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Section 62-Warranty

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Section 62-Warranty

Post by cgga91 on Sat Dec 20, 2008 1:28 pm

In Section 62.2.2. does the government/implementing agency have a working procedure to implement the warranty period called for after the final acceptance of the project relative to structure specification?

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Warranty Security

Post by engrjhez® on Sat Dec 27, 2008 7:54 pm

May I quote a section (62.2) prior to your query:

For the procurement of infrastructure projects, the contractor shall assume full
responsibility for the contract work from the time project construction
commenced up to final acceptance by the government and shall be held
responsible for any damage or destruction of the works except those occasioned
by force majeure. The contractor shall be fully responsible for the safety,
protection, security, and convenience of his personnel, third parties, and the
public at large, as well as the works, equipment, installation and the like to be
affected by his construction work and shall be required to put up a warranty
security in the form of cash, bank guarantee, letter of credit, GSIS or surety
bond callable on demand, in accordance with the following schedule:
Form of Warranty Minimum Amount in % of Total
Contract Price
1. Cash deposit, cash bond or letter of credit - Five percent (5%)
2. Bank guarantee - Ten percent (10%)
3. Surety bond - Thirty percent (30%)
The warranty security shall be stated in Philippine Pesos, shall remain effective
during the applicable warranty period provided in Section 62.2.2 hereof, and
shall be returned only after the lapse of the said warranty period. The
warranty shall be full for the first year, and renewable every year
thereafter, subject to depreciation after the first year, on a straight
line basis.


For example:

A chosen warranty is in the form of cash deposit for a permanent structure. This means that contractor's 5% may be "renewed" or be partially pulled out every year for the next fifteen (15) years until the full warranty is served.

The Accounting Office of the implementing agency makes sure of its strict implementation and while the engineering office (in case of LGU's) shall be responsible for monitoring the same.
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Warranty

Post by lily_mascarinas@yahoo.com on Wed Jan 28, 2009 11:15 am

Why is it that in the procurement of infrastructures, surety bond is acceptable as one of the form to be used in posting of warranty security but not in procurement of goods? It is ok if the ABC is small but how about in large supply contracts amounting to more than five or ten million pesos?

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Re: Section 62-Warranty

Post by engrjhez® on Wed Jan 28, 2009 11:24 pm

Infrastructure projects are product of both goods (as in construction materials) and services (in the form of labor and equipment). Unlike goods per se, infra projects may be corrected or modified to arrive at equivalent or even better structure depending on the methods of construction and material specifications. In addition, natural calamities, poor maintenance, and man made disasters may greatly affect the servicability of infrastructures. A surety, just like any insurance, can only be enforced in response to uncertainties and complexities of the product.

I believe the ABC does not (and must not) significantly affect the heed for retention money because it is based on percentage. In the same way we (as in almost everyone) never mind a one (P1) peso less from a ten (P10) peso change, suppliers that are able to bid for ten million worth of project would never mind if it is a million less because they will never (and should never) leave their accounts emptyhanded for just one project. This is a fact and if bidders can't afford to hold a million peso for three (3) to twelve (12) months (which will be returned anyway), they must be ineligible in the first place based on financial deficiency (NFCC).
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Re: Section 62-Warranty

Post by RDV @ GP3i on Fri Jan 30, 2009 11:43 am

Lily:

I will try to answer your questions in the “logical” point-of-view rather than on the “legal” aspect of it. Besides, as you correctly pointed out, on the legal POV, surety bond is acceptable as one of the forms of warranty security for infrastructure projects but not for goods. In the case of goods, there are only two (2) acceptable forms of warranty security; i.e. (1) retention money, and (2) special bank guarantee.

In the case of infrastructure projects, “retention money” is also collected but its purpose is not as warranty security, but to cover for any uncorrected discovered defects or 3rd party liabilities. Therefore, retention money is collected first for every progress payment and shall be released only upon final acceptance of the works. Thereafter, the warranty security shall be collected, the warranty period (whether 15 years, 5 years, or 2 years) will depend on the kind of structure built.

In the case of procurement of goods, the retention money, serves both the purpose of covering for any patent or latent defects of the goods and as warranty security. It shall be released also upon final acceptance of the goods, which is after the lapse of the warranty period of 3 mos. (supplies) or 1 year (equipment).

So, I think, it is only logical that surety bond, as a warranty security for goods, is no longer necessary considering that the retention money already serves the purpose. Should, however, the supplier wants the release of his retention money before the lapse of the warranty period, he may do so, provided he substitutes it with a special bank guarantee equivalent to at least 10% of the total contract price.

Finally, the inclusion of the surety bond as additional form of warranty security for infra is only fair considering that the warranty period for infra projects in much longer than that of goods.

