OFFICE OF THE PRESIDENT OF THE PHILIPPINES

malacañang, manila
October 10, 2000
Hon. BENJAMIN E. DIOKNO
Secretary for Budget and Management
Chairman of the Procurement Policy Board
Department of Budget and Management
Building 1, Solano Street
San Miguel, Manila
Dear Secretary Diokno,
The Office of the President has received the set of Implementing Rules and Regulations of Executive
Order 262 which the Procurement Policy Board drafted based on the principles of transparency,
accountability, equity, effectiveness, efficiency, and economy in government procurement of
goods/supplies/materials.
This is to approve the said Implementing Rules and Regulations of Executive Order 262, amending EO
302, series of 1996, entitled "Providing Policies, Guidelines, Rules and Regulations for the Procurement
of Goods/Supplies by the National Government" and Section Three (3) of EO 201, Series of 2000, entitled
"Providing Additional Policies and Guidelines in the Procurement of Goods and Supplies by the National
Government".
Very truly yours,
By authority of the President:
(SGD.) Ronaldo B. Zamora
Executive Secretary

November 27,2000 OFFICIAL GAZETTE Vol.96, No.48

Approved IRR for EO 262

REPUBLIC OF THE PHILIPPINES
DEPARTMENT OF BUDGET AND MANAGEMENT
MALANCAÑANG, MANILA
RULES AND REGULATIONS TO IMPLEMENT THE AMENDMENTS TO EXECUTIVE ORDER
NO.302 SERIES OF 1996 AND TO EXECUTIVE ORDER NO.201 SERIES OF 2000, PURSUANT
TO EXECUTIVE ORDER NO.262 SERIES OF 2000 TO GOVERN PROCUREMENT OF GOODS
AND SUPPLIES BY THE NATIONAL GOVERNMENT

SECTION 1.0 INTRODUCTION

1.1 General Policies and Objectives

1.1.1 In line with the government's efforts to uphold transparency and accountability, and
achieve equity, effectiveness, efficiency and economy 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 adopt procurement procedures that utilize information technology; 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 supply contracts of any agency or
subdivision of 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 of goods/supplies/materials rather than civil works. Procurement of services
such as janitorial or security services or repair and maintenance service is covered under
these IRR, as well as procurement of materials and supplies provided by the agency
concerned for such services. "Supplies", as herein used, include everything, except real
estate, which may be needed in the transaction of public businesses, or in the pursuit of
any undertaking, project, or activity, whether in the nature of equipment, furniture,
stationery, materials for construction, or personal property of any sort, including non-
personal or contractual services such as the repair and maintenance of equipment and
furniture, as well as trucking, hauling, janitorial, security, and related or analogous
services.
SECTION 2.0 ORGANIZATION
2.1 Bids and Awards Committee

Each government agency shall create a Bids and Awards Committee (BAC) in its head
office and/or in its implementing office which shall be responsible for the determination of
eligibility, conduct of bidding, evaluation of bids, post-qualification of the lowest calculated
bid and recommending award of contracts. The record keeping, planning and
management of the procurement process shall be designated to the procurement unit or
the administrative unit, as appropriate, of the office/agency/corporation concerned. The
prescribed composition of the BAC as well as relevant provisions pertaining thereto and
its responsibilities are described in Annex "A".
SECTION 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.

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/supplies/materials 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.
 3.4 Who May Be Eligible to Bid

3.4.1For 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 proprietorship;

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 manufacturers/suppliers/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 required under the procurement rules of the IFI
concerned.

3.4.3 Only eligible bidders as hereinafter determined 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.
SECTION 4.0 BIDDING PROCESS
4.1 Preparation of Bid/Tender Documents

4.1.1 To ensure fairest competition, the Bid/Tender Documents shall describe 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 Apply for Eligibility and to Bid

4.2.1 Invitation to Apply for Eligibility and to Bid for local competitive bidding, the
minimum content of which is prescribed in Annex "E", shall be publicly advertised at least
14 days before the deadline for submission of eligibility and bid requirements, in two
consecutive issues of two newspapers of general circulation existing for at least 2 years,
and posted in the website of the Department of Budget and Management (DBM)
Procurement Service and of the concerned office/agency/corporation during the same
period or for a longer period as determined by the Head of the office/agency/corporation
concerned, and posted at any conspicuous place reserved for this purpose in the
premises of the DBM Procurement Service and of the concerned
office/agency/corporation, as certified by the Chief of Administrative Services or the
equivalent official of the concerned office/agency/corporation.
 However, for contracts to be bid costing two million pesos (P2,000,000) and below,
advertisement may be posted only in the website of the DBM Procurement Service and of
the concerned office/agency/corporation during the same period as above or for a longer
period as determined by the head of the office/agency/corporation concerned, and posted
at any conspicuous place reserved for this purpose in the premises of the DBM
Procurement Service and of the concerned office/agency/corporation, as certified by the
Chief of Administrative Services or the equivalent official of the concerned
office/agency/corporation.

4.2.2 For international competitive bidding, 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 Apply for Eligibility and to Bid may be dispensed with.

4.3 Issuance of Application for Eligibility Forms and Bid/Tender Documents

4.3.1 Prospective bidders shall be given ample time to examine the forms for application
for eligibility and the bid/tender documents and to prepare their respective bids. To
provide ample time, the concerned BAC shall make available upon payment, if
applicable, said documents from the time the Invitation to Apply for Eligibility and to Bid is
first advertised.

4.3.2 Supplemental bulletins may be issued upon the government's initiative or upon
request of any interested party who secured the bid/tender documents, otherwise
referred to as a prospective bidder, for purposes of clarifying any provision of the bidding
document. Any amendment to the bid/tender documents should be identified as an
amendment. Such bulletins containing amendments and/or clarifications of certain
provisions of bid documents shall be sent by mail, by hand or electronically, to and duly
received/acknowledged by all interested parties within a reasonable time, including
extension of 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.
Requests for clarification(s) on bid documents by interested parties who have secured
the bid documents must be in writing, and submitted to the BAC within 14 calendar days
before the deadline set for the submission of eligibility and bid envelopes. All clarifications
shall be made in writing and furnished to all interested parties within the time stipulated in
the Instruction to Bidders, before the deadline for the submission of bids.

4.4 Determination of Eligibility of Prospective Bidders

4.4.1 The capabilities and resources of prospective bidders shall be initially assessed,
subject to post-qualification, to determine if they meet the requirements for eligibility. The
determination of eligibility of prospective bidders shall be based on the submission of the
following documents as specified hereunder:

A. Legal Documents

1. Current licenses/permits including Department of Trade and Industry

(DTI) business name registration or Securities and Exchange
Commission (SEC) registration certificate, mayor's permit/municipal
license, Bureau of Internal Revenue value-added tax registration, and if
applicable, DTI accreditation certificate
 2. Prospective bidder's statement that his firm is not "blacklisted" or
barred from bidding by any government office/agency/corporation

B. Technical Documents - prospective bidder's statement of previous similar

contracts/sales completed in at least the last two years, as prescribed by the
agency in the Invitation to Apply for Eligibility and to Bid. "Similar" contracts shall
be defined by the concerned office/agency/corporation in the Invitation to Apply
for Eligibility and to Bid. The bidder's documents shall include, for each contract,
kinds of goods/supplies/materials sold, amount of contract, end user's
acceptance, name of contract, date of contract, date of delivery, specification
whether prospective bidder is a manufacturer, supplier or distributor.

