EIGHTEENTH CONGRESS OF THE )  
REPUBLIC OF THE PHILIPPINES ) 
Second Regular Session 
 
) 
 
SENATE 
S. B. No. ________ 
 
 
Introduced by SENATOR IMEE R. MARCOS 
_____________________________________________________________________ 
AN ACT 
 ESTABLISHING A DEFENSE PROCUREMENT SYSTEM FOR THE 
DEPARTMENT OF NATIONAL DEFENSE AND ITS BUREAUS  IN SUPPORT OF 
THE ARMED FORCES OF THE PHILIPPINES  MODERNIZATION, AND FOR 
OTHER PURPOSES 
 
EXPLANATORY NOTE 
 
 
 Article II, Section 3 of the 1987 Constitution provides that “the Armed Forces 
of the Philippines is the protector of the people and the State. Its goal is to secure the 
sovereignty of the State and the integrity of the national territory.” 
 
 
On 1995, Republic Act No. 7898 or the “AFP Modernization Act” was enacted, 
as later amended by Republic Act No. 10379 in 2012. One of the major components 
of the Armed Forces of the Philippines (AFP) Modernization Program is the “Capability, 
Materiel and Technology Development (CMTD)” to be implemented in three (3) 
phases, namely: Horizon 1 for the years 2012-2017; Horizon 2 for the years 2018-
2022; and Horizon 3 for the years 2023-2027.  
 
However, the rigid requirements provided for under Republic Act No. 9184 or 
the “Government Procurement Reform Act” in relation to the acquisition of defense 
equipment, materiel, ordnance, services, facilities and integrated military systems, 
among others, prove to be one of the main factors that stifle the AFP Modernization 
Program. In the case of CMTD, while it was given the biggest bulk of the budget, only 
July 20 2020
10:55 a.m.
1707


 
 
a meager  twenty-one (21) out of the one hundred fifty two (152) projects have been 
completed as of August 2019 under Horizon 1. Worse, some twenty five (25) are still 
in various stages of procurement.  
 
Provisions of Republic Act No. 9184 also opens to the public nearly everything 
for monitoring. This “general public participation” compromises the confidential nature 
of certain goods and services lined up for procurement. While transparency is an 
essential element in government spending, it does not mean “full disclosure” as there 
are “trade secrets” that only few people need to know, such as the purchase of major 
and highly classified defense materiel which, if revealed, may pose an imminent threat 
to national security. 
 
This bill seeks to provide a defense procurement system that is devoted solely 
for the furtherance of the AFP Modernization Program by allowing the Department of 
National Defense (DND) to resort to other modes of procurement other than public 
bidding, under specific conditions, and mandates the confidentiality of the 
procurement of defense materiel, as herein provided. 
 
 
In view of the foregoing, the passage of this measure is earnestly sought. 
 
 
 
 
 
IMEE R. MARCOS


 
 


1 
 
EIGHTEENTH CONGRESS OF THE )  
REPUBLIC OF THE PHILIPPINES ) 
Second Regular Session 
 
) 
 
SENATE 
S. B. No. ________ 
 
 
Introduced by SENATOR IMEE R. MARCOS 
_____________________________________________________________________ 
AN ACT 
 ESTABLISHING A DEFENSE PROCUREMENT SYSTEM FOR THE 
DEPARTMENT OF NATIONAL DEFENSE AND ITS BUREAUS  IN SUPPORT OF 
THE ARMED FORCES OF THE PHILIPPINES  MODERNIZATION, AND FOR 
OTHER PURPOSES 
 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
 
ARTICLE I 
1 
GENERAL PROVISIONS 
2 
SECTION 1. Short Title. – This Act shall be known as the “Defense Procurement 
3 
Act.” 
4 
SEC. 2. Declaration of the Policy. – It is the policy of the State to secure its 
5 
sovereignty and the integrity of its national territory. Towards this end, the 
6 
procurement of defense equipment, facilities, materiel, ordnance, services and 
7 
integrated military systems under the Armed Forces of the Philippines (AFP) shall be 
8 
given utmost priority. 
9 
SEC. 3. Governing Principles. – This Act shall be governed by the following 
10 
principles:  
11 
a. Expeditious and specialized process in the procurement of defense 
12 
materiel, systems, military facilities and installations, and services;  
13 
b. Simple and adaptable to the advances in modern technology in order to 
14 
ensure an effective and efficient procurement process; 
15 
July 20 2020
10:55 a.m.
1707


2 
 
c. Quality, reliability and sustainability of defense equipment, facilities, 
1 
services, systems, critical components, and other critical requirements 
2 
through the adoption of appropriate criteria in determining the best-rated 
3 
offer; 
4 
d. Confidentiality throughout the procurement process; 
5 
e. Self-reliant defense posture to support defense requirements of the 
6 
Department of National Defense (DND) and its bureaus and promote the 
7 
development of local defense industry, reduce foreign exchange outflow, 
8 
generate local employment, and enhance technology transfer; and 
9 
f. Accountability and integrity through special monitoring of defense 
10 
procurement procedures and implementation of awarded contracts. 
11 
 
12 
SEC. 4. Scope and Application. – This Act shall apply to the procurement of 
13 
defense materiel, services, ordnance, systems, and facilities of the Department of 
14 
National Defense and its bureaus pursuant to the objectives of the AFP Modernization 
15 
Program. In so far as practicable, the Defense System of Management (DSOM) 
16 
process, as prescribed by the Secretary of National Defense (SND), shall be used in 
17 
the determination of requirements to be procured under this Act. 
18 
Procurement under this Act shall be done  with due regard to  war-fighting 
19 
capability, operational flexibility, and value-for-money. 
20 
 
