Selling to the Government

One of the biggest customers in the Philippines is the government, which procures through official tenders.  U.S. firms interested in selling to the government must first understand the process to qualify and participate in such opportunities, and then properly strategize on how to win them.

All procurement of the Philippine government (departments, bureaus, offices and agencies, state universities and colleges, government-owned and/or -controlled corporations, government financial institutions, and local government units) is governed by Republic Act (RA) No. 9184 or the Government Procurement Reform Act (GPRA) and its Implementing Rules and Regulations (IRR). 

RA 9184 and its IRR cover all Philippine government-funded procurement of goods, infrastructure projects, and consulting services.  They also apply to foreign-funded procurement activities unless another procedure is stipulated in the treaties or agreements under which the procurement is made.  The most common example would be procurements financed by development aid, where the procurement is conducted according to the rules of the donor entity, such as Japan International Cooperation Agency.

The Government Procurement Policy Board (GPPB) was established under RA 9184 to be the central procurement policy-making body of the government.  The GPPB website contains up-to-date government procurement-related resolutions and guidelines, as well as standard bidding documents and procurement manuals.

Tender opportunities are advertised at the Philippine Government Electronic Procurement System (PHILGEPS) website and the websites of the procuring entities.  Firms must pay membership fees to be a PHILGEPS Platinum Member and bid on tenders under competitive bidding.  To bid on specific projects, one must also pay for bid documents, ranging in price from $10 to $1500.  Appendix 8 of the IRR contains the standardized cost of bid documents based on the approved budget for the contract (ABC).

Projects funded by the Philippine Government have a national ownership requirement.  A minimum of 60% Filipino ownership is usually required for goods, infrastructure projects and consulting services.  U.S. firms interested in participating in tenders should work with a Filipino distributor, or in some cases with a Filipino joint venture partner as very few opportunities allow for foreign firms to bid without a Philippine partner.  Foreign firms can bid directly when there are no local suppliers able to provide the product and other special circumstances.  More information on these special circumstances is available in the IRR, specifically Sections 23.4.1.2 (Goods), 23.4.2.2 (Infrastructure Projects) and 24.3.3 (Consulting Services) and Appendix 9: Guidelines in the Determination of Eligibility of Foreign Suppliers, Contractors, and Consultants to Participate in Government Procurement Projects.

The local partner leads in the many cumbersome bureaucratic procedures.  Such procedures include excessive paperwork requirements such as: business registration certificates, mayor’s permit, tax clearances, audited financial statements, statements of ongoing contracts for a given period, and statements of single largest completed contract.  Section 23 of the IRR lists the required documents for submission.  Many defense and ICT firms have expressed concern on submitting some information that cannot be disclosed for national security or business confidentiality reasons.

The standard practice is for tenders to be conducted through competitive bidding.  The ABC should be mentioned in the Invitation to Bid and would be the ceiling for the bid price.

Bids are evaluated by the Bids and Awards Committees (BACs) that are created for the specific purpose of evaluating bids.  For goods and infrastructure projects, the contract is awarded to the bidder with the lowest calculated and responsive bid.  For consultancy service, the bidder with the highest rated responsive bid will win the contract.

Retention money or special bank guarantee of 1% to 5% of the total goods contract price is required to cover for warranty.  For infrastructure projects, the contractor is required to post a warranty security of 5%, 10% or 30% of the total contract price depending on the form of the warranty security.

The “lowest calculated and responsive bid” clause has proven to be a challenge for U.S. firms as the bid specifications do not often take life cycle cost into account.  Unless technical experts have a say in the bid specifications, they often are crafted in a manner that allows for the most economical option to be selected without consideration on value, or proper credit given to innovative technologies.  BAC officials fear choosing the more expensive option in what may seem to be a violation of the procurement law, even when the option likely has better long-term value.

Procurement methods other than competitive bidding, such as negotiated procurement, direct contracting, and limited source bidding, can be used in highly exceptional cases.