In the case of capital goods, the value of the bidder's largest single contract,
adjusted to current prices, completed within the period specified in the Invitation
to Apply for Eligibility and to Bid, and similar to the contract to be bid, must be at
least fifty percent (50%) of the approved budget for the contract to be bid.

C. Financial Documents - audited financial statements, stamped "received" by

the Bureau of Internal Revenue, for the last two calendar years.

Each of the above requirements shall be under oath and duly notarized, and shall
form part of the duly accomplished application form for eligibility.

For special cases of procurement of goods/supplies/materials where foreign

suppliers may participate, the above requirements may be substituted by the
appropriate equivalent documents issued by the foreign supplier's country. These
documents must be duly acknowledged by the Philippine Consulate therein.

4.4.2 The eligibility of prospective bidders shall be determined using simple "pass/fail"
criteria and shall be determined as either "eligible" or "ineligible". If the prospective bidder
is rated "passed" for all the above requirements, he shall be considered eligible. If the
prospective bidder is rated "failed" in any of the above requirements, he shall be
considered ineligible.

4.4.3 If only one bidder is found to be eligible, or that only one bidder responded to the
Invitation to Apply for Eligibility and to Bid, the agency concerned shall recognize a lone
eligible bidder as valid.

4.4.4 Notwithstanding the eligibility of a bidder, the government reserves the right to
review the qualifications of a bidder before the bidding of the contract is made. Should
such review uncover any misrepresentation made in the eligibility 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.

4.5 Pre-bid Conferences

4.5.1 For contracts to be bid costing more than one million pesos (P1,000,000), pre-bid
conferences shall be conducted by the government, to clarify and/or explain any of the
requirements, terms, conditions and specifications stipulated in the bid documents. For
contracts to be bid costing one million pesos (P1,000,000) or less, pre-bid conferences
may be conducted at the discretion of the concerned office/agency/corporation. The
conference shall be held not later than 14 days after the bid documents have been made
available to the prospective bidders to familiarize themselves with the documents but
sufficiently in advance of bid opening to allow consideration of the conference results in
preparing bids.
 The bidders shall bear all costs in the preparation of their bids and the government shall
in no case be responsible or liable for these costs, regardless of the outcome of the
bidding process.

4.5.2 Among others, the pre-bid conference shall discuss the following:

a. technical specifications
b. legal requirements
c. financial requirements
d. production capability requirements
e. delivery schedule
f. after-sales service requirements

4.5.3 Any statement at the pre-bid conference shall not modify the terms of the bid
documents unless such statement is specifically identified in writing as an amendment
thereto and sent by mail, by hand or electronically to all parties who have secured the
bid/tender documents. The minutes of the conference(s) shall be recorded and made
available to all participants.

4.6 Submission, Receipt and Opening of Eligibility and Bid Envelopes

4.6.1 Prospective bidders shall submit their application for eligibility and bid documents
simultaneously on the specified deadline for the submission of the eligibility and bid
envelopes. The eligibility envelope shall be sealed and contain the documents required in
section 4.4.1. The bid envelope(s) shall be sealed and contain the documents required in
section 4.8.1 and Annex "F".
In case of single-stage bidding: Prospective bidders shall submit simultaneously two
envelopes, one containing eligibility requirements and the other containing bidding
documents.

In case of single-stage bidding variation: Prospective bidders shall submit simultaneously

three envelopes, one containing eligibility requirements and two containing bidding
documents. Contents of each of the bid envelopes are specified in Annex "F".

In case of two-stage bidding: Prospective bidders shall submit their eligibility envelopes
first, during the first stage of the bidding. Eligible bidders who are interested to bid shall
submit their bidding documents in two sealed envelopes during the second stage of the
bidding.

The eligibility envelopes of prospective bidders shall be opened first to determine

eligibility of prospective bidders. In case any of the requirements specified in section
4.4.1 is missing from the eligibility envelope, the BAC shall declare said prospective
bidder as "ineligible" to bid. Bid envelope(s) shall immediately be returned unopened to
ineligible bidders in case of simultaneous submission of eligibility and bid envelopes.

In case of single-stage bidding variation and two-stage bidding, the first bid envelopes of
eligible bidders shall be opened to determine the bidders' compliance with requirements.
In case any of the requirements is missing, the BAC shall rate the bid as "failed" and
immediately return to the bidder concerned his second bid envelope unopened. The
second envelopes of the remaining eligible bidders shall be opened immediately for those
whose first bid envelopes were rated "passed". In case any of the requirements in the
second envelope is missing or if the submitted price exceeds the approved budget for the
contract, the BAC shall rate the bid concerned as "failed".
Only bids whose envelopes are all rated as "passed" shall be evaluated and calculated to
come up with the lowest calculated bid.
 4.6.2 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 maadopted are indicated in Annex
"F".

4.6.3 Each bid shall be accompanied by a bid security that is payable to the concerned
agency as a guarantee that the successful 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.

4.6.4 The amount of the bid security shall be fixed at an amount equal to two-and-one-
half percent (2-1/2%) of the approved budget for the contract to be bid. 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.

4.6.5 Bids and bid securities shall be valid for such reasonable period determined by the
head of the agency concerned. This period shall be so indicated in the Instructions to
Bidders. In no case shall this period exceed one hundred twenty (120) days from the date
of opening of bids.

4.6.6 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. Subject to this restriction, a prospective
bidder may withdraw his bid, including the bid security, or modify it. Where a bidder
wishes to modify his bid, he shall not be allowed to retrieve his original bid, but shall only
be allowed to send another bid equally sealed, properly identified and linked to his
original bid and marked as "modification".

4.6.7 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.

4.6.8 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 price is not higher than the approved
budget for the contract to be bid, his bid passes postqualification, and there is no
evidence of collusion with non-participating suppliers and/or other parties and that other
prospective bidders were given equal opportunity to respond.

4.7 Determination of the Lowest Calculated Responsive Bid

4.7.1 The "lowest calculated responsive bid" is defined as the bid (a) with the lowest
calculated price as determined in section 4.8.3, and (b) which complies with or is
responsive to all the requirements hereof. The bid satisfying (a) shall be referred to as the
lowest calculated bid.
 4.7.2 The BAC shall determine the lowest calculated responsive bid in the following
manner:
A. The first step is to determine whether each eligible bid complies with the submission
requirements as specified hereunder in section 4.8.1 and in Annex "F". The BAC shall
rate a bid "passed" only if it complies with all the requirements and the submitted price
does not exceed the approved budget for the contract.

B. The second step is to establish the calculated prices of all bids rated
"passed" in the first step. Calculated prices are to be determined in
accordance with section 4.8.3 hereunder. The BAC shall then rank the
calculated prices from lowest to highest.

C. The third step is the postqualification of the bidder with the lowest
calculated price based on the results of the above evaluation. This shall
be done in accordance with the provisions hereof. In case the said bidder
fails to postqualify, the provisions of section 4.10 shall apply.

4.8 Examination and Evaluation of Bids

4.8.1 Prior to bid evaluation and comparison, bids received shall be examined
using "pass/fail" criteria, to determine submission of the following: the bid prices
in the bill of quantities, the recurring and the maintenance costs (if applicable),
bid securities as to form, amount, and validity period, authority of signatory,
production/delivery schedule, personpower requirements, after-sales
service/parts, technical specifications, credit line commitments
or cash deposit certificate, and other non-discretionary criteria as stated in the
Instructions to Bidders.

