OUTLIN

I. Performance Sec
urity
II. Contract Pri
ces
III. Subcontracti
ng
IV. Wa r r a n t i
es
V. Va r i a t i o n O r
der
VI. Liquidated D
amages

2
 PERFORMANCE SECURITY

• The performance security shall remain valid until issuance by

the procuring entity of the final Certificate of Acceptance.

• Performance security may be released by the Procuring Entity

after issuance of the Certificate of Acceptance, subject to the
following conditions:
• No claims filed against the contract awardee or the surety
company;
• It has no claims for labor and materials filed against the
contractor; and
• Other terms of the contract.

3
 FAILURE TO ENTER INTO CONTRACT
AND POST THE PERFORMANCE SECURITY

• If the bidder with the Single/Lowest Calculated

Responsive Bid (S/LCRB) fails, refuses or is unable to
submit the documents required or to make good its bid
by entering into a contract with the PE or post the
required Performance Security within the ten (10)
calendar day period:
• the bid security shall be forfeited and the
appropriate sanctions under the IRR of RA 9184
and existing laws shall be imposed, except where
such failure, refusal or inability is through no fault of
the said bidder.
 CONTRACT PRICES

General Rule:

For the given scope of work in the contract as awarded,

all bid prices shall be fixed prices, and not subject to
price adjustment and escalation during contract
implementation.

5
 CONTRACT PRICES

Exceptions:
1. Price escalations caused by extraordinary
circumstances duly approved by the GPPB;
2. When a Treaty or International or Executive
Agreement expressly allows;
3. In cases where the cost of the awarded contract is
affected by any applicable new laws, ordinances,
regulations, or other acts of the GOP, promulgated
after the date of bid opening.

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 CONTRACT PRICE ESCALATION

Extraordinary Circumstances

— refer to an event or occurrence, or series of events or

occurrences during contract implementation which
give/s rise to price escalation as may be
determined by NEDA, in accordance with the
provisions of the Civil Code of the Philippines, and
upon the recommendation of the PE concerned.

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 CONTRACT PRICE ESCALATION

The term “extraordinary circumstances” shall refer to

the following articles of the Civil Code of the Philippines:

• Article 1174, as it pertains to Ordinary Fortuitous Events

or those events which ordinarily happen or which could
be reasonably foreseen but are inevitable, such as, but
not limited to the following:
— Typhoons;
— Thunderstorms;
— Flooding of lowly areas; and
— Vehicular accidents.

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 CONTRACT PRICE ESCALATION

The term “extraordinary circumstances” shall refer to

the following articles of the Civil Code of the Philippines:

• Article 1250 – Extraordinary Inflation or Deflation.

— decrease or increase of the
Philippine currency’s purchasing
powerwhich is unusual or
beyond the
FAcoILmUmRoEn OfluFctuBaItDioDn
IiNn Gthe value of said
currency, in
accordance with the 2 standard deviation rule, and
such decrease or increase could not have been
reasonably foreseen or was manifestly beyond the
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 CONTRACT PRICE ESCALATION

Article 1680, enumerates Extraordinary Fortuitous Events or

those events which do not usually happen, such as, but not
limited to the following:

1. Fire;
2. War;
3. Pestilence;
F AUILnUusRuaEl fOol FdB; IDDING
4 .
5. Locusts; and
6. Earthquake;

Provided that the circumstances before, during and after the

event shall be taken into consideration.

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 SUBCONTRACTING

• Subcontracting shall not relieve the principal from

any liability or obligation.

• Winning Supplier/Contractor/Consultant will

be
any subcontractor,
responsible for theits agents,
acts, servants
defaults, and ornegligence
workmen asof
fof
uFythe
l Aawinning
LI sUfiRthESupplier/Contractor/Consultant,
esOeFweBrIeDthDeN I owGnacts, or
defaults,
those ofor
its agents, servants or workmen.
negligence

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 SUBCONTRACTING

• Subcontractors must comply with the eligibility

criteria and documentary requirements specified in
the Procuring Entity’s Bidding Documents.

