Lesson 5

Competitive Bidding

1.   Bid Evaluation

2.   Post Qualification

3.   Failure of Bidding

4.   Award, Implementation and Termination of Contract

5.   Delivery

6.   Warranty

BID EVALUATION

What is the purpose of Bid Evaluation?

The purpose of bid evaluation is to determine the Lowest Calculated Bid (LCB).  This is
done by:

1. Establishing the correct calculated prices of the bids, through a detailed evaluation of

the financial component of the bids; and

2. Ranking of the total bid prices as so calculated from the lowest to the highest. The bid

with the lowest price shall be identified as the LCB.

When should the bids be evaluated?

The entire evaluation process for the bids for the procurement of goods must be completed
in

not more than seven (7) calendar days from the deadline for receipt of proposals.
However, the BAC should exert effort to complete the Bid Evaluation even before the lapse
of the 15-day period, as this will expedite the procurement process.

 
Who are the participants in the Bid Evaluation Process?

The following must participate in the bid evaluation process:

1. The BAC;

2. The TWG;

3. The BAC Secretariat/ Procurement Unit; and

4. The Observers.

Methodology: How are bids evaluated?

1. After the preliminary examination of bids, the BAC, or through the TWG, shall
immediately conduct a detailed evaluation of all bids rated “passed,” using a
nondiscretionary pass/fail criteria, as stated in the IAEB and the ITB, which shall include a

consideration of the following:

a.      The bid must be complete. Unless the ITB specifically allow partial bids, bids not
addressing or providing all of the required items in the bidding documents including, where
applicable, those requirements pertaining to the civil works components of Goods procured,
shall be considered non-responsive and, thus, automatically disqualified. In this regard,
where a required item is provided, but no price is indicated, the same shall be considered
as non-responsive, but specifying a “0” (zero) for the said item would mean that it is being
offered for free to the Government.

b.   Minor arithmetical corrections to consider computational errors, omissions and

discounts, if allowed in the bidding documents, to enable proper comparison of all eligible
bids. Any adjustment shall be calculated in monetary terms to determine the calculated
prices. For evaluation purposes, in allowed instances, the bid must be converted into
Philippine currency based on the exchange rate prevailing on the day of the bid opening.
The BSP reference rate as of the date of the bid opening shall be used.

c. In the evaluation of bids, all bids shall be evaluated on an equal footing to ensure fair and
competitive bid evaluation. For this purpose, all bidders shall be required to include the cost
of all taxes, such as, but not limited to, value added tax (VAT), income tax, local taxes, and
other fiscal levies and duties which shall be itemized in the bid form and reflected in the
detailed estimates. Such bids, including said taxes, shall be the basis for bid evaluation and
comparison. Moreover, applicable custom duties, as well as other costs of acquisition such
as freight, insurance, and bank charges, must be incorporated in the bid.
 

d. In case of discrepancies between: (a) bid prices in figures and in words, the latter shall
prevail; (b) total prices and unit prices, the latter shall prevail; (c) unit cost in the detailed
estimate and unit cost in the bill of quantities, the latter shall prevail.

2. Based on the detailed evaluation of bids, those that comply with the abovementioned
requirements shall be ranked in the ascending order of their total calculated bid prices, as
evaluated and corrected for computational errors, discounts and other modifications, to
identify the LCB. Total calculated bid prices, as evaluated and corrected for computational
errors, discounts and other modifications, which exceed the ABC shall be disqualified.

3. After all bids have been received, opened, examined, evaluated and ranked, the BAC
shall prepare the corresponding Abstract of Bids. All members of the BAC shall sign the
Abstract of Bids and attach thereto all the bids with their corresponding Bid Securities and
the minutes or proceedings of the bidding. The Observers shall also sign the Abstract of
Bids if, in their independent observation, the bidding activity conducted by the BAC followed
the correct procedure indicated under R.A. 9184 and its IRR-A. The Abstract of Bids shall
contain the following:

a. Name of the contract and its location, if applicable;

b. Time, date and place of bid opening; and

c. Names of bidders and their corresponding calculated bid prices arranged from

lowest to highest, the amount of bid security and the name of the issuing

entity.

4. The TWG, with the assistance of the BAC Secretariat, when directed by the BAC, should
prepare the Evaluation Report, containing the details of the evaluation conducted,
preferably within three (3) calendar days from the date the evaluation was concluded.

On clarifications during bid evaluation (the “no-contact” rule)

During the bid evaluation stage, the BAC, BAC Secretariat and the TWG shall not entertain
clarifications from Bidders, neither shall they initiate communication with the Bidders,
regarding the evaluation of the bids. There are two reasons for this rule:

1. There is no need for clarifications of technical issues since the evaluation is focused on
arithmetical computations which are determined from the face of the bid itself; and
2. Communications with the Bidders might lead to possible collusion or the Bidder might try
to influence the outcome of the bidding process.

Are there special privileges for cooperatives in the supply of goods to government
entities?

Yes. Under the Cooperative Code of the Philippines, or Republic Act No. 6938,
cooperatives have preferential right to supply government institutions and agencies with
rice, corn and other grains, fish and other marine products, meats, eggs, milk, vegetables,
tobacco and other agricultural commodities produced by their own members.

Moreover, there is a recurring provision in the GAA which mandates the Government to
procure at least ten percent (10%) of its total purchases from duly registered cooperatives
and another ten per cent (10%) from SMEs.

What may be done if all prospective bidders are unable to comply with the
requirement of having a single contract whose value is at least fifty percent (50%) of
the ABC of the project to be bid?

If all prospective bidders are unable to comply with the requirement of having a single
contract whose value is at least fifty percent (50%) of the ABC of the contract to be bid, the
Procuring Entity may have to review the packaging of the project or procurement
concerned, taking into account the technical and financial capabilities and experience in the
domestic and international market, as well as the most logical and practical approach/scope
of work to complete a project. However, the Procuring Entity must ensure that this will not
result to a splitting of contracts that is committed for the purpose of evading or
circumventing the requirements of law and existing rules and regulations.

In the alternative, the Procuring Entity may instead require prospective bidders to have at
least three (3) similar completed contracts the aggregate of which should be equivalent to at
least fifty percent (50%) of the ABC of the project to be bid; the largest of these similar
contracts must be equivalent to at least twenty-five percent (25%) of the ABC of the project
to be bid; and the business/company of the prospective bidder willing to participate in the
bidding has been in existence for at least three (3) consecutive years prior to the
advertisement and/or posting of the IAEB.

Furthermore, when the item/good to be procured is novel or its procurement is otherwise

unprecedented or is unusual, and compliance to the requirement on a largest single similar
contract is impracticable, the prospective bidder will only have to comply with the above-
mentioned required period for the existence of a business/company. This scheme may also
be applied when requiring a single contract that is at least fifty percent (50%) of the ABC will
likely result to a monopoly that will defeat the purpose of public bidding. (GPPB Resolution
007-2006, dated 20 January 2006)

The procuring entity can clarify in the bidding documents the similar projects that can be
considered in the bidding, which projects or contracts must have been completed within the
period specified in the IAEB. All other conditions of the contract must be the same as
provided for in the bidding documents.

What happens if a bidder does not accept the arithmetical corrections done by the
BAC on its bid?

The BAC must disqualify the bid and forfeit the bid security of the bidder.

What happens if no bid complies with all bid requirements?

If no bid complies with all bid requirements, the BAC should declare the bidding a failure. In
such a case the BAC shall issue a Resolution declaring a failure of bidding. The BAC then
reviews the terms and conditions stated in the IAEB. If warranted, it changes any of the
terms and conditions, including the quantities or specifications, provided that the ABC is left
unchanged. It must, thereafter, conduct a re-bidding, in the process formulating a new IAEB
and posting and publishing this as required. All bidders that have initially responded to the
IAEB in the first bidding shall be allowed to submit new bids.  If the original estimate is
found to be inadequate on reassessment to meet the objectives of the project, it may be
necessary to reduce the scope of the project.

Should a second failure of bidding occur and the Procuring Entity finds that there is a need
to evaluate the responsiveness of the ABC, and so decides to revise the ABC accordingly,
the Procuring Entity should conduct another public bidding with re-advertisement and/or
posting. Alternatively, the Procuring Entity may enter into a negotiated procurement with a
legally, technically, and financially capable supplier. However, if the Procuring Entity resorts
to negotiated procurement, the terms, conditions, and specifications of the project as well as
the ABC must be maintained.

How shall Domestic Preference be applied during bid evaluation?

A Procuring Entity shall apply domestic preference in the procurement of goods as long as it
complies with the provisions of IRR-A and R.A. 5183, and this shall be expressly mentioned
in the bidding documents. In applying domestic preference, the Procuring Entity shall be
guided by the provisions of C.A. No. 138, to wit:

1. When the LCB including taxes and customs duties, is a “foreign bid” as defined in C.A.

No. 138 (see definition below), the award shall be made to the bidder who submitted

the lowest “domestic bid”, provided that:

a. the domestic bid is not more than fifteen per centum (15%) in excess of

the LCB. (Section 3 [e] C.A. No. 138); and

b. the bidder who submitted the lowest domestic bid must pass the postqualification.

2. When several bidders participate in a public bidding for the supply of articles, materials
and equipment for a Procuring Entity, including public buildings or public works, and the
LCB is submitted by one other than a “domestic entity” (see definition below), the award
should be made to the domestic entity making the lowest bid, provided that:

a. the bid of the domestic entity is not more than 15% in excess of the LCB; and

b. the same domestic entity must pass the post-qualification.

3. In the case of FAPs or procurement undertaken by virtue of international treaties or

agreements, when there is no provision disallowing the application of domestic

preference, in compliance with R.A. 9184 Section 43, the preference in item (a) above

for domestically-produced and manufactured goods, supplies and materials that meet

the specified or desired quality may further be allowed in the interest of:

a. Availability, that is, the domestically-produced goods are more readily

available in the market, like off-the-shelf items;

b. Efficiency; and

c. Timely delivery of goods.

4. In the case of FAPs undertaken through IFI funding, at the request of the Procuring

Entity, and under conditions to be agreed under the loan agreement and set forth in
the bidding documents, a margin of preference may be provided in the evaluation of

bids for:

a. Goods manufactured in the country of the Procuring Entity when comparing

bids offering such goods with those offering goods manufactured abroad; and

b. Works in member countries below a specified threshold of Gross National

Product per capita, when comparing bids from eligible domestic contractors

with those from foreign firms.

5. Where preference for domestically manufactured goods or for domestic contractors is

allowed, the methods and stages set forth in the loan agreement should be followed.

How is the right to match undertaken in bidding of provincial projects?

1. Provincial Projects

The rules on public bidding and procurement processes prescribed in R.A. 9184, its IRR
and this Manual, shall apply to priority programs and infrastructure projects funded out of
the GAA for implementation within the province. These projects are referred to as
“provincial projects”. “Provincial projects” are Engineering District infrastructure projects and
priority programs fully funded by the Government and identified in consultation with the
concerned members of Congress.

2. Matching of Bids by Provincial Bidders

A provincial bidder is a contractor whose principal office is within the province where a
provincial priority program or infrastructure project, defined in the immediately preceding
paragraph, is being implemented. In the bidding of such provincial projects, a provincial
bidder is given the privilege to match the LCB of a bidder who is not a provincial bidder. In
implementing this rule,

the following shall be observed:

a. The subject bidding is done within five (5) years from the effectivity of R.A. 9184, or not
later than January 26, 2007.
b. The provincial bidder who is given the privilege to match the LCB submits the lowest bid
among the provincial bidders, although it is higher than the LCB.

c. The said provincial bidder shall exercise the privilege to match the LCB within forty-eight
(48) hours from receipt of the notice from the BAC to match the LCB.

d. Matching shall be made in writing, through appropriate adjustments in the unit bid prices
without changing the Scope of Work and work items prescribed by the Procuring Entity in
the bidding documents.

e. If the provincial bidder is able to match the LCB within the prescribed period and he
passes the post-qualification, the contract will be awarded to him. However, if he fails to
match the LCB or to pass the post-qualification, the contract will be awarded to the bidder
who originally obtained the LCB.

f. This privilege granted to provincial contractors shall not apply to:

i. contracts the coverage of which includes more than one (1) province;

ii. procurement of consulting services;

iii. projects for implementation within Metro Manila.

3. Publication and Posting of Provincial Projects

The release of funds for provincial projects should be published by the Procuring Entity in
accordance with the following requirements:

a. It shall be published in a local newspaper with the widest circulation in the region during
the same period as the advertisement/posting of the IAEB;

“Conspicuous place” shall mean any place in the premises of the Procuring Entity that is
accessible to the general public and reserved for the purpose of
posting/publishing announcements and/or notices for dissemination to the public.

b. It shall be posted at any conspicuous place reserved for the purpose in the premises of
the Procuring Entity during the same period as the advertisement/posting of the IAEB; and

c. It shall be posted in the website of the DBM and the PhilGEPS during the same period as
the advertisement/posting of the IAEB.
 