21 
SEC. 5. Definition of Terms. – For purposes of this Act, the following terms, 
22 
words or phrases shall mean or be understood as follows: 
23 
a. Best Rated Offer – is the offer with the best calculated rating based on 
24 
criteria/parameters including, but not limited to financial capacity, technical 
25 
capabilities of appropriate upgrade, and others such as life-cycle cost, after 
26 
sales support, willingness to transfer technology, warranty, perquisites and 
27 
price as determined by the end user. 
28 
b. Bid Security – cash, certified check, cashier’s check, manager’s check, bank 
29 
draft or irrevocable letter of credit, bank guarantee, surety bond callable 
30 
upon demand or foreign government guarantee  in the amount at least equal 
31 


3 
 
to, and not lower than, a percentage of the approved budget for the contract 
1 
to be bid, as advertised by the procuring entity which shall serve as a 
2 
guarantee that, after receipt of Notice of Award, the winning bidder shall 
3 
enter into contract with the Procuring Entity within the stipulated time and 
4 
furnish the required performance security. 
5 
c. Counter Trade – refers to various forms of trade financing methods in which 
6 
an international sale of products, services and technology is conditioned 
7 
upon a sale in the opposite direction involving payment primarily in goods 
8 
or services in lieu of money. 
9 
d. Defense System of Management (DSOM) - is defined as strategy-driven, 
10 
capability-based multi-planning and execution process where capability 
11 
development strategy is linked to resource management.  
12 
e. Facilities/Infrastructure 
– 
includes 
the 
construction, 
improvement, 
13 
rehabilitation, demolition, repair, restoration or maintenance of naval vessels 
14 
or station and aircraft and bases, roads and bridges, railways, airports, 
15 
seaports, communication facilities, civil works components of information 
16 
technology projects, irrigation, flood control and drainage, water supply, 
17 
sanitation, sewerage and solid waste management systems, shore 
18 
protection, energy/power and electrification facilities, national buildings, 
19 
hospital buildings, and other related defense construction projects of 
20 
government. 
21 
f. Head of Procurement Entity (HoPE) – refers to the Head of the agency or 
22 
body, or his duly authorized official in the procurement of defense materiel, 
23 
ordnance, facilities, services and integrated military systems.  
24 
g. In-country Enterprises – shall refer to (1) Filipino-owned enterprises 
25 
engaged in the manufacturing, servicing and operation of materiel in the 
26 
Philippines, or (2) foreign-owned enterprises engaged in the manufacturing, 
27 
servicing and operation of materiel provided however that such foreign-
28 
owned enterprises locate a substantial portion of their production wit in the 
29 
Philippines. 
30 
h. Materiel – refers to all items (including ships, tanks, self-propelled weapons, 
31 
aircraft, etc. and related spares, repair parts, and support equipment but 
32 


4 
 
excluding real property, installations, and utilities) necessary to equip, 
1 
operate, maintain, and support military activities without distinction as to its 
2 
application for administrative or combat purposes. 
3 
i. Military Specifications – refers to the project/product standard based on 
4 
local/international publication recognized and/or made by the AFP; 
5 
j. Ordnance – refer to explosives, chemicals, pyrotechnics, and similar stores, 
6 
such as bombs, guns, ammunitions, flares, or smoke.  
7 
k. Performance Security – cash or manager’s check issued by a universal or 
8 
commercial bank, bank draft or bank guarantee or irrevocable letter of credit 
9 
issued by a universal or commercial bank, or surety bond callable upon 
10 
demand or foreign government guarantee to ensure the faithful 
11 
performance by the winning bidder of its obligation under the contract in 
12 
accordance with the Bidding Documents. 
13 
l. Procurement – refers to the acquisition of defense equipment, materiel, 
14 
ordnance, services, facilities and integrated military systems, inclusive of 
15 
computer applications and e-solutions.  
16 
m. Services – refers to all defense-related services. 
17 
n. Systems – refers to the organization of hardware, software, materiel, 
18 
facilities, personnel, data, and services needed to perform a designated 
19 
function with specified results, such as gathering of specified data, its 
20 
processing, and delivery to user. A combination of two (2) or more 
21 
interrelated equipment’s (set) arranged in a functional package to perform 
22 
an operational function or to satisfy a requirement. 
23 
 
24 
ARTICLE II 
25 
PROCUREMENT, PLANNING, BUDGETING AND EXECUTION 
26 
 
27 
SEC. 6. Defense Procurement, Planning and Budgeting (DPPB).  – The DPPB is 
28 
a collaboratively developed procurement plan with realistic financial programs that 
29 
meet identified capability requirements in a timely manner. Only those priority needs 
30 
and/ or crucial to the efficient discharge of functions shall be included in the DPPB. 
31 


5 
 
(a) 
Preparation of Procurement Plan and Budget (PPB) – The PPB 
1 
must be consistent with the duly approved budget of the Department of 
2 
National Defense and shall bear the approval of the concerned HoPE. 
3 
i. 
Short Term Procurement Plan and Budget (SPPB) – It is a 3-year 
4 
defense procurement program to be funded through the General 
5 
Appropriations Act. 
6 
ii. 
For the AFP, the approving authority shall be the Chief of Staff of the 
7 
Armed Forces of the Philippines (AFP). 
8 
iii. 
 For DND Civilian Bureaus, the approving authority shall be the Head 
9 
Bureaus. 
10 
 
