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retention money

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retention money

Post by nissih_2001 on Fri Feb 26, 2010 11:18 am

i am just confused lang po about the retention money. is this the warranty stated in sec 62 of the r.a 9184, that when claimed by the contractor, they will post a bank guarantee of 10%, if LC 5% or if surety bond 30% of the contract prize? or the contractor will just replace the retention money with a surety bond equivalent to the retention money upon collection? thanks
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Re: retention money

Post by Guest on Fri Feb 26, 2010 12:01 pm

The forms of warranty with 5% 10% and 30% is for infrastructures. (Section 62.2.3.3 IRR - pertains to 62.2.3.1 (a) /Structural Defects) - no retention here

The forms of warranty with 10% is for goods (section 62.1 IRR / Manufacturing Defects) - may retain 10% for goods every progress payment as warranty

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Re: retention money

Post by nissih_2001 on Fri Feb 26, 2010 1:56 pm

for infra projects... you dont retain anymore? how come?
when do you require the contractor with warranty?
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Re: retention money

Post by sunriser431 on Fri Feb 26, 2010 2:08 pm

nissih_2001 wrote:i am just confused lang po about the retention money. is this the warranty stated in sec 62 of the r.a 9184, that when claimed by the contractor, they will post a bank guarantee of 10%, if LC 5% or if surety bond 30% of the contract prize? or the contractor will just replace the retention money with a surety bond equivalent to the retention money upon collection? thanks
For the procurement of Goods
The imposition of warranty for the procurement of goods is specifically mentioned in Section 62.1 of the revised IRR of R.A. 9184. Furthermore, Section 62.1 of the IRR, merely provided for the warranty period (minimum of 3 months in case of expendable supplies, or a minimum of 1 year in case of non expendable supplies), and the percentage provided for the retention money that will be impose on the conract (equal to at least 10% of every progress payment) or in form of special bank guarantee (equal to at least 10% of the total contract price.)
For the procurement of Infrastructure
By virtue of the Section 62.2.3.3 of the revised IRR, contractors (for infrastructure projects ) are mandated to post warranty security and to perform its responsibililities as mentioned in section 62.2.3.1 (a).
However in reference to the undeline bold text, for the procurement of Goods, the IRR is clear as to the form that is acceptable in the posting of the RM , meanwhile for the procurement of infra, surety bond is specifically mention, so in my opinion you can replace the RM (in form Cash), with a surety bond. bounce
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Re: retention money

Post by sunriser431 on Fri Feb 26, 2010 2:18 pm

nissih_2001 wrote:for infra projects... you dont retain anymore? how come?
when do you require the contractor with warranty?
excerpt from annex E of the revised IRR
6. RETENTION MONEY
6.1. Progress payments are subject to retention of ten percent (10%) referred to as the "retention money." Such retention shall be based on the total amount due to the contractor prior to any deduction and shall be retained from every progress payment until fifty percent (50%) of the value of works, as determined by the procuring entity, are completed. If, after fifty percent (50%) completion, the work is satisfactorily done and on schedule, no additional retention shall be made; otherwise, the ten percent (10%) retention shall be imposed. bounce
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Re: retention money

Post by Guest on Fri Feb 26, 2010 2:31 pm

nissih_2001 wrote:for infra projects... you dont retain anymore? how come?
when do you require the contractor with warranty?

Please read the warranty provision sa revised IRR of RA 9184 and then pag meron hindi malinaw you could ask again po.

Very Happy

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Re: retention money

Post by RDV @ GP3i on Fri Feb 26, 2010 6:29 pm

nissih_2001 wrote:i am just confused lang po about the retention money. is this the warranty stated in sec 62 of the r.a 9184, that when claimed by the contractor, they will post a bank guarantee of 10%, if LC 5% or if surety bond 30% of the contract prize? or the contractor will just replace the retention money with a surety bond equivalent to the retention money upon collection? thanks

Retention money is warranty for hidden defects during construction, including the 1-year defects liability period after project completion. Retention money is therefore released after the end of the 1-year defects liability period and when the certificate of acceptance is already issued. If the contractor wants the release of the retention money before the lapse of the 1-year defects liability period, replacement by the surety bond may be allowed.

The warranty security on the other hand will cover for structural defects and/or structural failures after acceptance of the project. Under the revised IRR the warranty security period has been reduced to only one year.


