BIR Ruling [DA-231-03]

July 18, 2003 BIR RULING [DA-231-03] Atty. Jaime Q. Concepcion Regional Director Revenue Region No. 2 Baguio City S i r : This refers to your letter dated April 3, 2003 requesting for a ruling on whether or not the Regional Office has the authority to renew the contract entered into by and between then Regional Director Estrella V. Martinez and Ms. Carmelita R. Castillo, the proprietress of the Magic Chef Canteen, covering the lease and operation of the BIR canteen in said Region under the terms and conditions to be set by the Regional Pre-qualification, Bids and Awards Committee (PBAC) without the need of a public bidding. It is represented that the Memorandum of Agreement (MOA) executed by the then Regional Director Estrella V. Martinez and Ms. Carmelita R. Castillo specifically provided for a term of one year renewable by mutual agreement of the parties. The MOA was signed last June 1, 2002 and will expire on June 2, 2003. In reply thereto, please be informed that the lease of the canteen for Revenue Region No. 2, Cordillera Administrative Region, Baguio City, is not covered by Executive Order No. 40, "Consolidating Procurement Rules and Procedures For All National Government Agencies, Government-Owned and Controlled Corporations and Government Financial Institutions, and Requiring the Use of the Government Electronic Procurement System." Section 1 of said E.O. 40 provides as follows: "Section 1. Scope and Application. This Executive Order shall apply to the procurement of: (a) goods, supplies, materials and related services; (b) civil works; and (c) consulting services, by all National Government agencies, including State Universities and Colleges (SUCs), Government-Owned or -Controlled Corporations (GOCCs) and Government Financial Institutions (GFIs), hereby referred to as "Agencies:" This Executive Order shall cover the procurement process from the pre-procurement conference up to award of contract". Executive Order 40 applies only to the procurement of goods, civil works and consulting services. The lease of the canteen in your Revenue Region is, obviously, not a procurement of consulting services. Likewise, it is not a procurement of goods or civil works. In the lease of the canteen, it is the BIR which leases part of its premises, it does not procure services or goods. This is clear under Section 3.3(r) of the Implementing Rules of the said E.O. 40, to wit: HIaTCc "r) Procurement. Procurement refers to the acquisition of: (i) goods, supplies, materials and related services; (ii) consulting services; and/or (iii) the contracting for civil works by an agency. For purposes of these IRR, the term "procurement" also covers the lease of goods, supplies and materials". As the lease of the canteen is not covered by the provisions of E.O. 40, your Office may enter into an agreement for the lease thereof provided that said contract is not grossly disadvantageous to the government or contrary to law or public policy. We cannot grant you the authority to renew the contract with Mrs. Castillo as we do not have a copy thereof. Consequently; this Office cannot render an opinion on whether or not its provisions are not grossly disadvantageous to the government or contrary to law or public policy. Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group