A. Procurement Planning and the Preparation of the Annual Procurement Program/Plan and Amendatory/Supplementary Program/Plan (Applicable to National, Local and Corporate Offices)

1. Procurement Planning is the first step in the procurement process. This may consist of the preparation of a procurement plan or procurement program.

In National government agencies and in pursuance of the IRR of Executive Order No. 302, procurement of goods shall be undertaken according to a procurement plan that the agency concerned shall formulate. 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. The plan 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. The procurement plan shall be with due regard to the provisions of the GAAM on the preparation of the Annual Procurement Program (APP).

An APP refers to the itemized list prepared by the Head of the Agency showing the kind, estimated quantity, estimated cost, description of supplies together with the balance on hand, if any, required by the agency for the ensuing fiscal year.

In national government agencies, it is prepared and submitted to the DBM as part of its Work and Financial Plan on or before the end of November. In local government units, it is prepared on or before the fifteenth (15th) day of July each year by the local Chief Executive.

In particular, the Annual Equipment Procurement Program (AEPP) is required to be prepared and submitted to support the Work and Financial Plan (Appendix 1).

In local government units, the preparation of an Annual Procurement Plan (Appendix 2) is required. It is prepared by heads of departments or offices at such time that maybe prescribed by the local Chief Executive and submitted to the General Services Officer. It contains the departments' supply requirements for the ensuing fiscal year. Based on the submitted procurement plan, the General Services Officer or the local treasurer, as the case maybe, shall prepare an Annual Procurement Program (Appendix 3) for the ensuing year. Heads of Departments may also prepare a Supplementary Procurement Plan during the year which will cover the supply or property requirement of his department or office not otherwise included in the Annual Procurement Plan. Based on this Supplementary Annual Procurement Plan, the General Services Officer or the Local Treasurer shall prepare a Supplementary Annual Procurement Program. An Amendatory Plan (Appendix 4), on the other hand, is prepared for supply or property requirements in lieu of those deleted, cancelled or substituted in the approved procurement plan. Based on the Amendatory Plan, an Amendatory Procurement Program (Appendix 5) is prepared.

Applicable Laws, Rules and Regulations

1. Section 3.2 of the IRR of Executive Order No. 302 dated February 19, 1996.

3.2 Procurement Planning

3.2.1 - Procurement of goods shall be undertaken according to a procurement plan that the agency concerned shall formulate to ensure that the goods to be procured are available when needed. The basic content of the procurement plan including pertinent guidelines and policies thereon are prescribed in Annex "B".

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 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 Contracts. As the general rule, the procurement of goods 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 or, 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 equipment, 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 measurers under these IRR.

Bids under the alternative contract options as described above, shall be evaluated in 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 document.

2. Section 424 of the GAAM, Vol. I

An Annual Procurement Program showing itemized quantity, description and estimated cost of supplies/materials/equipments required for a fiscal year shall be prepared by all agencies of the national government. Such program shall be made an integral part of supporting documents of the agency's Work and Financial Plan required to be submitted to the Department of Budget and Management on or before the end of every November pursuant to NBC 415 dated January 19, 1990.

3. Section 373 of the Local Government Code (RA 7160)

(a) On or before the fifteenth (15th) day of July each year, the local chief executive shall prepare an annual procurement program for the ensuing fiscal year which shall contain an itemized list of the estimated quantity of supplies needed for such year, a complete description thereof as to kind, quality, estimated cost, and balance on hand: Provided, however, That the total estimated cost of the approved annual procurement program shall not exceed the total appropriation authorized for the acquisition of supplies. The local government units may augment the supplies and equipment provided by the Supreme Court to the lower courts located in their respective jurisdictions.

(b) Except in emergency cases or where urgent indispensable needs could not have been reasonably anticipated, no purchase of supplies shall be made unless included in, or covered by, the approved procurement program.

(c) The conversion of excess cash into supplies stock is hereby prohibited except to the extent of the kind and quantity specified in the approved procurement program.

 A violation of this section shall be a ground for suspension or dismissal of any official or employee responsible therefor.

4.a Sec. 8 of the Rules and Regulations on Supply and Property Management in the Local Governments(COA Circular No. 92-386)

On or before the fifteenth day of July of each year, the general services officer or the local treasurer, as the case maybe, shall prepare for the approval of the local chief executive an annual procurement program for the ensuing fiscal year which shall contain an itemized quantity of supplies or property needed for the entire fiscal year, complete description thereof as to kind, quantity and quality, the estimated cost, and the balance on hand. The total estimated cost of the annual procurement program shall not exceed the total appropriations authorized for the acquisition of supplies or property.

4.b Sec. 11, RRSPMLG

Supplementary Procurement Plan.-At any time during the fiscal year, heads of departments or offices may prepare and submit to the general services officer or local treasurer, as the case maybe, for the approval of the local chief executive a supplementary procurement plan to cover supply or property requirement of his department or office not otherwise included in the annual procurement plan.

4.c Sec. 12, RRSPMLG

Within a reasonable time upon receipt of the supplementary procurement plan, the general services officer or local treasurer, as the case may be, shall prepare for the approval of the local chief executive a supplementary procurement program based on the supplementary procurement plan.

