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COA Findings SEC Comments

1.Non-compliance with procurement As mentioned above, for the Lease of Real


procedures under RA 9184 Property or office space like the SEC Office
in PICC, Public Budding is not the
(a) Violation of Sections 10 and 53 of appropriate mode of procurement.
RA9184 and GPPB Resolution No. 18-
007 dtd May 31, 2007 While it is mandatory that public bidding,
shall, as much as possible, be conducted for
RA 9184, Section 10 : government procurement, there are
“All procurement shall be done recognized alternative modes of
through Competitive Bidding, except procurement as provided in Rule XVI of IRR.
as provided for in Article XVI of this With due respect to the opinion of the
Act.” COA, Section 53.1, Negotiated
Procurement after Two Failed Biddings is
Article=le XVI, Section 53: not the applicable mode of procurement.
“Negotiated Procurement is a We respectfully call attention to Section
method of procurement of goods, 53.10, which provides:
infrastructure projects and consulting
services, whereby the procuring “Sec. 53.10. Lease of Real Property. Lease
entity directly negotiates a contract of privately owned real property and
with a technically, legally and venue for official use, subject to the
financially capable supplier, guidelines to be issued by the GPPB.”
contractor or consultant in any of the
following cases: The Implementing Guidelines for Lease of
Privately Owned Real Estate and Venue
a. Two Failed Biddings vis-à-vis Sec. 53.10-Appendix 18 of the IRR
b. Emergency Cases of RA9184 provides:
c. Take-over of Contracts
d. Adjacent or contiguous “4. Guiding Principles- It is more preferred
e. Agency-to-Agency that government agencies lease publicly
xxx.” owned real estate and venue from other
government agencies”

To reiterate, since PICC is a government-


owned property, SEC resorted to Agency-
to-Agency Agreements.

To cited GPPB Resolution No. 18-007 on


GPPB Resolution No. 18-0007 dtd 31 Agency to Agency Procurement had been
May 2007, item 5 of Annex “A”: amended and incorporated in the 2012
Revised IRR as Appendix 13, which
“5. GENERAL CONDITIONS provides:

a. Agency-to-Agency Agreements “5. General Conditions


may only be resorted to if the
following conditions are complied a. Agency to Agency Agreements may
with: only be resorted to if the following
conditions are complied with:
i. Conduct of a Cost-Benefit Analysis
by the Procuring Agency xxx; i. Conduct of a Cost-Benefit Analysis by
the Procuring Entity indicating that
ii. Total amount of all goods, entering into an Agency to Agency
consulting, and infrastructure Agreement with the Servicing Agency
projects undertaken or to be is more efficient and economical for
undertaken through Agency-to- the government.
Agency Agreements shall not ii. Xxx
exceed twenty-five percent (25%) of iii. Xxx
the Procuring Entity’s total iv. Xxx
procurement budget for each
category (i.e., goods, infrastructure, b. [conditions applicable for infra]
or consulting) as reflected in its
approved APP; 6. Procedural Requirements

iii. Xxx a. The end-user unit shall undertake a CBA


iv. Xxx.” taking into consideration the following
factors : prevailing standard cost for the
project xxx;
b. It shall likewise secure certification from
the relevant officer of the Servicing
Agency on conditions in Sec. 5 a and b.”

As discussed above, the CBA was


conducted under the supposition that it
was more efficient and economical for the
government as PICC is a government
property. Regardless of whether to lease a
government property or a privately-owned
real estate, the cost for the transfer,
cabling, and renovation would be the same
since the Commission will have to fit-out
the space that would serve the operational
requirements of the Commission. The cost
for the office fit out for PICC cannot be
considered as sunk cost for the
government as compared to spending for
the same in privately-owned office space
like that of DMCI had the contract of lease
pushed through. Also, prior to the transfer,
the Commission planned that the old and
fully depreciated modular workstations are
to be replaced. Hence, purchase of
modular workstations would still be
undertaken whether or not SEC would
transfer.

