Participation of Joint Venture w/ no JVA

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Participation of Joint Venture w/ no JVA

Post by RDV @ GP3i on Sat Feb 28, 2009 5:38 pm

The following changes in Sec. 23.3 and 24.7.1 on Class "B" documents in the eligibility requirements are proposed in the draft IRR:

"2. Class “B” Documents -

Valid joint venture agreement (JVA), in case a joint venture is already in existence. In the absence of a JVA, written statements from all the potential joint venture partners stating that they will enter into and abide by the provisions of the JVA in the instance that the Bid is successful shall be included in the Bid. Failure to enter into a joint venture in the event of a contract award shall be ground for the forfeiture of the bid security. Each member of the joint venture shall submit the legal eligibility documents. The submission of technical and financial documents by any of the joint venture partners constitutes compliance.
"

Allowing just the submission of a written statement from all potential joint venture partners, to the effect that they will enter into and abide by the provision of the JVA in the instance that the Bid is successful, and not the JVA itself, is a dangerous proposition, I think.

Since there is no JVA, who will be the authorized representative of the JV? Who will authorize him if there is no legal personality of a JV created yet?

What if the JVA, finally agreed upon, states that the JV partners are not bound jointly and severally?

What if there were changes in the final composition of the JV when they signed the JVA, different from the potential partners who/which submitted the eligibility requirements?

Since the JV is new, how can they comply with the tax clearance and latest income and business tax returns, and PhilGEPS registration? Will these be complied by the members themselves, which is the present requirement of IRR-A? In that case the wording of Sec. 37.1 may not be sufficient, as shown:

"37.1. Within thirty (30) calendar days from receipt by the bidder of the notice from the BAC that the bidder has the Lowest Calculated Responsive Bid or Highest Rated Responsive Bid, as the case may be, the bidder shall comply with all the remaining documentary requirements prior to the issuance of the Notice of Award and prior to formally entering into contract with the procuring entity concerned as follows:

a) Tax clearance;
b) Latest income and business tax returns. In case a foreign corporation legitimately does not have a BIR received income tax return in view of its newness, a sworn statement as to (i) when the company was formed, (ii) started operation, and (iii) that it has not received any income for the month/quarter from business in the Philippines for which a tax return should have been filed;
c) Certificate of PhilGEPS Registration;
d) Valid JVA, if applicable;
e) In the case of infrastructure projects, valid PCAB license and registration for the type and cost of the contract to be bid, for foreign bidders or joint ventures pursuant to an international treaty or agreement; and
f) Other appropriate licenses and documents as stated in the bidding documents.
"

Since the bidder is the potential JV, then it cannot comply with (a) and (b). Compliance by the members themselves will not be in accordance with the said provision.

Just my take. Idea[i]
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Re: Participation of Joint Venture w/ no JVA

Post by engrjhez® on Mon Mar 02, 2009 10:00 pm

For purposes of bidding, I believe that attachment of individual (a)'s (Tax Clearance) and (b)'s (Income/Business Tax Returns) of potential JV parties should be suffient enough to satisfy the requirements.

Again, I think the 30-day period is almost "forever". Very Happy
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Participation of Joint Venture w/ no JVA

Post by venom.0420 on Tue Mar 03, 2009 10:14 pm

I have to agree with RDV. Allowing entities to join a particular bidding w/o a valid JVA is another way of encouraging joybidders. What possible reason did the proponent (s) thinking for coming such an ammendment? No deal!!! Evil or Very Mad
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Re: Participation of Joint Venture w/ no JVA

Post by engrjhez® on Tue Mar 03, 2009 11:27 pm

venom.0420 wrote:I have to agree with RDV. Allowing entities to join a particular bidding w/o a valid JVA is another way of encouraging joybidders. What possible reason did the proponent (s) thinking for coming such an ammendment? No deal!!! Evil or Very Mad

Correct me if I'm wrong, but I don't remember RDV standing on opposing the provision. The query simply looks for an answer clarifying the validity of looking for (a) and (b) under "no JVA" cases.