The above requirements shall be submitted in the following manner: one sealed
bid envelope for single stage bidding; two sealed bid envelopes for single stage
bidding variation; and at least two sealed envelopes for two stage bidding.
Only bids that are determined to contain all the bid requirements in the sealed
envelope/s shall be rated "passed" and shall be considered for evaluation and
comparison.

4.8.2 The purpose of bid evaluation is to determine the lowest calculated bid.
This bid, which may not be the lowest submitted price, shall be subject to
postqualification. Postqualification shall determine the responsiveness of the
lowest calculated bid to eligibility and bid requirements. The contract shall be
awarded to the bidder with the lowest calculated responsive bid. The general
guidelines to be followed in bid evaluation and comparison are outlined in annex
"G".

The bid evaluation shall be based on a detailed analysis of the following:

A. Completeness of the bid: unless the instructions to bidders specifically

allow partial bids, bids not offering all of the required items shall be
considered non-responsive and, thus, automatically disqualified

B. The bid security must conform to the requirements of the Instructions

to Bidders, as to type, amount, form and wording, and validity period

C. The recurring costs if any and maintenance costs

D. The bid price subject to a price equalization analysis calculating

arithmetical errors and other minor deviations
 E. Identification of minor/major deviations and terms and conditions as
described in the Instructions to Bidders
Bids that contain major deviations from the requirements in the
instruction to bidders shall be considered invalid. Major deviations are
those that would not fulfill the purpose for which the bid was requested,
or would prevent a fair comparison with bids that comply with the bid
documents.

Examples are:
(1) stipulating price adjustment when fixed price bids were called
for;
(2) failing to respond to the specifications by offering a different
design or work item;
(3) subcontracting beyond allowable limits;
(4) refusing to bear contractual responsibilities specified in the
bid documents, such as performance guarantees;
(5) taking exception to critical provisions or setting conditions to
his bid, such as applicable laws, taxes and duties, and dispute
resolution procedures.

F. Corrections for errors, discounts, and other modifications: corrections

for arithmetical or computational errors, as well as for discrepancies
between total bid prices and extended unit bid prices, between stated
total prices and actual summations, between prices in figures and in
words, and other errors/discrepancies, shall use the methodology
described in the Instructions to Bidders. Discounts and other
modifications in the bid amounts shall be reflected in the evaluation of
bids.

4.8.3 The concerned agency may employ any of the specific evaluation
procedures described in Annex "H" in determining the bid's calculated price that it
deems most appropriate for the requirements of a particular contract. The use of
any such procedure shall be approved by the head of the concerned
office/agency/corporation and indicated in the Instructions to Bidders.

4.8.4 Evaluation of bids shall be completed not later than thirty (30) calendar
days from the date of the opening of bids. The BACs 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.

4.8.5 The Government reserves the right to reject any or all bids or to declare the
bidding a failure if there is evidence of collusion among bidders thus resulting in
the absence of competition. However, all bids shall not be rejected and new bids
invited on the same specifications for the purpose of obtaining low prices, except
in cases where the lowest submitted bid exceeds the approved budget for the
contract under bidding. In such a case, a revised less expensive requirement
may be substituted to seek a more affordable result.

4.8.6 No information relating to the detailed evaluation of bids, postqualification

of the lowest calculated bid and recommendations concerning awards shall be
disclosed to persons outside the BAC concerned before the announcement of
the contract award to the successful bidder. After the award of contract, all
unsuccessful bidders shall be informed individually in writing.

4.9 Failure of Bidding

 4.9.1 The Government shall declare the bidding a failure and the concerned
office/agency/corporation shall conduct a rebidding with re-advertisement as per section
4.2.1 of the project when no bids are received, or without re-advertisement when all bids
fail to comply with all the eligibility and bid requirements or fail postqualification. In case
of the latter, a direct notification shall be extended to all bidders either by mail, by hand,
or electronically.

4.9.2 Should there occur another bidding failure after the conduct of the project's
rebidding, the agency concerned may enter into a negotiated procurement.

4.10 Postqualification of the Lowest Calculated Bid

4.10.1 To determine the lowest calculated responsive bid, the BAC shall, within thirty (30)
days from the determination of the lowest calculated bid, conduct a postqualification of
the bidder with the lowest calculated bid. The postqualification shall verify, validate and
ascertain whether the bidder with the lowest calculated bid complies with and is
responsive to all the requirements for eligibility and of the bidding, using the non-
discretionary "pass/fail" criteria stated in the Invitation to Apply for Eligibility and to Bid
and in the Instructions to Bidders.

These criteria shall consider, but shall not be limited to, the following measures:

A. Legality of documents
To validate the licenses and agreements submitted by the bidder.

B. Evaluation of technical capacity

To determine compliance of the goods/product with the required specifications.
This may include inspection and tests of the goods/product, maintenance and
after-sales capabilities in applicable cases.

C. Evaluation of financial capability

To analyze and verify, whenever applicable, the required bank commitment to
provide a credit line to the bidder in the amount specified and over the period
stipulated in the Instructions to Bidders, to ensure that the bidder can sustain the
operating cash flow of the transaction.

If the bidder passes in all criteria, he shall be considered postqualified and the concerned
office/agency/corporation shall award the contract to him.
If, on the other hand, the bidder fails in any of the criteria, he shall be considered
postdisqualified and the concerned agency shall undertake the same postqualification
process on the bidder with the second lowest calculated bid.
SECTION 5.0 CONTRACT AWARD AND IMPLEMENTATION
5.1 Award of Contract

5.1.1 Award of contract shall be made using the submitted, not the calculated, price for
the contract under bidding.

5.1.2 The decision whether or not to award the contract shall be made within 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.

5.1.3 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.

5.1.4 If the BAC finds that the bidder with the lowest calculated price passes the
abovementioned postqualification criteria, his bid shall be considered as the "lowest
calculated responsive bid", and the office/agency/corporation shall award the contract to
him, at his submitted bid price, subject to the other provisions of this section.

If, however, the BAC finds that the bidder with the lowest calculated bid fails the
abovementioned postqualification criteria, the office/agency/corporation shall immediately
notify him in writing of his postdisqualification and the grounds for it. The postdisqualified
bidder shall have seven (7) days from receipt of the said notification to request from the
BAC, if he so wishes, a reconsideration of this decision. The BAC shall evaluate the
request for reconsideration, if any, using the same non-discretionary "pass/fail"
postqualification criteria.

After the office/agency/corporation has notified the first bidder of his postdisqualification,
the BAC shall initiate and, within seven (7) days, complete the same post-qualification
process on the bidder with the second lowest calculated price. If the request for
reconsideration of the bidder with the lowest calculated price is denied and if the second
bidder with the next lowest calculated price passes the postqualification criteria, the bid of
the second bidder shall be considered as the lowest calculated responsive bid. The
office/agency/corporation shall accordingly award the contract to the second bidder at his
submitted bid, pursuant to the pertinent provisions of this section.
If the second bidder, however, fails the postqualification criteria, the procedure shall be
repeated for the bidder(s) with the next lowest calculated bid(s), until the lowest
calculated responsive bid is obtained for award.

5.1.5 Contract award shall be made within the bid validity period. Should it become
necessary to extend the validity of bids, the agency concerned shall 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.

