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WHEREAS, Section 63.1(b) of Republic Act (RA) No. 9184 and its revised Implementing Rules and Regulations (IRR) authorize the Government Procurement Policy Board (GPPB) to formulate public procurement policies, rules and regulations, and amend, whenever necessary, the IRR;

WHEREAS, as part of the eligibility documents for submission, Section 23.1(a)(vi) of the IRR of RA 9184 and Clauses 12.1(a)(v) and 12.1(a)(vi) of the Instructions to Bidders (ITB) of the Philippine Bidding Documents (PBDs) for Goods and Infrastructure Projects, respectively, require the submission of the prospective bidder’s computation of its Net Financial Contracting Capacity (NFCC) or a commitment from a Universal or Commercial Bank to extend a credit line in favor of the prospective bidder if awarded the contract to be bid (CLC);

WHEREAS, Sections 23.5.1.4 and 23.5.2.6 of the IRR of RA 9184 and Clause 5.5 of the ITB of the PBDs for Goods and Infrastructure Projects provide for the NFCC formula, thus:

NFCC = [(Current assets minus current liabilities) (K)] minus the value of all outstanding or uncompleted portions of the projects under ongoing contracts, including awarded contracts yet to be started coinciding with the contract to be bid.

Where: K = 10 for a contract duration of one year or less, 15 for a contract duration of more than one year up to two years, and 20 for a contract duration of more than two years.

WHEREAS, the GPPB adheres to the policy that the government should only be entering into contracts with potential bidders who are actually contributing to the coffers of the government through the payment of correct taxes;

WHEREAS, during the 2^nd GPPB Regular Meeting held on 15 March 2013, the Board agreed to adopt, as a matter of policy, that the Income Tax Return, together with the Audited Financial Statement (AFS) submitted, should be used in determining the financial eligibility of bidders. During the meeting, the Board likewise created the NFCC Committee that will study alternative formula in lieu of the NFCC and the CLC;

WHEREAS, the Bureau of Internal Revenue (BIR) presented its proposed NFCC formula during the NFCC Committee meeting held on 5 June 2013, which utilized the prospective bidder’s average net income after taxes for three (3) years as the basis for the computation of the NFCC;

WHEREAS, in the meeting held on 9 July 2013, the Inter Agency Technical Working Group (IATWG) discussed the BIR’s proposed NFCC formula, reviewed the CLC requirement, and thereafter recommended the amendment of the provisions of the IRR of RA 9184 and the Philippine Bidding Documents in relation to NFCC/CLC;

WHEREAS, during the 5^th Regular GPPB Meeting held on 30 July 2013, the Board discussed the recommendations of the IATWG, and, after thorough discussion and careful deliberation, resolved to retain the current NFCC formula, subject to the following modifications:

1. CLC shall no longer be accepted as an alternative to the prospective bidder’s computation of NFCC;
2. The values of the bidder’s current assets and current liabilities shall be based on the data submitted to the BIR, through its Electronic Filing and Payment System (EFPS);
3. The Factor K multipliers 10, 15 and 20 shall be retained, subject to future review by the Board of its efficiency and accuracy in relation to NFCC.

NOW, THEREFORE, for and in consideration of the foregoing, WE, the Members of the GOVERNMENT PROCUREMENT POLICY BOARD, by virtue of the powers vested on US by law, hereby RESOLVE to confirm, adopt and approve, as WE hereby confirm, adopt and approve the following:

1. AMEND Sections 23.1(a)(vi), 23.5.1.4 and 23.5.2.6 of the IRR of RA 9184, as shown in Annex “A”^* hereof;
2. AMEND Clauses 5.5 and 12.1(a)(v) of the Instructions to Bidders of the Philippine Bidding Documents for Goods, and Clauses 5.5 and 12.1(a)(vi) of the Instructions to Bidders of the Philippine Bidding Documents for Infrastructure Projects, as shown in Annex “B”^* hereof; and,
3. REVIEW the efficiency and accuracy of Factor K multipliers 10, 15 and 20 in relation to NFCC at some future time.

This resolution shall take effect immediately.

Signed by the Representatives of the Following Agencies:

Department of Budget and Management
Department of Education
Department of Energy
Department of Finance
Department of the Interior and Local Government
Department of National Defense
Department of Public Works and Highways
Department of Transportation and Communications
Private Sector Representative

Attested by:

(SGD) DENNIS S. SANTIAGO
Board Secretary, GPPB
Executive Director, GPPB-TSO

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^* Text Available at the Office of the National Administrative Register, U.P. Law Complex, Diliman, Quezon City.