One thing more, for joybidding to be "joybidding" per se, it must not incur any cost to the "joybidder". On the contrary, they must buy "bidding documents" at a price. They cannot bid and enjoy the "game". More probable is the indication of collusion by introducing artificial competition. Very Happy
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Re: Participation of Joint Venture w/ no JVA

Post by RDV @ GP3i on Wed Mar 04, 2009 1:28 pm

engrjhez wrote:
venom.0420 wrote:I have to agree with RDV. Allowing entities to join a particular bidding w/o a valid JVA is another way of encouraging joybidders. What possible reason did the proponent (s) thinking for coming such an ammendment? No deal!!! Evil or Very Mad

Correct me if I'm wrong, but I don't remember RDV standing on opposing the provision. The query simply looks for an answer clarifying the validity of looking for (a) and (b) under "no JVA" cases.Very Happy

I said that the proposed provision is, I think, "a dangerous proposition." Unless those questions I itemized in my post are clarified, I am opposed to the provision.

The requirements for (a) and (b) to be submitted by the "bidder" as called for by the provision of Sec. 37.1, if the intention is to be complied by the members of the joint venture, would only need the rewording of the provision since the "bidder" in the case of joint venture, is the joint venture or potential joint venture itself, and not the individual members.
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Participation of Joint Venture w/ no JVA

Post by venom.0420 on Wed Mar 04, 2009 2:16 pm

Count me in Sir RDV, and thanks Sir Engrjhez for correcting me as to what joybidding mean! Cool
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JV Participation

Post by dlsn on Tue Mar 24, 2009 9:16 am

RDV wrote:Since there is no JVA, who will be the authorized representative of the JV? Who will authorize him if there is no legal personality of a JV created yet?
If I'm not mistaken, and lawyers please correct me if I am, an unincorporated JV is also considered a partnership, which is vested with a legal personality and subject to the general rules on partnership. The authorized representative of the JV may thus be whoever the partners agree upon.

RDV wrote:What if the JVA, finally agreed upon, states that the JV partners are not bound jointly and severally?
I may have to let the lawyers answer this one, particularly, the issue whether or not agreeing not to be bound jointly and severally affects the nature or validity of the partnership. At any rate, I think whatever the agreement of the parties is, as long as they legally bind themselves as one entity, the JV bidder may be considered.

RDV wrote:What if there were changes in the final composition of the JV when they signed the JVA, different from the potential partners who/which submitted the eligibility requirements?
I think this will affect the eligibility of the JV, and should be a ground for its disqualification. The draft rules provide that each member of the JV should submit eligibility requirements. Thus, only those that submitted their eligibility documents should constitute the incorporated JV.

RDV wrote:Since the JV is new, how can they comply with the tax clearance and latest income and business tax returns, and PhilGEPS registration? Will these be complied by the members themselves, which is the present requirement of IRR-A? In that case the wording of Sec. 37.1 may not be sufficient x x x
RDV wrote:The requirements for (a) and (b) to be submitted by the "bidder" as called for by the provision of Sec. 37.1, if the intention is to be complied by the members of the joint venture, would only need the rewording of the provision since the "bidder" in the case of joint venture, is the joint venture or potential joint venture itself, and not the individual members.
I don't think those documents are being required of the JV, but are instead required from the members of the JV. In this light, I agree that §37.1 of the Draft IRR needs rewording to clarify that, instead of the JV, the members of the JV are required to submit their corresponding tax clearance, latest income and business tax returns, and PhilGEPS registration.
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Re: Participation of Joint Venture w/ no JVA

Post by RDV @ GP3i on Tue Mar 24, 2009 12:52 pm

dlsn wrote:
RDV wrote:Since there is no JVA, who will be the authorized representative of the JV? Who will authorize him if there is no legal personality of a JV created yet?
If I'm not mistaken, and lawyers please correct me if I am, an unincorporated JV is also considered a partnership, which is vested with a legal personality and subject to the general rules on partnership. The authorized representative of the JV may thus be whoever the partners agree upon.

RDV wrote:What if the JVA, finally agreed upon, states that the JV partners are not bound jointly and severally?
I may have to let the lawyers answer this one, particularly, the issue whether or not agreeing not to be bound jointly and severally affects the nature or validity of the partnership. At any rate, I think whatever the agreement of the parties is, as long as they legally bind themselves as one entity, the JV bidder may be considered.

RDV wrote:What if there were changes in the final composition of the JV when they signed the JVA, different from the potential partners who/which submitted the eligibility requirements?
I think this will affect the eligibility of the JV, and should be a ground for its disqualification. The draft rules provide that each member of the JV should submit eligibility requirements. Thus, only those that submitted their eligibility documents should constitute the incorporated JV.