What rules govern the lease of Computers, Communications, Information and Other
Equipment?

Contracts for lease of construction and office equipment, including computers,

communication

and information technology equipment, are subject to the same public bidding and
procurement procedures as prescribed in R.A. 9184, its IRR-A and this Volume 2. (Please
refer also to Joint Memorandum Circular No. 2002-01 issued by the National Computer
Center and the DBM, which provides the policies, rules and regulations on lease of IT
equipment. Also, reference may be made to Department Order No. 188 (dated September
28,1999) and Department Order No. 219 (dated August 14, 2003), issued by the
Department of Public Works and Highways, governing the lease of construction equipment.)

POST QUALIFICATION

What is Post-qualification?

Post-qualification is the process of verifying, validating and ascertaining all the statements
made and documents submitted by the bidder with the LCB, which includes ascertaining the
said bidder’s compliance with the legal, financial and technical requirements of the bid. If its
eligibility documents had been validated and verified, and its compliance with the legal,
financial, and technical requirements of the bid had been ascertained, the bidder must be
declared the bidder with the

“Lowest Calculated Responsive Bid” (LCRB)

The eligibility check does not ascertain the validity and genuineness of the eligibility
documents submitted by the bidders. Neither does it determine the veracity of the claims
made by the bidders in their financial and technical proposals. The post-qualification
process, on the other hand, does.

What does Post-qualification entail?

Post-qualification involves the BAC verifying, validating and ascertaining that the bidder
satisfies the following criteria:
1. Legal Requirements. The post-qualification process under this criterion involves the
verification, validation and ascertaining of the supplier’s claim that it is not included in any
government “blacklist,” as well as all the licenses, permits and other documents it
submitted. The legal requirements refer to the Legal Documents submitted by the bidder as
part of the eligibility requirements, e.g., SEC registration, DTI business name registration,
Mayor’s permit, TIN, etc. The bidder’s status with regard to “blacklisting” may be verified by
checking the Consolidated Blacklisting Report issued by the GPPB, or the “blacklist” of any
government agency.

2. Technical Requirements. Post-qualification under this criterion means that the BAC would
have to validate, verify, and ascertain the veracity of the documents submitted by a supplier
to prove compliance of the goods and services offered with the requirements of the contract
and bidding documents. This involves the following processes:

a. Verification and validation of the bidder’s stated competence and experience;

b. Verification and/or inspection and testing of the goods/products, after-sales and/or

maintenance capabilities, in applicable cases; or inspection of the plant/factory of a
manufacturer, to determine production capacity; and

c. Ascertainment of the authenticity and sufficiency of the Bid Security as to type, amount,
form and wording, and validity period.

3. Financial Requirements. Under this criterion, the BAC ought to verify, validate and
ascertain the bid price proposal of the bidder and, whenever applicable, its computation of
the NFCC, the required bank commitment to provide a credit line to the bidder, or the hold
out on deposit status of the cash deposit certificate, in the amount specified and over the
period stipulated in the ITB. This is to ensure that the bidder can sustain the operating cash
flow of the transaction.

What is the Timeline for the conduct of Post-qualification?

The post-qualification process must be conducted and completed within seven (7)

calendar

days from the determination of the LCB. However, in the procurement of goods requiring
elaborate testing (such as equipment sourced from abroad) and other exceptional cases,
the Head of the Procuring Entity may extend the post-qualification period, but in no case
should the aggregate period exceed thirty (30) calendar days.

Who are involved in the conduct of Post-qualification?

The following Parties are involved in the conduct of post-qualification:

1. The BAC;

2. The TWG;

3. The BAC Secretariat / Procurement Unit; and

4. The eligible supplier/manufacturer, ranked starting from bidder with the LCB.

Methodology: How is Post-qualification conducted?

The following steps are followed in the conduct of post-qualification:

1. The BAC/TWG verifies, validates, and ascertains the genuineness, validity and accuracy
of the legal, technical and financial documents submitted by the bidder with the LCB, using
the non-discretionary criteria described above.

In verifying the information contained in such documents, the BAC/TWG may make
inquiries with appropriate government agencies and examine the original documents kept in
the bidder’s place of business. The use of other means for verification and validation of
such documents may be resorted to by the BAC/TWG, such as the Internet and other
research methods that yield the same results.

2. The BAC/TWG conducts a site inspection of the bidder’s place of business and/or
plant/factory, where applicable.

3. The BAC/TWG tests samples for compliance with specifications and performance levels,
where applicable.

4. The BAC/TWG inquires about the bidder’s performance in relation with other
contracts/transactions as indicated in its eligibility statement (statement of on-going,
completed or awarded contracts).

5. If the TWG conducts the post-qualification, it prepares a Post-qualification Report to be

submitted to the BAC. The Report shall contain, among others, the activities undertaken
with regard to the post-qualification process, feedback from inquiries conducted, and the
results of any tests conducted by the TWG or an accredited government testing center,
where applicable.

6. The BAC reviews the Post-qualification Report submitted by the TWG.

7. The BAC determines whether the bidder with the LCB passes all the criteria for
postqualification.

8. If the LCB passes the post-qualification, the BAC declares it as the LCRB.
9. After the BAC has determined the LCRB, the Secretariat, with the assistance of the
TWG, if necessary, prepares the BAC Resolution declaring the LCRB and the
corresponding Notice to the said bidder informing it of its post-qualification.

What happens if the bidder with the LCB fails Post-qualification?

If the bidder with the LCB fails to pass post qualification, the BAC shall immediately notify
the

said bidder in writing of its post-disqualification and the grounds for it. The post-disqualified

bidder shall have three (3) calendar days from receipt of the said notification to request from

the BAC, if it so wishes, a reconsideration of its decision. The BAC shall evaluate the
request

for reconsideration, if any, using the same non-discretionary criteria, and shall issue its final

determination of the said request within seven (7) calendar days from receipt thereof.
Similar to the cases of bidders deemed to be ineligible and whose bids are rated “failed,”
the bidder with the LCB who fails to pass post-qualification may likewise file a protest with
the payment of the corresponding fee in case the BAC denies its request for
reconsideration. (Please refer to Step 4, Receive and Open Eligibility Envelopes and Bids
for further discussions on filing a protest.)

Immediately after the BAC has notified the first bidder of its post-disqualification, and
notwithstanding any pending request for reconsideration thereof, the BAC shall initiate and
complete the same post-qualification process on the bidder with the second LCB. If the
second bidder passes the post-qualification, and provided that the request for
reconsideration of the first bidder has been denied, the BAC shall declare the second bidder
as the bidder with the LCRB. The Head of the Procuring Entity shall then award the contract
to it.

If the second bidder, however, fails the post-qualification, the procedure for post-
qualification

shall be repeated for the bidder with the next LCB, and so on until the LCRB, is determined
for

award.

 
What happens if all bidders fail Post-qualification?

If no bidder passes post-qualification, the BAC shall issue a Resolution declaring a failure of
bidding. In such a case, the BAC shall issue a Resolution declaring a failure of bidding. The
BAC then reviews the terms and conditions stated in the IAEB. If warranted, it changes any
of the terms and conditions, including the quantities or specifications, provided that the ABC
is left unchanged. It must, thereafter, conduct a re-bidding, in the process formulating a new
IAEB and posting and publishing this as required.

All bidders that have initially responded to the IAEB in the first bidding shall be allowed to
submit new bids. If the original estimate is found to be inadequate on reassessment to meet
the objectives of the project, it may be necessary to reduce the scope of the project. Should
a second failure of bidding occur and the Procuring Entity finds that there is a need to
evaluate the responsiveness of the ABC, and so decides to revise the ABC accordingly, the
Procuring Entity should conduct another public bidding with re-advertisement and/or
posting.

Alternatively, the Procuring Entity may enter into a negotiated procurement with a legally,
technically, and financially capable supplier. However, if the Procuring Entity resorts to
negotiated procurement, the terms, conditions, and specifications of the project as well as
the ABC must be maintained.

When may the Procuring Entity exercise its right to reject bids, declare a failure of
bidding, or not award the contract?

The Procuring Entity may exercise the right to reject any and all bids, to declare a failure of
bidding, or not to award the contract in any of the following situations:

1.      If there is prima facie evidence of collusion between appropriate public officers or

employees of the Procuring Entity, or between the BAC and any of the bidders, or between
or among the bidders themselves, or between a bidder and a third party, including any act
which restricts, suppresses or nullifies or tends to restrict, suppress or nullify competition;

2.      If the BAC is found to have failed in following the prescribed bidding procedures, for
which the applicable sanctions shall be applied to the erring officers, as provided in IRRA
Section 65; or

 
3.      For any justifiable and reasonable ground where the award of the contract will not
redound to the benefit of the government as follows:

a. If the physical and economic conditions have significantly changed so as to render the
project no longer economically, financially or technically feasible as determined by the Head
of the Procuring Entity;

b. If the project is no longer necessary as determined by the Head of the Procuring Entity;
and

c. If the source of funds for the project has been withheld or reduced through no fault of the
Procuring Entity.

What are the instances where the BAC is considered to have failed in following the
prescribed procedures?

The following are some instances where the BAC is deemed to have failed to follow
prescribed

procedures:

1. Prescribing an insufficient number of days in the advertisement and/or posting of the

IAEB;

2. Exceeding the required periods for eligibility screening, bid evaluation, post-qualification
for each lowest calculated bidder or for awarding the contract without justifiable cause;

3. Conducting the pre-bid conference or issuing the bidding documents in less than the
required number of days before deadline for the submission and opening of bids;

4. Requiring the bidder to submit additional documents which is tantamount to improving

his bidding documents; and

5. Allowing a bidder to become eligible or pass the post-qualification with incomplete

documents.

Failure of Bidding

The BAC shall declare the bidding a failure when:

a) No bids are received;

b) All prospective bidders are declared ineligible;

c) All bids fail to comply with all the bid requirements or fail post-qualification, or, in the case
of Consulting Services, there is no successful negotiation; or

d) The bidder with the LCRB, HRRB, SCRB or SRRB refuses, without justifiable cause, to
accept the award of contract, and no award is made in accordance with Section 40 of the
Act and the IRR.

In order to determine the reason for the failed bidding, the BAC shall conduct a mandatory
review and evaluation of the terms, conditions, and specifications in the Bidding
Documents, including its cost estimates.

Based on its findings, the BAC shall revise the terms, conditions, and specifications, and if
necessary, adjust the ABC, subject to the required approvals, and conduct a re-bidding with
re-advertisement and/or posting, as provided for in Section 21.2 of the IRR.

All bidders who have initially responded to the Invitation to Bid/Request for Expression of
Interest and have been declared eligible or short listed in the previous biddings shall be
allowed to submit new bids. The BAC shall observe the same process and set the new
periods according to the same rules followed during the previous bidding(s).

Should there occur a second failure of bidding, the Procuring Entity may resort to negotiated
procurement as provided for in Section 53.1 of the IRR.

AWARD OF CONTRACT

What is the rule on Contract Award?

The contract shall be awarded to the bidder with the LOWEST CALCULATED

RESPONSIVE BID at its submitted bid price or its calculated bid price, whichever is lower. 
The BAC shall issue a Resolution recommending to the Head of the Procuring Entity award
of the contract to the bidder with the LCRB at its submitted bid price or its calculated bid
price, whichever is lower.

 
Prior to the expiration of the period of bid validity, the Procuring Entity should notify the
successful bidder in writing that its bid has been accepted, through a Notice of Award
received personally or sent by registered mail or electronically. It is important that, in case
the Notice of Award is not received personally, its receipt must be confirmed in writing within
two (2) days by the successful bidder and submitted personally or sent by registered mail
or  electronically to the Procuring Entity (this particular instruction must be included in the
ITB so that the bidder may be guided accordingly).

What is the Timeline for Contract Award?

The Head of Procuring Entity or his duly authorized representative should approve or
disapprove the recommendation of award within seven (7) calendar days from the date
of determination and declaration by the BAC of the LCRB. In the case of GOCCs and
GFIs, the governing Board has a period of fifteen (15) calendar days to approve or
disapprove the said recommendation.

The Notice of Award shall be given to the bidder with the LCRB immediately after

approval of the recommendation. Simultaneously, a copy of the Notice shall be furnished to
all losing bidders, and posted in the website of the PhilGEPS, as well as the websites of the
Procuring Entity and its electronic procurement service provider, if any.

Who are involved in the Award of the Contract?

