Approving Amendments to the Revised Guidelines on the Index-Based Pricing Procurement of Petroleum, Oil, and Lubricant Products

ORIGINAL

AMENDED

REVISED GUIDELINES ON THE PROCUREMENT OF PETROLEUM, OIL, AND LUBRICANT (POL) PRODUCTS

REVISED GUIDELINES ON INDEX-BASEDPRICING ON THE PROCUREMENT OF PETROLEUM, OIL, AND LUBRICANT (POL) PRODUCTS IN BULK

1.0 SCOPE AND APPLICATION

These guidelines shall govern the use, under extraordinary circumstances, of an index-based pricing scheme for procurement of petroleum, oil, and lubricants (POL) in accordance with Section 61 of Republic Act No. 9184 (R.A. 9184), otherwise known as "Government Procurement Reform Act" and its Implementing Rules and Regulations (IRR), and the GPPB Guidelines for Contract Price Escalation.

These rules and procedures shall govern the procurement of POL by the national government, its departments, bureaus, offices and agencies, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units when POL is a major operational requirement necessary for the prosecution pursuit of their principal mandate.

These Guidelines shall likewise provide the rules on the procurement of POL from retailers, dealers or gas stations, other than major suppliers as hereinafter defined, or from those who are engaged in the business of selling the same to the general public for ultimate consumption, and which are sold at retail pump prices.

1.0 SCOPE AND APPLICATION

These guidelines shall govern the use, under extraordinary circumstances, of an index-based pricing scheme for procurement of petroleum, oil, and lubricants (POL) in accordance with Section 61 of Republic Act No. 9184 (R.A. 9184), otherwise known as "Government Procurement Reform Act" and its Implementing Rules and Regulations (IRR), and the GPPB Guidelines for Contract Price Escalation.

These rules and procedures shall govern the procurement of POL by the national government, its departments, bureaus, offices and agencies, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units when POL is a major operational requirement necessary for the prosecution pursuit of their principal mandate.

Removed third paragraph.

2.0 PURPOSE

These guidelines are formulated to meet the following objectives:

2.1. To identify the conditions for the applicability of the index-based pricing scheme in the procurement of POL products by a procuring entity.

2.2. To prescribe the rules and procedures on the use of index-based pricing scheme for the procurement of POL in bulk.

2.3. To prescribe the rules and procedures in the procurement of petroleum fuel for government vehicles and equipment for official use, including oil and lubricant products in necessary quantities, but not in bulk, by Procuring Entities.

2.0 PURPOSE

These guidelines are formulated to meet the following objectives:

2.1. To identify the conditions for the applicability of the index-based pricing scheme in the procurement of POL products by a procuring entity.

2.2. To prescribe the rules and procedures on the use of index-based pricing scheme for the procurement of POL in bulk.

Removed 2.3.

3.0 DEFINITION OF TERMS

a. Bid Price — refers to the difference of the WPP of the prospective supplier less discounts given plus delivery cost, in case of procurement using the WPP Index; and the sum of MOPS or ICIS-LOR assessments, the premium Imposed and delivery cost, in case of procurement using the MOPS or ICIS-LOR index;

b. Bulk Procurement — refers to any procurement which, by the totality of its POL requirements and by their sheer volume, necessitates procurement from major suppliers for purpose of economies of scale. All others are procurement by retail pump price.

c. Total Contract Price — refers to the aggregate of the amounts set by a procuring entity, as the ceiling, to meet the volume requirement for each type of POL product; the value of which shall not exceed the approved budget for the contract (ABC).

d. Delivery Cost — refers to cost of freight incurred by the Supplier from the source to the delivery point, i.e., refinery to delivery point for deliveries ex-refinery, or oil terminal/depot to delivery point for deliveries ex-depot.

e. Discounts — refers to the total deductions from the WPP.

f. Expanded Value Added Tax (E-VAT) — refers to a consumption tax on the sale or importation of goods and services in the ordinary course of business.

g. Extraordinary Circumstance — refers to an event or occurrence, or series of events or occurrences, before or during contract implementation, which give(s) rise to price movements in petroleum and its derivative products.

