RESOLUTION NO.

12 -2019

APPROVING THE AMENDMENT OF SECTION 42.6 OF THE 2016 REVISED

IMPLEMENTING RULES AND REGULATIONS (IRR) OF REPUBLIC ACT (RA) NO. 9184,
THE GUIDELINES ON PROCUREMENTS INVOLVING FOREIGN-DENOMINATED BIDS,
CONTRACT PRICES AND PAYMENT USING LETTERS OF CREDIT (LC) AND CLAUSE
10.5 OF THE SPECIAL CONDITIONS OF CONTRACT (SCC) OF THE FIFTH (5TH) EDITION
OF THE PHILIPPINE BIDDING DOCUMENTS (PBD) FOR THE PROCUREMENT OF
GOODS

WHEREAS, Republic Act (RA) No. 9184, otherwise known as the “Government
Procurement Reform Act” and the 2016 revised IRR took effect on 26 January 2003 and 28
October 2016, respectively;

WHEREAS, Section 63.1 (b) of the 2016 revised IRR of RA No. 9184 mandates the
Government Procurement Policy Board (GPPB) to formulate and amend public procurement
policies, rules and regulations, and amend, the IRR of RA No. 9184, whenever necessary;

WHEREAS, the LC is a document issued by a bank to guarantee, on behalf of the

procuring entity (PE) or buyer timely payment to the seller or exporter against the receipt of
complying stipulated documents;

WHEREAS, Section 42.6 of the 2016 revised IRR of RA No. 9184 allows PEs to use
LCs as payment in favor of local or foreign suppliers;

WHEREAS, the Technical Support Office (TSO) of the GPPB has received various
queries as regards the practice of PEs using LCs as a form of payment to local suppliers;

WHEREAS, the Department of Budget and Management (DBM) has likewise forwarded
issues and concerns over the said practice in view of the Budget Reform Program of the
National Government that aims to strengthen and modernize cash management, and to
improve monitoring and management of government funds maintained outside of the Treasury
Single Account and the Modified Disbursement Scheme, among others;

WHEREAS, on 27 March 2019, the GPPB-TSO met with the DBM and Bureau of the
Treasury (BTr) officials to discuss the proper use of LCs. During the said meeting, the BTr
presented a draft circular limiting payment through issuance of LCs to foreign suppliers;

WHEREAS, the discussions made during the meeting prompted the GPPB-TSO to
recommend limiting the payment for the procurement of goods through issuance of LCs to
foreign suppliers;

WHEREAS, the GPPB-TSO, accordingly, proposed the amendment of Section 42.6 of

the 2016 IRR of RA No. 9184; the Guidelines on Procurements Involving Foreign-
Denominated Bids, Contract Prices and Payment Using Letter of Credit; and Clause 10.5 of
the SCC of the PBDs for Goods;

WHEREAS, during the third (3rd) Regular Meeting of the Inter-Agency Technical Working
Group (IATWG) held on 11 April 2019, the GPPB-TSO presented its recommendation and
after due consideration, the IATWG resolved to recommend to the GPPB the proposed
amendments, and further limit the use of LC to those issued by government servicing banks;

GPPB Resolution No. 12-2019, dated 22 April 2019 page 1 of 5

 WHEREAS, during the 3rd Regular Meeting of the GPPB on 22 April 2019, after careful
review and due deliberations, the Board approved the recommendation of the IATWG;

NOW, THEREFORE, for and in view of all the foregoing, WE, the Members of the
GOVERNMENT PROCUREMENT POLICY BOARD, by virtue of the powers vested on US by law and
other executive issuances, hereby RESOLVE to confirm, adopt, and approve, as WE hereby
confirm, adopt, and approve the amendment of Section 42.6 of the 2016 revised IRR of RA
No. 9184, the Guidelines on Procurements Involving Foreign-Denominated Bids, Contract
Prices and Payment Using Letter of Credit and Clause 10.5 of the SCC of the PBDs for the
Procurement of Goods, a copy of which is attached as Annex “A”, and made an integral part
hereof.