The following must participate in the activities related to the awarding of the Contract:

1. The Head of the Procuring Entity;

2. The BAC;

3. The Procurement Office;

4. The BAC Secretariat/Procurement Unit;

5. The bidder who submitted the LCRB/SCRB; and

6. The Observers

What is the maximum period of time within which a contract can be awarded?
Contract award must be made within eighty (80) calendar days from the date of bid opening
but not to exceed the bid validity period as specified in the bidding documents. If award
cannot be made within the said period, the bid validity period should be extended. (Please
refer to Step on Preparing the Bidding Documents for the discussion on extension of the bid
validity period.)

Methodology: How is a contract awarded?

The following steps are followed in the awarding of a contract:

1. The BAC Secretariat consolidates all the documents and/or records of the proceedings of
the BAC with regard to the procurement at hand, and attaches the same to the BAC
Resolution.

2. The BAC Secretariat drafts the BAC Resolution recommending award.

3. The BAC approves and signs the Resolution Recommending Award, and transmits the
same to the Head of the Procuring Entity.

4. The Head of the Procuring Entity, or his/her duly authorized representative, acts on the
recommendation for award within seven (7) calendar days from the date of determination
and declaration by the BAC of the LCRB/SCRB. In the case of GOCCs and GFIs, the
governing Board shall have fifteen (15) calendar days within which to approve the
recommendation for award.

5. In case of approval of the recommendation, the Head of the Procuring Entity, through the
procurement unit/office, issues the Notice of Award to the bidder with the LCRB/SCRB,
while the BAC accordingly notifies the losing bidders. In case of a disapproval of the
recommendation of award, the Head of the Procuring Entity shall state the reason(s) for
disapproval and instruct the BAC on the subsequent steps to be adopted.

6. The bidder with the LCRB/SCRB accepts the Notice of Award.

What happens if the bidder being considered for award does not accept the award?

If the bidder refuses to accept the award within the bid validity period, the BAC shall
forfeit the bid security of the bidder and shall initiate the blacklisting proceedings
in accordance with the Uniform Guidelines for Blacklisting (GPPB Resolution No. 09-
2004). It then initiates and completes the post-qualification of the bidder with the second
lowest calculated bid. If found qualified, the said bidder shall be awarded the contract. This
procedure is repeated until the LCRB is determined. Should all eligible bidders fail
postqualification, the BAC must declare the bidding a failure.

 
Refusal to accept an award, without just cause or for the purpose of forcing the Procuring
Entity to award the contract to another bidder, if proven, is meted with a penalty of
imprisonment of not less than six (6) years and one (1) day by not more than fifteen (15)
years. Additional penalties of suspension for one (1) year from participation in government
procurement for the first offense, and suspension for two (2) years for the second offense
shall also be imposed on the bidder.

When must the winning bidder and the Procuring Entity enter into a contract?

The winning bidder and the Procuring Entity must enter into a contract immediately after the

former has submitted the performance security and all other documentary requirements
within the period specified in the IRR-A. The parties must sign the contract within ten (10)
calendar days from receipt by the winning bidder of the Notice of Award.

The Chief Accountant or the Chief Budget Officer may sign the contract as an instrumental
witness thereto. The Procuring Entity signatory is encouraged to sign within the same day
as the signing of the bidder as there are penalties against delaying, without justifiable
cause, the award of the contract.

Moreover, it would be best for the winning bidder and the Head of the Procuring Entity, or its
appropriate signing authority, to sign/execute the contract together – provided that all
contract documents and requirements are complete – so that both may personally appear
before a Notary Public.

What are the Timelines to be considered with respect to contract approval?

When, after contract signing, further approval of a higher authority is required, the
approving authority for the contract, or his duly authorized representative, shall be given
a maximum of fifteen (15) calendar days from receipt thereof, together with all
documentary requirements to perfect the said contract, to approve or disapprove it. In the
case of GOCCs and GFIs, when further approval of the governing Board is required, the
said governing Board or its duly authorized representative has twenty-five (25) calendar
days.

When should the Procuring Entity issue the NTP?

The NTP must be issued together with a copy or copies of the approved contract to the
successful bidder within three (3) calendar days from the date of approval of the contract
by the appropriate government approving authority.

When is a contract “effective”?

Unless otherwise specified in the contract, a contract is effective upon receipt of the NTP. If
an effectivity date is provided in the NTP by the Procuring Entity concerned, all notices
called for by the terms of the approved contract shall be effective only from such effectivity
date, but such effectivity date should not be later than seven (7) calendar days from the
issuance of the NTP.

Who are the Parties involved in Contract Signing and Approval and Issuance of the
NTP?

The following parties are involved in the signing and approval of the contract, and in the
issuance of the NTP:

1. The BAC Secretariat/Procurement Unit/Office;

2. The Head of the Procuring Entity;

3. The winning bidder; and

4. End-user;

What documents form part of the contract?

The contract shall include the following:

1. The Contract Agreement;

2. Conditions of the contract (General and Specific);

3. Technical Specifications of Goods or Scope of Work for services;

4. IAEB;

5. Bidding documents;

6. Addenda and/or Supplemental/Bid Bulletins, if any;

7. Bid form including all the documents/statements contained in the winning bidder’s two
bidding envelopes, as annexes;

8. Eligibility requirements, documents and/or statements;

9. Performance Security;

10. Credit Line issued by a licensed bank in accordance with the provisions of the IRR-A, if

applicable;

11. Notice of Award of Contract and winning bidder’s “Conforme” thereto; and

12. Other contract documents that may be required by existing laws and/or the Procuring

Entity concerned.

Methodology:

1. The winning bidder submits all the documentary requirements, including the performance
security, and signs the contract.

2. The procurement unit/ office transmits the contract and its attachments to the budget
office (for issuance of the OS) and the Chief Accountant (for issuance of the CAF)

3. The procurement unit/office transmits the contract documents to the Head of the
Procuring Entity or appropriate signing authority for signature, together with the following
documents:

a. Duly approved delivery schedule and cost estimates or the PPMP;

b. OS;

c. CAF;

d. Abstract of Bids;

e. Resolution of the BAC recommending award;

f. Approval of award by the appropriate approving authority; and

g. Other pertinent documents that may be required by existing laws and/or the

Procuring Entity concerned.

4. After signing, if the contract needs the approval of a higher authority – such as, for
bureaus, the Department Secretary, when required – the procurement unit/office transmits
the contract and related documents to the approving authority or his authorized
representative for approval.

5. The approving authority or his authorized representative acts on the contract within
fifteen (15) calendar days, or twenty-five (25) calendar days for GOCCs and GFIs, from
receipt thereof.

6. If further approval is required (e.g. approval of the Office of the President), or a review by

another government body is necessary (e.g., NEDA or DOJ review), the Head of the
Procuring Entity transmits the contract documents to the appropriate approving authority or
reviewing body. The periods indicated above for approval of contracts still apply, except if
the approving authority is the Office of the President.

7. The Head of the Procuring Entity or his/her duly authorized representative issues the
NTP within three (3) calendar days from the date of the approval of the contract.

What are the rules governing the review and approval of government contracts?

Executive Order 423, s. 2005, prescribes the rules and regulations on the review and
approval of government contracts. Essentially, E.O. 423 provides that, except for
government contracts required by law to be acted upon and/or approved by the President,
the Head of the Procuring Entity shall have full authority to give final approval and/or enter
into all government contracts of his respective government agency, awarded through public
bidding, regardless of amount. Provided, that the Head of the Procuring Entity certifies
under oath that the contract has been entered into in faithful compliance with all applicable
laws and regulations.

The Head of a Procuring Entity may also delegate in writing this full authority to give final
approval and/or enter into government contracts awarded through public bidding as
circumstances may warrant (i.e. to decentralization of procurement in a government
agency), subject to such limitations as he may impose. For procurement undertaken
through any of the alternative methods allowed by law, where the government contract
involves an amount less than P500 Million, except where action or approval of the President
is required, the Head of the Procuring Entity shall have full authority to give final approval
and/or enter into such contract, provided that the Department Secretary concerned certifies
under oath that the contract has been entered into in faithful compliance with all applicable
laws and regulations. He may delegate in writing this authority, as circumstances may
warrant (i.e. to decentralize procurement), subject to such limitations as he may impose.

 
Where the Head of the Procuring Entity has made a determination that a Government
contract, including Government contracts required by law to be acted upon and/or approved
by the President, involving an amount of at least P500 Million falls under any of the
exceptions from public bidding allowed by law, the Head of the Procuring Entity shall, before
proceeding with the alternative methods of procurement provided by law and applicable
rules and regulations, obtain the following requirements:

1. An opinion from the GPPB that said Government contract falls within the exceptions

from public bidding; and

2. Approval from the Director-General of NEDA to proceed with a specific alternative

method of procurement under the exceptional cases provided by law and applicable

rules and regulations.

Except for Government contracts required by law to be acted upon and/or approved by the
President, the Head of the Procuring Entity, after obtaining the foregoing requirements, shall
have full contracts of their his respective agency, entered into through alternative methods
of procurement allowed by law. Provided, that the head of the procurement entity certifies
under oath that the contract has been entered into in faithful compliance with all applicable
laws and regulations.

What happens if the bidder with the LCRB or SCRB refuses or is unable, through its
own fault, to post the performance security and sign the contract within the
prescribed period?

If the bidder with the LCRB or SCRB (as defined in Step 4, Receive and Open Eligibility
Envelopes and Bids) refuses to, or is unable, through its own fault, to post the performance
security and sign the contract within the prescribed period:

1. Its bid security is forfeited;

2. It is disqualified from further participating in the bidding at hand;

3. Upon conviction, the relevant officers or individuals will suffer the penalty of imprisonment
of not less than six (6) and one (1) day and not more than fifteen (15) years; and

4. Upon determination of administrative liability, it will suffer the administrative penalties

of suspension for one (1) year from participation in government procurement for the first
offense, and suspension for two (2) years for the second offense. This is without prejudice
to the blacklisting proceedings undertaken in accordance with the Uniform Guidelines for
Blacklisting (GPPB Resolution 09-2004).
 

For its part, the BAC must initiate and complete the post-qualification of the bidder with the
second LCB. This procedure must be repeated until the LCRB is determined for award. If no
bidder passes post-qualification, the BAC declares the bidding a failure and conducts a
rebidding with re-posting and re-advertisement. Should there be another failure of bidding
after the conduct of the re-bidding, the Procuring Entity may enter into a negotiated
procurement.

If the bidder that fails to post the performance security and sign the contract happens to be
one with the SCRB, the BAC must declare the bidding a failure. It then conducts a re-
bidding with re-posting and re-advertisement. Should there be another failure of bidding
after the conduct of the re-bidding, the Procuring Entity may enter into a negotiated
procurement.

The BAC shall initiate the process of blacklisting. The Uniform Guidelines for Blacklisting of
manufacturers, suppliers, distributors, and contractors shall be used.

What happens if the failure of the bidder with the LCRB or SCRB to sign the contract
within the prescribed period is not its own doing?

If the failure of the bidder with the LCRB or SCRB to sign the contract within the prescribed
period is not due to its fault, the sanctions mentioned above shall not be imposed.

TERMINATION OF CONTRACT

Termination for Default What are the grounds for termination for default?

Any of the following conditions shall constitute as a ground for termination of the contract for

default:

1. There being no force majeure, the supplier fails to deliver any or all of the goods within
the period(s) specified in the contract, or within any extension thereof granted by the
Procuring Entity pursuant to a request made by the supplier prior to the delay, and such
failure amounts to at least ten percent (10%) of the contract price;

2. As a result of force majeure, the supplier is unable to deliver or perform any or all of the
goods or services, amounting to at least ten percent (10%) of the contract price, for a period
of not less than sixty (60) calendar days after the receipt of the notice from the Procuring
Entity stating that the circumstance of force majeure is deemed to have ceased;
3. The supplier fails to perform any other obligation(s) under the contract; or

4. The supplier, in the judgment of the Procuring Entity, has engaged in corrupt, fraudulent,
collusive or coercive practices in competing for or in executing the contract.

How does the Procuring Entity proceed with the procurement in case of a contract
termination due to default?

If the Procuring Entity terminates the contract in whole or in part, due to default, it may
procure from third parties, through the appropriate alternative method of procurement,
goods or services similar to those undelivered. The supplier that defaulted will be liable to
the Procuring Entity for any excess costs for such similar goods or services.

Termination for Insolvency What remedy does the Procuring Entity have when a
supplier is unable to perform his obligations due to bankruptcy or insolvency?

The Procuring Entity may at any time terminate the contract by giving written notice to the
supplier, if the supplier is declared bankrupt or insolvent as determined with finality by a
court of competent jurisdiction. In this event, termination will be without compensation to the
supplier, provided that such termination will not prejudice or affect any right of action or
remedy which has accrued or will accrue thereafter to the Procuring Entity and/or the
supplier.

Termination for Convenience May termination be allowed for reasons other than
those attributable to the supplier?

