Additional Condition in the Procurement of Goods

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Additional Condition in the Procurement of Goods

Post by jfjdp on Thu May 14, 2009 5:51 pm

We are procuring water service connection materials through Public Bidding with several items per transaction or contract. So the total ABC is the sum of the unit price per item multiplied by the quantity of each item. To avoid to much distortion on the prices as it is also our basis for our costing we added a condition that bid price per item should not exceed 25% of unit price.

Is it prohibited to put such additional condition?
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Re: Additional Condition in the Procurement of Goods

Post by engrjhez® on Thu May 14, 2009 6:40 pm

jfjdp wrote:We are procuring water service connection materials through Public Bidding with several items per transaction or contract. So the total ABC is the sum of the unit price per item multiplied by the quantity of each item. To avoid to much distortion on the prices as it is also our basis for our costing we added a condition that bid price per item should not exceed 25% of unit price.

Is it prohibited to put such additional condition?
It would be best if you will first try to determine or check the Approved Budget for the Contract (ABC) considering all miscellaneous and freight costs as reflected in your Annual Procurement Plan (APP). The ABC is supposed to be the upper limit of contract prices. I don't get the idea on why you will have to allow a tolerance of 25%. The upper limit (25% higher) is not allowed by any means. The lower limit should not be actually imposed. This is because RA.9184 allow bids to drop to absolute zero (means the contract is free).

So the answer to your question is YES, on the basis that you are limiting the price most advantageous to the government.

Please elaborate more so we can discuss your inquiry more conversely. Smile
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Re: Additional Condition in the Procurement of Goods

Post by RDV @ GP3i on Fri May 15, 2009 7:05 pm

jfjdp wrote:We are procuring water service connection materials through Public Bidding with several items per transaction or contract. So the total ABC is the sum of the unit price per item multiplied by the quantity of each item. To avoid to much distortion on the prices as it is also our basis for our costing we added a condition that bid price per item should not exceed 25% of unit price.

Is it prohibited to put such additional condition?

You have a pre-determined quantity of materials you need. You set your ABC by multiplying that pre-determined quantity of materials with a unit price per item, right? I assume that the quantity per item is indicated in the bidding documents but the estimated unit price is not (for obvious reason).

Your condition 'that bid price per item should not exceed 25% of unit price' is confusing. How will the bidder's know the unit price per item which they should not exceed by 25%. If your estimated unit price is exceeded for each and every item, even by less than 25%, naturally your ABC would have been exceeded which would result to failure of bidding.

Maybe you need to clarify further the situation because I may be wrong in my assumptions.
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Re: Additional Condition in the Procurement of Goods

Post by riddler on Sat May 16, 2009 11:51 am

what jfjdp meant are variance of 25% per item, which is not allowed anymore under the GPRA for obvious reason that the ABC is already posted. You can never put variance as a condition now (unlike in the old PD 1594). the Bid must be equal or below the ABC, no more variance.

If I am bidder of a BULK BID (of which I am a rabid Advocate), I would really distort (fluctuate) my bid price per line item as long as the totality of my Bid is responsive as determined by the Procuring Entity. One Bidder, less paper works.
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Re: Additional Condition in the Procurement of Goods

Post by aljune70 on Mon May 18, 2009 5:47 pm

Per Section 7 of the IRR:
7.1 " All procurement should be within the approved budget of the procuring entity xxx The ABC for the contract shall be at all times consistent with the appropriations for the project authorized in the GAA xxx Corporate budget approved by governing boards xxx and the budget approved by the Sanggunian xxx."

Section 31 (Ceiling for Bid Prices) also states:

"The ABC under bidding shall be the upper limit or ceiling for acceptable bid prices. If a bid price xxx is higher than the ABC under bidding, the bidder submitting the same shall be automatically disqualified. There shall be no lower limit or floor on the amount of the award."