GPPB Resolution No. 18-007 on Agency to


Agency Procurement, which was amended
and incorporated in 2012 IRR of RA 9184,
Review of AAP CY 2015 showed that the also states:
estimated budget for the lease of office
spaces in PICC amounted to P100M which “5. General Conditions
is equivalent to 85.88% of the Agency’s
total budget for the office space and i. Xxx
warehouse rental of P116.446M: ii. Total amount of all goods, xxx
undertaken or to be undertaken
PAP End- Mod MOOE % through Agency to Agency shall not
user e exceed 25% of the Procuring Entity’s
total procurement budget for each
Lease of HRAD NP- P4,200,
Offsite LRP 000.00
category (i.e. goods, infrastructure or
Warehouse consulting) as reflected in its approved
Lease of LEO NP- P895,0 APP.
Office Space LRP 00.00 Xxx xxx xxx.”
Lease of BEO NP- P500,0 (underscoring provided)
Office Space LRP 00.00
Lease of ZEO NP- P291,0
Office Space LRP 60.00 Goods, as defined in Section 5 of the IRR of
Lease of DEO NP- P1,276, 14.12 RA 9184:
Office Space SVP 170.00
Lease of HRAD PB P784,3 “r) Goods – Refer to all items, supplies,
parking 50.00
space
materials and general support services,
Lease of ICTD PB P8,500, except Consulting Services and
Space for 000.00 Infrastructure Projects … including non-
servers/ Co- personal or contractual services … and
location related or analogous services … The term
Services
Lease of HRAD P100,0 85.88
“related” or “analogous services” shall
Bldg. for SEC 00,000. include, but it is not limited to, lease of
Offices 00 office space, media and advertisements,
P114,4 100 health maintenance services, and other
46,580. services xxx.”
00
(underscoring provided)

Therefore, “Goods”, for the purpose of


computing for the 25% limit, should not be
broken down into different categories
under it. The BAC did not consider only the
lease of spaces/warehouse but all the
procurement except the consulting and
infrastructure.

Please see attached computation of 25%


as Annex A

Worthy of consideration is the 2016 IRR,


which took effect on October 28,2016
wherein Lease of Property and A-to-A are
included in the consolidated guidelines for
Alternative Modes of Procurement, pp.
120-134
2016 IRR, specifically item “b.i” of V.9.
Specific Guidelines for the Lease of Real
Property and Venue in Annex “H”,
provides:

b.i. Policy Considerations. Publicly-owned


vis-à-vis privately owned real estate and
venue
“It is preferred that government agencies
lease publicly-owned real property or
venue form other government agencies.

If there is an available publicly-owned real


property or venue that complies with the
requirements of the Procuring Entity, it
may enter into a contract of lease with the
government-agency owner.

In the event that the Procuring Entity


would resort to privately-owned real
property or venue, the End-User Unit shall
justify that the same is more efficient and
economical to the government.”

There is a November 9, 2015 certification


It is further provided in the said GPPB issued by PICC Corporate Secretary Melpin
Resolution, Section 6.b, which states: A Gonzaga regarding PICC’s compliance
with the requirements as the Servicing
“6. Procedural Requirements Agency under Section 5(a).
a. Xxx
b. It shall likewise secure a certificate We apologize that the BAC Secretariat had
form the relevant officer of the submitted the one issued by GM Renato
Servicing Agency that the latter Padilla dated May 3, 2016 which is just an
complies with all the conditions updating and consolidation of the
prescribed under certification from CS Gonzaga and the one
Section 5 (a) and (b).” from GM Padilla.

Our post-audit of transaction


revealed that the attached
certification from the General
Manager of PICCI did not comply with
Section 5 (a).

As verified, the Lease Contract was


perfected/signed on December 21,
2015 while the Certification of PICCI
Manager was only dated May 3, 2016
or four (40 months from the contract-
signing date.