A foreign supplier that wins a government tender should submit a Certificate of Registration issued by the Philippines’ Securities and Exchange Commission, and/or the authority or license from the appropriate government agency to the procuring entity before the contract award.

While there are significant hurdles in pursuing government tenders, their value may make such pursuit worthwhile.  Firms with a local partner, unique product not locally available, and a proper risk hedging strategy can position themselves to secure government business.  In fact, many firms have engaged with government stakeholders early on, in anticipation of future tenders.  They have helped shape tender specifications to allow for a proper evaluation that takes value into consideration so that the final decision is less likely to be made by cost.

In 2019, the World Trade Organization Committee on Government Procurement approved the Philippines’ application for observer status.

The Philippines is not a party to a free trade agreement (FTA) with the United States that contains commitments on government procurement.

It is important to note that there have been many reported scams from entities impersonating the Philippine Government.  Such entities have reached out directly to U.S. firms and requested deposits to fulfill tenders with the Philippine Government.  It is important for firms to properly conduct due diligence when contacted by such agencies, and the U.S. Commercial Service can help.

U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy.  A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies.  The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts.  Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government.  Consult Advocacy for Foreign Government Contracts for additional information.

Financing of Projects

Official Development Assistance (ODA)

Official Development Assistance (ODA) from foreign funding agencies has been a key source of financing for major projects in the Philippines (Republic Act No. 8182) from organizations such as the World Bank (WB), the Asian Development Bank (ADB), the UN System; and bilateral institutions within the Governments of Japan (Japan International Cooperation Agency), the United States (U.S. Agency for International Development), and Australia (Australia Department of Foreign Affairs and Trade) are among the leading sources of ODA. 

According to the Philippine National Economic and Development Authority (NEDA), Japan is the top provider of ODA assistance to the country accounting for 36 percent (USD11.18 billion for 30 loans and 15 grants), followed by ADB with 29 percent (USD8.75 billion for 31 loans and 21 grants), and WB with 21 percent (USD6.44 billion for 22 loans and seven grants).  Total assistance from the three DPs accounted for 86 percent of the ODA portfolio as of 2020.  The following table provides the percentage distribution of active ODA by fund source.

CUMULATIVE ODA BY FUND SOURCE IN USD MILLION, 2020*

 

*Source: Philippine National Economic Development Authority – Official Development Assistance

1 Japan is composed of JICA and the Embassy of Japan (i.e., non-project grant aid).

2 Korea is composed of the KOICA, Korea Rural Economic Institute, and Ministry of Agriculture Food and Rural Affairs - Education, Promotion, and Information Service.

3 UN System is composed of Food and Agriculture Organization (FAO), International Fund for Agricultural Development (IFAD), IOM, UN HABITAT, UNDP, UNESCO, UNFPA, UNICEF, UNIDO, UNOPS, WFP, and World Health Organization (WHO).  Loans under the UN System refer to IFAD loans.

4 This excludes the grant amount of the Switzerland-assisted Trade Capacity Building: Market Study – Philippines due to unavailability of data.

5 This excludes the grant amount of the UK-assisted Global Future Cities due to unavailability of data.

United States Agency for International Development

The U.S., through USAID allocated approximately $136.3 million in grant funds to the Philippines in fiscal year (FY) 2021.  USAID activities are implemented through contracts, grants, and cooperative agreements with American and Philippine entities, and international organizations.  USAID’s programs in the Philippines encompass a wide range of activities aimed at accelerating inclusive and market-driven economic growth; promoting democracy and citizen-responsive governance; improving basic education outcomes; expanding quality health access; and enhancing environmental and community resilience to withstand climate shocks and transnational threats.  FY 2021 funding also includes U.S. assistance to fight the COVID-19 pandemic by helping to strengthen the country’s health systems and ability to respond to the epidemic, and to restore livelihoods affected by the crisis.  It also includes humanitarian assistance funding for communities affected by natural disasters that hit the country during the year.

