COMMISSION ON AUDIT RESOLUTION NO.

91-52 September 17, 1991

SUBJECT : Policy guidelines governing auditorial review and evaluation of bidded

Infrastructure Contracts

WHEREAS, the Commission on Audit has exclusive authority “to define the
scope of its audit and examination, establish the techniques and methods required
therefore, and promulgate accounting and auditing rules and regulations, including those
for the prevention and disallowance of irregular, unnecessary, excessive, extravagant or
unconscionable expenditures, or uses of government funds and properties”; (Sec. 2 /2/,
Art. IX-D, 1987 Constitution)

WHEREAS, in line with said constitutional mandate, this Commission issued

COA Circular No. 85-55A dated September 8, 1985, prescribing the rules and
regulations on the Prevention of Irregular, Unnecessary, Excessive or Extravagant
Expenditures or Uses of Funds and Property;

WHEREAS, this Commission, thru its Technical Services Office, is charged with
the responsibility to “review and evaluate contracts with emphasis on the engineering
and other technical aspects"; (Sec. 7 /6/, Ch. 3, Title I-B, Bk. V, Adm. Code of 1987)

WHEREAS, such preliminary processes, consultation and acquiescence are

deemed as constituting substantial compliance with the legal requirement of
Commission Proper action with respect to appointments and administrative cases;

WHEREAS, among the said contracts subject to COA review and evaluation are
infrastructure contracts awarded after public bidding;

WHEREAS, among the said contracts subject to COA review and evaluation are
infrastructure contracts awarded after public bidding;

WHEREAS, the purpose of public bidding being to obtain the best and most
advantageous terms for the government, it is expected to yield a price that is fair and
reasonable if conducted properly and regularly;

WHEREAS, COA, in the exercise of its review prerogative, should be able to

assure the adequacy and efficiency of its audit procedures in order to determine
regularity of the prequalification, bidding and awarding processes as well as the
reasonableness of the contract price of bidded infrastructure contracts;

NOW, THEREFORE, the Commission Proper has RESOLVED, as it does hereby

RESOLVE, to prescribe the following policy guidelines to govern the auditorial review
and evaluation of infrastructure contracts awarded as a result of public bidding in order
to determine regularity of the prequalification, bidding and awarding processes as well
as the reasonableness of the contract price:
 1. The Auditor concerned should exert all possible efforts to ascertain strict
compliance by the management of the auditee agency with the pertinent requirements
provided under PD 1594, its Implementing Rules and Regulations, as amended, and
other relevant issuances.

2. The Auditor or his representative may attend meetings of the

Prequalification, Bidding and Award Committee (PBAC) during the prequalification stage
as observer.

3. The Auditor or his representative shall witness the opening of bids to be

conducted by the PBAC.

4. The Auditor’s observations and comments as such observer or witness

shall be communicated in writing within a reasonable time to the management of the
auditee agency and shall form part of the basis of the audit action to be taken thereafter.

5. For purposes of determining the reasonableness of the contract price as

a technical aspect of the review and evaluation process, the Approved Agency Estimate
(AAE) shall serve as a reference value for the formulation of the COA cost estimate.

6. Should defects or errors in the AAE be discovered in the course of the

review, the same together with the pertinent reasons, especially those that would
adversely affect the contract price, shall be communicated to the auditee in writing by
the Auditor.

7. The total contract price should be equal to or less than the total COA
estimate plus ten percent (10%) in order to sustain a finding of reasonableness,
otherwise, the contract price will be deemed excessive.

8. The contract price, however, should not only be reasonable as

hereinabove determined but should also be within the ceiling provided for by law, rules
and regulations.

Adopted this 17th day of September, 1991 at Quezon City, Philippines.

(SGD.) EUFEMIO C. DOMINGO, Chairman

(SGD.) BARTOLOME C. FERNANDEZ, JR., Commissioner
(SGD.) ROGELIO B. ESPIRITU, Commissioner