Preparation of Approved Budget for the Contract (ABC)

As defined in RA 9184-IRR, the ABC refers to the budget for the contract duly approved by the HoPE, as provided for in the GAA, continuing, and automatic appropriations, in the case of DPWH and other National Government Agencies (NGAs). For multi-year contracts, for which a Multi-Year Obligational Authority (MYOA) is required, the ABC shall be that incorporated in the project cost reflected in the MYOA issued for the purpose.

Based on the Detailed Engineering, particularly the Proposed ABC prepared therein as discussed in Section 2.3.3, the IU concerned shall prepare and recommend the Indicative/Final ABC(depending on whether the ABC is based on the NEP/GAA) in accordance with DO 22, series of 2015. In either case, the ABC shall be supported by a Program of Work (POW), including a Detailed Unit Price Analysis (DUPA) to be undertaken in accordance with the guidelines of the DPWH. These offices shall use the standard Form DPWH-03 in preparing and presenting the POW, ABC, and DUPA as prescribed in DO 163, series of 2015.

The Indicative/Final ABC shall be reviewed the concerned Construction Unit - i.e., the Bureau of Construction in the CO, the Construction Division in the RO, and the Construction Section in the DEO - and submitted to the HoPE for approval.

It should be noted that the ABC is usually not the same as, but only a component of, the Project Cost. The Project Cost normally includes the ABC plus other expense items related to the project, such as ROW acquisition, detailed engineering, construction supervision, project management and overhead expenses of the Implementing Office (IO).

Pending the approval of the GAA, as stated in Section 2.3, the Indicative ABC based on the DPWH budget proposal in the NEP and consistent with the Indicative PPMP and Indicative APP shall be used in order to proceed with the advance procurement of the project, as provided in Section 3.2-i. Once the GAA is approved, the Final ABC shall be adopted consistent with the appropriations in the GAA.

For a single-year contract, the Indicative/Final ABC shall be within the appropriations for the project as provided for in the NEP/GAA and consistent with the Indicative/Final PPMP and APP.

For a multi-year contract, as mentioned in Section 3.2-f, the project must be included in the DPWH Medium-Term Infrastructure Program. The Indicative/Final ABC for a multi-year contract must cover its entire scope and total cost up to completion. The scope of the contract must include a complete stand-alone infrastructure facility which is safe, strong, and usable or functional to the end-user. The Final ABC must be covered by a MYOA issued by the DBM which shall authorize the Procuring Entity to enter into a multi-year contract for the project, and which shall certify that the funds to cover the total multi-year contract cost shall be included in the annual budget proposals of the DPWH, within its budget ceilings, subject to approval by Congress of the annual appropriation of the funds for the project through the GAAs.

The Procuring Entity shall use the ABC as the ceiling for accepting bids and awarding the contract. The ABC shall not exceed the approved appropriation for the project in the GAA or, in the case of a multi-year contract, the total contract amount given in the MYOA.

Since the ABC is the ceiling for accepting bids, the entity preparing the proposed ABC as part of the Detailed Engineering, as well as the IU, and other offices subsequently preparing, reviewing, and approving the Indicative/Final ABC, must formulate and adopt the ABC from the point of view of the prospective bidder-contractor. As such, these offices must take into account all relevant and legitimate factors that the bidder-contractor will and must consider in arriving at its estimate of the cost that it will incur to implement the contract.

Hence, the concerned entities/offices shall consider the following factors in preparing the ABC:

a. Approved DED and Bidding Documents for the contract, which contain, among other things, the plans, specifications, work pay items and quantities to be used by the contractor in preparing his bid.

b. Applicable and cost-effective construction methods and sequencing of activities for the project, considering construction industry norms and practices.

c. Appropriate size and composition of labor crew, type and number of equipment, and construction materials corresponding to the construction method and sequencing of activities.

d. Realistic production and efficiency rates for construction equipment and labor, considering industry norms and empirical data.

e. Identified feasible sources of construction materials.

f. Market prices of component labor, materials and equipment and monitored as-built costs of contract work items.

g. Reasonable risks and contingencies, cost of money, projected inflation, and other relevant and legitimate cost items to be incurred by the contractor.

g. Compliance with DO No. 22, series of 2015, providing guidelines in preparing the ABC.

h. Rule-of-thumb or benchmark unit costs normally used in the construction sector –e.g., cost per kilometer of concrete road, cost per square meter of building, cost per cubic meter of earthwork, etc. – for similar or comparable contracts or work items, as a quick and rough check if the ABC is within the “ballpark.”

As basic reference in preparing the ABC, the Procuring Entity shall refer to the construction cost database and price monitoring system of the Bureau of Construction (BOC), which covers market prices of materials, contract pay items, as-built costs, and related data. To achieve realistic and reliable ABCs, the Procuring Entity shall also develop and use trained agency estimators and quantity surveyors under the guidance of the BOC.

