Republic of the Philippines

CIVIL AVIATION AUTHORITY OF THE PHILIPPINES

MEMORANDUM

FOR:

FROM: RONALD V. ESTABILLO

Civil Aviation Area Manager – Area I

DATE:

SUBJECT: EAGLEMATRIX SECURITY AGENCY, INC. (EMSAI)

VIOLATIONS – Area I and Area II

BACKGROUND

1. In accordance with R.A. No. 9184 (Government Procurement Reform Act)

and it’s Implementing Rules and Regulations, the Civil Aviation Authority of the Philippines
(CAAP) through the Special Bids and Awards Committee (SBAC) conducted a public
bidding on 03 July 2018 for the Procurement of Security Services in various Airports of
CAAP Area Center I.

2. After evaluation, Eagle Matrix Security Agency, Inc. (EMSAI) was awarded
the contract under the Three-Year Service Agreement/Security Services Contract for having
submitted the Single Calculated Responsive Bid (SCRB) for the Services.

3. On 19 October 2018, EMSAI through its President, was given a Notice of

Award with contract price of Nineteen Million Six Hundred Eighty Six Thousand Nine
Hundred Nine Pesos & 72/100 (PhP19,686,909.72). In said notice, EMSAI was also required
to submit a Performance Bond in the amount indicated therein, otherwise EMSAI’s bid shall
be disqualified.

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4. A Notice to Proceed was subsequently sent to and received by EMSAI in 08

January 2019, stating that the Security Services Contract shall take effect on 01 February
2019.

5. EMSAI security forces were also deployed in CAAP Area Center II in 01

February 2019.

6. Under Article XII (Performance Security), Section 12 of the Security Services

Contract, the Contractor (EMSAI) shall post a Performance Security to guarantee the faithful
performance of its obligation.

7. Accordingly, the Table of Offenses/Violations and Penalties (Annex “A”)

attached to the Security Services Contract provides for the offenses or violations of rules
committed by EMSAI and their corresponding penalties.

8. Beginning February 2019, EMSAI failed to perform some of its obligation

under the contract which resulted to their incurred penalties amounting to twenty one million
eight hundred fifty three thousand five hundred pesos (PHP21,853,500.00), and thirty two
million three hundred twelve thousand five hundred pesos (PHP32,312,500.00) from Area I
and Area II, respectively.

9. On 24 July 2019, Atty. Claustro sent a written Request for Reconsideration

and Waiver of Penalty to Area I, citing the prevailing COMELEC Gun Ban, among other
reasons. A similar written request was sent to Area II on 29 July 2019 seeking for another
reconsideration and waiver of penalties from Area II.

10. On 19 August 2019, CAAP Area I approved the request for reconsideration
and waiver of penalty. A total of ten million four hundred sixty nine thousand five hundred
pesos (PHP10,469,500.00) was waived from the penalties of EMSAI from Area I. The
Request for Reconsideration and Waiver of Penalty to Area II was however, not passed upon.

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11. Despite their standing obligation to pay the incurred penalties, Atty. Claustro
sent another letter to Area Center I on 11 November 2019 requesting payment from CAAP
for the unpaid Security Services from 01 March to 31 October 2019 in the amount of thirteen
million nine hundred fifty two thousand seven hundred seventy two pesos and 96/100
(PHP13,952,772.96).

12. On 04 August 2020, CSIS Area I Supervisor Danilo Manalo forwarded a

Summary Report of EMSAI Penalties from Area I for the period February 2019 up to
February 2020. The adjusted penalties of EMSAI from Area I after approving the written
request for reconsideration amounted to Eleven Million Three Hundred Eighty Four
Thousand Pesos (PHP11,384,000.00).

13. On 04 January 2021, CSIS Area II Supervisor Derrick Mones also forwarded a
Summary Report of EMSAI Penalties from Area II for the period February 2019 up to
September 2020. The total amount of EMSAI penalties from Area II is Thirty Two Million
Three Hundred Twelve Thousand Five Hundred Pesos (PHP32,312,500.00).

