NPM No. 051-2016

Requesting Entity: Punonghimpilan Hukbong Dagat ng Pilipinas

Issues Concern: Procurement for the Repair and Maintenance of Ships



Whether ship repair, which is a complex procurement activity, could be considered as a procurement of infrastructure project.


[T]he Procuring Entity (PE) is in the best position to determine the correct classification of its procurement based on its identified needs and the best way by which these needs may be addressed, managed, and satisfied. It is the motivation or intention of the PE in pursuing the project that will determine the primary purpose of a project.


[H]owever, that the PE does not possess unbridled authority to classify its procurement as to Goods, Infrastructure Projects or Consulting Services, as when by its nature, the procurement activity falls within the definition of a certain type. Hence, it is vital that the motivation and primary purpose of the PE, alongside RA 9184 and its IRR, be considered in categorizing or classifying any procurement activity. The procuring entity, however, may be guided by the definition of what comprises goods procurement vis--vis those considered civil works procurement.


Whether progress payments may be made in the procurement of goods, and if not, may a certification from a recognized organization of shipyards be submitted to establish the fact of industry practice for progress payments.


[W]hether the type of procurement is goods and services or infrastructure project, progress payments are allowed. Although it is not specifically mentioned how progress payments shall be made in the procurement of goods, Clause 11.2 of the General Conditions of the Contract (GCC) of the Standard Philippine Bidding Documents (PBDs) for Goods provides that "all progress payments shall first be charged against the advance payment until the latter has been fully exhausted". Moreover, Clause 17.3 of the same GCC provides that the obligation for the warranty may be covered by a "retention money in an amount equivalent to at least ten percent (10%) of every progress payment". Thus, it is evident from these provisions that progress payments are allowed for goods procurement as it is the amount from which the advance payment and retention money are deducted.


Whether the Philippine Navy (PN) may resort to direct contracting with the same shipyard which was awarded through public bidding for additional and necessary repair works discovered in the course of the repair activity.


[T]he procurement of ship repair and maintenance service can be conducted through Direct Contracting only if the PE, after conducting a diligent market survey, can establish the singularity of the supplier or manufacturer of such goods and services required by the PE or when there is a contract for an infrastructure project and critical components of such structure are prescribed by the contractor for it to guarantee its contract performance. A negative finding on the singularity of the source of the goods and services sought to be procured or the absence of such contract requiring the prescribed components shall be a caveat to PE from resorting to Direct Contracting.


Whether the PN may enter into an ordering agreement for repair and maintenance of ships with one or several shipyards.


Ordering Agreement may be used by the procuring entity 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 PE`s needs, but by its nature, use, or characteristic, the quantity and/or exact time of need cannot be accurately pre-determined. Since the repair and maintenance of the ships are in the nature of a repair and maintenance service, the Philippine Navy may use ordering agreement mechanism for their procurement.