IMPLEMENTING RULES AND REGULATIONS (IRR) TO GOVERN PROCUREMENT

OF GOODS BY THE GOVERNMENT

1.0 INTRODUCTION
1.1 General Policies and Objectives
1.1.1 In line with the government's efforts to achieve economy and effieciency
while upholding integrity and transparency in its operations, the herein
Implementing Rules and Regulations (IRR) are prescribed to standardize and
provide uniformity to the existing rules and regulations governing the
procurement of goods using government funds.

1.1.2 In the context of free enterprise, the aims and purposes of the government's
procurement process are as follows:
a. to purchase goods of acceptable quality at fair and reasonable prices
from qualified and capable suppliers/manufacturers/distributors, with on
time delivery and satisfactory compliance of all contract terms and
conditions;

b. to assure fair and equitable treatment of suppliers/manufacturers/
distributors including arrangements for prompt payments;

c. to accomplish procurement through open competitive bidding in the
interest of economy and efficiency; and

d. to maintain records and collect data for refinement of procurement
policies and procedures based on experiences gained.

1.2 Coverage and Applicability

1.2.1 These IRR shall govern and apply to all contracts of any agency or
subdivision of the National Government, including Government-Owned or
Controlled Corporations (GOCCs), involving agreements for the acquisition/
procurement of goods/supplies/materials for either project-related or normal/
regular operations and maintenance activities/requirements as well as mixed civil
works-procurement agreements where the nature of the project requirements is
essentially that of procurement rather than civil works. Procurement of services
such as janitorial or security services or repair and maintenance service is not
covered under these IRR. However, procurement of materials and supplies
provided by the agency concerned for such services shall be governed by these
IRR.

1.2.2 For supply contracts financed partly or wholly with Official Development
Assistance (ODA) funds from International Financing Institutions (IFIs), as well
as from bilateral and other sources, the corresponding loan/grant/credit agreement
governing the prosecution of such projects as negotiated and agreed upon between
the Government and the concerned IFI shall prevail.
2.0 ORGANIZATION
2.1 Prequalification, Bidding and Award Committee
2.1.1 Each government agency shall create a Prequalification, Biding and Award
Committee (PBAC) in its head office or in its implementing office which shall be
responsible for the conduct of bidding, evaluation of bids and recommending
award of contracts, including record keeping, planning and management of the
procurement process. The prescribed composition of the PBAC as well as relevant
provisions pertaining thereto and its responsibilities are described in Annex "A".
3.0 GENERAL PROCEDURES
3.1 Certificate of Availability of Funds
3.1.1 Contracts for the procurement of goods shall not be approved unless a
Certificate of Availability of Funds (CAF) has been issued by the proper
accounting official of the concerned agency certifying that funds are available and
have been duly appropriated for the purpose to cover the expenditures for the
current fiscal year. The verification of the CAF by the auditor shall be without
prejudice to the execution/implementation of the contract.
3.2 Procurement Planning
3.2.1 Procurement of goods shall be undertaken according to a procurement plan
that the agency concerned shall formulate to ensure that the goods to be procured
are available when needed. The basic content of the procurement plan including
pertinent guidelines and policies thereon are prescribed in Annex "B".

3.3 Method of Procurement
3.3.1 As a general rule, awards of contracts shall be done after open competitive
bidding unless a more appropriate method has been duly approved for adoption.
Other than the open competitive bidding methods, Annex "C" outlines the various
alternative methods of procurement and the conditions under which such methods
may be adopted in the interest of economy and efficiency. Further, in line with
COA Resolution No. 95-244, public bidding may be dispensed with for purchases
of supplies, materials and equipment in an amount up to P10,000,000 as long as
the purchase is most advantageous to the government.

