NPM 136-2004

Requesting Entity: New Ormoc Builders Association

Issues Concern: Request for Suspension of the Imposition of Warranty Security for Infrastructure Projects



Whether or not the Government Procurement Policy Board (GPPB) is authorized to grant suspension of the implementation of any provision of R.A. 9184 and its IRR-A

We wish to inform you that the GPPB has had the chance to discuss the issue at hand under Policy Matter 004-2004, dated March 25, 2004 where it opined that the implementation of the said law is absolute and mandatory after its effectivity on October 8, 2003. Furthermore, it was mentioned therein that the GPPB has no authority to grant exemptions from the implementation of R.A. 9184 and its IRR-A as it is “bereft of a legislative delegated authority to determine within its discretion or ‘to ascertain, under and pursuant to law, some circumstances on which the law by its own terms, makes its own action depend, or to find the facts or conditions properly prescribed under which a law as passed will or will not operate, that is, for putting in effect, applying or suspending a law.’”

Based on the foregoing, although we understand and emphatize with your plight of having difficulty complying with the mandate of the law, we cannot disregard its implementation on account of the grounds you have provided in your letter.

[S]o as not to be incommodious to contractors, it is suggested that a warranty security be posted in full for the first year and renewable every year thereafter, subject to depreciation after the first year on a straight line basis. Thus, a project with a fifteen-year required warranty security will have a full amount of the warranty for its first year; 14/15 of the full amount for the second year; 13/15 of the full amount for the third year; 12/15 for the fourth year; and so on. Following this formula, a permanent structure amounting to P100 million, with a warranty security in the form of a bank guarantee will amount to P10 million for the first year; P9,333,333.00 for the second year; P8,666,666.00 for the third year; P8 million for the fourth year; and so on.