50% largest single contract requirement

by shobe on Wed Mar 18, 2009 1:24 pm

I hope the engineers can help me with this.

Is it highly impossible for the GPPB to apply the exceptions provided under Section 23.11.1.2 for infrastructure projects as well? I have heard time and again that local contractors find it difficult to join locally funded projects with ABCs worth billions of pesos simply because of the 50% largest single contract requirement. Or will applying the same exceptions for infra be too dangerous?

Please enlighten me with your thoughts on this. Thank you.

by engrjhez® on Wed Mar 18, 2009 7:28 pm

shobe wrote:
I hope the engineers can help me with this.

Is it highly impossible for the GPPB to apply the exceptions provided under Section 23.11.1.2 for infrastructure projects as well? I have heard time and again that local contractors find it difficult to join locally funded projects with ABCs worth billions of pesos simply because of the 50% largest single contract requirement. Or will applying the same exceptions for infra be too dangerous?

Please enlighten me with your thoughts on this. Thank you.

Please enlighten us also on the comparison you are trying to establish. Are we comparing goods/services to infra? Because Section 23.11.1.2 is already all about infra:

The value of the prospective bidder’s largest single completed contract, adjusted to current prices using the National Statistics Office consumer price indices available at the G-EPS website, and similar to the contract to be bid, must be at least fifty percent (50%) of the approved budget for the contract to be bid: Provided, however, That in the case of a contractor under Small A and Small B categories without similar experience on the contract to be bid, he may be allowed to bid if the cost of such contract is not more than fifty percent (50%) of the Allowable Ranges Contract Cost (ARCC) of his registration. For this purpose, the classification of contractors vis-à-vis the ARCC shall be based on the Guidelines as prescribed by the Philippine Contractors Accreditation Board (PCAB).

The difficulty of adhering to the requirements may be solved by dividing the billion worth project into several million worth-phases (of course all must be under competitive bidding). A good procurement planning should be make the process smoother. Very Happy

by shobe on Thu Mar 19, 2009 2:07 pm

No, i am obviously not trying to compare goods with infra procurement. What I'm driving at is the possibility of applying the exceptions laid down in GPPB Resolution 07-2006 to infrastructure projects.

To date, no single Filipino contractor can enter a multi-billion locally funded project (if my sources are correct) because of 50% largest single contract requirement under the procurement rules. It is for this reason that i am inquiring as to the possibility of coming up with exceptions similar with the goods procurement.

by RDV @ GPPPI on Thu Mar 19, 2009 2:48 pm

shobe wrote:No, i am obviously not trying to compare goods with infra procurement. What I'm driving at is the possibility of applying the exceptions laid down in GPPB Resolution 07-2006 to infrastructure projects.

Shobe, what will you say if I inform you that in the draft IRR the 50% Single Largest Contract is even proposed to be increased to 70%? Sec. 23.6.2 of the draft IRR is partly quoted as follows:

"3. To be considered eligible and qualified to bid for a contract, a prospective bidder must have the following:

a) successful experience as contractor in the completed construction, in the last five (5) years, of at least one (1) work of a nature and complexity similar to the works under the contract to be bid. To comply with this requirement, the cost of the completed single works cited should be at least seventy percent (70%) of the Approved Budget for the Contract/Estimated Contract Cost of works under bidding, adjusted to current prices using the National Statistics Office consumer price indices available at its website, such being verifiable from the completion certificates; and

b) an annual turnover from all works averaged over the last three (3) years equal to one hundred percent (100%) of the Approved Budget for the Contract/Estimated Contract Cost.

Contractors under Small A and Small B categories without similar experience on the contract to be bid may be allowed to bid if the cost of such contract is not more than fifty percent (50%) of the Allowable Range of Contract Cost (ARCC) of his registration. For this purpose, the classification of contractors vis-à-vis the ARCC shall be based on the Guidelines as prescribed by the PCAB.

For the procurement of infrastructure projects, a contract shall be considered “similar” to the contract to be bid if it has the same major categories of work. "

I think, your proposal to apply the same exception laid down in that GPPB Resolution for goods has been proposed also during the different consultation meetings conducted by the GPPB-TSO.

I suggest you post your proposal in the Comments on the draft IRR, so that GPPB-TSO can include it for consideration as it is now in the process of rewriting the draft IRR. I have also posted my own comments/questions there on the same eligibility requirements for infra.

shobe wrote:To date, no single Filipino contractor can enter a multi-billion locally funded project (if my sources are correct) because of 50% largest single contract requirement under the procurement rules. It is for this reason that i am inquiring as to the possibility of coming up with exceptions similar with the goods procurement.

The contractors can always enter into JVAs if alone they would not be able to qualify for multi-billion projects.

by shobe on Thu Mar 19, 2009 3:11 pm

Thanks for the info Sir RDV. I think increasing the requirement from 50% to 70% sounds problematic to me. Shocked

by RDV @ GPPPI on Thu Mar 19, 2009 3:20 pm

You are probably right.

This is comments to the draft IRR na pala.

See my comments also on the eligibility requirements based on experience. It would be more difficult for the small contractors to participate.

by shobe on Thu Mar 19, 2009 3:31 pm

As for the suggestion to form JVs, please correct me if i'm wrong, but one party in the Joint Venture needs to comply with the single largest contract requirement, right? So no Filipino contractor, without a foreign partner would then still be able to join a multi-billion locally funded contract? Neutral

by RDV @ GPPPI on Thu Mar 19, 2009 3:47 pm

shobe wrote:As for the suggestion to form JVs, please correct me if i'm wrong, but one party in the Joint Venture needs to comply with the single largest contract requirement, right? So no Filipino contractor, without a foreign partner would then still be able to join a multi-billion locally funded contract?