Unless otherwise specifically provided by a subsequent DPWH DO or issuance, all items of work to be used in preparing the ABC shall conform to the Standard Specifications for Highways

and Bridges, revised 2013, Standard Specifications for Public Works, 1995, and approved Special Specifications for the project, and shall be consistent with the Standard Pay Items provided in the PCMA.

For a design-and-build project involving the retrofitting/strengthening of an existing building or bridge, a provisional sum, usually not exceeding ten percent (10%) of the total estimated project cost, shall be included to cover the cost of additional repair/replacement works or introduction of additional interventions due to unexpected conditions of parts of the structure which may be revealed during the detailed investigation and construction of the project.

As provided in DO 22, series of 2015, the ABC shall be composed of the Estimated Direct Cost and the Estimated Indirect Cost and shall be calculated in accordance with the following guidelines.

a. The Estimated Direct Cost (EDC) shall consist of the following:

(1) Cost of materials to be used in doing the work item called for, which shall include, inter alia, the following:

(a) Cost at source, including processing, crushing, stockpiling, loading, royalties, local taxes, construction and/or maintenance of haul roads, etc.

(b) Expenses for hauling to project site.

(c) Handling expenses.

(d) Storage expenses.

(e) Allowance for waste and/or losses, not to exceed 5% of materials requirement.

(2) Cost of Labor:

(a) Salaries and wages, as authorized by the Department of Labor and Employment.

(b) Fringe benefits, such as vacation and sick leaves, benefits under the Workmen’s Compensation Act, Social Security System (SSS) contributions, allowances, 13^th month pay, bonuses, etc.

(3) Equipment Expenses:

(a) Rental of equipment–based on the prevailing “Associated Construction Equipment Lessors, Inc.” (ACEL) rental rates approved for use by the DPWH.

Rental rates of equipment not indicated in the ACEL booklet shall be taken from the rental rates prepared by the Bureau of Equipment. For simplicity in computation, the operated rental rates are preferred to the bare rental rates as the former includes operator’s wages, fringe benefits, fuel, oil, lubricants and equipment maintenance. The make, model and capacity of the equipment should be indicated in the detailed unit cost analysis.

(b) Mobilization and demobilization –treated as a separate pay item. It shall be computed based on the equipment requirements of the project stipulated in the proposal and contract booklet. In no case shall mobilization and demobilization exceed one percent (1%) of the EDC of the civil works items.

b. The Estimated Indirect Cost shall consist of the following:

(1) Overhead Expenses– range from five to eight percent (5-8%) of the EDC, which include the following:

(a) Engineering and Administrative Supervision.

(b) Transportation allowances.

(c) Office Expenses, e.g., for office equipment and supplies, power and water consumption, communication and maintenance.

(d) Premium on Contractor’s All Risk Insurance (CARI).

(e) Financing Cost.

i. Premium on Bid Security

ii. Premium on Performance Security

iii. Premium on Surety for Advance Payment iv. Premium on Warranty Bond (one year)

(2) Contingencies– range from five-tenths to three percent (0.5-3.0%) of the EDC. These include expenses for meetings, coordination with other stakeholders, billboards (excluding Project Billboard which is a pay item under General Requirements), stages during ground breaking and inauguration ceremonies, and other unforeseen events.

(3) Miscellaneous Expenses– range from five-tenths to one percent (0.5-1.0%) of the EDC. These include laboratory tests for quality control and plan preparation.

(4) Contractor’s Profit Margin– shall be eight percent (8%) of the EDC for projects with an EDC of more than PhP5Million and ten percent (10%) for projects with an EDC of PhP5Million and below.

Estimates for Overhead, Contingencies and Miscellaneous or OCM (items b(1), b(2) and b(3)) and Profit (item b(4)), as percentages of the EDC, shall not exceed the following amounts for different cost ranges:

Table 1. Allowable OCM and Profit Estimated Direct Cost

(EDC)

OCM, as % of EDC

Profit, as % of EDC

Up to PhP5M 12 10

Above PhP5M to PhP50M 9 8

Estimated Direct Cost (EDC)

OCM, as % of EDC

Profit, as % of EDC

Above PhP50M to PhP150M 7 8

Above PhP150M 6 8

(5) Value Added Tax (VAT) Component– shall be five percent (5%) of the sum of the EDC, OCM and Profit.

(6) The following items shall not be subjected to OCM and Profit mark-up:

(a) Mobilization and demobilization (b) Provision of Service Vehicle

(7) The following non-civil works items shall not be subjected to OCM mark-up:

(a) Field/Laboratory Office and Living Quarters (Rental Basis)

(b) Furnishing of Furniture, Laboratory Equipment, Survey Equipment and Consumables

(c) Assistance to the Engineer (d) Photographs

(e) Health and Safety (f) Traffic Management (g) Environmental Compliance (h) Communication Equipment, etc.