The Procuring Entity, by written notice sent to the supplier, may terminate the contract, in
whole or in part, at any time for its convenience. The notice of termination shall specify that
the termination is for the Procuring Entity’s convenience, the extent to which performance of
the supplier under the contract is terminated, and the date upon which such termination
becomes effective.

What circumstances may constitute sufficient grounds to terminate a contract for

convenience?

Any of the following circumstances may constitute sufficient grounds to terminate a contract

for convenience:

1. If physical and economic conditions have significantly changed so as to render the

project no longer economically, financially or technically feasible, as determined by the
Head of the Procuring Entity;
2. The Head of the Procuring Entity has determined the existence of conditions that make
project implementation impractical and/or unnecessary, such as, but not limited to,
fortuitous event/s, changes in laws and government policies;

3. Funding for the project has been withheld or reduced by higher authorities through no

fault of the Procuring Entity; or

4.      Any circumstance analogous to the foregoing.

Also see the Guidelines on Termination of Contracts approved by the GPPB in Resolution
No. 018-2004, dated December 22, 2004.

What effect shall termination for convenience have on pending deliveries?

The goods that are complete and ready for shipment within thirty (30) days after the
supplier’s receipt of notice of termination shall be accepted by the Procuring Entity at the
contract terms and prices. For the remaining goods, the Procuring Entity may elect:

1. To have any portion completed and delivered at the contract terms and prices; and/or

2. To cancel the remainder and pay to the supplier an agreed amount for partially
completed goods and services and for materials and parts previously procured by the
supplier.

If the Supplier suffers loss in its initial performance of the terminated contract, such as
purchase of raw materials for Goods specially manufactured for the Procuring Entity which
cannot be sold in the open market, it shall be allowed to recover partially from the contract,
on a quantum meruit basis. The fact of loss must be established before recovery may be
made.

Assignment May the Supplier assign a contract, or any of its rights or obligations
arising from

the contract, to a third party?

As a general rule, the supplier may not assign the contract, or any of its rights or obligations
arising from the contract, to a third party, except with the Procuring Entity’s prior written
consent.
 

On the assignment of contractual obligations and the entry of nonbidders into the
procurement process

Assignment of contractual obligations or the contract itself may generally not be done
because this will enable a non-bidder to become a party to the contract. This arrangement
will make a mockery of the public bidding process, so that one who was not declared
eligible to bid and did not participate in the bidding process will end up as the contract
awardee, although indirectly.

Moreover, assignors will only add to the number of parties that the procuring entity has to
deal with, thereby complicating contract implementation. This could also be a problem if
litigation becomes necessary to enforce the contract.

Blacklisting

The blacklisting of suppliers must conform to the GPPB Guidelines issued for this purpose.
As such, reference should be made to the Uniform Guidelines for Blacklisting of
Manufacturers, Suppliers, Distributors, Contractors and Consultants, approved by the
GPPB in Resolution 09- 2004, dated August 20, 2004.

DELIVERY

What are the grounds for suspension of delivery or contract implementation?

The Procuring Entity may suspend the delivery or contract implementation, wholly or partly,
by written order for a certain period of time, as it deems necessary due to force majeure or
any fortuitous event as defined in the contract.

Are corresponding adjustments in contract price and/or delivery schedule allowed?

Yes, appropriate adjustments shall be made in the delivery or contract schedule, or contract
price, or both, and the contract shall be modified accordingly. When warranted, price
adjustments may be made in accordance with the guidelines previously discussed in the
immediately preceding section on “Amendment to Order.”

When shall the Supplier/ Manufacturer/ Distributor resume delivery and/or contract
implementation?
Work must be resumed or delivery made either upon the lifting or the expiration of the
suspension order. However, if the Procuring Entity terminates the contract covered by such
order, resumption of work cannot be done.

Who are the parties involved in the issuance of a Suspension Order?

The following parties are involved in the issuance of a Suspension Order:

1. The PMO or end-user unit;

2. The supplier/manufacturer/distributor; and

3. The Head of the Procuring Entity or his duly authorized representative.

Methodology: How is a Suspension Order issued?

The following steps are necessary for the issuance of a suspension order:

1. The PMO or end-user unit determines the existence of a force majeure or fortuitous

event that will be the basis for the issuance of a suspension order.

2. Based upon the findings and recommendation of the PMO or end-user, the Head of the
Procuring Entity issues a written order suspending the order or work, wholly or partly, for a
certain period of time.

3. The supplier/manufacturer/distributor shall take all reasonable steps to minimize the

costs allocable to the order or work covered by the order during the suspension.

4. The PMO or end-user unit discusses with the supplier/manufacturer/distributor any need
for adjustments in the delivery or contract schedule and/or contract price, including any
need to modify contract.

5. The PMO or end-user unit drafts the contract amendment containing the agreements
reached with the supplier/manufacturer/distributor.

6. The contract amendment is submitted to the Head of the Procuring Entity or his duly
authorized representative, for approval.

7. Prior to the expiration of the suspension order, the PMO or end-user unit determines
whether or not the grounds for suspension are still existent. If such grounds continue to
exist, or if it is no longer practicable to complete the delivery or continue with the work, it
shall cancel the delivery of the items subject of the suspension order, or terminate the work
subject of the order, by written notice. If, however, the grounds for suspension no longer
exist, and completion of delivery or continuation of the work may already be done, the PMO,
with the approval of the Head of the Procuring Entity or his duly authorized representative,
shall lift the suspension order by written notice, thereby instructing the
supplier/manufacturer/distributor to proceed with the delivery or work in accordance with the
amended contract.

What is the rule on the applicable period for the delivery of goods or performance of
services?

The supplier/manufacturer/distributor must deliver the goods or perform the services

procured within the period prescribed by the Procuring Entity, as specified in the Contract. If
delays are likely to be incurred, the supplier/manufacturer/distributor must notify the
Procuring Entity in writing. It must state therein the cause/s and duration of the expected
delay. The Procuring Entity may grant time extensions, at its discretion, if based on
meritorious grounds, with or without liquidated damages. In all cases, the request for
extension should be submitted before the lapse of the original delivery date. The maximum
allowable extension shall not be longer than the initial delivery period as stated in the
original contract.

What are Liquidated Damages?

Liquidated damages are damages agreed upon by the parties to a contract, to be paid in
case of breach thereof. (Civil Code of the Philippines Art. 2226)

What are the grounds for the imposition of Liquidated Damages?

When the supplier fails to satisfactorily deliver the goods or services under the contract
within the specified delivery schedule or project implementation schedule, inclusive of duly
granted time extensions, if any, the supplier shall be liable for damages for the delay and
shall pay the Procuring Entity liquidated damages, not by way of penalty, for every day of
delay until such goods or services are finally delivered or performed and accepted by the
Procuring Entity concerned. The Procuring Entity need not prove that it has incurred actual
damages to be entitled to liquidated damages.

What is the amount of Liquidated Damages that may be imposed upon the supplier?

The supplier must pay the Procuring Entity liquidated damages, not by way of penalty, an
amount equal to one-tenth (1/10) of one percent (1%) of the cost of the delayed goods or
services scheduled for delivery or performance for every day of delay. The liquidated
damages will be imposed until such goods or services are finally delivered or performed and
accepted by the Procuring Entity concerned. In no case shall the sum of liquidated
damages reach ten percent (10%) of the contract amount. If it does, the contract shall
automatically be rescinded by the Procuring Entity, without prejudice to other courses of
action and remedies open to it. The Procuring Entity may also take over the contract or
award the same to a qualified supplier through negotiation. In addition to the liquidated
damages, the erring supplier’s performance security shall also be forfeited.

Methodology: How are Liquidated Damages imposed?

The following steps need to be followed in the imposition of liquidated damages:

1. The supplier/manufacturer/distributor submits a written request to the PMO or enduser

unit for an extension of the delivery or performance period, citing the reason/s for such
delay.

2. The PMO or end-user unit either approves or disapproves the request for extension.

3. If the extension is granted, the liquidated damages may or may not be imposed and the
supplier/manufacturer/distributor is informed of this in writing. The
supplier/manufacturer/distributor is then asked to extend the validity of the performance
bond, to conform to the extended period.

4. If, however, the request for extension is denied, the PMO or end-user unit informs in
writing the supplier/manufacturer/distributor of such denial, and ensures that the said notice
or communication is received by the latter within a reasonable time from receipt of the
request for extension. In this case, the Procuring Entity imposes the liquidated damages in
accordance with the provisions of the contract and the procedures outlined below.

5. If the supplier/manufacturer/distributor incurs delay and it does not request for an

extension

a. The PMO or end-user unit informs, within a reasonable time from the first day of delay,
the supplier/manufacturer/distributor that the Procuring Entity shall impose the liquidated
damages agreed upon by the parties.

b. Upon delivery, the PMO or end-user unit and the Technical Inspection and Acceptance
Committee records the delay in the inspection documents, noting therein the amount of the
liquidated damages imposable on the supplier.

c. Upon payment, the amount of liquidated damages due is deducted from the total amount
payable to the supplier, and the same shall be reflected in the DVs. Or, if the contract
provides that the liquidated damages is to be collected from securities or warranties posted
by the supplier, the PMO or end-user unit informs the official authorized to call on the
securities or warranties about the delay and the corresponding liquidated damages
imposable.

WARRANTY

What is the purpose of a Warranty?

A Warranty is required in the procurement of goods to ensure that the supplier,

manufacturer

or distributor, as the case may be, will correct any manufacturing defect.

What is the Warranty requirement for Goods?

For the procurement of goods, a warranty shall be required from the contract awardee for a
minimum period of three (3) months, in the case of supplies, and one (1) year, in the case of
equipment, after the acceptance by the Procuring Entity of the goods and/or equipment.
The obligation for the warranty shall be covered by either retention money in an amount
equivalent to at least ten percent (10%) of every progress payment, or a special bank
guarantee equivalent to at least ten percent (10%) of the total contract price. The special
bank guarantee must be contract specific, that is, it shall be executed for the special
purpose of covering the warranty for the subject procurement contract. If the warranty
period is longer than the minimum period of three (3) months for supplies and one (1) year
for equipment, the period beyond the minimum period need not be covered by retention
money or special bank guarantee. After the lapse of the minimum period, the Procuring
Entity must release the retention money or special bank guarantee. The warranty shall only
be released after the lapse of the warranty period, provided that the goods supplied are free
from patent and latent defects and all the conditions imposed under the contract have been
fully met.

When shall Goods be considered defective?

Goods are considered defective when they are “unfit for the use for which it is intended,” or
“its fitness for such use is diminished to such an extent that, had the vendee been aware
thereof, he would not have acquired it or would have given a lower price for it….” (Civil
Code of the Philippines Article 1561). A defect can either be:

1. A patent defect, which is one that is apparent to the buyer on normal observation. It is an
apparent or obvious defect. For example, a ballpen that does not write is patently defective.
2. A latent defect, which is one that is not apparent to the buyer by reasonable observation.
A latent defect is “hidden” or one that is not immediately determinable. For example, a
ballpen that writes .75 kilometers instead of the expected 1.5 kilometers, has a latent defect.

Both latent and patent defects are covered by the warranty expressly required in R.A. 9184
and its IRR-A. This means that the Procuring Entity may proceed against the warranty
whenever any of these defects are determined to be present in the goods procured, and the
same are determined within the period covered by the warranty. However, wear and tear
due to normal usage of the goods is excluded from the coverage of the warranty.

The Procuring Entity should promptly notify the supplier in writing of any claims arising
under the warranty. Upon receipt of such notice, the supplier should, within the period
specified in the contract and with all reasonable speed, repair or replace the defective
goods or parts thereof, without costs to the Procuring Entity. If the supplier, having been
notified, fails to remedy the defects within the period specified in the contract, the Procuring
Entity may then proceed to call upon the warranty security, without prejudice to any other
rights which it may have against the supplier under the contract and under the applicable
law.

Are there instances where partial release or reduction of the required warranty may
be done by the Procuring Entity?

Yes, a partial release or reduction of the warranty may be allowed in the case of partial
deliveries. In this case, the warranty periods will vary among the various lots. The warranty
for goods delivered ahead will lapse earlier than the succeeding deliveries. The retention
money or a portion of the special bank guarantee covering the warranty for goods received
or delivered ahead may thus be released. The effect is that there will be partial releases of
the retention money or special bank guarantee to coincide with the lapse of the warranty
period for each delivered lot.

However, the warranty must be in the form of retention fee equivalent to ten percent (10%)
of every progress payment. For example, in the case of a procurement transaction allowing
partial deliveries and progress payment for each delivery, the amount of the warranty for the
first partial delivery may be released after the lapse of the warranty period for such first
delivery. The remaining goods that are still under warranty will be covered by a warranty fee
equivalent to ten percent (10%) of each progress payment.

