NPM 056-2013

Requesting Entity: Province of Misamis Occidental

Issues Concern: Variation Order



Whether the issuance of variation order by the Provincial Government for the Design and Construction/Improvement of Misamis Occidental Provincial Capitol Building (Project) is proper, considering that the recommended approach of the National Commission for Culture and Arts to preserve the historic features of the building was not considered in the original contract.

Variation Order may be validly implemented provided that the Provincial Government has established that Change Orders or Extra Work Orders are within the general scope of the Project as bid and awarded, and are due to the change of plans, design, or alignment to suit actual field conditions resulting in disparity between the preconstruction plans used for purposes of bidding and the "as staked plans" or the construction drawings prepared after the joint survey by the contractor and the government after award of contract.

Whether Variation Order may be interpreted to include major changes in the design as conceptualized, bid out, and awarded.

Contract Implementation Guidelines for the Procurement of Infrastructure Projects does not qualify whether the introduction or reclassification of work items includes major changes in the design as conceptualized, bid out, and awarded. Section 1.1 thereof, however, requires that the addition/deletion of works under Variation Orders should be within the general scope of the project as bid and awarded.

Whether the contractor may claim 15% mobilization fee pending the completion of the amended contract.

Mobilization fee cannot be granted if the contractor has already mobilized its equipment and has commenced with the required works under the contract, advance payment can no longer be provided as doing so shall negate the very purpose of granting such privilege to the contractor.

Whether it is necessary for the Sangguniang Panlalawigan to ratify the contract.

In the case of Vergara v. Ombudsman , relying on Sections 22(c) and 455(b)(1)(vi) of RA 7160, the Supreme Court held that "when the local chief executive enters into contracts, the law speaks of prior authorization or authority from the Sangguniang Panlungsod and not ratification."

Accordingly, as long as there is prior clear and categorical authorization from the Sangguniang Panlalawigan, the Provincial Governor may enter into contract for and in behalf of the local government unit.

Whether the Government Procurement Policy Board (GPPB) can make a categorical declaration that the 2 components of the Project may be made into 2 separate contracts.

[T]he Government Procurement Policy Board (GPPB) and its Technical Support Office (GPPB-TSO) x x x cannot, nor any other government agency, authority, or official, encroach upon or interfere with the exercise of the functions of the BAC, since these duties and responsibilities fall solely within the ambit of its authority as sanctioned by law. As such, the Provincial Government, through its BAC, is in the best position to determine the details of its Project, and the concomitant responsibility and authority to declare whether the two (2) components of the Project may be made into two (2) separate contracts.