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B. REPAIR CONTRACTS

Review as to Basic Requirements

1. Check whether the documentary requirements for review of repair contracts are submitted:

a.   Approved Contract including Annexes and all documents referred to therein necessary for technical review;
b.  Complete agency approved specifications including detailed plans and drawings;
c.  Supplier's quotation including catalogues/brochures, where applicable;
e.  Complete description of equipment to be repaired;
f.  Agency Pre-repair Evaluation Report showing in sufficient detail the scope of work to be done;
d.  Detailed breakdown of contract amount showing the derivation of the cost.

 Applicable Laws, Rules and Regulations

COA Memorandum No. 91-704 dated February 27, 1991, Annex S

Checklist for Review of Supply/Delivery/Installation/Repair Contracts

1. Copy of duly approved contract
2. Complete bid documents
3. Abstract of Bids
4. Agency's Bids Evaluation Report
5. Individual bid quotations and catalogue/brochure showing complete specifications of items offered by each bidder
6. Complete agency approved specifications
7.  Approved detailed plan, if applicable
 8. Approved Agency estimate for fabrication, installation, and repair contract
 9. All other documents referred to in the contract necessary for technical evaluation

2. Identify the mode of procurement from the contract documents submitted.

3. Check the following additional documentary requirements specific to the different procurement modes.

 A. Public Bidding:

a. Complete bid documents - Invitation to Bid, Instruction to Bidders, Proof of Publication, General and Specific Conditions, etc.
b. Abstract of Bids
c. Agency's Bids Evaluation Report
d. Individual Bid Quotations and Catalogue/Brochure showing complete specifications of items offered by each bidder

B. Negotiated Purchase:

a. Certificate or resolution indicating that there were two (2) failed biddings, and the bid documents for the failed biddings
b. Certificate that the price is the most advantageous to the agency

C. Emergency Purchase:

a. Certification by the head of agency or his authorized representative showing the nature of the purchase and that it was resorted to to avoid loss of or danger to life and/or property or to meet a project or activity which cannot be delayed without causing detriment to the public service

b. Canvass of prices from at least three bona fide suppliers, except if the amount involved is less than P=1,000.00

D. Personal Canvass:

a. Canvass sheets
b. Abstract of Canvass

4. Determine if the requirements and conditions for the mode of procurement are complied with/met:

A. Public bidding :

- publication in a newspaper of general circulation or posting of notices in conspicuous places
- bidding procedures are regular/not rigged
- award is made to the contractor offering the most advantageous offer

Applicable Laws, Rules and Regulations

Executive Order No. 301 dated July 26, 1987

Section 1. Any provision of law, decree, executive order or other issuances to the contrary notwithstanding, no contract for public services of the government or any of its branches, agencies or instrumentalities, shall be renewed or entered into without public bidding, .. x x x x

COA Resolution No. 95-244 dated May 18, 1995

By its very nature and characteristic, public bidding aims to protect the public interest by giving the public the best possible advantages thru open competition;
The conduct of public bidding entails the incurrence of expenses consisting of the cost of publication and documentation and man-hours utilized which sometimes exceed the amount of supplies, materials and equipment to be procured;
Ordinary practices reveal that the tediousness of the process and the expenses incurred let alone the fraud, collusion, simulation and rigging attending the conduct of public bidding are not commensurate with the desired objective to achieve the best possible advantage to the government;
In keeping with its avowed objective to be a partner in development and to ensure greater facility or flexibility in the procurement of supplies, materials and equipment in the face of continuous escalation of prices of these commodities, this Commission resolves, as it does hereby resolve to revoke Paragraph 4.1 (a) of COA Circular No. 85-55A dated September 8, 1995 prescribing the limit of P50,000.00 for purchases subjected to public bidding.

Government Accounting and Auditing Manual (GAAM):

Sec. 435. Rule on Awards - In the national government agencies, contract shall be generally awarded to the most advantageous offer. The following factors, among others, shall be considered in making the award:

a. conformity with the specifications in the invitation to bid;
b. price quoted, considering the Flag Law, Commonwealth Act 138, as amended, and other laws and policies pertinent to procurement;
c. when time is of the essence, the bidder who offers to deliver within the period stipulated in the invitation to bid shall be awarded the contract, provided that the price is not unreasonably higher than the lowest price offered;
d. all other things being equal, the bidder shall be preferred, in order to obtain uniformity in quality, tensile strength, color shade, etc.,; and
e. reliability of bidders as supplier or contractor.

Division of award may be made only in either of the following:

a. in case of tie offers and the supplies are divisible, the award may be divided as equally as practicable unless the interest of the service demands that it should be given to only one dealer; or

b. in case the lowest bidder offers to supply a limited or partial quantity only, in which agent the balance may be awarded to the acceptable bidders in the order of advance of their offers. (Rule 13 DGS Order 13, supra)

In the local government units, awards in the procurement of supplies shall be given to the lowest complying and responsible bid which meets all the terms and conditions of the contract or undertaking (Sec. 365, RA 7160).

