discrepancy in foreign currency rate

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discrepancy in foreign currency rate

Post by ziaragabriel on Fri Sep 25, 2009 5:16 pm

guys,
sorry to disturb you again guys,napakahirap dito sa place namin ang internet connection that's why paminsan-minsan lang maka online.
kindly enlighten us on the following issues relative to discrepancy in foreign currency rate arising from issuance of foreign letter of credit in the procurement of heavy equipment.
1. when there is discrepancy in foreign currency rate between and among the rates during contract implementation (issuance of PO), on bidding date and during application of LC, what rate should prevail?
2. what if during the issuance of PO there was a remarkable increase in foreign currency rate, will there be or who will be liable for discrepancy considering that the agency failed to include a provisional sum of not more than 10% (GPPB Res. 20-2005 dated Oct. 7, 2005) of the ABC to cover the possible appreciation of peso?
3. will it be proper/legal to adjust or reduce the ordered quantity from the winning bidder purposely just to accomodate the remarkable increase in exchange rate? What pertinent rules and regulations were violated?
Comments pls. Usual thanks to all!
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Re: discrepancy in foreign currency rate

Post by engrjhez® on Mon Sep 28, 2009 11:30 am

ziaragabriel wrote:guys,
sorry to disturb you again guys,napakahirap dito sa place namin ang internet connection that's why paminsan-minsan lang maka online.
kindly enlighten us on the following issues relative to discrepancy in foreign currency rate arising from issuance of foreign letter of credit in the procurement of heavy equipment.
1. when there is discrepancy in foreign currency rate between and among the rates during contract implementation (issuance of PO), on bidding date and during application of LC, what rate should prevail?
2. what if during the issuance of PO there was a remarkable increase in foreign currency rate, will there be or who will be liable for discrepancy considering that the agency failed to include a provisional sum of not more than 10% (GPPB Res. 20-2005 dated Oct. 7, 2005) of the ABC to cover the possible appreciation of peso?
3. will it be proper/legal to adjust or reduce the ordered quantity from the winning bidder purposely just to accomodate the remarkable increase in exchange rate? What pertinent rules and regulations were violated?
Comments pls. Usual thanks to all!

Section 61 of the Revised IRR will clearly answer all your queries:

Section 61. Contract Prices

61.1. For the given scope of work in the contract as awarded, all bid prices shall be considered as fixed prices, and therefore not subject to price adjustment and escalation during contract implementation, except under extraordinary circumstance and upon prior approval of the GPPB, or when a Treaty or International or Executive Agreement expressly allows it pursuant to Section 4 of this IRR.

61.2. In cases where the cost of the awarded contract is affected by any applicable new laws, ordinances, regulations, or other acts of the GOP, promulgated after the date of bid opening, a contract price adjustment shall be made or appropriate relief shall be applied on a no loss-no gain basis.

61.3. Any request for price escalation under extraordinary circumstances shall be submitted by the concerned entity to the National Economic and Development Authority (NEDA) with the endorsement of the procuring entity. The burden of proving the occurrence of extraordinary circumstances that will allow for price escalation shall rest with the entity requesting for such escalation. NEDA shall only respond to such request after receiving the proof and the necessary documentation. For purposes of this Section, “extraordinary circumstances” shall refer to events that may be determined by the NEDA in accordance with the Civil Code of the Philippines, and upon the recommendation of the procuring entity concerned.

61.4. All contracts shall be denominated and payable in Philippine currency, and this shall be stated in the Bidding Documents: Provided, however, That subject to the guidelines issued by the GPPB, the procuring entity may provide in the Bidding Documents that obligations may be paid in foreign currency; Provided, further, That should the procuring entity receive bids denominated in foreign currency, the same shall be converted to Philippine currency based on the exchange rate prevailing on the day of the bid opening for purposes of bid comparison and evaluation.

Have a nice day! Very Happy
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Re: discrepancy in foreign currency rate

Post by ziaragabriel on Tue Sep 29, 2009 9:36 am

my million thanks to engrjhez. it helped us a lot!
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Re: discrepancy in foreign currency rate

Post by sunriser431 on Tue Sep 29, 2009 3:47 pm

For clarification lang po. Is the issuance of foreign letter of credit is another form of advance payment? Isnt it disallow by COA? any input from you guys
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Re: discrepancy in foreign currency rate

Post by ziaragabriel on Thu Oct 01, 2009 9:28 am

sir,
a letter of credit is not a form of payment but it is a document issued by a bank guaranteeing to provide a customer a line of credit (automatic loan up to a certain amount) for money or security for a loan. Such a letter is used primarily to facilitate long-distance business transactions.
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Re: discrepancy in foreign currency rate

Post by sunriser431 on Thu Oct 01, 2009 10:10 am

ziaragabriel wrote:sir,
a letter of credit is not a form of payment but it is a document issued by a bank guaranteeing to provide a customer a line of credit (automatic loan up to a certain amount) for money or security for a loan. Such a letter is used primarily to facilitate long-distance business transactions.