1. Introduction/Overview

Lesson 5

 
Competitive Bidding

1.   Bid Evaluation

2.   Post Qualification

3.   Failure of Bidding

4.   Award, Implementation and Termination of Contract

5.   Delivery

6.   Warranty

BID EVALUATION

What is the purpose of Bid Evaluation?

The purpose of bid evaluation is to determine the Lowest Calculated Bid (LCB).  This is
done by:

1. Establishing the correct calculated prices of the bids, through a detailed evaluation of

the financial component of the bids; and

2. Ranking of the total bid prices as so calculated from the lowest to the highest. The bid

with the lowest price shall be identified as the LCB.

When should the bids be evaluated?

The entire evaluation process for the bids for the procurement of goods must be completed
in

not more than seven (7) calendar days from the deadline for receipt of proposals.
However, the BAC should exert effort to complete the Bid Evaluation even before the lapse
of the 15-day period, as this will expedite the procurement process.

Who are the participants in the Bid Evaluation Process?

The following must participate in the bid evaluation process:

1. The BAC;

2. The TWG;

3. The BAC Secretariat/ Procurement Unit; and

4. The Observers.

Methodology: How are bids evaluated?

1. After the preliminary examination of bids, the BAC, or through the TWG, shall
immediately conduct a detailed evaluation of all bids rated “passed,” using a
nondiscretionary pass/fail criteria, as stated in the IAEB and the ITB, which shall include a

consideration of the following:

a.      The bid must be complete. Unless the ITB specifically allow partial bids, bids not
addressing or providing all of the required items in the bidding documents including, where
applicable, those requirements pertaining to the civil works components of Goods procured,
shall be considered non-responsive and, thus, automatically disqualified. In this regard,
where a required item is provided, but no price is indicated, the same shall be considered
as non-responsive, but specifying a “0” (zero) for the said item would mean that it is being
offered for free to the Government.

b.   Minor arithmetical corrections to consider computational errors, omissions and

discounts, if allowed in the bidding documents, to enable proper comparison of all eligible
bids. Any adjustment shall be calculated in monetary terms to determine the calculated
prices. For evaluation purposes, in allowed instances, the bid must be converted into
Philippine currency based on the exchange rate prevailing on the day of the bid opening.
The BSP reference rate as of the date of the bid opening shall be used.

c. In the evaluation of bids, all bids shall be evaluated on an equal footing to ensure fair and
competitive bid evaluation. For this purpose, all bidders shall be required to include the cost
of all taxes, such as, but not limited to, value added tax (VAT), income tax, local taxes, and
other fiscal levies and duties which shall be itemized in the bid form and reflected in the
detailed estimates. Such bids, including said taxes, shall be the basis for bid evaluation and
comparison. Moreover, applicable custom duties, as well as other costs of acquisition such
as freight, insurance, and bank charges, must be incorporated in the bid.

 
d. In case of discrepancies between: (a) bid prices in figures and in words, the latter shall
prevail; (b) total prices and unit prices, the latter shall prevail; (c) unit cost in the detailed
estimate and unit cost in the bill of quantities, the latter shall prevail.

2. Based on the detailed evaluation of bids, those that comply with the abovementioned
requirements shall be ranked in the ascending order of their total calculated bid prices, as
evaluated and corrected for computational errors, discounts and other modifications, to
identify the LCB. Total calculated bid prices, as evaluated and corrected for computational
errors, discounts and other modifications, which exceed the ABC shall be disqualified.

3. After all bids have been received, opened, examined, evaluated and ranked, the BAC
shall prepare the corresponding Abstract of Bids. All members of the BAC shall sign the
Abstract of Bids and attach thereto all the bids with their corresponding Bid Securities and
the minutes or proceedings of the bidding. The Observers shall also sign the Abstract of
Bids if, in their independent observation, the bidding activity conducted by the BAC followed
the correct procedure indicated under R.A. 9184 and its IRR-A. The Abstract of Bids shall
contain the following:

a. Name of the contract and its location, if applicable;

b. Time, date and place of bid opening; and

c. Names of bidders and their corresponding calculated bid prices arranged from

lowest to highest, the amount of bid security and the name of the issuing

entity.

4. The TWG, with the assistance of the BAC Secretariat, when directed by the BAC, should
prepare the Evaluation Report, containing the details of the evaluation conducted,
preferably within three (3) calendar days from the date the evaluation was concluded.

On clarifications during bid evaluation (the “no-contact” rule)

During the bid evaluation stage, the BAC, BAC Secretariat and the TWG shall not entertain
clarifications from Bidders, neither shall they initiate communication with the Bidders,
regarding the evaluation of the bids. There are two reasons for this rule:

1. There is no need for clarifications of technical issues since the evaluation is focused on
arithmetical computations which are determined from the face of the bid itself; and
2. Communications with the Bidders might lead to possible collusion or the Bidder might try
to influence the outcome of the bidding process.

Are there special privileges for cooperatives in the supply of goods to government
entities?

Yes. Under the Cooperative Code of the Philippines, or Republic Act No. 6938,
cooperatives have preferential right to supply government institutions and agencies with
rice, corn and other grains, fish and other marine products, meats, eggs, milk, vegetables,
tobacco and other agricultural commodities produced by their own members.

Moreover, there is a recurring provision in the GAA which mandates the Government to
procure at least ten percent (10%) of its total purchases from duly registered cooperatives
and another ten per cent (10%) from SMEs.

What may be done if all prospective bidders are unable to comply with the
requirement of having a single contract whose value is at least fifty percent (50%) of
the ABC of the project to be bid?

If all prospective bidders are unable to comply with the requirement of having a single
contract whose value is at least fifty percent (50%) of the ABC of the contract to be bid, the
Procuring Entity may have to review the packaging of the project or procurement
concerned, taking into account the technical and financial capabilities and experience in the
domestic and international market, as well as the most logical and practical approach/scope
of work to complete a project. However, the Procuring Entity must ensure that this will not
result to a splitting of contracts that is committed for the purpose of evading or
circumventing the requirements of law and existing rules and regulations.

In the alternative, the Procuring Entity may instead require prospective bidders to have at
least three (3) similar completed contracts the aggregate of which should be equivalent to at
least fifty percent (50%) of the ABC of the project to be bid; the largest of these similar
contracts must be equivalent to at least twenty-five percent (25%) of the ABC of the project
to be bid; and the business/company of the prospective bidder willing to participate in the
bidding has been in existence for at least three (3) consecutive years prior to the
advertisement and/or posting of the IAEB.

Furthermore, when the item/good to be procured is novel or its procurement is otherwise

unprecedented or is unusual, and compliance to the requirement on a largest single similar
contract is impracticable, the prospective bidder will only have to comply with the above-
mentioned required period for the existence of a business/company. This scheme may also
be applied when requiring a single contract that is at least fifty percent (50%) of the ABC will
likely result to a monopoly that will defeat the purpose of public bidding. (GPPB Resolution
007-2006, dated 20 January 2006)

The procuring entity can clarify in the bidding documents the similar projects that can be
considered in the bidding, which projects or contracts must have been completed within the
period specified in the IAEB. All other conditions of the contract must be the same as
provided for in the bidding documents.

What happens if a bidder does not accept the arithmetical corrections done by the
BAC on its bid?

The BAC must disqualify the bid and forfeit the bid security of the bidder.

What happens if no bid complies with all bid requirements?

If no bid complies with all bid requirements, the BAC should declare the bidding a failure. In
such a case the BAC shall issue a Resolution declaring a failure of bidding. The BAC then
reviews the terms and conditions stated in the IAEB. If warranted, it changes any of the
terms and conditions, including the quantities or specifications, provided that the ABC is left
unchanged. It must, thereafter, conduct a re-bidding, in the process formulating a new IAEB
and posting and publishing this as required. All bidders that have initially responded to the
IAEB in the first bidding shall be allowed to submit new bids.  If the original estimate is
found to be inadequate on reassessment to meet the objectives of the project, it may be
necessary to reduce the scope of the project.

Should a second failure of bidding occur and the Procuring Entity finds that there is a need
to evaluate the responsiveness of the ABC, and so decides to revise the ABC accordingly,
the Procuring Entity should conduct another public bidding with re-advertisement and/or
posting. Alternatively, the Procuring Entity may enter into a negotiated procurement with a
legally, technically, and financially capable supplier. However, if the Procuring Entity resorts
to negotiated procurement, the terms, conditions, and specifications of the project as well as
the ABC must be maintained.

How shall Domestic Preference be applied during bid evaluation?

A Procuring Entity shall apply domestic preference in the procurement of goods as long as it
complies with the provisions of IRR-A and R.A. 5183, and this shall be expressly mentioned
in the bidding documents. In applying domestic preference, the Procuring Entity shall be
guided by the provisions of C.A. No. 138, to wit:

1. When the LCB including taxes and customs duties, is a “foreign bid” as defined in C.A.

No. 138 (see definition below), the award shall be made to the bidder who submitted

the lowest “domestic bid”, provided that:

a. the domestic bid is not more than fifteen per centum (15%) in excess of

the LCB. (Section 3 [e] C.A. No. 138); and

b. the bidder who submitted the lowest domestic bid must pass the postqualification.

2. When several bidders participate in a public bidding for the supply of articles, materials
and equipment for a Procuring Entity, including public buildings or public works, and the
LCB is submitted by one other than a “domestic entity” (see definition below), the award
should be made to the domestic entity making the lowest bid, provided that:

a. the bid of the domestic entity is not more than 15% in excess of the LCB; and

b. the same domestic entity must pass the post-qualification.

3. In the case of FAPs or procurement undertaken by virtue of international treaties or

agreements, when there is no provision disallowing the application of domestic

preference, in compliance with R.A. 9184 Section 43, the preference in item (a) above

for domestically-produced and manufactured goods, supplies and materials that meet

the specified or desired quality may further be allowed in the interest of:

a. Availability, that is, the domestically-produced goods are more readily

available in the market, like off-the-shelf items;

b. Efficiency; and

c. Timely delivery of goods.

4. In the case of FAPs undertaken through IFI funding, at the request of the Procuring

Entity, and under conditions to be agreed under the loan agreement and set forth in
the bidding documents, a margin of preference may be provided in the evaluation of

bids for:

a. Goods manufactured in the country of the Procuring Entity when comparing

bids offering such goods with those offering goods manufactured abroad; and

b. Works in member countries below a specified threshold of Gross National

Product per capita, when comparing bids from eligible domestic contractors

with those from foreign firms.

5. Where preference for domestically manufactured goods or for domestic contractors is

allowed, the methods and stages set forth in the loan agreement should be followed.

How is the right to match undertaken in bidding of provincial projects?

1. Provincial Projects

The rules on public bidding and procurement processes prescribed in R.A. 9184, its IRR
and this Manual, shall apply to priority programs and infrastructure projects funded out of
the GAA for implementation within the province. These projects are referred to as
“provincial projects”. “Provincial projects” are Engineering District infrastructure projects and
priority programs fully funded by the Government and identified in consultation with the
concerned members of Congress.

2. Matching of Bids by Provincial Bidders

A provincial bidder is a contractor whose principal office is within the province where a
provincial priority program or infrastructure project, defined in the immediately preceding
paragraph, is being implemented. In the bidding of such provincial projects, a provincial
bidder is given the privilege to match the LCB of a bidder who is not a provincial bidder. In
implementing this rule,

the following shall be observed:

a. The subject bidding is done within five (5) years from the effectivity of R.A. 9184, or not
later than January 26, 2007.
b. The provincial bidder who is given the privilege to match the LCB submits the lowest bid
among the provincial bidders, although it is higher than the LCB.

c. The said provincial bidder shall exercise the privilege to match the LCB within forty-eight
(48) hours from receipt of the notice from the BAC to match the LCB.

d. Matching shall be made in writing, through appropriate adjustments in the unit bid prices
without changing the Scope of Work and work items prescribed by the Procuring Entity in
the bidding documents.

e. If the provincial bidder is able to match the LCB within the prescribed period and he
passes the post-qualification, the contract will be awarded to him. However, if he fails to
match the LCB or to pass the post-qualification, the contract will be awarded to the bidder
who originally obtained the LCB.

f. This privilege granted to provincial contractors shall not apply to:

i. contracts the coverage of which includes more than one (1) province;

ii. procurement of consulting services;

iii. projects for implementation within Metro Manila.

3. Publication and Posting of Provincial Projects

The release of funds for provincial projects should be published by the Procuring Entity in
accordance with the following requirements:

a. It shall be published in a local newspaper with the widest circulation in the region during
the same period as the advertisement/posting of the IAEB;

“Conspicuous place” shall mean any place in the premises of the Procuring Entity that is
accessible to the general public and reserved for the purpose of
posting/publishing announcements and/or notices for dissemination to the public.

b. It shall be posted at any conspicuous place reserved for the purpose in the premises of
the Procuring Entity during the same period as the advertisement/posting of the IAEB; and

c. It shall be posted in the website of the DBM and the PhilGEPS during the same period as
the advertisement/posting of the IAEB.
 

