SOP Library
SOP NO:
GS-PD10
(List of Exhibits/Attachments)
Missi
on
:
Finance and Administration
Area:
General Services (GS)
Activity:
Purchasing/Inspection and Fixed Asset Disposition (GS-PD)
Title:
Bid and Surety (Performance) Bonds
Date Approved/Issued:
07/09/1990
Date Effective:
07/16/1990
Digest:
I. TERMS OF REFERENCE
A. Rationale
B. Objective
C. Scope
D. Basis
II. IMPLEMENTING GUIDELINES
A.
Bid or Bidder's Bonds
1. Posting of a bid or bidder's bond in favor of the NFA shall be required from all prospective contractors for procurement of materials and services/disposition of unserviceable fixed assets and materials subject to public bidding. This shall serve as a guarantee that the successful bidder shall within seven calendar days from notice of receipt of award enter into contract with the NFA and furnish the surety (performance) bond for the faithful and complete prosecution of the work specified in the contract documents.
The presence of a collecting officer during the bidding process shall be required to acknowledge receipt of bid bonds.
2. The bidder's bond shall be in the form of cash, cashier's or manager's check, letter of credit issued by a commercial bank or a surety bond (Bidder's Bond) callable on demand issued by the Government Service Insurance System or a surety companyt duly accredited by the Office of the Insurance Commissioner subject to NFA acceptance. The amount of the bidder's bond required shall be indicated in the Instruction to Bidders.
3. The bidder's bond shall be valid for a reasonable period to be determined by the Committee on Bids and Awards (CBA)/Disposition Committee (DC) as specified in the Instruction to Bidders. However the period shall in no case exceed 120 calendar days following the opening of the bids.
4. The bid bonds of all, except the next lowest (for procurement of materials and services) or highest (disposition of unserviceable fixed assets and materials) complying bidders whose bids appear to be the most advantageous to the NFA, shall be returned after the opening of bids upon the request of the bidders.
5. Any bid bond maybe withdrawn before the award is made. The withdrawal shall be construed as a waiver by the bidder concerned for the award of the contract.
6. The remaining bid bonds shall be returned after the successful bidder has signed the contract and furnished the surety (performance) bond. This shall be made not later than the expiration of the validity period indicated in the Instruction to Bidders.
7. Refusal or failure of the winning bidder to enter into contract with the NFA within seven days from award shall mean forfeiture of the bid bond.
B.
Surety (Performance) Bonds
1. Prior to the award, the winning bidder shall be required to post a surety (performance) bond in favor of the NFA. The surety (performance) bond shall guarantee the faithful performance of the terms and conditions of the contract awarded. This shall also answer for any loss that may be incurred by the NFA in the event of the contractor's failure to perform his obligations provided in the contract.
2. The surety (performance) bond shall be in the form of cash, manager's or cashier's checks or surety bond (Performance Bond) callable on demand issued by the GSIS or a private surety company acredited by the Office of the Insurance Commissioner subject to NFA acceptance. The amount of the surety (performance) bond required shall also be indicated in the Instruction to Bidders.
C.
Safekeeping and Release of the Bonds Posted
1. All bidder's bonds shall be in the custody of the NFA Central Office regular collecting officer assigned for the particular bidding/Field Office Cashier.
2. A Bidder's Bond Acknowledgment Receipt (Exhibit 1) shall be issued for the bidder's bonds received. This shall be accomplished in 2 copies (Copy 1: Bidder; Copy 2: NFA Central Office Collecting Officer/Field Office Cashier).
3. Any losing bidder shall request for the release of his bid bond thru the same document. The "Release of Bidder's Bond" portion of the form shall be approved by the Chairman of the CBA/DC.
4. The approved request shall be the basis for the release of the bidder's bond by the collecting officer.
5. The bid bond of the winning bidder in cash or check form shall be receipted with an official receipt (OR) and shall be subject to the usual cash collection and deposit policies.