11 
(b) Midterm Procurement Plan and Budget (MPPB) – A 5-year 
12 
defense procurement program to be funded through the General 
13 
Appropriations Act and/ or other sources as enumerated in R.A. 7898, 
14 
otherwise known as “AFP Modernization Act”, as amended. The MPPB shall 
15 
be approved by the Secretary of National Defense. 
16 
i. 
Modes of Payment – In order to have uniform and standard modes 
17 
of payment, the same shall be limited to the following: 
18 
a. For Foreign Suppliers – The modes of payment shall be 
19 
limited to Letters of Credit and Electronic Wire Transfer. 
20 
b. For Local Suppliers – The modes of payment shall be limited 
21 
to Local Letters of Credit or Direct Payment, except when 
22 
counter-trade is resorted to as a mode of transaction. 
23 
 (c) Budgetary Requirement – The Secretary of National Defense 
24 
shall submit to the President, Congress and Secretary of Budget and 
25 
Management the required budgets for defense procurement. 
26 
 (d) Release of Funds by the Department of Budget and 
27 
Management (DBM) – The DBM shall release the amounts to support the 
28 
funding requirements for the procurement of materiel, systems, facilities 
29 
and services of the DND proper and its bureaus in accordance with the 
30 
AFP Modernization Act. 
31 


6 
 
(e) Execution – The DND proper and its bureaus shall execute the 
1 
allocated amount for the procurement of materiel, systems, ordnance, 
2 
facilities and services in accordance with the existing government 
3 
accounting and auditing rules and regulations.    
4 
(f) Review – The Office of the Assistant Secretary for Financial 
5 
Management (OASFM) shall be responsible in the conduct of quarterly 
6 
review and assessment of the financial performance of the DND proper 
7 
and its bureaus for the procurement of the materiel, systems, facilities and 
8 
services based on the guidelines set forth in the Implementing Rules and 
9 
Regulations (IRR). 
10 
ARTICLE III 
11 
MODES OF PROCUREMENT 
12 
 
13 
SEC. 7. Modes of Procurement. – As a general rule, all procurement shall 
14 
be through Competitive Bidding. However, subject to objective evaluation and 
15 
approval of Secretary of National Defense and whenever justified by the 
16 
conditions provided in this Act, the DND may, in order to promote economy and 
17 
efficiency, and in case of national emergency and/or calamity, resort to any of 
18 
the following modes of procurement: 
19 
(a)  Direct Procurement – The procurement of defense equipment maybe 
20 
in any of the following mode: 
21 
   i. Open Competition – refers to a method of procurement which is open 
22 
to participation by any interested party or entity who can meet the 
23 
specified requirements. The procuring entity may enter into a framework 
24 
agreement as necessary. 
25 
ii. Limited/Selective Competition – is a method of procurement that 
26 
limits the participants in the procurement process to known legitimate 
27 
manufacturers/suppliers. This mode is used mainly for security reasons; 
28 
often where the requirements have been deemed classified such that the 
29 
same may not be disclosed freely through an open competition. It involves 
30 


7 
 
direct invitation to at least two (2) manufacturers by the Procuring Entity 
1 
from the list of pre-selected suppliers with known experience and proven 
2 
capability. The pre-selection shall be based upon the capability and 
3 
resources of the manufacturers to perform the contract taking into account 
4 
their experience and past performance on similar contracts, capabilities 
5 
with respect to personnel equipment or manufacturing facilities, and 
6 
financial position. 
7 
iii. Single-sourced – refers to the mode of procurement where the 
8 
Procuring Entity negotiates with one (1) manufacturer/supplier in view of 
9 
national security or emergency or other urgent strategic considerations. 
10 
1.  Government-to-Government – refers to an arrangement involving 
11 
negotiation with a State with which the Philippines has a Treaty or 
12 
International or Executive Agreements. 
13 
2. Emergency Procurement – refers to the type of single-sourced 
14 
procurement of defense materiel and other defense requirements 
15 
necessary to support and sustain defense operations, in any of the 
16 
following situations: 
17 
a. During a state of calamity or emergency; 
18 
b.  Where immediate procurement is necessary either to prevent 
19 
loss of life or damage to property; or, to rehabilitate, rebuild and 
20 
develop an area which has been damaged by an armed conflict. 
21 
iv. Anticipated Emergency Procurement – refers to the type of single-sourced 
22 
procurement of defense materiel necessary in anticipation of a disaster that 
23 
poses in imminent danger to life or damage to property. 
24 
v. Direct Purchase – refers to the type of single-sourced method/mode that 
25 
allows procurement directly from pre-selected supplier, manufacturer, and/or 
26 
contractor. It may be resorted to under any of the following circumstances: 
27 


8 
 
1. For the procurement of readily available and off-the-shelf goods not 
1 
available to the Procurement Service of the Department of Budget 
2 
and Management, subject to the threshold prescribed in the IRR. 
3 
2. In order to obtain and maintain the desired standardization and 
4 
interoperability of defense materiel based on the defense inventory 
5 
of the DND and/or is Bureaus. 
6 
3. Procurement of Goods of proprietary nature which can be obtained 
7 
only from the proprietary source, i.e. when patent, trade secrets, 
8 
and copyrights prohibit others from manufacturing the same item. 
9 
 
