Philippines - Commercial Guide
Selling to the Public Sector

Includes how major projects are financed and gives examples where relevant. Explains activities of the multilateral development banks in and other aid-funded projects where procurement is open to U.S. bidders.

Last published date: 2020-07-22

Selling to the Government 

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.”

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 in order to qualify to 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) and can be found at:

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 nation, such as Japan.

The Government Procurement Policy Board (GPPB; http://www.gppb.gov.ph/), an agency under the Department of Budget and Management, 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 via the Philippine Government Electronic Procurement System (PHILGEPS) website (https://www.philgeps.gov.ph/) that firms must pay membership fees to be a Platinum Member and bid on tenders. 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 percent Filipino ownership is 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 Filipino one. 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 adhoc Bids and Awards Committees (BACs), created and disbanded for the specific purpose of evaluating each bid. Members are agency government officials who try to protect themselves from legal action and corruption allegations. 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 at least 1% to up to 5% of the total contract price is required for goods 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.

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 in order to fulfill tenders with the Philippine Government. It is important for firms to properly conduct due diligence when contacted by such agencies, and the Commercial Service can help. The Philippine Government rarely does direct procurements outside of PHILGEPS. While it may not be uncommon to have to pay for bid documents, a prospective requesting a deposit for a tender should raise some questions.

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.  Multilateral 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), the total ODA Portfolio as of December 2018 amounted to US$16.86 billion consisting of 76 loans (US$14.46 billion) and 313 grants (US$2.40 billion). Japan provided the bulk of ODA assistance to the country accounting for 37 percent share (USD6.24 billion for 35 loans/grants) of the active ODA portfolio, followed by ADB with 22 percent (USD3.64 billion for 33 loans/grants) and WB with 19 percent (USD3.13 billion for 22 loans/grants). The following table provides the percentage distribution of active ODA by fund source.

Philippines: Total ODA by Fund Source in US$ million

Fund Source

Loans

Grants

Total Count

Loan Net Commitment (US$ M)

Grant Amount (US$ M)

Total ODA

% Share on Amount

Japan

24

11

35

6132.86

106.76

6239.62

35.69

ADB

18

15

33

3561.70

74.64

3636.34

21.56

WB

12

10

22

3094.21

33.43

3127.64

18.54

USA

-

57

57

-

886.47

886.47

5.26

Korea

6

12

18

653.38

83.70

737.08

4.37

Australia

-

53

53

-

476.19

476.19

2.82

UN System**

5

134

139

108.97

349.28

458.25

2.72

China

2

2

4

273.3

91.62

364.92

2.16

France

4

3

7

321.18

1.31

322.49

1.91

AIIB

1

-

1

207.6

-

207.6

1.23

EU

-

6

6

-

148.74

148.74

0.88

Germany

-

6

6

-

73.12

73.12

0.43

Canada

-

17

17

-

55.80

55.80

0.33

OFID

2

-

2

51.61

-

51.61

0.31

Italy

1

2

3

35.63

5.55

41.18

0.24

Austria

1

-

1

24.44

-

24.44

0.14

New Zealand

-

3

3

-

8.32

8.32

0.05

Spain

-

6

6

-

8.10

8.10

0.5

TOTAL

76

338

414

14,464.48

2,403.02

16,867.90

100.00

Source: http://www.neda.gov.ph/wp-content/uploads/2020/01/ODA-2018-As-of-January-29.-2020.pdf

*Loans under UN System pertains to IFAD loans

**UN System is composed of FAO, IFAD, ILO, IOM, UN Habitat, UN Women, UNDP, UNFPA, UNIDO, UNOPS, WFP, and WHO.

U.S. Agency International Development (USAID)

The U.S., through USAID (https://www.usaid.gov), allocated approximately US$114.5 million in development assistance grant funds to the Philippines in fiscal year (FY) 2019. 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, with a focus on early childhood education; expanding quality health access; and enhancing environmental and community resilience to withstand shocks and transnational threats. FY 2019 funding also includes U.S. assistance to fight the COVID-19 pandemic.

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: https://beta.sam.gov, and Federal Grants (https://www.grants.gov)

U.S. Financing Institutions

U.S. financing institutions such as the Export-Import (http://www.exim.gov) Bank and the Development Finance Corporation (DFC: https://www.dfc.gov) 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 Ex-Im 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) connects America’s private sector to priority infrastructure projects in emerging markets.  The Agency helps build the infrastructure for trade, match U.S. expertise with development needs, and facilitate business partnerships between U.S. industry and overseas project sponsors.  These partnerships allow the Agency to target its program investments toward projects that are most likely to be implemented using U.S. goods and services.

USTDA achieves its mission by funding feasibility studies, technical assistance and pilot projects that integrate the innovation and expertise of U.S. companies.  The Agency also connects overseas buyers with U.S. sellers through its reverse trade missions, industry conferences and expert workshops.

USTDA is unique among federal agencies: it is mandated to promote U.S. industry’s participation in infrastructure projects at the critical early stages when design choices and technology options are being determined and defined.  The Agency also places particular emphasis on vital economic sectors: energy, transportation, information and communication technology, healthcare and agribusiness.

USTDA achieves an incredible rate of return on U.S. taxpayer dollars, generating $111 of U.S. exports for every $1 invested.  The Agency has generated over $73 billion in U.S. exports since its inception, including over $6.7 billion new exports identified in FY 2019 alone.

USTDA’s regional office, covering Southeast Asia and the Pacific, is located at the U.S. Embassy in Bangkok, Thailand.  USTDA’s Southeast Asia staff members can be contacted either in the Washington, D.C.-area headquarters or in Bangkok.

U.S. companies can access more information on USTDA’s program and proposal submission requirements through https://ustda.gov/work/propose-a-project/  or connect with USTDA:

In Thailand:

Brandon Megorden,

Regional Manager for Asia,

Email: bmegorden@ustda.gov 

 

In Vietnam:

Tuyet Trees

USTDA Representative, Vietnam and Southeast Asia

Email: ttrees@ustda.gov  

 

In Washington, DC:

Verinda Fike, Regional Director for the Indo-Pacific

Email: vfike@ustda.gov

 

Shannon Roe, Senior Manager and Energy Projects Lead

Email: sroe@ustda.gov

 

Alissa Lee, Indo-Pacific Manager for Aviation, Healthcare and Agribusiness

Email:  alee@ustda.gov

 

Jeffrey Philips, Indo-Pacific Manager for Digital Economy

Email: jphillips@ustda.gov

 

Kevin Toohers, Indo-Pacific Manager for Surface Transport

Email:  ktoohers@ustda.gov

 

Jennifer Walters, Indo-Pacific Events Coordinator

Email: jwalters@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 African Development Bank

Commercial Liaison Office to the Asian Development Bank

Commercial Liaison Office to the World Bank