So, in effect, informing your prospective bidders of the 25% margin over your unit price, will only result to "failure" because their bids will definitely exceed the ABC. Shocked No
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Re: Additional Condition in the Procurement of Goods

Post by RDV @ GP3i on Mon May 18, 2009 6:43 pm

ruel t. wrote:what jfjdp meant are variance of 25% per item, which is not allowed anymore under the GPRA for obvious reason that the ABC is already posted. You can never put variance as a condition now (unlike in the old PD 1594). the Bid must be equal or below the ABC, no more variance.

If I am bidder of a BULK BID (of which I am a rabid Advocate), I would really distort (fluctuate) my bid price per line item as long as the totality of my Bid is responsive as determined by the Procuring Entity. One Bidder, less paper works.

Engr. ruel is right.

Setting allowable variances in unit price for each item is not allowed. It is contrary to the principle of Transparency. While the ABC is made known to prospective bidders, the procuring entity's own unit prices are not. Any bidder who exceeds by 25% the procuring entity's set unit price for any item would automatically be disqualified. If a procuring entity wants to favor a particular supplier, all it has to do is set one unit price ridiculously low, which is known only to a favored supplier. Those who are not favored would most likely be disqualified since their own unit price will most likely exceed the ridiculously low-priced item by 25%.
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Re: Additional Condition in the Procurement of Goods

Post by jfjdp on Tue May 19, 2009 4:44 pm

Just for illustration sir:

Quantity UOM Description Unit Price Amount
250 pcs. COUPLING GI S.40 1/2 13.70 3,425.00
100 pcs. COUPLING GI S.40 3/4 16.75 1,675.00
20 pcs. COUPLING GI S.40 1 20.84 416.80
20 pcs. COUPLING REDUCER GI 3/4 X 1/2 12.03 240.60
2500 pcs. ELBOW GI S.40 1/2 25.50 63,750.00
176 pcs. ELBOW GI S.40 3/4 27.00 4,752.00
100 pcs. ELBOW GI S.40 1 29.99 2,999.00
400 pcs. ELBOW REDUCER GI S.40 3/4 x 1/2 22.56 9,024.00
ABC 86,282.40

This is how we publish our requirement. So the ABC and the unit price is shown. Bidders are not allowed to exceed the ABC per RA9184 but on the Unit Price they will do so for as long as it does not exceed 25%.
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Re: Additional Condition in the Procurement of Goods

Post by RDV @ GP3i on Tue May 19, 2009 5:00 pm

jfjdp wrote:Just for illustration sir:

Quantity UOM Description Unit Price Amount
250 pcs. COUPLING GI S.40 1/2 13.70 3,425.00
100 pcs. COUPLING GI S.40 3/4 16.75 1,675.00
20 pcs. COUPLING GI S.40 1 20.84 416.80
20 pcs. COUPLING REDUCER GI 3/4 X 1/2 12.03 240.60
2500 pcs. ELBOW GI S.40 1/2 25.50 63,750.00
176 pcs. ELBOW GI S.40 3/4 27.00 4,752.00
100 pcs. ELBOW GI S.40 1 29.99 2,999.00
400 pcs. ELBOW REDUCER GI S.40 3/4 x 1/2 22.56 9,024.00
ABC 86,282.40

This is how we publish our requirement. So the ABC and the unit price is shown. Bidders are not allowed to exceed the ABC per RA9184 but on the Unit Price they will do so for as long as it does not exceed 25%.

Okey, there is actually no violation of the Transparency Principle.

