procurement through bank financing

by virgilio on Fri Jul 03, 2009 2:06 pm

our agency`s board of directors has directed the management to seek local banks best terms to finance the acquisition of a brand new 4x4 pick-up utility vehicle for production and maintenance use. Two banks submitted thier terms and conditions with the most advatageous having lower amortization and low cash out is about to be chosen or awarded the financing. Is it posible without violating r.a.9184. this will be the first time the agency will have a vehicle. thnx

by RDV @ GP3i on Fri Jul 03, 2009 2:43 pm

virgilio wrote:our agency`s board of directors has directed the management to seek local banks best terms to finance the acquisition of a brand new 4x4 pick-up utility vehicle for production and maintenance use. Two banks submitted thier terms and conditions with the most advatageous having lower amortization and low cash out is about to be chosen or awarded the financing. Is it posible without violating r.a.9184. this will be the first time the agency will have a vehicle. thnx

Procurement thru bank financing is not one of the alternative methods of procurement.
Bank financing is just a mode of funding for the purchase of the motor vehicle. Therefore, you need to separate the financing aspect or obtaining of a bank loan fund the procurement, from the procurement itself of the motor vehicle. The procurement of motor vehicle, is still normally done by public bidding. Award of contract is based on the LCRB still.

by virgilio on Fri Jul 03, 2009 3:16 pm

while its true that bank financing is not an alterntive method of procurement, the banks that offer their terms to finance the acquisition of the motor vehicle has a complete car loan plans/programs. does this complete the procurement process having satisfied the bidding procedure thru bank financing? thank you.

by engrjhez® on Fri Jul 03, 2009 8:57 pm

virgilio wrote:while its true that bank financing is not an alterntive method of procurement, the banks that offer their terms to finance the acquisition of the motor vehicle has a complete car loan plans/programs. does this complete the procurement process having satisfied the bidding procedure thru bank financing? thank you.

Have you conducted Public Bidding proceedings in determining the bank with the best finance terms? Can you share with us how? scratch

by RDV @ GP3i on Sat Jul 04, 2009 10:06 am

virgilio wrote:while its true that bank financing is not an alterntive method of procurement, the banks that offer their terms to finance the acquisition of the motor vehicle has a complete car loan plans/programs. does this complete the procurement process having satisfied the bidding procedure thru bank financing? thank you.

I don't think combining both is legally feasible under RA 9184. You cannot procure motor vehicle unless you have an approved budget for the purpose (Sec. 7 of RA 9184). You do not have a budget yet because you are planning to procure thru bank financing.

by ziaragabriel on Sat Jul 04, 2009 8:11 pm

More on procurement through bank financing....... our LGU had bidded out several heavy equipments worth 80M with the intention of acquiring through bank financing through the issuance of letters of credit. there are 2 winning bidders both identified as local bidders by the BAC. I am confused ..... did their bids qualify as local bid when in fact the letters of credit issued by the bank is not a domestic one but a foreigh letter of credit?... and the heavy equipments actually came from foreign countries proven by custom and import duties and taxes billed to the LGU but paid by the importer... are these local bidders just agents of these foreign suppliers? .... what pertinent provisions of RA 9184 were violated by this manner of acquisition? Dir RDV, ssir ruel and sir engrjhez...i know you could enlighten me much on this. tnx

by engrjhez® on Sun Jul 05, 2009 10:57 pm

ziaragabriel wrote:More on procurement through bank financing....... our LGU had bidded out several heavy equipments worth 80M with the intention of acquiring through bank financing through the issuance of letters of credit. there are 2 winning bidders both identified as local bidders by the BAC. I am confused ..... did their bids qualify as local bid when in fact the letters of credit issued by the bank is not a domestic one but a foreigh letter of credit?... and the heavy equipments actually came from foreign countries proven by custom and import duties and taxes billed to the LGU but paid by the importer... are these local bidders just agents of these foreign suppliers? .... what pertinent provisions of RA 9184 were violated by this manner of acquisition? Dir RDV, ssir ruel and sir engrjhez...i know you could enlighten me much on this. tnx

First of all, it is imperative to understand RDV's point. The procurement process under RA.9184 requires an ABC (which is the budget itself). No procurement shall be made unless it is in accordance to the APP (bearing the contracts and its ABC). This means that whether the payment term is not cash basis, the procurement still has to be paid, and obligated. In my opinion, bank financing is not even mandatory as a requirement together with the bidding, as long as you have identified that the payment scheme is not by lumpsum. Bank financing shall only be consequential if that's the case. Kasi whether you like it or not, the LGU must still pay for the procurement.
[Q: Is the bidder also the bank?]

