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Warranty Security

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Warranty Security

Post by Berna on Wed Feb 24, 2010 4:27 pm

We are now on the process of preparing the documents for payment of farm tractor which we bid early this year.

The source of fund is a loan from the Land Bank of the Philippines. The Land Bank of the Philippines requires Certification from the BAC that the LGU had complied to the provisions of RA 9184, its IRR and COA Rules and Regulations.

The BAC now requires the supplier to post warranty sec before issuing such certification. The supplier, in compliance to the said requirement, issued a letter advising the LGU to deduct the 10% from the contract price as their warranty security.

The LGU requests the Land Bank of the Philippines to retain the 10% of the contract price...and waits for the response.
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Re: Warranty Security

Post by Guest on Wed Feb 24, 2010 4:55 pm

What is the connection of the requirement of the LBP of certification and the warranty which is the obligation of the bidder to give and the PE to retain.

1. Clarify what is the extent of the certification is it a certification of the procedure or compliance w/ ra 9184 until contract implementation.

If the case is certificaiton of compliance of procedure the BAC can issue it after the NOA. If the latter the certification can only be issued after contract implementation.


2 The posting of warranty is required under sec 62 to assure that there is no manufacturing defects. 10% of the contract price may be witheld by the Procuring entity.

The LGU do not need to request the LBP to retain the 10% because the job to retain is the responsibility of the PE.

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Re: Warranty Security

Post by amang'65 on Wed Feb 24, 2010 7:24 pm

well we cannot do otherwise, banko yan maraming requirements lalo na pag loan. i believe you have a loan agreement, check every conditions you may use this to argue.
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Re: Warranty Security

Post by riddler on Thu Feb 25, 2010 8:56 am

amang1965 wrote:well we cannot do otherwise, banko yan maraming requirements lalo na pag loan. i believe you have a loan agreement, check every conditions you may use this to argue.

'just want to be clarified driz, yung buong pera ba na nai-loan nyo sa LBP eh pumasok sa Local Fund nyo as "Trust Fund'? Kung pumasok nga, tama si amang na resposibilidad ng PE na mag retain ng 10% contract price as Warranty Security for 1 year... All you need as PE is to issue a Certification na na with-hold nyo ang 10% retention for warranty sa final payment. Very Happy

halmbawa na LBP ang nag ho-hold ng boong pera, eh sila supposed to be ang mag with-hold non at saka i turn-over sa LGU. Very Happy Very Happy
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Re: Warranty Security

Post by RDV @ GP3i on Thu Feb 25, 2010 9:10 am

Bernadette G. Driza wrote:We are now on the process of preparing the documents for payment of farm tractor which we bid early this year.

The source of fund is a loan from the Land Bank of the Philippines. The Land Bank of the Philippines requires Certification from the BAC that the LGU had complied to the provisions of RA 9184, its IRR and COA Rules and Regulations.

The BAC now requires the supplier to post warranty sec before issuing such certification. The supplier, in compliance to the said requirement, issued a letter advising the LGU to deduct the 10% from the contract price as their warranty security.

The LGU requests the Land Bank of the Philippines to retain the 10% of the contract price...and waits for the response.

The assumption here is that the LGU loan will be released directly by LBP to the winning supplier. That is the reason why that certification is being asked by the bank, at least to assure itself and be out of any liability just in case the LGU awarded the contract in violation of RA 9184.

I think the procedure is proper and the request by the LGU to LBP for the retention money of 10% to be deducted from the amount to be paid the supplier would be in order.
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Re: Warranty Security

Post by charlie brown on Thu Feb 25, 2010 3:50 pm

Bernadette G. Driza wrote:We are now on the process of preparing the documents for payment of farm tractor which we bid early this year.

The source of fund is a loan from the Land Bank of the Philippines. The Land Bank of the Philippines requires Certification from the BAC that the LGU had complied to the provisions of RA 9184, its IRR and COA Rules and Regulations.

The BAC now requires the supplier to post warranty sec before issuing such certification. The supplier, in compliance to the said requirement, issued a letter advising the LGU to deduct the 10% from the contract price as their warranty security.

