CONTRACT IMPLEMENTATION AND TERMINATION

Implementation Guidelines for the Procurement of Goods, Supplies, and Materials

Amendment to Order
Amendments to order may be issued at any time by the procuring entity concerned. If any such order
increases or decreases the cost of, or the time required for executing any part of the work under the
original contract, an equitable adjustment in contract price and/or delivery schedule shall be mutually
agreed upon between the parties concerned, and the contract modified in writing. An amendment to
order may be issued only in emergency cases or during fortuitous events requiring necessary
adjustments within the general scope of the contract.
Suspension of Work
The procuring entity may suspend the work wholly or partly by written order for a certain period of
time, as it deems necessary due to force majeure or any fortuitous events as defined in the contract.
Before the suspension order expires, the procuring entity concerned shall either lift such order or
terminate the work covered by the same. If the suspension order is lifted, or if the period of the order
expires, the supplier shall have the right to resume work.
Liquidated Damages
When the supplier fails to satisfactorily deliver goods under the contract within the specified delivery
schedule, inclusive of duly granted time extensions, if any, the supplier shall be liable for damages for
the delay and shall pay the procuring entity liquidated damages, not by way of penalty, an amount equal
to one-tenth (1/10) of one percent (1%) of the cost of the delayed goods scheduled for delivery for
every day of delay until such goods are finally delivered and accepted by the procuring entity concerned.
In no case shall the total sum of liquidated damages exceed ten percent (10%) of the total contract
price.
Advance Payment
Advance payment shall be made only after prior approval of the President, and shall not exceed fifteen
percent (15%) of the contract amount, unless otherwise directed by the President.
IMPLEMENTATION GUIDELINES FOR THE PROCUREMENT OF INFRASTRUCTURE PROJECTS
VARIATION ORDERS - CHANGE ORDER/EXTRA WORK ORDER
Variation Orders may be issued by the procuring entity to cover any increase/decrease in quantities,
including the introduction of new work items that are not included in the original contract or
reclassification of work items. Provided that the Variation Order does not exceed ten percent (10%) of
the original contract price.
A Change Order may be issued by the implementing official to cover any increase/decrease in quantities
of original work items in the contract.
An Extra Work Order may be issued by the implementing official to cover the introduction of new work
necessary for the completion, improvement or protection of the project which was not included as
items of work in the original contract.
ADVANCE PAYMENT
The procuring entity shall, upon a written request of the contractor which shall be submitted as a
contract document, make an advance payment to the contractor in an amount not exceeding fifteen
percent (15%) of the total contract price, to be made in lump sum or, at the most, two installments
according to a schedule specified in the Instructions to Bidders and other relevant Tender Documents.
PROGRESS PAYMENT
Once a month, the contractor may submit a statement of work accomplished (SWA) or progress billing
and corresponding request for progress payment for work accomplished.
The procuring entity’s representative/project engineer shall check the contractor’s monthly SWA and
certify the amount to be paid to the contractor as progress payment. Except as otherwise stipulated in
the Instruction to Bidders, materials and equipment delivered on the site but not completely put in
place shall not be included for payment.
RETENTION MONEY
Progress payments are subject to retention of ten percent (10%) referred to as the "retention money."
Such retention shall be based on the total amount due to the contractor prior to any deduction and shall
be retained from every progress payment until fifty percent (50%) of the value of works, as determined
by the procuring entity, are completed. If, after fifty percent (50%) completion, the work is satisfactorily
done and on schedule, no additional retention shall be made; otherwise, the ten percent (10%)
retention shall be imposed. The total "retention money" shall be due for release upon final acceptance
of the works.
CONTRACT COMPLETION
Once the project reaches an accomplishment of ninety five (95%) of the total contract amount, the
procuring entity may create an inspectorate team to make preliminary inspection and submit a punch-
list to the contractor in preparation for the final turnover of the project.
LIQUIDATED DAMAGES
Where the contractor refuses or fails to satisfactorily complete the work within the specified contract
time, plus any time extension duly granted and is hereby in default under the contract, the contractor
shall pay the procuring entity for liquidated damages, and not by way of penalty, an amount, as
provided in the conditions of contract, equal to at least one tenth (1/10) of one (1) percent of the cost of
the unperformed portion of the works for every day of delay. To be entitled to such liquidated damages,
the procuring entity does not have to prove that it has incurred actual damages.
In case that the delay in the completion of the work exceeds a time duration equivalent to ten percent
(10%) of the specified contract time plus any time extension duly granted to the contractor, the
procuring entity concerned may rescind the contract, forfeit the contractor's performance security and
takeover the prosecution of the project or award the same to a qualified contractor through negotiated
contract. In no case however, shall the total sum of liquidated damages exceed ten percent (10%) of the
total contract price, in which event the contract shall automatically be taken over by the procuring
entity concerned or award the same to a qualified contractor through negotiation and the erring
contractor's performance security shall be forfeited.
SUSPENSION OF WORK
The procuring entity shall have the authority to suspend the work wholly or partly by written order for
such period as may be deemed necessary, due to force majeure or any fortuitous events or for failure on
the part of the contractor to correct bad conditions which are unsafe for workers or for the general
public, to carry out valid orders given by the procuring entity or to perform any provisions of the
contract, or due to adjustment of plans to suit field conditions as found necessary during construction.
The contractor shall immediately comply with such order to suspend the work wholly or partly.
The contractor or its duly authorized representative shall have the right to suspend work operation on
any or all projects/activities along the critical path of activities after fifteen (15) calendar days from date
of receipt of written notice from the contractor to the district engineer/regional director/consultant or
equivalent official, as the case may be.

