Government Procurement Law by Atty. Mae Diane Azores, CPA

Atty. Mae Diane Azores, CPA, welcomes attendees to a special seminar on government procurement law. She highlights upcoming events for undergrad students and a CPD seminar for fellow CPAs. She notes that the seminar on government procurement law has garnered significant interest, with over 400 participants, including non-CPAs and non-accountancy graduates, indicating a broad need for understanding this topic. She conducts a quick survey to gauge the participants' backgrounds and interests.

Atty. Azores provides an overview of RA 9184, also known as the Government Procurement Reform Act, explaining its coverage for the CPA board exam starting October 2022. She shares her five years of experience with the government, working in accounting, procurement, and auditing, demonstrating her practical knowledge of RA 9184. The core principles discussed are transparency throughout the procurement and implementation phases, competitiveness to encourage broad participation, streamlined processes for uniformity, and a system of accountability for all involved parties. Public monitoring is also emphasized as a crucial aspect of transparency.

The discussion moves to the scope of RA 9184, clarifying that it applies to the procurement of infrastructure, goods, and consulting services, regardless of funding source, across all government branches, including LGUs, GOCCs, and SUCs. Exceptions due to international treaties or special laws are also noted. The bedrock principle of RA 9184 is competitive bidding, which involves processes like advertisement, pre-bid conferences, bid evaluation, post-qualification, and award, all designed to ensure fair and open competition.

Atty. Azores introduces the Bids and Awards Committee (BAC), a body of 5-7 members with unquestionable integrity and procurement proficiency, designated by the head of the procuring entity. She also explains the role of the Philippine Government Electronic Procurement System (PhilGEPS) as the single portal for all government procurement information. PhilGEPS mandates all procuring entities to post opportunities and serves as a centralized database for suppliers, making it essential for any entity wishing to transact with the government.

The competitive bidding process begins with the preparation of bidding documents, which provide essential information to prospective bidders. This is followed by a pre-procurement process (mandatory for contracts exceeding certain thresholds), advertising the invitation to bid, and a pre-bid conference to clarify requirements. The presentation details the dual envelope system for bid submission (technical and financial components), including eligibility requirements like NFCC (Net Financial Contracting Capacity) or a committed line of credit, and bid security. The process culminates in the receipt and opening of bids.

After receiving bids, the BAC evaluates them, first opening the technical envelopes on a pass/fail basis, ensuring compliance without discretion. Only technically compliant bids proceed to financial evaluation. The lowest calculated bid is then subjected to post-qualification, a crucial step to verify and validate all submitted information and assess the bidder's capacity to fulfill the contract. This involves checking financial capabilities, experience, and adherence to requirements, with physical inspections often conducted. If the lowest bidder fails post-qualification, the second-lowest bidder undergoes the same process.

Once a bidder is post-qualified as the lowest calculated responsive bidder, the BAC recommends the award to the head of the procuring entity, who has 15 calendar days to issue a notice of award. Disapproval must be based on valid grounds, and bidders have appeal rights. The winning bidder must then submit additional documents and post a performance security (different from bid security) to guarantee contract fulfillment. A notice to proceed is issued, marking the start of contract implementation. The entire process from bid opening to award should not exceed three months.

Reasons for contract pre-termination include failure to deliver a certain percentage of goods or negative slippage in infrastructure projects, or undelivered deliverables for consulting services. Contracts can also be terminated for convenience by the government if continuing is uneconomical, or by the contractor/consultant due to force majeure or breaches by the procuring entity. A crucial principle in government procurement is the strict prohibition against 'splitting' government contracts – dividing them into smaller amounts to evade competitive bidding requirements, which is a corrupt practice.

Atty. Azores introduces alternative methods of procurement, which offer more efficiency and responsiveness by foregoing the rigorous competitive bidding process. The first method discussed is limited source bidding (selective bidding), where the procuring entity directly invites a pre-selected list of suppliers with known experience for specialized goods or services (e.g., sophisticated equipment, complex systems). This method is justified when only a few suppliers are qualified or to maintain uniform quality for specific components.

Direct contracting is another alternative where a supplier is directly asked for a price quotation. This is used for proprietary nature items (patents, trade secrets), specific component supply essential for a contractor's guarantee, or when there's an exclusive dealer. Repeat order allows procuring entities to re-purchase from a previous successful bidder without new bidding under specific conditions: same or lower unit price, within six months of the original contract's notice to proceed, and not exceeding 25% of the original quantity of each item. This method leverages established relationships with reliable suppliers.

Shopping is an alternative where the procuring entity gathers price quotations from at least three qualified suppliers for off-the-shelf goods or unforeseen contingencies requiring immediate purchase. Thresholds apply, typically P1M for GOODS for NGAs and GOCCs, and P50,000 for LGUs. The Department of Budget and Management Procurement Service (DBM-PS) acts as a central purchasing agent, acquiring common-use supplies and equipment (CSE) in bulk for government agencies to achieve lower prices and better quality. This ensures efficiency for frequently needed items.

Atty. Azores refers to the controversy surrounding the DBM Procurement Service (DBM-PS) acquiring face shields during the pandemic. The issue arose because face shields were not classified as common-use supplies, questioning DBM-PS's authority to purchase them and the pricing. This leads into negotiated procurement, a method where the procuring entity directly negotiates with a technically, legally, and financially capable supplier. It's allowed in cases of failed bidding (after two attempts) or emergency situations like the COVID-19 response, where immediate action is paramount and time is of the essence.

Different types of negotiated procurement include: takeover of contracts (when a previous contract needs immediate action to prevent damage), adjacent or contiguous contracts (for projects related to ongoing ones where continuity is efficient), agency-to-agency (where one government agency procures from another, like DBM-PS procuring for the DOH), and for scientific/artistic work, exclusive technology, highly technical consultants, or defense cooperation agreements requiring specialized expertise. Small value procurement, similar to shopping, is for small procurements below certain thresholds, and also requires seeking quotations from qualified suppliers and posting on PhilGEPS or the entity's website. The speaker emphasizes that even with alternative methods, the goal is still to find legally, technically, and financially capable suppliers.

Atty. Azores concludes her discussion on alternative procurement methods, reiterating their advantages in efficiency and speed, especially for urgent needs, while still requiring adherence to conditions and ensuring the method is most advantageous to the government. She then opens the floor for a 15-minute Q&A, addressing questions about NFCC vs. committed line of credit, comparing competitive bidding and alternative methods, and the transparency of bid opening. She emphasizes that transparency and having qualified suppliers are crucial, regardless of the procurement method used. She also touches upon the past controversies with the DBM-PS and irregularities that need to be improved in government procurement processes. She ends with a final message for all Filipinos to be vigilant observers of how public funds are used, and for future government officials to faithfully comply with procurement laws.