h. Independent Commodity Information System-London Oil Report or ICIS-LOR — refers to an information provider for the chemical and oil industry, and is part of the Reed Business Information Ltd., a private entity, based in London with office in Singapore.

i. Major Suppliers — refer to POL wholesale suppliers and who, in the operation of their business, either maintains a refinery in the Philippines or directly imports POL products from production or trading venues.

j. Mean of Platts Singapore or MOPS — refers to the mean of the high and low components of a Platts assessment for oil cargoes loading from Singapore as officially released by Platts, a publishing/trading house based in Singapore which publishes daily information on oil price and shipping rates.

k. Petroleum, Oil, and Lubricant Products or POL Products — for purposes of these guidelines, shall refer to those enumerated in Section 5 hereof.

l. Premium — refers to all applicable and reasonable cost or expenses (i.e., ocean freight, marine insurance, bank charges, ocean loss, storage/handling/throughput fees, profit, margin, etc.) to arrive at a landed cost of petroleum, oil and lubricant in the Philippines.

m. Retail Pump Price — the price of petroleum fuel per liter, such as, gasoline, diesel oil and kerosene, as established by retailers, dealers or gas stations for the day.

n. Wholesale Posted Price or WPP — refers to the reference fuel prices individually set by local refiners and traders subject to periodic changes based on the movement in crude oil prices, foreign exchange, and all other costs as verified and confirmed by the Department of Energy (DOE).

o. Vehicles — any means of conveyance to transport passengers and carry cargoes, goods or effects on land, air or sea.

3.0 DEFINITION OF TERMS

3.1. Bid Price — refers to the bid of the prospective supplier, less discounts given, plus delivery cost, regardless of the index used in the procurement of petroleum, oil, and lubricant (POL) products.

3.2. Bulk Procurement — refers to any procurement which, by the totality of its POL requirements and by their sheer volume, necessitates procurement from suppliers for purpose of economies of scale.

3.3. Total Contract Price — x x x

3.4. Delivery Cost — x x x

3.5. Discounts — refers to the total deductions given by the prospective supplier.

3.6. Expanded Value Added Tax (E-VAT) — x x x

3.7. Extraordinary Circumstance — x x x

3.8. Independent Commodity Information System-London Oil Report or ICIS-LOR — x x x

Removed Major Suppliers.

3.9. Mean of Platts Singapore or MOPS — refers to the mean of the high and low components of a Platts assessment for oil cargoes loading from Singapore as officially released by S&P Global Platts, a provider of energy and commodities information and a source of benchmark price assessments in the physical commodity market based in Singapore.

3.10. Petroleum, Oil, and Lubricant Products or POL Products — for purposes of these guidelines, shall refer to those enumerated in Section 6 hereof.

Removed Premium.

Removed Retail Pump Price

3.11. Wholesale Price or WP — refers to the reference fuel prices individually set by local refiners and traders subject to periodic changes based on the movement in oil prices, foreign exchange, and all other costs without hauling charge, dealer's mark-up and dealer's E-VAT.

3.12. Vehicles — any means of conveyance to transport passengers and carry cargoes, goods or effects on land, air or sea.

4.0 CONDITIONS FOR APPLICABILITY OF THESE GUIDELINES

These guidelines shall be applicable in cases of bulk procurement of POL by the national government, its departments, bureaus, offices and agencies, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units where POL procurement is a major requirement in their operations. For this purpose, procuring entities intending to use these guidelines for their POL procurement shall notify the Government Procurement Policy Board (GPPB) in writing.

POL requirements shall be considered major if the use of the same are necessary in the primary operation of the procuring entity and in the pursuit of its principal mandate. The duration of the contract to cover the POL requirement of the procuring entity shall not exceed one (1) year, without prejudice to the applicability of any guidelines that may govern multi-year contracts.

These guidelines shall likewise apply to the procurement of POL from retailers, dealers or gas stations, other than major suppliers as hereinafter defined, or from those who are engaged in the business of selling the same to the general public for ultimate consumption, and which are sold at retail pump prices.