This Resolution shall take effect fifteen (15) days following its publication.

APPROVED this 22nd day of April 2019 at Manila, Philippines.

GPPB Resolution No.12-2019, dated 22 April 2019 Page 2 of 5

 SGD
____________________________________ ____________________________________
DEPARTMENT OF BUDGET AND NATIONAL ECONOMIC AND
MANAGEMENT DEVELOPMENT AUTHORITY

SGD
____________________________________ ____________________________________
DEPARTMENT OF EDUCATION DEPARTMENT OF ENERGY

SGD
____________________________________ ____________________________________
DEPARTMENT OF FINANCE DEPARTMENT OF HEALTH

SGD SGD
____________________________________ ____________________________________
DEPARTMENT OF THE INTERIOR AND DEPARTMENT OF NATIONAL
LOCAL GOVERNMENT DEFENSE

SGD
____________________________________ ____________________________________
DEPARTMENT OF PUBLIC WORKS AND DEPARTMENT OF SCIENCE AND
HIGHWAYS TECHNOLOGY

SGD
____________________________________ ____________________________________
DEPARTMENT OF TRADE AND INDUSTRY DEPARTMENT OF TRANSPORTATION

SGD
____________________________________ ____________________________________
PRIVATE SECTOR REPRESENTATIVE DEPARTMENT OF INFORMATION AND
COMMUNICATIONS TECHNOLOGY

GPPB Resolution No.12-2019, dated 22 April 2019 Page 3 of 5

 ANNEX “A”
_______________________________________________________________________________________________
________

2016 revised Implementing Rules and Regulation (IRR)

of Republic Act (RA) No. 9184

Original Amendment

42.6. Procuring Entities may cause the 42.6. Procuring Entities may cause the
issuance of the letter of credit in favor of a issuance of the letter of credit in favor of A
local or foreign suppliers: Provided , That no LOCAL OR foreign suppliers: Provided, That
payment on the letter of credit shall be made the letter of credit shall be issued by a
Government Servicing Bank: Provided,
until delivery and acceptance of the goods
further, That the cost for the opening of letter
as certified to by the Procuring Entity in of credit shall be for the account of the local
accordance with the delivery schedule or foreign supplier and must be stated in the
provided for in the contract have been Bidding Documents: Provided, finally, That
concluded: Provided, further , That the cost no payment SHALL BE CHARGED
for the opening of letter of credit shall be for AGAINST ON the letter of credit shall be
the account of the local or foreign supplier made until ONLY AFTER delivery and
acceptance of the goods as certified to by the
and must be stated in the Bidding
Procuring Entity in accordance with the
Documents. delivery schedule provided for in the contract
have been concluded.

Guidelines on Procurements Involving Foreign-Denominated Bids,

Contract Prices and Payment Using Letters of Credit
or Appendix 16 of the IRR of RA No. 9184

Original Amendment

7.0 PAYMENTS USING LETTERS OF 7.0 PAYMENTS USING LETTERS OF

CREDIT CREDIT

7.1. For procurement projects fully utilizing 7.1. For procurement projects fully utilizing
domestic funds, where the goods will be domestic OR FOREIGN funds, where the
supplied by a local or foreign supplier, the goods will be supplied by a LOCAL OR
procuring entity, may open LCs or similar foreign supplier, the procuring entity may
instruments in favor of such local or foreign open LCs or similar instruments in favor of
supplier. such local or foreign supplier FROM A
GOVERNMENT SERVICING BANK.
PAYMENT/S SHALL BE MADE ON THE
LETTER OF CREDIT ONLY AFTER
DELIVERY AND ACCEPTANCE OF THE

GPPB Resolution No.12-2019, dated 22 April 2019 Page 4 of 5

 GOODS AS CERTIFIED BY THE
PROCURING ENTITY.