5.1.6 The successful bidder shall execute the contract with the concerned agency within
fifteen (15) calendar days after receipt of the notice of award. All unsuccessful bidders
shall also be notified of the award through official notices/communications. Notice of
award shall immediately be posted in a conspicuous place within the premises of the
concerned office/agency/corporation and in the website of the office/agency/corporation
and/or the procurement service. A copy thereof may be requested in writing.

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 Warranties

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 calculated responsive bidder refuse, fail or be 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 Annex "M" of these IRR and the office/agency/corporation concerned may consider
for award the second lowest calculated responsive bidder at his submitted bid provided it
does not exceed the approved budget of the contract to be awarded. 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 of 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 increases 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 deems 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 "M".
SECTION 6.0 PROCUREMENT BY ELECTRONIC MEANS
6.1. Within two (2) years from the issuance of these IRR, government
offices/agencies/corporations shall have adopted electronic communications and digital
information processing technology systems in the conduct of procurement procedures.

Electronic procurement systems of government offices/agencies/corporations shall ensure the

integrity, security and confidentiality of documents submitted through such systems. Due to the
peculiar requirements of electronic procurement, government offices/agencies/corporations with
electronic procurement systems may adopt procedures and safeguards to address such peculiar
requirements, provided such are in accordance with and guided by the principles of transparency,
accountability, equity, effectiveness, efficiency and economy and submitted for review by the
procurement policy board; and provided further, that, the determination of eligibility,
postqualification, and the lowest calculated responsive bid are undertaken in accordance with the
provisions of these implementing rules and regulations.

6.2 In the interim, government offices/agencies/corporations with reliable means and facilities
may implement electronic procurement gradually, starting with basic commodities that the agency
uses. Pending the issuance by the Supreme Court of rules and regulations on electronic notaries,
the BAC shall require hard copies of documents submitted by prospective bidders. Where
electronic and hard copies are inconsistent, and such inconsistences materially affect the
 substance of the bid, the bidder shall be automatically disqualified. In addition, the
office/agency/corporation concerned shall keep hard copies of all documents received and
notices sent, to protect from possible loopholes in implementation of electronic procurement.

The implementing procedures for electronic procurement are found in Annex L.

SECTION 7.0 EFFECTIVITY
7.1 These Implementing Rules and Regulations (IRR) as well as their amendments shall take
effect fifteen (15) days after the date of publication of the same in the Official Gazette or in a
newspaper of general circulation. The IRR and their amendments shall have prospective
application.
ANNEX "A"
Bids and Awards Committee

The Bids and Awards Committee (BAC) as referred to by these IRR on the procurement of goods
shall be composed of the following:..

Chairman (regular)-At least the third ranking official of the Agency

Executive Officer and Secretary (regular) - Legal Officer of the office/agency/corporation. The
Administrative Officer of the agency concerned may be the Executive Officer and Secretary of the
BAC when the agency does not have a legal officer in its plantilla positions, or when the legal
officer is unavailable.

Member (regular) - Technical member designated by the Head of Agency or his authorized
representative

Member (provisional) - At least two, with knowledge and experience in the

goods/supplies/materials to be bid, duly designated by the Head of Agency or his duly authorized
representative on a project to project basis.
Member from the private sector - To ensure the transparency of the process, one private sector
qualified representative each from the following organizations:

1. Philippine Chamber of Commerce and Industry

2. End-user group or non-governmental organization to be designated by the Head of

office/agency/corporation Concerned
Both representatives shall serve only as observers.

The relevant guidelines/provisions pertaining to the creation and responsibilities of the BAC are
as follows:

1. COA Representation. A representative from the Commission on Audit (COA) shall be invited as
observer in accordance with existing COA procedures and regulations.

2. Non-infrastructure Agencies (i.e., all government agencies other than the Department of Public
Works and Highways, the Department of Transportation and Communications, the Department of
Energy, the National Power Corporation, the National Electrification Administration, the National
Irrigation Administration, the Metropolitan Waterworks and Sewerage Administration, and other
infra-structure agencies and corporations) that do not possess an in-house technical capability to
constitute their own BACs may cause the designation of any of the Infrastructure Agencies to
undertake the qualification, bid and award services, as well as the preparation of specification
and designs. If this is not possible due to manpower constraints, non-infrastructure agencies may
hire the services of qualified and experienced consultants offering procurement services for the
purpose. Such consultants shall be hired in accordance with existing laws, rules and regulations,
particularly Executive Order No. 164 and the NEDA Board-approved Guidelines on the
 procurement of Consulting Services for Government Projects (Implementing Rules and
Regulations).

3. Agency Discretion. At the discretion of the Head of Agency concerned, the BAC herein created
may be the same as existing bids and awards committees in the Agency concerned involved in
other types of contracts, such as civil works and consulting services contracts, or a different
committee altogether. The Head of Agency concerned may create more than one (1) BAC in the
Agency to allow flexibility and avoid over-burdening of work.

4. Quorum. A quorum of the BAC shall be composed of the Chairman or his designated alternate
plus two (2) members of the BAC. The Chairman may call meetings at any time as required to
expedite work presented to the Committee. Decisions shall be made by a simple majority vote of
members who are present and voting except the Chairman, who shall cast his vote only in the
case of a tie. The decisions of the BAC pertaining to the award of contract shall however be
merely recommendatory and shall be subject to the final approval/authority of the Head of Agency
concerned or his duly authorized representative.

5. Procurement-related Responsibilities. The responsibilities of the BAC shall be to

administer the bidding and award function. Specifically, the BAC shall determine the eligibility of
prospective bidders, conduct preliminary examination of bids, evaluate bids, post-qualify the
lowest calculated bid and recommend award of contracts.

Planning and management of the procurement process, as well as record keeping, shall be the
responsibility of the procuring unit or the administrative unit, as appropriate. These responsibilities
include the following:

a. review/validate the procurement plans of their respective Agency prior to the initiation
of the bidding process.

b. maintain a record listing of all supply contracts made for a minimum of ten (10) years.
The record shall contain:

i. each manufacturer/supplier/distributor's name;

ii. amount and type of each supply contract;
iii. a listing of the goods procured under each contract;
iv. a brief history of the contract placement events including problems and their
final solution.

All procurement records shall be retained and disposed of in accordance with the existing
records retention guidelines and schedules approved by the Government.

c. prepare and keep on file detailed reports on the evaluation and comparison of bids
setting forth the specific reasons on which the recommendations are based for the award
of the contract.
ANNEX "B"
Procurement Planning

Agencies concerned shall formulate their respective procurement plans in accordance with the
guidelines prescribed hereunder with due consideration of Section 424 of the Government
Accounting and Auditing Manual. The basic content of the procurement plan shall include the
decisions as to the type of contract to be employed, the extent/size of contract scopes, the
procurement methods to be adopted, along with the expected time schedule for each
procurement action. Procurement of goods/supplies/materials shall be undertaken according to a
plan that shall take into account the lead time for the procurement process plus the manufacturing
and shipping times expected so that goods are available at the time needed.
 1. Types of Contract. As the general rule, the procurement of goods/supplies/materials by the
Government shall be based on a fixed-price contract and no price adjustment/escalation shall be
allowed. However, in cases where, as determined by the Government implementing agency
concerned, uncertainties involved in the performance of the contract are of such magnitude that
the cost is too difficult to estimate with reasonable certainty and use of a fixed-price contract may
seriously affect a manufacturer/supplier/distributor's financial stability or result in payments by the
Government of contingencies that never occurred, types of contracts other than those based on a
fixed-price basis may be used. Alternatively, the Agency concerned may provide for a price
adjustment/escalation provision in the contract. The procedures, including the formulas to be
adopted in the computation of the price adjustment/escalation due under a contract shall be
agreed upon between the parties and shall be stipulated under the related contract.

