PHL scales terrain of Swiss challenge and procurement

In Photo: This file photo shows workers working on steel rods for a building in Pasay City.

Part One

IT sounds sweet; but “Swiss challenge” is more than euphony.

So says the Government Procurement Policy Board, the agency tasked to protect the national interest in all matters affecting the procurement of goods and services on behalf of the public. For the GPPB, the Swiss challenge system, which is in line with project bidding in the country, falls mainly under the build-operate-transfer (BOT) law, or Republic Act 6957, and not the Government Procurement Reform Act, or RA 9184.

That is according to GPPB-Technical Support Office (TSO) Executive Director V Dennis S. Santiago.

“It’s like this:  the Swiss challenge is not really under RA 9184,” Santiago, also a lawyer, told the BusinessMirror. “As a matter of fact, the procurement law does not have that concept of a Swiss challenge.”

Santiago explained in an interview that the Swiss challenge only aligns with procurement when an unsolicited proposal has been presented to the government.

“It comes in when there is an unsolicited proposal.”

Santiago explained that the Swiss Challenge tack is governed by RA 6957, the BOT law, as amended by RA 7718.

“That’s where you find Swiss Challenge [in the BOT law].”

The BOT law was created to help recognize the role of the private sector in terms of contributing to the growth of the Philippine economy, by helping the government in terms of goods delivery, consultancy services and infrastructure buildup, among others, Santiago explained.

Unsolicited proposal

THE BOT scheme, according to RA 6957, is defined as “a contractual arrangement whereby the contractor undertakes the construction, including financing of a given infrastructure facility, and the operation and maintenance” of the facility.

“The contractor operates the facility over a fixed term, during which it is allowed to charge facility users appropriate tolls, fees, rentals and charges sufficient to enable the contractor to recover its operating and maintenance expenses and its investment in the project plus a reasonable rate of return.”

Under a Swiss challenge system, the government receives an unsolicited proposal for a project wherein the details of the bid are published. The government invites third parties to match or exceed the bid.

“In a situation where there is a Swiss challenge, there is no request from government to submit deeds or offers coming from bidders,” Santiago said. “Normally, it would be a bidder, consortium or joint venture, offering [or submitting to the] government [a project or proposal].”

As for the complete details undertaken when the government receives an unsolicited proposal, Santiago said it would be the Public-Private Partnership (PPP) Center as the main entity knowledgeable about the complete process.

“There’s a procedure actually, the PPP Center is the very relevant agency insofar as the BOT law is concerned,” he added. “So when the unsolicited proposal is offered to the government, it will be studied through the PPP Center. And when they see that it’s [the project is] okay, what they do after is they will now submit it for a Swiss challenge.”

The challenge

ACCORDING to Santiago, once the PPP Center gives the go-ahead for the proposed project, the original proponent’s proposal will be shown to other bidders to challenge. This, he said, is either for a chance to match the bid or submit a better bid for the proposal.

The government is responsible for calling market operators that it deems may be able to challenge the original bid.

Santiago told the BusinessMirror that when a bid from a challenger is received, the government will give time for the original proponent to counter the challenger’s bid.

Doing so foster fairness or under the concept of fair play, he added.

“That’s basically the Swiss challenge,” Santiago said. “But that entire regime is not in the Government Procurement Reform Act; it’s in the BOT law. If the question is ‘Do we have a Swiss challenge under RA 9184’?, [the answer is] we don’t. Because it [RA 9184] has a straightforward competition; we call it traditional procurement.”

Procurement Act

UNDER RA 9184, a traditional procurement entails for the government to prepare requirements for its various projects and then seek bids from market operators and bidders from the private sector. Government agencies procure goods, infrastructure and consultancy services to address their operational needs.

“It’s [RA 9184] competitive in nature; all these bidders now will compete against each other. So in that competitive setup, one will become the winner,” Santiago said. “And that’s [the winning bid] the lowest calculated responsive bidder if it is infrastructure. If it’s consultancy service, we call it highest-rated and responsive bid. If it’s for goods and works, we look at the lowest calculated and responsive bid. For services it’s the highest rated responsive bid.”

The Government Procurement Reform Act streamlines processes in terms of the government’s purchase of goods, services and works. Goods include supplies or moveable materials, services include the purchase of either consultancy or expertise and works procurement include infrastructure or construction. The project is usually awarded to the company with the lowest bid.

The Act applies to procurement regardless of source of funds, whether local of foreign, by all branches and instrumentalities of government, its departments, offices and agencies, including government-owned and -controlled corporations and local government units.

Implementing rules

WHEN asked if RA 9184 should be reviewed, Santiago said the law was designed to adapt to the changing needs of the procurement environment.  If changes have to be made, the government just revises the implementing rules and regulations (IRR), he said.

The government only revised the IRR twice since these were issued in 2003. The first revision to the IRR was in 2009; the second in 2016.

Santiago added he believes the major revisions on the IRR was done to help the law adapt to the more innovative ways the country’s procurement environment was changing.

“The nice thing about the procurement law is that it has an IRR that you can change. The first IRR issued in 2003 was denominated as IRR-A. And then, eventually, in 2009 another IRR was issued, which we considered as the 2009 revised IRR,” Santiago said. “Now, because there are changes in the procurement environment, that is why you have to really update it, the last amendment was in 2016.”

In January President Duterte said he wants to do away with the bidding process for public work projects and instead opt for the Swiss challenge scheme. Duterte said his idea could eliminate the chances of corruption and lessen chances of delay in terms of completing major projects.

Santiago pointed out that for public biddings, the lowest-bid policy is not usually the route taken as the government awards the project to the company that complies with the technical requirements.

To be continued

Image credits: Nonie Reyes


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