Consider this Freq & ask questions from the GPPB (Old IRR-A of RA#9184)
Are procuring entities not allowed to issue Letter of Credits (LCs) to foreign manufacturers?

R.A. 9184 and its IRR-A only prohibit the issuance of domestic LCs to local companies and the latter's foreign manufacturers or suppliers. Letters of credit are considered as advance payment and advance payment is not allowed by Section 88 of Presidential Decree No. 1445 (P.D. 1445) . If a procuring entity has to directly procure from a foreign manufacturer, in case of non-availability of the item in the domestic market and not through a local company, foreign LCs may be issued. (Section 42.5, IRR-A)
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Re: discrepancy in foreign currency rate

Post by amang'65 on Thu Oct 01, 2009 12:05 pm

sunriser431 wrote:
ziaragabriel wrote:sir,
a letter of credit is not a form of payment but it is a document issued by a bank guaranteeing to provide a customer a line of credit (automatic loan up to a certain amount) for money or security for a loan. Such a letter is used primarily to facilitate long-distance business transactions.

Consider this Freq & ask questions from the GPPB (Old IRR-A of RA#9184)
Are procuring entities not allowed to issue Letter of Credits (LCs) to foreign manufacturers?

R.A. 9184 and its IRR-A only prohibit the issuance of domestic LCs to local companies and the latter's foreign manufacturers or suppliers. Letters of credit are considered as advance payment and advance payment is not allowed by Section 88 of Presidential Decree No. 1445 (P.D. 1445) . If a procuring entity has to directly procure from a foreign manufacturer, in case of non-availability of the item in the domestic market and not through a local company, foreign LCs may be issued. (Section 42.5, IRR-A)


alam nyo ziaragabriel, sunriser431 sa aking opinion tama kayong dalawa. LCs may not be considered a form of payment kasi literarily sya ay isang sulat, but behind that a certain amount is being held in the bank which serves as a guarantee para sa isang nangungutang (with all the conditions of course). on the other hand LCs may likemanner be a payment kasi nga may money involve yun nga lang in a form of a letter, which for in this case ay "LC". parang ba yung mg cheke, literarily it is just a piece of paper na maganda, parang walang value, but behind that pera pala ito. Embarassed
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Re: discrepancy in foreign currency rate

Post by sunriser431 on Thu Oct 01, 2009 1:25 pm

amang1965 wrote:
sunriser431 wrote:
ziaragabriel wrote:sir,
a letter of credit is not a form of payment but it is a document issued by a bank guaranteeing to provide a customer a line of credit (automatic loan up to a certain amount) for money or security for a loan. Such a letter is used primarily to facilitate long-distance business transactions.

Consider this Freq & ask questions from the GPPB (Old IRR-A of RA#9184)
Are procuring entities not allowed to issue Letter of Credits (LCs) to foreign manufacturers?

R.A. 9184 and its IRR-A only prohibit the issuance of domestic LCs to local companies and the latter's foreign manufacturers or suppliers. Letters of credit are considered as advance payment and advance payment is not allowed by Section 88 of Presidential Decree No. 1445 (P.D. 1445) . If a procuring entity has to directly procure from a foreign manufacturer, in case of non-availability of the item in the domestic market and not through a local company, foreign LCs may be issued. (Section 42.5, IRR-A)


alam nyo ziaragabriel, sunriser431 sa aking opinion tama kayong dalawa. LCs may not be considered a form of payment kasi literarily sya ay isang sulat, but behind that a certain amount is being held in the bank which serves as a guarantee para sa isang nangungutang (with all the conditions of course). on the other hand LCs may likemanner be a payment kasi nga may money involve yun nga lang in a form of a letter, which for in this case ay "LC". parang ba yung mg cheke, literarily it is just a piece of paper na maganda, parang walang value, but behind that pera pala ito. Embarassed
Watch mode Arrow I ll be back later late for lunch then Sleep Sleep Sleep
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