• If sub-contractor is ineligible, proposed sub-

contracting arrangement shall be disallowed.
FAILURE OF BIDDING
• If subcontractor is disclosed during bid submission, the
prospective bidder shall include the required eligibility
documents as part of the First (1st) Bid Envelope
(Eligibility Documents and Technical Component).

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 SUBCONTRACTING

• Subcontractors disclosed and identified during the

bidding may be changed during the implementation
of the Contract, subject to:

– compliance with the required qualifications; and

– the approval of the Procuring Entity.

FAILURE OF BIDDING

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 WARRANTIES

• From commencement of project construction up to final

acceptance, contractor shall assume full responsibility for
the following:
a) any damage or destruction of the works except those
occasioned by force majeure; and
b) safety, protection, security, and convenience of his
personnel, third parties, and the public at large, as well

FAILaUaffected
s Rh
t Ee by
wOhis
oFrconstruction
ksB, IeDquDpi work;
ImNeGn,t installation and
the like to be
• Defects Liability Period –1 year from project completion up
to issuance of the Certificate of Final Acceptance.

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 WARRANTY PERIOD
FOR INFRA
PROJECTS
Contract Completion Of Certificate Of
Award The Project Acceptance

Defects Liability Period

Performance Security

Warranty Security Remaining Warranty

Period Period
FAILURE OF BIDDING
1 Year 2 to 15 Years
Final
Acceptance
Warranty Period
 Warranty Security Period reduced to 1 year from issuance of the
Certificate of Final Acceptance

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 WARRANTIES

Type of Structure
and Warranty Covered Structures
Period
Permanent Buildings of types 4 (steel, iron, concrete, or
Structures: Fifteen masonry construction with walls, ceilings, and
(15) years permanent partitions of incombustible fire
resistance) and 5 (steel, iron, concrete, or
masonry construction), steel and concrete
FAILURE OF BIDDING bridges, flyovers, concrete aircraft movement
areas, ports, dams, diversion tunnels,
causeways, wharves, piers, dikes, filtration and
treatment plants, sewerage systems, power
plants, transmission and communication towers,
railway system, and other similar structures;

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 WARRANTIES

Type of Structure
and Warranty Covered Structures
Period
Semi- Permanent Buildings of types 1 (wooden), 2 (wood with 1
Structures: hour fire resistance), and 3 (masonry and wood
Five (5) years construction), concrete roads, asphalt roads,
river control, drainage, irrigation and drainage
canals, municipal ports and river landing, deep
FAILURE OF BIDDING wells, rock causeway, pedestrian overpass, and
other similar structures
Other Structures: Bailey and wooden bridges, shallow wells,
Two (2) years spring developments, and other similar
structures.(Section 62.2.3.2 of the IRR of R.A.
9184.

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 WARRANTIES

• Structural Defects
— major faults/flaws/deficiencies in one or more key
structural elements of the project which may lead
to structural failure of the completed elements or
structure

• S t ru ct u ra l F ai lu re s
F A LI U R E O F B D
I DING
— where one or more key structural elements in an
infrastructure facility fails or collapses, thereby
rendering the facility or part thereof incapable of
withstanding the design loads, and/or endangering
the safety of the users or the general public
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 WARRANTIES

• To guarantee that the contractor shall perform his responsibilities

against Structural Defects and Failures, a warranty security shall
be required based on the following:

Amount Of
Forms Of Warranty Effectivity Of The
Warranty
Security Warranty Security
Security

Cash or Letter of Credit Five Percent One (1) year from the

FAILURE OF BIDD ING

issued by a Universal or
Commercial Bank:
Provided, however, that the
LC shall be confirmed or
authenticated by a Universal
or Commercial Bank, if
issued by a foreign bank.
(5%) f the date of issuance of the
Certificate of Final
Total Acceptance by the
Contract procuring entity, and
Price returned only after the
lapse of the said one (1)
year period