3.4 Bidders Eligibility
3.4.1 For Procurement Financed by the Government, the following
manufacturers/ suppliers/distributors, whether 100% local or at most 40% foreign-
owned, may participate in the bidding for the supply of goods to be bid out by the
Government.

a. Duly Licensed Individuals/Sole Proprietorships;
b. Partnerships or Corporations;
c. Manufacturers/suppliers/distributors forming themselves into a joint
venture, i.e., a group of two or more manufacturers/suppliers/distributors
that intend to be jointly and severally liable for a particular contract;
d. Cooperatives duly registered with the Cooperatives Development
Authority (CDA).
3.4.2 For projects financed wholly or partly with funds from International
Financing Institutions (IFIs) as well as bilateral and other sources, eligible
bidders shall meet the following requirements:
a. the manufacturer/supplier/distributor is an entity from an IFI member
country and eligible in accordance with the procurement rules of the IFI
concerned as may be required; and
b. the goods must be manufactured in or supplied, as well as bid by, an
eligible member country bidder as may be required under the procurement
rules of the IFI concerned.;

3.4.3 Only eligble bidders as defined above may participate in the bidding and
may be awarded contracts if the same bidders are found qualified in accordance
with the pertinent provisions of these IRR. An exceptional case is the acquisition
called for under the Armed Forces of the Philippines (AFP) Modernization
Program wherein only offers from suppliers who are manufacturers themselves
shall be entertained pursuant to the pertinent provisions of RA 7898.
4.0 BIDDING PROCESS
4.1 Preparation of Bid/Tender Documents
4.1.1 To ensure fairest competition, the Bid/Tender Documents shall prescribe
clearly and precisely the nature of the goods for which bids are to be invited, the
technical standards/requirements which must be met, the place and period of
delivery or installation, the warranty and maintenance requirements, the method
and criteria to be employed in the evaluation and comparison of bids and other
pertinent terms. Annex "D" discusses and elaborates on the basic content of the
Bid/Tender Documents.
4.2 Invitation to Prequalify and To Bid
4.2.1 Invitations to Prequalify and to Bid for local competitive bidding, the
minimum content of which are prescribed in Annex "E", shall be publicly
advertised for at least three (3) times within at least two (2) consecutive weeks in
at least two (2) newspapers of general circulation which have been regularly
published for at least two (2) years prior to the date of issueance of such
invitations. At the same time, copies thereof shall be posted at any conspicuous
places at the office of the agency concerned.

4.2.2 For international competitive biddings, advertisement shall be done along
the same lines prescribed above. Advertisements of invitations for contracts
financed partly or wholly from ODA funds provided by IFIs shall be in
accordance with the procedures established by and agreed upon with the
concerned IFI.

4.2.3 For procurement methods other than the open competitive procedure, public
advertisement of the Invitation to Prequalify and to Bid may be dispensed with.

4.3 Prequalification of Bidders
4.3.1 The capabilities and resources of prospective bidders should be assessed to
determine if the same could satisfactorily perform the contract requirements. The
prequalification shall take into account the bidders' financial, technical and
production capabilities based on documentary evidences in the submitted
prequalification statements as well as other current and relevant factual
information, and previous experiences on the product as the concerned agency
deems necessary and appropriate.

4.3.2 Each prospective bidder shall be assessed vis-a-vis the qualification
requirements of the agency concerned and shall be determined as either
"Prequalified" or "Predisqualified". All qualified bidders shall be informed within
seven (7) calendar days from approval thereof by the Head of Agency concerned
through official notices. Predisqualified bidders shall also be informed within the
same period of time of the grounds for their disqualification and shall be allowed
seven (7) calendar days from receipt of such notice to appeal for reconsideration.

4.3.3 The notice to prequalified bidders shall contain the following information,
among others:
a. the deadline set for the issuance of the related Bid/Tender Documents,
including the place/office where such documents could be contained;
b. the cost of the Bid/Tender Documents and mode of payment, if any; and
c. the deadline for the submission of bids, including the place/office where
the same shall be submitted.