Local Government Code (R.A. 7160)

SEC. 364. The Committee on Awards- There shall be in every province, city or municipality a committee on awards to decide the winning bids and questions of awards on procurement and disposal of property.

The Committee on Awards shall be composed of the local chief Executive as chairman, the local treasurer, the local accountant, the local budget officer, the local general services officer, and the head of office or department for whose use the supplies are being procured, as members. In case a head of office or department would sit in a dual capacity, a member of the sanggunian elected from among its members shall sit as member. The committee on awards at the barangay level shall be the sangguniang barangay. No national official shall sit as a member of the committee on awards.

The results of the bidding shall be made public by conspicuously posting the same in the provincial capitol or city, municipal, or barangay hall.

Sec. 365. Rule of Awards.-Awards in the procurement of supplies shall be given to the lowest complying and responsible bid which meets all the terms and conditions of the contract or undertaking.

B. Negotiated Purchase:

- there must be failure of public bidding, or it is apparent that negotiated purchase is the most advantageous to the government.

Applicable Laws, Rules and Regulations

COA Circular No. 85-55A

"Negotiated Purchase

Negotiated purchase, recognized as another mode of procurement shall be allowed under any of the following grounds:

1. failure of the required public bidding.

Government Accounting and Auditing Manual -

Sec. 441: Conditions for Negotiated Purchase: Negotiated purchase is a system of purchase which dispenses with stringent requirements of public bidding. Purchases through this may be allowed in the following cases:

a. x x x

d. whenever the supplies under procurement have been unsuccessfully placed on bid for at least two consecutive times, either due to lack of bidders or offers received in each instance were exorbitant or non-conforming to specifications.

e. In cases where it is apparent that the requisition of the needed supplies through negotiated purchase is most advantageous to the government to be determined by the department head concerned.

x x x

Local Government Code:

Sec.369 Negotiated Purchase - (a) In cases where public biddings have failed for two (2) consecutive times and no suppliers have qualified to participate or win in the biddings, local government units may, through the local chief executive concerned, undertake the procurement of supplies by negotiated purchase, regardless of amount, without public bidding: Provided, however, That the contract covering the negotiated purchase shall be approved by the sanggunian concerned. Delivery of purchase orders or utilization of repair orders pursuant to this Section shall be made within seven (7) days after placement of the same. Immediately after the negotiated purchase or repair order is made, the local chief executive concerned shall draw a regular requisition to cover the same which shall contain the following:

1) A complete description of the supplies acquired or the work done or to be performed;

2) By whom furnished or executed;

3) Date of placing the order and the date and time of delivery or execution;

4) The unit price and the total contract price;

5) Certification of the provincial or city general services or the municipal or barangay treasurer, as the case may be, to the effect that the price paid or contracted for was the lowest at the time of procurement;

6) A certification to the effect that the price paid or contracted for was the lowest at the time of procurement; and

7) A certification of the local budget officer as to the existence of appropriations for the purpose, the local accountant as to the obligation of the amount involved, and the local treasurer as to the availability of funds.

C. Emergency Purchase:

-the mode is resorted to to avoid loss of or danger to life or property, or if the repair to be undertaken is of such nature that a delay would cause detriment to the public service.

-price must be the lowest from at least three "bona fide" contractors.

Bona fide contractors:

a) duly licensed and registered with appropriate bodies

b) not "blacklisted" by any government agency at the time of canvass

c) it should be in business for at least 6 months

Applicable Laws, Rules and Regulations:

COA Circular 85-55A - Sec. 4.1 Procurement: Emergency Purchase

1. Unless otherwise provided by law or the charter, agencies are authorized to make emergency purchase of supplies, materials and spare parts to meet an emergency which may involve the loss of or danger to life and/or property, or are to be used in connection with a project or activity which cannot be delayed without causing detriment to the public service.

2. An emergency purchase shall be allowed only upon a proper showing of the nature of the purchase. For this purpose, a certification shall be made by the agency head or his duly authorized representative particularly stating the actual conditions obtaining at the time of purchase, the quantity of items needed and the time or period when such items are to be used.

3. In an emergency purchase, canvass of prices of items from at least three (3) bona fide and reputable suppliers shall be required, except when the amount involved is less than P=1,000.00 or in case of repeat orders where the price is the same or less than the original price.

A supplier may be deemed bona fide and reputable if it satisfies the following criteria:

a) it should be duly licensed and registered with appropriate bodies;

b) it is not "blacklisted" by any government agency at the time of canvass; and

c) it should be in business for at least six (6) months.

