NPM 130-2014

Requesting Entity: City Government of Navotas

Issues Concern: Outsourcing and Public-Private Partnership (PPP)



1. Whether the City Government of Navotas can undertake the acquisition of the following service centers of the hospital: laboratory, x-ray and ultrasound imaging, and pharmacy through Outsourcing and Public-Private Partnership.

On the proposed outsourcing and PPP arrangement for the laboratory, x-ray and ultrasound imaging, and pharmacy, x x x the PPP regime is governed by Republic Act No. 6957, as amended by RA 7718, otherwise known as #&34An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes#&34, or the Philippine BOT Law.

2. Whether the city government can undertake an ordering agreement, i.e. medicines and medical supplies to avoid pilferage, expiration and overstocking of medicines.

Ordering Agreement may be used by the city government for expendable or non-expendable goods, and services for hotel accommodation, air travel, and repair and maintenance, determined to be necessary and desirable to address and satisfy the city government"s needs, but by its nature, use, or characteristic, the quantity and/or exact time of need cannot be accurately pre-determined. Since medicines and medical supplies are in the nature of expendable goods or supplies, the city government may use ordering agreement mechanism for their procurement.

3. Whether the City Government may adopt consignment system for the purchase of medicines and medical supplies.

For a consignment arrangement to be valid, the following requisites must be present: (a) delivery of goods by their owner (consignor), without sale, to a government agency (consignee); (b) consignee must try to sell the goods and remit the price of the sold goods to the consignor; (c) consignee accepts without any liability except for failure to reasonably protect them from damage; (d) no disbursement of government funds is involved; and (e) at terms not disadvantageous to the GOP. Accordingly, the city government may adopt a consignment system for medicines and medical supplies upon compliance with the above-mentioned requisites.

4. Whether the City Government may enter into a three-year contract for the consumables/collaterals of the equipment for PPP.

[T]he legality of entering into a contract for a period of three (3) years will depend on the appropriations for the project as authorized by the Sangguniang Lungsod or the City Council in accordance with Section 319 of RA 7160 or the Local Government Code (LGC) of 1991. As the legislative arm of the City, the Sanggunian, based on the budget proposal for the identified project, may pass an Appropriation Ordinance appropriating sufficient funds to cover the project cost or expenditure for a period of three (3) years thereby authorizing contract implementation on a multi-year basis pursuant to its corporate powers under Section 22 of the LGC and in accordance with the budgetary requirement under Section 324(b) of the LGC.