How analyzing spending on office supplies could help the Philippines save big on procurement
The Philippine government is made up of 1.8 million career civil servants, nearly 200,000 non-career civil servants, and almost 1 million temporary or contract staff, according to official statistics. Each of them needs computers, paper, printers and other office supplies to do their work. Buying these seemingly small items is a big task, managed centrally by the Procurement Service – Department of Budget and Management (PS-DBM), which procures around PHP 2 billion (US$34 million) worth of “common-use supplies and equipment” (CSEs) for other government agencies annually.
After controversies related to Covid purchases, PS-DBM’s new management embarked on a reform agenda to restore trust in the institution.
To improve how the government buys common supplies, PS-DBM partnered with WeSolve Foundation (WeSolve), a local civil society organization that empowers communities towards systems change. Together, they successfully applied to OCP’s Lift Impact Accelerator program. They were among the ten teams, out of 150 proposals from 70 countries, who won two years of advisory services and financial support from OCP to make their reform plans a reality.
The collaboration included research with extensive data analysis to understand the current challenges in buying CSEs and how to address them. They focused on three areas: value for money, competition, and intra-agency coordination (or, as they call it, service delivery for government agencies). They worked on a theory of change document that attempted to map challenges, causes, courses of action, and outcomes, to improve on these three areas.
Caption: A theory of change framework to help understand challenges in the procurement of common use supplies and possible steps to address them developed by PS-DBM, WeSolve and OCP.
What the research found
WeSolve analyzed data from the PS-DBM’s Procurement Group and PhilGEPS (the Philippines’ centralized electronic portal) on common-use supplies and equipment procured by PS-DBM in 2023. Worth PHP 1.6 billion (around US$27 million), these purchases represent 80% of the total value of all the agency’s CSE procurement for the year and cover 40 of the 135 product categories. A more in-depth historical analysis was also conducted for seven selected products worth PHP 1.6 billion in 2018, 2019, 2021 and 2023, based on available documents.
The research looked at different methods for calculating savings and setting budgets for different products to understand how the government’s implementation of the new laws might influence value for money.
Here are the key insights:
1. Bulk purchases save taxpayers millions
In 2023, PS-DBM saved around PHP 711 million (US$12 million), equivalent to a 32% discount compared to market prices, by purchasing common use supplies in bulk and leveraging greater buying power. When compared to the ceiling price or the approved budget for the contract (ABC), the savings were PHP 36 million (US$615,000).
Lower prices were driven by bids with at least two competing bidders. To generate more savings and maximize the advantages of bulk purchasing, PS-DBM is looking into expanding its CSE list to introduce more items and products for centralized procurement.
2. Competition leads to better prices
Products with multiple bidders achieved average savings of almost 10% compared to the approved budget for the contract – a rate nearly five times that of purchases with a single bidder, for which average savings were less than 2%. This is important because the study found that 18 products had only one bidder, generating less savings, while 22 products had at least two bidders, generating more savings due to competition.
Actual savings on 40 products compared to their approved budget for the contract (ABC). If only one bidder participates, the savings on a product compared to its budgeted price is 2% on average. With multiple bidders, potential savings are much greater at 10% on average.
When looking at savings based on the median value of retail prices (MVR), product purchases involving at least two bidders saw average savings of 44% compared to 37% for those with only one bidder.
Building on these insights, PS-DBM is planning to make several changes to attract more bidders and spur competition, such as allowing suppliers to use alternative evidence to demonstrate they meet green technical specifications instead of ECO certifications.
Under the ongoing draft implementing rules and regulations of a new procurement law passed in 2024, the government is planning to lower the requirements for previous experience, such as the single largest completed contracts, to allow smaller bidders to compete and build their track-record for bigger contracts.
The researchers also recommended that PS-DBM improve market outreach to new bidders, organize dialogues with business chambers and associations, especially for products with just one bidder.
3. Setting prices that are “just right” ensures better value for money
One common challenge among all agencies in the Philippines is deciding on a budget ceiling, or an approved budget for the contract (ABC), that is “just right”.
“Just right” prices are those that are at the right amount to attract bid participation, spur competition, and increase savings.
Setting “just right” prices is a difficult balancing act.
While a higher budget ceiling for common use supplies can attract more bidders, these can also lead to higher contract awards, spending, and, consequently, lower savings, especially if there is only one bidder that eventually bids.
If the government sets the budget ceiling too low, new bidders might just refuse to participate in the bid. Budget ceilings that are not responsive to changes in the market therefore might favor only incumbent suppliers.