This policy shall also be applicable to the cash bond of the next complying bidders withheld by the NFA as required by the bidding policies. However, if the bid bonds are in check form, the policy on the issuance of official receipt shall not be adopted to facilitate the return of the checks to the bidders.
In case the contract is awarded to any of the next complying bidders upon failure of the winning bidder to execute the contract and post the required surety (performance) bond, the bid bond in check form of the new prospective contractor shall be receipted and deposited to the NFA account.
6. For reference, the original and duplicate copies of the bidder's bond acknowledgement receipt shall reflect the number and date of the corresponding OR issued.
7. Bid bonds of the winning bidder in surety form shall not be subject to the collection and deposit procedures. This shall be kept by the collecting officer for purposes of effecting subsequent collection from the surety company in the event forfeiture of the bid bond shall be undertaken.
8. After the signing of the contract and posting of the required surety (performance) bond by the winning bidder, thebid bonds of the next complying bidders withheld shall be released upon the request of the bidders as approved by the Chairman of the CBA/DC.
Cash bond already deposited shall be refunded thru the usual disbursement voucher (DV) system. The approved request shall be attached to the DV to be certified by the Chairman of the CBA/DC. Claims for refund of bidder's bondsshall be prioritized in voucher processing.
9. The bid bond of the winning bidder shall be returned after he had signed the contract and posted the surety (performance) bond as authorized by the CBA/DC Chairman thru the "Release of Bidder's Bond" portion of the Bidder's Bond Acknowledgment Receipt. The form shall indicate that a surety (performance) bond had been posted.
The official receipt number and date for bonds posted in cash or check shall be reflected on the form.
Bid bond deposited to the NFA account shall be refunded thru the usual DV system with the "Release of Bidder's Bond" as attachment.
10. Surety (performance) bonds shall be under the custody of the Cash Division of the Directorate for Treasury and Fund Management/Field Office Cashier. Official receipts shall be issued for surety (performance) bonds posted in cash or check to be deposited to the NFA account. Receipt of surety (performance) bond in surety form shall be evidenced with an acknowledgement receipt issued by the DTFM / F.O. Cashier.
A copy of the OR or acknowledgement receipt shall be provided by the DTFM / F.O. Cashier to the implementing office(s) which shall monitor the contract implementation. A copy of the surety (performance) bond in surety form shall also be provided to the implementing office(s) for purposes of determiningthe liabilities under the bond.
11. Release of surety (performance) bond shall be authorized thru the use of an Authority to Release Surety (Performance) Bond (Exhibit 2). This shall be signed by:
11.1 Central Office: Heads of Offices or Directorates concerned in the implementation of the terms and conditions of the contract and DAB/ DTFM/ DLA Directors.
The signing authority of the respective official shall apply to his area of responsibility.
11.2 Field Offices: Regional Director or
Provincial Manager.
The authority of the Regional Director or Provincial Manager to release surety (performance) bonds shall cover those bonds for decentralized contracts.
12. Surety (performance) bonds posted in cash or check which had been deposited to the NFA account shall be refunded to the contractor thru the usual DV system. The Authority to Release Surety (Performance) Bond and the original copy of the NFA official receipt for the surety (performance) bond shall be attached to the DV.
The Authority to Release Surety (Performance) Bond shall be required for release of surety (performance) bond in surety form.
13. Any official who through misrepresentation or fraudulent action caused the release of the bid and surety (performance) bond to the contractor shall be held responsible and liable. Furthermore, he shall be held answerable for any NFA claim against the contractor which was not settled due to the irregular release of the bond.
D.
Forfeiture of Bid Bonds / Application of Surety (Performance) Bond
1. The bid bond of the winning bidder shall be forfeited in case he fails to enter into contract with the NFA and post the required surety (performance) bond within seven days from award of the contract.
2. The Chairman of the CBA/DC shall advise the DTFM thru the collecting officer assigned for the particular bidding/F.O. Cashier (for bonds in surety form) and Central Office Accounting Division/field office accounting unit for purposes of effecting collections from surety company or forfeiture of the bid bond posted in cash or check form deposited to the NFA bank account and recording the transactions in the books of accounts.
