NPM 038-2005

Requesting Entity: Department of Finance

Issues Concern: Legality of success-based arrangement for the procurement of financial advisory/consultancy services for the Government’s privatization projects



Whether a success-based arrangement for the procurement of financial advisory/consultancy services is allowed under R.A. 9184 and its IRR-A.

The proposed success-based arrangement in the hiring of consultants/advisors of DOF is not a mode of procurement within the contemplation of Republic Act No. 9184; rather, it is a payment scheme purported to provide a remedy to avoid or temporarily skip an outlay of money by the government. It does not in any way directly involve the acquisition of services nor the selection of a service provider or contractor.

As payment scheme, the agency and process by which it is to be accomplished should be addressed and set out in the terms and conditions of the contract, in accordance with the Philippine Bidding Documents. Under this proposed arrangement, the payment of the financial consultant/advisor will be made to depend on the eventual success of the principal undertaking which is the sale of government assets. In this case, payment becomes conditional to the happening of an uncertain event which concern is not within the intention of RA 9184.

The foregoing having been stated, it is our considered view that while the proposed scheme addresses payment or other incidents of the prospective contract, the procedures involved in the acquisition of the consulting services shall be governed by the provisions of RA 9184. This is without prejudice to whatever legal sanction that may be available to justify the adoption of a success-based payment arrangement in government contracts. Be that as it may, the legality of the same is beyond the jurisdiction of this office to determine.