Local Government Code:

SEC.368. Emergency Purchase- In cases of emergency where the need for the supplies is exceptionally urgent or absolutely indispensable and only to prevent imminent danger to, or loss of life or property, local government units may, through the local chief executive concerned, make emergency purchase or place repair orders, regardless of amount, without public bidding. Delivery of purchase orders or utilization of repair orders pursuant to this Section shall be made within ten (10) days after placement of the same. Immediately after the emergency purchase or repair order is made, the chief of office or department making the emergency purchase or repair order shall draw a regular requisition to cover the same which shall contain the following:

a) A complete description of the supplies acquired or the work done or to be performed;

b) By whom furnished or executed;

c) Date of placing the order and the date and time of delivery or execution;

d) The unit price and the total contract price;

e) A brief and concise explanation of the circumstances why procurement was of such urgency that the same could not be done through the regular course without involving danger to, or loss of, life or property;

f) A certification of the provincial or city general services or the municipal or barangay treasurer, as the case may be, to the effect that the price paid or contracted for was the lowest at the time of procurement; and

g) A certification of the local budget officer as to the existence of appropriations for the purpose, the local accountant as to the obligation of the amount involved, and the local treasurer as to the availability of funds.

The goods or services procured under this Section must be utilized or availed of within fifteen (15) days from the date of delivery or availability.

 Without prejudice to criminal prosecution under applicable laws, the local chief executive, the head of department, or the chief of office making the procurement shall be administratively liable for any violation of this Section and shall be a ground for suspension or dismissal from service.

D. Personal Canvass:

-award must be made to supplier offering the lowest price from among at least three responsible suppliers.

 Applicable Laws, Rules and Regulations

Local Government Code

SEC.367. Procurement through Personal Canvass. - Upon approval by the Committee on Awards, procurement of supplies may be effected after personal canvass of at least three (3) responsible suppliers in the locality by a committee of three (3) composed of the local general services officer or the municipal or barangay treasurer, as the case may be, the local accountant, and the head of office or department for whose use the supplies are being procured. The award shall be decided by the Committee on Awards.

Purchases under this Section shall not exceed the amounts specified hereunder for all items in any one (1) month for each local government unit:

Provinces and Cities and Municipalities within the Metropolitan Manila Area:

First and Second Class - One hundred fifty thousand pesos (P150,000.00)

Third and Fourth Class -One hundred thousand pesos (P100,000.00)

Fifth and Sixth Class - Fifty thousand pesos (P50,000.00)

Municipalities:

First Class -Sixty thousand pesos (P60,000.00)

Second and Third Class - Forty thousand pesos (P40,000.00)

Fourth Class and Below -Twenty thousand pesos (P20,000.00)

Review as to Clarity/Specificity

5. Determine if the specifications of the repair work subject of the contract are clear and unambiguous - would not give an option to the supplier to perform any work other than that actually required.

Applicable Laws, Rules and Standards :

COA Manual on Property and Supply Management

The description of the work items to be procured should be clear and unambiguous, leaving no room for interpretation during performance. The specifications may be classified into:

a.  design specifications - contain precise measurements, tolerance, materials in process and finished product tests, quality control and inspection requirements.

b.  performance specifications - contain performance characteristics for the desired items.

In interpreting specifications, the basic rule is to follow the normal rules of contract interpretation. In case of ambiguity, the contractor must demonstrate that the ambiguity was not so patent that he was aware of it at the time his bid was submitted. Otherwise, he is deemed to have assumed the risk of a patent ambiguity if he does not request clarification.

Review as to Confluence

6. Determine if the specifications of the work items indicated in the supplier's offer are similar to the specifications of the work items required/needed by the agency.

The RIV/Purchase Request/Agency Estimate, etc., indicate the agency requirements.

7. Ascertain that the specifications indicated in the contract are similar to those indicated in the offer of the winning supplier. If not, validate deviations from the supporting documents.

Review as to Necessity

8. Determine if the work per Contract and scope thereof is necessary, moderate, and not luxurious.

a.  For repairs of equipment, the scope of work indicated in the contract should correspond to the defects reported in the Pre-Repair Inspection Report.

Applicable Laws, Rules and Regulations

COA Circular 85-55A:

"3.2 "Unnecessary" Expenditures

Definition: The term pertains to expenditures which could not pass the test of prudence or the diligence of a good father of a family, thereby denoting non-responsiveness to the exigencies of the service. Unnecessary expenditures are those not supportive of the implementation of the objectives and mission of the agency relative to the nature of its operation. This would also include incurrence of expenditure not dictated by the demands of good government, and those the utility of which cannot be ascertained at a specific time. An expenditure that is not essential or that which can be dispensed with without loss or damage to property is considered unnecessary. The mission and thrusts of the agency incurring the expenditures must be considered in determining whether or not an expenditure is necessary.