4.0 CONDITIONS FOR APPLICABILITY OF THESE GUIDELINES

These guidelines shall be applicable in cases of bulkprocurement of POL by the national government, its departments, bureaus, offices and agencies, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units where POL procurement is a major requirement in their operations. (Removed next sentence)

POL requirements shall be considered major if the use of the same [are] is necessary in the primary operation of the procuring entity and in the pursuit of its principal mandate. The duration of the contract to cover the POL requirements of the procuring entity may be one year or more. In the case of multi-year, the same shall be subject to the issuance of Multi-Year Contracting Authority (MYCA) or its equivalent document.

Removed third paragraph.

NEW

5.0 GENERAL GUIDELINES

5.1. The rules and regulations governing competitive bidding shall apply whenever the rules in these Guidelines are silent.

5.2. Right to Inspect. The procuring entity shall allow the Department of Energy (DOE) to inspect the procuring entity's fuel facilities, if there is any, subject to DOE's guidelines to check compliance to Philippine National Standards (PNS) on products and facilities, among others. The procuring entity may provide the delivery schedule of the supplier to DOE.

5.0 INDEX-BASED PRICING FOR PETROLEUM, OIL AND LUBRICANT PRODUCTS

5.1. The WP index shall be used in the procurement of the following products:

i. Premium, Unleaded or Regular Gasoline;

ii. Automotive Diesel Oil;

iii. Jet A-1;

iv. AVGAS.

5.2. The MOPS index shall be used in the procurement of the following products:

i. Industrial Fuel Oil;

ii. Low Sulfur Fuel Oil; and

iii. Industrial Diesel Oil.

5.3. In the procurement of all types of lubricant products, the procuring entity may adopt either a fixed or index-based pricing. If its assessment or cost-benefit analysis indicates that index-based pricing is more advantageous, then it shall adopt the ICIS-LOR index.

5.4. The foregoing list shall be subject to annual review, modification or reclassification by the GPPB, or as often as it deems necessary.

6.0 INDEX-BASED PRICING FOR PETROLEUM, OIL AND LUBRICANT PRODUCTS (renumbered)

6.1. The WP index shall be used in the procurement of the following products:

i. Premium, Unleaded or Regular Gasoline;

ii. Automotive Diesel Oil.

6.2. The MOPS index shall be used in the procurement of the following products:

i. Industrial Fuel Oil;

ii. Low Sulfur Fuel Oil;

iii. Industrial Diesel Oil;

iv. Jet A-1;

v. AVGAS; and

vi. Aviation Fuel Additives.

No changes on the succeeding, renumbered only.

6. WPP, MOPS AND ICIS-LOR-BASEDPRICING SCHEME

6.1. For the procurement of products using the WPP index, the Bid Price shall be determined based on the prospective supplier's WPP ten (10) days prior to the date of bid opening as verified with the Oil Industry Management Bureau of the Department of Energy, subject to the rules under Item 7 hereunder.

6.2. For the procurement of products using the MOPS index, the Bid Price shall be determined based on the average MOPS of the immediately preceding calendar month prior to the date of bid opening, subject to the rules under Item 7 hereunder.

6.3. For the procurement of lubricant products using the ICIS-LOR index, the Bid Price shall be determined based on the average ICIS-LOR assessments of the immediately preceding calendar month prior to the date of bid opening as officially released by ICIS-LOR, Singapore.

7. BID AND CONTRACT PRICES

7.1. Bid Prices for procurement using the WPP index shall be the individual WPP of the prospective supplier less the discounts given, if any, plus delivery cost. On the other hand, the Bid Price for procurement using the MOPS and ICIS-LOR indices in accordance with Sections 5.2 and 5.3 hereof shall be the MOPS or ICIS-LOR plus premium and delivery cost charged by the bidder.

7.2. Cost for E-VAT and other governmental costs which fall equally on all prospective suppliers are presumed to be included in the computation of the bid price.