Those are, I believe, are the logical answers to your questions.

RDV
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Re: Section 62-Warranty

Post by riddler on Tue Mar 10, 2009 12:14 pm

Sec. 62 Warranty of the IRR. It really difficult to implement this Section in the real situation. I discussed this matter with different program holders. Most of them never implement this after the substitution of the ten percent cash retention by a Bond or Security. After the lapse of one year, the instrument shall expire..

here is the situation,, What about if the contractor posted a warranty for the 1st year on a certain 15 year warrant for a permanent strucure, and before the 15 year warranty period the contractor's firm is dissolved? who will pay for the rest warranty security?

granting that the contractor's firm is still in business for the next 15 years after the completion of the project, are we requiring the firm to pay a warranty bond every year until the 15th year period?

i suggest that we shall require warranty Bond to the contractor on a "one-time" basis or a one time paymeny for, say 15 years. Is there a Bonding company that accepts that kind of warranty bond?
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Re: Section 62-Warranty

Post by RDV @ GP3i on Tue Mar 10, 2009 4:45 pm

tianchon,ruel wrote:Sec. 62 Warranty of the IRR. It really difficult to implement this Section in the real situation. I discussed this matter with different program holders. Most of them never implement this after the substitution of the ten percent cash retention by a Bond or Security. After the lapse of one year, the instrument shall expire..

here is the situation,, What about if the contractor posted a warranty for the 1st year on a certain 15 year warrant for a permanent strucure, and before the 15 year warranty period the contractor's firm is dissolved? who will pay for the rest warranty security?

granting that the contractor's firm is still in business for the next 15 years after the completion of the project, are we requiring the firm to pay a warranty bond every year until the 15th year period?

i suggest that we shall require warranty Bond to the contractor on a "one-time" basis or a one time paymeny for, say 15 years. Is there a Bonding company that accepts that kind of warranty bond?

Maybe you would like to post your suggestion under the category: Comments on the draft IRR.

It is an important input for GPPB to consider in the draft IRR.
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Warranty for poultry and livestock

Post by jomadel86 on Fri Oct 02, 2009 2:41 pm

If we impose a three month warranty for poulty and livestock, I don't think that there will be any suppliers that will be amenable to this warranty. Because for them a 3-month warranty for animals is too long. Under the old rules where there is no any warranty stipulated, we just impose a 7-day warranty for live animals. Can we do the same under the new IRR? Question Question Question
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Re: Section 62-Warranty

Post by engrjhez® on Sun Oct 04, 2009 3:39 pm

jomadel86 wrote:If we impose a three month warranty for poulty and livestock, I don't think that there will be any suppliers that will be amenable to this warranty. Because for them a 3-month warranty for animals is too long. Under the old rules where there is no any warranty stipulated, we just impose a 7-day warranty for live animals. Can we do the same under the new IRR? Question Question Question

The Revised IRR did not amend Section 62.1 to wit:

62.1. For the procurement of goods, in order to assure that manufacturing defects shall be corrected by the supplier, a warranty security shall be required from the contract awardee for a minimum period of three (3) months, in the case of Expendable Supplies, or a minimum period of one (1) year, in the case of Non-expendable Supplies, after acceptance by the procuring entity of the delivered supplies.

The obligation for the warranty shall be covered by either retention money in an amount equivalent to at least ten percent (10%) of every progress payment, or a special bank guarantee equivalent to at least ten percent (10%) of the total contract price. The said amounts shall only be released after the lapse of the warranty period or, in the case of Expendable Supplies, after consumption thereof: Provided, however, That the supplies delivered are free from patent and latent defects and all the conditions imposed under the contract have been fully met.

BTW, are we talking here of the purchase of animals or animal feeds? If it is the latter, considering it is consumable/expendable, the warranty shall be released after consumption thereof. You may not need to hold-off until the 7th day to clear the delivery of defects. If it is the former, it shall be the consumption date or three (3) months whichever comes first for the purpose it was procured. Very Happy
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Re: Section 62-Warranty

Post by amang'65 on Mon Oct 05, 2009 9:18 pm

jomadel86 wrote:If we impose a three month warranty for poulty and livestock, I don't think that there will be any suppliers that will be amenable to this warranty. Because for them a 3-month warranty for animals is too long. Under the old rules where there is no any warranty stipulated, we just impose a 7-day warranty for live animals. Can we do the same under the new IRR? Question Question Question


i am afraid warranties does not apply to the procurement of live animals, such as chicken, livestock, etc. everthing lies within the inspectorate team, once delivered wala ng resposibilidad and supplier provided nasunod lahat ang mga specifications at pumasa sa inspectorate team. kaya sa setting palang ng specifications dapat detalyado na. naka specify ang weight, size, age, vaccination, etc. siguro and pwedeng maimpose sa mga live animals ay insurance pero i am sure mahal, baka madoble ang presyo ng animal or more than pa.
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Re: Section 62-Warranty