The LGU requests the Land Bank of the Philippines to retain the 10% of the contract price...and waits for the response.

for clarification lang:

has the amount of loan been released yet? and to whom?
If the amount has not been released yet to the LGU, i wonder how the BAC was able to proceed with the procurement when a basic requirement is an ABC that is enacted by the Sanggunian. Without the funds released to the coffers of the LGU, how could the treasurer certify to its availability and subsequently the sanggunian to enact the appropriation ordinance that would in effect create the ABC? I have encountered a few cases such as this and in my view thre is a need to reconcile the rquirements of the lending bank with that of the requirments of the local government code as well as RA 9184.

As to the warranty, i beleive this is only required ones the goods are already delivered and accepted by the PE - as part of the requirements for the payment. the supplier is correct in exercising the option of retaining 10% of the contract price by the PE.
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Re: Warranty Security

Post by Guest on Thu Feb 25, 2010 4:08 pm

Siguro naman ung LBP ay hindi dederetso sa bidder pag mag babayad. idadaan ung pera syempre sa procuring entity.

Just issue the Certification para ma release ung pera and retain the 10% pero notify the LBP of the retention and reason(compliance with ra 9184).

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Re: Warranty Security

Post by charlie brown on Thu Feb 25, 2010 4:30 pm

Pritong Kandule wrote:Siguro naman ung LBP ay hindi dederetso sa bidder pag mag babayad. idadaan ung pera syempre sa procuring entity.

Just issue the Certification para ma release ung pera and retain the 10% pero notify the LBP of the retention and reason(compliance with ra 9184).

it will probably be less problematic if funds will be coursed thru the LGU but then again the issue of how the BAC was able to commence with the bidding without the ABC... the only other option i could think of is if this is recorded as a trust fund and thus by COA rules need not pass through the sanggunian for appropriation. However, there is still the issue of the ABC as defined in RA 9184
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Re: Warranty Security

Post by riddler on Thu Feb 25, 2010 4:47 pm

charlie brown wrote:
Pritong Kandule wrote:Siguro naman ung LBP ay hindi dederetso sa bidder pag mag babayad. idadaan ung pera syempre sa procuring entity.

Just issue the Certification para ma release ung pera and retain the 10% pero notify the LBP of the retention and reason(compliance with ra 9184).

it will probably be less problematic if funds will be coursed thru the LGU but then again the issue of how the BAC was able to commence with the bidding without the ABC... the only other option i could think of is if this is recorded as a trust fund and thus by COA rules need not pass through the sanggunian for appropriation. However, there is still the issue of the ABC as defined in RA 9184

May I share how the Loan proceeds from Banks works for our LGU's.

1st There has to be a Local Sanggunian resolution authorizing the Local Chief Executive to Negotiate the Loan with the Bank.. i.e Terms and Conditions with the bank.

2nd After the Loan has been approved by both parties, another Local Sanggunian Relolution shall be enacted to APPROPRIATE the Loan into the Local Budget.

3rd Another Local Resolution shall be passed authorizing the LCE to open a Trust Account Fund with the Bank relative to the loan

under the Terms of Agremment to the Bank, upon signing of Contract with the Bank, the Bank shall release either 50% or the whole Amount depending on the TOR. For Goods, the BAnk may release the whole amount, while for Infra the fund shall be released on a staggard basis subject to the inspection of the BAnk's reps. The PE shall retain 10% percent of every progress payment.

under our TOR with the BAnk, theyrequire the Contractor/LGU to submit the Comprehensive All Risk Insurance (CARI)
upon signing of theContract with the winning bidder.. Very Happy Very Happy

grabe ang byrukrasya sa LGU ano? Very Happy
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Re: Warranty Security

Post by Berna on Fri Feb 26, 2010 1:53 pm

RDV wrote:
Bernadette G. Driza wrote:We are now on the process of preparing the documents for payment of farm tractor which we bid early this year.

The source of fund is a loan from the Land Bank of the Philippines. The Land Bank of the Philippines requires Certification from the BAC that the LGU had complied to the provisions of RA 9184, its IRR and COA Rules and Regulations.

The BAC now requires the supplier to post warranty sec before issuing such certification. The supplier, in compliance to the said requirement, issued a letter advising the LGU to deduct the 10% from the contract price as their warranty security.

The LGU requests the Land Bank of the Philippines to retain the 10% of the contract price...and waits for the response.

The assumption here is that the LGU loan will be released directly by LBP to the winning supplier. That is the reason why that certification is being asked by the bank, at least to assure itself and be out of any liability just in case the LGU awarded the contract in violation of RA 9184.

I think the procedure is proper and the request by the LGU to LBP for the retention money of 10% to be deducted from the amount to be paid the supplier would be in order.