(b) Cost-Benefit Analysis/Evaluation To reiterate, the CBA was conducted under


(CBA) did not include relocation and the supposition that it was more efficient
renovation costs which deprived the and economical for the government as PICC
government of a more efficient and is a government property. Regardless of
economical consideration before whether to lease government property or a
officials decided to enter into an privately-owned real estate, the cost for
Agency-to-Agency Agreement with transfer, cabling, and renovation would be
PICCI. the same since the Commission will have to
fit-out space like that of DMCI had the
CBA refers to a tool used to aid contract of lease pushed through. Also,
decision-making by evaluating the prior to the transfer, the Commission
benefits to be attained from an action planned that the old and fully depreciated
against the costs for the transfer, modular workstations are to be replaced.
furnishing and renovation, and/or Hence, purchase of modular workstations
maintenance of real estate. would still be undertaken whether or not
SEC would transfer.

Upon the commencement of the lease


period, there were SEC
departments/officials and employees who
transferred immediately. To effectively
accomplish their functions and perform
As of 30 September 2016 P635,744.41 operations, the work spaces and facilities
has been disbursed for needed to be arranged. The disbursed
relocation/renovation, as follows: amount of P635,744.41 was due to the
delay in the award of Supply, Delivery and
Particulars Date Amount Installation of Electrical, Civil/Architectural
CK# 6/30/ P38,942.00 and Various Requirements for the SEC
1568601* 2016 Office Space in PICC. The delay was not due
CK# 6/16/ 69,834.55 to the fault of SEC but due to the bidders’
1568553* 2016 non-compliance with the SEC
CK# 7/13/ 14,761.00 requirements. Notably, the said disbursed
1568628* 2016
amount for relocation/renovation was
CK# 7/13/ 48,441.74
1568627* 2016
deducted from the Budget Estimate or
Approved Budget for the Contract (ABC) of
July 7/18/ 39,099.12
liquidation 2016 the project Electrical, Civil/Architectural;
Shobe 8/9/ 279,166.00 and Various Works as shown below:
Hardware 2016 Original ABC: P13,343,573.23
Real Form 9/30/ 145,500.00 First Adjustment: P11,049,160.00
Furniture 2016 Second Adjustment: P10,755,160.96
Shop ABC Difference: P2,588,412.27
P635,744.41
*Various expenses
On top of the above expenses, on-going Please see explanation above regarding the
procurement relative to the transfer CBA
with a total amount of P30,836,630.00,
as follows:

Particulars Estimate
Budget
Electrical, Civil/Architectural P11,049,160.00
and Various Requirements for
SEC Office Space in PICC
Modular Workstations 8,287,200.00
Server Room and Structured 11,500,000.00
Cabling System
P30,836,360.00
Aside from the monthly rental of
P5,550,132.84, additional expenses for
depreciation needs to be allocated for the
refurbishment needs to be considered in
the CBA.
Additionally, the BAC Resolution dated
May 13, 2015 for the Lease of Office Space
raised, among others, the concern on the
cost of refurbishing/renovation of DMCI
building, the lowest calculated bidder, to
be P40Million, a substantial amount to be
shouldered by the agency. In the case of
PICC, the refurbishment cost was not
considered in the CBA.
(c) Late posting of the procurement c. As mentioned above, Section 54.2 of
activities in the PhilGEPS and SEC Revised IRR provides:
website, which defeated the purpose
of transparency “For alternative methods of
procurement, advertisement and
Sec.3, RA 9184 provides: posting as prescribed in Section 21.2.1
“a.)Transparency in the procurement of this IRR may be dispensed with xxx”
process and in the implementation of
procurement contracts xxx Further, Appendix 13 “Implementing
b)Xxx Guidelines on Agency-to Agency
c)Xxx Agreements” provides:
d)Xxx
e)Public monitoring of the “6. Procedural Requirements
procurement process xxx”
a. Xxx
Sec. 6.f. Procedural Requirements in c. Xxx
Appendix 13: Implementing d. Xxx
Guidelines on Agency-to Agency e. Purposes of information, the Procuring
Agreements requires that the Agency shall enter post Notice Award in
Procuring Agency should post general the following areas:
information pertaining to the
procurement activity, for a period of i. Philippine Government Electronic
seven (7) days, in the following areas: Procurement System or PhilGEPS;
ii. Website of the Procuring Agency,
“i. Philippine Government Electronic if any; and
Procurement System (PhilGEPS); iii. Any conspicuous place in the
ii.Website of the Procuring Entity, if premises of the Procuring Agency.”
any; and
iii.Any conspicuous place in the Hence, there is no longer mandatory period
premises of the Procuring Agency.” for posting. Thus, posting of NOA, contract,
and NTP for purposes of information is
sufficient.