Last edited by RDV @ GPPPI on Sat Feb 27, 2010 9:55 pm; edited 2 times in total
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Re: retention money

Post by riddler on Fri Feb 26, 2010 7:59 pm

RDV wrote:
The warranty security on the other hand will cover for structural defects and/or structural failures after acceptance of the project. Under the revised IRR the warranty security period has been reduced to only one year.

i if get it right RDV, after the issuance of Acceptance Certificate, di na magbbayad ang contractor nang warranty, say: Building- 15 year warranty. meaning to say yung 14 years the PE na ba ang magbbayad?
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Re: retention money

Post by RDV @ GP3i on Fri Feb 26, 2010 9:04 pm

riddler wrote:
RDV wrote:
The warranty security on the other hand will cover for structural defects and/or structural failures after acceptance of the project. Under the revised IRR the warranty security period has been reduced to only one year.

i if get it right RDV, after the issuance of Acceptance Certificate, di na magbbayad ang contractor nang warranty, say: Building- 15 year warranty. meaning to say yung 14 years the PE na ba ang magbbayad?

The contractor will only post a warranty security for one (1) year. Kung permanent structure, the warranty period is still 15 years, but the remaining 14 years will no longer be covered by a warranty security. In case structural damage or failure happens during that period, the procuring entity could still run after the contractor in some other way.

There is no reason why the procuring entity would pay for the warranty security, since it is the contractor that is the one giving that warranty.
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Re: retention money

Post by RDV @ GP3i on Sat Feb 27, 2010 9:55 pm

RDV @ GPPPI wrote:
nissih_2001 wrote:i am just confused lang po about the retention money. is this the warranty stated in sec 62 of the r.a 9184, that when claimed by the contractor, they will post a bank guarantee of 10%, if LC 5% or if surety bond 30% of the contract prize? or the contractor will just replace the retention money with a surety bond equivalent to the retention money upon collection? thanks

Retention money is warranty for hidden defects during construction, including the 1-year defects liability period after project completion. Retention money is therefore released after the end of the 1-year defects liability period and when the certificate of acceptance is already issued. If the contractor wants the release of the retention money before the lapse of the 1-year defects liability period, replacement by the surety bond may be allowed.

The warranty security on the other hand will cover for structural defects and/or structural failures after acceptance of the project. Under the revised IRR the warranty security period has been reduced to only one year.

Aside from hidden defects or uncorrected discovered defects, the retention money will also answer for third party liabilities.
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Re: retention money

Post by charlie brown on Mon Mar 01, 2010 4:26 pm

RDV @ GPPPI wrote:
RDV @ GPPPI wrote:
nissih_2001 wrote:i am just confused lang po about the retention money. is this the warranty stated in sec 62 of the r.a 9184, that when claimed by the contractor, they will post a bank guarantee of 10%, if LC 5% or if surety bond 30% of the contract prize? or the contractor will just replace the retention money with a surety bond equivalent to the retention money upon collection? thanks

Retention money is warranty for hidden defects during construction, including the 1-year defects liability period after project completion. Retention money is therefore released after the end of the 1-year defects liability period and when the certificate of acceptance is already issued. If the contractor wants the release of the retention money before the lapse of the 1-year defects liability period, replacement by the surety bond may be allowed.

The warranty security on the other hand will cover for structural defects and/or structural failures after acceptance of the project. Under the revised IRR the warranty security period has been reduced to only one year.

Aside from hidden defects or uncorrected discovered defects, the retention money will also answer for third party liabilities.

Just to add:

the retention money mentioned for goods actually refer to a method of covering for the warranty security (it could either be rentention money of 10% for every progress payment or a 10% special bank quarantee section 62.1)

the rentention for infra can be found under item 6 Annex E of the IRR "Contract iMPLEMENTATION gUIDELINES for the procurement of infra". this is on top of the warranty security required for infra under 62.2.
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Re: retention money

Post by leobcaleja on Thu Mar 03, 2011 1:07 pm

The Works is not completed because the additional funding to complete the Works is delayed due to reasons beyond the control of the PE. But the current Contract Amount is already consumed. In this situation, can the PE issue Certificate of Completion? While waiting for the additional funding, what can be done or the justification to extend the contract?
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Re: retention money