The DTFM/ F.O. Cashier shall effect the collections from the surety company for the forfeited bid bond. The COAD/ accounting unit shall:
2.1 Set-up NFA claims against the surety company (bid bond in surety form)
2.2 Adjust the accounting records to take-up the forfeiture of the bond in cash or check form.
3. The surety (performance) bond of the contractor shall be applied to any loss that maybe incurrec by the NFA resulting from the failure of the contractor to comply with the terms of the contract.
4. The officials in charge of the contract implementation shall immediately advise the DTFM/ F.O. Cashier (bond in surety form) and COAD/ accounting unit in case there are claims against the surety (performance) bond for purposes of effecting collections from surety company or application of the surety (performance) bond and recording of transactions in the books of accounts. DLA shall be furnished a copy of the advice.
E.
Accounting Policies
1. The receipt and subsequent release of bid and surety (performance) bonds posted in surety form shall not be recorded in the books of accounts. This shall also apply to bid bonds posted in the form of letters of credits.
Only transactions pertaining to bonds posted in cash or manager's /cashier's checks which had been deposited to the NFA bank account shall be recognized in the books of accounts.
2. Accounting entries to take-ip transactions relative to bid and surety (performance) bonds shall be as follows:
2.1 Receipt and deposit of bidder's bond in cash or check form based on OR and validated deposit slip:
DR: Cash with Collecting Officer xxx
CR: Depository LIabilities -
Miscellaneous- Bidder's Bonds xxx
#
DR: Cash in Bank xxx
CR: Cash with Collecting Officer xxx
2.2 Release of Bidder's Bonds posted in cash or check thru DV system:
DR: Depository Liabilities -
Miscellaneous- Bidder's bonds xxx
CR: Vouchers Payable xxx
2.3 Forfeiture of bidder's bond based on advice from
Chairman of tghe CBA/DC.
a.
Cash or check (deposited to the NFA account)
DR: Depository Liabilities -
Miscellaneous - Bidder's Bonds xxx
CR: Miscellaneous Income -
Forfeiture of Bid/ Surety
(Performance) Bonds xxx
b.
Surety Form (claim from surety company) and
Lettes of Credit (claim from issuing bank)
DR: Receivables - Miscellaneous -
Claims Receivables - Others
(Bid/Surety (Performance Bond) xxx
CR: Miscellaneous Income -
Forfeiture of Bid/ Surety
(Performance Bonds) xxx
2.4 Receipt and deposit of surety (performance) bond posted in cash or check form based on OR and validated deposit slip:
DR: Cash with Collecting Officer xxx
CR: Depository Liabilities -
Guaranty Deposits - Surety
(Performance) Bonds xxx
#
DR: Cash in Bank xxx
CR: Cash with Collecting Officer xxx
2.5 Release of Surety (Performance) Bonds posted in cash or check:
DR: Depository Liabilities -
Guaranty Deposits xxx
CR: Vouchers Payable xxx
2.6 Application of surety (performance) bond:
a.
Cash or Check
DR: Depository Liabilities -
Guaranty Deposits - Surety
(Performance) Bonds xxx
CR: Miscellaneous Income _
Forfeiture of Bid/ Surety
(Performance ) Bonds xxx
b.
Surety Form (claim from surety company):
DR: Receivables - Miscellaneous -
Claims Receivables - Others
(Bid/ Surety (Performance)
Bonds xxx
CR: Miscellaneous Income -
Forfeiture of Bid/ Surety
(Performance) Bonds xxx
#
In case an expense was incurred by the NFA resulting from the contractor's non-compliance of the terms of the contract, a negative debit to the expense accouint shall be recorded. The excess amount (surety (performance) bond less expense previously recorded) shall be recognized as miscellaneous income. Any deficiency shall be set-up as a receivable account from the contractor.
Date Approved:
July 9, 1990
III. RESPONSIBILITIES
IV. FLOW CHART
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