4.3.4 If only one bidder is found to be prequalified, or that only one bidder
responded to the Invitation to Prequalify and to Bid, the agency concerned shall
cease to proceed with the bidding process and shall re-advertise the invitation in
the manner prescribed in Section 4.2. The previously prequalified bidder shall
automatically be considered as prequalified during the second advertisement.
Should the same condition occur after the re-advertisement, the agency concerned
may resort to negotiated procurement with the lone prequalifying bidder.
4.3.5 Notwithstanding the prequalification of a bidder, the Government reserves
the right to review the qualifications of a selected bidder before actual award of
the contract is made. Should such review uncover any misrepresentation made in
the prequalification statements, or any changes in the situation of the bidder to
materially downgrade the substance of such statements, the agency concerned
shall disqualify the bidder from submitting a bid or from obtaining any award of
contract.

4.4 Issuance of Bid/Tender Documents
4.4.1 Prequalified bidders should be given ample time to examine the Bid/Tender
Documents and to prepare their respective bids. To provide ample time, the
concerned PBAC shall make available the related Bid/Tender Documents in
accordance with the following schedule. Such schedule may be extended
depending on the complexity of the requirements to be bid out.
Estimated Project Cost Issuance of Bid/Tender
(in Pesos) Documents
Up to fifteen (15) million 15 days before date of bid opening
Above fifteen (15) million

& up to fifty (50) million 30 days before date of bid opening
Above fifty (50) million

& up to one hundred (100) million 45 days before date of bid opening
Above one hundred (100) million 60 days before date of bid opening
4.4.2 Supplemental notices may be issued upon the Government's initiative or
upon request of any bidder for purposes of clarifying any provision of the bidding
document. Any amendment to the Bid/Tender Documents should be identified as
such while referring to the portion of such documents being amended.
Supplemental notices and/or amendments shall be sent to and duly
received/acknowledged by all prequalified bidders within a reasonable time,
including extension in the deadline set for the receipt of bids if needed, to be
determined by the agency concerned depending on the nature, complexity and
magnitude of such notices/amendments to allow said bidders to consider the same
in preparing their respective bids.
4.5 Pre-Bid Conferences
4.5.1 Pre-bid conferences may be conducted at the discretion of the Government
or upon written request of any prequalified bidder to clarify and/or explain any of
the requirements, terms, conditions and specifications stipulated in the bidding
documents. The conference shall be held long enough after the bidding documents
have been issued to allow bidders to familiarize themselves with the documents
but sufficiently in advance of bid opening to allow consideration of the
conference results in preparing bids. In any event, pre-bid conferences shall be
held not later than fourteen (14) calendar days prior to the bid opening date.

4.5.2 Nothing stated at the pre-bid conference shall modify the terms of the
bidding documents unless such is made as a written amendment. A summary of
the conference proceedings and results shall be sent to all prequalified bidders
known to have purchased the bidding documents.
4.6 Submission, Receipt and Opening of Bids
4.6.1 Bidders may be required to submit bids either through the single-stage
bidding procedure, its variation or two-stage bidding procedures, depending on
the requirements of the procurement process as duly approved for use. These
bidding procedures and the conditions under which the same may be adopted are
elaborated in Annex "F".

4.6.2 Each bid shall be accompanied by a bid security that is payable to the
concerned agency as a guarantee that the succesful bidder shall, within fifteen
(15) calendar days after receipt of the Notice of Award, enter into contract with
the Government and furnish the required performance security for the faithful
performance of all works called for. Failure to enclose the required bid security as
to form and amount prescribed herein shall automatically disqualify the bid
concerned.

4.6.3 The amount of the bid security shall not be less than two-and-one half
percent (2-1/2%) of the total bid price. The security may be in the form of cash,
cashier's check, manager's check, bank draft or guarantee againts any reputable
bank, letter of credit issued by a commercial bank, a surety bond callable on
demand issued by a surety or insurance company accredited by the Office of the
Insurance Commissioner, or any combination thereof.

