Approving the Amendment of Section 42.6 of the 2016 Revised IRR of RA No. 9184

April 22, 2019

GPPB RESOLUTION NO. 12-2019

APPROVING THE AMENDMENT OF SECTION 42.6 OF THE 2016 REVISED IMPLEMENTING RULES AND REGULATIONS (IRR) OF REPUBLIC ACT (RA) NO. 9184, THE GUIDELINES ON PROCUREMENTS INVOLVING FOREIGN-DENOMINATED BIDS, CONTRACT PRICES AND PAYMENT USING LETTERS OF CREDIT (LC) AND CLAUSE 10.5 OF THE SPECIAL CONDITIONS OF CONTRACT (SCC) OF THE FIFTH (5TH) EDITION OF THE PHILIPPINE BIDDING DOCUMENTS (PBD) FOR THE PROCUREMENT OF GOODS

WHEREAS, Republic Act (RA) No. 9184, otherwise known as the "Government Procurement Reform Act" and the 2016 revised IRR took effect on 26 January 2003 and 28 October 2016, respectively; HTcADC

WHEREAS, Section 63.1 (b) of the 2016 revised IRR of RA No. 9184 mandates the Government Procurement Policy Board (GPPB) to formulate and amend public procurement policies, rules and regulations, and amend, the IRR of RA No. 9184, whenever necessary;

WHEREAS, the LC is a document issued by a bank to guarantee, on behalf of the procuring entity (PE) or buyer timely payment to the seller or exporter against the receipt of complying stipulated documents;

WHEREAS, Section 42.6 of the 2016 revised IRR of RA No. 9184 allows PEs to use LCs as payment in favor of local or foreign suppliers;

WHEREAS, the Technical Support Office (TSO) of the GPPB has received various queries as regards the practice of PEs using LCs as a form of payment to local suppliers;

WHEREAS, the Department of Budget and Management (DBM) has likewise forwarded issues and concerns over the said practice in view of the Budget Reform Program of the National Government that aims to strengthen and modernize cash management, and to improve monitoring and management of government funds maintained outside of the Treasury Single Account and the Modified Disbursement Scheme, among others;

WHEREAS, on 27 March 2019, the GPPB-TSO met with the DBM and Bureau of the Treasury (BTr) officials to discuss the proper use of LCs. During the said meeting, the BTr presented a draft circular limiting payment through issuance of LCs to foreign suppliers;

WHEREAS, the discussions made during the meeting prompted the GPPB-TSO to recommend limiting the payment for the procurement of goods through issuance of LCs to foreign suppliers;

WHEREAS, the GPPB-TSO, accordingly, proposed the amendment of Section 42.6 of the 2016 IRR of RA No. 9184; the Guidelines on Procurements Involving Foreign-Denominated Bids, Contract Prices and Payment Using Letter of Credit; and Clause 10.5 of the SCC of the PBDs for Goods;

WHEREAS, during the third (3rd) Regular Meeting of the Inter-Agency Technical Working Group (IATWG) held on 11 April 2019, the GPPB-TSO presented its recommendation and after due consideration, the IATWG resolved to recommend to the GPPB the proposed amendments, and further limit the use of LC to those issued by government servicing banks;

WHEREAS, during the 3rd Regular Meeting of the GPPB on 22 April 2019, after careful review and due deliberations, the Board approved the recommendation of the IATWG;

NOW, THEREFORE, for and in view of all the foregoing, WE, the Members of the GOVERNMENT PROCUREMENT POLICY BOARD, by virtue of the powers vested on US by law and other executive issuances, hereby RESOLVE to confirm, adopt, and approve, as WE hereby confirm, adopt, and approve the amendment of Section 42.6 of the 2016 revised IRR of RA No. 9184, the Guidelines on Procurements Involving Foreign-Denominated Bids, Contract Prices and Payment Using Letter of Credit and Clause 10.5 of the SCC of the PBDs for the Procurement of Goods, a copy of which is attached as Annex "A", and made an integral part hereof. CAIHTE

This Resolution shall take effect fifteen (15) days following its publication.