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 WARRANTIES

Amount
Amount Of
Of
Forms
Forms Of
Of Warranty
Warranty Effectivity
Effectivity Of
Of The
The
Warranty
Warranty
Security
Security Warranty Security
Warranty Security
Security
Security
One (1)(1)year
yearfrom thethe
from
Surety bond callable upon date of issuance of the
FAILURE OF BIDD ING
Ten percent
demand issued by GSIS or
(10%) of
Certificate of Final
aBank
surety or insurance
guarantee confirmed Acceptance by the
company
by a duly certified byor
Universal the Total procuring entity, and
the InsuranceBank.
Commercial Commission Contract returned
returned only
only after
after the
the
as authorized to issue such Thirty lapse
Price
percent lapse ofof the
the said
said one
one (1)
(1)
security. year
(30%) year period
period
of the Total
Contract
Price 23
 WARRANTIES

Amount Of
Forms Of Warranty Effectivity Of The
Warranty
Security Warranty Security
Security

One (1) year from the

Surety bond callable upon date of issuance of the
FAILURE OF BIDD ING
demand issued by GSIS or Certificate of Final
a surety or insurance Acceptance by the
company duly certified by procuring entity, and
the Insurance Commission returned only after the
as authorized to issue such Thirty lapse of the said one (1)
security. percent year period
(30%)
of the Total
Contract
Price 24
 VARIATION ORDERS

Variation Order
— refers to any increase/decrease in quantities within
the general scope of the project as bid and awarded,
in any of the following aspects:
1. Introduction of new work items ,or
2. Reclassification of work items that are either due to

FAILUcRhfield
EanOconditions
geFoBf resulting inIdisparity
pDal nDsI,between
NdGesgi n theorpre-
constructiontoplans used for
alignment suitbidding andactual
“as stated
plans” or construction drawings prepared after joint
survey by the contractor and the government after
contract award or during actual construction.

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 VARIATION ORDERS

Conditions in Issuing Variation Orders:

1. Net cumulative amount (net cumulative positive or
additive) Variation Order should not exceed +10% of
the original project cost.

2. Addition/deletion of works under Variation

Orders
FAIsLhUouRdl EbOeFwBtihD
I ni DthIeNgGeneral scope of the
project as
bid and awarded.

3. Scope of works shall not be reduced so

as to 26
 VARIATION ORDERS

Conditions in Issuing Variation Orders:

4. Any cumulative positive Variation Order beyond 10% of

the original contract price shall be subject of another
contract to be bid out if the works are separable from
the original contract. However, in exceptional cases
wAheLIof
Fscope reUwork,
iRt EisHOPE
OurFgemay
BnItDauthorize
yl DneN
I ceG ssarVariation
the y to complete
Order
beyond
the 10% but not more than 20%, subject to GPPB
original
guidelines.

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 VARIATION ORDERS

Conditions in Issuing Variation Orders: (Cont).

• In such cases where the Variation Orders exceed 10%

but not more than 20% of the original contract price,
appropriate sanctions shall be imposed on the designer,
consultant or official responsible for the original detailed
enFgAn
Order ibeyond
IeLeUriR10%.
ngEdOeFsgi BnD
I wDhci N
I h Gfailed to consider
the Variation

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 VARIATION ORDERS

Forms of Variation Orders:

• Change Order – any increase/decrease in quantities

of original work of items in the contract.
• Extra Work Order – introduction of new
necessary
work for the completion/improvement or
FApIrLoUteRctEionOFofBthIDe DpIrNojeGct
which are not included as
items of work in the original contract.

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 VARIATION ORDERS

Variations shall be valued as follows:

1. At a lump sum price agreed between the parties;

2. Where appropriate, at contract rates;
3. In the absence of appropriate rates, the
Contract rates shall be used as the basis for
valuation; or
F4A. IILf UthReECOonFtrBacItDrDatIeNsGcannot be used
as basis for valuation, at appropriate new rates,
equal to or lower than current industry rates and to
be agreed upon by both parties and HOPE
approved.
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 LIQUIDATED DAMAGES

Liquidated Damages (LD):

— damages agreed upon by the parties to a contract, to be
paid in case of breach thereof.

Rules on Imposition of Liquidated Damages:

1. LD may be imposed when the contractor fails to
FsaAtiIsLfUacRtoErliOy dFeBlivIeDrDthIeNGgoods or services
or complete the infrastructure projects within the
specified delivery schedule or project implementation
schedule, inclusive of duly granted time extensions, if
any.

