Implementing Rules and Regulations of Republic Act No.

9184

Annex E

ANNEX E
CONTRACT IMPLEMENTATION GUIDELINES FOR THE PROCUREMENT OF
INFRASTRUCTURE PROJECTS

1
VARIATION
ORDERS
ORDER/SUPPLEMENTAL AGREEMENT

CHANGE

ORDER/EXTRA

WORK

1. Variation Orders may be issued by the procuring entity to cover any increase/decrease in
quantities, including the introduction of new work items that are not included in the
original contract or reclassification of work items that are either due to change of plans,
design or alignment to suit actual field conditions resulting in disparity between the
preconstruction plans used for purposes of bidding and the "as staked plans" or
construction drawings prepared after a joint survey by the contractor and the
Government after award of the contract, provided that the cumulative amount of the
Variation Order does not exceed ten percent (10%) of the original project cost. The
addition/deletion of works should be within the general scope of the project as bid and
awarded. A Variation Order may either be in the form of a change order or extra work
order.
2. A Change Order may be issued by the implementing official to cover any
increase/decrease in quantities of original work items in the contract.
3. An Extra Work Order may be issued by the implementing official to cover the
introduction of new work necessary for the completion, improvement or protection of the
project which were not included as items of work in the original contract, such as, where
there are subsurface or latent physical conditions at the site differing materially from
those indicated in the contract, or where there are duly unknown physical conditions at
the site of an unusual nature differing materially from those ordinarily encountered and
generally recognized as inherent in the work or character provided for in the contract.
4. Any cumulative Variation Order beyond ten percent (10%) shall be subject of another
contract to be bid out if the works are separable from the original contract. In
exceptional cases where it is urgently necessary to complete the original scope of work,
the head of the procuring entity may authorize the variation order beyond ten percent
(10%) but not more than twenty percent (20%) subject to the guidelines to be
determined by the GPPB: Provided, however, That appropriate sanctions shall be
imposed on the designer, consultant or official responsible for the original detailed
engineering design which failed to consider the Variation Order beyond ten percent
(10%).
5. In claiming for any Variation Order, the contractor shall, within seven (7) calendar days
after such work has been commenced or after the circumstances leading to such
condition(s) leading to the extra cost, and within twenty-eight (28) calendar days deliver
a written communication giving full and detailed particulars of any extra cost in order
that it may be investigated at that time. Failure to provide either of such notices in the
time stipulated shall constitute a waiver by the contractor for any claim. The preparation
and submission of Variation Orders are as follows:
a. If the Project Engineer believes that a Change Order or Extra Work Order
should be issued, he shall prepare the proposed Order accompanied with the
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notices submitted by the contractor, the plans therefore, his computations as

to the quantities of the additional works involved per item indicating the
specific stations where such works are needed, the date of his inspections and
investigations thereon, and the log book thereof, and a detailed estimate of
the unit cost of such items of work, together with his justifications for the need
of such Change Order or Extra Work Order, and shall submit the same to the
Regional Director or equivalent official of office/agency/corporation/LGU
concerned.
b. The Regional Director or equivalent official concerned, upon receipt of the
proposed Change Order or Extra Work Order shall immediately instruct the
technical staff of the Region to conduct an on-the-spot investigation to verify
the need for the work to be prosecuted. A report of such verification shall be
submitted directly to the Regional Director or equivalent official concerned.
c. The Regional Director or equivalent official concerned, after being satisfied
that such Change Order or Extra Work Order is justified and necessary, shall
review the estimated quantities and prices and forward the proposal with the
supporting documentation to the head of procuring entity for consideration.
d. If, after review of the plans, quantities and estimated unit cost of the items of
work involved, the proper office of the procuring entity empowered to review
and evaluate Change Orders or Extra Work Orders recommends approval
thereof, the head of the procuring entity or his duly authorized representative,
believing the Change Order or Extra Work Order to be in order, shall approve
the same.
e. The timeframe for the processing of Variation Orders from the preparation up
to the approval by the procuring entity concerned shall not exceed thirty (30)
calendar days.
2 - ADDITIONAL/EXTRA WORK COSTING
1. For Variation Orders, the contractor shall be paid for additional work items whose unit
prices shall be derived based on the following:
a.