The adoption of contract types other than the fixed-price contract or the inclusion of a price
adjustment/escalation clause in the contract provisions shall be subject to the prior approval of
the Head of Agency concerned or his duly authorized representative.

2. Size of Contracts. The size and scope of individual contracts depends on the magnitude,
nature and location of the project. For projects requiring a variety of equipment, separate
contracts shall generally be required for each type/variety.

For a project requiring similar but separate items of goods/supplies/materials, bids may be invited
under alternative contract options that would attract the interest of both small and large firms.
Manufacturers/suppliers/distributors may then be allowed to bid for individual contract (slices) or
for a group of similar contracts (package) at their option. Contract requirements shall, however,
not be artificially divided into multiple contracts (splitting of contract package) to avoid using any
source selection method or for the purpose of doing away with or circumventing control measures
under these IRR.

Bids under the alternative contract options as described above shall be evaluated on the basis of
the option provided by the concerned manufacturer/supplier, i.e., a bid submitted as a package
only shall be eligible for award only as a package and shall not be eligible for award on an
individual contract/per item basis. The adoption of this option including the basis of bid
comparison for the same shall be clearly and explicitly spelled out in the bidding documents.

The above notwithstanding, procurement of goods/supplies/materials shall be carried out in such

a way each bid package or contract would be of such size as to attract widespread competition
and provide optimum efficiency and economy.

For routine operations and maintenance activities, the procurement of necessary supplies,
materials and equipment spare parts by the Agency concerned which are to be acquired through
shopping as defined in Annex "C" of these IRR shall at no time exceed normal three-month
requirements.
ANNEX "C"
Alternative Methods of Procurement

In the interest of economy and efficiency, the agency concerned may adopt the following
alternative methods of procurement after the Head of Office/Agency/Corporation concerned or his
duly authorized representative has approved the use of the same as indicated in the bidding
documents.

1. Limited Source Bidding (a.k.a., selective bidding) is a procedure that involves direct invitation
to bid by the concerned Agency from a set of pre-selected manufacturers/suppliers/distributors
with known experience and proven capability on the requirements of the particular contract. The
BAC of the concerned Office/Agency/Corporation shall directly send to the pre-selected bidders
the invitation to bid, which shall already indicate the relevant information required to enable the
bidders to prepare their bids as prescribed under the pertinent provisions of these IRR. Limited
source bidding may be employed by concerned offices/agencies/corporations under any of the
following conditions:

a. Procurement of highly specialized types of goods/supplies/materials where only a few

manufacturers/suppliers/distributors are available who could maintain a competitive
position, such that resorting to the open competitive bidding method will not likely result in
any additional manufacturers/suppliers/distributors participating in the bidding;

b. Procurement of relatively small additions to an existing fleet of equipment where a few

manufacturers/suppliers/distributors are well-established and who provide satisfactory
after-sales services;

c. Procurement of major plant components where it is deemed advantageous to limit the

bidding to known qualified bidders in order to maintain uniform quality and performance
of the plant as a whole; and

d. Procurement of goods involving relatively small amounts, i.e., amounts involving one
million pesos (P1,000,000) or less, such that the cost and time of publicly advertising the
bidding is not justifiable; provided, that, splitting of contracts shall not be resorted to
simply to meet the maximum amount and avoid public bidding. "Splitting of contracts"
happens when two (2) or more contracts for similar goods/supplies/materials are made in
favor of one dealer or supplier within one (1) month of each other and analogous cases.

2. Direct Contracting or single source procurement. This procedure does not require elaborate
bidding documents. The selected manufacturer/supplier/ distributor is simply asked to submit a
price quotation or a pro-forma invoice together with the conditions of sale. The offer may be
accepted immediately or after some negotiations. Direct contracting may be resorted to by
concerned offices/agencies/corporations under any of the following conditions:

a. Procurement of items of proprietary nature which can be obtained only from the
proprietary source, i.e., when patents, trade secrets and copyrights prohibit others from
manufacturing the same item;

b. Those sold by an exclusive dealer or manufacturer which does not have sub-dealers
selling at lower prices and for which no suitable substitute can be obtained at more
advantageous terms to the Government;

c. When the procurement of critical plant components from a specialist

manufacturer/supplier/distributor serves as a precondition of a contractor responsible for
the erection of the project for his guarantee of project performance;

d. For purposes of maintaining standards, such as a purchase involving a small addition

to an already existing fleet of equipment; and

e. In emergencies where procurement must be immediately accomplished regardless of

cost. Emergencies shall be defined as those situations where there is imminent danger to
life and/or property as determined by the Head of Office/Agency/Corporation concerned.
Emergency procurements shall not exceed a monthly amount of four percent (4%) of the
annual agency expenditure program for supplies and materials out of the appropriations
allotted for maintenance and other operating expenses of the agency concerned, except
as may be authorized by the president upon the joint recommendation of the Department
of Budget and Management and the Commission on Audit.

3. Repeat Order. Under this method, acquisition is made on additional quantities from the
manufacturer/supplier/distributor who provided the same items under a contract previously
awarded through open competitive bidding. Repeat orders may be resorted to by Agencies only
 in cases where the manufacturer/supplier/distributor who was selected in the previous bidding is
clearly superior to the other bids not only in terms of the price quoted but also in terms of
equipment reliability, availability of spare parts, after-sales service and delivery period, among
others. Repeat orders shall likewise be subject to the following conditions:

a. Contract Prices of the repeat order must be the same as or lower than those in the
original contract, provided that such prices are still the most advantageous to the
government after price verification;

b. The repeat order will not result in splitting of requisitions or purchase orders;

c. Repeat orders may be availed of only within a six (6) month period from the date of the
original purchase; and

d. The repeat order shall not exceed the quantity in the original contract.

4. Shopping is a method of procurement whereby the purchaser simply requests for the
submission of price quotations for the goods/supplies/materials to be procured directly from
manufacturers/suppliers/distributors of known qualifications. This method of procurement shall be
employed only in the following cases, and to ensure competitive prices, the BAC concerned shall
obtain quotations from at least three (3) manufacturers/suppliers/distributors, provided, that, the
prohibition against splitting of contracts in paragraph 1.d of this annex shall be equally applicable
to this alternative method of procurement:

a. procurement of readily available off-the-shelf goods or standard specifications goods

that are small in value, i.e., amounts involving one million pesos (P1,000,000) or less;

b. procurement of ordinary/regular office supplies and equipment involving an amount not

to exceed one million pesos (P1,000,000). At the discretion of the Head of
Office/Agency/Corporation concerned, the procurement of ordinary/regular office supplies
and equipment involving an amount not exceeding one million pesos (P1,000,000) may
be handled by the respective Administrative Staff/Department/Division of the
Office/Agency/Corporation instead of the BAC.