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 LIQUIDATED DAMAGES

Rules on Imposition of Liquidated Damages (Cont.):

2. Imposition of liquidated damages is not a way of
penalty.
3. LD is imposed for every day of delay until such goods or
services or works are finally delivered or performed and
accepted.
4. Procuring entity need not prove that it has incurred
FaAcut LI aUl dRaEmaOgFesBot D
I bDe IeNntGitled to LD.
5. LD shall be an amount equivalent to 1/10 of 1% of the
cost of the unperformed portion for every day of delay.
6. In no case shall the sum of liquidated damages reach
10% of the contract amount.
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 LIQUIDATED DAMAGES

Rules on Imposition of Liquidated Damages (Cont.):

7. If LD reaches 10% of the contract amount, contract may be
rescinded, without prejudice to other courses of action and
remedies open to it.

Procuring entity may also take over the contract or award the
same to a qualified supplier through negotiation.
FAILURE OF BIDDING
8. LD will be imposed until such goods or services are finally
delivered or performed and accepted by the procuring entity.

9. Performance security shall also be forfeited.

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 PROGRESS PATYMENT

Revised Guidelines on Contract Implementation

for Infrastructure Projects
(Resolution No. 07-2018)

• The PE may require the Bidding Documents that

statement
in of work accomplished or progress billing and
thFeAcIoLrUresRpEonOdiFngBrIeDqDueIsNt Gfor progress
payment may only be submitted upon actual completion
of the infrastructure project or a specific portion,
segment, milestone or phase thereof.

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 SESSION VII

Contract Administration and

Management
(Contract Management)
 CONTRACT MANAGEMENT
Contract life cycle management
— is the process of systematically and efficiently
managing contract creation, execution and analysis
for maximizing operational and financial
performance and minimizing risk.

Based on the good practice contract management

framework developed by the UK Government, the four (4)
blocks of good contract management are:
1. Structure and resources;
2. Delivery;
3. Development; and
4. Strategy.
 CONTRACT MANAGEMENT
The four (4) blocks of good contract management comprise of the
following areas that organizations should consider when planning and
delivering contract management:
1. Planning and governance
2. Market management
3. People
4. Supplier relationship management
5. Administration
6. Supplier development
7. Good practice framework
8. Relationships
9. Contract development
10. Performance
11. Risk
12. Payment
 CONTRACT MANAGEMENT
Benefits of effective contract management include:
1. More favorable contract outcomes
2. Improved quality of service and customer focus
3. Achieving value for money and financial control
4. Decrease in the level of risk
5. Clarification of roles and responsibilities of the contract
manager, contractors, end users
6. Early identification and resolution of poor performance,
other problems or disputes
7. Evaluation of the specification against contract
performance, and identification of contract changes or
variations.
 CONTRACT MANAGEMENT
Role of the Contract Manager:

1. Contract Drafting;

2. Evaluation, Negotiation and Execution;

3. Maintain contractual records and documentation such as

receipt and control of all correspondence, customer
contact information sheets, contractual changes, status
reports and other documents for all projects;

4. Provide guidance on contract matters to project managers,

including training to new project managers and other
employees in contracting procedures;
 CONTRACT MANAGEMENT
Role of the Contract Manager: (Cont.)
5. Develop and implement procedures for contract
management and administration in compliance with
company policy. As appropriate, contribute to or influence
company policies;
6. Monitor compliance by company employees with
established procedures;
7. Work with Risk Management Department to coordinate
contractual insurance requirements.
8. Work with Finance to ensure adherence to broader
finance and risk requirements such as revenue
recognition, pricing and discounting policies, export
controls etc.
 CONTRACT MANAGEMENT
Role of the Contract Manager: (Cont.)
9. Support product management/marketing to ensure
company products and services are offered with
appropriate, competitive terms and conditions;
10. Monitor competitive terms. Monitor customer satisfaction
with terms and conditions and contracting practices and
recommend changes;
11. Monitor transaction compliance (milestones, deliverables,
invoicing, etc.);
12. Oversee Service Level Agreement compliance; and
13. Ensure contract close-out, extension or renewal.
 SESSION VII

Contract Administration and

Management
(Contract Administration)
 CONTRACT ADMINISTRATION

Contract administration
— is the process that begins from when the contract is
awarded to when the work is completed and
accepted or the contract terminated; payment has
been made; and disputes have been completely
resolved. It is primary part of the procurement
process that assures the project owner gets a quality
product for what it has bargained and assures that
users are satisfied with the final product.
 CONTRACT ADMINISTRATION
• Contract administration concentrates on the relationship
between the department and the supplier from contract
award to contract closeout ensuring the supplier delivers
the product and/or service in conformance with the
purchase document requirements.