14. Based from the summary reports provided by Mr. Manalo and Mr. Mones, the
combined penalties of EMSAI from Areas I and II total to Forty One Million Six Hundred
Ninety Six Thousand Five Hundred Pesos (PhP41,696,500.00).

STATEMENT OF THE ISSUE/S

15. Whether or not the Liquidated Damages are chargeable against the retention
money or amount due to EMSAI pursuant to Section 3, Annex D of the 2016 Revised IRR of
R.A. No. 9184.

DISCUSSION

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16. The Manual of Procedures for the Procurement of Goods, Volume 2, discusses
the rule on the applicable period for the delivery of goods or performance of services. The
supplier/manufacturer/distributor must deliver the goods or perform the services procured
within the period prescribed by the Procuring Entity, as specified in the Contract. If
delays are likely to be incurred, the supplier/manufacturer/distributor must notify the
Procuring Entity in writing. It must state therein the cause/s and duration of the expected
delay. The Procuring Entity may grant time extensions, at its discretion, if based on
meritorious grounds, with or without liquidated damages. In all cases, the request for
extension should be submitted before the lapse of the original delivery date. The maximum
allowable extension shall not be longer than the initial delivery period as stated in the original
contract.1 [Emphasis supplied.]

17. Liquidated damages are damages agreed upon by the parties to a contract, to
be paid in case of breach thereof.2

18. The 2016 Revised Implementing Rules and Regulations (IRR) of R.A. No.
9184, otherwise known as The Government Procurement Reform Act has just been updated
as of 31 March 2021. The provisions of the IRR are in line with the commitment of the
Government of the Philippines to promote good governance and its effort to adhere to the
principles of transparency, accountability, equity, efficiency, and economy in its procurement
process.3

19. Section 68 of the Revised Implementing Rules and Regulations (IRR) of

Republic Act (RA) 9184 provides that the amount of the liquidated damages shall be at least
equal to one-tenth of one percent (0.1%) of the cost of the unperformed portion for every day
of delay for the procurement of goods, infrastructure projects, and consulting services.4
1
https://www.gppb.gov.ph/downloadables/forms/GPM%20Volume%202.pdf; page 119.
2
Civil Code of the Philippines, Art. 2226.
3
Rule I, Section 2. Declaration of Policy, 2016 Revised IRR of RA No. 9184.
4
Section 68. Liquidated Damages. All contracts executed in accordance with the Act and this IRR shall contain
a provision on liquidated damages which shall be payable by the contractor in case of breach thereof. For the
procurement of Goods, Infrastructure Projects and Consulting Services, the amount of the liquidated damages
shall be at least equal to one-tenth of one percent (0.001) of the cost of the unperformed portion for every day
of delay. Once the cumulative amount of liquidated damages reaches ten percent (10%) of the amount of the
contract, the Procuring Entity may rescind or terminate the contract, without prejudice to other courses of
action and remedies available under the circumstances.

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20. A similar provision is found in Section 3.1 of Annex “D” of said IRR:

3.1 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. The procuring entity need not prove that it has incurred
actual damages to be entitled to liquidated damages. Such amount shall
be deducted from any money due or which may become due to the
supplier, or collected from any securities or warranties posted by the
supplier, whichever is convenient to the procuring entity concerned. In
case the total sum of liquidated damages reaches ten percent (10%) of
the total contract price, the procuring entity concerned may rescind the
contract and impose appropriate sanctions over and above the
liquidated damages to be paid. [Emphasis supplied.]

21. Based from the aforementioned provisions, the procuring entity or CAAP has
the right to claim Liquidated Damages from EMSAI as the latter has defaulted in the
fulfillment of its obligations under the contract as early as February 2019.

22. A review of the documents provided by the CSIS of Areas I and II, since the
effectivity of the contract on February 2019, EMSAI has been failing to provide the
necessary firearm to posted guard, had issued ammunition short of the requirement, or had
not issued extra magazine or holler for extra ammunition, failed to provide the required
number of radios, failed to provide the required service vehicle, and has posted Guards that
are not qualified, all in violation of the Security Services Contract.