8. BID EVALUATION AND COMPARISON OF BIDS

8.1. For purposes of bid evaluation and/or comparison of bids, regardless of the index used, the Lowest Calculated Bid shall be determined by identifying the bidder who offered the lowest Bid Price.

8.2. For purposes of payment, the discount or premium and the delivery cost stated in the contract shall be fixed from the time of the bidding through the term of the contract.

9. ACTUAL PRICES PAYABLE

9.1. The amount to be paid by the procuring entity for POL requirements actually delivered and duly received by it shall be: (i) the WPP less the discounts offered, if any, plus the delivery cost charged, at the date of actual delivery; or (ii) the MOPS or ICIS-LOR, plus the premium imposed and the delivery cost charged, referenced to the average of the MOPS or ICIS-LOR of the calendar month immediately preceding the date of actual delivery.

9.2. For staggered deliveries, the procuring entity shall make, after every delivery, an accounting of the amount actually payable based on the date of the delivery receipt to determine the allowable unit/volume that may still be ordered from the remaining amount allotted for each POL product. The procuring entity shall be allowed to make adjustments in the units/volume to be delivered per type of product to conform to the remaining amount in the total contract price.

9.3. For contracts stipulating consignment whereby a supplier makes a delivery of POL products to a procuring entity's holding area and payment is based on volume consumed, the actual price payable shall be determined based on the weighted average of the applicable index from the date the order is placed up until the cut-off date for payments agreed upon by the parties. The same rule shall apply for contracts where a major supplier delivers the POL products to the procuring entity through its authorized stations and/or distribution centers.

9.4. If during contract implementation, the total contract price for the project would have been consumed notwithstanding that the requirements were not fully delivered in the units/volume contemplated, no further order and payments shall be made. This provision shall form part of the bidding documents.

Items 6, 7, 8 and 9 of the previous guidelines are revised as follows:

7.0 SPECIFIC GUIDELINES

7.1. The Procuring Entity shall indicate in its ITB among others the ABC per product with indicative volume for bidding purposes only. Regardless of the index used, the bid price shall be determined by the prospective supplier's bid, less discounts given plus delivery cost.

7.2. Cost for E-VAT and other governmental costs are presumed to be included in the computation of the bid price by the prospective suppliers.

7.3. For purposes of bid evaluation and/or comparison of bids, regardless of the index used, the Lowest Calculated Bid shall be determined by identifying the bidder that offered the lowest bid price.

7.4. For purposes of payment, the bid price, discount and the delivery cost stated in the contract shall be fixed from the time of the bidding through the term of the contract. Delivery should be done at the end of the week. The amount to be paid by the procuring entity for POL requirements actually delivered and duly received by it shall be:

7.4.1. For the WP index, the bid price, less the discounts offered, if any, plus or minus the weekly price adjustments duly posted by the Oil Industry Management Bureau (OIMB) of the Department of Energy (DOE) in its Price Watch/Price Adjustments/Fuel page in the DOE's website, and the delivery cost stated in the contract, at the date of actual delivery [Payment = (bid price – discounts) +/- (DOE) weekly price adjustments for gasoline and diesel) + (delivery cost or DC)];

7.4.2. For the MOPS index, the bid price, less the discounts offered, if any, plus or minus the MOPS week on week price adjustments, the delivery cost stated in the contract, at the date of actual delivery [Payment = (bid price – discounts) +/- (MOPS week on week price adjustments) + (DC)]; or

7.4.3. For the ICIS-LOR Index, the bid price, less the discounts offered, if any, plus or minus the ICIS-LOR pricing adjustment, the delivery cost stated in the contract, at the date of actual delivery [Payment = (bid price – discounts) +/- (ICIS pricing adjustments) + (DC)].