• The specific nature and extent of contract administration

varies from contract to contract.

• It can range from the minimum acceptance of a delivery

and payment to the contractor to extensive involvement by
program, audit and procurement officials throughout the
contract term.
 CONTRACT ADMINISTRATION
• Factors influencing the degree of contract administration
include the nature of the work, the type of contract, and the
experience and commitment of the personnel involved.

• Contract administration starts with developing clear,

concise performance based statements of work to the
extent possible, and preparing a contract administration
plan that cost effectively measures the contractor's
performance and provides documentation to pay
accordingly.
 CONTRACT ADMINISTRATION
For effective discharge of contract administration duties,
the procuring entity must focus on these four (4)
important elements:

1. Time
2. Cost
3. Quality
4. Documentation

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 CONTRACT ADMINISTRATION
1. Time Element
• The task here is to ensure that contract performance is
on schedule.

• Work schedule is clear – that is, start date, finish date,

and key milestone dates are clear to all parties.

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 CONTRACT ADMINISTRATION
1. Time Element

• The task here is to ensure that contract performance is

on schedule. The work schedule -- the start date, finish
date, and key milestone dates-- are clear to all parties.

• For example, in infrastructure, slippage should not

exceed fifteen percent (15%) on key milestone dates. If
the slippage exceeds fifteen percent (15%), the
contractor should be asked to submit a “catch up” plan.

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 CONTRACT ADMINISTRATION
1. Time Element
• There is a need to conduct regular meetings with
supplier/contractor to know the following:
1. its contract performance as of reckoning date, and
2. Potential delays, so that preventive measures will be
put in place.

• Procuring entity should realize that delays in payment of

supplier’s/contractor’s claims affect their cash flows that
in turn affect their contract performance.

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 CONTRACT ADMINISTRATION
1. Time Element

• In works, the day-to-day supervision of contractor’s

works must be clear at first instance, that is, whether
supervision will be in-house or through a construction
management team.

• Contracts completed beyond the agreed or promised

date, all approved time extensions or suspensions
considered, must be imposed the appropriate amount of
liquidated damages and penalties.

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 CONTRACT ADMINISTRATION
2. Cost Element
• Unnecessary additional or extra quantities or works
should be avoided.

• Procuring entities should pay the supplier’s or

contractor’s claim promptly. Interests on delayed
payment should be honored and paid as provided in the
contract.

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 CONTRACT ADMINISTRATION
2. Cost Element
• The task here is to ensure that contract cost is kept
within budget or agreed amount.

• For example, as much as possible, net variation/

change orders should not exceed ten percent (10%) of
the total contract price.

49
 CONTRACT ADMINISTRATION
2. Cost Element
• Any request for contract price escalation, if the required
conditions under the law are met, should be considered
and processed in accordance with the prescribed
guidelines and procedures.

• When a supplier or contractor incurs delay in contract

performance, the work schedule should be updated. In
such an event, a new Cash Flow statement should be
demanded.

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 CONTRACT ADMINISTRATION
3. Quality Element
• The task here is to ensure that the product delivered or
work completed or services rendered are in accordance
with those specified in the contract and internationally
accepted quality standards.

• Inspections and tests procedures that will be put in

place must ensure that the procuring entity receives the
goods, works or services in the right quantity, in the
right quality, in the right place, and in the right time.

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 CONTRACT ADMINISTRATION
3. Quality Element
• In goods, packaging must be in accordance with
specifications to ensure that they are received in good
condition and free of defects and damages.