What rules govern the lease of Computers, Communications, Information and Other
Equipment?

Contracts for lease of construction and office equipment, including computers,

communication

and information technology equipment, are subject to the same public bidding and
procurement procedures as prescribed in R.A. 9184, its IRR-A and this Volume 2. (Please
refer also to Joint Memorandum Circular No. 2002-01 issued by the National Computer
Center and the DBM, which provides the policies, rules and regulations on lease of IT
equipment. Also, reference may be made to Department Order No. 188 (dated September
28,1999) and Department Order No. 219 (dated August 14, 2003), issued by the
Department of Public Works and Highways, governing the lease of construction equipment.)

POST QUALIFICATION

What is Post-qualification?

Post-qualification is the process of verifying, validating and ascertaining all the statements
made and documents submitted by the bidder with the LCB, which includes ascertaining the
said bidder’s compliance with the legal, financial and technical requirements of the bid. If its
eligibility documents had been validated and verified, and its compliance with the legal,
financial, and technical requirements of the bid had been ascertained, the bidder must be
declared the bidder with the

“Lowest Calculated Responsive Bid” (LCRB)

The eligibility check does not ascertain the validity and genuineness of the eligibility
documents submitted by the bidders. Neither does it determine the veracity of the claims
made by the bidders in their financial and technical proposals. The post-qualification
process, on the other hand, does.

What does Post-qualification entail?

Post-qualification involves the BAC verifying, validating and ascertaining that the bidder
satisfies the following criteria:
1. Legal Requirements. The post-qualification process under this criterion involves the
verification, validation and ascertaining of the supplier’s claim that it is not included in any
government “blacklist,” as well as all the licenses, permits and other documents it
submitted. The legal requirements refer to the Legal Documents submitted by the bidder as
part of the eligibility requirements, e.g., SEC registration, DTI business name registration,
Mayor’s permit, TIN, etc. The bidder’s status with regard to “blacklisting” may be verified by
checking the Consolidated Blacklisting Report issued by the GPPB, or the “blacklist” of any
government agency.

2. Technical Requirements. Post-qualification under this criterion means that the BAC would
have to validate, verify, and ascertain the veracity of the documents submitted by a supplier
to prove compliance of the goods and services offered with the requirements of the contract
and bidding documents. This involves the following processes:

a. Verification and validation of the bidder’s stated competence and experience;

b. Verification and/or inspection and testing of the goods/products, after-sales and/or

maintenance capabilities, in applicable cases; or inspection of the plant/factory of a
manufacturer, to determine production capacity; and

c. Ascertainment of the authenticity and sufficiency of the Bid Security as to type, amount,
form and wording, and validity period.

3. Financial Requirements. Under this criterion, the BAC ought to verify, validate and
ascertain the bid price proposal of the bidder and, whenever applicable, its computation of
the NFCC, the required bank commitment to provide a credit line to the bidder, or the hold
out on deposit status of the cash deposit certificate, in the amount specified and over the
period stipulated in the ITB. This is to ensure that the bidder can sustain the operating cash
flow of the transaction.

What is the Timeline for the conduct of Post-qualification?

The post-qualification process must be conducted and completed within seven (7)

calendar

days from the determination of the LCB. However, in the procurement of goods requiring
elaborate testing (such as equipment sourced from abroad) and other exceptional cases,
the Head of the Procuring Entity may extend the post-qualification period, but in no case
should the aggregate period exceed thirty (30) calendar days.

Who are involved in the conduct of Post-qualification?

The following Parties are involved in the conduct of post-qualification:

1. The BAC;

2. The TWG;

3. The BAC Secretariat / Procurement Unit; and

4. The eligible supplier/manufacturer, ranked starting from bidder with the LCB.

Methodology: How is Post-qualification conducted?

The following steps are followed in the conduct of post-qualification:

1. The BAC/TWG verifies, validates, and ascertains the genuineness, validity and accuracy
of the legal, technical and financial documents submitted by the bidder with the LCB, using
the non-discretionary criteria described above.

In verifying the information contained in such documents, the BAC/TWG may make
inquiries with appropriate government agencies and examine the original documents kept in
the bidder’s place of business. The use of other means for verification and validation of
such documents may be resorted to by the BAC/TWG, such as the Internet and other
research methods that yield the same results.

2. The BAC/TWG conducts a site inspection of the bidder’s place of business and/or
plant/factory, where applicable.

3. The BAC/TWG tests samples for compliance with specifications and performance levels,
where applicable.

4. The BAC/TWG inquires about the bidder’s performance in relation with other
contracts/transactions as indicated in its eligibility statement (statement of on-going,
completed or awarded contracts).

5. If the TWG conducts the post-qualification, it prepares a Post-qualification Report to be

submitted to the BAC. The Report shall contain, among others, the activities undertaken
with regard to the post-qualification process, feedback from inquiries conducted, and the
results of any tests conducted by the TWG or an accredited government testing center,
where applicable.

6. The BAC reviews the Post-qualification Report submitted by the TWG.

7. The BAC determines whether the bidder with the LCB passes all the criteria for
postqualification.

8. If the LCB passes the post-qualification, the BAC declares it as the LCRB.
9. After the BAC has determined the LCRB, the Secretariat, with the assistance of the
TWG, if necessary, prepares the BAC Resolution declaring the LCRB and the
corresponding Notice to the said bidder informing it of its post-qualification.

What happens if the bidder with the LCB fails Post-qualification?

If the bidder with the LCB fails to pass post qualification, the BAC shall immediately notify
the

said bidder in writing of its post-disqualification and the grounds for it. The post-disqualified

bidder shall have three (3) calendar days from receipt of the said notification to request from

the BAC, if it so wishes, a reconsideration of its decision. The BAC shall evaluate the
request

for reconsideration, if any, using the same non-discretionary criteria, and shall issue its final

determination of the said request within seven (7) calendar days from receipt thereof.
Similar to the cases of bidders deemed to be ineligible and whose bids are rated “failed,”
the bidder with the LCB who fails to pass post-qualification may likewise file a protest with
the payment of the corresponding fee in case the BAC denies its request for
reconsideration. (Please refer to Step 4, Receive and Open Eligibility Envelopes and Bids
for further discussions on filing a protest.)

Immediately after the BAC has notified the first bidder of its post-disqualification, and
notwithstanding any pending request for reconsideration thereof, the BAC shall initiate and
complete the same post-qualification process on the bidder with the second LCB. If the
second bidder passes the post-qualification, and provided that the request for
reconsideration of the first bidder has been denied, the BAC shall declare the second bidder
as the bidder with the LCRB. The Head of the Procuring Entity shall then award the contract
to it.

If the second bidder, however, fails the post-qualification, the procedure for post-
qualification

shall be repeated for the bidder with the next LCB, and so on until the LCRB, is determined
for

award.

 
What happens if all bidders fail Post-qualification?

If no bidder passes post-qualification, the BAC shall issue a Resolution declaring a failure of
bidding. In such a case, the BAC shall issue a Resolution declaring a failure of bidding. The
BAC then reviews the terms and conditions stated in the IAEB. If warranted, it changes any
of the terms and conditions, including the quantities or specifications, provided that the ABC
is left unchanged. It must, thereafter, conduct a re-bidding, in the process formulating a new
IAEB and posting and publishing this as required.

All bidders that have initially responded to the IAEB in the first bidding shall be allowed to
submit new bids. If the original estimate is found to be inadequate on reassessment to meet
the objectives of the project, it may be necessary to reduce the scope of the project. Should
a second failure of bidding occur and the Procuring Entity finds that there is a need to
evaluate the responsiveness of the ABC, and so decides to revise the ABC accordingly, the
Procuring Entity should conduct another public bidding with re-advertisement and/or
posting.

Alternatively, the Procuring Entity may enter into a negotiated procurement with a legally,
technically, and financially capable supplier. However, if the Procuring Entity resorts to
negotiated procurement, the terms, conditions, and specifications of the project as well as
the ABC must be maintained.

When may the Procuring Entity exercise its right to reject bids, declare a failure of
bidding, or not award the contract?

The Procuring Entity may exercise the right to reject any and all bids, to declare a failure of
bidding, or not to award the contract in any of the following situations:

1.      If there is prima facie evidence of collusion between appropriate public officers or

employees of the Procuring Entity, or between the BAC and any of the bidders, or between
or among the bidders themselves, or between a bidder and a third party, including any act
which restricts, suppresses or nullifies or tends to restrict, suppress or nullify competition;

2.      If the BAC is found to have failed in following the prescribed bidding procedures, for
which the applicable sanctions shall be applied to the erring officers, as provided in IRRA
Section 65; or

 
3.      For any justifiable and reasonable ground where the award of the contract will not
redound to the benefit of the government as follows:

a. If the physical and economic conditions have significantly changed so as to render the
project no longer economically, financially or technically feasible as determined by the Head
of the Procuring Entity;

b. If the project is no longer necessary as determined by the Head of the Procuring Entity;
and

c. If the source of funds for the project has been withheld or reduced through no fault of the
Procuring Entity.

What are the instances where the BAC is considered to have failed in following the
prescribed procedures?

The following are some instances where the BAC is deemed to have failed to follow
prescribed

procedures:

1. Prescribing an insufficient number of days in the advertisement and/or posting of the

IAEB;

2. Exceeding the required periods for eligibility screening, bid evaluation, post-qualification
for each lowest calculated bidder or for awarding the contract without justifiable cause;

3. Conducting the pre-bid conference or issuing the bidding documents in less than the
required number of days before deadline for the submission and opening of bids;

4. Requiring the bidder to submit additional documents which is tantamount to improving

his bidding documents; and

5. Allowing a bidder to become eligible or pass the post-qualification with incomplete

documents.

Failure of Bidding

The BAC shall declare the bidding a failure when:

a) No bids are received;

b) All prospective bidders are declared ineligible;

c) All bids fail to comply with all the bid requirements or fail post-qualification, or, in the case
of Consulting Services, there is no successful negotiation; or

d) The bidder with the LCRB, HRRB, SCRB or SRRB refuses, without justifiable cause, to
accept the award of contract, and no award is made in accordance with Section 40 of the
Act and the IRR.

In order to determine the reason for the failed bidding, the BAC shall conduct a mandatory
review and evaluation of the terms, conditions, and specifications in the Bidding
Documents, including its cost estimates.

Based on its findings, the BAC shall revise the terms, conditions, and specifications, and if
necessary, adjust the ABC, subject to the required approvals, and conduct a re-bidding with
re-advertisement and/or posting, as provided for in Section 21.2 of the IRR.

All bidders who have initially responded to the Invitation to Bid/Request for Expression of
Interest and have been declared eligible or short listed in the previous biddings shall be
allowed to submit new bids. The BAC shall observe the same process and set the new
periods according to the same rules followed during the previous bidding(s).

Should there occur a second failure of bidding, the Procuring Entity may resort to negotiated
procurement as provided for in Section 53.1 of the IRR.

AWARD OF CONTRACT

What is the rule on Contract Award?

The contract shall be awarded to the bidder with the LOWEST CALCULATED

RESPONSIVE BID at its submitted bid price or its calculated bid price, whichever is lower. 
The BAC shall issue a Resolution recommending to the Head of the Procuring Entity award
of the contract to the bidder with the LCRB at its submitted bid price or its calculated bid
price, whichever is lower.

 
Prior to the expiration of the period of bid validity, the Procuring Entity should notify the
successful bidder in writing that its bid has been accepted, through a Notice of Award
received personally or sent by registered mail or electronically. It is important that, in case
the Notice of Award is not received personally, its receipt must be confirmed in writing within
two (2) days by the successful bidder and submitted personally or sent by registered mail
or  electronically to the Procuring Entity (this particular instruction must be included in the
ITB so that the bidder may be guided accordingly).

What is the Timeline for Contract Award?

The Head of Procuring Entity or his duly authorized representative should approve or
disapprove the recommendation of award within seven (7) calendar days from the date
of determination and declaration by the BAC of the LCRB. In the case of GOCCs and
GFIs, the governing Board has a period of fifteen (15) calendar days to approve or
disapprove the said recommendation.

The Notice of Award shall be given to the bidder with the LCRB immediately after

approval of the recommendation. Simultaneously, a copy of the Notice shall be furnished to
all losing bidders, and posted in the website of the PhilGEPS, as well as the websites of the
Procuring Entity and its electronic procurement service provider, if any.

Who are involved in the Award of the Contract?

