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Tuesday, February 23, 2010

Procurement controversies -- Philippines

Tobacco farmers press charges vs BIR executives
Tobacco farmers in Northern Luzon want four more executives of the Bureau of Internal Revenue (BIR) jailed for favoring a multi-billion peso tax stamp scheme which, they said, could kill the local tobacco industry.

The farmers claimed that this committee set aside “the stringent requirements” of the Build-Operate-Transfer (BOT) Law when it classified the SICPATRACE System as an unsolicited proposal and declared SICPA as an original proponent of the costly tax stamp project.

It will be recalled that a BIR pre-qualification, bidding and awards committee (PBAC) recommended to the BIR management committee to accept SICPA’s proposal despite the company’s failure to meet at least 48 of the 83 technical requirements.

Records show that the management committee approved the costly tax stamp project in October 2008. “Based on the initial evaluation of the documents submitted to our office, the SICPATRACE Project was found to have satisfied the evaluation criteria for pursuing the project as an unsolicited proposal,” the management committee said in a letter.


It appears that clear specifications for the build-operate-transfer were put out for tender, by whatever means of bid/proposal procedure contemplated by the BOT law.

It then appears that the bid which came in was non-responsive to those specifications.

It then appears that this non-responsive bid was accepted as an unsolicited proposal.

Now those "appearances" may not be the actual case, but as thus framed, this case presents an interesting hypothetical question for examination of Guam procurement: Can a non-responsive bid nevertheless be accepted as a non-solicited proposal?

For many reasons, I would say, "no", but it is a tantalizing proposition.

Under either an IFB or RFP of source selection, a non-responsive offering should be rejected, and that should not present any controversial comment. But what if, to simply shortcut the acquisition process, the government did in one step what might arguably be done in two steps; that is, why couldn't it simply cancel the first solicitation and at the same time accept an unsolicited proposal?

There are a lot of technical answers to that question, all saying "no", but I presented this case to illustrate the importance of the basic principles of procurement law. And this case illustrates the fundamental proposition that fair and equitable competition is meant to be the keystone of the procurement process, and this situation fails the competitive purpose of procurement.

There can be no shortcuts to achieving an effective government purchase regime when those shortcuts eliminate effective competition. Any concoction or connivance or combination of otherwise acceptable procurement processes which are so organized as to bypass fair and equitable competition must be strictly scrutinized.

Apart from failing the principles of procurement law and the competitive sealed bidding procedures, this scenario would violate the unsolicited proposal provisions of Guam procurement law.

As originally enacted, and as found in the ABA Model Procurement Code, Guam law provided that unsolicited offers were to be treated as a sole source procurement. Sole source is only available if there are no other products or offerors who can provide the supply or service, bearing in mind that the government's needs are intended to be articulated by means of specifications which are intended to be drafted to promote competition.

Thus, assuming the original specifications adequately described the government's needs, and there were other providers that could meet the needs, this scenario would clearly be inconsistent with the sole source procurement rules.

But Guam law has gone further, and the unsolicited proposal provision was revised from the MPC to require that all unsolicited proposals trigger a competitive sealed bid procedure. Acceptance of a non-responsive bid in that event is a clear violation of the law.

Competitive sealed bidding is the preferred and default method of procurement under Guam law. Any exception which swallows that rule must be avoided, and an arrangement whereby a non-responsive bid could be accepted under an unsolicited proposal concept would undermine the entire edifice of the Guam procurement regime.

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