Requesting Entity: Municipality of Montevista, Compostela Valley
Issues Concern: Applicability of Republic Act 9184 and its Implementing Rules and Regulations Part A on Loan Agreements Entered into by Local Government Units with Domestic Commercial Banks
1. Whether or not the proceeds of the loan agreement executed by the PNB and the Municipality of Montevista are considered public funds.
2. Whether or not the provisions of R.A. 9184 and its IRR-A on competitive bidding are applicable in the procurement of the equipments.
Section 297 of Republic Act 7160 grants Local Government Units (LGUs) authority to contract loans, credits, and other forms of indebtedness with any government or domestic private bank and other lending institutions; and provides further that the proceeds from such transaction shall accrue directly to the LGU concerned. As such, the loan proceeds from the loan agreement executed by the Municipality of Montevista and the PNB will be considered part of the public funds once it has been released to the former.
Considering that the loan proceeds are now part of the public funds, the procurement of equipments using the said loan proceeds should conform with the existing procurement rules and regulations provided by law, specifically R.A. 9184 and its IRR-A.
Hence, in the absence of any circumstance warranting resort to alternative methods of procurement allowed under Rule XVI of R.A. 9184 and its IRR-A, all the stages of the competitive bidding process should be complied with; namely, advertisement, pre-bid conference, eligibility screening of prospective bidder, receipt and opening of bids, evaluation of bids, post-qualification, and award of contract.
Based on the foregoing, it is mandatory upon the Bids and Awards Committee (BAC) of the Municipality of Montevista to conduct an eligibility screening of the prospective bidders, among others, in the procurement of the equipments mentioned in the loan agreement; otherwise, the Commission on Audit (COA) may disallow the procurement.
3. Whether or not the absence of a certification that funds have been appropriated and available to cover the payment of the amortization of the loan nullifies the loan agreement.
Upon verification with the Local Government Sector of COA, Sections 85 and 86 of Presidential Decree 1445 do not contemplate that a certification that funds have been appropriated and available to cover the payment of the amortization of the loan is a mandatory requirement before an LGU may enter in a contract of loan. A certificate of availability of funds is only required before payment for the amortization of the loan is made.