Yes sir...we had the consultation with the Land Bank of the Philippines just this morning. They told us that they are not going to retain the warranty security since it was not stipulated in their procedure.

I think the terms were designed before the revised IRR... Laughing


Last edited by Bernadette G. Driza on Fri Feb 26, 2010 2:26 pm; edited 1 time in total (Reason for editing : mali)
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Re: Warranty Security

Post by Berna on Fri Feb 26, 2010 2:11 pm

riddler wrote:
charlie brown wrote:
Pritong Kandule wrote:Siguro naman ung LBP ay hindi dederetso sa bidder pag mag babayad. idadaan ung pera syempre sa procuring entity.

Just issue the Certification para ma release ung pera and retain the 10% pero notify the LBP of the retention and reason(compliance with ra 9184).

it will probably be less problematic if funds will be coursed thru the LGU but then again the issue of how the BAC was able to commence with the bidding without the ABC... the only other option i could think of is if this is recorded as a trust fund and thus by COA rules need not pass through the sanggunian for appropriation. However, there is still the issue of the ABC as defined in RA 9184

May I share how the Loan proceeds from Banks works for our LGU's.

1st There has to be a Local Sanggunian resolution authorizing the Local Chief Executive to Negotiate the Loan with the Bank.. i.e Terms and Conditions with the bank.

2nd After the Loan has been approved by both parties, another Local Sanggunian Relolution shall be enacted to APPROPRIATE the Loan into the Local Budget.

3rd Another Local Resolution shall be passed authorizing the LCE to open a Trust Account Fund with the Bank relative to the loan

under the Terms of Agremment to the Bank, upon signing of Contract with the Bank, the Bank shall release either 50% or the whole Amount depending on the TOR. For Goods, the BAnk may release the whole amount, while for Infra the fund shall be released on a staggard basis subject to the inspection of the BAnk's reps. The PE shall retain 10% percent of every progress payment.

under our TOR with the BAnk, theyrequire the Contractor/LGU to submit the Comprehensive All Risk Insurance (CARI)
upon signing of theContract with the winning bidder.. Very Happy Very Happy

grabe ang byrukrasya sa LGU ano? Very Happy

Sorry sir but i do not know the TOR with the Bank...
Embarassed

i am just a mere casual employee...

but as far as i know, it was in the terms that the bank shall pay 100% to the supplier... maybe the TOR was designed before the revised IRR. Very Happy

Thanks for the sharing.
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Re: Warranty Security

Post by RDV @ GP3i on Fri Feb 26, 2010 6:19 pm

Bernadette G. Driza wrote:
RDV wrote:
Bernadette G. Driza wrote:We are now on the process of preparing the documents for payment of farm tractor which we bid early this year.

The source of fund is a loan from the Land Bank of the Philippines. The Land Bank of the Philippines requires Certification from the BAC that the LGU had complied to the provisions of RA 9184, its IRR and COA Rules and Regulations.

The BAC now requires the supplier to post warranty sec before issuing such certification. The supplier, in compliance to the said requirement, issued a letter advising the LGU to deduct the 10% from the contract price as their warranty security.

The LGU requests the Land Bank of the Philippines to retain the 10% of the contract price...and waits for the response.

The assumption here is that the LGU loan will be released directly by LBP to the winning supplier. That is the reason why that certification is being asked by the bank, at least to assure itself and be out of any liability just in case the LGU awarded the contract in violation of RA 9184.

I think the procedure is proper and the request by the LGU to LBP for the retention money of 10% to be deducted from the amount to be paid the supplier would be in order.

Yes sir...we had the consultation with the Land Bank of the Philippines just this morning. They told us that they are not going to retain the warranty security since it was not stipulated in their procedure.

I think the terms were designed before the revised IRR... Laughing

If that is the case, you should ask the supplier to post a bank guarantee first as warranty security before you give the certification to LBP which will be the bank's basis of releasing the full amount of the contract to the supplier.
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Re: Warranty Security

Post by riddler on Fri Feb 26, 2010 8:05 pm

RDV wrote:
Bernadette G. Driza wrote:
RDV wrote:
Bernadette G. Driza wrote:We are now on the process of preparing the documents for payment of farm tractor which we bid early this year.

The source of fund is a loan from the Land Bank of the Philippines. The Land Bank of the Philippines requires Certification from the BAC that the LGU had complied to the provisions of RA 9184, its IRR and COA Rules and Regulations.