Since the contract cost is fixed, the Procuring Entity must first estimate the base cost of the works as of a certain date. Next, the Procuring Entity must apply to this base cost the estimated inflation factor to cover the projected increases in construction prices over the procurement and implementation period, since the cost estimate is usually done several months ahead of the bidding date and because construction works may take more than one year. The Procuring Entity shall refer to the NEDA and the Philippine Statistics Authority (PSA) for estimates of likely inflation rates applicable to the contract.

If the project or contract has a foreign exchange component, a currency valuation adjustment factor may be adopted to hedge against any foreign exchange rate fluctuations between the planning phase and the procurement and implementation stages. To determine the factor to be used, the IU may refer to estimates and forecasts of the Bangko Sentral ng Pilipinas (BSP).

SECTION 4

PREPARATION OF CONTRACT-SPECIFIC BIDDING

DOCUMENTS (BDs)

4.1 LEGAL REFERENCE

IRR Section 17 provides the rules in relation to the preparation of Bidding Documents (BDs).

4.2 PURPOSE OF CONTRACT-SPECIFIC BDs

For each particular infrastructure contract to be procured, the DPWH Procuring Entity shall issue the contract-specific Bidding Documents (BDs) to prospective bidders to provide them the necessary information that they need to prepare responsive bids for that contract (IRR Section 5 f)).These BDs shall clearly and adequately define the following aspects, among other things, for the specific contract to be procured (IRR Section 17.1):

a. Scope of work, approved budget, duration, and expected outputs of the proposed contract.

b. Minimum legal, technical, and financial requirements that the bidder must meet to be eligible to bid.

c. Documents and other requirements that the bidder must include in its bid.

d. Process and rules for the submission and receipt of bids, evaluation of bids, post-qualification, and award of contract.

e. Terms and conditions of the contract between the winning bidder and the DPWH, including their prospective obligations.

In all stages of the preparation of the Bidding Documents, the Procuring Entity shall ensure equal access to information. Prior to their official release to prospective bidders, no aspect or part of the BDs shall be divulged or released to any prospective bidder or person having direct or indirect interest in the project to be procured, or to any party, except those officially authorized in the handling of the documents (IRR Section 19).

4.3 CONTENT OF CONTRACT-SPECIFIC BDs

The BDs for the specific contract to be procured shall consist of the following:

ANNEX II-1.1A: Section I. Invitation to Bid (IB)

ANNEX II-1.1B: Section II. Eligibility Requirements (ER) ANNEX II-1.1C: Section III. Eligibility Data Sheet (EDS) ANNEX II-1.1D: Section IV. Instructions to Bidders (ITB) ANNEX II-1.1E: Section V. Bid Data Sheet (BDS)

ANNEX II-1.1F: Section VI. General Conditions of Contract (GCC) ANNEX II-1.1G: Section VII. Special Conditions of Contract (SCC) ANNEX II-1.1H: Section VIII. Specifications

ANNEX II-1.1I: Section IX. Drawings

ANNEX II-1.1J: Section X. Bill of Quantities (BOQ) ANNEX II-1.1K: Section XI. Bidding Forms (BFs)

ANNEX II-1.1L: Section XII. Foreign-Assisted Projects (FAPs)

4.4 STANDARD BIDDING DOCUMENTS (SBDs)

For every contract to be procured, the Procuring Entity shall prepare the contract-specific BDs by using, as template, the DPWH Standard Bidding Documents (SBDs) shown in ANNEX II-1.1 of this Manual Volume II. The SBDs are essentially based on the Philippine Bidding Documents (PBDs) prepared by the Government through the GPPB, but with appropriate modifications to suit the specific procurement systems and procedures of the DPWH. The DPWH Procurement Service shall post the SBDs in the DPWH website (www.dpwh.gov.ph) for easy reference by the Procuring Entities and bidders/contractors.

For each contract to be procured, however, the Procuring Entity shall insert in the SBDs the information particular to that contract, particularly in the IB, EDS, BDS, SCC, Specifications, Drawings, and BOQ, in order to produce the complete contract-specific BDs.

The specifications and other terms in the contract-specific BDs shall reflect minimum requirements for the contract. A bidder may submit a superior offer which exceeds the minimum requirements. In the evaluation of the bids, however, no premium or bonus must be given as a result of this superior offer (IRR Section 17.4). This rule is based on the nature of the procedure used to evaluate the technical proposals – a “pass/fail” method – such that the presence or absence of the minimum technical requirements is the sole basis for determining technical compliance. After having established compliance with the minimum technical specifications, the next factor to consider would then be the price or financial bid.

