THE Philippine Army must refund P64.923 million in excess liquidated damages imposed against its supplier of troop carriers and heavy equipment on six contracts awarded in 2017 and 2018 with a combined cost of P332.869 million.
According to the Commission on Audit, the maximum liquidated damages imposable against JROG Marketing for delays in delivery schedules was P27.553 million but the Army imposed P92.476 million.
Claimant Ronie Osnan, owner of JROG Marketing, said he won the contracts for the delivery of 19 dump trucks worth P104.9 million, eight motor graders for P79.984 million, 11 truck troop carriers for P63.8 million, three passenger buses and two mini-buses for P24.795 million, and one fuel lorry worth P2.05 million in December 2017.
Osnan admitted he failed to meet the deadlines on the procurement contracts by four to 14 months.
In April 2018, he was again awarded a P57.34 million contract for three well-drilling truck/rigs and accessories. The supplier delivered in January 2020 but the Army issued a certificate of non-acceptance.
While acknowledging that the Army was right to impose liquidated damages, Osnan said it should not have amounted to 33.56 percent of the contract cost.
He invoked Government Procurement Policy Board (GPPB) Circular No. 02-2003 and Resolution No. 07-2019 which state that the applicable rate of liquidated damage for delayed delivery of goods is one-tenth of 1 percent of the undelivered portion but should never exceed one-tenth of the contract price.
The Army countered that the sum charged in excess of the 10 percent liquidated damages should be considered as a form of penalty on the supplier who repeatedly failed to meet the delivery deadlines.
It said Osnan requested, and was given, several time extensions on the pre-agreed dates of delivery but failed to make good on his commitments. Imposing such penalties, the Army said, was a necessary step to protect its interest as well as a means to encourage suppliers to fulfill their obligations based on their signed contracts with the government.
This view was supported by the audit team leader assigned with the Philippine Army but was opposed by the National Government Audit Sector cluster director on the ground that the imposition of penalties has a separate process and cannot be done unilaterally by the procuring entity.
In its five-page decision released on October 21, the COA Commission Proper said the Army could have dissolved the contract but failed to exercise this choice.
“It is undisputed that JROG incurred substantial delays in the delivery of the units. However, the PA opted not to rescind the contract, and allowed the delivery and accepted the units. This imposition of liquidated damages more than the 10% cap of the total contract price was not in accordance with the contract and Section 3.2 of Annex D of the 2016 Revised IRR of RA No. 9184. This imposition of liquidated damages more than the 10 percent cap of the total contract price was not in accordance with …the 2016 Revised IRR of RA No. 9184 (Government Procurement Reform Law),” the Commission said.
By accepting the deliveries even after the supplier defaulted on the set deadlines, the COA said the Army may only impose a maximum of 10 percent liquidated damages and anything in excess deducted from payment due the supplier amounts to underpayment of the contract.
However, COA Chairperson Gamaliel Cordoba and Commissioners Roland Café Pondoc and Mario G. Lipana said JROG Marketing has to submit the originals or certified true copies of disbursement vouchers and other supporting documents, including official receipts and checks to substantiate the amounts of payment he has received.
The Commission reminded the claimant that release of payment is subject to the submission of the documents to the audit team leader assigned to the Philippine Army.
