NPM 012-2010

Requesting Entity: Municipality of San Pedro

Issues Concern: Warranty Security



1. Is warranty security required in the procurement of goods through alternative methods, particularly under Small Value Procurement and Shopping under Section 53.9 and 52, respectively, of the Implementing Rules and Regulations (IRR) of Republic Act 9184 (RA 9184)?

To ensure that manufacturing defects shall be corrected by the supplier, Section 62.1 of the IRR prescribes the general rule that submission of a warranty security is required in the procurement of goods. However, an exception to the foregoing is provided under Section 54.5 of the IRR.

Accordingly, posting of warranty security is not required in the procurement of goods through the alternative method of Shopping and Small Value Procurement under Section 53.9 and 52, respectively, of the IRR. Relative thereto, please be advised that the purchase threshold for the two (2) modes shall depend on the income classification of your local government unit, as provided under Annex "H" of the IRR of the Thresholds for Shopping and Small Value Procurement.

2. In the procurement of brand new vehicles, does the submission of a warranty certificate constitute compliance with the requirement on warranty security as prescribed under Section 62 of the IRR?

It bears stressing that the manufacturer's certificate of warranty is not one of the acceptable forms of warranty security enumerated under Section 62.1 of the IRR. It differs from a warranty security in that a certificate of warranty simply stipulates the agreement on when the supplier shall make repairs or remedy a problem at no additional cost to the buyer. A warranty security, on the other hand, is a form of deposit or collateral that can easily be forfeited by the buyers in case the supplier does not correct any manufacturing defect on the product purchased.