The BAC now requires the supplier to post warranty sec before issuing such certification. The supplier, in compliance to the said requirement, issued a letter advising the LGU to deduct the 10% from the contract price as their warranty security.

The LGU requests the Land Bank of the Philippines to retain the 10% of the contract price...and waits for the response.

The assumption here is that the LGU loan will be released directly by LBP to the winning supplier. That is the reason why that certification is being asked by the bank, at least to assure itself and be out of any liability just in case the LGU awarded the contract in violation of RA 9184.

I think the procedure is proper and the request by the LGU to LBP for the retention money of 10% to be deducted from the amount to be paid the supplier would be in order.

Yes sir...we had the consultation with the Land Bank of the Philippines just this morning. They told us that they are not going to retain the warranty security since it was not stipulated in their procedure.

I think the terms were designed before the revised IRR... Laughing

If that is the case, you should ask the supplier to post a bank guarantee first as warranty security before you give the certification to LBP which will be the bank's basis of releasing the full amount of the contract to the supplier.

ThaT'S right RDV, since the IRR is very clear of the 10% retention. 'Bdette ,supplier need to post that retention to your mucipality, para sure kayo na pag merong dprensya yung unit meron kayong mahhabol. make sure also that the Bond is posted in the name of your municpality. Very Happy
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Re: Warranty Security

Post by riddler on Fri Feb 26, 2010 8:21 pm

Bernadette G. Driza wrote:

Sorry sir but i do not know the TOR with the Bank...
Embarassed .

I meant, Terms of Reference/Agreement with the Bank, sort of a Contract made between the Bank and our LGU. Very Happy Very Happy Some Banks kasi parang "onerous" ang TOR nila. So pag dis-advantage ang TOR ng bangko sa atin, pwd tayo hanap sa ibang Bank na advantage para sa atin ang Terms..

Bernadette G. Driza wrote:
i am just a mere casual employee...
i wish you could find a nice word 'dette, dont do that to yourself.. i admire your courage to ask question.. it goes to show that you are doin your job well.. your unit should be proud of you. Very Happy

Bernadette G. Driza wrote:
but as far as i know, it was in the terms that the bank shall pay 100% to the supplier... maybe the TOR was designed before the revised IRR. Very Happy
Thanks for the sharing.
usually your Municipal Treasurer, Budget Officer or MPDO are involved in the crafting of the TOR with the Bank. Can you ask a copy from them?I dont believed na nauna pa yung TOR sa IRR natin. kasi 2004 pa yung procurement LAw eh. Very Happy
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Warranty Security

Post by Berna on Sun Feb 28, 2010 1:19 pm

riddler wrote:
RDV wrote:
Bernadette G. Driza wrote:
RDV wrote:
Bernadette G. Driza wrote:We are now on the process of preparing the documents for payment of farm tractor which we bid early this year.

The source of fund is a loan from the Land Bank of the Philippines. The Land Bank of the Philippines requires Certification from the BAC that the LGU had complied to the provisions of RA 9184, its IRR and COA Rules and Regulations.

The BAC now requires the supplier to post warranty sec before issuing such certification. The supplier, in compliance to the said requirement, issued a letter advising the LGU to deduct the 10% from the contract price as their warranty security.

The LGU requests the Land Bank of the Philippines to retain the 10% of the contract price...and waits for the response.

The assumption here is that the LGU loan will be released directly by LBP to the winning supplier. That is the reason why that certification is being asked by the bank, at least to assure itself and be out of any liability just in case the LGU awarded the contract in violation of RA 9184.

I think the procedure is proper and the request by the LGU to LBP for the retention money of 10% to be deducted from the amount to be paid the supplier would be in order.

Yes sir...we had the consultation with the Land Bank of the Philippines just this morning. They told us that they are not going to retain the warranty security since it was not stipulated in their procedure.

I think the terms were designed before the revised IRR... Laughing

If that is the case, you should ask the supplier to post a bank guarantee first as warranty security before you give the certification to LBP which will be the bank's basis of releasing the full amount of the contract to the supplier.