The following must participate in the activities related to the awarding of the Contract:

1. The Head of the Procuring Entity;

2. The BAC;

3. The Procurement Office;

4. The BAC Secretariat/Procurement Unit;

5. The bidder who submitted the LCRB/SCRB; and

6. The Observers

What is the maximum period of time within which a contract can be awarded?
Contract award must be made within eighty (80) calendar days from the date of bid opening
but not to exceed the bid validity period as specified in the bidding documents. If award
cannot be made within the said period, the bid validity period should be extended. (Please
refer to Step on Preparing the Bidding Documents for the discussion on extension of the bid
validity period.)

Methodology: How is a contract awarded?

The following steps are followed in the awarding of a contract:

1. The BAC Secretariat consolidates all the documents and/or records of the proceedings of
the BAC with regard to the procurement at hand, and attaches the same to the BAC
Resolution.

2. The BAC Secretariat drafts the BAC Resolution recommending award.

3. The BAC approves and signs the Resolution Recommending Award, and transmits the
same to the Head of the Procuring Entity.

4. The Head of the Procuring Entity, or his/her duly authorized representative, acts on the
recommendation for award within seven (7) calendar days from the date of determination
and declaration by the BAC of the LCRB/SCRB. In the case of GOCCs and GFIs, the
governing Board shall have fifteen (15) calendar days within which to approve the
recommendation for award.

5. In case of approval of the recommendation, the Head of the Procuring Entity, through the
procurement unit/office, issues the Notice of Award to the bidder with the LCRB/SCRB,
while the BAC accordingly notifies the losing bidders. In case of a disapproval of the
recommendation of award, the Head of the Procuring Entity shall state the reason(s) for
disapproval and instruct the BAC on the subsequent steps to be adopted.

6. The bidder with the LCRB/SCRB accepts the Notice of Award.

What happens if the bidder being considered for award does not accept the award?

If the bidder refuses to accept the award within the bid validity period, the BAC shall
forfeit the bid security of the bidder and shall initiate the blacklisting proceedings
in accordance with the Uniform Guidelines for Blacklisting (GPPB Resolution No. 09-
2004). It then initiates and completes the post-qualification of the bidder with the second
lowest calculated bid. If found qualified, the said bidder shall be awarded the contract. This
procedure is repeated until the LCRB is determined. Should all eligible bidders fail
postqualification, the BAC must declare the bidding a failure.

 
Refusal to accept an award, without just cause or for the purpose of forcing the Procuring
Entity to award the contract to another bidder, if proven, is meted with a penalty of
imprisonment of not less than six (6) years and one (1) day by not more than fifteen (15)
years. Additional penalties of suspension for one (1) year from participation in government
procurement for the first offense, and suspension for two (2) years for the second offense
shall also be imposed on the bidder.

When must the winning bidder and the Procuring Entity enter into a contract?

The winning bidder and the Procuring Entity must enter into a contract immediately after the

former has submitted the performance security and all other documentary requirements
within the period specified in the IRR-A. The parties must sign the contract within ten (10)
calendar days from receipt by the winning bidder of the Notice of Award.

The Chief Accountant or the Chief Budget Officer may sign the contract as an instrumental
witness thereto. The Procuring Entity signatory is encouraged to sign within the same day
as the signing of the bidder as there are penalties against delaying, without justifiable
cause, the award of the contract.

Moreover, it would be best for the winning bidder and the Head of the Procuring Entity, or its
appropriate signing authority, to sign/execute the contract together – provided that all
contract documents and requirements are complete – so that both may personally appear
before a Notary Public.

What are the Timelines to be considered with respect to contract approval?

When, after contract signing, further approval of a higher authority is required, the
approving authority for the contract, or his duly authorized representative, shall be given
a maximum of fifteen (15) calendar days from receipt thereof, together with all
documentary requirements to perfect the said contract, to approve or disapprove it. In the
case of GOCCs and GFIs, when further approval of the governing Board is required, the
said governing Board or its duly authorized representative has twenty-five (25) calendar
days.

When should the Procuring Entity issue the NTP?

The NTP must be issued together with a copy or copies of the approved contract to the
successful bidder within three (3) calendar days from the date of approval of the contract
by the appropriate government approving authority.

When is a contract “effective”?

Unless otherwise specified in the contract, a contract is effective upon receipt of the NTP. If
an effectivity date is provided in the NTP by the Procuring Entity concerned, all notices
called for by the terms of the approved contract shall be effective only from such effectivity
date, but such effectivity date should not be later than seven (7) calendar days from the
issuance of the NTP.

Who are the Parties involved in Contract Signing and Approval and Issuance of the
NTP?

The following parties are involved in the signing and approval of the contract, and in the
issuance of the NTP:

1. The BAC Secretariat/Procurement Unit/Office;

2. The Head of the Procuring Entity;

3. The winning bidder; and

4. End-user;

What documents form part of the contract?

The contract shall include the following:

1. The Contract Agreement;

2. Conditions of the contract (General and Specific);

3. Technical Specifications of Goods or Scope of Work for services;

4. IAEB;

5. Bidding documents;

6. Addenda and/or Supplemental/Bid Bulletins, if any;

7. Bid form including all the documents/statements contained in the winning bidder’s two
bidding envelopes, as annexes;

8. Eligibility requirements, documents and/or statements;

9. Performance Security;

10. Credit Line issued by a licensed bank in accordance with the provisions of the IRR-A, if

applicable;

11. Notice of Award of Contract and winning bidder’s “Conforme” thereto; and

12. Other contract documents that may be required by existing laws and/or the Procuring

Entity concerned.

Methodology:

1. The winning bidder submits all the documentary requirements, including the performance
security, and signs the contract.

2. The procurement unit/ office transmits the contract and its attachments to the budget
office (for issuance of the OS) and the Chief Accountant (for issuance of the CAF)

3. The procurement unit/office transmits the contract documents to the Head of the
Procuring Entity or appropriate signing authority for signature, together with the following
documents:

a. Duly approved delivery schedule and cost estimates or the PPMP;

b. OS;

c. CAF;

d. Abstract of Bids;

e. Resolution of the BAC recommending award;

f. Approval of award by the appropriate approving authority; and

g. Other pertinent documents that may be required by existing laws and/or the

Procuring Entity concerned.

4. After signing, if the contract needs the approval of a higher authority – such as, for
bureaus, the Department Secretary, when required – the procurement unit/office transmits
the contract and related documents to the approving authority or his authorized
representative for approval.

5. The approving authority or his authorized representative acts on the contract within
fifteen (15) calendar days, or twenty-five (25) calendar days for GOCCs and GFIs, from
receipt thereof.

6. If further approval is required (e.g. approval of the Office of the President), or a review by

another government body is necessary (e.g., NEDA or DOJ review), the Head of the
Procuring Entity transmits the contract documents to the appropriate approving authority or
reviewing body. The periods indicated above for approval of contracts still apply, except if
the approving authority is the Office of the President.

7. The Head of the Procuring Entity or his/her duly authorized representative issues the
NTP within three (3) calendar days from the date of the approval of the contract.

What are the rules governing the review and approval of government contracts?

Executive Order 423, s. 2005, prescribes the rules and regulations on the review and
approval of government contracts. Essentially, E.O. 423 provides that, except for
government contracts required by law to be acted upon and/or approved by the President,
the Head of the Procuring Entity shall have full authority to give final approval and/or enter
into all government contracts of his respective government agency, awarded through public
bidding, regardless of amount. Provided, that the Head of the Procuring Entity certifies
under oath that the contract has been entered into in faithful compliance with all applicable
laws and regulations.

The Head of a Procuring Entity may also delegate in writing this full authority to give final
approval and/or enter into government contracts awarded through public bidding as
circumstances may warrant (i.e. to decentralization of procurement in a government
agency), subject to such limitations as he may impose. For procurement undertaken
through any of the alternative methods allowed by law, where the government contract
involves an amount less than P500 Million, except where action or approval of the President
is required, the Head of the Procuring Entity shall have full authority to give final approval
and/or enter into such contract, provided that the Department Secretary concerned certifies
under oath that the contract has been entered into in faithful compliance with all applicable
laws and regulations. He may delegate in writing this authority, as circumstances may
warrant (i.e. to decentralize procurement), subject to such limitations as he may impose.

 
Where the Head of the Procuring Entity has made a determination that a Government
contract, including Government contracts required by law to be acted upon and/or approved
by the President, involving an amount of at least P500 Million falls under any of the
exceptions from public bidding allowed by law, the Head of the Procuring Entity shall, before
proceeding with the alternative methods of procurement provided by law and applicable
rules and regulations, obtain the following requirements:

1. An opinion from the GPPB that said Government contract falls within the exceptions

from public bidding; and

2. Approval from the Director-General of NEDA to proceed with a specific alternative

method of procurement under the exceptional cases provided by law and applicable

rules and regulations.

Except for Government contracts required by law to be acted upon and/or approved by the
President, the Head of the Procuring Entity, after obtaining the foregoing requirements, shall
have full contracts of their his respective agency, entered into through alternative methods
of procurement allowed by law. Provided, that the head of the procurement entity certifies
under oath that the contract has been entered into in faithful compliance with all applicable
laws and regulations.

What happens if the bidder with the LCRB or SCRB refuses or is unable, through its
own fault, to post the performance security and sign the contract within the
prescribed period?

If the bidder with the LCRB or SCRB (as defined in Step 4, Receive and Open Eligibility
Envelopes and Bids) refuses to, or is unable, through its own fault, to post the performance
security and sign the contract within the prescribed period:

1. Its bid security is forfeited;

2. It is disqualified from further participating in the bidding at hand;

3. Upon conviction, the relevant officers or individuals will suffer the penalty of imprisonment
of not less than six (6) and one (1) day and not more than fifteen (15) years; and

4. Upon determination of administrative liability, it will suffer the administrative penalties

of suspension for one (1) year from participation in government procurement for the first
offense, and suspension for two (2) years for the second offense. This is without prejudice
to the blacklisting proceedings undertaken in accordance with the Uniform Guidelines for
Blacklisting (GPPB Resolution 09-2004).
 

For its part, the BAC must initiate and complete the post-qualification of the bidder with the
second LCB. This procedure must be repeated until the LCRB is determined for award. If no
bidder passes post-qualification, the BAC declares the bidding a failure and conducts a
rebidding with re-posting and re-advertisement. Should there be another failure of bidding
after the conduct of the re-bidding, the Procuring Entity may enter into a negotiated
procurement.

If the bidder that fails to post the performance security and sign the contract happens to be
one with the SCRB, the BAC must declare the bidding a failure. It then conducts a re-
bidding with re-posting and re-advertisement. Should there be another failure of bidding
after the conduct of the re-bidding, the Procuring Entity may enter into a negotiated
procurement.

The BAC shall initiate the process of blacklisting. The Uniform Guidelines for Blacklisting of
manufacturers, suppliers, distributors, and contractors shall be used.

What happens if the failure of the bidder with the LCRB or SCRB to sign the contract
within the prescribed period is not its own doing?

If the failure of the bidder with the LCRB or SCRB to sign the contract within the prescribed
period is not due to its fault, the sanctions mentioned above shall not be imposed.

TERMINATION OF CONTRACT

Termination for Default What are the grounds for termination for default?

Any of the following conditions shall constitute as a ground for termination of the contract for

default:

1. There being no force majeure, the supplier fails to deliver any or all of the goods within
the period(s) specified in the contract, or within any extension thereof granted by the
Procuring Entity pursuant to a request made by the supplier prior to the delay, and such
failure amounts to at least ten percent (10%) of the contract price;

2. As a result of force majeure, the supplier is unable to deliver or perform any or all of the
goods or services, amounting to at least ten percent (10%) of the contract price, for a period
of not less than sixty (60) calendar days after the receipt of the notice from the Procuring
Entity stating that the circumstance of force majeure is deemed to have ceased;
3. The supplier fails to perform any other obligation(s) under the contract; or

4. The supplier, in the judgment of the Procuring Entity, has engaged in corrupt, fraudulent,
collusive or coercive practices in competing for or in executing the contract.

How does the Procuring Entity proceed with the procurement in case of a contract
termination due to default?

If the Procuring Entity terminates the contract in whole or in part, due to default, it may
procure from third parties, through the appropriate alternative method of procurement,
goods or services similar to those undelivered. The supplier that defaulted will be liable to
the Procuring Entity for any excess costs for such similar goods or services.

Termination for Insolvency What remedy does the Procuring Entity have when a
supplier is unable to perform his obligations due to bankruptcy or insolvency?

The Procuring Entity may at any time terminate the contract by giving written notice to the
supplier, if the supplier is declared bankrupt or insolvent as determined with finality by a
court of competent jurisdiction. In this event, termination will be without compensation to the
supplier, provided that such termination will not prejudice or affect any right of action or
remedy which has accrued or will accrue thereafter to the Procuring Entity and/or the
supplier.

Termination for Convenience May termination be allowed for reasons other than
those attributable to the supplier?

