Blog Lecture No. 79: Exemptions from Competitive Bidding

You may want to look into this previous blog lecture as it picks up from where it left off.

What are the exemptions to the general rule of public bidding provided by present laws?

More accurately, these are called Alternative Methods of Procurement.

Very good, wise guy. So what are these so-called alternative methods?

These are:

1. Limited Source Bidding
2. Direct Contracting
3. Repeat Order
4. Shopping
5. Negotiated Procurement

So what is limited source bidding?

This is otherwise known as Selective Bidding. It is a method of Procurement that involves direct invitation to bid by the government from a set of pre-selected suppliers or consultants with known experience and proven capability relative to the requirements of a particular contract.

When will this be applicable?

It applies to:

1) Procurement of highly specialized types of goods and consulting services which are known to be obtainable only from a limited number of sources.

For example, the government requires a specialized smart card or biometric reader that can be supplied by a limited number of vendors. Bidding will be limited to a small group.

2) Procurement of major plant components where it is deemed advantageous to limit the bidding to known eligible bidders in order to maintain an optimum and uniform level of quality and performance of the plant as a whole.

For example, an electric plant has a G.E. turbine. Of course, you will limit the bidders to those who can supply the compatible parts. Bear in mind, reference to brand names is not allowed in the terms of reference but this case is an exemption.

What is direct contracting?

It is otherwise known as Single Source Procurement. It is a method of Procurement that does not require elaborate Bidding Documents because the supplier is simply asked to submit a price quotation or a pro-forma invoice together with the conditions of sale, which offer may be accepted immediately or after some negotiations.

Simply put, there will be no formalities here like submission of a specific bid form or a strict documents required by our procurement law. The bidders will just submit the accustomed forms like price quotes or invoices, to be accepted quickly or after some negotiations.

When is this applicable?

It applies to the following:

1. Procurement of Goods of proprietary nature, which can be obtained only from the proprietary source, i.e. when patents, trade secrets and copyrights prohibit others from manufacturing the same item.

2. When the Procurement of critical components from a specific manufacturer, supplier or distributor is a condition precedent to hold a contractor to guarantee its project performance, in accordance with the provisions of his contract.

3. Those sold by an exclusive dealer or manufacturer, which does not have sub-dealers selling at lower prices and for which no suitable substitute can be obtained at more advantageous terms to the government.

What is repeat order?

It is a method of Procurement that involves a direct Procurement of Goods from the previous winning bidder, whenever there is a need to replenish Goods procured under a contract previously awarded through Competitive Bidding.

Here, the previous winning bidder gets to win a second round of procurement be default. No new bidding, no new process. The previous winner get to supply goods or services anew.

What are the conditions for a repeat order?

These are:

1. The unit price must be equal to or lower than that provided in the original contract;

2. The repeat order does not result in splitting of requisitions or purchase orders;

Aside from the obvious, what is shopping?

It is a method of Procurement whereby the Procuring Entity simply requests for the submission of price quotations for readily available off-the-shelf Goods or ordinary/regular equipment to be procured directly from suppliers of known qualification.

Ordinary or regular office supplies include paper, pencils, pens, clips, etc.

Under what circumstances can shopping be allowed?

It can be resorted to in any of the following circumstances:

1. When there is an unforeseen contingency requiring immediate purchase: Provided, however, That the amount shall not exceed Fifty thousand pesos (P50,000); or

2. Procurement of ordinary or regular office supplies and equipment not available in the Procurement Service involving an amount not exceeding Two hundred fifty thousand pesos (P250,000): Provided, however, That the Procurement does not result in Splitting of Contracts: Provided, further, That at least three (3) price quotations from bona fide suppliers shall be obtained.

What is negotiated procurement?

It is a method of Procurement that may be resorted under the extraordinary circumstances, whereby the Procuring Entity directly negotiates a contract with a technically, legally and financially capable supplier, contractor or consultant.

When is this applicable?

It can be resorted to in the following cases:

1. After two failed competitive biddings.

When the government went through two bidding processes but both failed for one reason or another, it can then go through negotiated procurement.

2. In case of imminent danger to life or property during a state of calamity, or when time is of the essence arising from natural or man-made calamities or other causes where immediate action is necessary to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public utilities.

Take note of the key words like imminent, state of calamity, time is of the essence, etc.

3. Take-over of contracts, which have been rescinded or terminated for causes provided for in the contract and existing laws, where immediate action is necessary to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public utilities

For example, a road contractor repairing a major road fails to complete the job for one reason or another and gets terminated. The government can negotiate with another without competitive bidding to save time as the road is urgently needed.

4. Where the subject contract is adjacent or contiguous to an on-going infrastructure project

5. Purchases of goods from another agency of the Government

6. In the case of individual consultants hired to do work that is highly technical or proprietary; or primarily confidential or policy determining, where trust and confidence are the primary consideration for the hiring of the consultant

7. When the procurement involves major defense equipment for use by the AFP and the Secretary of National Defense has determined that the interests of the country shall be protected by negotiating directly with an agency or instrumentality of another country

8. Procurement of real estate since it is under another law

9. Those under the build, operate and transfer scheme or any of its variations, since it will be the BOT law will govern.

10. In some bilateral loans, a particular contractor has already been identified in the grant agreement with the foreign funding institution, the procurement guidelines of the foreign creditor shall apply and not the general rule of competitive bidding.

Let’s wait for the next hearing to make another lecture, if applicable.

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