5. Negotiated Procurement. Negotiated procurement may be employed by Agencies only in the

following cases as determined by the Head of Agency concerned:

a. Where there has been failure of competitive bidding for the second time as provided
under section 4.9 hereof;

b. Where the existing contract has been terminated in accordance with the pertinent
provisions of these IRR and existing laws, rules and regulations;

c. Whenever the goods/supplies/materials are to be used in connection with a project or

activity which cannot be delayed without causing detriment to public service; and

d. Whenever the purchase is to be made from another officer/agency/corporation of the

Government. One special negotiated procurement scheme which government
offices/agencies/corporations may consider is the procurement through the Procurement
Service of the Department of Budget and Management. Such mode of procurement
should, however, conform to Executive Order No. 359 which prescribes the guidelines in
the implementation of Executive Order No. 285 regarding the operation of a government-
wide procurement system for common-use goods/supplies/materials.
ANNEX "D"
Bid/Tender Documents
The Bid/Tender Documents shall basically include the Instructions to Bidders; General and
Special Conditions of Contract; Technical Specifications and Drawings; Form of Bid; Forms of Bid
Security, Performance Security and Warranty; Type/Form of Contract; Price Form; and Bill of
Quantities.

1. The Instructions to Bidders, which establishes the rules of the bidding, shall as much as
possible be clear, comprehensive and fair to all prospective bidders and shall include at the
minimum the following information:

a. General Description of the goods/supplies/materials to be provided, including site

location and other pertinent project information.

b. Scope of Bids, whether bidders are required to bid for the entire contract or are
permitted to bid for parts of it (alternative contract options).

c. Bid Submission Procedures and Requirements, which shall include information on the
language to be adopted in the preparation of the bids, the manner of submission, the
number of copies of bid proposals to be submitted aside from the original, pertinent
addresses such as where the bids are to be submitted, deadline for the submission of
bids, permissible mode of transmission of bid
proposals, the exact place, date and time of opening of bids, except in the case of the
two (2) stage bidding where the exact place, date and time of bid opening shall be
announced as prescribed by the BAC.

d.Terms of Delivery, which shall refer to the basis/currencies and applicable exchange
rates on which the bid prices are to be quoted and on what terms the contract is to be
awarded.

e. Bid and Bid Security Validity Period, which shall consider the time that will be required
to examine and evaluate all bids, select the successful bidder, obtain the necessary
approvals, including the time required to notify the successful bidder of the award of
contract in his favor.

f. Method and Criteria for Bid Evaluation that will be adopted.

g. Pre-bid Conference schedule where applicable.

2. The Conditions of Contract shall contain the provisions that clearly define the basic and legal
responsibilities of and relationships between the parties involved. Provisions for bonds,
guarantee, warranty obligations of the manufacturer/supplier/distributor, form of warranty and
warranty period, insurance, liquidated damages, taxes and duties, force majeure or fortuitous
events, contract termination, and resolution of disputes including arbitration procedures in
addition to the general conditions and supplementary conditions suited to the nature of the goods
should be included.

3. The Technical Specifications shall describe all the essential features of the item(s) to be
procured and should state that any non-conformity to these essential features shall be treated as
a major deviation and would render the bids as non-responsive. Drawings should be consistent
with the text of the technical specifications.

If particular standards to which goods/supplies/materials must comply are cited, the specifications
shall state that goods meeting other authoritative standards, which ensure an equal or higher
quality that the standards mentioned will also be accepted.
Specifications should be based on performance requirements, and, as a general rule, reference
to brand names, catalogue numbers or the like shall be avoided unless this is deemed necessary
to ensure inclusion of certain essential features. In such case, the reference should be followed
 by the words "or equivalent" and the specifications should permit offers of alternative goods which
provide performance and quality at least equal to those specified.
ANNEX "E"
Invitation to Apply for Eligibility and to Bid

The Invitation to Apply for Eligibility and to Bid advertised, in accordance with section 4.2.1, shall
include the following information, among others:

a. the general description and nature of the goods to be procured and the source of
funding, and the approved budget for the contract to be bid;

b. eligibility criteria as prescribed under sections 3.4 and 4.4 of these IRR;

c. the deadline set for securing the related application for eligibility statement
forms/documents and bid/tender documents, including the place/office where such
documents could be obtained;

d. the cost of the application for eligibility statement forms/documents and bid/tender
documents, and the mode of payment, if any;

e. the deadline set for the submission of prospective bidders' application for eligibility
statements and bid/tender documents, including the place/office where the same shall be
submitted;

f. the date/time/place of opening of eligibility and bid envelopes;

g. the date/time/place of the pre-bid conference where applicable;

h. the name, address, telephone, telex, e-mail and website addresses of the concerned
office/agency/corporation;

i. Disclaimers
ANNEX "F"
Allowable Bid Submission and Bidding Procedures

Agencies may require bidders to submit bids in accordance with any of the following procedures
prescribed below. The use of either procedure shall have the prior approval of the Head of
Agency concerned or his duly authorized representative and shall be so indicated in the
Instructions to Bidders.

The BAC shall conduct post-qualification of the lowest calculated bid, using "pass/fail" criteria, as
stated in section 4.10 and in the Instructions to Bidders.

1. Single Stage Bidding with post-qualification for limited-source bidding

Under the single stage bidding, bidders shall be required to submit both their technical
and financial documents/forms/statements in one (1) envelope as stipulated in the
Instructions to Bidders. This procedure may be adopted in the procurement of
goods/supplies/materials with simple or standard technical requirements or where offers
are likely to be technically comparable.

2. Single Stage Bidding Variation with post-qualification

A variation to the above procedure is to require bidders to submit their technical and
financial proposals in two (2) separate sealed envelopes. The exact place, date and time
when the first envelopes are to be opened shall be stipulated in the related Instructions to
Bidders.
Bids in the prescribed bid form including its annexes shall be submitted in two (2) sealed
 envelopes with the name of the contract to be bid and the name of the bidders in capital
letters, addressed to the BAC of the Office/Agency/Corporation concerned. They shall be
marked "do not open before (date and time of opening of bids)."

The first envelope shall contain the following information/documents:

a. bid securities as to form, amount, and validity period;

b. authority of signatory;
c. production/delivery schedule;
d. personpower requirements;
e. after-sales service/parts;
f. technical specifications;
g. if applicable, credit line commitments or cash deposit certificate; and
h. other non-discretionary criteria as stated in the instructions to bidders.

The second envelope shall contain the following:

a. the bid prices in the bill of quantities; and

b. for capital equipment, detailed recurring and maintenance costs.
The first envelopes shall be opened in public to determine whether or not the bidder has
submitted all the required documents in the first envelope. For this purpose, a checklist of
the required documents shall be made and the submitted documents shall be checked
against this checklist to ascertain if they are all present in the first envelope. In case one
or more of the above-required documents is missing in the first envelope, the BAC shall
disqualify the concerned bidder outright and immediately return to him his second
envelope unopened. The BAC shall inform such bidders in writing of their disqualification,
including the specific reasons for the same.

The second envelopes shall be opened in public immediately after the opening of the first
envelopes but only for the bidders that complied with the requirements for the first
envelope. In case one or more of the above-required documents is missing in the second
envelope, the BAC shall disqualify the concerned bidder outright. The BAC shall inform
such bidders in writing of their disqualification, including the specific reasons for the
same. The disqualified bidders have seven (7) calendar days from receipt of such notice
to file a written request for reconsideration with the BAC whose decision shall be final.

