Law Summary
Eligibility Requirements for Prospective Bidders
- Prospective bidders must submit either:
- A computation of their Net Financial Contracting Capacity (NFCC), or
- A commitment letter from a Universal or Commercial Bank to extend a credit line (CLC).
- These requirements are stated in Section 23.1(a)(vi) of the IRR and applicable Clauses in the Instructions to Bidders for Goods and Infrastructure Projects.
Existing NFCC Formula and Considerations
- NFCC is computed as: NFCC = [(Current assets – Current liabilities) × K] – value of all outstanding/uncompleted contracts including awarded but unstarted contracts that coincide with the contract bid.
- Factor K values:
- 10 for contracts with a duration of one year or less,
- 15 for contracts more than one year up to two years,
- 20 for contracts longer than two years.
Policy on Tax Compliance and Financial Eligibility
- GPPB enforces that bidding government contracts is reserved for bidders who properly pay taxes.
- Income Tax Return (ITR) and Audited Financial Statement (AFS) must be submitted and used to determine financial eligibility of bidders.
Formation of NFCC Committee and Alternative Formula Proposal
- An NFCC Committee was tasked to study alternatives to the NFCC computation and the use of CLC.
- The Bureau of Internal Revenue (BIR) proposed a new NFCC formula using the prospective bidder’s average net income after taxes for three years.
Deliberations and Decision on NFCC Formula
- During meetings, the Board reviewed the BIR’s proposed formula and the CLC requirement.
- The Board resolved to retain the current NFCC formula with modifications:
- CLC will no longer be accepted as an alternative to NFCC.
- Current assets and current liabilities values must be based on data submitted to the BIR via the Electronic Filing and Payment System (EFPS).
- Retain Factor K multipliers (10, 15, 20) pending future review for efficiency and accuracy.
Amendments to Implementing Rules and Instructions to Bidders
- Sections 23.1(a)(vi), 23.5.1.4, and 23.5.2.6 of the IRR of RA 9184 were amended accordingly.
- Clauses 5.5 and 12.1(a)(v) of the Instructions to Bidders of the Philippine Bidding Documents for Goods and Infrastructure Projects were also amended.
Scope and Effectivity
- The amendments affect documentation and financial eligibility requirements in public procurement bidding processes.
- The resolution took effect immediately upon approval.
Review and Future Considerations
- The GPPB commits to reviewing the efficiency and accuracy of the Factor K multipliers periodically.
Signatories and Attestation
- The resolution was signed by representatives from multiple government departments and the private sector.
- Attested by the Board Secretary and Executive Director of the GPPB Technical Support Office (TSO).