However, in IRR-A, particularly Sec. 32.4.1, a bidder is allowed to put a "0" price for an item, which would mean that it is being offered for free, and that particular bid would be considered responsive.
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Re: Additional Condition in the Procurement of Goods

Post by aljune70 on Tue May 19, 2009 5:03 pm

sir jfjdp,

correct me if i'm wrong, but if your ABC won't be affected, and your unit price has a margin, then will your quantity be decreased also? if that happens, then the technical specifications of your project will be affected. also, we conduct biddings to obtain prices most beneficial to the procuring entity right? why the 25% margin?... just a thought... Crying or Very sad
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Re: Additional Condition in the Procurement of Goods

Post by engrjhez® on Tue May 19, 2009 5:07 pm

jfjdp wrote:Just for illustration sir:

Quantity UOM Description Unit Price Amount
250 pcs. COUPLING GI S.40 1/2 13.70 3,425.00
100 pcs. COUPLING GI S.40 3/4 16.75 1,675.00
20 pcs. COUPLING GI S.40 1 20.84 416.80
20 pcs. COUPLING REDUCER GI 3/4 X 1/2 12.03 240.60
2500 pcs. ELBOW GI S.40 1/2 25.50 63,750.00
176 pcs. ELBOW GI S.40 3/4 27.00 4,752.00
100 pcs. ELBOW GI S.40 1 29.99 2,999.00
400 pcs. ELBOW REDUCER GI S.40 3/4 x 1/2 22.56 9,024.00
ABC 86,282.40

This is how we publish our requirement. So the ABC and the unit price is shown. Bidders are not allowed to exceed the ABC per RA9184 but on the Unit Price they will do so for as long as it does not exceed 25%.
It follows that, if the unit price may be variable, then so does the quantity? Does it mean that the quantities may be less than the published one? While on the others, the quantity may be more than what is required?

I believe the principle must be - FIRST determine the actual quantities needed. SECOND - determine the reasonable price per unit. THIRD - determine the addition costs that may be incurred with the procurement (taxes, freight cost, etc.) FINALLY - the ABC is determined. Smile
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Fixed Quantity

Post by jfjdp on Wed May 20, 2009 3:20 pm

Thank you everyone,

The quantity is fixed. The unit price is the estimated current price based from the latest purchases plus some allowance for possible increase (will call it Estimated Price per Item or EPI) and subsequently will be the basis to establish the ABC. But since each bidder have their own different sources for any particular item their acquisition cost could also vary. Therefore if they add their margin chances are their bid price per item differs our EPI. There's no problem about that as long as the total amount does not exceed the ABC. But we noticed that the variance is so erratic that it distorts our pricing when we eventually pass on the items to our concessionaire. So we thought of this provision to correct the problem.
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Re: Additional Condition in the Procurement of Goods

Post by RDV @ GP3i on Wed May 20, 2009 5:08 pm

jfjdp wrote:Thank you everyone,

The quantity is fixed. The unit price is the estimated current price based from the latest purchases plus some allowance for possible increase (will call it Estimated Price per Item or EPI) and subsequently will be the basis to establish the ABC. But since each bidder have their own different sources for any particular item their acquisition cost could also vary. Therefore if they add their margin chances are their bid price per item differs our EPI. There's no problem about that as long as the total amount does not exceed the ABC. But we noticed that the variance is so erratic that it distorts our pricing when we eventually pass on the items to our concessionaire. So we thought of this provision to correct the problem.

Again, you would be violating Sec. 32.4.1 of IRR-A allowing a bidder to put a zero ("0") price for an item, meaning he could offer an item for free.

In your case, a bidder cannot exceed by 25% your EPI, otherwise, you will consider his bid an non-responsive.
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Re: Additional Condition in the Procurement of Goods

Post by sunriser431 on Fri May 29, 2009 3:39 pm

jfjdp wrote:We are procuring water service connection materials through Public Bidding with several items per transaction or contract. So the total ABC is the sum of the unit price per item multiplied by the quantity of each item. To avoid to much distortion on the prices as it is also our basis for our costing we added a condition that bid price per item should not exceed 25% of unit price.

Is it prohibited to put such additional condition?
Hi jfjdp
You might find this link useful http://www.gppb.gov.ph/opinions/view_opinion.asp?o_id=149
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