3. Two-Stage Bidding with post-qualification

For supply contracts wherein due to the nature of the requirements of the project the
required technical specifications/requirements of the contract cannot be precisely defined
in advance of bidding, or where the problem of technically unequal bids is likely to occur,
the two (2)-stage bidding procedure may be employed. In these cases, the Agency
concerned shall prepare the bidding documents, including the technical specification in
the form of performance criteria only.

Under this procedure, prospective bidders shall be requested at the first stage to submit
their eligibility requirements and initial technical proposals only (no price tenders). The
concerned BAC shall then evaluate the technical merits of the proposals received from
eligible bidders vis-a-vis the required performance standards.

A meeting/discussion shall then be held by the BAC with those eligible bidders whose
technical tenders meet the minimum required standards stipulated in the bidding
documents for purposes of drawing up the final revised technical
specifications/requirements of the contract.

Once the final revised technical specifications are completed and duly approved by the
concerned BAC, copies of the same shall be issued to all the bidders identified in the first
 stage who shall then be required to submit their revised technical tenders, including their
price proposals in two (2) separate sealed envelopes containing the documents as
specified earlier in this annex, at a specified deadline, after which time no bids shall be
received. The concerned BAC shall then proceed in accordance with the applicable
procedure prescribed in the Single Stage Bidding Variation.
ANNEX "G"
Guidelines on Bid Evaluation and Comparison

The evaluation and comparison of bids received shall be in accordance with the following general
guidelines:

1. Only bids which have been rated "passed" in the preliminary examination of bids shall
be considered for bid evaluation.

2. Bids quoted in various currencies shall be converted to Philippine Peso for purpose of
bid price comparison using the exchange rate prevailing on the date to be specified in the
bidding documents.

3. Additional credits shall not be given for bids that exceed the required technical
standards or specifications.

4. Minor omissions, deviations, exceptions and reservations in the bids shall be quantified
and added to the quoted bid price for purposes of comparison. Prices of minor items
called for in the bidding documents but were omitted shall be based on the average of the
other responsive bids corresponding to that particular item or on available catalogue
prices. However, to avoid underpricing of bids through omissions, the bidders shall not be
allowed to make upward adjustments in their bid price.

5. The evaluation of various commercial features of a bid, as well as performance,

efficiency, productivity and technical features shall strictly follow the procedure prescribed
in the bidding documents.

6. The calculated price of each bid shall be compared to determine the bid most
advantageous to the Government. Award of the contract shall be made to the lowest
calculated responsive bid. Contract award to a bidder submitting a higher quality item
than that designated in the bidding documents is not permissible if such bidder is not also
the lowest evaluated calculated responsive bidder.

7. For projects financed partly or wholly by ODA funds, the rules and procedures of the
concerned funding agency with respect to the application of the domestic preference
scheme shall be adopted.

8. During bid analysis, the concerned BAC shall be allowed to request bidders for any
clarification(s) and/or information(s) needed to evaluate the bids but shall not be
permitted to request or permit any bidder to change the substance or price of his bid.

9. In the evaluation of the bids, the BAC concerned may be allowed to waive any minor
deviations in a bid which are matters of form rather than substance evident from the bid
document, or insignificant mistakes that can be waived or corrected without prejudice to
other bidders, that is, the effect on price, quantity, quality, delivery, or contractual
conditions would be negligible.

10. If a mistake and the intended correct bid are clearly evident on the face of the bid
submitted, the bid shall be corrected to the intended correct bid and shall be evaluated on
the basis of the corrected bid. Examples of mistake that may be clearly evident on the
 face of the bid document are typographical errors, errors in extending unit prices,
transposition errors, and arithmetical errors.

Such bids, after being corrected to the intended bid, shall not be allowed to be withdrawn.
Withdrawal of the same shall be subject to appropriate sanctions.
ANNEX "H"
Specific Evaluation Procedures

For the determination of the lowest calculated bid, the BAC of the concerned agency may employ
any of the following specific price equalization procedures that it deems appropriate for the
requirement of a particular contract and shall be so indicated in the bidding documents. The use
of any such procedure shall be subject to the prior approval of the Head of
Office/Agency/Corporation concerned or his duly authorized representative.

1. Lowest Price Analysis. In procuring simple equipment, tools, supplies, and raw or
semi-finished raw materials, as well as ordinary/regular office supplies and equipment, or
where there is a strong possibility that offers will be for identical or comparable materials,
evaluation of the bids on the basis of the price alone may be appropriate. In these cases,
foreign bids shall be evaluated on the basis of the cost, insurance and freight (CIF) port
of entry prices while domestic or local bids shall be evaluated on the basis of the ex-
factory price. For local bidders offering wholly imported goods, the bids shall be
evaluated on the basis of the off-the-shelf price which shall include custom duties paid on
the imported goods by the firm.

2. Price Plus Other Factors Analysis. In the procurement of durable goods such as
engines, pumps, vehicles, highway equipment and other similar equipment, it is more
appropriate to evaluate each bid on the basis of the price quoted and other relevant
factors that are intrinsic to the purpose for which the goods are intended. The probable
costs of these factors shall, where possible and appropriate, be quantified in monetary
terms to facilitate comparison. The major considerations and general outline to be
considered under this procedure may include the following, among others:

a. Extra features, option, accessories, etc. Where a bidder failed to provide a

quotation for a particular item called for in the bidding document, but where such
omission is not serious enough to warrant rejection of the bid, then the price of
that omitted item based on available catalogue prices or the average of the
responsive bids corresponding to that particular item shall be added to the
bidder's total bid for purposes of comparison. Such addition shall however be
made only on items specifically called for under the bidding documents. An
addition shall not be made to a bid for the sole purpose of making it comparable
to another bid who has offered an extra item not included in the specifications.

b. Cost of inland transportation and insurance. When the comparison of bids is to

be made on the basis of the delivered cost, expenses for inland transportation
and other expenditures incidental to the handling, transportation and delivery of
goods to the project site shall be considered in the evaluation.

c. Delivery schedules. As much as possible, procurement shall be initiated early

enough so that delivery schedules normally prevailing in the market are
acceptable and no premium has to be given for early deliveries. However, in
cases where the required goods are urgently needed, the Government may opt
to provide a non-discretionary premium for early deliveries. In such cases, the
premium shall be explicitly stated in the Instructions to Bidders and the
evaluation methodology used to arrive at the monetary equivalent to be
discounted from the submitted bid price shall likewise be disclosed. The
 monetary discount shall be based on the proportionate benefit to be earned by
the Government as a result of such early delivery.

d. Cost of spare parts. In certain procurements, the cost of the initial and
subsequent spare parts may be very important if they add up to a substantial part
of the maintenance cost. In such cases, the cost of spare parts should be
considered in the evaluation.

3. Life Cycle Cost Analysis. Evaluation of bids through this procedure involves the
assessment of the initial cost of the acquisition plus the follow-on cost (costs for
maintenance and operation) of ownership. This method is most suitable in the
procurement of major industrial plants or equipment where the follow-on costs are quite
substantial so much so that a difference in the initial quoted price between competing
bidders can easily be outweighed by the difference in the follow-on costs. For purposes
of bid comparison, follow-on costs shall be discounted to their present values at a
discount rate to be prescribed in the bidding documents. Likewise, the bidding documents
shall clearly outline the methodology for the quantification of the follow-on costs and also
the precise information required to be submitted by the bidders.

