Rules and Regulations for Government
Infrastructure Projects (PD 1594)
Engr. Ma. Gracia Antoinette T. Ley - Lorenzo
DEFINITION OF TERMS:
• AAE – Approved Agency Estimate
• ABC – Approved Budget for the Contract
• AGE - refers to the Allowable Government Estimate, which is
calculated as one-half the sum of the AAE and the average of all
responsive bids, excluding those exceeding 120% or falling below 60%
of the AAE.
The AGE is a benchmark to determine the reasonability of bids
submitted by prospective bidders in public procurement projects.
PD 1594 : PRESCRIBING POLICIES, GUIDELINES,
RULES AND REGULATIONS FOR GOVERNMENT
INFRASTRUCTURE CONTRACTS
• No bidding and/or award of contract for a construction project shall be
made unless the detailed engineering investigations, surveys, and
designs for the project have been sufficiently carried out in accordance
with the standards and specifications to be established under the rules
and regulations to be promulgated pursuant to Section 12 of this
Decree so as to minimize quantity and cost overruns and underruns,
change orders and extra work orders, and unless the detailed
engineering documents have been approved by the Minister of Public
Works, Transportation and Communications, the Minister of Public
Highways, of the Minister of Energy, as the case may be.
PD 1594 : PRESCRIBING POLICIES, GUIDELINES,
RULES AND REGULATIONS FOR GOVERNMENT
INFRASTRUCTURE CONTRACTS
• Award and Contract. The contract may be awarded to the
lowest prequalified bidder whose bid as evaluated complies with
all the terms and conditions in the call for bid and is the most
advantageous to the Government.
Calculation of AGE:
• Step 1: Identify the AAE: The AAE is the agency's estimated cost for the
project or procurement.
• Step 2: Determine the average of responsive bids: Calculate the average
of all valid and responsive bids submitted by bidders.
• Step 3: Exclude outliers: Bids higher than 120% or lower than 60% of the
AAE are excluded from the average calculation.
• Step 4: Calculate AGE: The AGE is calculated as one-half the sum of the
AAE and the average of the responsive bids (after excluding outliers).
Who are the responsive bidders?
1. A construction project requires bidders to submit a bid that includes
a detailed project timeline, cost estimates, and proof of relevant
licenses. If a bidder submits a proposal without the timeline, is their
bid considered responsive?
Who are the responsive bidders?
2. In a procurement process, a company must submit a bid that
includes a signed non-collusion affidavit. If a bidder submits their
proposal without this signed document, what is the status of their bid?
Who are the responsive bidders?
3. A request for proposals (RFP) specifies that bidders must have at
least five years of experience in the industry to qualify. If a bidder has
four years of experience, can they still be considered responsive?
Calculation of AGE:
Suppose the AAE is 1,000,000 and the average of responsive bids is
800,000.
The AGE would be (1,000,000 + 800,000) / 2 = 900,000
Who is the winning bidder?
The approved agency estimate (AAE) of a Gov’t. project is 500M. The bids
are:
Bidder A : P354,000,000
Bidder B : P639,000,000
Bidder C : P483,000,000
Bidder D : P583,000,000
Bidder E : P295,000,000
Bidder F : P385,000,000
Which bidder wins the contract for the Gov’t. project?
Who is the winning bidder?
The approved agency estimate (AAE) of a Gov’t. project is 500M. The bids
are:
Bidder A : P354,000,000
Bidder B : P639,000,000 (exceeds 120%)
Bidder C : P483,000,000
Bidder D : P583,000,000
Bidder E : P295,000,000 (below 60%)
Bidder F : P385,000,000
Which bidder wins the contract for the Gov’t. project?
Who is the winning bidder?
The approved agency estimate (AAE) of a Gov’t. project is 500M. The bids
are:
Bidder A : P354,000,000
Bidder B : P639,000,000 (exceeds 120%)
Bidder C : P483,000,000
Bidder D : P583,000,000
Bidder E : P295,000,000 (below 60%)
Bidder F : P385,000,000
Which bidder wins the contract for the Gov’t. project?
Importance of AGE:
• Unbalanced Bids: The AGE helps identify unbalanced bids, where a
bidder significantly underprices certain items while overpricing
others, potentially leading to project delays or quality issues.
• Price Reasonability: The AGE ensures that the bids are within a
reasonable range and are not excessively high or low, protecting
public funds.
SITUATION 1:
Government construction contracts are governed by Presidential
decree 1594 which prescribes that change of orders are limited to 25%
of the original contract price provided that no major pay item shall be
increased by more than 100% of its original cost. Major items is defined
as pay items representing at least 20% of the AAE or the first two items
having the highest percentage of the AAE or those indicated or
specified in the Instruction to Bidders. For this problem, the AAE of a
certain government project is 15 million pesos.
SITUATION 1:
1. Which of the following most nearly gives the amount at which an
item becomes a major item?
A. P4 Million
B. P6 Million
C. P5 Million
D. P3 Million
SITUATION 1:
1. Which of the following most nearly gives the amount at which an
item becomes a major item?
A. P4 Million
B. P6 Million
C. P5 Million
D. P3 Million
15,000,000.00 * 20% = 3,000,000.00
SITUATION 1:
2. A certain major item has an original quantity of 4,000 units. The
winning bidder bid a unit price of P1, 000 for this item. If the only change
involves this item, which of the following most nearly gives the maximum
amount of the Change Order?
A. P5 Million
B. P4 Million
C. P3 Million
D. P6 Million
SITUATION 1:
2. A certain major item has an original quantity of 4,000 units. The
winning bidder bid a unit price of P1, 000 for this item. If the only change
involves this item, which of the following most nearly gives the maximum
amount of the Change Order?
A. P5 Million
B. P4 Million
C. P3 Million
D. P6 Million
TOTAL COST = 4,0000*1000 = 4,000,000.00
FOR MAJOR ITEMS, CHANGE IS 100% SO,
4,000,000.00 * 1 = 4,000,000.00
SITUATION 1:
3. Which of the following most nearly gives the maximum increase in
quantity of the item if the unit price is unchanged?
A. 4, 000
B. 3, 000
C. 5, 000
D. 6, 000
SITUATION 1:
3. Which of the following most nearly gives the maximum increase in
quantity of the item if the unit price is unchanged?
A. 4, 000
B. 3, 000
C. 5, 000
D. 6, 000
Original cost of the major item = 4,000*1,000 = P4,000,000
Total contract price ( major item is 20% of AAE) = 4,000,000/0.20 = P20,000,000
The maximum increase in quantity is limited to 25% of the original contract price, so:
Maximum increase in quantity = 0.25*20,000,000/1,000 = 5,000 units
Cost of Bidding Documents:
Ineligible Bidders:
Evaluation:
Sample Calendar of Activities:
