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cash deposit certificate

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cash deposit certificate

Post by endingcumti on Sat Sep 26, 2009 4:42 pm

The revised IRR deleted cash deposit certificate as one of the requirements in bidding and instead prescribed NFCC and Credit Line Certification. Can a cash deposit certificate which certifies among others that "the bidder commits not to withdraw the amount prescribed in the bidding until a letter of clearance from the BAC..." be acceptable? Is this not complying? I was thinking that if the prospective bidder has a large amount of deposit in a certain bank, why does he have to secure a credit line certification when he can just instead submit a cash deposit certificate certifying therein the amount of his deposit and committing not to withdraw the amount prescribed in a certain bidding for a certain period until he is cleared. or does the IRR strictly prescribe bidder's computation of NFCC and Credit Line Certifiaction only?
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Re: cash deposit certificate

Post by engrjhez® on Mon Sep 28, 2009 11:19 am

endingcumti wrote:The revised IRR deleted cash deposit certificate as one of the requirements in bidding and instead prescribed NFCC and Credit Line Certification. Can a cash deposit certificate which certifies among others that "the bidder commits not to withdraw the amount prescribed in the bidding until a letter of clearance from the BAC..." be acceptable? Is this not complying? I was thinking that if the prospective bidder has a large amount of deposit in a certain bank, why does he have to secure a credit line certification when he can just instead submit a cash deposit certificate certifying therein the amount of his deposit and committing not to withdraw the amount prescribed in a certain bidding for a certain period until he is cleared. or does the IRR strictly prescribe bidder's computation of NFCC and Credit Line Certifiaction only?

I believe the main reason for removing the CDC is that it is "self-serving". Certification, must by nature, issued by another party and not by claiming it exists. In the case of CDC, although the document is issued by the bank (which is another party), the liquidity and weight of statement loosens up from the fact that the account is from the person being issued, and there is no harm on the bank to issue CDC because it really exists. CLC on the other hand, uses the liquidity and statement being extended by bank (based on their assessment of credit standing) and that weighs heavier than just for the immediate presence of account deposit. CLC also will be a better measure of the account holder's performance rating with the bank - and not just a depositor. NFCC serves the same purpose.

In the Revised IRR, since there are no CDCs being mentioned to replace any requirement, then they SHOULD NOT be acceptable and SHOULD NOT BE COMPLYING. Very Happy
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Re: cash deposit certificate

Post by engrjhez® on Mon Sep 28, 2009 11:51 am

There is actually a POLL and a thorough discussion of this scenario in the drafting of the Revised IRR (Topics on Draft IRR) in this forum.

Follow this link.


Very Happy
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Re: cash deposit certificate

Post by riddler on Tue Sep 29, 2009 1:48 pm

engrjhez wrote:
endingcumti wrote:The revised IRR deleted cash deposit certificate as one of the requirements in bidding and instead prescribed NFCC and Credit Line Certification. Can a cash deposit certificate which certifies among others that "the bidder commits not to withdraw the amount prescribed in the bidding until a letter of clearance from the BAC..." be acceptable? Is this not complying? I was thinking that if the prospective bidder has a large amount of deposit in a certain bank, why does he have to secure a credit line certification when he can just instead submit a cash deposit certificate certifying therein the amount of his deposit and committing not to withdraw the amount prescribed in a certain bidding for a certain period until he is cleared. or does the IRR strictly prescribe bidder's computation of NFCC and Credit Line Certifiaction only?

I believe the main reason for removing the CDC is that it is "self-serving". Certification, must by nature, issued by another party and not by claiming it exists. In the case of CDC, although the document is issued by the bank (which is another party), the liquidity and weight of statement loosens up from the fact that the account is from the person being issued, and there is no harm on the bank to issue CDC because it really exists. CLC on the other hand, uses the liquidity and statement being extended by bank (based on their assessment of credit standing) and that weighs heavier than just for the immediate presence of account deposit. CLC also will be a better measure of the account holder's performance rating with the bank - and not just a depositor. NFCC serves the same purpose.

In the Revised IRR, since there are no CDCs being mentioned to replace any requirement, then they SHOULD NOT be acceptable and SHOULD NOT BE COMPLYING. Very Happy

Speaking of the CLC. MAy I ask what percentage from the ABC does the revised IRR allows for such CLC from the bank? thanks. Very Happy
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Re: cash deposit certificate

Post by venom.0420 on Tue Sep 29, 2009 3:23 pm

ruel wrote:
Speaking of the CLC. MAy I ask what percentage from the ABC does the revised IRR allows for such CLC from the bank? thanks. Very Happy

According to the new IRR under Section 23.5.1.4:

If the prospective bidder submits a computation of its NFCC, the NFCC must be at least equal to the ABC to be bid, calculated as follows:

NFCC = [(Current assets minus current liabilities) (K)] minus the valueof 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.

If the prospective bidder submits a CLC, the CLC must be at least equal to ten percent (10%) of the ABC to be bid. If the CLC is issued by a foreign Universal or Commercial Bank, it shall be confirmed or authenticated by a Universal or Commercial Bank. For biddings conducted by LGUs, the prospective bidder may also submit CLC from other banks certified by the BSP as authorized to issue such financial instrument.
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Re: cash deposit certificate

Post by sunriser431 on Tue Sep 29, 2009 3:35 pm

ruel wrote:
engrjhez wrote:
endingcumti wrote:The revised IRR deleted cash deposit certificate as one of the requirements in bidding and instead prescribed NFCC and Credit Line Certification. Can a cash deposit certificate which certifies among others that "the bidder commits not to withdraw the amount prescribed in the bidding until a letter of clearance from the BAC..." be acceptable? Is this not complying? I was thinking that if the prospective bidder has a large amount of deposit in a certain bank, why does he have to secure a credit line certification when he can just instead submit a cash deposit certificate certifying therein the amount of his deposit and committing not to withdraw the amount prescribed in a certain bidding for a certain period until he is cleared. or does the IRR strictly prescribe bidder's computation of NFCC and Credit Line Certifiaction only?

I believe the main reason for removing the CDC is that it is "self-serving". Certification, must by nature, issued by another party and not by claiming it exists. In the case of CDC, although the document is issued by the bank (which is another party), the liquidity and weight of statement loosens up from the fact that the account is from the person being issued, and there is no harm on the bank to issue CDC because it really exists. CLC on the other hand, uses the liquidity and statement being extended by bank (based on their assessment of credit standing) and that weighs heavier than just for the immediate presence of account deposit. CLC also will be a better measure of the account holder's performance rating with the bank - and not just a depositor. NFCC serves the same purpose.

In the Revised IRR, since there are no CDCs being mentioned to replace any requirement, then they SHOULD NOT be acceptable and SHOULD NOT BE COMPLYING. Very Happy

Speaking of the CLC. MAy I ask what percentage from the ABC does the revised IRR allows for such CLC from the bank? thanks. Very Happy
likewise given the facts, May I know what are the requirements in securing this CLC? any input would be appreciated
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Re: cash deposit certificate

Post by riddler on Wed Sep 30, 2009 3:08 pm

sunriser431 wrote:
ruel wrote:
engrjhez wrote:
endingcumti wrote:The revised IRR deleted cash deposit certificate as one of the requirements in bidding and instead prescribed NFCC and Credit Line Certification. Can a cash deposit certificate which certifies among others that "the bidder commits not to withdraw the amount prescribed in the bidding until a letter of clearance from the BAC..." be acceptable? Is this not complying? I was thinking that if the prospective bidder has a large amount of deposit in a certain bank, why does he have to secure a credit line certification when he can just instead submit a cash deposit certificate certifying therein the amount of his deposit and committing not to withdraw the amount prescribed in a certain bidding for a certain period until he is cleared. or does the IRR strictly prescribe bidder's computation of NFCC and Credit Line Certifiaction only?

I believe the main reason for removing the CDC is that it is "self-serving". Certification, must by nature, issued by another party and not by claiming it exists. In the case of CDC, although the document is issued by the bank (which is another party), the liquidity and weight of statement loosens up from the fact that the account is from the person being issued, and there is no harm on the bank to issue CDC because it really exists. CLC on the other hand, uses the liquidity and statement being extended by bank (based on their assessment of credit standing) and that weighs heavier than just for the immediate presence of account deposit. CLC also will be a better measure of the account holder's performance rating with the bank - and not just a depositor. NFCC serves the same purpose.

In the Revised IRR, since there are no CDCs being mentioned to replace any requirement, then they SHOULD NOT be acceptable and SHOULD NOT BE COMPLYING. Very Happy

Speaking of the CLC. MAy I ask what percentage from the ABC does the revised IRR allows for such CLC from the bank? thanks. :D
likewise given the facts, May I know what are the requirements in securing this CLC? any input would be appreciated

now i found it! the CLC is still equal to 10% of the ABC (Sec. 5.5 of the ITB (draft PBD).. I think Banks has different requirements relative to its issuance sunriser, depende yan lalo na yung Bidder eh malakas na depositor nila... Although this is between the Bank and the Bidder who are involve on this matter, what is important is that, this legal documents must be presented by the Bidder to the Procuring Entity.
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Re: cash deposit certificate

Post by venom.0420 on Thu Oct 01, 2009 2:23 pm

ruel wrote:
now i found it! the CLC is still equal to 10% of the ABC (Sec. 5.5 of the ITB (draft PBD).. I think Banks has different requirements relative to its issuance sunriser, depende yan lalo na yung Bidder eh malakas na depositor nila... Although this is between the Bank and the Bidder who are involve on this matter, what is important is that, this legal documents must be presented by the Bidder to the Procuring Entity.

Sir ruel,

Please take note that the CLC under the new IRR is required only if the NFCC of the bidder is insufficient. The CDC nor the CLC is no longer a technical component of the bid.

FYI. Very Happy
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Re: cash deposit certificate

Post by sunriser431 on Thu Oct 01, 2009 2:54 pm

ruel wrote: now i found it! the CLC is still equal to 10% of the ABC (Sec. 5.5 of the ITB (draft PBD).. I think Banks has different requirements relative to its issuance sunriser, depende yan lalo na yung Bidder eh malakas na depositor nila... Although this is between the Bank and the Bidder who are involve on this matter, what is important is that, this legal documents must be presented by the Bidder to the Procuring Entity.
According to bidders/suppliers its much easier to secure the CDC than the CLC because of the latters stringent requirements in obtaining it. my speculation/reason it was omitted in the Revised IRR of RA#9184.
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Re: cash deposit certificate

Post by riddler on Thu Oct 01, 2009 2:58 pm

venom.0420 wrote:
ruel wrote:
now i found it! the CLC is still equal to 10% of the ABC (Sec. 5.5 of the ITB (draft PBD).. I think Banks has different requirements relative to its issuance sunriser, depende yan lalo na yung Bidder eh malakas na depositor nila... Although this is between the Bank and the Bidder who are involve on this matter, what is important is that, this legal documents must be presented by the Bidder to the Procuring Entity.

Sir ruel,

Please take note that the CLC under the new IRR is required only if the NFCC of the bidder is insufficient. The CDC nor the CLC is no longer a technical component of the bid.

FYI. Very Happy
Class A Documents of the New IRR

x x x x x x x

Financial Documents

v) The prospective bidder’s audited financial statements, showing, among
others, the prospective bidder’s total and current assets and liabilities,
stamped “received” by the BIR or its duly accredited and authorized
institutions, for the preceding calendar year which should not be earlier
than two (2) years from the date of bid submission.
vi) The prospective bidder’s computation for 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).
quote]

Surely the CLC is still a part of the Technical Component Venom. BEcause the Bidders could still choose from either the NFCC or CLC or the combination of both in there financial documents. Very Happy Very Happy
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Re: cash deposit certificate

Post by fe a. araya on Fri Oct 02, 2009 2:31 pm

I agree that the bidder has two options to submit either computation of NFCC or a CLC. However, am just apprehensive that if the bidder submits its NFCC, it may not be the TRUE picture of his current assets and liabilites. Alam naman natin na there are plenty of bright boys in the business na kayang kaya imagic ang figures in connivance with the independent auditor they hired. And of course, pag nag post-qua his auditor will confirm what was submitted. Perhaps the CDC ( with condition that the cash deposit will be put on hold until the issuance of BAC clearance) or CLC will suffice. Kaya lang kawawa ung maliliit bidders. I experienced receiving info that they resort to borrowing money just so they have cash deposit sa bank kasi mas matagal daw ung CLC
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Re: cash deposit certificate

Post by sunriser431 on Sat Oct 03, 2009 9:23 am

fe a. araya wrote:I agree that the bidder has two options to submit either computation of NFCC or a CLC. However, am just apprehensive that if the bidder submits its NFCC, it may not be the TRUE picture of his current assets and liabilites. Alam naman natin na there are plenty of bright boys in the business na kayang kaya imagic ang figures in connivance with the independent auditor they hired. And of course, pag nag post-qua his auditor will confirm what was submitted. Perhaps the CDC ( with condition that the cash deposit will be put on hold until the issuance of BAC clearance) or CLC will suffice. Kaya lang kawawa ung maliliit bidders. I experienced receiving info that they resort to borrowing money just so they have cash deposit sa bank kasi mas matagal daw ung CLC
Before the independent auditor engage his/her services, I think there is this statement of waiver signed by the owner, among others certifying the accuracy and reliability of the supporting financial documents is the responsibility of the business/owner. It would be unfair for those independent auditor saying as such. no offense intended Smile any comments are welcome. cheers
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