RDV wrote:Since the JV is new, how can they comply with the tax clearance and latest income and business tax returns, and PhilGEPS registration? Will these be complied by the members themselves, which is the present requirement of IRR-A? In that case the wording of Sec. 37.1 may not be sufficient x x x
RDV wrote:The requirements for (a) and (b) to be submitted by the "bidder" as called for by the provision of Sec. 37.1, if the intention is to be complied by the members of the joint venture, would only need the rewording of the provision since the "bidder" in the case of joint venture, is the joint venture or potential joint venture itself, and not the individual members.
I don't think those documents are being required of the JV, but are instead required from the members of the JV. In this light, I agree that §37.1 of the Draft IRR needs rewording to clarify that, instead of the JV, the members of the JV are required to submit their corresponding tax clearance, latest income and business tax returns, and PhilGEPS registration.

Maybe, atty shobe can provide her legal expertise on dlsn's replies.

Of course, if there are violations in the final JVA or changes in the JV composition, the members comprising the JV or the newly formed JV can be disqualified. However, it can cause further delays in the procurement process because the "JV" will not just give up its claim to being already declared by the BAC as the LCRB.

If a rebidding is done, those who participated would object to the fact that their financial bids have already been exposed to the other bidders or other prospective bidders who/which would later participate in the re-bidding.

This brings us to venom's, earlier question: "What possible reason did the proponent (s) thinking for coming such an ammendment?"
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JV Participation

Post by dlsn on Tue Mar 24, 2009 1:25 pm

venom.0420 wrote:What possible reason did the proponent (s) thinking for coming such an ammendment? [sic] No deal!!!
I can only surmise that it is because it deters competition when bidders are required to incorporate a JV for a project which they are not sure they can get.

RDV wrote:If a rebidding is done, those who participated would object to the fact that their financial bids have already been exposed to the other bidders or other prospective bidders who/which would later participate in the re-bidding.
It appears that every re-bidding where all the financial bids have been opened is faced with this kind of concern, and not just in a case where a JV is formed constituting members other than those who submitted eligibility documents.

Question: What possible solution can we adopt to balance the concerns on deterrence to competition and possible delay in the procurement process with respect to this requirement?
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Re: Participation of Joint Venture w/ no JVA

Post by shobe on Tue Mar 24, 2009 3:17 pm

RDV: Since there is no JVA, who will be the authorized representative of the JV? Who will authorize him if there is no legal personality of a JV created yet?

DLSN: If I'm not mistaken, and lawyers please correct me if I am, an unincorporated JV is also considered a partnership, which is vested with a legal personality and subject to the general rules on partnership. The authorized representative of the JV may thus be whoever the partners agree upon.


I'll just share some of what I learned from Dean Dimayuga. Smile
A joint venture is basically a loose partnership and its legal concept is of common law origin. In fact, no specific provision under the Corporation Code (BP 168) or under the New Civil Code pertains to joint ventures as a legal creature.

Notably, a joint venture, within the concept of Philippine law, is organized or established only for some transient or temporary business objective. Joint ventures are usually resorted to by corporations - domestic or foreign-based - which are not allowed to form partnerships or become partners in a partnership. Please note that only individual, natural persons are permitted to form partnerships.

To add, the only distinction between partnerships and joint ventures (as far as I can remember) is that a corporation cannot enter into a partnership contract, but is not precluded from engaging in a joint venture with others.

I agree with Big Brother DLSN that the general rules on partnership would have to apply and that any partner or member of the JV, for that matter, may be designated or may designate the authorized representative of the JV.

RDV: What if the JVA, finally agreed upon, states that the JV partners are not bound jointly and severally?

DLSN: I may have to let the lawyers answer this one, particularly, the issue whether or not agreeing not to be bound jointly and severally affects the nature or validity of the partnership. At any rate, I think whatever the agreement of the parties is, as long as they legally bind themselves as one entity, the JV bidder may be considered.


Applying the rules on partnership: As a general rule, the liability of partners in a partnership organization is unlimited, meaning, creditors of the partnership may run after the partners for any and all of their assets and property. Should one of the partners pay for all the liabilities of the partnership, said partner (under the law) is entitled to be reimbursed by the other partners for their respective shares therein.