ThaT'S right RDV, since the IRR is very clear of the 10% retention. 'Bdette ,supplier need to post that retention to your mucipality, para sure kayo na pag merong dprensya yung unit meron kayong mahhabol. make sure also that the Bond is posted in the name of your municpality. Very Happy

Thanks po ...it is so ironic when the bank requires the 100% payment of the LGU (LGU's counterpart) to the supplier before they would pay the supplier... bounce


Last edited by Bernadette G. Driza on Sun Feb 28, 2010 1:30 pm; edited 1 time in total (Reason for editing : kulang)
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Re: Warranty Security

Post by charlie brown on Mon Mar 01, 2010 3:59 pm

riddler wrote:
charlie brown wrote:
Pritong Kandule wrote:Siguro naman ung LBP ay hindi dederetso sa bidder pag mag babayad. idadaan ung pera syempre sa procuring entity.

Just issue the Certification para ma release ung pera and retain the 10% pero notify the LBP of the retention and reason(compliance with ra 9184).

it will probably be less problematic if funds will be coursed thru the LGU but then again the issue of how the BAC was able to commence with the bidding without the ABC... the only other option i could think of is if this is recorded as a trust fund and thus by COA rules need not pass through the sanggunian for appropriation. However, there is still the issue of the ABC as defined in RA 9184

May I share how the Loan proceeds from Banks works for our LGU's.

1st There has to be a Local Sanggunian resolution authorizing the Local Chief Executive to Negotiate the Loan with the Bank.. i.e Terms and Conditions with the bank.

2nd After the Loan has been approved by both parties, another Local Sanggunian Relolution shall be enacted to APPROPRIATE the Loan into the Local Budget.

3rd Another Local Resolution shall be passed authorizing the LCE to open a Trust Account Fund with the Bank relative to the loan

under the Terms of Agremment to the Bank, upon signing of Contract with the Bank, the Bank shall release either 50% or the whole Amount depending on the TOR. For Goods, the BAnk may release the whole amount, while for Infra the fund shall be released on a staggard basis subject to the inspection of the BAnk's reps. The PE shall retain 10% percent of every progress payment.

under our TOR with the BAnk, theyrequire the Contractor/LGU to submit the Comprehensive All Risk Insurance (CARI)
upon signing of theContract with the winning bidder.. Very Happy Very Happy

grabe ang byrukrasya sa LGU ano? Very Happy

My concern is actually centered on step 2 you mentioned. please note that pursuant to section 321 of the Local Government Code there are only 3 instances when a supplemental budget can be enacted by the sanggunian: 1) when funds are actually available 2) if covered by new revenue source; and 3) in times of public calamity. A detailed discussion of these sources are also provided under AO 47 by then Pres. Ramos. if a got it right, there is no mention that a bank approval -without the corresponding receipt of the amount of the loan - can be a source of a supplemental budget. by the way the suplemental budget is enacted by way of an appropriation ordinance and not just a resolution as mentioned.

My concern as i have said is, what is the basis of the sanggunian for step 2 you described? and without the enactment of an ordinance authorizing the supplemental budget how can there be an ABC as defined under section 5 of the IRR? Im sure thre is a way out of this but i beleive there is a need to harmonize the existing bankloan policies with the provisions of RA 9184 AND ra 7160
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Re: Warranty Security

Post by engrjhez® on Mon Mar 01, 2010 9:46 pm

charlie brown wrote:
My concern is actually centered on step 2 you mentioned. please note that pursuant to section 321 of the Local Government Code there are only 3 instances when a supplemental budget can be enacted by the sanggunian: 1) when funds are actually available 2) if covered by new revenue source; and 3) in times of public calamity. A detailed discussion of these sources are also provided under AO 47 by then Pres. Ramos. if a got it right, there is no mention that a bank approval -without the corresponding receipt of the amount of the loan - can be a source of a supplemental budget. by the way the suplemental budget is enacted by way of an appropriation ordinance and not just a resolution as mentioned.

My concern as i have said is, what is the basis of the sanggunian for step 2 you described? and without the enactment of an ordinance authorizing the supplemental budget how can there be an ABC as defined under section 5 of the IRR? Im sure thre is a way out of this but i beleive there is a need to harmonize the existing bankloan policies with the provisions of RA 9184 AND ra 7160

In case of LGU, I think it will fall under "(1) when funds are actually available".

First and foremost, before an LGU is granted a loan, it should have determined the intention and need of the LGU itself;

Second, when the intention or project is realized, the LCE requests for the authority from the Sanggunian to authorize him/her to invite proposals and to negotiate with banks and other financing institution;

Third, once the most advantageous terms and conditions is determined (it may be evaluated by other means or may hire the expertise of the BAC for the purpose), the recommendation and award is brought to the Sanggunian again for ratification;

Finally, only when the loan is granted can the Sanggunian concurrently enact the Supplemental Budget based on the approval of the bank or financing institution.

