Sans ‘surprise’ witness, NBN hearing to delve into overprice allegations

“SURPRISE” witness Rodolfo Noel Lozada Jr. has backed out, allegedly fearing threats to his life, from testifying at today’s resumption of the Senate investigation on the aborted national broadband network (NBN) deal. This leaves Jose de Venecia III, son and namesake of the House Speaker, to again face the senators who are trying to tie loose ends regarding allegations of overpricing, influence-peddling, and bribery of government officials that attended the award of the contract to a Chinese firm, ZTE Corporation.

Lozada, chief executive officer of Philippine Forest Corp., a subsidiary of the state-owned Natural Resources Development Corp., is believed to have a “more intimate knowledge” of the $329-million NBN project, having been designated by former socioeconomic planning secretary Romulo Neri as his consultant in evaluating proposals for the said undertaking to build a broadband network across the country to link government agencies and local government units. Lozada is said to know every detail of the scandal, including “how much in bribes went to powerful officials for every signature obtained for the project.”

Without Lozada, what the Senate blue ribbon committee will likely hear from de Venecia at today’s hearing are the details of the findings by a panel of industry experts that he convened, upon the request of the Senate, showing that the ZTE proposal was overpriced by $197 million, or about P8 billion.

Based on its review of the contract annexes submitted by the Department of Transportation and Communication to the blue ribbon committee, the panel said it was “self-evident that the DOTC was grossly negligent in failing to complete even a rudimentary objective evaluation of the ZTE proposal.”

See the cost analysis of the ZTE/DOTC proposal.

The panel’s summary of findings is as follows:

• On Equipment Cost per site, the ZTE/DOTC proposal is 1.7 times higher — about $290,000 — against the industry estimate of $171,450.

• On WiMax Deployment, the CPE (customer premises equipment) cost in the ZTE/DOTC proposal is seven times higher, at over $2,122 per site compared to the industry estimate for WiMax equipment of about $300/unit. Its access site cost, on the other hand, is roughly 2.3 times higher as it is pegged at over $90,000 per site as against industry average of $40,000.

• On Services, the ZTE/DOTC services cost is 2.4 times higher — at over 36 percent — compared to the industry estimate of about 15 percent of Total Project Cost.

In an earlier statement, ZTE Corp. described as “unfair and absurd” the inclusion of de Venecia in the panel tasked by the Senate to look into allegations of overpricing in the aborted NBN deal. The Chinese firm said it expected the panel’s conclusions to be devoid of objectivity given that the Speaker’s son headed Amsterdam Holdings Inc. (AHI), its rival for the project.

But a source of Philippine Star columnist Jarius Bondoc recently confirmed the gross overpricing, saying the kickbacks were even more than what de Venecia and telecom experts have estimated. On condition of anonymity, the source, said to be a former consultant of the “Filipino group” that lobbied for ZTE, divulged that the overprice actually amounted to $231 million, which was 70 percent of the contract price.

Additional kickbacks in the amount of $106 million, he said, were hidden in the Services item of the ZTE/DOTC contract covering engineering, management, training, and other services.