NPM 014-2005

Requesting Entity: National Economic and Development Authority

Issues Concern: Downward Adjustment and Acceptance of Price Offer for the Contract for Supply of Coal



Whether or not the following reasons posited by the National Power Corporation (NPC) in resorting to negotiate with a bidder to reduce charges for cost and freight are valid in light of R.A. 9184 and its IRR-A:

(a) There is no provision in the IRR of R.A. 9184 on Limited Source Bidding or any alternative mode of procurement for that matter, prohibiting the agency from awarding the contract beyond the ABC or the ceiling price.

The prohibition against awarding government contracts beyond the Approved Budget for the Contract (ABC) is not mute in those cases where alternative modes of procurement were resorted to. Contrary to the import of the justification of NPC, the provision in R.A. 9184 and its IRR-A on the matter of ABC is as applicable to contracts entered into by way alternative modes of procurement as it is to contracts entered into by way of public bidding. The provision is not limited to public bidding as the law does not create a distinction between public bidding and alternative methods of procurement on this respect. Witness Section 31 of R.A. 9184:

x x x x

The reason underlying the provision is likewise present in the cases where alternative method of procurement was the facility for contract acquisition. The mandate of the law is to identify, through judicious and deliberate effort, a definite expense ceiling for every procurement project to be undertaken by procuring entities. The wisdom in this is to ensure that all government undertakings, as in the case of procurement, are made and prosecuted pursuant to government budgetary and expenditure programs. Also, the prescription is calculated to forestall fraud and collusion, and serve as a deterrent to the execution of unjust and inequitable contracts to the prejudice not only of the government but the private parties as well.

(b) The ABC established (based on prevailing prices) one month before the actual bids submission became non-responsive on the bidding date itself which almost always caused failure of tenders.

While the circumstances surrounding NPC’s procurement of coal are clear and its impact to NPC well recognized, the same hardly constitute sufficient justification for the negotiation of the contract at a price above the ABC. The law is categorical in its mandate and definitive in its policy. The ABC has to be maintained in pursuing government procurement contracts. What NPC could have done given the predicament of having to deal with increased coal prices is to have made the necessary adjustment in the PPMP or APP as sanctioned in Section 7 of R.A. 9184 and its IRR-A.