4.6.3 The amount of the bid security shall not be less than two-and-one half
percent (2-1/2%) of the total bid price. The security may be in the form of cash,
cashier's check, manager's check, bank draft or guarantee against any reputable
bank, letter of credit issued by a commercial bank, a surety bond callable on
demand issued by a surety or insurance company accredited by the Office of the
Insurance Commissioner, or any combination thereof.

4.6.4 Bids and bid securities shall be valid for a reasonable period of time to be
determined by the Head of Agency concerned and shall be so indicated in the
Instructions to Bidders but in no case beyond one hundred twenty (120) days from
the date of opening of bids.

4.6.5 Upon written request of concerned bidders, bids may be withdrawn,
including the bid security if already received, and/or modified. For procurement
procedures wherein the technical requirements/ specifications have been clearly
defined by the agency concerned, (as in the single-stage bidding and its variation),
bids may be withdrawn and/or modified prior to the deadline set for the
submission of bids. For supply contracts whose required technical specifications
cannot be precisely defined in advance of bidding (as in the two-stage bidding),
bids may be withdrawn and/or modified before the time and date set for the
opening of bids. In any case, withdrawal of bids after the applicable deadline shall
be subject to appropriate sanctions as prescribed herein. Bid modifications
received after the applicable deadline as well as bids submitted after the deadline
for the submission of bids shall not be considered and shall be returned
unopened.

4.6.6 No bid securities submitted in the form of sureties of all complying bidders
shall be returned after the opening of bids. Bid securities submitted in form other
than sureties, such as cash, cashier's check, manager's check, letter of credit and
bank draft/guarantee, may be returned upon request of the bidder, provided that he
is not among the three lowest evaluated complying bidders and such withdrawal
shall be construed as a waiver by the bidder for the award of contract. Bid
securities in the form of sureties shall be returned only after the successful bidder
has signed the contract and furnished the performance security but not later than
the expiration of the bid security validity period indicated in the Instructions to
Bidders.

4.6.7 If only one (1) bid is received in response to an invitation for bids, an award
may be made to the single bidder provided that his bid is substantially responsive
and complying with the technical requirements/ specifications of the contract, that
his price offer is fair and reasonable, and that other prospective bidders were
given equal opportunity to respond.
4.7 Examination and Evaluation of Bids.
4.7.1 Prior to bid evaluation and comparison, bids received shall be examined
with respect to, among others, the eligibility requirements, bid securities as to
form and amount, responsiveness/compliance with the bidding documents and
technical specifications, authority of signatory, or for any material computational
errors in preparing the bid. Only bids that are determined to be complete, valid,
eligible and substantially responsive and complying shall be considered for
evaluation and comparison.

4.7.2 The purpose of bid evaluation is to determine the cost of each bid to the
Government in a manner that will permit a comparison of bids on the basis of
their evaluated cost. The responsive bid with the lowest evaluated cost, but not
necessarily the lowest submitted price, shall be selected for award. The general
guidelines to be followed in bid evaluation and comparison are given in Annex
"G".

4.7.3 The concerned agency may employ any of the specific evaluation
procedures described in Annex "H" in determining the bid's evaluated cost that it
deems most appropriate for the requirements of a particular contract. The use of
any such procedure shall be duly approved and so indicated in the bidding
documents.

4.7.4 Evaluation of bids shall be completed not later than thirty (30) calendar days
from the date of the opening of bids The PBACs of all agencies shall prepare and
keep on file detailed reports on the evaluation and comparison of bids setting
forth the specific reasons on which recommendations are based for the contract
award.

4.7.5 The Government reserved the right to reject any or all bids or to declare the
bidding a failure if there is no reason to suspect an evident collusion among
bidders, thus resulting in no competition. However, all bids should not rejected
and new bids invited on the same specifications for the purpose of obtaining low
prices, except in cases where the lowest evaluted bid exceeds the estimated
procurement cost by a very substantial amount. In such a case, a revised less
expensive requirement may be substituted to seek a more affordable result.