It is actually during the same time the amount of loan is realized it is only logical to have the ABC determined properly (or adjusted accordingly) for Supplemental APP and for Supplemental Budget.
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Re: Warranty Security

Post by Berna on Tue Mar 02, 2010 2:37 pm

RDV @ GPPPI wrote:
Bernadette G. Driza wrote:
RDV wrote:
Bernadette G. Driza wrote:We are now on the process of preparing the documents for payment of farm tractor which we bid early this year.

The source of fund is a loan from the Land Bank of the Philippines. The Land Bank of the Philippines requires Certification from the BAC that the LGU had complied to the provisions of RA 9184, its IRR and COA Rules and Regulations.

The BAC now requires the supplier to post warranty sec before issuing such certification. The supplier, in compliance to the said requirement, issued a letter advising the LGU to deduct the 10% from the contract price as their warranty security.

The LGU requests the Land Bank of the Philippines to retain the 10% of the contract price...and waits for the response.

The assumption here is that the LGU loan will be released directly by LBP to the winning supplier. That is the reason why that certification is being asked by the bank, at least to assure itself and be out of any liability just in case the LGU awarded the contract in violation of RA 9184.

I think the procedure is proper and the request by the LGU to LBP for the retention money of 10% to be deducted from the amount to be paid the supplier would be in order.

Yes sir...we had the consultation with the Land Bank of the Philippines just this morning. They told us that they are not going to retain the warranty security since it was not stipulated in their procedure.

I think the terms were designed before the revised IRR... Laughing

If that is the case, you should ask the supplier to post a bank guarantee first as warranty security before you give the certification to LBP which will be the bank's basis of releasing the full amount of the contract to the supplier.

Does it mean sir, the supplier has no option but the bank guarantee?We were planning to suggest sana to the supplier to issue check to be receipted by the Treasurer but we thought we could be out of process...
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Re: Warranty Security

Post by RDV @ GP3i on Tue Mar 02, 2010 2:48 pm

Bernadette G. Driza wrote:
RDV @ GPPPI wrote:
Bernadette G. Driza wrote:
RDV wrote:
Bernadette G. Driza wrote:We are now on the process of preparing the documents for payment of farm tractor which we bid early this year.

The source of fund is a loan from the Land Bank of the Philippines. The Land Bank of the Philippines requires Certification from the BAC that the LGU had complied to the provisions of RA 9184, its IRR and COA Rules and Regulations.

The BAC now requires the supplier to post warranty sec before issuing such certification. The supplier, in compliance to the said requirement, issued a letter advising the LGU to deduct the 10% from the contract price as their warranty security.

The LGU requests the Land Bank of the Philippines to retain the 10% of the contract price...and waits for the response.

The assumption here is that the LGU loan will be released directly by LBP to the winning supplier. That is the reason why that certification is being asked by the bank, at least to assure itself and be out of any liability just in case the LGU awarded the contract in violation of RA 9184.

I think the procedure is proper and the request by the LGU to LBP for the retention money of 10% to be deducted from the amount to be paid the supplier would be in order.

Yes sir...we had the consultation with the Land Bank of the Philippines just this morning. They told us that they are not going to retain the warranty security since it was not stipulated in their procedure.

I think the terms were designed before the revised IRR... Laughing

If that is the case, you should ask the supplier to post a bank guarantee first as warranty security before you give the certification to LBP which will be the bank's basis of releasing the full amount of the contract to the supplier.

Does it mean sir, the supplier has no option but the bank guarantee?We were planning to suggest sana to the supplier to issue check to be receipted by the Treasurer but we thought we could be out of process...

Mali talaga yun sa process.

There are only two (2) forms of warranty security for goods, either a retention money or a bank guarantee (Sec. 62.1). As far as the supplier is concerned also, the bank guarantee it is a better option for him since his capital will not be tied with you, which the retention money (or even the check that you are envisioning) will do.
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Warranty Security

Post by Berna on Tue Mar 02, 2010 3:14 pm

RDV @ GPPPI wrote:
Bernadette G. Driza wrote:
RDV @ GPPPI wrote:
Bernadette G. Driza wrote:
RDV wrote:
Bernadette G. Driza wrote:We are now on the process of preparing the documents for payment of farm tractor which we bid early this year.