The Procuring Entity, by written notice sent to the supplier, may terminate the contract, in
whole or in part, at any time for its convenience. The notice of termination shall specify that
the termination is for the Procuring Entity’s convenience, the extent to which performance of
the supplier under the contract is terminated, and the date upon which such termination
becomes effective.

What circumstances may constitute sufficient grounds to terminate a contract for

convenience?

Any of the following circumstances may constitute sufficient grounds to terminate a contract

for convenience:

1. If physical and economic conditions have significantly changed so as to render the

project no longer economically, financially or technically feasible, as determined by the
Head of the Procuring Entity;
2. The Head of the Procuring Entity has determined the existence of conditions that make
project implementation impractical and/or unnecessary, such as, but not limited to,
fortuitous event/s, changes in laws and government policies;

3. Funding for the project has been withheld or reduced by higher authorities through no

fault of the Procuring Entity; or

4.      Any circumstance analogous to the foregoing.

Also see the Guidelines on Termination of Contracts approved by the GPPB in Resolution
No. 018-2004, dated December 22, 2004.

What effect shall termination for convenience have on pending deliveries?

The goods that are complete and ready for shipment within thirty (30) days after the
supplier’s receipt of notice of termination shall be accepted by the Procuring Entity at the
contract terms and prices. For the remaining goods, the Procuring Entity may elect:

1. To have any portion completed and delivered at the contract terms and prices; and/or

2. To cancel the remainder and pay to the supplier an agreed amount for partially
completed goods and services and for materials and parts previously procured by the
supplier.

If the Supplier suffers loss in its initial performance of the terminated contract, such as
purchase of raw materials for Goods specially manufactured for the Procuring Entity which
cannot be sold in the open market, it shall be allowed to recover partially from the contract,
on a quantum meruit basis. The fact of loss must be established before recovery may be
made.

Assignment May the Supplier assign a contract, or any of its rights or obligations
arising from

the contract, to a third party?

As a general rule, the supplier may not assign the contract, or any of its rights or obligations
arising from the contract, to a third party, except with the Procuring Entity’s prior written
consent.
 

On the assignment of contractual obligations and the entry of nonbidders into the
procurement process

Assignment of contractual obligations or the contract itself may generally not be done
because this will enable a non-bidder to become a party to the contract. This arrangement
will make a mockery of the public bidding process, so that one who was not declared
eligible to bid and did not participate in the bidding process will end up as the contract
awardee, although indirectly.

Moreover, assignors will only add to the number of parties that the procuring entity has to
deal with, thereby complicating contract implementation. This could also be a problem if
litigation becomes necessary to enforce the contract.

Blacklisting

The blacklisting of suppliers must conform to the GPPB Guidelines issued for this purpose.
As such, reference should be made to the Uniform Guidelines for Blacklisting of
Manufacturers, Suppliers, Distributors, Contractors and Consultants, approved by the
GPPB in Resolution 09- 2004, dated August 20, 2004.

DELIVERY

What are the grounds for suspension of delivery or contract implementation?

The Procuring Entity may suspend the delivery or contract implementation, wholly or partly,
by written order for a certain period of time, as it deems necessary due to force majeure or
any fortuitous event as defined in the contract.

Are corresponding adjustments in contract price and/or delivery schedule allowed?

Yes, appropriate adjustments shall be made in the delivery or contract schedule, or contract
price, or both, and the contract shall be modified accordingly. When warranted, price
adjustments may be made in accordance with the guidelines previously discussed in the
immediately preceding section on “Amendment to Order.”

When shall the Supplier/ Manufacturer/ Distributor resume delivery and/or contract
implementation?
Work must be resumed or delivery made either upon the lifting or the expiration of the
suspension order. However, if the Procuring Entity terminates the contract covered by such
order, resumption of work cannot be done.

Who are the parties involved in the issuance of a Suspension Order?

The following parties are involved in the issuance of a Suspension Order:

1. The PMO or end-user unit;

2. The supplier/manufacturer/distributor; and

3. The Head of the Procuring Entity or his duly authorized representative.

Methodology: How is a Suspension Order issued?

The following steps are necessary for the issuance of a suspension order:

1. The PMO or end-user unit determines the existence of a force majeure or fortuitous

event that will be the basis for the issuance of a suspension order.

2. Based upon the findings and recommendation of the PMO or end-user, the Head of the
Procuring Entity issues a written order suspending the order or work, wholly or partly, for a
certain period of time.

3. The supplier/manufacturer/distributor shall take all reasonable steps to minimize the

costs allocable to the order or work covered by the order during the suspension.

4. The PMO or end-user unit discusses with the supplier/manufacturer/distributor any need
for adjustments in the delivery or contract schedule and/or contract price, including any
need to modify contract.

5. The PMO or end-user unit drafts the contract amendment containing the agreements
reached with the supplier/manufacturer/distributor.

6. The contract amendment is submitted to the Head of the Procuring Entity or his duly
authorized representative, for approval.

7. Prior to the expiration of the suspension order, the PMO or end-user unit determines
whether or not the grounds for suspension are still existent. If such grounds continue to
exist, or if it is no longer practicable to complete the delivery or continue with the work, it
shall cancel the delivery of the items subject of the suspension order, or terminate the work
subject of the order, by written notice. If, however, the grounds for suspension no longer
exist, and completion of delivery or continuation of the work may already be done, the PMO,
with the approval of the Head of the Procuring Entity or his duly authorized representative,
shall lift the suspension order by written notice, thereby instructing the
supplier/manufacturer/distributor to proceed with the delivery or work in accordance with the
amended contract.

What is the rule on the applicable period for the delivery of goods or performance of
services?

The supplier/manufacturer/distributor must deliver the goods or perform the services

procured within the period prescribed by the Procuring Entity, as specified in the Contract. If
delays are likely to be incurred, the supplier/manufacturer/distributor must notify the
Procuring Entity in writing. It must state therein the cause/s and duration of the expected
delay. The Procuring Entity may grant time extensions, at its discretion, if based on
meritorious grounds, with or without liquidated damages. In all cases, the request for
extension should be submitted before the lapse of the original delivery date. The maximum
allowable extension shall not be longer than the initial delivery period as stated in the
original contract.

What are Liquidated Damages?

Liquidated damages are damages agreed upon by the parties to a contract, to be paid in
case of breach thereof. (Civil Code of the Philippines Art. 2226)

What are the grounds for the imposition of Liquidated Damages?

When the supplier fails to satisfactorily deliver the goods or services under the contract
within the specified delivery schedule or project implementation schedule, inclusive of duly
granted time extensions, if any, the supplier shall be liable for damages for the delay and
shall pay the Procuring Entity liquidated damages, not by way of penalty, for every day of
delay until such goods or services are finally delivered or performed and accepted by the
Procuring Entity concerned. The Procuring Entity need not prove that it has incurred actual
damages to be entitled to liquidated damages.

What is the amount of Liquidated Damages that may be imposed upon the supplier?

The supplier must pay the Procuring Entity liquidated damages, not by way of penalty, an
amount equal to one-tenth (1/10) of one percent (1%) of the cost of the delayed goods or
services scheduled for delivery or performance for every day of delay. The liquidated
damages will be imposed until such goods or services are finally delivered or performed and
accepted by the Procuring Entity concerned. In no case shall the sum of liquidated
damages reach ten percent (10%) of the contract amount. If it does, the contract shall
automatically be rescinded by the Procuring Entity, without prejudice to other courses of
action and remedies open to it. The Procuring Entity may also take over the contract or
award the same to a qualified supplier through negotiation. In addition to the liquidated
damages, the erring supplier’s performance security shall also be forfeited.

Methodology: How are Liquidated Damages imposed?

The following steps need to be followed in the imposition of liquidated damages:

1. The supplier/manufacturer/distributor submits a written request to the PMO or enduser

unit for an extension of the delivery or performance period, citing the reason/s for such
delay.

2. The PMO or end-user unit either approves or disapproves the request for extension.

3. If the extension is granted, the liquidated damages may or may not be imposed and the
supplier/manufacturer/distributor is informed of this in writing. The
supplier/manufacturer/distributor is then asked to extend the validity of the performance
bond, to conform to the extended period.

4. If, however, the request for extension is denied, the PMO or end-user unit informs in
writing the supplier/manufacturer/distributor of such denial, and ensures that the said notice
or communication is received by the latter within a reasonable time from receipt of the
request for extension. In this case, the Procuring Entity imposes the liquidated damages in
accordance with the provisions of the contract and the procedures outlined below.

5. If the supplier/manufacturer/distributor incurs delay and it does not request for an

extension

a. The PMO or end-user unit informs, within a reasonable time from the first day of delay,
the supplier/manufacturer/distributor that the Procuring Entity shall impose the liquidated
damages agreed upon by the parties.

b. Upon delivery, the PMO or end-user unit and the Technical Inspection and Acceptance
Committee records the delay in the inspection documents, noting therein the amount of the
liquidated damages imposable on the supplier.

c. Upon payment, the amount of liquidated damages due is deducted from the total amount
payable to the supplier, and the same shall be reflected in the DVs. Or, if the contract
provides that the liquidated damages is to be collected from securities or warranties posted
by the supplier, the PMO or end-user unit informs the official authorized to call on the
securities or warranties about the delay and the corresponding liquidated damages
imposable.

WARRANTY

What is the purpose of a Warranty?

A Warranty is required in the procurement of goods to ensure that the supplier,

manufacturer

or distributor, as the case may be, will correct any manufacturing defect.

What is the Warranty requirement for Goods?

For the procurement of goods, a warranty shall be required from the contract awardee for a
minimum period of three (3) months, in the case of supplies, and one (1) year, in the case of
equipment, after the acceptance by the Procuring Entity of the goods and/or equipment.
The obligation for the warranty shall be covered by either retention money in an amount
equivalent to at least ten percent (10%) of every progress payment, or a special bank
guarantee equivalent to at least ten percent (10%) of the total contract price. The special
bank guarantee must be contract specific, that is, it shall be executed for the special
purpose of covering the warranty for the subject procurement contract. If the warranty
period is longer than the minimum period of three (3) months for supplies and one (1) year
for equipment, the period beyond the minimum period need not be covered by retention
money or special bank guarantee. After the lapse of the minimum period, the Procuring
Entity must release the retention money or special bank guarantee. The warranty shall only
be released after the lapse of the warranty period, provided that the goods supplied are free
from patent and latent defects and all the conditions imposed under the contract have been
fully met.

When shall Goods be considered defective?

Goods are considered defective when they are “unfit for the use for which it is intended,” or
“its fitness for such use is diminished to such an extent that, had the vendee been aware
thereof, he would not have acquired it or would have given a lower price for it….” (Civil
Code of the Philippines Article 1561). A defect can either be:

1. A patent defect, which is one that is apparent to the buyer on normal observation. It is an
apparent or obvious defect. For example, a ballpen that does not write is patently defective.
2. A latent defect, which is one that is not apparent to the buyer by reasonable observation.
A latent defect is “hidden” or one that is not immediately determinable. For example, a
ballpen that writes .75 kilometers instead of the expected 1.5 kilometers, has a latent defect.

Both latent and patent defects are covered by the warranty expressly required in R.A. 9184
and its IRR-A. This means that the Procuring Entity may proceed against the warranty
whenever any of these defects are determined to be present in the goods procured, and the
same are determined within the period covered by the warranty. However, wear and tear
due to normal usage of the goods is excluded from the coverage of the warranty.

The Procuring Entity should promptly notify the supplier in writing of any claims arising
under the warranty. Upon receipt of such notice, the supplier should, within the period
specified in the contract and with all reasonable speed, repair or replace the defective
goods or parts thereof, without costs to the Procuring Entity. If the supplier, having been
notified, fails to remedy the defects within the period specified in the contract, the Procuring
Entity may then proceed to call upon the warranty security, without prejudice to any other
rights which it may have against the supplier under the contract and under the applicable
law.

Are there instances where partial release or reduction of the required warranty may
be done by the Procuring Entity?

Yes, a partial release or reduction of the warranty may be allowed in the case of partial
deliveries. In this case, the warranty periods will vary among the various lots. The warranty
for goods delivered ahead will lapse earlier than the succeeding deliveries. The retention
money or a portion of the special bank guarantee covering the warranty for goods received
or delivered ahead may thus be released. The effect is that there will be partial releases of
the retention money or special bank guarantee to coincide with the lapse of the warranty
period for each delivered lot.

However, the warranty must be in the form of retention fee equivalent to ten percent (10%)
of every progress payment. For example, in the case of a procurement transaction allowing
partial deliveries and progress payment for each delivery, the amount of the warranty for the
first partial delivery may be released after the lapse of the warranty period for such first
delivery. The remaining goods that are still under warranty will be covered by a warranty fee
equivalent to ten percent (10%) of each progress payment.