10 
 vi. Assumption of Contracts – Assumption of contract by a specific 
11 
supplier/manufacturer whenever a contract under any of the methods of 
12 
procurement of this Act is terminated or rescinded for causes provided for in 
13 
the contract and existing laws. In the case of Open and Limited Competition, 
14 
all the ranked offerors shall be considered prior to sending of REIs. 
15 
In all cases, a bid security shall be required to ensure that the successful 
16 
bidder will not default on its offer and enter into contract with the procuring 
17 
entity within a specific period of time as indicated in the instructions to bidders. 
18 
 
19 
(b)  Special Defense Materiel Procurement – Upon approval by the President of 
20 
the Philippines, and when the procurement for use by the AFP involves major defense 
21 
equipment or materiel and/or defense related consultancy services, when the expertise 
22 
or capability required is not available locally, and the Secretary of National Defense 
23 
has determined that the interests of the country shall be protected by negotiating 
24 
directly with an agency or instrumentality of another country with which the Philippines 
25 
has entered into a defense cooperation agreement or otherwise maintain diplomatic 
26 
relations, the AFP may be allowed to resort to negotiated procurement: Provided, That 
27 
the performance by the supplier of its obligations under the procurement contract shall 
28 
be covered by a performance security. 
29 
Prior to the signing of the contract, the winning bidder shall, as a means of 
30 
guarantee for the faithful performance and compliance to the obligations under the 
31 


9 
 
contract prepared in accordance with the bidding documents, be required to post a 
1 
performance security in such form and amount as specified in the bidding document.   
2 
(c) Donation – refers to an act of liberality whereby private companies, 
3 
institutions, local government units (LGUs), government agencies and other foreign 
4 
governments or institutions disposes gratuitously of assorted items/equipment to the 
5 
DND and its attached bureaus: Provided, That, acceptance of foreign donations shall 
6 
be subject to the approval of the President, upon the recommendation of the 
7 
Secretaries of Defense and Foreign Affairs. 
8 
(d) Counter Trade and Promotion of National Defense Industry – as far as 
9 
practicable and applicable, counter trade for defense-related procurement shall be 
10 
significant, meaningful and must benefit the national defense industry. The 
11 
Department of Trade and Industry (DTI) is mandated to identify and develop, in 
12 
consultation with DND and other relevant offices, a list of goods/services or industries 
13 
which may be subject of a countertrade. 
14 
 
15 
SEC. 8. Procurement for the Development of Self-Reliant Defense Posture 
16 
(SRDP). –  The DND shall adopt a continuous and aggressive research and 
17 
development program for purposes of utilizing new technology or otherwise upgrading 
18 
existing inventory of equipment and weapons systems. The necessary funding for this 
19 
program shall be sourced from the appropriations provided for under the AFP 
20 
Modernization Program.  
21 
 
22 
SEC. 9. Capability, Materiel  and Technology Development. – The AFP 
23 
modernization program entails the development and employment of certain 
24 
capabilities that can address the assessed threats:   Provided, That the procurement 
25 
of air force, navy and army equipment and materiel of such types and quantities shall 
26 
be made in accordance with the need to develop AFP capabilities pursuant to its 
27 
modernization objectives: Provided, Further, That procurement of new equipment and 
28 
weapons systems shall be synchronized with the phase-out of uneconomical and 
29 
obsolete major equipment and weapons systems in the AFP inventory: Provided, even 
30 


10 
 
Further, That, with the exception of locally- manufactured major equipment,  weapons 
1 
system  and  advanced or frontier technologies which are of proven quality and 
2 
reliability, no major equipment,  weapons system and advanced or frontier 
3 
technologies  shall be purchased if the same are not being used by the armed forces 
4 
in the country of origin or used by armed forces of at least two countries: Provided, 
5 
Furthermore, That only offers from suppliers who are themselves the manufacturers 
6 
shall be entertained:  Provided, Finally, That no contract shall be entered into unless 
7 
it provides for, in clear and unambiguous terms, after-sales services and the availability 
8 
of spare parts. 
9 
 
10 
SEC. 10. Exemption from Single Largest Completed Contract. – In-country 
11 
enterprises participating in the acquisition and production of materiel by the DND and 
12 
its bureaus shall be exempt from the Single Largest Completed Contract (SLCC) 
13 
requirement upon effectivity of this Act. For this purpose, there should be accreditation 
14 
from the Office of the Undersecretary for Procurement, Defense Technology Research 
15 
and Industry Development. 
16 
 
17 
SEC. 11. Terms and Conditions for the Use of Procurement. – The specific 
18 
terms and conditions including the limitations and restrictions, for the application of 
19 
each of the procurement methods in this article shall be specified in the IRR. 
20 
 
21 
ARTICLE IV 
22 
SECURITY AND CONFIDENTIALITY 
23 
 
24 
SEC. 12. Security and Confidentiality. – Whenever necessary, an offeror or 
25 
bidder may be required to sign a Non-Disclosure Agreement. 
26 
            In procurement involving and affecting national security, the disclosure of 
27 
specific components of the procurement documents, such as technical specifications, 
28 
requirements and components, shall be dependent on the HoPE, having due regard 
29 


11 
 
to the nature, classification, sensitivity and confidentiality of the relevant documents 
1 
vis-à-vis the purpose and reason for the request for bid documents. 
2 
 
3 
ARTICLE V 
4 
ORGANIZATIONAL STRUCTURE 
5 
 
6 
SEC.13. Head of Procurement Entity (HoPE). – The Secretary of National 
7 
Defense and the Bureau Heads shall be the Head of the Procurement Entity for the 
8 
DND and their respective bureaus. 
9 
The HoPEs shall be responsible for establishing and maintaining a transparent, 
10 
effective, and efficient procurement process in their respective agencies.  
11 
 
