “Bong” Go. He has even served as a presidential adviser.
In 2017, Yang introduced to President Duterte the executives of Taiwan-based Pharmally Biologicals, which was looking for investment opportunities in the country.
The son of the company’s president, Huang Wen-Lieh, formed a local Pharmally unit together with Ong and other friends in 2018.
If Yang introduced the old Pharmally company in 2017, he would definitely play a role in the new Pharmally company by serving as a guarantor, allowing it access to supplies from big Chinese manufacturers.
Was Lao placed at the PS-DBM last year to favor Davao City-based Pharmally which has links with Yang, who is also based in Davao City?
It appears the Davao City business group won the contract based on personal ties among the people in the government and the people selling the medical supplies.
The PS-DBM awarded billions of pesos in supply contracts, a big disadvantage to local Filipino companies that had invested millions to retool factories to produce face masks after they were asked to do so by the Department of Trade and Industry.
These Filipino companies generated employment in the time of the pandemic but PS-DBM chose to give the business to a company that did not generate employment.
The coronavirus pandemic became the convenient excuse to circumvent the procurement law and award the deal to friends of the president.