NPM 019-2004

Requesting Entity: National Transmission Corporation

Issues Concern: Performance Security



1. Whether or not a procuring entity may require that performance securities come exclusively from the Government Service Insurance System (GSIS).

It should be noted that procuring entities have the discretion to require a particular form of performance security but such discretion does not extend to the authority to require where a performance security may be secured because to allow otherwise would defeat the principle of competitiveness espoused under R.A. 9184 and its IRR-A. The preference of a bidder on the insurance/surety company which shall provide it with its performance security should not serve as a hindrance in its eligibility as a bidder.

In this regard, we are of the opinion that your agency can prescribe only the type of performance security to be posted by the winning bidder, but not from where it should be applied from, advantage to other government agencies notwithstanding.

2. Whether or not a procuring entity may impose standards or requirements in order to ascertain if the insurance/surety company issuing the performance security is “reputable.”

During the meeting of the GPPB and the Joint Congressional Oversight Committee (JCOC) on the draft IRR-A of R.A. 9184, held on July 11, 2003, it was unanimously agreed upon that the phrase “duly accredited by the Insurance Commission” under Section 39.1(c) of IRR-A be deleted in order not to discriminate bonds issued by GSIS. Moreover, in order to emphasize the character of the insurance/surety company from which the performance security will be applied from, the term “reputable” was inserted in the provision.

Considering that the “reputable” character of an insurance/surety company is a requirement that is subjective in nature, and considering further that the IRR-A did not provide guidelines for its proper determination, it may be inferred that it was the intention of the Legislature to vest procuring entities with the discretion to impose standards or additional requirements, e.g., certificate of accreditation from IC, in ensuring the “reputable” character of the insurance/surety company issuing the performance security.

Accordingly, it is our opinion that your agency may prescribe standards or additional requirements to properly ensure the “reputable” character of an insurance/surety company issuing a performance security provided that it shall be so stated in the bidding documents.