12 
SEC. 14. Creation of Office of the Undersecretary for Defense Procurement, 
13 
Technology Research and Industry Development. – There shall be created in the 
14 
Department of National Defense (DND)  an Office of the Undersecretary for Defense 
15 
Procurement, Technology Research and Industry Development. 
16 
The Office shall be charged with the responsibility of advising and assisting the 
17 
Secretary of National Defense in formulating DND programs, policies, and directives 
18 
on matters of defense procurement,  defense technology research and industry 
19 
development. 
20 
 
21 
SEC. 15. Office of the Defense Procurement and Sustainment (ODPS). – The 
22 
ODPS shall formulate and implement an procurement and sustainment strategy, plan 
23 
and manage the Department’s procurement activities and recruit, develop, and retain 
24 
a diverse procurement and sustainment workforce. It shall also enable the swift and 
25 
cost-efficient delivery and sustainment of secure and resilient capabilities of the DND. 
26 
The ODPS shall have divisions to include: (1) a Human Capital Initiatives Division 
27 
which shall handle procurement workforce development; (2) a Procurement Planning 
28 
and Management Division which shall handle procurement planning and management 
29 
services; (3) a Defense Procurement Secretariat Division which shall provide secretariat 
30 
services to Bids and Awards Committee (BAC); and (4) a contract management division 
31 
which shall provide post contract services. 
32 


12 
 
SEC. 16. Project Management Team. – There shall be Project Management 
1 
Teams (PMTs) created to support the ODPS which shall be composed of operations, 
2 
finance, legal and technical experts to assist in the procurement process.  
3 
 
4 
SEC. 17. Procurement Workforce Capacity-Building Program. – The DND and 
5 
AFP shall implement a procurement workforce capacity-building program to enhance 
6 
staff competency and professional standards for knowledge and integrity.  
7 
The AFP shall include defense procurement as an occupational specialty and be 
8 
made a part of the AFP personnel career development regulations, including its officer 
9 
promotion system.  
10 
ARTICLE VI 
11 
PROCUREMENT PROCEDURES 
12 
 
13 
SEC. 18. Procurement Requirements. – The procurement requirements shall 
14 
be determined in accordance with the DSOM process prescribed by the Secretary of 
15 
National Defense.  
16 
 
17 
(a) Determination of the Mode of Procurement – The BAC shall recommend 
18 
the mode of acquisition for approval of the HoPE. 
19 
 
20 
SEC. 19. Contract Signing. – The HoPE shall be signing the authority to enter 
21 
into a contract with the supplier with the Best Rated Offer. 
22 
 
23 
SEC. 20. Contract Implementation. – The rules and guidelines for the 
24 
implementation of contracts which includes but not limited to the delivery, acceptance 
25 
test, extension of contract, variation of contract and payment shall be prescribed in 
26 
the IRR. The rules and guidelines shall include standard general and special conditions 
27 
for contracts. 
28 
 
29 
SEC. 21. Contract Termination. – The rules and guidelines for the termination 
30 
of contracts awarded pursuant to the provisions of this Act shall be prescribed in the 
31 


13 
 
IRR. The rules and guidelines shall include standard general and special conditions for 
1 
contracts. 
2 
 
3 
SEC. 22. Warranties. – In order to ensure the integrity of the materiel acquired 
4 
and the supplier’s obligation to repair or replace the same when warranted, a warranty 
5 
security shall be required from the supplier for a period as specified in the contract. 
6 
 
7 
SEC. 23. Review and Assessment. – The HoPE may create a Procurement 
8 
Review Committee to assess the procurement activities of the Department and its 
9 
bureaus on a quarterly basis in accordance with the guidelines and procedures 
10 
provided for in the IRR. 
11 
 
12 
SEC. 24. Suppletory Application. – Republic Act No. 9184, otherwise known as 
13 
the “Government Procurement Reform Act” shall apply suppletorily to the provisions 
14 
of this Act. 
15 
ARTICLE VII 
16 
SANCTIONS 
17 
 
18 
SEC. 25. Liquidated damages. – All contracts executed in accordance with this 
19 
Act and its IRR shall contain a provision on liquidated damages which shall be payable 
20 
by the contractor or supplier in case of breach as specified in the contract. 
21 
 
22 
SEC. 26. Blacklisting. – Corporations, companies, board members, single 
23 
proprietorships, their principals, and duly authorized representatives or agents shall 
24 
be blacklisted in accordance with the grounds and procedures as provided for in the 
25 
IRR. The period of Blacklisting shall be as follows:  
26 
 
27 
a.   1st Blacklisting – one (1) year.  
28 
b.   2nd Blacklisting – two (2) years. 
29 
c.  3rd Blacklisting - perpetual disqualification from participating in the 
30 
procurement process of the DND.  
31 


14 
 
The non-performance of an obligation under the warranty shall be a ground for 
1 
blacklisting. 
2 
ARTICLE VIII 
3 
PENAL CLAUSE 
4 
 