COA Circular 81-131-A dated January 19, 1981

Pre-inspection is necessary to determine the necessity and/or extent of repair work to be done on the equipment for repair, and to guide the Property Inspector in the post-repair inspection in determining if the repair specified in the Pre- inspection Report was actually undertaken.

All equipment, vehicles, etc., for repair should be subjected to pre-inspection. Failure to do so will be a ground for non- conduct of the post-repair inspection and/or disallowing in audit the payment of claim for the services rendered.

Review as to Reasonableness:

9. Determine if the contract cost is most advantageous to the agency.

a. Public bidding - lowest bid

If there is no evidence of rigged bidding or other irregularity in the bidding process that may affect the outcome, then the contract awarded to the lowest bidder is reasonable as to its cost. This is in line with the principle that when a bidder is awarded a contract under the strict procedures of a public bidding, his winning bid is considered the response of the market, with supply and demand forces in free interplay. Thus, the winning bid, being the free market's response to the call for public bidding, is prima facie a reasonable price. The reasonableness of the price is inextricably linked to the regularity of the transaction.

b. Negotiated  - not higher than the lowest offer in the failed bidding

c. Emergency - lowest-canvassed price

d. Personal canvass- lowest-canvassed price

Applicable Laws, Rules and Regulations

COA Circular 85-55A

Definition:The term "excessive expenditures" signifies unreasonable expense or expenses incurred at an immoderate quantity and exorbitant price. It also includes expenses which exceed what is usual or proper as well as expenses which are unreasonably high, and beyond just measure or amount. They also include expenses in excess of reasonable limits.

Standards for "Excessive" Expenditures

The term "excessive expenditures" pertains to the variables of Price  and Quantity.

1. Price- The price is excessive if it is more than the 10% allowable price variance between the price paid for the item bought and the price of the same item per canvass of the auditor.

2. Factors - In determining whether or not the price is to be excessive, the following factors may be considered.

A - Supply and demand forces in the market.

C - Warranty of Products or Special Features

Situational Cases of "Excessive" Expenditures - (application to NLC sectors)

1.Payment for repair of government equipment at a cost exceeding 30% of the current market price of the same or similar equipment is also an excessive expenditure.

3.4"Extravagant" Expenditures

Definition:The term "extravagant expenditure" signifies those incurred without restraint, judiciousness and economy. Extravagant expenditures exceed the bounds of propriety. These expenditures are immoderate, prodigal, lavish, luxurious, wasteful, grossly excessive, and injudicious.

Standards for "Extravagant" Expenditures

Factors such as the nature of the agencies' operations, agency missions, profitability of their past operational performance, and availability of financial resources derived from income or retained earnings must be taken into account in the matter of determining whether or not an expenditure is extravagant. The term "extravagant expenditure" pertains to the variables of quality relative to level or rank of the user and the purpose for such expenditure.

10. Determine the reasonableness of the contract cost if the mode of procurement is thru negotiated purchase or thru emergency purchase and canvass. The following documents are necessary for evaluation:

1. Job Order/Contract

2. Approved sketch/drawing

3. Complete specifications

4. Detailed Breakdown of contract cost

Applicable Laws, Rules and Regulations

COA Memorandum No. 91-704, Annex T

Price Reasonableness Review Evaluation Checklist

1. Clear copy of the duly accomplished purchase documents (P.O. or equivalent) with date and complete name and address of the supplier

2. Clear copy of the Sales Invoice/Delivery Receipts and Inspection Report

3. Approved drawing/sketch with corresponding description/specifications and material used, if applicable

4. Detailed breakdown of contract cost

5. Individual unit prices of the items

6. Sample and brochures/photographs, if applicable

7. Complete specification such as but not limited to:

narrative description of the item and accessories, brand, unit of measurement, make/country of origin, size/dimension/volume, model, use of item, color, capacity, horsepower, voltage, watts, gauge, kind of equipment where spare part is to be used, whether replacement or original (for spare parts), part number of spare parts, type and classification of material, packing (quantity per pack), substance, speed, kind of service/job rendered.

11. From the submitted contract, validate computation for the contract cost comprising: direct cost, indirect cost, VAT

-Direct Cost:

a) Validate material quantities

b) Estimate allowances (for wastage, breakage and shrinkage) based on the generally accepted design and construction standards

c) Apply unit prices of materials to estimated quantities per item

d) Compute for labor cost by determining the number of days to do the job and the labor rates based on the current usage for specific work classification

-Indirect Costs:

These include overhead, contingencies, miscellaneous expenses and profit. The standard rates depend on industry practice but there are no specific guidelines at present. DPWH Department Order No. 30 series of 1991 applied to construction contracts is sometimes applied to repair work.

-VAT-10% of the cost of labor and equipment

 The COA computed cost shall be compared with the contract cost. To be considered reasonable, the contract cost must not be higher that 10% of the COA evaluated cost.