The source of fund is a loan from the Land Bank of the Philippines. The Land Bank of the Philippines requires Certification from the BAC that the LGU had complied to the provisions of RA 9184, its IRR and COA Rules and Regulations.

The BAC now requires the supplier to post warranty sec before issuing such certification. The supplier, in compliance to the said requirement, issued a letter advising the LGU to deduct the 10% from the contract price as their warranty security.

The LGU requests the Land Bank of the Philippines to retain the 10% of the contract price...and waits for the response.

The assumption here is that the LGU loan will be released directly by LBP to the winning supplier. That is the reason why that certification is being asked by the bank, at least to assure itself and be out of any liability just in case the LGU awarded the contract in violation of RA 9184.

I think the procedure is proper and the request by the LGU to LBP for the retention money of 10% to be deducted from the amount to be paid the supplier would be in order.

Yes sir...we had the consultation with the Land Bank of the Philippines just this morning. They told us that they are not going to retain the warranty security since it was not stipulated in their procedure.

I think the terms were designed before the revised IRR... Laughing

If that is the case, you should ask the supplier to post a bank guarantee first as warranty security before you give the certification to LBP which will be the bank's basis of releasing the full amount of the contract to the supplier.

Does it mean sir, the supplier has no option but the bank guarantee?We were planning to suggest sana to the supplier to issue check to be receipted by the Treasurer but we thought we could be out of process...

Mali talaga yun sa process.

There are only two (2) forms of warranty security for goods, either a retention money or a bank guarantee (Sec. 62.1). As far as the supplier is concerned also, the bank guarantee it is a better option for him since his capital will not be tied with you, which the retention money (or even the check that you are envisioning) will do.

Thank you very much sir! Very Happy
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Re: Warranty Security

Post by charlie brown on Wed Mar 03, 2010 11:40 am

engrjhez® wrote:
charlie brown wrote:
My concern is actually centered on step 2 you mentioned. please note that pursuant to section 321 of the Local Government Code there are only 3 instances when a supplemental budget can be enacted by the sanggunian: 1) when funds are actually available 2) if covered by new revenue source; and 3) in times of public calamity. A detailed discussion of these sources are also provided under AO 47 by then Pres. Ramos. if a got it right, there is no mention that a bank approval -without the corresponding receipt of the amount of the loan - can be a source of a supplemental budget. by the way the suplemental budget is enacted by way of an appropriation ordinance and not just a resolution as mentioned.

My concern as i have said is, what is the basis of the sanggunian for step 2 you described? and without the enactment of an ordinance authorizing the supplemental budget how can there be an ABC as defined under section 5 of the IRR? Im sure thre is a way out of this but i beleive there is a need to harmonize the existing bankloan policies with the provisions of RA 9184 AND ra 7160

In case of LGU, I think it will fall under "(1) when funds are actually available".

First and foremost, before an LGU is granted a loan, it should have determined the intention and need of the LGU itself;

Second, when the intention or project is realized, the LCE requests for the authority from the Sanggunian to authorize him/her to invite proposals and to negotiate with banks and other financing institution;

Third, once the most advantageous terms and conditions is determined (it may be evaluated by other means or may hire the expertise of the BAC for the purpose), the recommendation and award is brought to the Sanggunian again for ratification;

Finally, only when the loan is granted can the Sanggunian concurrently enact the Supplemental Budget based on the approval of the bank or financing institution.

It is actually during the same time the amount of loan is realized it is only logical to have the ABC determined properly (or adjusted accordingly) for Supplemental APP and for Supplemental Budget.

the definition of "funds are actually available" can be found in AO 47 issued during the time of Pres. Ramos. part of the definition is savings and when actual collections exceeds targets. In both instances, the money is firmly in the coffers of the LGU and not merely a bank loan approval
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Re: Warranty Security

Post by msm326 on Thu Mar 04, 2010 2:20 pm

Miss Bernadette,
We have the same case ibang equipment lang sa amin but it is not stipulated in the project loan agreement about the warranty maraming gray issues yun sa amin because they like it to pay directly to supplier which is in the contract but if you follow rules in accounting , 7160 and 9184 there are lapses ...this issue is still not resolved by our legal officer and their legal department too....There must a supplemental APP , supplemental budget through an ordinance of the SB and that the loan be acknowledged by the Municipal Accountant ....
This is still a debatable issue on our part.......just imagine the transaction.
I will just wait for the development of your project (acquisition of equipment) then.....
msm326 Very Happy
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Re: Warranty Security