4.d Sec. 13, RRSPMLG

Amendatory Procurement Plan. - At any time during the fiscal year, the head of department or office may prepare and submit to the general services officer or local treasurer, as the case maybe, for the approval of the local chief executive an amendatory procurement plan for supply or property requirement of his department or office in lieu of those deleted, cancelled or substituted in the approved procurement plan. Amendatory procurement plan shall be supported by a written justification.

4.e Sec. 14, RRSPMLG

Amendatory Procurement Program.-Within a reasonable time upon receipt of the amendatory procurement plan from a head of department or office, the general services officer or local treasurer, as the case maybe, shall prepare for the approval of the local chief executive an amendatory procurement program for the department or office concerned.

4.f Sec. 15, RRSPMLG

Provision for Contingency. - In the preparation of the annual procurement plan, a maximum of fifteen per cent (15%) of the estimated requirements may be provided for contingency and miscellaneous items. This shall take care of the requirements which could not be anticipated or defined during the preparation of the plan.

4.g Sec. 16, RRSPMLG

Separate Procurement Plans and Programs for Supplies or Property, Non-expendable Supplies, Non-Personal Services and Materials for Infrastructure Project.-Separate procurement plans and programs shall be prepared for supplies or property for the operation of a department or office, non-expendable supplies, non-personal services and supplies or property intended for infrastructure project.

5. National Budget Circular (NBC) No. 415 dated January 19, 1990 of the DBM re preparation and submission of the Work and Financial Plans for FY 1990 and the subsequent fiscal years.

Section 3.6 (Budget Execution Form No. 203)

The Annual Equipment Procurement Program is a prioritized list of equipment proposed to be procured from programmed equipment outlay. The type and engine displacement and other specifications of motor vehicles, if any, should be indicated.
Section 4.0 Procedures and Manner of Submission:

4.1 The prescribed filled-up forms under Section 3.0 and other supporting documents, except the Program of Liquidation of Accounts Payable (Plap) form, shall be submitted to the Department of Budget and Management preferably in computer diskettes together with three (3) printouts on or before November 30 of the preceding fiscal year, using the appropriate spreadsheet program for the purpose. x x x x x. 6. NBC No. 438 dated January 11, 1995 of the DBM re Guidelines on the Purchase of Equipment.

2.0 Definition of Equipment

For purposes of this Circular, "Equipment" shall refer to those items provided under Section 378 of the Standard Government Chart of Accounts (SGCA) which includes furniture, fixtures, transport equipment, other equipment and books the cost of which shall not be lower than the minimum amount prescribed by COA whose serviceable life is more than one year and which add to the assets of the government.

3.0 Preparation of Equipment Procurement Program

3.1 All agencies with programmed equipment outlays shall prepare an Annual Equipment Procurement Program (AEPP). The AEPP shall be part of the Work and Financial Plan that is annually submitted at the start of the fiscal year to the Department of Budget and Management for evaluation and approval. In the case of State Universities and Colleges (SUCs), the Regional Offices of DECS and DOH and Integrated Area Development Projects (IADPs), the AEPP shall be submitted to the DBM Regional Offices concerned,

3.2 In the preparation of AEPP, the following guidelines shall be adhered to:
  1. It shall be based on the programmed equipment outlay authorized in the General Appropriations Act, net of reserves, if any.
  2. Equipment intended for replacement of unserviceable items shall be supported by an Inventory and Inspection Report of Unserviceable Property.
  3. The request for authority to purchase a motor vehicle shall be supported by a duly accomplished inventory of existing motor vehicles and detailed justifications for acquisition, including deployment, user and specific activities for which the motor vehicles would be used.
  4. The purchase of computers and other Information Technology (IT) Equipment shall be subject to the guidelines and requirements of the National Computer Center.
  5. The purchase of books intended as reference materials shall not exceed five (5) copies per title.
  6. The purchase of the following equipment shall be subject to clearance/authority from appropriate agencies:
    7.
    1. Equipment - clearance from the National Telecommunications Commission.
    2. Firearms - authority from the Firearms and Explosives Unit of the Philippine National Police.
      3.
4.0 Modification of Equipment Procurement Program 4.1 The approved AEPP maybe modified as a result of the agency reprioritization of its equipment requirements without prior approval by the DBM, provided that, the modification shall involve only those items not subject to prior clearance from competent authority. In the case of equipment items subject to prior clearance by competent authority, i.e. motor vehicles, computers, communications equipment and firearms, authority shall first be secured prior to modification. Priority shall be given to equipment items that are directly used in the substantive operations of the agency.

4.2 In the modification of the AEPP, priority shall be given to equipment or items that are directly used in the substantive operation of the agency.

 5.0 Reporting Requirements Agencies shall submit to the Organization and Productivity Improvement Bureau and in the case of SUCs, DECS and DOH Regional Offices and IADPs, to the Regional Offices concerned of the Department of Budget and Management a report on the purchased equipment within thirty (30) days after acquisition. Non-submission of the report is a basis for disapproval of equipment request for the succeeding year. 7. Sections 3 and 4, Executive Order No. 359 dated June 2, 1989 Sec. 3. Coverage. All national government agencies including State Universities and Colleges and government-owned or controlled corporations and their subsidiaries, that require common use supplies, materials and equipment are covered by the Executive Order. The Central procurement system may be availed of by local government units, on a voluntary basis.