5 
SEC. 27. Offenses and Penalties. – 
6 
 (a) Without prejudice to the provisions of R.A. 3019, otherwise known as the 
7 
“Anti-Graft and Corrupt Practices Act” and other penal laws, public officers who commit 
8 
any of the following acts shall suffer the penalty of imprisonment of not less than six 
9 
(6) years and one (1) day, but not more than fifteen (15) years: 
10 
i. Opening any sealed bid including but not limited to Bids that may have been 
11 
submitted through the electronic system and any and all documents required to be 
12 
sealed or divulging their contents, prior to the appointed time for the public opening 
13 
of Bids or other documents. 
14 
ii. Delaying, without justifiable cause, the screening for eligibility, opening of 
15 
bids, evaluation and post evaluation of bids, and awarding of contracts beyond the 
16 
prescribed periods of action provided for in this IRR. 
17 
iii. Unduly influencing or exerting undue pressure on any member of the BAC 
18 
or any officer or employee of the Procuring Entity to take a particular action which 
19 
favors, or tends to favor a particular bidder. 
20 
iv. Splitting of contracts which exceed procedural purchase limits to avoid 
21 
competitive bidding or to circumvent the limits of approving or procurement authority. 
22 
v. Abuse by the HoPE of his power to reject any and all bids as mentioned under 
23 
Section 41 of the Act and this IRR, with manifest preference to any bidder who is 
24 
closely related to him. 
25 
When any of the foregoing acts is done in collusion with private individuals, the 
26 
private individuals shall likewise be liable for the offense. 
27 
In addition, the public officer involved shall also suffer the penalty of temporary 
28 
disqualification from public office, while the private individual shall be permanently 
29 
disqualified from transacting business with the Government. 
30 
(b) Private individuals who commit any of the following acts, and any public 
31 
officer who conspires with them, shall upon conviction, suffer the penalty of 
32 


15 
 
imprisonment of not less than six (6) years and one (1) day but not more than fifteen 
1 
(15) years: 
2 
i. When two or more bidders agree and submit different bids as bona fide 
3 
bidders, all the while knowing that the bid(s) of one or more of them was so much 
4 
higher than the other that the latter could not be honestly accepted and that the 
5 
contract will surely be awarded to the pre-arranged lowest bid. 
6 
ii. When a bidder maliciously submits different bids through two or more 
7 
persons, corporations, partnerships or any other business entity in which he has an 
8 
interest, to create the appearance of competition that does not in fact exist so as to 
9 
be adjudged as the winning bidder. 
10 
iii. When two or more bidders enter into an agreement which calls upon one or 
11 
more of them to refrain from bidding for procurement contracts, or which requires 
12 
one or more of them to withdraw Bids already submitted, in order to secure an undue 
13 
advantage to any one of them. 
14 
iv. When a bidder, by himself or in connivance with others, employs schemes 
15 
which tend to restrain the natural rivalry of the parties or operates to stifle or suppress 
16 
competition and thus produce a result disadvantageous to the public. 
17 
In addition, the public officer persons involved shall also suffer the penalty of 
18 
temporary or perpetual disqualification from public office and the private individual 
19 
shall be permanently disqualified from transacting business with the Government. 
20 
 
21 
(c) Private individuals who commit any of the following acts, and any public 
22 
officer conspiring with them, shall upon conviction, suffer the penalty of imprisonment 
23 
of not less than six (6) years and one (1) day but not more than fifteen (15) years: 
24 
i. Submitting eligibility requirements of whatever kind and nature that contain 
25 
false information or falsified documents calculated to influence the outcome of the 
26 
eligibility screening process or conceal such information in the eligibility requirements 
27 
when the information will lead to a declaration of ineligibility from participating in 
28 
competitive bidding. 
29 
ii. Submitting Bidding Documents of whatever kind and nature that contain false 
30 
information or falsified documents or conceal such information in the Bidding 
31 
Documents, in order to influence the outcome of the competitive bidding. 
32 


16 
 
iii. Participating in a competitive bidding using the name of another or allowing 
1 
another to use one’s name for the purpose of participating in a competitive bidding. 
2 
iv. Withdrawing a bid, after it shall have qualified as the Lowest Calculated 
3 
Bid/Highest Rated Bid, or refusing to accept an award, without just cause or for the 
4 
purpose of forcing the Procuring Entity to award the contract to another bidder. This 
5 
shall include the non-submission within the prescribed time, or delaying the 
6 
submission of requirements such as, but not limited to, performance security, 
7 
preparatory to the final award of the contract. 
8 
 
9 
(d) It is understood that the above penalties and offenses shall cover all types 
10 
of procurement whether done manually or electronically. 
11 
 
12 
(e) When the bidder is a juridical entity, criminal liability and the accessory 
13 
penalties shall be imposed on its directors, officers or employees who actually commit 
14 
any of the foregoing acts. If a person previously held liable or found guilty under the 
15 
provisions of the Act and this IRR has a controlling interest in a prospective bidder- 
16 
entity, the said bidder-entity shall be disqualified to participate in any procurement 
17 
activity being conducted by the Government. 
18 
 
19 
SEC. 28. Jurisdiction. – Jurisdiction over the offenses defined under this Rule 
20 
shall belong to the appropriate courts, according to laws existing at the time of the 
21 
commission of the offenses.  
22 
ARTICLE IX 
23 
CIVIL LIABILITY 
24 
 
25 
SEC. 29. Civil Liability in Case of Conviction. – Without prejudice to 
26 
administrative sanctions that may be imposed in proper cases, a conviction under the 
27 
Act and this IRR or R.A. 3019, otherwise known as the “Anti-Graft and Corrupt 
28 
Practices Act”, shall carry with it civil liability, which may either consist of restitution 
29 
for the damage done or the forfeiture in favor of the government of any unwarranted 
30 
benefit derived from the act or acts in question, or both, at the discretion of the courts. 
31 
 