ACCREDITATION OF TESTING LABORATORIES

To help ensure the quality of materials being used in infrastructure projects, the Bureau of Research and
Standards (BRS) of the DPWH, Department of Science and Technology (DOST), or Department of Trade
and Industry (DTI) shall accredit, in accordance with industry guidelines, the testing laboratories whose
services are engaged or to be engaged in infrastructure projects. All government infrastructure project
owners must accept results of material test(s) coming only from DOST/BRS accredited laboratories.
CONTRACT IMPLEMENTATION GUIDELINES FOR THE PROCUREMENT OF CONSULTING SERVICES
Advance Payment for Mobilization
The Government, as it considers fair and reasonable, may allow advance payment to the Consultant in
the amount which shall not exceed fifteen percent (15%) of the contract amount to cover the cost of
mobilization, subject to the posting of an irrevocable standby letter of credit issued by an entity
acceptable to the agency and of an amount equal to the advance payment. The advance payment shall
be repaid by the Consultant by deducting from his progress payments such sum as agreed upon during
the contract negotiations until fully liquidated within the duration of the contract.
Cost of Consulting Services
All Consultancy contracts shall be fixed price contracts. Any extension of contract time shall not involve
any additional cost.
Other Rules and Guidelines
The rules and regulations for the other aspects of contract implementation shall be included in the
manuals to be issued by the GPPB.

Grounds for termination of contracts:

● In case of procurement of goods, failure to deliver at least 10% of the contract price
● In case of infrastructure, due to contractor's fault, negative slippage of 15% or more while
project is ongoing, or 10% or more in the completion of work, neglect, negligence, sublets any
part of the contract without approval
● In contracts for Consulting Services, failure deliver or perform the Outputs and Deliverables
within the period(s) specified in the contract, unable to deliver or perform a material portion of
the Outputs and Deliverables for a period of not less than sixty (60) calendar days after the
Consultant's receipt of the notice from the Procuring Entity stating that the circumstance of
force majeure is deemed to have ceased or fails to perform any other obligation under the
contract.
● For convenience
● Insolvency of the supplier, contractor or consultant
● Unlawful acts
 ● Termination by contractor/consultant

SPLITTING OF GOVERNMENT CONTRACTS

Splitting of Government Contracts is not allowed. Splitting of Government Contracts means the division
or breaking up of contracts into smaller quantities and amounts, or dividing contract implementation
into artificial phases or subcontracts for the purpose of evading or circumventing the requirements of
the law, particularly the necessity of competitive bidding and the requirements for the alternative
methods of procurement.

DISCLOSURE OF RELATIONS
All bidding documents shall be accompanied by a sworn affidavit of the bidder that he or she or any
officer of their corporation is not related to the Head of the Procuring Entity by consanguinity of affinity
up to the third civil degree. Failure to comply with the aforementioned provision shall be a ground for
the automatic disqualification of the bid.

