NPM No. 127-2017


Issues Concern: Bank Guarantee as Bid Security



Whether a bank guarantee that contains only four (4) conditions under which the bid security may be forfeited by the procuring entity, may be accepted.

A bid security is an undertaking on the part of the bidder in the form and amount prescribed and acceptable by, and made payable to, the Procuring Entity (PE) that in case the prospective bidder is awarded the contract, such successful bidder warrants to enter into contract, within the prescribed period from receipt of the Notice of Award (NOA), with the PE and furnish the corresponding performance security. It serves as a mechanism of the bidder to bind itself in good faith to make good its offer to the PE.

Section 28 of the 2016 revised Implementing Rules and Regulations (IRR) of Republic Act (RA) No. 9184, the Government Procurement Reform Act, provides that: “bids and bid securities shall be valid for a reasonable period as determined by the Head of the Procuring Entity (HoPE) concerned, which shall be indicated in the Bidding Documents, but in no case shall the period exceed one hundred twenty (120) calendar days from the date of opening of bids.” The validity of bids is the period within which the BAC conducts its preliminary examination of bids, bid evaluation, post-qualification process, recommends award of contract, and for the HoPE to approve the recommendation, issue the NOA and sign the contract. Hence, it is important that the PE must be able to forfeit the bid security within the period of validity of the bid and the bid security.

[T]he bid security, particularly the bank guarantee in this case, shall include all the conditions provided for under Clause 18.5 of the Instructions to Bidders of the Philippine Bidding Documents for Goods, under which the bid security may be called upon.