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Conditions on the contract

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Conditions on the contract

Post by 04OTQMG on Thu Jun 07, 2012 2:14 pm

The AFP entered into a Multi-Year contract with Petron Corporation for the Supply and Delivery of AFP Petroleum, Oil and Lubricants (POL) from CY 2011 to Jan 2013 that was acquired thru public bidding by the DND BAC. The total amount that the AFP committed to Petron Corporation that will be implemented through the said multi-year contract is 8.050 Billion. On the other hand, the Notice to Proceed (NTP) was given to Petron by DND last 13 September 2011. The date when Petron Corp. received the NTP, will then be the reckoning date to be used if ever Repeat Order as mode of procurement will be availed. However, on the said contract there is a provision stipulated under the Special Conditions of the Contract (SCC) which states “During the implementation of the contract, the actual budgets for a particular lot maybe increased as a result of increase in yearly appropriations, additional budgets for POL for additional operational requirements or to cover inflation, use of savings, realignments in the AFP budget, among others”, this provision is in anticipation of the additional POL budgets that is possible if the AFP acquires new assets or equipment (e.g. the acquisition of new navy ship Hamilton) that needs POL or in case of increase in operational tempo.
The DND-AFP received PhP230M additional budget specifically for the procurement of POL products needed by the AFP operating units. Procurement Request was issued for this purpose, however, the DND-AFP is encountering some legal issues on the implementation of the contract relative to the procurement of these additional POL requirements of the DND-AFP, to wit:
a) Repeat Order can no longer avail as mode of procurement due to the allowed number of months from the time NTP was served to Petron Corp. has exceeded already. However, under the special conditions of the contract as mentioned above, it can be used by the DND-AFP in order to facilitate the speedy procurement of the needed POL products. Will the AFP be violating the RA 9184 and its IRR if we implement the provision of the contract?
b) If ever we are allowed to use the provision on the special condition of the contract as mentioned above, what will be the mode of procurement that will be stated in the Purchase Order (PO)? Will it still be Public Bidding?
c) If we resorted to use Public Bidding as mode of procurement for this additional POL requirements of the AFP. Will it be a violation of the contract entered by DND-AFP with Petron Corp.?
Please help us on these issues. We are likewise on the stage preparing the contract for next bidding of DND-AFP POL requirements for the year 2013. Your immediate response will help us to decide whether to include again the above mentioned Special Condition of the Contract. This provision is very important on our part particularly on the procurement of this critical supply of the AFP wherein it will address the complexities on the timely delivery of supplies in our military operation.

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Re: Conditions on the contract

Post by RDV @ GP3i on Wed Jun 13, 2012 2:50 pm

04OTQMG wrote:The AFP entered into a Multi-Year contract with Petron Corporation for the Supply and Delivery of AFP Petroleum, Oil and Lubricants (POL) from CY 2011 to Jan 2013 that was acquired thru public bidding by the DND BAC. The total amount that the AFP committed to Petron Corporation that will be implemented through the said multi-year contract is 8.050 Billion. On the other hand, the Notice to Proceed (NTP) was given to Petron by DND last 13 September 2011. The date when Petron Corp. received the NTP, will then be the reckoning date to be used if ever Repeat Order as mode of procurement will be availed. However, on the said contract there is a provision stipulated under the Special Conditions of the Contract (SCC) which states “During the implementation of the contract, the actual budgets for a particular lot maybe increased as a result of increase in yearly appropriations, additional budgets for POL for additional operational requirements or to cover inflation, use of savings, realignments in the AFP budget, among others”, this provision is in anticipation of the additional POL budgets that is possible if the AFP acquires new assets or equipment (e.g. the acquisition of new navy ship Hamilton) that needs POL or in case of increase in operational tempo.
The DND-AFP received PhP230M additional budget specifically for the procurement of POL products needed by the AFP operating units. Procurement Request was issued for this purpose, however, the DND-AFP is encountering some legal issues on the implementation of the contract relative to the procurement of these additional POL requirements of the DND-AFP, to wit:
That would be your background information.

04OTQMG wrote:a) Repeat Order can no longer avail as mode of procurement due to the allowed number of months from the time NTP was served to Petron Corp. has exceeded already. However, under the special conditions of the contract as mentioned above, it can be used by the DND-AFP in order to facilitate the speedy procurement of the needed POL products.
For repeat order beyond six months after the contract effectivity, you may seek the approval first by the GPPB. If approved, then even if it is already beyond 6 months, you could still procure by Repeat Order, subject to compliance with the other conditions.

04OTQMG wrote: Will the AFP be violating the RA 9184 and its IRR if we implement the provision of the contract?

The question that should be ask here is: Is that provision of the contract not contrary to public policy, that is the policy of public bidding? My answer to that is YES, it is contrary to public policy, which, therefore, is in violation of RA 9184 on the requirement of public bidding.

04OTQMG wrote:b) If ever we are allowed to use the provision on the special condition of the contract as mentioned above, what will be the mode of procurement that will be stated in the Purchase Order (PO)? Will it still be Public Bidding?

Considering my answer on the 2nd question, then the mode should really be another public bidding.

04OTQMG wrote:c) If we resorted to use Public Bidding as mode of procurement for this additional POL requirements of the AFP. Will it be a violation of the contract entered by DND-AFP with Petron Corp.?

If that provision of the contract is not in accordance with public policy, the contract could even be declared null and void by a competent court.

04OTQMG wrote:Please help us on these issues. We are likewise on the stage preparing the contract for next bidding of DND-AFP POL requirements for the year 2013. Your immediate response will help us to decide whether to include again the above mentioned Special Condition of the Contract. This provision is very important on our part particularly on the procurement of this critical supply of the AFP wherein it will address the complexities on the timely delivery of supplies in our military operation.

Those are just my personal opinion.
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