7.5. The supplier will provide a detailed price adjustment for its POL products actually delivered, as part of its billing (weekly price adjustments for WP index, daily traded MOPS pricing, and ICIS pricing adjustment), together with its certification under oath that:

7.5.1. The supplier's price adjustments are those reported and duly posted at DOE's website for products using the WP index;

7.5.2. The supplier's week on week price adjustments are based on the daily prices traded in MOPS for products using the MOPS index; or

7.5.3. The supplier's price adjustment is based on ICIS-LOR pricing for the month for lubricant products.

7.6. Illustrative Example Computation

7.6.1. Illustrative Example of the Computation for First Delivery for Diesel.

a. Bid opening was 2nd week January. Winning bidder offered bid price of P25.00/liter for diesel, already with discount. Delivery cost is 5c/liter (fixed).

b. Total Contract Price is P7,500,000.00 for estimated 200,000 liters of diesel.

c. Staggered deliveries. PE has ordered for 16,000-22,000 liters to be delivered at the scheduled deliveries (i.e., monthly delivery, but end of the week), subject to adjustment of the volumes.

d. End user may verify the price adjustments by checking the DOE's website, www.doe.gov.ph, go to Price Watch, then Price Adjustments tab/menu, then Fuels.

For example, first delivery is at 3rd week of February for diesel.

Bid price at 2nd week Jan. 25.00/liter (fixed)

Price Adjustments + (0.70/liter week3 Jan.)

+ (0.70/liter week4 Jan.)

+ (0.75/liter week1 Feb.)

+ (0.00/liter week2 Feb.)

+ (0.70/liter week3 Feb.)

Total Price, as adjusted P27.85/liter

Volume * 22,000 liters

Price * Volume P612,700

DC + 1,100 (fixed)

Actual payable P613,800

7.6.2. Illustrative Example of the Computation for First Delivery for AVGAS.

a. Bid opening was 2nd week January. Winning bidder offered bid price of P20.00/liter for AVGAS, already with discount. Delivery cost is 5c/liter (fixed).

b. Total Contract Price is P2,200,000.00 for estimated 120,000 liters of diesel.

c. Staggered deliveries. PE has ordered for 10,000-12,000 liters to be delivered at the scheduled deliveries (i.e., bi-monthly delivery, but end of the week), subject to adjustment of the volumes.

For example, first delivery is on the end of 2nd week February (i.e., February 15) for AVGAS.

1. Bid price at 3rd week Jan (i.e., Jan. 18) P20.00/liter (fixed)

2. MOPS week on week Price Adjustments: difference between average of the past week and the average of present week; check daily traded MOPS pricing which is in US dollars per Barrel (bbl):

2.1. Week 0, Jan. 18: Monday MOPS price at $60/bbl + Tue. MOPS price at $63/bbl + Wed. MOPS price at $64/bbl + Thurs. MOPS price at $62/bbl + Friday MOPS price at $60/bbl, divide by 5, to get the average.

2.2. Week 1, Jan. 25: Monday MOPS price at $61/bbl + Tue. MOPS price at $63/bbl + Wed. MOPS price at $64/bbl + Thurs. MOPS price at $64/bbl + Friday MOPS price at $62/bbl, divide by 5, to get the average.

2.3. Thus: week 0 ave. $61.8/bbl — week 1 ave. of $62.8/bbl, = increase of $1/bbl for week 1 (Jan. 25).

2.4. Get weekly average for week 2. Get difference from week 1 (Jan. 25) against week 2 (Feb. 1). The difference is the week on week price adjustment for week 2. Repeat process on getting week on week price adjustments until first delivery date (Feb. 15).

2.5. Convert the peso to dollar and the barrel to liters (1 Oil Barrel to 159 liters) per week. Use the Bangko Sentral ng Pilipinas (BSP) exchange rate at the end of the week.

3. MOPS week on week price adjustments:

+ (0.33/liter Jan. 25)

+ (0.00/liter Feb. 01)

- (0.07/liter Feb. 08)

+ (0.27/liter Feb. 15)

Total Price, as adjusted P20.87/liter

Volume * 10,000 liters

Price * Volume P208,700

DC + P500 (fixed)

Actual payable P209,200

7.7. For staggered deliveries, the end-user or acceptance team shall make, after every delivery, an accounting of the amount actually payable based on the date of the delivery receipt to determine the allowable unit/volume that may be ordered from the remaining amount allotted for each POL product. The procuring entity shall be allowed to make adjustments in the units/volume to be delivered per type of product to conform to the remaining amount in the total contract price.