You are right, at least one member of the JV should be able to comply with that experience requirement. Very Happy

I think naman, most, if not all, multi-billion infrastructure contracts are foreign-assisted and not locally-funded. However, there are Filipino contractors who have qualified although they are not many.

by riddler on Sun Mar 22, 2009 4:42 pm

Let me share my thoughts shobe,

shobe wrote:
I hope the engineers can help me with this.

Is it highly impossible for the GPPB to apply the exceptions provided under Section 23.11.1.2 for infrastructure projects as well? I have heard time and again that local contractors find it difficult to join locally funded projects with ABCs worth billions of pesos simply because of the 50% largest single contract requirement. Or will applying the same exceptions for infra be too dangerous?

The Single Largest Contract Similar to the project requirement is related to the Construction Industry Authority of the Philippines (CIAP) through Philippine Contractors Board Resolution (PCAB) 001 SERIES OF 2004 which provides for Allowable Range of Contract Cost (ARCC) any Contractor (under its License) can be allowed to bid to a particular infrastructure project. CIAP through the PCAB which is under the supervision of the Department of Trade and Industry (DTI) recommends for accreditation of new application, and upgrading of Contractors License based on their assets and liabilities, capability, experience, and capacity set forth under RA 4566.

The 50% of the ABC Single Largest Contract similar to the project requirement is made to ensure that the participating foreign or Filipino contractors have the experience to have constructed the project which is similar in nature.

Yes, I believed so that applying the same exception (as you mentioned) to Infra maybe dangerous, because if these contractor/s are allowed to participate in the bidding yet, they do not have the experience though they are awashed with capital to finance the project, it may compromise the project due to their inexperience to manage it. The above requirement is a safety net for the Procuring Entity.

But I am not in favor of increasing the 50% Single Largest Project (SLP) requirement as discussed by RDV, This is too restrictive, many Filipino contractors will be displaced. I hope the GPPB will not pursue the matter. Wink

by riddler on Mon Mar 23, 2009 10:16 am

engrjhez wrote

....the value of the prospective bidder’s largest single completed contract, adjusted to current prices using the National Statistics Office consumer price indices available at the G-EPS website, and similar to the contract to be bid,.....

engrjhez,

I have tried to contact the NSO and G-EPS websites with regards to adjustments of a certain Single Largest Project ( say 10 million completed in year 2004) to the current price or value, but nada! I got lost in the dark of their web. Ha ha Ha.. I hope I can find a simple formula from their end.

you also said that,

...The difficulty of adhering to the requirements may be solved by dividing the billion worth project into several million worth-phases (of course all must be under competitive bidding). A good procurement planning should be make the process smoother.

I am afraid, that these may result to splitting of the project engrjhez. Program holders should be careful in doing this. Certain projects are approved by congress into a "single appropriation". Dividing this into different parts maybe difficult for the program holders to make. Questions maybe difficult to answer later on, especially pag may inquiry sa congress.

by engrjhez® on Tue Mar 24, 2009 1:47 pm

Engr. Ruel,

Splitting of contracts is defined in Sec.54.1 of the IRR:
"...Splitting of Government Contracts means the division or breaking up of Government Contracts into smaller quantities and amounts, or dividing contract implementation into artificial phases or sub-contracts for the purpose of evading or circumventing the requirements of law and this IRR-A, especially the necessity of public bidding ... x x x"

In my opinion, dividing the contracts into phases cannot be artificial if we are looking to a "reasonable cause" posed by the statistical impossibility of contractors able to join the bidding. We are not actually circumventing the law, but we are opening the way for a more competitive bidding process.

Most important, we are not splitting the contract to avoid bidding - and we believe that by doing so, every part of it still has to and must comply with the process. Very Happy

by shobe on Tue Mar 24, 2009 3:26 pm

I have tried to contact the NSO and G-EPS websites with regards to adjustments of a certain Single Largest Project ( say 10 million completed in year 2004) to the current price or value, but nada! I got lost in the dark of their web. Ha ha Ha.. I hope I can find a simple formula from their end---ruel

I got this from one of the best engineers in NEDA, hope this helps. Very Happy

The adjusted contract price may be computed using the following formula:
Adjusted Contract Price (ACP) = (CPI Current Year / CPI Given Year) x (Project Cost)

by riddler on Tue Mar 24, 2009 4:32 pm

shobe wrote:
I have tried to contact the NSO and G-EPS websites with regards to adjustments of a certain Single Largest Project ( say 10 million completed in year 2004) to the current price or value, but nada! I got lost in the dark of their web. Ha ha Ha.. I hope I can find a simple formula from their end---ruel

I got this from one of the best engineers in NEDA, hope this helps.

The adjusted contract price may be computed using the following formula:

Adjusted Contract Price = ( CPI Current Year ) X (Project Cost)
CPI Given Year

haha ha. Now its simple atty.. but wait, one more spoon feed for me, please.

How can I get that CPI data?

by RDV @ GPPPI on Tue Mar 24, 2009 4:37 pm

Engr. ruel:

You get the CPI (Consumer Price Index) data from the NSO. ciao.

by riddler on Tue Mar 24, 2009 8:39 pm

RDV wrote:Engr. ruel:

You get the CPI (Consumer Price Index) data from the NSO. ciao.

ok. now I get it. i'll try to navigate again to their web. Thanks RDV!

50% largest single contract requirement

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