5th Edition of the Philippine Bidding Documents

for the Procurement of Goods

Original Amendment

Special Conditions of Contract Special Conditions of Contract

GCC GCC
Clause Clause

10.5 State “Payment using LC is 10.5 State “Payment using LC is

not allowed.” not allowed.”

or or

If payment using LC is If payment using LC is

allowed, state “The amount of allowed, state “The amount of
provisional sum is ________ provisional sum is ________
Pesos (PhP ______).” [Note: Pesos (PhP ______).” [Note:
The provisional sum shall not The provisional sum SHALL
exceed 10% of the ABC, and NOT EXCEED 10% OF THE
shall form part of the ABC]. ABC, AND shall form part of
the ABC. PAYMENT USING
LC MAY ONLY BE
ALLOWED FOR FOREIGN
SUPPLIERS.]

GPPB Resolution No.12-2019, dated 22 April 2019 Page 5 of 5

 Unit 2506 Raffles Corporate Center,
F. Ortigas Jr. Road, Ortigas Center,
Pasig City, Philippines 1605

CIRCULAR 05-2019
22 April 2019

TO : Heads of Departments, Bureaus, Offices and Agencies of the

National Government including State Universities and Colleges,
Government Owned and/or Controlled Corporations,
Government Financial Institutions and Local Government Units

SUBJECT : Payment through Issuance of Letters of Credit from Government

Servicing Banks (GSBs) in favor of Foreign Suppliers

1.0 PURPOSE

This Circular is issued to inform all procuring entities (PEs) that the use of Letters
of Credit to guarantee payment of government procurement contracts shall only
be made in favor of foreign suppliers and covering those issued by Government
Servicing Banks pursuant to Government Procurement Policy Board Resolution
No. 12-2019.

2.0 SCOPE
All Departments, Bureaus, Offices and Agencies of the National Government
including State Universities and Colleges, Government-Owned and/or Controlled
Corporations, Government Financial Institutions and Local Government Units.

3.0 DEFINITION OF TERMS

3.1 Letter of Credit – a document issued by a bank to guarantee, on behalf

of the procuring entity or buyer, timely payment to the seller or exporter
against the receipt of complying stipulated documents.

3.2 Government Servicing Banks – authorized government servicing

banks, such as the Land Bank of the Philippines, Development Bank of
the Philippines, Philippine Veterans Bank, to which Department of
Budget and Management (DBM) issues the Notices of Cash Allocation
for crediting to the Modified Disbursement System sub-accounts of
NGAs.1

4.0 GENERAL CONSIDERATIONS IN USING LETTERS OF CREDIT

4.1 PEs may only use Letters of Credit issued by a GSB to guarantee the
timely payment for the goods delivered by a foreign supplier in
accordance with GPPB Resolution No. 12-2019.2

1 Section 5.8 of DBM Circular Letter No. 23-2016, dated 23 December 2013.
2 Dated 22 April 2019.

__________________________________________________________________________________________________
(02) 900-6741 to 44  gppb@gppb.gov.ph  www.gppb.gov.ph
 4.2 In accordance with Section 42.6 of the 2016 revised Implementing Rules
and Regulations, Clause 10.5 of the General and Special Conditions of
Contract of the 5th Edition of the Philippine Bidding Documents for the
Procurement of Goods and GPPB Resolution No. _-2019, PEs may
cause the issuance of Letters of Credit subject to the following conditions:

a.) the letter of credit shall be issued by a GSB;

b.) the letter of credit shall be made in favor of a foreign supplier;
c.) the cost for the opening a letter of credit shall be for the account of
the foreign supplier which must be stated in the bidding documents;
and
d.) no payment shall be charged against the letter of credit until delivery
and acceptance of the goods as certified by the PE.

5.0 For guidance and compliance.

6.0 This Circular shall take effect fifteen (15) days following its publication.

SGD
_________________
LAURA B. PASCUA
Alternate Chairperson