NPM 083-2013

Requesting Entity: Philippine National Railways (PNR)

Issues Concern: Direct Contracting



Whether PNR can proceed with the procurement of overhauling and rehabilitation services for its major trains and locomotives through Direct Contracting.

Section 50 of the Revised Implementing Rules and Regulations (IRR) of Republic Act No. (RA) 9184 allows the use of Direct Contracting for the procurement of tangible goods. The procurement activity at issue pertains more to procurement of services for repair/overhauling since the PNR’s main objective for the contract is the repair and/or overhauling of the identified train sets and locomotives, and that the acquisition of parts and materials is only ancillary.

PNR should conduct Public or Competitive Bidding for the proposed project. Since the actual repair and overhauling works will be done directly by a local company that will still be identified by the manufacturers as their partner, this partnership arrangement has not yet been finalized at this point, and thus, opening the opportunity to industry players by reason of competitive bidding will serve to increase the pool of potential partners for the manufacturers, instead of limiting it to only one. It cannot automatically resort to Direct Contracting as it has to first provide sufficient justification and proof that (1) the parts and materials to be procured are sold by an exclusive manufacturer or dealer, which does not have sub-dealers selling at lower prices and for which no suitable substitute can be obtained at more advantageous terms for the government and (2) the repair and overhauling service for the train sets and locomotives can be undertaken only by the identified service provider and no one else.