NPM 001-2006

Requesting Entity: National Kidney and Transplant Institute

Issues Concern: Price escalation on services contracts



Whether or not NKTI may accommodate all of the request for price escalation of all its service provider mentioned above on the basis of the effect of the issuance of Wage Order NCR-11.

[T]he Guidelines for Contract Price Escalation stands to be inapplicable in the case as the same is limited only to address price adjustments in tangible goods. It does not cover under its scope the adjustment of prices for contracts of services.

While it is not categorically mentioned in any of the provisions of the guidelines, the clear intention is to limit its application only to cases where price escalation is warranted in the cases of tangible goods or commodities. Note that in the review of the technical parameters of a request for price escalation, reference is made to price indices and commodities which fact plainly points to the intention of the guidelines.

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The provision above-cited (Sec. 17.7.4, IRR-A) sufficiently provides remedy to the contracting parties in addressing the need for price adjustment because of the issuance or promulgation of a new law, ordinance, regulation, or other Governmental act. The provision is self-executing and does not require elaborate process for its accomplishment; provided, that in the grant of relief or allowing price adjustment shall be on a "no loss-no gain" basis, i.e., the relief or adjustment shall only be to the extent of the actual adjustment or change caused by the supervening issuance or governmental act.

In sum, the NKTI may allow price adjustment relative to its contracts for the above mentioned general support services with its incumbent service providers, in accordance with the new Wage Order No. NCR-11 and on a "no loss-no gain" basis as stated above.