NPM 098-2013

Requesting Entity: Philippine Health Insurance Corporation (PHILHEALTH) Regional Office VIII

Issues Concern: Forfeiture of Performance Security



Whether the performance security posted by the winning bidder, on the basis of a Notice of Award (NOA) issued in its favor, should be forfeited in the event that it is found that another procuring entity has previously issued a Blacklisting Order against the same bidder.

The performance security posted by winning bidder on the basis of the NOA issued in its favor by PhilHealth cannot be forfeited, but should instead be returned in accordance with the principle of solutio indebiti under Article 2154 of the Civil Code of the Philippines.

Section 7 of the Uniform Guidelines for Blacklisting of Manufacturers, Supplies, Distributors, Contractors and Consultants (Guidelines) states that before the issuance of a Blacklisting Order, the erring contractor may participate in the procurement of any government project except in the agency where it is suspended. But if the Blacklisting Order is issued prior to the date of the NOA, the blacklisted entity shall not be qualified for the award, and such project or contract shall be awarded to another bidder pursuant to Republic Act (RA) No. 9184 and its revised Implementing Rules and Regulations (IRR). In the case at bar, the Blacklisting Order of the Office of the Ombudsman was issued prior to the NOA from the PhilHealth; therefore, the winning bidder is deemed disqualified from entering into a contract with PhilHealth, and the NOA issued in its favor is deemed to have no force and effect.

Under Section 39.1 of the IRR of RA 9184, the posting of a performance security and its forfeiture depend on a validly awarded contract. Considering that the NOA issued by PhilHealth has no force and effect, the winning bidder has no obligation to post a performance security in favor of the procuring entity because there is no contract performance to guarantee in the first place.