Title
DPWH Revised Approved Budget for Contract Guidelines
Law
Dpwh Department Order No. 29, S. 2011
Decision Date
May 16, 2011
The Revised Guidelines in the Preparation of Approved Budget for the Contract (ABC) provides detailed instructions on how to prepare the ABC for construction projects in the Philippines, including guidelines for direct and indirect costs, mark-ups, and required documentation.
revised guidelines
approved budget
contract

Legal basis and related issuances

  • The ABC must be prepared on the basis of the approved project design under existing DPWH regulations governing authorization of project designs.
  • The order ties the ABC to procurement compliance through R.A. 9184, stating the ABC is the ceiling for acceptable bid prices.
  • The order requires conformity with technical specifications under Standard Specifications for Highways and Bridges (revised 2004) and Standard Specifications for Public Works (1995), plus approved Special Specifications for the project.
  • The order revokes inconsistent issuances and amendments accordingly, covering Department Orders, circulars, memoranda, and other issuances or any portions thereof that conflict with it.

Policy purpose and guiding standards

  • The ABC must be prepared to reflect the approved project design and must use work items that conform to the relevant DPWH standard and special specifications.
  • The ABC is structured to support fair comparison with bidders by being consistent with the approval Bidding Documents used by contractors in preparing their bids.
  • DPWH estimators must use realistic unit prices based on valid, up-to-date market information, avoiding “guesswork and haphazard pricing.”
  • The order requires all assumptions used in generating estimates to be shown in the cost analysis.
  • The order directs additional documentation for special items of work by requiring approved plans, specifications, methods, measurements, and payments for special items.

ABC composition and allowable cost items

  • The ABC consists of Direct Cost and Indirect Cost.
  • The order defines Direct Cost as the sum of:
    • Cost of materials to be used in doing the work item, including:
      • Cost at source, including processing, crushing, stockpiling, loading, royalties, local taxes, and construction/maintenance of haul roads, etc.
      • Expenses for hauling to the project site
      • Handling expenses
      • Storage expenses
      • Allowance for waste and/or losses, not to exceed 5% of materials requirement
    • Cost of labor, including:
      • Salaries and wages authorized by the Department of Labor and Employment
      • Fringe benefits such as vacation and sick leaves, benefits under the Workmen’s Compensation Act, GSIS and/or SSS contributions, 13th month pay, bonuses, etc.
    • Equipment expenses, including:
      • Rental of equipment based on prevailing ACEL rental rates approved for use by DPWH (noting the presently used 2009 ACEL Rates)
      • Rental rates not in the ACEL booklet are taken from rental rates computation, with operated rental rates preferred over bare rental rates
      • The detailed unit cost analysis must indicate the make, model, and capacity of the equipment
      • Mobilization and demobilization treated as a separate pay item, computed based on equipment requirements in the project proposal and contract booklet
      • Mobilization and demobilization must not exceed 1% of the Estimated Direct Cost (EDC) of the civil works items
  • The order defines Indirect Cost as the sum of:
    • Overhead expenses ranging from 5% to 8% of the EDC, including:
      • Engineering and Administrative Supervision
      • Transportation allowances
      • Office expenses (office equipment and supplies, power and water consumption, communication and maintenance)
      • Premium on Contractor’s All Risk Insurance (CARI)
      • Financing cost, including:
        • Premium on Bid Security
        • Premium on Performance Security
        • Premium on Surety for Advance Payment
        • Premium on Warranty Bond (one year)
    • Contingencies ranging from 0.5% to 3% of the EDC, including expenses for:
      • Meetings and coordination with other stakeholders
      • Billboards
      • Stages during ground breaking and inauguration ceremonies
      • Other unforeseen events
    • Miscellaneous expenses ranging from 0.5% to 1% of the EDC, including:
      • Laboratory tests for quality control
      • Plan preparation
    • Contractor’s profit margin of 8% to 12% of the EDC, depending on project size:
      • 8% for projects above P5 Million and up to P5 Million
      • 12% for projects above P5 Million (as stated in the table provided)
    • VAT component equal to 12% of the sum of the EDC, OCM and Profit