Agencies are, however, allowed to procure directly for emergency needs whenever there is a significant delay in the delivery of urgently needed supplies by the Procurement Service, subject to existing accounting and auditing rules and regulations.

Sec. 4. Operating Procedures. The operating procedures of the procurement system shall be prescribed by the Procurement Service (PS). Said operating procedures shall remain in force unless subsequently modified in consultation with the Systems and Procedures Bureau (SPB) of DBM, subject to the approval of the Procurement Policy Board.

The operating procedures shall cover, among others, the following:

a. Preparation and submission of the annual agency procurement programs for brand new supplies, materials and equipment which are covered by the procurement system.

b. The appropriations for the Annual Procurement Programs of Agencies shall be identified in their annual Work and Financial Plan. Said Work and Financial Plan shall serve as the basis of the Department of Budget and Management in the release of the Agency's quarterly allotments and monthly funding warrants.

The agencies shall remit to the Procurement Service the funds needed to service their requirements for supplies, materials and equipment as reflected in said Work and Financial Plan.

c. Adoption of simplified bidding procedures as authorized under Item 12 of Letter of Instructions No. 755 by a Procurement Service Bids and Awards Committee whose composition shall be determined by the Procurement Policy Board.

d. In the evaluation of supplies, materials and equipment, the applicable standards as to specifications and test methods as formulated by the Bureau of Product Standards shall be strictly followed; where otherwise not available, the appropriate international and/or trade standards, whichever is more beneficial to the government, shall apply. Evaluation of items which are highly technical in nature shall in all cases be attended by the technical experts of the end-user agency and representatives of professional associations under whose field of expertise the items may be covered.

e. The charging of service fees by the Procurement Service to cover its personnel services and other operational expenses as maybe authorized by the Procurement Policy Board pursuant to Section 33 of Republic Act No. 6688 and Section 52 of Presidential Decree No. 1177, but not to exceed five (5%) percent of the value of supplies, materials and equipment procured and supplied to the agency concerned.

 8. Procurement Policy Board Circular No. 1 dated Jan. 1, 1990.

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3.0 Coverage/Scope

3.1 Agencies  
3.1.1 All government agencies, including government hospitals and sanitaria, state universities and colleges and government-owned or controlled corporations and their subsidiaries shall be covered by the Procurement Service (PS) in the matter of their requirement for common-use supplies, materials and equipment and such other items as may be determined by the Procurement Policy Board to be of general use in the pursuit of government functions.

3.1.2 Regional offices or government agencies in the regions shall locally purchase their common-use supplies, materials and equipment through the PS Regional Depots which shall be established for the purpose.

3.1.3 Local government units may avail of PS services on a voluntary basis.

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 5.0 Operational Procedures 5.1 Agencies shall prepare an annual procurement program of their common-use supplies/materials/equipment requirements in quarterly schedules to be submitted to PS three (3) months before the start of the calendar year. The said program shall be based on the current PS price list, plus an additional 10% to cover possible increases in the ensuing year.

5.1.1 Agencies shall reflect the budgetary requirements of their annual procurement program for common-use supplies/materials/equipment in the Work and Financial Plan (WFP) indicating on the first month of each quarter the total budgetary requirements for a given quarter.

 5.1.2 A listing of the amount of the respective annual programs for common-use supplies/materials/equipment of each agency or records of previous withdrawals shall be submitted by PS to the MBBB two (2) months before the start of the new calendar year as basis for the amount to be earmarked.

5.1.3 The agency may opt to procure its requirements for non-common supplies/materials/equipment and other items peculiar to the agency's function from the PS, in which case the agency shall include such in its APP listing to be accomplished in the attached form.

ILLUSTRATIVE DECISION

Nature: Purchase of medicines Annual Procurement Program

Decision No.: COA Decision No. 2606 dated Dec. 1, 1992.

Particulars: This is an appeal dated January 20, 1992 of the Executive Director, Philippine Trade Training Center (PTTC) to lift the disallowance on the purchase of medicines amounting to P4,687.05. The amount was disallowed by the Auditor for lack of legal basis for the charging of the expenditure to Fund 101 object codes 07(supplies) and 19(representation expenses). The Executive Director, in his appeal cited the provision of Occupational Safety and Health Standards Law which states that every employer including the government shall keep in the workplace a minimum medical facilities listed in Table 47 of the law. The facilities listed therein maybe substituted with other comparable medicines. The appeal was granted. The cost of the medicines/medicinal supplies purchased can be validly charged against the allotment for supplies and materials (07) under Fund 101 as long as these medicinal supplies are included in the Annual Procurement Program of the agency in support of the Work and Financial Plan of the agency as approved by the Department of Budget and Management (DBM) or to the allotment for extraordinary and miscellaneous expenses (18) authorized under Section 26 of the 1991 General Appropriations Act.