NPM 070-2004

Requesting Entity: Municipality of Libona, Bukidnon

Issues Concern: Queries on Republic Act 9184 (R.A. 9184) and its Implementing Rules and Regulations Part A (IRR-A)



1. Whether or not Local Government Units (LGUs) are now mandated to comply with the provisions of R.A. 9184 and its IRR-A.

In order to fully implement R.A. 9184, we wish to inform your office that the IRR-A of R.A. 9184 was finalized by the Government Procurement Policy Board (“GPPB”) and the Joint Congressional Oversight Committee (“JCOC”) on July 11, 2003, and that it was approved by the President through Memorandum Order No. 119, dated September 18, 2003. Having been published in two (2) newspapers of general nationwide circulation, namely Manila Times and Malaya, on September 23, 2003, the IRR-A became effective on October 8, 2003, in accordance with Section 78 of the said IRR-A.

Hence, after the law was put into operation by its IRR-A on October 8, 2003, all government agencies, including LGUs such as your agency, are now governed by a uniform and standard procurement law, and mandated to comply with the provisions of R.A. 9184 and its IRR-A.

2. Whether or not the policy on warranty in the IRR-A of R.A. 9184 is disadvantageous to the Government in view of the possibility for a supplier or contractor to quote a higher price for the contract in view of the ten percent (10%) retention money requirement under Section 62.1 of the IRR-A of R.A. 9184.

The argument that the policy on warranty under R.A. 9184 and its IRR-A is disadvantageous to the Government, considering that a supplier or contractor may possibly quote higher prices in view of the 10% retention money requirement, has been discussed and addressed extensively. It must be noted that although the bidder-suppliers or bidder-contractors may have thought of incrementing their bid prices to hedge against miscellaneous expenses or costs that would be incurred by them, such as the 10% retention money or special bank guarantee as a form of warranty for the goods supplied, it is still the procuring entity that identifies and sets the Approved Budget for the Contract (ABC), in excess of which, any bid shall be disqualified. Hence, even if there is a possibility of quoting higher prices by prospective bidders as a mark-up for the warranty, the procuring entity concerned would not be put on a disadvantage as there is an upper limit or ceiling for bid prices, which is the ABC. This is in addition to the principle of “check and balance,” brought about by competitive bidding itself. In other words, the requirement of setting an ABC protects the procuring entity from unwanted bidders who would usually bid for unrealistic high prices, especially if the bid price is way beyond the said ceiling as such practice will cause the unwanted bidder to be disqualified from participating in the ensuing procurement activity.