NPM 056-2004

Requesting Entity: Lehrmeister-Faktor Phils., Inc.

Issues Concern: Eligibility Criterion on Net Financial Contracting Capacity under Executive Order No. 40 and Republic Act No. 9184



Whether or not a bidder with a negative Php 2.89 Billion Net Financial Contracting Capacity (NFCC) can be prospectively considered as being financially stable by merely obtaining a bank guarantee of Php 40.8 Million, equivalent to 10% of the approved budget for the contract (ABC).

[I]f the advertisement or invitations for bid for the LRT Line 1 Maintenance Contract was issued prior to October 8, 2003, the date of effectivity of the IRR-A of R.A. 9184, then the strict NFCC eligibility criterion of the IRR of E.O. 40 shall apply. Hence, a prospective bidder with a negative NFCC should be declared ineligible to bid in such project under the non-discretionary pass/fail criteria sanctioned by the IRR of E.O. 40. However, if the advertisement or invitations for bid for such project was issued after the effectivity of the IRR-A of R.A. 9184, the financial requirement under the IRRA shall apply in the eligibility check of prospective bidders for such project. In this case, a prospective bidder is allowed to submit in lieu of its NFCC, a commitment from a licensed bank to extend to it a credit line if awarded the contract to be bid not lower than that set by the procuring entity in the bidding documents, which shall be at least equal to ten percent (10%) of the ABC.