ALTERNATIVE METHOD
Subject to the prior approval of the Head of the Procuring Entity or his duly authorized representative,
and whenever justified by the conditions provided in this Act, the Procuring Entity may, in order to
promote economy and efficiency, resort to any of the following alternative methods of Procurement:
Limited Source Bidding, otherwise known as Selective Bidding – a method of Procurement that
involves direct invitation to bid by the Procuring Entity from a set of pre- selected suppliers or
consultants with known experience and proven capability relative to the requirements of a particular
contract; It may be resorted to only in any of the following conditions:
(a) Procurement of highly specialized types of Goods and Consulting Services which are known to be
obtainable only from a limited number of sources; or
(b) Procurement of major plant components where it is deemed advantageous to limit the bidding to
known eligible bidders in order to maintain an optimum and uniform level of quality and performance of
the plant as a whole.
Direct Contracting, otherwise known as Single Source Procurement – a method of Procurement that
does not require elaborate Bidding Documents because the supplier is simply asked to submit a price
quotation or a pro-forma invoice together with the conditions of sale, which offer may be accepted
immediately or after some negotiations;
may be resorted to only in any of the following conditions:
(a) Procurement of Goods of proprietary nature, which can be obtained only from the proprietary
source, i.e. when patents, trade secrets and copyrights prohibit others from manufacturing the same
item;
(b) When the Procurement of critical components from a specific manufacturer, supplier or distributor is
a condition precedent to hold a contractor to guarantee its project performance, in accordance with the
provisions of his contract; or,
 (c) Those sold by an exclusive dealer or manufacturer, which does not have sub- dealers selling at lower
prices and for which no suitable substitute can be obtained at more advantageous terms to the
Government.
Repeat Order – a method of Procurement that involves a direct Procurement of Goods from the
previous winning bidder, whenever there is a need to replenish Goods procured under a contract
previously awarded through Competitive Bidding;
It may be resorted to provided that all the following conditions are present:
(a) The unit price must be equal to or lower than that provided in the original contract;
(b) The repeat order does not result in splitting of requisitions or purchase orders;
(c) Except in special circumstances defined in the IRR, the repeat order shall be availed of only within six
(6) months from the date of the Notice to Proceed arising from the original contract; and,
(d) The repeat order shall not exceed twenty-five percent (25%) of the quantity of each item of the
original contract.
Shopping – a method of Procurement whereby the Procuring Entity simply requests for the submission
of price quotations for readily available off-the-shelf Goods or ordinary/regular equipment to be
procured directly from suppliers of known qualification; It may be resorted to under any of the following
instances:
a. When there is an unforeseen contingency requiring immediate purchase:
Provided, however, that the amount shall not exceed the following amounts:
i.For NGAs, GOCCs,GFIs,SUCs, and Autonomous Regional Government, Two Hundred Thousand Pesos(P
200,000)

ii.For LGUs, in accordance with the following schedule:

DOF Maximum Amount (in Philippine Peso)

Classifications
of LGUs Province City Municipality

1st class 200,000 200,000 100,000

2nd class 200,000 200,000 100,000

3rd class 200,000 160,000 100,000

4th class 160,000 120,000 100,000

5th class 120,000 100,000 100,000

6th class 100,000 100,000 100,000

In the case of barangays, FIfty Thousand Pesos (P 50,000).

b.Procurement of ordinary or regular office supplies and equipment not available in the DBM-
Procurement System, in the amount not to exceed the following:

i.For NGAs, GOCCs,GFIs,SUCs, and Autonomous Regional Government, Two Hundred Thousand Pesos(P
1,000,000)

ii.For LGUs, in accordance with the following schedule:

DOF Classifications of Maximum Amount ( in Philippine Peso)

LGUs
Province City Municipality

1st class 1,000,000 1,000,000 200,000

2nd class 1,000,000 1,000,000 200,000

3rd class 1,000,000 800,000 200,000

4th class 800,000 600,000 100,000

5th class 600,000 4000,000 100,000

6th class 400,000 200,000 100,000

In the case of barangays, FIfty Thousand Pesos (P 50,000).

