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Advance Payment for Goods and Services

Advance Payment for Goods and Services

ni Marissa Mabingnay -
Number of replies: 1

Good day!

Can Catering Services/Supply and delivery of Food be entitled to advanced payment?

Can advance payment be given even without stating it in the PBD - BDS during procurement process?

Is the irrevocable letter of credit different/separate from the performance issued by the winning supplier? and what is the amount?  Is it equivalent to the contract amount or is it equivalent to 15% advance payment requested?

Thank you very much

In reply to Marissa Mabingnay

Re: Advance Payment for Goods and Services

ni Jessie Salvador -

Good day!

Can Catering Services/Supply and delivery of Food be entitled to advanced payment?

 

Yes. Annex "D" of the IRR provides:

4.1 In accordance with Presidential Decree 1445, advance payment shall be made only after prior approval of the President, and shall not exceed fifteen percent (15%) of the contract amount, unless otherwise directed by the President; Provided,
however, that for cases mentioned under 4.3, 4.4, and 4.5 of these guidelines, no prior approval by the President shall be necessary.


4.2 All progress payments shall first be charged against the advance payment until the latter has been fully exhausted, unless otherwise approved by the President. 

4.3 A single advance payment not to exceed fifty percent (50%) of the contract amount shall be allowed for contracts entered into by a procuring entity for the following services where requirement of down payment is a standard industry practice:

a) Hotel and restaurant services;
b) Use of conference/seminar and exhibit areas; and
c) Lease of office space.

4.4 Advance payment not to exceed fifteen percent (15%) of the contract amount, unless otherwise directed by the President, shall also be allowed for procurement of goods required to address contingencies arising from natural or man-made calamities in areas where a “State of Calamity” has been declared by appropriate
authorities.

4.5 Upon submission of an irrevocable letter of credit or bank guarantee issued by a Universal or Commercial Bank, advance payment not to exceed fifteen percent (15%) of the contract amount shall be allowed and paid within sixty (60) calendar
days from signing of the contract. The irrevocable letter of credit or bank guarantee must be for an equivalent amount, shall remain valid until the goods are delivered, and accompanied by a claim for advance payment.

Can advance payment be given even without stating it in the PBD - BDS during procurement process?

Yes. The 6th Edition of Philippine Bidding Documents provide:

   1.               Advance Payment and Terms of Payment

 

                        1.1.            Advance payment of the contract amount is provided under Annex “D” of the revised 2016 IRR of RA No. 9184.

 

                        1.2.            The Procuring Entity is allowed to determine the terms of payment on the partial or staggered delivery of the Goods procured, provided such partial payment shall correspond to the value of the goods delivered and accepted in accordance with prevailing accounting and auditing rules and regulations.  The terms of payment are indicated in the SCC.

Is the irrevocable letter of credit different/separate from the performance issued by the winning supplier? and what is the amount?  Is it equivalent to the contract amount or is it equivalent to 15% advance payment requested?

Yes, ILC is different from performance security. The amount is already provided in the citation above, which is 15% of the contract price.

Thank you very much.

You're welcome.