APPROVED this 22nd day of April 2019 at Manila, Philippines.

(SGD.) _________________________  Department of Budget and Management

________________________________________National Economic and Development Authority

_________________________Department of Education

(SGD.) ________________________              Department of Energy

        _______________________         Department of Finance

(SGD.) ___________________                 Department of Health

(SGD.) _______________________________________                    Department of the Interior and Local Government

(SGD.) ___________________________            Department of National Defense

(SGD.) _____________________________________                  Department of Public Works and Highways

      __________________________________      Department of Science and Technology

(SGD.) _______________________________            Department of Trade and Industry

   ______________________________    Department of Transportation

  _______________________________  Private Sector Representative

(SGD.) __________________________________________________            Department of Information and Communications Technology

ANNEX A

2016 Revised Implementing Rules and Regulations (IRR) of Republic Act (RA) No. 9184

 

Original

Amendment

42.6. Procuring Entities may cause the issuance of the letter of credit in favor of a local or foreign suppliers: Provided, That no payment on the letter of credit shall be made until delivery and acceptance of the goods as certified to by the Procuring Entity in accordance with the delivery schedule provided for in the contract have been concluded: Provided, further, That the cost for the opening of letter of credit shall be for the account of the local or foreign supplier and must be stated in the Bidding Documents.

42.6. Procuring Entities may cause the issuance of the letter of credit in favor of A LOCAL OR foreign suppliers: Provided, That the letter of credit shall be issued by a Government Servicing Bank: Provided, further, That the cost for the opening of letter of credit shall be for the account for the local or foreign supplier and must be stated in the Bidding Documents: Provided, finally, That no payment SHALL BE CHARGED AGAINST ONthe letter of credit shall be made untilONLY AFTER delivery and acceptance of the goods as certified to by the Procuring Entity in accordance with the delivery schedule provided for in the contract have been concluded.

 

Guidelines on Procurements Involving Foreign-Denominated Bids, Contract Prices and Payment Using Letters of Credit or Appendix 16 of the IRR of RA No. 9184

 

Original	Amendment
7.0 PAYMENTS USING LETTERS OF CREDIT	7.0 PAYMENTS USING LETTERS OF CREDIT
7.1. For procurement projects fully utilizing domestic funds, where the goods will be supplied by a local or foreign supplier, the procuring entity, may open LCs or similar instruments in favor of such local or foreign supplier.	7.1. For procurement project fully utilizing domestic OR FOREIGN funds, where the goods will be supplied by a LOCAL ORforeign supplier, the procuring entity may open LCs or similar instruments in favor of such local or foreign supplier FROM A GOVERNMENT SERVICING BANK. PAYMENT/S SHALL BE MADE ON THE LETTER OF CREDIT ONLY AFTER DELIVERY AND ACCEPTANCE OF THE GOODS AS CERTIFIED BY THE PROCURING ENTITY.

 

5th Edition of the Philippine Bidding Documents for the Procurement of Goods

 

Original	Amendment
Special Conditions of Contract	Special Conditions of Contract

	GCC Clause				GCC Clause
	10.5	State "Payment using LC is not allowed."			10.5	State "Payment using LC is not allowed."
		or				or
		If payment using LC is allowed, state "The amount of provisional sum is ________ Pesos (PhP_______)." [Note: The provisional sum shall not exceed 10% of the ABC, and shall form part of the ABC].				If payment using LC is allowed, state "The amount of provisional sum is _______ Pesos (PhP_______)." [Note: The provisional sum SHALL NOT EXCEED 10% OF THE ABC, AND shall form part of the ABC. PAYMENT USING LC MAY ONLY BE ALLOWED FOR FOREIGN SUPPLIERS.]

 

 

GPPB Circular No. 05-19April 22, 2019