Setting the right budget ceiling is technically difficult: agencies must conduct proper market and price research while promoting value for money, competition, and public service delivery.
Thus, the researchers looked at how the current price-setting methodology of PS-DBM could be improved.
The analysis reviewed the price-setting guidelines released by PS-DBM in 2024, and simulated the effect of these guidelines to the approved budgets for the contract of common supplies procured in 2023 (Guideline vs. Actual).
If the new price-setting guidelines were used to determine budgeted prices, there would be a large increase in budgeted prices (>40%) for 10 products compared to their actual budgeted price in 2023 (orange box).
The analysis shows that the PS-DBM’s price-setting guidelines, if applied to the previous transactions, would increase the budget ceilings for 33 out of 40 products (83%). There would also be a significant drop in the budget prices (>40%) of one product.
To illustrate: the budget for data folders would be 55% higher than it was in 2023, if the PS-DBM’s price-setting method in 2024 were used in 2023. Meanwhile, the budgeted price for scissors would be 41% lower.
The analysis also simulated different price-setting guidelines to improve on PS-DBM’s guidelines, that could be the basis of future implementation (Recommended vs. Actual).
Priority Items: The simulated guidelines would lead to a change in the price setting method for 10 products (highlighted): instead of using the agency’s previously bought price as a reference, the budget would be set by the median value of suppliers’ quotes and prices gathered in PS-DBM’s price research.
For six of these products (green box), all with only one bidder, the budgeted price would significantly increase compared to the actual budgeted price in 2023, which may help spur competition and make it attractive to new bidders. For four of these products (orange box), such as external hard drives (1 TB), the recommended guidelines would result in a lower budgeted price.
In the last 100 days of the Lift Accelerator program, the findings that come out of this research can help PS-DBM prioritize which products can have their price-setting methods adjusted. We look forward to the results of these trial runs during the implementation phase of Lift.
Scaling open contracting reforms in the Philippines
Beyond price-setting guidelines, there are many opportunities to deepen procurement reforms in the country, especially with the passage of the new government procurement law in 2024, which enshrined the principles of open contracting.
The new law, for example, requires merchants and suppliers to disclose their ultimate beneficial owner to prevent conflicts of interest and prevent corruption.
“This law guarantees transparency through open contracting, where all stakeholders will have access to procurement information and observers from the private sector and civil society will be invited to participate in all levels of procurement proceedings,” Amenah Pangandaman, Secretary of the PS-DBM said during last year’s United Nations General Assembly.
High-level support for these goals was also reflected in the country’s 2023-2027 Open Government National Action Plan, which commits to transparent, accountable and participatory procurement.
The new law expands the PS-DBM’s mandate to purchase common supplies to cover local government units. It also allows them to introduce measures to improve procurement processes, such as budget ceilings and reference prices, and implement market outreach strategies to promote greater participation by micro, small and medium enterprises, social enterprises, and women-led businesses.
In December 2024, a new e-marketplace was introduced for the central electronic procurement portal, with plans for it to be an “e-commerce” platform for government purchases. The pilot items in the e-marketplace are for flight tickets, motor vehicles, and commonly used office software.
“With the eMarketplace, government agencies or procuring entities can now just ‘add to cart’ or directly purchase their common-use supplies and equipment requirements from competent and reputable suppliers,” said Budget Secretary Pangandaman at the launch.
PS-DBM is also onboarding more government agencies, and planning to proactively disclose more and better data and open up procurement transactions to the public.
“The Lift Impact Accelerator project is just the beginning of the journey for PS-DBM’s reform initiatives. We look forward to building on the results from the Lift Project to translate into policy and scale our programs,” said PS-DBM Executive Director Genmaries Entredicho-Caong.
“We look forward to continuing this collaboration with our partners in government and civil society, including improving opportunities for public participation and publishing open contracting data and open ownership data to truly benefit our 7,641 islands and our 115 million people. It has been an honor collaborating with committed civil servants at the PS-DBM under the Lift Project. We want to continue working towards building a procurement system our people can trust,” said Kenneth Isaiah Ibasco Abante, President of WeSolve Foundation.
For more information, please read WeSolve’s working paper for public comment and download the open contracting data set and code that provide the research and source data: “Improving the Procurement of Common Use Supplies and Equipment in the Philippines” by Kenneth Isaiah Ibasco Abante, Reinabelle C. Reyes, Riz Supreme Balgos Comia, JC Albert Peralta, and Lanz Anthonee A. Lagman.
Our work in the Philippines is supported by UNODC.