OCM and profit ranges by EDC bands

  • The order provides a table of percentages for OCM (Overhead, Contingencies, and Miscellaneous) and profit and their corresponding totals by EDC ranges.
  • For Up to P5 Million, OCM is 12% and profit is 12%, with total indirect cost percent 24%.
  • For Above P5 Million up to P50M (as presented), OCM is 9% and profit is 8%, with total indirect cost percent 17%.
  • For Above P50M up to P150M, OCM is 7% and profit is 8%, with total indirect cost percent 15%.
  • For Above P150M, OCM is 6% and profit is 8%, with total indirect cost percent 14%.
  • The order instructs that the percentage to be used for Nos. B.1, B.2, and B.3 is governed by the OCM column in the tabulation and the profit percentage.

Required format and computation rules

  • The order requires use of the prescribed format for the calculation of the BAC shown in Attachment “A”.
  • Columns (1) to (4) are filled based on their respective labels in the format and are treated as self-explanatory in the instructions.
  • The order requires the following calculation rules for the BAC format:
    • Column (5) is the EDC of the work item as calculated and reflected in the cost analysis prepared by the Estimator.
    • Columns (6) and (7) are the mark-ups in percent for OCM and profit.
    • Column (8) is the total mark-up percent, computed as the sum of columns (6) and (7).
    • Column (9) is the Peso value of the total mark-up, computed by multiplying column (8)’s total mark-up percent by the EDC (column 5).
    • Column (10) is the VAT component, computed as 12% of the sum of columns (5) and (9).
    • Column (11) is the total estimated Indirect Cost, computed as the sum of columns (9) and (10).
    • Column (12) is the total estimated Total Cost, computed as the sum of columns (5) and (11).
    • Column (13) is the unit cost for each item of works, computed by dividing the estimated total cost in column (12) by the total quantity in column (3).
  • The order requires that the BAC be based on approval Bidding Documents containing the same work items and quantities as those for contractors to use in preparing their bid.

Who computes, evaluates, and approves BAC

  • The implementing office must ensure integrity and reasonableness of estimates against current market prices, including cost-effectiveness of construction methods and equipment, and compliance with minimum production rates, equipment/material/labor selections, and other estimate factors.
  • The order requires that Columns (1) thru (5) be filled by the following officials:
    • Head of the Project Management Office/Implementing Unit for projects in the Central Office
    • Chief of the Construction/Maintenance Division for Regional Offices
    • Chief of the Construction/Maintenance Section for District Offices
  • The order requires that Columns (6) thru (13) be filled by the following officials:
    • Bureau of Construction (BOC) for Central Office
    • Assistant Regional Director for projects within delegated authority in the Regional Office
    • Assistant District Engineer for projects within delegated authority in the District Office
  • The order grants these evaluation entities authority to revise submitted estimates when adjustment is needed to comply with the order’s provisions.
  • The order provides that final approvers (District Engineer/Regional Director/Undersecretary/Secretary) may cause revisions through judicious exercise of authority.

Procurement linkage and estimate discipline

  • The ABC must be prepared so it can be compared with the contractor’s bid and must function as the ceiling for acceptable bid prices under R.A. 9184.
  • The order requires that DPWH estimators continuously update market price information and use only realistic unit prices based on valid up-to-date information.
  • The order requires showing all assumptions used in generating the estimate in the cost analysis.
  • The order requires special item estimates (SPL) to be supported by plans and specifications, methods of construction, measurements, and payments that are duly approved by the head of the implementing office.
  • The order mandates that the ABC be based on the approved project design by authorized officials under applicable DPWH regulations.

Compliance effects and revocation

  • The order revokes or amends any Department Orders, circulars, memoranda, and other issuances or parts thereof that are inconsistent with the order.
  • The order takes effect immediately, making the revised ABC preparation guidelines applicable upon issuance and adoption.

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