NPM 113-2004

Requesting Entity: Metropolitan Cebu Water District

Issues Concern: Procurement of Consulting Services for Power Management System



Whether or not the engagement of a private firm should be undertaken through competitive bidding, considering that the proposal is based on a no cure, no pay principle and that the power management system known as the Power Cost Reduction System (PCRS) is a proprietary technology of such firm.

We have observed that the engagement of a private firm for the implementation of a cost-effective power management system is in a nature of procurement of consulting services, considering that the intended contract for such involves the review, assessment and determination of MCWDs power consumption status, preparatory and as a component part to the PCRS. To our mind, this is a form of a technical service and/or special study, a project that requires adequate external technical and professional expertise beyond the capability and/or capacity of the MCWD to undertake.

In view of this, we are of the opinion that the engagement of such firm is governed by R.A. 9184, otherwise known as the Government Procurement Reform Act, and its IRR-A. Although the engagement of the private firm has some peculiarities in the terms of the contract, such as the no cure, no pay principle, which takes the form of a conditional obligation, it does not negate the fact that this is a form government procurement, falling within the specific definition of Section 5(p) of the IRR-A of R.A. 9184, x x x

Verily, R.A. 9184 and its IRR-A does not limit its application for the procurement of goods, infrastructure projects and consulting services, which is to be covered by contracts characterized as pure obligation. The Government Procurement Act and its Implementing Rules are equally applicable to procurement contracts that are subject to conditions.

Procurement of Consulting Services Undertaken through Competitive Bidding as a General Rule

If it is certified that the PCRS is a proprietary technology, we believe that the procurement of such consulting services may be undertaken through Limited Source Bidding under Section 49 of the IRR-A, as the technology would be a highly-specialized type of consulting services. But of course, resort to this alternative method must be undertaken with prudence. Alternative methods of procurement are resorted only to promote economy and efficiency, and in all instances the procuring entity shall ensure that the most advantageous price for the Government is obtained.

Furthermore, if resort to Limited Source Bidding is justified, MCWD still has to follow the basic procedures in competitive bidding such as eligibility check, bid evaluation, negotiation, post-qualification, contract award, signing and approval of contract. There are also certain requirements under the IRR-A which should be complied in the conduct Limited Source Bidding such as, issuing a direct invitation to bid to a set of pre-selected prospective bidders with known experience and proven capability to provide the services required in the contract. This set of pre-selected prospective bidders should appear in the list of a relevant government authority that has expertise in the type of procurement concerned. In the absence of such list or relevant government authority, we strongly suggest that MCWD resort to competitive bidding in the hiring of consultant/s for the development of its power management system.