4. Other evaluation procedures using transparent, upfront and non-discretionary criteria

as approved by the Head of the Agency which can be used to calculate price equalization
to compare bids.
ANNEX "I"
Performance Security

To guarantee the faithful performance of the successful bidder under contract, he shall post in
favor of the Government within the time specified by the concerned Agency after the signing of
the contract a performance security according to the following schedule:
Acceptable Form Required Amount
(in Percent of Total Contract Price)

1. Cash, manager's check, or cashier's check

- Five percent (5%)

2. Irrevocable Letter of Credit issued by a reputable bank

- Five percent (5%)

3. Bank Draft confirmed by a local bank (in the case of foreign bidders, bonded by a
foreign bank)
- Five percent (5%)

4. Bank guarantee confirmed by a local bank (in the case of foreign bidders, bonded by a
foreign bank)
- Ten percent (10%)

5. Surety bond, callable on demand issued by the Government Service Insurance

System, or by surety or insurance companies duly accredited by the Office of the
Insurance Commissioner
- Thirty percent (30%)

6. Any combination of the above

- Proportionate to share of Form with respect to total Amount of security
ANNEX "J"
Amendment to Order
 An amendment to Order may be issued in the event that necessary adjustments within the
general scope of the contract in any one or more of the following is required in order to fully meet
the requirements of the project:

a. drawings, design or specifications, if the goods to be furnished are to be specifically

manufactured for the Government in accordance therewith;

b. method of shipment or packing; or

c. place of delivery.

An amendment to Order may also be issued by the concerned Agency where there are additional
items needed and necessary for the protection of the goods which were not included in the
original contract. Payments for these additional items shall be based on the unit prices in the
original contract for items of goods similar to those in the original supply contract. If the supply
contract does not contain any rate applicable to the additional item, then suitable prices shall
mutually be agreed upon between the parties.

Request for payment by the manufacturer/supplier/distributor for any additional items shall be
accompanied by a statement with the approved supporting forms, giving a detailed accounting
and record of amount for which he claims payment. The contract time shall likewise be extended
if the acquisition of such additional items so warrants.

Under no circumstances shall a supplier proceed to commence work under any Amendment to
Order unless the same has been approved by the Head of Agency concerned or his duly
authorized representative. As an exception to the rule, the Regional Director/Head concerned
may authorize the immediate start of work under any Amendment to Order in the event of
emergencies to avoid detriment to public service, or damage to life and/or property or when time
is of the essence, provided however, that the same is valid only on items up to the point where
the cumulative increase in the contract cost which has not yet been duly fully approved by the
Head of Agency concerned or his duly authorized representative does not exceed five percent
(5%) of the original contract cost, provided further that the corresponding Amendment to Order
shall immediately be prepared and submitted for approval to the Head of Agency concerned or
his duly authorized representative. For an Amendment to Order involving a cumulative amount
exceeding five percent (5%) of the original contact price, no work thereon shall be commenced
unless the same has been approved by the Head of Agency concerned or his duly authorized
representative.
ANNEX "K"
Contract Termination

Termination for Default. If the manufacturer/supplier/distributor refuses or fails to perform any of

the provisions of the contract with such diligence as will ensure its completion within the time
specified in the contract, or any extension thereof, otherwise fails to timely satisfy the contract
provisions, or commits any other substantial breach of the contract; the Agency concerned shall
notify the manufacturer/supplier/distributor in writing of the delay or non-performance and if not
cured in time specified in writing by the Agency concerned, it may terminate the
manufacturer/supplier/distributor's right to proceed with the contract or such part of the contract
as to which there has been a delay or a failure to properly perform.

In the event that such termination applies to the remainder of the contract, the Government shall
impose the appropriate sanctions provided in these IRR and may proceed to contract out the
remaining works/items through negotiated procurement. In case the termination applies only to
portions of the remaining works/items, the Government may likewise resort to negotiated
procurement to acquire the terminated portions of the contract and the original
manufacturer/supplier/distributor shall be held liable for the excess in the costs to be incurred by
the Government for the portions terminated.
 Termination for Convenience. The concerned Agency may, when the interest of the Government
so require, terminate the contract in whole or in part, for the convenience of the Government. The
Agency concerned shall give written notice of the termination to manufacturer/supplier/distributor
specifying the part(s) of the contract terminated and when termination becomes effective.
The manufacturer/supplier/distributor should incur no further obligations in connection with the
terminated work and on the date set in the notice of termination it will stop work to the extent
specified. The manufacturer/supplier/distributor should also terminate outstanding orders and
subcontract as they relate to the terminated work and shall settle the liabilities and claims arising
out thereto. The manufacturer/supplier/distributor must still complete the work not terminated by
the notice of termination and may incur obligations as are necessary to do so.
ANNEX "L"
Procurement by Electronic Means

The sequential submission of eligibility and bid requirements by prospective bidders may be
allowed under procurement by electronic means, provided, that, it does not lead to negotiation
when the procurement method being used for the project is open competitive bidding.
The determination of eligibility based on requirements stated in section 4.4.1 may be done
electronically.

Submission of bid envelope(s) may be done electronically through the bid submission system. To
ensure the integrity and confidentiality of bids prior to their opening by the BAC, the following
conditions must be met:

a. the concerned office/agency/corporation shall utilize methods of ensuring that nobody,

including members of the BAC, will be able to alter the contents of bids submitted
electronically or read the same ahead of the stipulated time for the decryption or opening
of such bids;

b. that such electronic security methods are periodically tested and upgraded to ensure
that they can not be breached; and

c. that the electronic procurement system of the procurement service and/or the
concerned office/agency/corporation shall be protected from hacking or cracking through
electronic security features.

The submission of bids shall be through encrypted or electronically locked documents.

The electronic procurement system of the concerned office/agency/corporation shall incorporate
features that bar incoming bids after the cut-off period specified in the instructions to bidders.
Once decrypted or opened, bids submitted electronically shall be made available for viewing by
the public.

Procurement procedures other than the above may be done manually.

The electronic procurement system shall include an update of the procurement process for every
contract under bidding, regardless of whether procurement is being done manually or
electronically. The update shall show the whole procurement process, from advertisement to
approval of contract, and dated accordingly.
ANNEX "M"
Administrative Sanctions

The following sanctions shall be imposed on manufacturers/suppliers/ distributors for

offenses/violations committed under the pertinent provisions of these IRR:

a. Suspension for one (1) year for the first offense, disqualification to bid for two (2) years
for the second offense, and perpetual disqualification for the succeeding offenses for:
 i. misrepresentations of any information or concealment of any material fact in
the bidder's qualification statements and/or bids; and
ii. other acts of the manufacturer/supplier/distributor which directly or indirectly
tend to defeat the purpose of competitive bidding.

b. Forfeiture of the bid security for the first offense, forfeiture of the bid security and
suspension for one (1) year for the second offense, and forfeiture of bid security and
perpetual disqualification for the succeeding offenses for:

i. refusal or failure of the proposed awardee/selected bidder to enter into contract

with the Government or failure to post the required performance security within
the prescribed time; and,
ii. withdrawal of bid after the applicable deadline as specified in Section 4.6.3.

c. Forfeiture of performance security for the first offense, forfeiture of the performance
security and suspension for one (1) year for the second offense, and forfeiture of
performance security and suspension for two (2) years for succeeding offenses in case of
contract termination due to manufacturer/supplier/distributor's default.