Scope and Application
- Applies to national government agencies, branches, constitutional offices, departments, bureaus, offices, including state universities and colleges, government-owned or controlled corporations, government financial institutions, and local government units.
- Excludes leases of government properties for private use.
Key Definitions
- Capitalization Rate: Interest rate on property cost or value.
- Comparative Price Analysis: Method comparing price quotes with prevailing market lease rates nearby.
- Computation based on Observed Depreciation: Method using depreciation rate after ocular inspection to find reasonable rent.
- Computation based on Straight Line Depreciation: Method using DPWH’s structural depreciation table.
- Cost-Benefit Analysis: Evaluates benefits versus costs including transfer, furnishing, maintenance, and market lease rates.
- Depreciation: Decrease in real estate value due to wear and tear.
- Estimated Unit Construction Cost: Prevailing cost per square meter from DPWH.
- Factor Value: Rating factor considering location, condition, amenities, and free facilities by lessor.
- Lessee: Government agency leasing real estate.
- Lessor: Private owner of the real estate.
- Real Estate: Land and buildings including office spaces.
- Rentable Area: Usable area excluding common spaces.
- Rental: Payment made by lessee to lessor, usually monthly.
- Reproduction Cost: Estimated replacement cost with same utility.
Guiding Principles
- Prefer leasing publicly-owned real estate from government entities.
- Leasing privately-owned real estate allowed if no public option or more advantageous based on cost-benefit analysis.
- Location selection must consider prudence, economy, suitability, and accessibility.
- Approved Budget for Contract (ABC) determined from mid-point of prevailing market rates.
- Reasonable rent approximates equitable return and fair accommodation.
- Reasonableness tested by comparing similar properties and considering amenities.
- Lease objectives must avoid unnecessary or extravagant expenditure.
- Rental rates plus expenses must not exceed the ABC.
Procedures and Guidelines
- End user unit conducts cost-benefit analysis comparing leasing private vs government property.
- Recommendations supported by analytical and market data forwarded to Bids and Awards Committee (BAC).
- BAC evaluates and approves recommendation if advantageous.
- Lease contracts under negotiated procurement must be included in the Annual Procurement Plan (APP); changes require BAC resolution and head approval.
- BAC prepares draft contract and specifications, posts procurement notice for 7 days.
- At least three prospective lessors invited to submit sealed price quotations.
- BAC opens quotations, determines Lowest Calculated Bid (LCB), and evaluates reasonableness.
- For land leases, reasonableness determined using comparative price analysis with local zonal valuation.
- When LCB reasonable, declared Lowest Calculated Responsive Bid (LCRB) and recommended for award.
- If LCB unreasonable, disqualified with written notice; next lower bids evaluated similarly.
- If all quotations unreasonable, compare LCB with market rates; if higher, continue to next bid.
- Failure of negotiated procurement declared if all prices exceed market rate; public bidding or another negotiated procurement follows.
- BAC recommends award to head of procuring entity immediately after LCRB determination.
Determination of Reasonableness of Rental Rates
- Two methods: Observed Depreciation and Straight Line Depreciation; only one consistently applied per procurement.
- Both methods compute reproduction cost, formula rate, rental rate, and monthly rental based on area.
- Computation formulae rely on depreciation rates from ocular inspection or DPWH structural depreciation table.
- Rental rates not exceeding computed values are deemed reasonable.
Terms and Conditions of Lease Contracts
- Multiyear contracts permitted, following multi-year contract guidelines.
- Lease terms must be most advantageous to the government.
Effectivity
- Guidelines effective 15 days after publication in the Official Gazette or a nationwide newspaper.
This summary presents essential provisions governing the lease of privately-owned real estate by government entities including scope, definitions, procedures for procurement, reasonableness criteria for rental rates, and terms for lease contracts under the approved guidelines formulated by the Government Procurement Policy Board.