For additional/extra works duly covered by Change Orders involving work

items which are exactly the same or similar to those in the original contract,
the applicable unit prices of work items original contract shall be used.

b.

For additional/extra works duly covered by Extra Work Orders involving new
work items that are not in the original contract, the unit prices of the new
work items shall be based on the direct unit costs used in the original
contract (e.g. unit cost of cement, rebars, form lumber, labor rate,
equipment rental, etc.). All new components of the new work item shall be
fixed prices, provided the same is acceptable to both the Government and
the contractor, and provided further that the direct unit costs of new
components shall be based on the contractor's estimate as validated by the
procuring entity concerned via documented canvass in accordance with
existing rules and regulations. The direct cost of the new work item shall

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then be combined with the mark-up factor (i.e. taxes and profit) used by the
contractor in his bid to determine the unit price of the new work item.
2. Request for payment by the contractor for any extra work shall be accompanied by a
statement, with the approved supporting forms, giving a detailed accounting and record
of amount for which he claims payment. Said request for payment shall be included
with the contractor's statement for progress payment.
3 - CONDITIONS UNDER WHICH CONTRACTOR IS TO START WORK UNDER
VARIATION ORDERS AND RECEIVE PAYMENTS
1. Under no circumstances shall a contractor proceed to commence work under any
Change Order or Extra Work Order unless it has been approved by the head of the
procuring entity or his duly authorized representative. Exceptions to the preceding rule
are the following:
a. The Regional Director or equivalent official may, subject to the availability of
funds, authorize the immediate start of work under any Change or Extra Work
Order under any or all of the following conditions:
(1) In the event of an emergency where the prosecution of the work is urgent
to avoid detriment to public service, or damage to life and/or property;
and/or
(2) When time is of the essence;

Provided, however, That such approval is valid on work done up to the point

where the cumulative increase in value of work on the project which has not
yet been duly fully approved does not exceed five percent (5%) of the
adjusted original contract price whichever is less;

Provided, further, That immediately after the start of work, the corresponding

Change Order or Extra Work Order shall be prepared and submitted for
approval in accordance with the above rules herein set. Payments for works
satisfactorily accomplished on any Change Order or Extra Work Order may be
made only after approval of the same by the head of the procuring entity or
his duly authorized representative.

b. For a Change Order or Extra Work Order involving a cumulative amount

exceeding five percent (5%) of the original contract, no work thereon may be
commenced unless said Change Order or Extra Work Order has been
approved by the Secretary or his duly authorized representative.
4 - ADVANCE PAYMENT
1. The procuring entity shall, upon a written request of the contractor which shall be
submitted as a contract document, make an advance payment to the contractor in an
amount equal to fifteen percent (15%) of the total contract price, to be made in lump
sum or, at the most two, installments according to a schedule specified in the
Instructions to Bidders and other relevant Tender Documents.

