NPM 067-2004

Requesting Entity: Bureau of Internal Revenue

Issues Concern: Procurement of Licenses of Software Products through Direct Contracting as an Alternative Method of Procurement



Whether or not the Bureau of Internal Revenue (BIR) may procure through “Direct Contracting” the licenses for SSA Software Products and ACL Software Products considering that those licenses are sold only by exclusive distributors.

However, while Section 50 of R.A. 9184 and its IRR-A allows a procuring entity to directly purchase goods from an exclusive dealer or manufacturer, this is to be done with utmost prudence and judiciousness. Under the law, procuring entities are mandated to adopt public bidding as the general mode of procurement and alternative methods are resorted to only in highly exceptional cases set forth in Sections 48-54 of R.A. 9184 and its IRR-A. Moreover, the procuring entity shall ensure that the most advantageous price for the Government is obtained.

Accordingly, before resorting to said alternative method, your Bids and Awards Committee (BAC) shall prudently determine that there is no existing substitute for said product in the market that may be procured at more advantageous terms to the Government. In this connection, it is suggested that the BIR’s BAC first conduct a survey of the software industry, prior to the commencement of the procurement process, to determine the availability of substitutes in the supply market, and finally to confirm the exclusivity of the distributors to the licenses for the softwares.

If the foregoing conditions are satisfied, such that it is more advantageous to continue using the software and the exclusivity of dealership is confirmed, then the BIR may resort to Direct Contracting in the procurement of licenses for the software products. As to the methodology on how to conduct said alternative method, we are providing you with the following guidelines:

1) In the Annual Procurement Plan (APP), the BAC shall include a recommendation to the Head of the Procuring Entity on the use of Direct Contracting for the particular procurement.

2) The Head of the Procuring Entity shall approve the same.

3) The BAC through the Technical Working Group (TWG) and the BAC Secretariat, shall prepare the Request for Quotation, Technical Specifications and Draft Contract in accordance with the procedures laid down in the IRR-A of R.A. 9184.

4) The BAC, through the Secretariat, shall identify the exclusive distributor from whom the goods will be procured.

5) The BAC, through the Secretariat, shall post the procurement activity in:

a) the Government Electronic Procurement System (G-EPS)
b) the website of the Procuring Entity and its electronic procurement service provider, if any,
c) any conspicuous place in the premises of the Procuring Entity

6) The BAC shall send the Request for Quotation to the exclusive distributor. If necessary, negotiations may be conducted to ensure that the Government is able to procure the goods at the most advantageous terms. Furthermore, such negotiations may be conducted through correspondence, if the exclusive distributor is based abroad.

7) The BAC shall then proceed with Contract Award, Signing and Approval in accordance with R.A. 9184 and its IRR-A.