NPM 018-2012

Requesting Entity: Office of the Ombudsman

Issues Concern: Validity of Bid Security after Issuance of Notice of Award



Whether the winning bidder's submission of performance security prior to the lapse of the bid security and within the three-month reglementary period provided in Section 38.1 of the Implementing Rules and Regulations (IRR) of Republic Act (RA) 9184, under the situation where the Notice of Award (NOA) was timely issued, but the execution of the corresponding contract and the issuance of the Notice to Proceed were deferred beyond said period, may be considered compliant with the procurement rules.

We wish to clarify that in the related opinion we cited in NPM 10-2012, the bidding process was still in the post-qualification stage and the NOA has not yet been issued. It was then necessary to emphasize that the bid security should still be valid at the time of contract award in line with Section 37.1.5 of the IRR. The validity of the bid security is material at the time of the issuance of the NOA since the validity of the bid security signifies that the bidder's bid or offer still stands at the time the procuring entity awarded the contract. The validity of the bid or offer is vital because the NOA or the act of acceptance by the procuring entity will be rendered nugatory and ineffectual when there is no longer an "offer" to accept. Under the law on contracts, an offer must be duly accepted during its validity or prior to its revocation. Thus, the issuance of the NOA by the procuring entity is actually the acceptance of the winning bidder's offer; and the latter's act of posting the performance security guarantees that it will fulfill its contractual obligations.

Based on all the foregoing, it is our considered opinion that if the NOA was issued and the winning bidder has submitted a performance security within the three-month period, the requirement that the bid security should remain valid no longer finds application considering that the act, i.e. the offer, which it guarantees has already been accepted. In other words, since the offer/bid was accepted through the issuance of the NOA, during the validity of the bid and the corresponding bid security, it is no longer relevant whether the bid security was extended or not. Accordingly, under the attending circumstances, the non-extension of the validity of the bid security should not prevent the execution of the contract for the construction of the Ombudsman Annex Building.