• In works, contractors must be obliged to correct defects

in quality of workmanship as soon as they are known or
discovered at no additional costs to the procuring entity.

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 CONTRACT ADMINISTRATION
3. Quality Element
• In consulting services, consultant must perform the
services and carry out his/her obligations with all due
diligence, efficiency and economy, in accordance with
generally accepted professional standards and
practices.

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 CONTRACT ADMINISTRATION
4. Documentation
• The task here is to ensure that all decisions and actions
taken by the procuring entity during contract execution
are properly supported by documentations.

• For example, all authorizations for time extension or

time suspension, and change orders or variation orders,
must be duly supported by proper documentations duly
signed by proper authorities.

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 CONTRACT ADMINISTRATION
4. Documentation
• Contract documents are the basis of decision-making
and action taking. Given their importance, they must be
stored in a secure and safe place accessible only to
authorized officials and personnel.

• Contract documents must be filed in an organized

manner that is easy to access and retrieve at any time.

• Backup copies must be stored in a separate but secure

location.
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ONITORING OF CONTRACT ADMINISTRATION

Considerations for an efficient monitoring of contract

administration:
1. Develop a master schedule and a work breakdown
structure that incorporates every important date or
milestone in the contract;
2. List contract deliverables and their evaluation criteria in
detail, with checklists for the people who perform the
tasks;
3. Set a schedule and reminders for required reports,
including the format and delivery method;

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ONITORING OF CONTRACT ADMINISTRATION

Considerations for an efficient monitoring of contract

administration: (Cont.)
4. For each party involved in the contract, document
change orders and contract modifications that require
rescheduling of any deliverables;
5. Ensure that expenses charged to the contract are
allowable, allocable and reasonable; and
6. Give room for competing priorities.

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ONITORING OF CONTRACT ADMINISTRATION
General weaknesses of contract administration:
1. Allocation of more time to awarding contracts
rather than administering existing contracts;
2. Unclear roles and responsibilities of the Project
Manager (PM) and his/her team;
3. Excessive backlog in contract closeout and
incurred costs audits;
4. Improperly trained officials performing contract
oversight;
5. Unclear statements of work that hinder
contractor performance, and
6. Inadequate guidance on voucher processing and
contract closeout.
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ONITORING OF CONTRACT ADMINISTRATION

Suggested Processes to Address the General Weaknesses of

Contract Administration:
1. Begin with post award orientation – either by
conference, letter or some other form of
communication;
2. Establish good communication process – helps both
parties (project owner and contractor) to achieve a
clear and mutual understanding of the contract
requirements; & the contractor to understand the roles
and responsibilities of the PM who will administer the
contract, and reduces future problems;

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ONITORING OF CONTRACT ADMINISTRATION

Suggested Processes to Address the General Weaknesses of

Contract Administration: (Cont.)
3. Pre-construction meeting with applicable program and
contracting officials prior to the post award orientation
conference so that there is a clear understanding of
their specific responsibilities and restrictions in
administering the contract;
4. Discuss authority of the project owner’s personnel who
will administer the contract, quality control and testing,
the specific contract deliverable requirements, special
contract provisions, etc.;

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ONITORING OF CONTRACT ADMINISTRATION

Suggested Processes to Address the General Weaknesses of

Contract Administration: (Cont.)
5. Ensure there is an alternative dispute resolution
technique in place – known as "partnering" to help
avoid future contract administration problems; and
6. To ensure that the end users are satisfied with the
product or service being obtained under the contract,
obtain input directly from the customers through the
use of customer satisfaction surveys.

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 NATURE OF CONTRACT
MANAGEMENT AND CONTRACT
CONTRACT
ADMINISTRATION
CONTRACT
MANAGEMENT ADMINISTRATION
Relationship focus Operational focus
Strategic Tactical
Process Development Process Compliance
Longer time frame Short-term/transactional
Holistic View Narrow Focus
Driven by Added Value Driven by key Performance
Indicators

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CONTACT US AT:
Unit 2506 Raffles Corporate
Center
F. Ortigas Road, Ortigas Center
Pasig City, Philippines 1605
TeleFax: (632)900-6741 to 44
Email address: gppb@gppb.gov.ph
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