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Contract Agreement vs. Purchase Order

18 Jul

This should have been a non-debatable issue by this date. But for the purposes of discussion, can we really dispense Contract Agreement form in favor of the Purchase Order (PO) in our dealings with the supplier?

For all we know, PO is a Commission on Audit (COA) prescribed format equivalent to a contract. It has been incorporated as one of the documentary requirements for accounting and auditing matters.In practice, PO is indispensable. That means, even in the presence of any contract, a PO must be accomplished. So if that is the case, why not use PO alone?

Before we answer the question, we first seek the roots of the Contract Agreement form. The term “Contract Agreement” can be found under Sec.37.2.3 of the Revised IRR of RA 9184 (Government Procurement Reform Act):

37.2.3. The following documents shall form part of the contract:

a) Contract Agreement; (emphasis supplied)

x x x

Take note that Sec.37 is all about contract signing after a successfully completed procurement process undertaken thru Public Bidding. And it is not just from any manual or any directives. There is this statutory provision of requiring a Contract Agreement form. This can be found in the latter pages of Philippine Bidding Documents (PBDs) issued by the GPPB as “Bidding Forms”. And PBDs are also mandatory requisites of the same law as the Basis for Bidding Documents of the Procuring Entity:

17.1. The Bidding Documents shall be prepared by the procuring entity following the standard forms and manuals prescribed by the GPPB. The Bidding Documents shall include the following:

x x x

l) Form of Contract and General and Special Conditions of Contract. (emphasis supplied) http://wp.me/p2ghmr-2O

This means that likewise, a Contract Agreement form is a substantial requirement should the mode of procurement undertaken was public bidding. But what harm can non-adherence to the prescribed form cause the Procuring Entity in not following the provisions of the law? Suppose the PE complied with the Bidding Documents anyway. We can enumerate some of them as follows:

  1. There will be a great chance of missing out general conditions of the the contract as compiled by the GPPB in enforcing the PO instead;
  2. There will be a great chance of missing out special conditions of the contract as introduced by the Procuring Entity during the preparation of the Bidding Documents; and,
  3. There will be a lot to reconcile with if the bidder after have read the conditions of the contract before submitting the bid, finds out later after the award, that he is bounded by another set of conditions with the Purchase Order (PO) form.

We in the government procurement profession, in our pursuit and advocacy to institute real reforms, have already accepted the fact that a Contract Agreement and Purchase Order form may have to be accomplished both for compliance, although we are very much inclined to insist the former as in lieu of the latter. However, since the PO form is from COA, an independent commission under the constitution and the supreme audit institution, we leave to them the idea of pre-disposing the PO as part of the documentary requirements for public bidding. Besides, PO can still be used for Alternative Methods of Procurement provided for under Article XVI of RA 9184.

This is (also) the author’s stand. Let this opinion be heard for ratification or rebuttal.

 
5 Comments

Posted by on July 18, 2012 in Government Procurement

 

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5 responses to “Contract Agreement vs. Purchase Order

  1. engrjhez

    July 18, 2012 at 11:21 am

    There has been a similar thread which started January, 2009 with last response by March, 2012. More than three years but the topic is still hot. You may want to see the entire GPPB Online forum discussion on this link >>> http://gppb.topicsolutions.net/t21-contract-form-or-purchase-order?highlight=purchase+order

     
  2. Elmer Nev Valenzuela

    August 4, 2014 at 10:32 am

    I am in quandary. Our contract with a photocopying company expired last December 31, 2013. Our contract is good for one year and — as stipulated — the agreement will be AUTOMATICALLY RENEWED at the conclusion of the initial term and any renewal thereof for an identical 12 month term unless either party advises the other etc etc.

    Since the contract expired last Dec., we assume it is renewed up to Dec 2014 because there was no motion from us to terminate the contract. My question is, was there a need to undergo bidding, canvassing or anything as to photocopying service prior to Dec. 31, 2013? Did we miss something as to procurement policies? Thank you.

     
    • engrjhez

      August 4, 2014 at 2:01 pm

      What in particular is the object of your contract? In as far as R.A. No. 9184 is concerned, there is NO automatic renewal of contract. Even Repeat Order must be properly documented and undertaken as Alternative Mode of Procurement before entering such contract.

       
  3. Elmer Nev Valenzuela

    August 4, 2014 at 3:50 pm

    It is about our contract to UBIX Corporation for the rental of their copier. Does this mean we have violated some procurement policy? Any advise pls. thanks

     
  4. hopia

    October 7, 2015 at 11:58 pm

    True. The COA shld be updated with RA9184 And require that the contract agreement be sufficient for public bids and the PO for AMPs. both are actually contracts per se. requiring PO + CA would be redundant and prone to confusion and errors. They shld instead assign CA for public bids and PO for AMP. Besides that would help in lessening doc requirements and paper consumption.

     

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