4.7.6 No information relating to the susbstance, examination and evaluation of
bids and recommendations concerning awards shall be disclosed to persons
outside the PBAC concerned before the announcement of the contract award to
the successful bidder. After the award of contract, all unsuccessful bidders shall
be informed individually.
4.8 Failure of Bidding
4.8.1 The Government shall declare the bidding a failure and the concerned
agency shall conduct a rebidding of the project when no bids are received, or
when no bids are found to be substantially responsive and/or complying to the
requirements of the bidding documents, particularly in terms of the technical
requirements/specifications of the contract.

4.8.2 Should there occur another bidding failure after the conduct of the project's
rebidding, the agency concerned may enter into a negotiated procurement.
5.0 CONTRACT AWARD AND IMPLEMENTATION
5.1 Award of Contract
5.1.1 The decision whether or not to award the contract shall be made after thirty
(30) calendar days after the completion of bid evaluation. If the decision is to
award the contract, the Notice of Award should be approved by the Head of
Agency or his duly authorized representative and issued within seven (7) calendar
days from the date the decision to award is made.

5.1.2 For foreign assisted projects, the duly approved decision to award shall be
transmitted to the concerned IFI, for concurrence as may be required, within
seven (7) calendar days from the date of approval of the decision. Likewise, the
Notice to Award shall be issued by the concerned agency within seven (7)
calendar days from the date of concurrence of the concerned IFI.

5.1.3 The contract shall be awarded to the bidder whose bid has been determined
to be the lowest evaluated responsive bid and who meets the appropriate standards
of capability and financial resources. A bidder shall not be required, as a
condition of award, to undertake responsibilities for work not stipulated in the bid
documents or otherwise modify his bid.

5.1.4 Contract award shall be made within the bid validity period. Should it
become necessary to extend the validity of bids, the agency concerned should
request in writing all those who submitted bids for such extension before the bid
expiration date. Bidders, however, shall have the right to refuse to grant such an
extension without forfeiting their bid security.

5.1.5 The successful bidder should execute the contract with the concerned
agency within fifteen (15) calendar days upon receipt of the Notice of Award.
Each unsuccessful bidder shall also be notified of the award through official
notices/communications. Notice of Award shall be made available to the public
when requested.
5.2 Performance Security
5.2.1 To guarantee the faithful performance of the contract awardee, he shall post
a performance security, whose form and amount are prescribed in Annex "I", in
favor of the Government within the time specified by the concerned agency after
contract signing. Subject to the conditions of the contract, the performance
security may be released after the issuance of the Certificate of Acceptance" of
the goods provided that there are no claims filed against the awardee or the surety
company.

5.2.2 The supplier/manufacturer/distributor shall post an additional performance
security proportionate to cover any cumulative increase of more than ten percent
(10%) over the original value of the contract, including validity extension of
performance security to cover approved contract time extensions if any, as a result
of cost adjustments and/or Amendments to Order. Similarly, the agency
concerned may allow a proportional reduction in the original amount of
performance security in case of a reduction in contract value.
5.3 Warranting
5.3.1 To assure that manufacturing defects will be corrected by the contract
awardee for a fixed time after delivery, a warranty shall be required of the
successful bidder, the obligations for which shall be covered by either retention
moneys in the amount equal to ten percent (10%) of every progress payment, or a
special bank guarantee equivalent to ten percent (10%) of the total contract price.
Such amounts shall only be released after the warranty period provided that the
goods supplied are free from defects and all the conditions imposed under the
contract are fully met.