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23. For every violation mentioned, a corresponding penalty is provided as per

Annex “A” of the contract, to which EMSAI also failed to settle with CAAP.

24. Nevertheless, R.A. No. 9184 and its IRR provide for the remedy in the event
that supplier EMSAI could not pay the same. As mentioned earlier, CAAP may deduct the
liquidated damages from any money due or which may become due to the EMSAI, or
collected from any securities or warranties posted by EMSAI, whichever is convenient to
CAAP as the procuring entity.

25. The liquidated damages of EMSAI shall be the amount equal to one-tenth
(1/10) of one percent (1%) of the cost of the delayed goods or services scheduled for delivery
or performance for every day of delay. The liquidated damages will be imposed until such
goods or services are finally delivered or performed and accepted by CAAP.

26. A rough estimate of EMSAI’s liquidated damages based from its violations
from Area I may be illustrated as follows:

LIQUIDATED
LIQUIDATED NO. OF DAYS DAMAGES DUE
MONTH and PENALTY
DAMAGES UNTIL for the period
YEAR INCURRED*
(1/10 of 1%) 01 March 2020 01 February 2019
to 01 March 2020
Feb 2019 126,000.00 126.00 394 49,644.00
Mar 2019 139,500.00 139.50 366 51,057.00
Apr 2019 135,000.00 135.00 335 45,225.00
May 2019 139,500.00 139.50 305 42,547.50
Jun 2019 868,000.00 868.00 274 237,832.00
Jul 2019 2,518,000.00 2,518.00 244 614,392.00
Aug 2019 1,691,000.00 1,691.00 213 360,183.00
Sep 2019 1,623,000.00 1,623.00 182 295,386.00
Oct 2019 1,534,500.00 1,534.50 152 233,244.00
Nov 2019 1,485,000.00 1,485.00 121 179,685.00
Dec 2019 1,124,500.00 1,124.50 91 102,329.50
Jan 2020 325,500.00 325.50 60 19,530.00
Feb 2020 304,500.00 304.50 29 8,830.50
TOTAL 2,239,885.50
* Numerical figures provided by CSIS Danilo Manalo of Area I dated 04 August 2020.

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27. In the preceding table, the computed liquidated damages of EMSAI for CAAP
Area I alone totals to two million two hundred thirty nine thousand eight hundred eighty five
pesos and 50/100 (PHP2,239,885.50) and counting.

28. Ten percent (10%) of the total contract price is One Million Nine Hundred
Sixty Eight Thousand Six Hundred Ninety Pesos & 97/100 (PhP1,968,690.97).

29. Given that the liquidated damages of EMSAI have already reached the ten
percent (10%) of the total contract price, CAAP may now opt to rescind the contract AND
impose appropriate sanctions over and above the liquidated damages.

30. Based from the foregoing, CAAP may now either retain any money due to
EMSAI or collect from any securities or warranties posted by EMSAI, whichever is more
convenient to CAAP.

RECOMMENDATION

31. This office respectfully recommends the following actions to be taken:

a. That an itemized table of violations and the corresponding penalties of

EMSAI for every day starting February 2019 up to December 2020 be
provided in order to determine and compute the actual amount of
liquidated damages due from EMSAI, to be verified by CAAP accounting
officer;

b. That after confirmation and verification of the liquidated damages, a notice

be given to EMSAI containing information of their violations, penalties,
and that liquidated damages will be imposed based on their default or
delay in delivering the required services to CAAP, pursuant to R.A. 9184
and its IRR; and

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c. That CAAP, upon conference of SBAC and other concerned offices, may
decide to rescind the contract with EMSAI and impose other sanctions as
deemed fit in addition to the liquidated damages.

RONALD V. ESTABILLO
Civil Aviation Area Manager – Area I
Civil Aviation Authority of the Philippines
Airport Road, Brgy. 36 Araniw
Laoag City, Philippines 2900

Copy furnished:

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