Post by sunriser431 on Tue Oct 06, 2009 11:22 am

jomadel86 wrote:If we impose a three month warranty for poulty and livestock, I don't think that there will be any suppliers that will be amenable to this warranty. Because for them a 3-month warranty for animals is too long. Under the old rules where there is no any warranty stipulated, we just impose a 7-day warranty for live animals. Can we do the same under the new IRR? Question Question Question
For info. consider this NPM
NPM No. NPM 040-2008
Date 10/14/2008
Requesting Entity VTJ Trading
Subject Warranty Security for the Procurement of Goods
Issues/Concern Whether or not the ten percent (10%) retention money may be dispensed with in the delivery of livestock which are given away without restrictions considering that any casualty thereof is no longer the liability of the suppliers inasmuch as the same is already beyond their control.

Please be advised that the framers of R.A. 9184 and its IRR-A perceived the wisdom in including an innovative provision that will provide for guarantee and immediate indemnity in case the goods or the construction works procured are found to be defective or of substandard quality, in order to protect the proprietary interest of the Government. Thus, R.A. 9184 and its IRR-A contain special provisions on warranty in the procurement of goods and infrastructure projects which grant an upfront or forward patent and latent defects. x x x

By virtue of the aforesaid provision (Section 62.1, IRR-A), procuring entities are mandated to retain a part of the contract price, or require a bank guarantee from its suppliers, manufacturers or distributors in the procurement of goods. This provision is generic in application and provides for no exception such that even procurement of goods in small amounts and quantity including those acquired through the alternative methods of procurement are subject to this requirement. However, in exceptional cases and upon prior approval of the procuring entity, the winning supplier may replace the same with a special bank guarantee in the same amount.

Further, please take note that a partial release or reduction of the warranty may be allowed in the case of partial deliveries. In this case, the warranty for goods delivered ahead will lapse earlier than the succeeding deliveries. This will have the effect of having partial releases of the retention money or special bank guarantee to coincide with the lapse of the warranty provision for each delivered lot. However, the warranty must be in the form of retention fee equivalent to ten percent (10%) of every payment.
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Re: Section 62-Warranty

Post by amang'65 on Tue Oct 06, 2009 12:06 pm

sunriser431 wrote:
jomadel86 wrote:If we impose a three month warranty for poulty and livestock, I don't think that there will be any suppliers that will be amenable to this warranty. Because for them a 3-month warranty for animals is too long. Under the old rules where there is no any warranty stipulated, we just impose a 7-day warranty for live animals. Can we do the same under the new IRR? Question Question Question
For info. consider this NPM
NPM No. NPM 040-2008
Date 10/14/2008
Requesting Entity VTJ Trading
Subject Warranty Security for the Procurement of Goods
Issues/Concern Whether or not the ten percent (10%) retention money may be dispensed with in the delivery of livestock which are given away without restrictions considering that any casualty thereof is no longer the liability of the suppliers inasmuch as the same is already beyond their control.

Please be advised that the framers of R.A. 9184 and its IRR-A perceived the wisdom in including an innovative provision that will provide for guarantee and immediate indemnity in case the goods or the construction works procured are found to be defective or of substandard quality, in order to protect the proprietary interest of the Government. Thus, R.A. 9184 and its IRR-A contain special provisions on warranty in the procurement of goods and infrastructure projects which grant an upfront or forward patent and latent defects. x x x

By virtue of the aforesaid provision (Section 62.1, IRR-A), procuring entities are mandated to retain a part of the contract price, or require a bank guarantee from its suppliers, manufacturers or distributors in the procurement of goods. This provision is generic in application and provides for no exception such that even procurement of goods in small amounts and quantity including those acquired through the alternative methods of procurement are subject to this requirement. However, in exceptional cases and upon prior approval of the procuring entity, the winning supplier may replace the same with a special bank guarantee in the same amount.

Further, please take note that a partial release or reduction of the warranty may be allowed in the case of partial deliveries. In this case, the warranty for goods delivered ahead will lapse earlier than the succeeding deliveries. This will have the effect of having partial releases of the retention money or special bank guarantee to coincide with the lapse of the warranty provision for each delivered lot. However, the warranty must be in the form of retention fee equivalent to ten percent (10%) of every payment.