32 


17 
 
SEC. 30. Liquidated Damages. – All contracts executed in accordance with the 
1 
Act and this IRR shall contain a provision on liquidated damages which shall be payable 
2 
by the contractor in case of breach thereof. For the procurement of Goods, 
3 
Infrastructure Projects and Consulting Services, the amount of the liquidated damages 
4 
shall be at least equal to one-tenth of one percent (0.001) of the cost of the 
5 
unperformed portion for every day of delay. Once the cumulative amount of liquidated 
6 
damages reaches ten percent (10%) of the amount of the contract, the Procuring 
7 
Entity may rescind or terminate the contract, without prejudice to other courses of 
8 
action and remedies available under the circumstances 
9 
 
10 
ARTICLE X 
11 
ADMINISTRATIVE SANCTIONS 
12 
 
13 
SEC. 31. Imposition of Administrative Penalties. – 
14 
(a) The HoPE, subject to the authority delegated to the BAC, if any, shall impose 
15 
on bidders or prospective bidders, the administrative penalty of suspension for one 
16 
(1) year for the first offense, and suspension of two (2) years for the second offense 
17 
from participating in the competitive bidding process, as well as disqualification from 
18 
further participating in the competitive bidding being undertaken by the Procuring 
19 
Entity concerned, where applicable, for the following violations: 
20 
i. Submission of eligibility requirements containing false information or falsified 
21 
documents. 
22 
ii. Submission of Bids that contain false information or falsified documents, or 
23 
the concealment of such information in the Bids in order to influence the outcome of 
24 
eligibility screening, or any other stage of the competitive bidding. 
25 
iii. Allowing the use of one’s name, or using the name of another for purposes 
26 
of competitive bidding. 
27 
iv. Withdrawal of a bid, or refusal to accept an award, or enter into contract 
28 
with the Government without justifiable cause, after he had been adjudged as having 
29 
submitted the Lowest Calculated Responsive Bid or Highest Rated Responsive Bid. 
30 
v. Refusal or failure to post the required performance security within the 
31 
prescribed time. 
32 


18 
 
vi. Termination of the contract due to the default of the bidder. 
1 
vii. Refusal to clarify or validate in writing its bid during post-qualification within 
2 
a period of seven (7) calendar days from receipt of the request for clarification. 
3 
viii. Any documented attempt by a bidder to unduly influence the outcome of 
4 
the bidding in his favor. 
5 
ix. All other acts that tend to defeat the purpose of the competitive bidding, 
6 
such as habitually withdrawing from bidding, submitting late Bids or patently 
7 
insufficient bid, for at least three (3) times within a year, except for valid reasons. 
8 
 
9 
(b) In addition to the penalty of suspension, the bid security or the performance 
10 
security posted by the concerned bidder or prospective bidder shall also be forfeited. 
11 
 
12 
(c)  The HoPE may delegate to the BAC the authority to impose the 
13 
aforementioned administrative penalties. 
14 
 
15 
SEC. 32. Preventive Suspension. – The HoPE may preventively suspend any 
16 
member of the Technical Working Group or the Secretariat, or the BAC, if there are 
17 
strong reasons or prima facie evidence showing that the officials or employees 
18 
concerned are guilty of the charges filed against them under Rules XXI and XXII of 
19 
this IRR, or for dishonesty as defined by the Civil Service Laws. For uniformed 
20 
personnel of the AFP, the substantive and procedural due process under its justice 
21 
system shall be applied. In all cases, due process as mandated by the Constitution 
22 
and Civil Service laws, rules and regulations, shall be strictly observed. 
23 
 
24 
SEC. 33. Lifting of Suspension and Removal of Administrative Disabilities. – 
25 
Lifting of preventive suspension pending administrative investigation, as well as 
26 
removal of administrative penalties and disabilities shall be in accordance with the 
27 
provisions of Sections 52 and 53, Chapter 6, Subtitle A (Civil Service Commission), 
28 
Title I, Book V of E.O. 292, otherwise known as the Administrative Code of 1987. 
29 
 
30 
ARTICLE XI 
31 
SETTLEMENT OF DISPUTES 
32 


19 
 
 
1 
SEC. 34. Protest on Decisions of the ODPS. – Decisions of the ODPS in all 
2 
stages of procurement may be protested to the HoPE and shall be in writing. Decisions 
3 
of the ODPS may be protested by filing a verified position paper and paying a non-
4 
refundable protest fee. The amount of the protest fee and the periods during which 
5 
the protests may be filed and resolved shall be specified in the IRR. 
6 
 
7 
SEC. 35. Resolution of Protests. – The protests shall be resolved strictly on the 
8 
basis of records of the BAC. The decisions of the HoPE shall be final. 
9 
 
10 
SEC. 36. Non-interruption of the Procurement Process. – In no case shall any 
11 
protest taken from any decision treated in this article stay or delay the acquisition 
12 
process. 
13 
 
14 
SEC. 37. Resort to Regular Courts; Certiorari. – Court action may be resorted 
15 
to only after the protests contemplated in this Article shall have been completed.  
16 
Cases that are filed in violation of the process specified in this Act shall be dismissed 
17 
for lack of jurisdiction. The Regional Trial Court (RTC) shall have jurisdiction over final 
18 
decisions of the HoPE. Court actions shall be governed by Rule 65 of the 1997 Rules 
19 
of Civil Procedure or its amendment as the case maybe and as applicable. 
20 
 