5.3.2 For supply contracts which include installation and commissioning services
in addition to the supply of goods/equipment, the period and the required
obligation of the warranty shall cover the same.
5.4 Refusal to Enter Into Contract
5.4.1 Should the lowest evaluated responsive and complying bidder refuse, fail or
is unable to enter into contract with the Government and/or to post the required
performance security within the time provided therefor, he shall be meted with the
appropriate sanctions provided under these IRR and the agency concerned may
consider for award the second lowest evaluated responsive bidder at his bid price
provided it does not exceed the total amount of the lowest evaluated responsive
bidder at his bid plus the amount of bid security posted. In case of another refusal
or failure, appropriate sanctions shall likewise be imposed and the agency
concerned may consider the next ranked bidder and so on until an award is made.
5.5 Approval of Contracts
5.5.1 Supply contracts should be approved or disapproved by the Head of Agency
concerned or his duly authorized representative in accordance with existing laws,
rules and regulations within fifteen (15) calendar days from the date the
successful bidder has executed the contract with the concerned agency and
submitted all documentary requirements to perfect the contract.
5.6 Issuance of Notice to Proceed
5.6.1 The concerned agency shall issue the Notice to Proceed (NTP) to the
successful bidder not later than fifteen (15) calendar days from the date of
contract approval. All notices called for by the terms of the contract shall be
effective only at the time of receipt thereof by the supplier.
5.7 Amendment to Order
5.7.1 Subject to conditions set forth in Annex "J", amendments to order may be
issued at any time by the concerned agency. If any such Order increase or
decreases the cost of, or the time required for executing any part of the work
under the original contract, an equitable adjustment in contract price and/or
delivery schedule shall be mutually agreed upon between the parties concerned
and the contract accordingly modified in writing.
5.8 Suspension of Work
5.8.1 The Government may suspend the work wholly or partly by written order
for a certain period of time as it seems necessary due to force majeure or any
fortuitous events as defined in the contract. The supplier shall take all reasonable
steps to minimize the costs allocable to the work covered by such order during
work stoppage.
5.8.2 Before the suspension order expires, the agency concerned shall either lift
such order or terminate the work covered by the same. if the suspension order is
lifted, or if the period of the order expires, the supplier shall have the right to
resume work. Appropriate adjustments shall be made in the delivery schedule or
contract price, or both, and the contract shall be modified accordingly.
5.9 Contract Termination
5.9.1 The Government may terminate the contract for reasons of default and/or
convenience. Annex "K" discusses the conditions and/or situations where such
authority could be exercised.
5.9.2 Notwithstanding contract termination and subject to any directives from the
concerned agency the supplier shall take timely, reasonable and necessary actions
to protect and preserve property(s) in his possession upon which the Government
has an interest.
5.10 Liquidated Damages
5.10.1 When the supplier fails to satisfactorily deliver goods under the contract
within the specified delivery schedule, inclusive of duly granted time extensions,
if any, the supplier shall be liable for damages for the delay and shall pay the
Government for liquidated damages, not by way of penalty; an amount equal to
one-tenth (1/10) of one percent (1%) of the cost of the delayed goods scheduled
for delivery for every day of delay until such goods are finally delivered and
accepted by the Government.
5.10.2 The Government need not prove that it has incurred actual damages to be
entitled to liquidated damages.Such amount shall be deducted from any money
due or which may become due to the supplier, or collect the same from any
securities or warrantees posted by the supplier whichever is convenient to the
Government. In no case shall the total sum of liquidated damages exceed fifteen
percent (15%) of the total contract price, in which event the concerned agency
shall automatically terminate the contract and impose appropriate sanctions over
and above the liquidated damages to be paid.
5.11 Administrative Sanctions
5.11.1 For offenses/violations committed under the pertinent provisions of these
IRR, appropriate administrative sanctions shall be imposed on erring suppliers as
prescribed under Annex "L".
6.0 EFFECTIVITY
6.1 These Implementing Rules and regulations (IRR) and any of its subsequent
amendments shall apply to projects that will be bid out, or in case of negotiated contracts,
where contract negotiations have been initiated fifteen (15) days after the date of
publication of the same by the appropriate authorities. For supply contracts bid out or
negotiated prior to said effectivity date, the previous Implementing Rules and
Regulations shall apply.
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