But again it could not be applied to procurement of live animals.
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Re: Section 62-Warranty

Post by sunriser431 on Tue Oct 06, 2009 11:05 pm

amang1965 wrote:
sunriser431 wrote:
jomadel86 wrote:If we impose a three month warranty for poulty and livestock, I don't think that there will be any suppliers that will be amenable to this warranty. Because for them a 3-month warranty for animals is too long. Under the old rules where there is no any warranty stipulated, we just impose a 7-day warranty for live animals. Can we do the same under the new IRR? Question Question Question
For info. consider this NPM
NPM No. NPM 040-2008
Date 10/14/2008
Requesting Entity VTJ Trading
Subject Warranty Security for the Procurement of Goods
Issues/Concern Whether or not the ten percent (10%) retention money may be dispensed with in the delivery of livestock which are given away without restrictions considering that any casualty thereof is no longer the liability of the suppliers inasmuch as the same is already beyond their control.

Please be advised that the framers of R.A. 9184 and its IRR-A perceived the wisdom in including an innovative provision that will provide for guarantee and immediate indemnity in case the goods or the construction works procured are found to be defective or of substandard quality, in order to protect the proprietary interest of the Government. Thus, R.A. 9184 and its IRR-A contain special provisions on warranty in the procurement of goods and infrastructure projects which grant an upfront or forward patent and latent defects. x x x

By virtue of the aforesaid provision (Section 62.1, IRR-A), procuring entities are mandated to retain a part of the contract price, or require a bank guarantee from its suppliers, manufacturers or distributors in the procurement of goods. This provision is generic in application and provides for no exception such that even procurement of goods in small amounts and quantity including those acquired through the alternative methods of procurement are subject to this requirement. However, in exceptional cases and upon prior approval of the procuring entity, the winning supplier may replace the same with a special bank guarantee in the same amount.

Further, please take note that a partial release or reduction of the warranty may be allowed in the case of partial deliveries. In this case, the warranty for goods delivered ahead will lapse earlier than the succeeding deliveries. This will have the effect of having partial releases of the retention money or special bank guarantee to coincide with the lapse of the warranty provision for each delivered lot. However, the warranty must be in the form of retention fee equivalent to ten percent (10%) of every payment.
But again it could not be applied to procurement of live animals.
For the benefit of all, please explain. or share your Idea Idea
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Re: Section 62-Warranty

Post by amang'65 on Wed Oct 07, 2009 10:21 am

sunriser431 wrote:
amang1965 wrote:
sunriser431 wrote:
jomadel86 wrote:If we impose a three month warranty for poulty and livestock, I don't think that there will be any suppliers that will be amenable to this warranty. Because for them a 3-month warranty for animals is too long. Under the old rules where there is no any warranty stipulated, we just impose a 7-day warranty for live animals. Can we do the same under the new IRR? Question Question Question
For info. consider this NPM
NPM No. NPM 040-2008
Date 10/14/2008
Requesting Entity VTJ Trading
Subject Warranty Security for the Procurement of Goods
Issues/Concern Whether or not the ten percent (10%) retention money may be dispensed with in the delivery of livestock which are given away without restrictions considering that any casualty thereof is no longer the liability of the suppliers inasmuch as the same is already beyond their control.

Please be advised that the framers of R.A. 9184 and its IRR-A perceived the wisdom in including an innovative provision that will provide for guarantee and immediate indemnity in case the goods or the construction works procured are found to be defective or of substandard quality, in order to protect the proprietary interest of the Government. Thus, R.A. 9184 and its IRR-A contain special provisions on warranty in the procurement of goods and infrastructure projects which grant an upfront or forward patent and latent defects. x x x

By virtue of the aforesaid provision (Section 62.1, IRR-A), procuring entities are mandated to retain a part of the contract price, or require a bank guarantee from its suppliers, manufacturers or distributors in the procurement of goods. This provision is generic in application and provides for no exception such that even procurement of goods in small amounts and quantity including those acquired through the alternative methods of procurement are subject to this requirement. However, in exceptional cases and upon prior approval of the procuring entity, the winning supplier may replace the same with a special bank guarantee in the same amount.

Further, please take note that a partial release or reduction of the warranty may be allowed in the case of partial deliveries. In this case, the warranty for goods delivered ahead will lapse earlier than the succeeding deliveries. This will have the effect of having partial releases of the retention money or special bank guarantee to coincide with the lapse of the warranty provision for each delivered lot. However, the warranty must be in the form of retention fee equivalent to ten percent (10%) of every payment.
But again it could not be applied to procurement of live animals.
For the benefit of all, please explain. or share your Idea Idea


gusto mo malaman? kiss muna, geek
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Re: Section 62-Warranty

Post by engrjhez® on Wed Oct 07, 2009 10:40 pm

mwah! Razz o ayan, wahehehe! Very Happy
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Re: Section 62-Warranty

Post by amang'65 on Wed Oct 07, 2009 11:04 pm

engrjhez wrote:mwah! Razz o ayan, wahehehe! Very Happy


eeeew..... yuck!!!! Embarassed
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