In the case, however, of limited partnerships, the law allows the limitation of the liability of certain partners to the extent of the amount contributed to the partnership.

In this sense, (in my opinion) if the JVA did provide for specific extent of liabilities for each partner, then the provisions in said agreement would have to be respected.



RDV: What if there were changes in the final composition of the JV when they signed the JVA, different from the potential partners who/which submitted the eligibility requirements?

DLSN: I think this will affect the eligibility of the JV, and should be a ground for its disqualification. The draft rules provide that each member of the JV should submit eligibility requirements. Thus, only those that submitted their eligibility documents should constitute the incorporated JV.


I agree with the position taken by Big Brother DLSN.

RDV: Since the JV is new, how can they comply with the tax clearance and latest income and business tax returns, and PhilGEPS registration? Will these be complied by the members themselves, which is the present requirement of IRR-A? In that case the wording of Sec. 37.1 may not be sufficient x x x

RDV: The requirements for (a) and (b) to be submitted by the "bidder" as called for by the provision of Sec. 37.1, if the intention is to be complied by the members of the joint venture, would only need the rewording of the provision since the "bidder" in the case of joint venture, is the joint venture or potential joint venture itself, and not the individual members.

DLSN: I don't think those documents are being required of the JV, but are instead required from the members of the JV. In this light, I agree that §37.1 of the Draft IRR needs rewording to clarify that, instead of the JV, the members of the JV are required to submit their corresponding tax clearance, latest income and business tax returns, and PhilGEPS registration.


Maybe Section 37.1 can be reworded this way:

Within thirty (30) calendar days from receipt by the bidder of the notice xxx, the bidder shall comply with all the remaining documentary requirements prior to the issuance of the Notice of Award and prior to formally entering into contract with the procuring entity concerned as follows:

a) Tax clearance;
xxxx
f) Other appropriate licenses and documents as stated in the bidding documents.

Provided, that for joint ventures, compliance by one of the members of the foregoing requirements shall be deemed sufficient.

The Notice of Award shall be made to the bidder xxx
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Re: Participation of Joint Venture w/ no JVA

Post by RDV @ GP3i on Tue Mar 24, 2009 3:27 pm

dlsn wrote:
venom.0420 wrote:What possible reason did the proponent (s) thinking for coming such an ammendment? [sic] No deal!!!
I can only surmise that it is because it deters competition when bidders are required to incorporate a JV for a project which they are not sure they can get.

The essence of the Competitiveness principle is that nobody is sure who will be awarded the contract, but everybody should be prepared to be awarded once they were declared as the LCRB/HRRB. If they are yet to constitute themselves into a JV, question is, how prepared are they? Besides, joining the bidding is taking some form of a risk, don't they want to take a risk by forming JV first?

In the case of the COMELEC automation, there was a JV which participated in the bidding but the one that was awarded or signed the contract was a different entity. What is the safeguard against such a scenario, except for the Supreme Court which eventually invalidated the contract?
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Re: Participation of Joint Venture w/ no JVA

Post by venom.0420 on Tue Mar 24, 2009 4:02 pm

hahaha...forgive me guyz but looks like the discussion on this matter is gettin' too deep for my average level of comprehension. but my take remains the same. how difficult it is in the first place to form a JV? It's easy as A-B-C, yet, the risks that the procuring entity will assume once this amendment is implented is substantial. Using the cost-benefit consideration, it's still a no-deal! Very Happy
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Re: Participation of Joint Venture w/ no JVA

Post by RDV @ GP3i on Tue Mar 24, 2009 4:15 pm

venom.0420 wrote:hahaha...forgive me guyz but looks like the discussion on this matter is gettin' too deep for my average level of comprehension. but my take remains the same. how difficult it is in the first place to form a JV? It's easy as A-B-C, yet, the risks that the procuring entity will assume once this amendment is implented is substantial. Using the cost-benefit consideration, it's still a no-deal! Very Happy

But the important thing, venom, is that we are learning from the discussion, and not getting confused. Very Happy

For me, without adequate safeguard, the provision could be subject to abuse. I have mentioned the COMELEC automation case in point. In that situation, the requirement for the JVA was already in place, yet despite that, we know what happened.

If the JVA will no longer be required, but only a commitment from the potential partners, I don't know about that. pirat
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