Regarding the bid security, the use of ILOC issued by a foreign bank is allowed under Sec.27.2.b but the same must be confirmed or authenticated by a reputable local bank. I believe the bidder may still be considered a local bidder regardless of the source of goods, as long as the bidder represented themselves as a local bidder (with at least 60% of owners are Filipino in case of corporation, etc.). No violation seemed to be committed as of your statement, as long as the appropriate taxes were declared and paid, and no other misrepresentation took place. Very Happy

by RDV @ GP3i on Mon Jul 06, 2009 12:05 pm

ziaragabriel wrote:More on procurement through bank financing....... our LGU had bidded out several heavy equipments worth 80M with the intention of acquiring through bank financing through the issuance of letters of credit. there are 2 winning bidders both identified as local bidders by the BAC. I am confused ..... did their bids qualify as local bid when in fact the letters of credit issued by the bank is not a domestic one but a foreigh letter of credit?... and the heavy equipments actually came from foreign countries proven by custom and import duties and taxes billed to the LGU but paid by the importer... are these local bidders just agents of these foreign suppliers? .... what pertinent provisions of RA 9184 were violated by this manner of acquisition? Dir RDV, ssir ruel and sir engrjhez...i know you could enlighten me much on this. tnx

Sec. 42.5 of IRR-A allows the payment through the issuance of Letter of Credit, as follows:

"42.5. Procuring entities may issue a 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; Provided further, that, the cost for the opening of letter of credit shall be for the account of the local or foreign supplier and to be so stated in the bidding documents."

The above-mentioned payment scheme is normally the procedure if the goods procured come from foreign countries and the supplier is a foreign supplier. However, it is also possible that the bidder is a local supplier but the goods it is offering is imported goods. It is also possible that the situation you mentioned, in which the supplier is an agent of foreign suppliers, is what happened. However, in that case, a Manufacturer's Authorization Form should be attached to the bid. (The form is part of the PBDs, Sec. VIII - Sample Forms.) You will also know if the goods are to be supplied from abroad, he will also fill up the Bid Price Form for Goods Offered from Abroad.

If the bidder is a foreign supplier, which does not possess Filipino ownership of at least 60%, it does not necessarily mean that RA 9184 and its IRR-A is violated. Foreign suppliers are allowed under any of these circumstances (Pls see GPPB Res. 018-2005):
1) When goods sought to0 be procured are not available from local suppliers;
2) When there is a need to prevent situations that defeat competition or restrain trade;
3) When the foreign supplier, manufacturerm and/or distributor is a citizen, corporation or association of a country the laws or regulations of which grant reciprocal rights or privileges to Filipino citizens, corporations or goods, irrespective of availability of goods from local suppliers; or
4) When provided for under any treaty or international or executive agreement.

by virgilio on Tue Jul 07, 2009 9:04 am

thnx, while it was not included in our 2009 budget, a supplemental budget was approved by our board based on the positive cash flow projection submitted and the the necessity of its usage in the field operation maintenance of this government corporation. In summary;
1.the board directed the management to invite reputable bank branches in the local area to finance the acquisition of a service vehicle (4x4) on a two year term of payment.
2.two national banks with existing vehicle financing program submitted thier quotations.
3.the most economical and responsive bank bid was to be awarded. question:( does the directive by the board in order without the BAC, since it is not a direct prurchase of goods, infra or services coming but, thru bank financing with terms and on account.

by engrjhez® on Tue Jul 07, 2009 8:33 pm

I have a few clarificatory questions:

virgilio wrote:thnx, while it was not included in our 2009 budget, a supplemental budget was approved by our board based on the positive cash flow projection submitted and the the necessity of its usage in the field operation maintenance of this government corporation. In summary;
1.the board directed the management to invite reputable bank branches in the local area to finance the acquisition of a service vehicle (4x4) on a two year term of payment.

The board directed the management, and not the BAC?

virgilio wrote:2.two national banks with existing vehicle financing program submitted thier quotations.

Where did the banks submitted their quotation? to the management? to the board? or to the BAC?

virgilio wrote:3.the most economical and responsive bank bid was to be awarded.

Who determined this? the board? the management? or the BAC?

virgilio wrote:question:( does the directive by the board in order without the BAC, since it is not a direct prurchase of goods, infra or services coming but, thru bank financing with terms and on account.

I believe there is dibursement of public funds involved for the procurement of the vehicle even though it is made thru bank financing. In that premise, the BAC should be the proper authority to invite, accept bids/quotation, evaluate, and award for the purpose. Cool

procurement through bank financing

procurement through bank financing

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procurement through bank financing

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procurement thru bank financing

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