Post by engrjhez® on Thu Mar 03, 2011 10:06 pm

leobcaleja wrote:The Works is not completed because the additional funding to complete the Works is delayed due to reasons beyond the control of the PE. But the current Contract Amount is already consumed. In this situation, can the PE issue Certificate of Completion? While waiting for the additional funding, what can be done or the justification to extend the contract?
I am confused. Works completed or not? Please correct me if I understood your case: Say contract amount was 9M after being bidded and awarded from ABC of 10M. You mean the 9M was consumed but the project is not yet complete? Or did the 10M ABC corresponds to a (say) Phase 1 of the project where Phase 2 completes it but the funding for Phase 2 is not yet available? Smile
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Re: retention money

Post by leobcaleja on Sat Mar 05, 2011 2:37 pm

Portion of the Works is not complete. However, substantial part of the Works is already completed and being utilized by the PE. The project was awarded at 10M (say year 2007) but due to prevailing site conditions it required additional works like clearing the right-of-way (this is not included in the 10M). Additional loan is necessary to complete the project and is still being processed by the PE. However, the processing of the additional loan is delayed, the 10M was already accomplished and paid, and the contract duration is nearing its expiration.
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Re: retention money

Post by engrjhez® on Sun Mar 06, 2011 11:50 am

leobcaleja wrote:Portion of the Works is not complete. However, substantial part of the Works is already completed and being utilized by the PE. The project was awarded at 10M (say year 2007) but due to prevailing site conditions it required additional works like clearing the right-of-way (this is not included in the 10M). Additional loan is necessary to complete the project and is still being processed by the PE. However, the processing of the additional loan is delayed, the 10M was already accomplished and paid, and the contract duration is nearing its expiration.

Pardon me for asking more questions. This is to ensure that I give the most suitable answer to your query.

Awarded contract is 10M. You said the 10M is already accomplished and paid in full. If "portion of works is not complete" and if it refers to the 10M contract, I would presume that "the 10M was not fully accomplished but paid already". Is this correct?

Meanwhile, going back to the problem on acquisition of ROW:
17.6. Detailed Engineering for the Procurement of Infrastructure Projects

No bidding and award of contract for infrastructure projects shall be made unless the detailed engineering investigations, surveys and designs, including the acquisition of the ROW, for the project have been sufficiently carried out and duly approved in accordance with the standards and specifications prescribed by the Head of the Procuring Entity concerned or his duly authorized representative, and in accordance with the provisions of Annex “A” of this IRR.

Which means that ROW acquisition should not be a hindrance upon contract award and implementation of 10M because this should be a pre-requisite even before that contract is bidded. Smile



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Re: retention money

Post by RDV @ GP3i on Sun Mar 13, 2011 9:40 am

leobcaleja wrote:The Works is not completed because the additional funding to complete the Works is delayed due to reasons beyond the control of the PE. But the current Contract Amount is already consumed. In this situation, can the PE issue Certificate of Completion? While waiting for the additional funding, what can be done or the justification to extend the contract?

If the original works was not completed but contract amount was already fully consumed (which, I suppose, would mean that the amount was already fully released), a Certificate of Completion may be issued on the assumption that there was/were approved Change Order/s. The Change Order/s would pertain to the reduction in the works of the contractors from the original scope to a lesser scope. Because if no such Change Order/s was/were approved, then the contractor is duty bound to complete the project based on the original scope and no Certificate of Completion should be issued unless the same is completed to the satisfaction of the procuring entity.
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Re: retention money

Post by Doc Engr on Thu Jun 09, 2011 12:55 pm

Relative to the above discussion,
I would like to ask whether it is safe for the contractor to disown responsibility of the defects of the Infra Project if the PE has already occupy the Building without the Certificate of Turnover and Certificate of Acceptance duly issued before occupancy of the Building.

It is noteworthy to add though that the PE has issued punchlisted works for Contractor's rectification however, no action has been initiated on their part.

-Is the PE compelled to wait for the expiration of the 90 days notice under Section 62.2.1 Rule XIX of IRR RA 9184? and if the PE commence by itself the rectification of the defects, is it entitled to reimbursement?
-Is the PE allowed to deduct (as reimbursement) from the Contractor's outstanding collectible or is the reimbursement exclusively be deductible from the retention money?

Answer to the above query is of great help. Very Happy

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