NPM 106-2004

Requesting Entity: National Power Corporation

Issues Concern: Request for Clarification on Section 42.4 of the Implementing Rules and Regulations Part A of Republic Act 9184



Whether or not the grant of upward adjustment in the price of coal in case is produces a heating value higher than what was guaranteed is a form of incentive bonus.

The incentive bonus contemplated under the IRR-A of R.A. 9184 is an extra consideration given by the procuring entity to a bidder, during evaluation of bids, which submitted specifications or provided works more than what was required at no cost to the procuring entity. x x x

In the procurement of coal, the bidders guarantee a certain amount of heating value/heat content and other quality parameters of coal to be delivered. Based on these guaranteed parameters, the bidders submit its price quotation for the amount of coal to be delivered. The bids are then evaluated based on the submitted price for the quality parameters guaranteed using a standard formula.

In this regard, we are of the opinion that the above-mentioned upward price adjustment mechanism is not an incentive bonus that is prohibited under Section 42.4 of the IRR-A of R.A. 9184. However, it is noteworthy that this mechanism does not characterize a fixed priced contract mandated under Section 61.1 of the IRR-A of R.A. 9184.