21 
SEC. 38. Arbitration. – Any and all disputes arising from the implementation of 
22 
a contract covered by this Act shall be submitted to arbitration in the Philippines 
23 
according to the provision of Republic Act No. 876, otherwise known as the “Arbitration 
24 
Law”: Provided, That, disputes that are within the competence of the Construction 
25 
Industry Arbitration Commission (CIAC) to resolve shall be referred thereto. The 
26 
process or arbitration shall be incorporated as a provision in the contract that will be 
27 
executed pursuant to the provisions of this Act: Provided, Further That, by mutual 
28 
agreement, the parties may agree in writing to resort to alternative modes of dispute 
29 
resolution. 
30 
 
31 


20 
 
SEC. 39. Appeals. – The arbitral award and any decision rendered in 
1 
accordance with the foregoing Section shall be appealable by way of a Petition for 
2 
Review to the Court of Appeals (CA). The petition shall raise pure questions of law 
3 
and shall be governed by the Rules of Court. 
4 
 
5 
ARTICLE XII 
6 
LEGAL ASSISTANCE 
7 
 
8 
 
SEC. 40. Legal Assistance. – The legal office of the DND or its equivalent for 
9 
DND bureaus is authorized to represent in all stages of the case for its members of or 
10 
any or all persons involved in the procurement process immediately upon receipt of 
11 
Court Notice that a civil, criminal, or Ombudsman case, suit or proceeding is filed 
12 
against them. 
13 
 
14 
 
SEC. 41. Private Legal Assistance. – In case of inability of the legal office of 
15 
the DND or its equivalent for DND bureaus, the Procuring Entity shall provide for the 
16 
lawyer’s fee subject to guidelines as provided for under the IRR. 
17 
 
18 
ARTICLE XIII 
19 
MISCELLANEOUS PROVISIONS 
20 
 
21 
 
SEC. 42. Multi-Year Contracts and other Contractual Arrangements. – For the 
22 
purpose of procurement under this Act, notwithstanding existing laws to the contrary, 
23 
the DND and its bureaus shall be authorized to enter into multi-year contracts and 
24 
other multi-year contractual arrangements. The Congress shall, upon issuance of 
25 
multi-year obligation authority by the DBM, make the corresponding appropriation for 
26 
the ensuing fiscal years. 
27 
 
28 
 
SEC. 43. Issuance of Import Licenses and other Licenses. - All procurement 
29 
under this Act shall be exempt from import and other licenses imposed by other 
30 
agencies of the government. In lieu thereof, the Secretary of National Defense shall 
31 


21 
 
issue an Authority to Import and other certification that the goods, services, systems 
1 
and equipment being imported are acquired pursuant to this Act. 
2 
 
3 
 
SEC. 44. Exemption from Custom Duties and Other Taxes for Donated Goods. 
4 
– The donation of defense equipment or items to the DND, which are directly and 
5 
exclusively used for its projects, undertakings, activities, services and programs under 
6 
this Act, shall be exempted from custom duties and other taxes. 
7 
 
8 
 
SEC. 45. Procurement of Units Deployed Overseas. – Units deployed overseas 
9 
such as the DAFA, U.N. Peace-Keepers and the likes are authorized to acquire certain 
10 
reasonable requirements in connection with the discharge of their functions within the 
11 
country where they are deployed, subject to the guidelines provided for in the IRR.  
12 
 
13 
 
SEC. 46. Exemption from Value-Added Tax, Customs Duties and other Taxes. 
14 
– The sale and/or importation of weapons, equipment and ammunitions to and by the 
15 
AFP, which are directly and exclusively used for its projects, undertakings and activities 
16 
and programs under the Revised AFP Modernization Act, shall be exempt from the 
17 
value added tax, customs duties and other taxes. 
18 
 
ARTICLE XIV 
19 
FINAL PROVISIONS 
20 
 
21 
 
Sec. 47. Implementing Rules and Regulations; Supplementary Regulations. – 
22 
Within sixty (60) days from the promulgation of this Act, the necessary rules and 
23 
regulations for the proper implementation of its provisions shall be formulated by the 
24 
DND. The said rules and regulations shall be approved by the President of the 
25 
Philippines. The President thru the Secretary of National Defense is authorized to 
26 
implement this Act, formulate and amend, whenever necessary, the implementing 
27 
rules and regulations and standard forms necessary for the implementation of this Act, 
28 
and issue supplemental regulations to hasten and facilitate the implementation of this 
29 
Act. 
30 
 
31 


22 
 
 
Sec. 48. Rule of Interpretation. – Rights and Obligations existing on the date 
1 
of effectivity of this Act and arising out of contract shall be governed by the original 
2 
terms and conditions of said contract or law in force at that time such rights were 
3 
vested. 
4 
 
5 
 
Sec. 49. Repealing Clause. – All provisions of existing laws, orders and 
6 
regulations contrary to or inconsistent with this Act are hereby repealed or modified 
7 
accordingly. 
8 
 
9 
 
Sec. 50. Separability Clause. – If for any reason any part or provision of this 
10 
Act shall be deemed unconstitutional or invalid, the other sections or provisions hereof 
11 
shall not be affected and shall remain in force and effect. 
12 
 
13 
 
Sec. 51. Effectivity. – This Act shall take effect fifteen (15) days following its 
14 
publication in the Official Gazette or in two (2) newspapers of general circulation. 
15 
 
Approved,