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2. The advance payment shall be made only upon the submission to and acceptance by the
procuring entity of an irrevocable standby letter of credit of equivalent value from a
commercial bank, a bank guarantee or a surety bond callable upon demand, issued by a
surety or insurance company duly licensed by the Insurance Commission and confirmed
by the procuring entity.
3. The advance payment shall be repaid by the contractor by deducting fifteen percent
(15%) from his periodic progress payments.
4. The contractor may reduce his standby letter of credit or guarantee instrument by the
amounts refunded by the Monthly Certificates in the advance payment.
5 - PROGRESS PAYMENT
1. Once a month, the contractor may submit a request for payment for work accomplished.
Such request for payment shall be verified and certified by the Government project
engineer concerned. Except as otherwise stipulated in the Instruction to Bidders,
materials and equipment delivered on the site but not completely put in place shall not
be included for payment.
2. The procuring entity shall have the right to deduct from the contractor's progress billing
such amount as may be necessary to cover third party liabilities, as well as uncorrected
discovered defects in the project.
6 - RETENTION MONEY
1. Progress payments are subject to retention of ten percent (10%) referred to as the
"retention money." Such retention shall be based on the total amount due to the
contractor prior to any deduction and shall be retained from every progress payment
until fifty percent (50%) of the value of works, as determined by the procuring entity,
are completed. If, after fifty percent (50%) completion, the work is satisfactorily done
and on schedule, no additional retention shall be made; otherwise, the ten percent
(10%) retention shall be imposed.
2. The total "retention money" shall be due for release upon final acceptance of the works.
The contractor may, however, request the substitution of the retention money for each
progress billing with irrevocable standby letters of credit of from a commercial bank,
bank guarantees or surety bonds callable on demand, of amounts equivalent to the
retention money substituted for and acceptable to Government, provided that the
project is on schedule and is satisfactorily undertaken. Otherwise, the ten percent
(10%) retention shall be made. Said irrevocable standby letters of credit, bank
guarantees and/or surety bonds, to be posted in favor of the Government shall be valid
for a duration to be determined by the concerned implementing office/agency or
procuring entity and will answer for the purpose for which the ten percent (10%)
retention is intended, i.e., to cover uncorrected discovered defects and third party
liabilities.

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7 - CONTRACT COMPLETION
Once the project reaches an accomplishment of ninety five (95%) of the total contract
amount, the procuring entity may create an inspectorate team to make preliminary
inspection and submit a punch-list to the contractor in preparation for the final turnover of
the project. Said punch-list will contain, among others, the remaining works, work
deficiencies for necessary corrections, and the specific duration/time to fully complete the
project considering the approved remaining contract time. This, however, shall not preclude
the procuring entity's claim for liquidated damages.
8 - LIQUIDATED DAMAGES
1. Where the contractor refuses or fails to satisfactorily complete the work within the
specified contract time, plus any time extension duly granted and is hereby in default
under the contract, the contractor shall pay the procuring entity for liquidated damages,
and not by way of penalty, an amount to be determined in accordance with the following
formula until the work is completed and accepted or taken over by the procuring entity:
TLD = VUUP x [ (1+ OCC)n - 1] x K
VUUP = TCP - VCUP
WHERE:
TLD

Total Liquidated Damages, In Pesos

VUUP =

value of the uncompleted and unusable portions of the contract work, as of

the expiry date of the contract, in pesos

TCP

Total Contract Price, In Pesos

VCUP =

value of the completed and usable portion of the contract work, as of the
expiry date of the contract, in pesos

OCC =

prevailing opportunity cost of capital for government projects set by NEDA,

which is currently pegged at 15%

=
=

total number of years that the contract work is delayed after the expiry date
of the contract
adjustment factor to cover additional losses
1 + C + ( i x n)