Also, as aforementioned, Section 54.2 does


The Notice of award posted in the not require posting of other procurement
Bulletin Board of SEC located on the activities (i.e. invitation to bid or request
ground floor of SEC building did not for quotation) under Agency-to-Agency
indicate the date of its posting. Agreements.

Rest assured that we will continue the


practice of prompt posting of the Notice of
Award, BAC Resolution, Notice to Proceed
and Purchase Order/Contract upon their
approval.

We take not of your observation and we


will institute improvement upon your
recommendation.
(d) Notice of Award and Notice to d. We sincerely apologize for this omission.
Proceed are undated, casting doubt Please take note of the following dates in
on its compliance with the our processing of the Notice of Award
procedural requirements of Sections and Notice to Proceed:
37.2.1 and 37.5
NOA
Sec. 37.2.1, Revised IRR of RA 9184 In (Office of the Chair) – Dec. 7, 2015
provides: Out (Office of the Chair) - Dec. 8, 2015
“[W]ithin a period not exceeding
fifteen (15) calendar days from the Contract Notarial Date is December 21,
determination and declaration by the 2016.
BAC of the Lowest Calculated Bid OR
Highest Rated Responsive Bid, and NTP
the recommendation of the award, In (Office of Comm. Viterbo) – Dec. 22,
the head of the procuring entity or 2015
his duly authorized representative Out (Office of Comm. Viterbo) - same
shall immediately issue the Notice of date
Award xxx”

Sec.37.5, Revised IRR of RA 9184


provides:
“The Procuring Entity shall issue the
Notice to Proceed to the winning
bidder not later than seven (7)
calendar days from the date of The contract date is December 21,
approval of the contract by the 2016 and the Notice to Proceed was
appropriate authority.” issued to PICC on December 23, 2015.

2. Payment of lease without legal basis As extensively discussed above under no. 1
considering that the contract was and as borne out by the RECORDS, SEC
perfected contrary to Section 10 of followed the procedures for Lease of Real
2016 Revised IRR of RA 9184 Property and Agency-to-Agency
Agreements. The validity entered contract
Sec. 10 of RA 9184 requires that: between PICC and SEC, Notice to Proceed
“All procurement shall be done through and eventual use by SEC of the PICC leased
competitive bidding, except as provided in office space serve as sufficient legal bases
Rule XVI of this IRR.” for the payment of lease.

Post-audit of the transaction reveals that


the said procurement did not qualify
under the Agency-to-Agency Agreement
since the total agency budget for the lease
exceeded the threshold of 25%, as
indicated in GPPB Resolution No. 18-007
dtd 31 May 2007 and discussed in Par. 1.a.
of the AOM

3. SEC was not able to utilize fully the The major projects undertaken related to
leased property on time due to delayed the transfer to the PICC are:
procurement of materials for 1. Supply, Delivery and Installation of
refurbishment wasting approx. O17.5 Modular Workstations for the SEC Office
Million (June to October 2016), which Space in PICC
may fall under JUEEU expenditures 2. Supply, Delivery and Installation of
Server Room and Structured Cabling for the
SEC Office Space in PICC
3. Supply, Delivery and Installation of
Electrical/Civil/Architectural and Various
Requirements for the SEC Office Space in
PICC. The award of these projects were
delayed for reasons beyond the control of
the SEC.
The COA observers attended the relevant
procurement activities and were notified of
the failed biddings, failed re-biddings as
well as the resort to Negotiated
Procurement after two failed biddings
Please consider the significant details of
the procurement activities and the results
thereof:

1. Modular Workstations

First Bidding:
June 24, 2016- Publication of Invitation To
Bid (ITB)
July 11, 2016 – Pre-bid Conference
July 25, 2016-Deadline for submission of
bids
Result: Failed Bidding
Reason: Distinctive Blinds and Office
System was sole bidder. It failed to attach
Contract or Purchase/Work Order for the
Single Largest Contract

Second Bidding:
July 5,2016- ITB was published
July , 2016- Pre-bid Conference
August 5, 2016 – Deadline for submission
of bids.
Result: Failed Bidding
Reasons; The 2 bidders failed to comply
with the bidding instructions as follows:
a. Design Excellence failed to follow
instruction in Sec. 3, GCC Clause 20.3;
failed to submit a copy of original
submission
b. Distinctive did not follow the
prescribed format

Negotiated Procurement after two FAILED


biddings:
August 12, 2016- ITB was sent to invited
suppliers and posted as required by law.
August 25, 2016- Initial meeting with
invited suppliers
August 31, 2016- Deadline of submission of
best and final offers
Awarded to Filcrafters, Inc.

2. Structured Cabling
First Bidding:
June 28, 2016- ITB was published
-21 Suppliers viewed the invitation in the
PhilGEPS
- Maximum Data and Multi-Folds bought
bidding documents
July 1, 2016- Pre-bid Conference
July 15,2016- Deadline for submission of
bids
Result: Failed Bidding
Reason: Maximum Data did not submit a
bid and Multi-Folds failed to attach PCAB
License

Second Bidding:
July 27, 2016- ITB was published
August 1, 2016- Pre-bid conference
-14 Suppliers viewed the invitation
August 15, 2016- Deadline for submission
of bids
Results: Multi-folds was the sole bidder
Said bidder was post-disqualified upon
review by the OGC. Hence, the BAC
declared Failed Bidding

Negotiated Procurement – Two Failed


Bidding:
October 22, 2016- ITB sent to invited
constructors and posted as required by law
October 28, 2016- Initial meeting with
prospective contractors
-iServe Customer Mgt. and Multi-Folds
bought bidding documents
November 15, 2016- Deadline of
submission of best and final offers
Status: Ongoing evaluation

3. Electrical/Civil/Architectural Works

First Bidding:
June 6, 2016- ITB was published
June 15, 2016- Pre-bid Conference
June 27, 2016- Deadline for submission of
bids
Result: Failed Bidding
Reason: Marcphil (lone bidder) failed to
attach the correct format of Bid Securing
Declaration

Second Bidding:
July 20, 2016- ITB was published
July 25, 2016- Pre-bid Conference
August 28, 2016- - Deadline for
submission of bids
Result: Failed Bidding
Marcphil (lone bidder) was post-
disqualified due to negative slippage

Negotiated- Two Failed Biddings:


October 28, 2016- ITB sent to invited
constructors and posted as required by law
November 4, 2016- Initial meeting with
invited constructors
November 25, 2016- Deadline for
submission of bids
Status: Ongoing evaluation of iServe
(lowest calculated)

Despite the holding of pre-bid conferences,


the bidders failed to submit documents
that comply with the SEC requirements. As
required in RA 9184 and its IRR, the
evaluation and post-qualification of bids
shall be done using non-discretionary
pass/fail criterion. Hence, if the bidder
failed to submit any required document or
the submitted document appear to be
patently incomplete or insufficient the BAC
had not recourse but to declare the bid
ineligible or post disqualified.

In view of the unforeseen circumstances,


the transfer of the SEC departments. For
instance, the procurement for Structured
Cabling is requisite for the operations of
departments which are greatly dependent
on internet servers, surveillance systems,
SEC management did not act on the among others.
retrofitting plan recommended by DPWH
and opted instead in transferring to Per DPWH letter dated July 23, 2013, it
another location by leasing PICC without sanctioned that “SEC may opt to transfer to
further conducting the necessary another location in order to assure the
feasibility study. safety of the occupants and continue the
vital function of an important office such as
the SEC”

Retrofitting or not, management exercised


judgement call and decided to lease
another building as it has been the primary
concern of the SEC to secure the safety of
its employees and the public.

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