4.5 PERSONS/OFFICES TO PREPARECONTRACT-SPECIFIC BDs

The following shall participate in the preparation of the contract-specific BDs:

a. BAC, as Lead

b. Technical Working Group (TWG) c. IU

d. Consultants, if any e. BAC Secretariat

4.6 PERIOD FOR PREPARATION OF CONTRACT-SPECIFIC BDs

The contract-specific BDs must be prepared in time for presentation at the Pre-Procurement Conference. After the Conference, and before the advertisement and/or posting of the IB, the Procuring Entity should ascertain that the BDs are finalized.

4.7 PREPARATION OF INVITATION TO BID (IB) 4.7.1 Purpose of IB

The Invitation to Bid (IB) shall serve as the notice to interested contractors and to the general public and other interested parties of the proposed procurement for a specific contract of the Procuring Entity. It shall also provide basic information that will enable prospective bidders to decide whether or not to participate in the procurement at hand.

4.7.2 Format and Content of IB

The Procuring Entity shall use the standard IB template shown in Form DPWH-INFR-04 and in ANNEXII-1.1A which contains the following information (IRR Section 21.1):

a. Procurement/Contract ID, name and location, brief description of the type, size, major items and other important or relevant features of the works.

b. Approved Budget for the Contract (ABC).

c. Source of funding.

d. Contract duration.

e. Statement that the bidding is conducted in accordance with RA 9184 and its IRR.

f. General statements of the criteria to be used for the Eligibility Check, examination and evaluation of bids, post-qualification, and award.

g. Date, time, deadline, and place and websites for the issuance/downloading of Bidding Documents, Pre-Bid Conference, receipt of bids, and opening of bids.

h. Payment of Fee for the BDs.

i. Reservation for the Procuring Entity to accept/reject any/all bids or annul the bidding process without any liability to the bidders.

j. Name, address, telephone number, fax number, email and website addresses of the concerned Procuring Entity and its designated contact person.

k. Statement as to whether Electronic Bidding, in accordance with GPPB Resolution 23-2013, is available for the procurement opportunity.

l. Other necessary information as determined by the Procuring Entity.

4.8 PREPARATION OF ELIGIBILITY REQUIREMENTS(ER) 4.8.1 Purpose of ER

The Eligibility Requirements (ER) shall define the legal, technical, and financial criteria that a prospective bidder for an infrastructure contract must meet in order to be declared by the DPWH as eligible for the contract (IRR Section 23).

4.8.2 Content of ER

The Procuring Entity shall use the standard ER shown in ANNEX II-1.1B which contains the following set of requirements for the eligibility of a prospective bidder to bid for a particular contract (IRR Section 23.1):

 Submission of Class “A” and Class “B” Documents

To participate in the bidding for an infrastructure contract in the DPWH, a contractor/

bidder must submit to the BAC of the Procuring Entity, not later than the deadline for the submission of bids or simultaneously with the submission of its bid for the contract, the following Class “A” and Class “B” Documents as embodied in the Contractor’s Confidential Application Statement for Registration or CCASR (Form DPWH-INFR-05) (IRR Section 23.1). This submission is required only of contractors that are not yet enrolled in the DPWH Civil Works Registry (CWR) or those that wish to update their Class “A” and Class “B” documents. In any case, prior enrolment or registration of a contractor with the CWR is not a prerequisite to the submission of bids for a specific contract.

o Class “A” Documents (IRR Section 23.1a):

(1) Legal Documents

(a) Registration certificate from the Securities and Exchange Commission (SEC) in the case of a Partnership or Corporation, or from the Department of Trade and Industry (DTI) in the case of a Single Proprietorship, or from the Cooperatives Development Authority in the case of a cooperative.

(b) Mayor’s/Business Permit issued by the city or municipality where the principal place of business of the prospective bidder is located, or the equivalent document for exclusive economic zones or areas.

In case of a recently expired Mayor’s/Business Permit, it shall be accepted together with the Official Receipt as proof that the bidder has applied for renewal within the prescribed period, provided that the renewed permit shall be submitted as a post-qualification requirement in accordance with Section 34.2 of the IRR (IRR Section 23.1).

(c) Tax Clearance per Executive Order (EO) No. 298, series of 2005, as finally reviewed and approved by the Bureau of Internal Revenue (BIR).

(2) Technical Documents

(a) Valid PCAB license applicable to the type and cost of contract to be procured.

In the case of a proposed joint venture (JV), during the registration with the CWR, only the individual licenses of all members of the JV are required.

(During the bidding, a PCAB Special JV license shall be required as part of the Technical Proposal of the bid to be submitted by the JV, unless otherwise provided in the procurement of foreign-assisted contracts.)

(During the bidding, a PCAB Special JV license shall be required as part of the Technical Proposal of the bid to be submitted by the JV, unless otherwise provided in the procurement of foreign-assisted contracts.)

In document DPWH Procurement Manual - Volume II (Page 34-200)