Post by chriscabuenos on Fri Mar 05, 2010 3:55 pm

do you mean that the winning bidder can only collect 90% of the contract price if even 100% of the subject bidded has been delivered to the PE? does it mean that the 10% balance will only be collected by the winning bidder after the lapse of warranty period ( for expendable goods-three months or when the goods delivered has already been consumed whatever is earlier and for at least 1 year for non-expendable goods (Section 17.4) IRR-R.A. 9184
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Re: Warranty Security

Post by Niwram on Fri Mar 05, 2010 4:16 pm

chriscabuenos wrote:do you mean that the winning bidder can only collect 90% of the contract price if even 100% of the subject bidded has been delivered to the PE? does it mean that the 10% balance will only be collected by the winning bidder after the lapse of warranty period ( for expendable goods-three months or when the goods delivered has already been consumed whatever is earlier and for at least 1 year for non-expendable goods (Section 17.4) IRR-R.A. 9184

You are correct criscabuenos.. under section 62 of the IRR only after the lapse of the warranty period you can claim the ten percent of every progress payment. but if it is a special bank guarantee you can get the whole 100% but make sure that you have a 10% in that special bank guarantee. by the way Section 17.4 of the IRR is about bidding documents.
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Re: Warranty Security

Post by RDV @ GP3i on Fri Mar 05, 2010 6:24 pm

charlie brown wrote:
engrjhez® wrote:
charlie brown wrote:
My concern is actually centered on step 2 you mentioned. please note that pursuant to section 321 of the Local Government Code there are only 3 instances when a supplemental budget can be enacted by the sanggunian: 1) when funds are actually available 2) if covered by new revenue source; and 3) in times of public calamity. A detailed discussion of these sources are also provided under AO 47 by then Pres. Ramos. if a got it right, there is no mention that a bank approval -without the corresponding receipt of the amount of the loan - can be a source of a supplemental budget. by the way the suplemental budget is enacted by way of an appropriation ordinance and not just a resolution as mentioned.

My concern as i have said is, what is the basis of the sanggunian for step 2 you described? and without the enactment of an ordinance authorizing the supplemental budget how can there be an ABC as defined under section 5 of the IRR? Im sure thre is a way out of this but i beleive there is a need to harmonize the existing bankloan policies with the provisions of RA 9184 AND ra 7160

In case of LGU, I think it will fall under "(1) when funds are actually available".

First and foremost, before an LGU is granted a loan, it should have determined the intention and need of the LGU itself;

Second, when the intention or project is realized, the LCE requests for the authority from the Sanggunian to authorize him/her to invite proposals and to negotiate with banks and other financing institution;

Third, once the most advantageous terms and conditions is determined (it may be evaluated by other means or may hire the expertise of the BAC for the purpose), the recommendation and award is brought to the Sanggunian again for ratification;

Finally, only when the loan is granted can the Sanggunian concurrently enact the Supplemental Budget based on the approval of the bank or financing institution.

It is actually during the same time the amount of loan is realized it is only logical to have the ABC determined properly (or adjusted accordingly) for Supplemental APP and for Supplemental Budget.

the definition of "funds are actually available" can be found in AO 47 issued during the time of Pres. Ramos. part of the definition is savings and when actual collections exceeds targets. In both instances, the money is firmly in the coffers of the LGU and not merely a bank loan approval

It does not require that the funds should be actually available before the LGU could pass a budget for the purpose. On the basis of estimates of income (by the Treasurer), the LGU could already include the estimated amount, such as the proposed loan, in its budget.

In the case at hand, it would not even require the prior approval of loan, much less the release of the loan, before the LGU could budget for the intended loan. On that basis therefore, I would assume that there is already an approved budget for the purported loan, therefore there is already an ABC which should be the basis by the LGU in conducting public bidding for the equipment or materials for which the loan is intended.

If the bank condition is that the loan will have to be released directly to the winning bidder, there has to be some accounting entries that the LGU has to reflect in order that the loan will have to be recorded first as received by the LGU and then paid to the winning bidder. Otherwise, the loan would not be taken up in the LGU books of accounts as having been received or disbursed. Only a Memorandum Entry for the receipt of the equipment purchased would have to be recorded and it would not reflect a correct and complete accounting record of all the transactions.

RDV @ GPPPI
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