7.8. Illustrative Example of the Computation for Succeeding Deliveries for Diesel.

Same considerations under 7.6.1.

First delivery was on 3rd week of February for diesel, second delivery was on 3rd week of March for diesel, third delivery was on 3rd week of April for diesel, and so on.

First-Fourth Deliveries were at 22,000 liters

Payments made for the first delivery

(February) P613,800

Second delivery (March) P654,500

Third delivery (April) P684,200

Fourth delivery (May) P737,000

Total payments as of May P2,689,500

Available funds as of end of May P4,810,500

Estimated remaining liters of diesel for delivery 112,000

PE decides to adjust the volumes (upwards or downwards) for the next two months, which may be based on usage and projected price adjustments, or based on contractor's monthly balance of the POL budget of the PE.

Payment made on fifth delivery

(June) P796,530 at 21,000 liters

Payment made on six delivery

(July) P796,000 at 20,000 liters

Total payment (Jun.-Jul.) P1,592,530

Available funds as of end of July P3,217,970

Estimated remaining liters of diesel for delivery 71,000

PE decides to adjust the volumes (upwards or downwards) for the next two months which may be based on usage and projected price adjustments, or based on contractor's monthly balance of the POL budget of the PE.

Payment made on seventh delivery

(Aug.) P788,500 at 19,000 liters

Payment made on eight delivery

(Sept.) P767,700 at 18,000 liters

Total payment (Aug.-Sept.) P1,556,200

Available funds as of end of Sept. P1,661,770

Estimated remaining liters of diesel for delivery 34,000

7.9. If during contract implementation, the total contract price for the project would have been consumed notwithstanding that the requirements were not fully delivered in the units/volume contemplated, no further order and payments shall be made. This provision shall form part of the bidding documents.

7.10 Illustrative Example for the Assessment of units/volume contemplated

Remaining estimated

Available funds as of end

PE decides to adjust volumes (upwards or downwards) for the next two months (Ninth and Tenth deliveries) based on remaining POL budget. No further order and payments to be made for the eleventh and twelfth scheduled deliveries when the total contract price or POL Budget is consumed.

10. NECESSARY QUANTITIES OF PETROLEUM OIL & LUBRICANT

10.1. For necessary quantities of petroleum fuel (gasoline, diesel, oil, and kerosene), not in bulk, to be used for official government vehicles and equipment for ultimate consumption, procuring entities may directly purchase from any reputable retailers, dealers or gas stations at retail pump price, subject to the controls on fuel purchase and consumption issued by the Commission on Audit (COA) to avoid excessive purchases.

10.2. For necessary quantities of Oil and Lubricant products, not in bulk, to be used for official government vehicles and equipment for ultimate consumption, the same may be directly purchased from reputable retailers, dealers or gas stations.

Removed this. This becomes part of Sec. 53.14

11. PROCUREMENT OF FLEET CARDS OR GAS VOUCHERS

Procuring entities can continue procuring automotive fuels (by fleet cards or gas vouchers) through competitive bidding or any of the alternative methods of procurement as may be applicable under the circumstances.

In such procurements, the ABC and resulting contract price for the purchase of fuels shall also be at retail pump price subject to the discounts and additional services offered as part of the bid.

Remove this provision, as guidelines will be limited to BULK procurement of POL products. Procurement of fleet cards or gas vouchers by Procuring Entities are allowed.

12. EFFECTIVITY

These Guidelines amend GPPB Resolution No. 11-2007, dated 31 May 2007, and shall take effect fifteen (15) days after publication in the Official Gazette or in a newspaper of general nationwide circulation and upon filing with the University of the Philippine Law Center of three (3) certified copies.

8.0 EFFECTIVITY

These Guidelines amend GPPB Resolution No. 11-2007, dated 31 May 2007, and GPPB Resolution No. 05-2018, dated 18 May 2018, and shall take effect immediately.