U.S. bidders are welcome to join foreign-funded projects where International Competitive Bidding (ICBs) procedures are observed.  Multilateral Development Banks (MDBs), such as the World Bank and the Asian Development Bank (ADB), observe this practice, as do U.S. Government agencies.  The websites of these organizations are good sources of project and business opportunities and are updated regularly.  Information on U.S. Government funding opportunities may also be found in the Federal Business Opportunities website and Federal Grants.

U.S. Financing Institutions

U.S. financing institutions such as the Export-Import Bank and the Development Finance Corporation (DFC) continue to explore opportunities in the Philippines.  The U.S. International Development Finance Corporation (DFC, formerly Overseas Private Investment Corporation (OPIC) provides debt financing, partial credit guarantees, political risk insurance, equity investment and technical assistance grants to support U.S. and other investors and their investments.  The EXIM Bank, the official export credit agency of the United States, provides export credit insurance, loan guarantees, and project and structured finance for U.S. exporters and foreign buyers of U.S. goods and services.

For more information on DFC’s programs in Asia-Pacific:

Geoffrey Tan
Managing Director, Asia Pacific
Development Finance Corporation
Email: geoffrey.tan@dfc.gov

U.S. Trade and Development Agency (USTDA)

The U.S. Trade and Development Agency (USTDA) helps companies create U.S. jobs through the export of U.S. goods and services for priority development projects in emerging economies.  USTDA links U.S. businesses to export opportunities by funding project preparation and partnership building activities that develop sustainable infrastructure and foster economic growth in partner countries.

USTDA facilitates U.S. business participation in the preparation and execution of infrastructure development projects. The Agency helps build the infrastructure for trade, match U.S. expertise with overseas development needs, and facilitate business partnerships between U.S. industry and emerging markets.  These partnerships allow the Agency to target its investments toward projects that are most likely to be implemented using U.S. goods and services.  The Agency funds early-stage project preparation activities such as feasibility studies, technical assistance, and pilot projects, which provide the analysis needed for projects to attract financing and reach implementation.  Additionally, USTDA creates market access for U.S. companies, connecting them with key decision-makers in emerging economies by hosting reverse trade missions, conferences, workshops, and trainings.  The Agency’s reverse trade missions bring overseas decision-makers to the United States to introduce them to the design, manufacture and operation of U.S. goods and services that can help advance their infrastructure development goals.

USTDA’s prioritizes support for sustainable development and U.S. commercial opportunities in major infrastructure sectors including energy, transportation, ICT, healthcare, and agribusiness.  In 2021, every $1 USTDA invested in its programs generated a record of $117 in U.S. exports.  USTDA has facilitated more than $76 billion in U.S. exports since its founding in 1992, supporting 4,000 infrastructure activities in 139 countries.

USTDA’s regional office, covering Southeast Asia and the Pacific, is located at the U.S. Embassy in Bangkok, Thailand.  USTDA’s regional staff members can be contacted either in the Washington, D.C.-area headquarters or in Bangkok.  Information on accessing USTDA tools and upcoming program activities is available via the Agency’s website: https://ustda.gov.

Multilateral Development Banks and Financing Government Sales

Price, payment terms, and financing can be a significant factor in winning a government contract. Many governments finance public works projects through borrowing from the Multilateral Development Banks (MDB).  A helpful guide for working with the MDBs is the Guide to Doing Business with the Multilateral Development Banks. The U.S. Department of Commerce’s (USDOC) International Trade Administration (ITA) has a Foreign Commercial Service Officer stationed at each of the five different Multilateral Development Banks (MDBs): the African Development Bank; the Asian Development Bank; the European Bank for Reconstruction and Development; the Inter-American Development Bank; and the World Bank. 

Learn more by contacting the:  

• Commercial Liaison Office to the Asian Development Bank
• Commercial Liaison Office to the World Bank