The above amounts shall be subject to a periodic review by the GPPB. For this purpose, the GPPB shall be
authorized to increase or decrease the said amount in order to reflect changes in economic conditions
and for other justifiable reasons.
Negotiated Procurement- it is a method of procurement of Goods, Infrastructure Projects and
Consulting services, whereby the Procuring Entity directly negotiates a contract with a technically,
legally and financially capable supplier, contractor or consultant. It may be resorted to in the following
cases:
● Two Failed Biddings. Where there has been failure of competitive bidding or Limited Source
Bidding for the second time.
● Emergency Cases. In case of imminent danger to life or property during a state of calamity, or
when time is of the essence arising from natural or man-made calamities or other causes where
immediate action is necessary to prevent damage to or loss of life or property, or to restore vital
public services, infrastructure facilities and other public utilities. In the case of Infrastructure
Projects, the Procuring Entity has the option to undertake the project through negotiated
procurement or by administration or, in high security risk areas, through the AFP.
● Take-Over of Contracts. Take-over of contracts, which have been rescinded or terminated for
causes provided for in the contract and existing laws, where immediate action is necessary to
prevent damage to or loss of life or property, or to restore vital public services, infrastructure
facilities and other public utilities.
 ● Adjacent or Contiguous. Where the subject contract is adjacent or contiguous to an ongoing
Infrastructure Project or Consulting Service where the consultants have unique experience and
expertise to deliver the required service: Provided, however, That (a) the original contract is the
result of a Competitive Bidding; (b) the subject contract to be negotiated has similar or related
scopes of work; (c) it is within the contracting capacity of the contractor/consultant; (d) the
contractor/consultant uses the same prices or lower unit prices as in the original contract less
mobilization cost; (e) the amount of the contiguous or adjacent work involved does not exceed
the amount of the ongoing project; and (f) the contractor/consultant has no negative
slippage/delay: Provided, further, That negotiations for the procurement of the contiguous or
adjacent work are commenced before the expiry of the original contract.(a)
● Agency-to-Agency. Procurement of Goods, Infrastructure Projects and Consulting Services from
another agency of the GoP, such as the DBM-PS, which is tasked with a centralized procurement
of Common-Use Supplies for the GoP
● Scientific, Scholarly or Artistic Work, Exclusive Technology and Media Services. Where Goods,
Infrastructure Projects and Consulting Services can be contracted to a particular supplier,
contractor or consultant and as determined by the HoPE, for any of the following:
1. The requirement is for:
a. Work of art; commissioned work or services of an artist for a specific artist skills (e.g.,
Singer, poet, writer, painter, sculptor, etc.);
b. Scientific, academic, scholarly work or research, or legal services;
c. Highly-specialized life-saving medical equipment, as certified by the Department of Health
(DOH);
d. Scientific, technical, economic, business, trade or legal journal, magazine, paper,
subscription, or other exclusive statistical publications and references; or
e. Media documentation, advertisement, or announcement through television, radio,
newspaper, internet, and other communication media.
2. The construction or installation of an infrastructure facility where the material, equipment,
or technology under a proprietary right can only be obtained from the same contractor.
● Highly Technical Consultants. In the case of individual consultants hired to do work that is (i)
highly technical or proprietary; or (ii) primarily confidential or policy determining, where trust
and confidence are the primary consideration for the hiring of the consultant: Provided,
however, That the term of the individual consultants shall, at the most, be on a six month basis,
renewable at the option of the appointing HoPE, but in no case shall exceed the term of the
latter.
● Defense Cooperation Agreement. Upon prior approval by the President of the Philippines, and
when the procurement for use by the AFP involves major defense equipment or materiel and/or
defense-related consultancy services, when the expertise or capability required is not available
locally, and the Secretary of National Defense has determined that the interests of the country
shall be protected by negotiating directly with an agency or instrumentality of another country
with which the Philippines has entered into a defense cooperation agreement or otherwise
maintains diplomatic relations.
 ● Small Value Procurement. Procurement of (a) goods not covered by Shopping under (b)
infrastructure projects, and (c) consulting services, where the amount involved does not exceed
the following threshold:
i.For NGAs, GOCCs,GFIs,SUCs, and Autonomous Regional Government, Two Hundred Thousand Pesos(P
1,000,000)

ii.For LGUs, in accordance with the following schedule:

In the case of barangays, FIfty Thousand Pesos (P 50,000).

● Lease of Real Property and Venue. Lease of real property and venue for official use
● NGO Participation. When an appropriation law or ordinance earmarks an amount to be
specifically contracted out to Non-Governmental Organizations (NGOs), the Procuring Entity
may enter into a Memorandum of Agreement with an NGO, subject to the guidelines issued by
the GPPB for the purpose.
● Community Participation. Where, in the interest of project sustainability or to achieve certain
specific social objectives, it is desirable in selected projects, or its components, to call for
participation of local communities in the delivery of goods, including non-consulting services,
and simple infrastructure projects, subject to the Community Participation Procurement Manual
(CPPM) issued by the GPPB.
● United Nations Agencies, International Organizations or International Financing Institutions.
Procurement from specialized agencies of the United Nations, International Organizations or
International Financing Institutions, of any of the following: (a) small quantities of off-the-shelf
goods, primarily in the fields of education and health; (b) specialized products where the
number of suppliers is limited, such as but not limited to vaccines or drugs; or (c) Goods,
Infrastructure Projects and Consulting Services, involving advanced technologies, techniques
and innovations not locally available as certified by the HoPE, when it is most advantageous to
the government.