WHERE:
C
i

cost of construction supervision as a percentage, not exceeding 10%, of

construction cost

= annual inflation rate as defined by NEDA

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The head of procuring entity may also impose additional liquidated damages on the
contractor provided such is prescribed in the Instructions to Bidders.
2. A project or a portion thereof may be deemed usable when it starts to provide the
desired benefits as certified by the targeted end-users and the concerned procuring
entity.
3. To be entitled to such liquidated damages, the procuring entity does not have to prove
that it has incurred actual damages. Such amount shall be deducted from any money
due or which may become due the contractor under the contract and/or collect such
liquidated damages from the retention money or other securities posted by the
contractor whichever is convenient to the procuring entity.
4. In case that the delay in the completion of the work exceeds a time duration equivalent
to ten percent (10%) of the specified contract time plus any time extension duly granted
to the contractor, the procuring entity concerned may rescind the contract, forfeit the
contractor's performance security and takeover the prosecution of the project or award
the same to a qualified contractor through negotiated contract.
5. In no case however, shall the total sum of liquidated damages exceed ten percent
(10%) of the total contract price, in which event the contract shall automatically be
taken over by the procuring entity concerned or award the same to a qualified contractor
through negotiation and the erring contractor's performance security shall be forfeited.
The amount of the forfeited performance security shall be aside from the amount of the
liquidated damages that the contractor shall pay the government under the provisions of
this clause and impose other appropriate sanctions.
6. For terminated contracts where negotiation shall be undertaken, the procedures
prescribed in the IRR shall be adopted.
9 - SUSPENSION OF WORK
1. The procuring entity shall have the authority to suspend the work wholly or partly by
written order for such period as may be deemed necessary, due to force majeure or any
fortuitous events or for failure on the part of the contractor to correct bad conditions
which are unsafe for workers or for the general public, to carry out valid orders given by
the procuring entity or to perform any provisions of the contract, or due to adjustment
of plans to suit field conditions as found necessary during construction. The contractor
shall immediately comply with such order to suspend the work wholly or partly.
2. The contractor or its duly authorized representative shall have the right to suspend work
operation on any or all projects/activities along the critical path of activities after fifteen
(15) calendar days from date of receipt of written notice from the contractor to the
district engineer/regional director/consultant or equivalent official, as the case may be,
due to the following:
a. There exist right-of-way problems which prohibit the contractor from performing
work in accordance with the approved construction schedule.
b. Requisite construction plans which must be owner-furnished are not issued to the
contractor precluding any work called for by such plans.

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c. Peace and order conditions make it extremely dangerous, if not possible, to work.
However, this condition must be certified in writing by the Philippine National
Police (PNP) station which has responsibility over the affected area and
confirmed by the Department of Interior and Local Government (DILG) Regional
Director.
d. There is failure on the part of the procuring entity to deliver governmentfurnished materials and equipment as stipulated in the contract.
e. Delay in the payment of contractor's claim for progress billing beyond forty-five
(45) calendar days from the time the contractor's claim has been certified to by
the procuring entitys authorized representative that the documents are complete
unless there are justifiable reasons thereof which shall be communicated in
writing to the contractor.
3. In case of total suspension, or suspension of activities along the critical path, which is
not due to any fault of the contractor, the elapsed time between the effective order of
suspending operation and the order to resume work shall be allowed the contractor by
adjusting the contract time accordingly.
10 - EXTENSION OF CONTRACT TIME
1. Should the amount of additional work of any kind or other special circumstances of any
kind whatsoever occur such as to fairly entitle the contractor to an extension of contract
time, the procuring entity shall determine the amount of such extension; provided that
the procuring entity is not bound to take into account any claim for an extension of time
unless the contractor has, prior to the expiration of the contract time and within thirty
(30) calendar days after such work has been commenced or after the circumstances
leading to such claim have arisen, delivered to the procuring entity notices in order that
it could have investigated them at that time. Failure to provide such notice shall
constitute a waiver by the contractor of any claim. Upon receipt of full and detailed
particulars, the procuring entity shall examine the facts and extent of the delay and shall
extend the contract time completing the contract work when, in the procuring entity's
opinion, the findings of facts justify an extension.
2. No extension of contract time shall be granted the contractor due to (a) ordinary
unfavorable weather conditions and (b) inexcusable failure or negligence of contractor to
provide the required equipment, supplies or materials.
3. Extension of contract time may be granted only when the affected activities fall within
the critical path of the PERT/CPM network.
4. No extension of contract time shall be granted when the reason given to support the
request for extension was already considered in the determination of the original
contract time during the conduct of detailed engineering and in the preparation of the
contract documents as agreed upon by the parties before contract perfection.
5. Extension of contract time shall be granted for rainy/unworkable days considered
unfavorable for the prosecution of the works at the site, based on the actual conditions
obtained at the site, in excess of the number of rainy/unworkable days pre-determined

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by the government in relation to the original contract time during the conduct of detailed
engineering and in the preparation of the contract documents as agreed upon by the
parties before contract perfection, and/or for equivalent period of delay due to major
calamities such as exceptionally destructive typhoons, floods and earthquakes, and
epidemics, and for causes such as non-delivery on time of materials, working drawings,
or written information to be furnished by the procuring entity, non-acquisition of permit
to enter private properties within the right-of-way resulting in complete paralyzation of
construction activities, and other meritorious causes as determined by the Government's
authorized Engineer and approved by the procuring entity. Shortage of construction
materials, general labor strikes, and peace and order problems that disrupt construction
operations through no fault of the contractor may be considered as additional grounds
for extension of contract time provided they are publicly felt and certified by appropriate
government agencies such as DTI, DOLE, DILG, and DND, among others. The written
consent of bondsmen must be attached to any request of the contractor for extension of
contract time and submitted to the procuring entity for consideration and the validity of
the performance security shall be correspondingly extended.
11 - ACCREDITATION OF TESTING LABORATORIES
1. To help ensure the quality of materials being used in infrastructure projects, the Bureau
of Research and Standards (BRS) of the DPWH, Department of Science and Technology
(DOST), or Department of Trade and Industry (DTI) shall accredit, in accordance with
industry guidelines, the testing laboratories whose services are engaged or to be
engaged in infrastructure projects. All government infrastructure project owners must
accept results of material test(s) coming only from DOST/BRS/ accredited laboratories.
12 - EVALUATION OF CONTRACTORS PERFORMANCE
1. SUBJECT AND SCOPE
All procuring entities implementing government infrastructure projects are mandated to
evaluate the performance of their contractors using the NEDA-Approved Constructors
Performance Evaluation System (CPES) Guidelines for the type of project being
implemented. These guidelines cover all infrastructure projects awarded by the government
regardless of contract amount and funding source. CPES evaluation shall be done during
construction and upon completion of each government project. To ensure continuous
implementation of CPES, all procuring entities concerned are required to include in their
Projects Engineering and Administrative Overhead Cost the budget for the implementation
of CPES pursuant to NEDA Board Resolution No. 18 (s.2002).
2. EVALUATION GUIDELINES
For project types which do not have specific CPES Guidelines, the procuring entities
concerned may formulate and adopt their own implementing Guidelines specific to their
needs provided the NEDA-INFRACOM poses no objections to their adoption, and provided
further that said Guidelines are made known to all prospective bidders.

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3. IMPLEMENTATION MECHANISM FOR CPES

All procuring entities implementing infrastructure projects are required to establish CPES
Implementing Units (IUs) in their respective offices/agencies/corporations. The CPES
Implementing Units shall be responsible for the implementation of the CPES Implementing
guidelines, including but not limited to, the supervision of Constructors Performance
Evaluators (CPEs) to be accredited by the Construction Industry Authority of the Philippines
(CIAP). The procuring entitys CPES IU shall be responsible for the following: a) prescreening of applications of CPEs, b) funding for CPEs accreditation training and seminars;
and c) yearly evaluation of CPEs.
4. SUBMISSION AND DISSEMINATION OF EVALUATION RESULTS
All procuring entities implementing CPES shall submit the results of their performance
evaluation to the CIAP on a monthly basis or as often as necessary. The procuring entitys
CPES-IU shall likewise develop and maintain a databank and disseminate the CPES reports
to the concerned units/departments within the procuring entity and to other interested
users.
5. UTILIZATION OF EVALUATION RESULTS
The CIAP shall consolidate all of the CPES evaluation results received and shall disseminate
the same to all procuring entities concerned. The CPES rating and other information shall
be used by the concerned government agencies for the following purposes: a) pre
qualification/eligibility screening of constructors; b) awarding of contracts; c) project
monitoring and control; d) issuance of Certificate of Completion; e) policy
formulation/review; f) industry planning; g) granting of Incentives/Awards, and, in adopting
measure to further improve performance of contractors in the prosecution of government
projects.
13 OTHER RULES AND GUIDELINES
The rules and regulations for the other aspects of contract implementation shall be included
in the manuals to be issued by the GPPB, such as, but not limited to, the following:
1. Sub-contracting;
2. Interference with Traffic and Adjoining Properties;
3. Clearance of Project Site of Obstruction;
4. Inspection and Testing;
5. Daywork;
6. Measurement of Works; and
7. Other Implementation Aspects.

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