Government Contracting and Procurement Integrity Act

Senate Office of the Secretary TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES 26 MAR 11 A9:58 First Regular Session SENATE RECEIVED BY: 1962 S. B. No. - (In substitution of Senate Bill No. 783) Prepared and submitted by the Civil Service, Government Reorganization and Professional Regulation (upon the recommendation of the Subcommittee on the Disqualification of Relatives of Officials on the Fourth Degree in Government Contracts) jointly with the Committee on Finance with Senators Escudero, Go, Villanueva, Dela Rosa, and Gatchalian as authors AN ACT DISQUALIFYING RELATIVES OF PUBLIC OFFICIALS WITHIN THE FOURTH CIVIL DEGREE OF CONSANGUINITY AND AFFINITY FROM ALL GOVERNMENT CONTRACTS AND PROVIDING PENALTIES THEREFOR Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Government

2 Contracting and Procurement Integrity Act".

Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to

4 maintain honesty and integrity in the public service and take positive and effective measures against graft and corruption. Towards this end, cognizant of the need to eliminate potential avenues for corruption, and uphold fairness, integrity, transparency, impartiality, and accountability in the procurement process and the utilization of public funds, the State shall mitigate conflicts of interest that may arise from familial relationships between public officials and private entities participating in government contracts.

Sec. 3. Scope and Application. - This Act shall apply to contracts between a

private entity and a government agency or instrumentality that pertains to a) supplies, materials, machinery, equipment, and services; (b) infrastructure projects; (c) joint

1 ventures; (d) public-private partnership (PPP) projects; and (e) other similar or 2 analogous agreements or undertakings to which the latter is the procuring entity, partner, shareholder, implementing agency, end user, or a party contributing public 4 funds or property: Provided, further, That this Act shall likewise apply to contracts 5 entered into by private entities that have existing contracts with government agencies 6 and instrumentalities with third parties under subcontracting, consortium, joint 7 venture or other similar business arrangements for the performance of such 8 government contracts: Provided, however, That this Act shall not apply to contracts 9 that are highly technical, proprietary, exclusive, or confidential in nature, duly certified 10 by the Government Procurement Policy Board (GPPB) or the PPP Center, as the case 11 may be.

Sec. 4. Definition of Terms. - For purposes of this Act, the following terms shall

13 mean or be understood as follows: (a) Beneficial Owner shall refer to a natural person who: (1) ultimately owns or exercises dominant influence over the management or policies of the juridical 16 entity; (2) exercises ultimate effective control over the juridical entity; or (3) owns, 17 directly or indirectly through a chain of ownership, at least twenty percent (20%) of 18 the voting rights, voting shares, or capital of the juridical entity; (b) Corporate Officer shall refer to the president, treasurer, secretary, compliance officer, or such other officers as may be provided in the bylaws of a 21 juridical entity in accordance with Section 24 of Republic Act No. 11232, otherwise 22 known as the "Revised Corporation Code of the Philippines"; (c) Covered Public Officials and Personnel shall refer to the public officials occupying national or local elective positions; cabinet secretaries, undersecretaries, and assistant secretaries; officers, directors, trustees or regents of government owned or controlled corporations (GOCCs) and state universities and colleges (SUCs); Heads of Procuring Entity; Procurement Agents, if engaged; the members of Bids and Awards Committee (BAC), Technical Working Group, and BAC Secretariat; Heads of the Project Management Office; End Users or Implementing Units; or the Project Consultants of 30 any government agency or instrumentality;

(d) Government Agency and Instrumentality shall refer to any branch, 2 department, bureau, office, agency, or instrumentality of the government, including 3 GOCCs with or without original charter, SUCs, government financial institutions, and 4 local government units;

Sec. 5. Disqualification on the Basis of Relationship with Covered Public Officials

6 and Personnel. - Notwithstanding any provision of the law to the contrary, relatives 7 of any covered public official or personnel within the fourth (4th) civil degree of consanguinity or affinity shall be barred from participating in or entering into any 9 government contract or from engaging in subcontracting, consortium, joint venture, or other similar business arrangements for the performance of a government contract: Provided, That for juridical persons, such prohibition shall apply when such relatives are the beneficial owners of the juridical entity concerned or when they serve as corporate officers or members of the board of directors or trustees thereof;

Sec. 6. Responsibilities of Private Entities. - Private entities participating in or

entering into any contract with government agencies and instrumentalities or engaging in subcontracting, consortium, joint venture or other similar business arrangements for the performance of any government contract shall bear a continuing responsibility to ensure compliance with the provisions of this Act and the performance of the following: (a) Submit, as part of the procurement or contract requirements, a sworn affidavit stating that neither the private entity nor, in the case of juridical persons, its corporate officers, members of the board of directors or trustees, and beneficial owners are related by consanguinity or affinity within the fourth (4th) civil degree to any covered public official or personnel; (b) Refrain from participating in any procurement activity or contract with government agencies or instrumentalities or from engaging in subcontracting, consortium, joint venture, or other similar business arrangements for the performance of a government contract when the private entity or, in the case of juridical persons, any of its corporate officers, members of the board of directors or trustees, and beneficial owners are related by consanguinity or affinity within the fourth (4th) civil degree to any covered official or personnel; and

(c) Maintain compliance with the provisions of this Act throughout the duration of the contract: Provided, That in the event that the private entity or, in the case of juridical persons, any of its corporate officers, members of the board of directors or trustees, or beneficial owners becomes related within the prohibited degree to any 5 covered public official or personnel of the government agency or instrumentality 6 concerned, the private entity shall disclose such relationship to the government agency 7 or instrumentality concerned within fifteen (15) days from the date of knowledge or 8 discovery thereof and shall undertake the necessary steps to cause the resignation or 9 divestment of the disqualified person within a reasonable period as may be determined 10 by the GPPB or PPP Center, as the case may be: Provided, further, That no liability 11 shall attach to the private entity that, upon discovery of prohibited relationship, promptly discloses the same and undertakes the corrective action within the period to be prescribed by the GPPB and the PPP Center.

Sec. 7. Liability of Private Entities. - Without prejudice to administrative,

criminal, and civil liabilities under applicable laws, including their accessory penalties, if any, liability shall attach to private entities participating in contracts with government agencies or instrumentalities or engaging in subcontracting, consortium, joint venture, or other similar business arrangements for the performance of a government contract for violations of this Act. Any private entity found to have knowingly violated any provision of this Act shall be penalized with imprisonment of not less than one (1) year nor more than three (3) years, a fine of not less than One hundred thousand pesos (P100,000.00), and perpetual disqualification from participating in any government procurement activity: Provided, That if the offender is a juridical person, the penalty of imprisonment shall be imposed upon the responsible corporate officers, members of the board of directors or trustees, and beneficial owners who knowingly participated in or authorized the commission of the violation, or who, through gross negligence, allowed such violation to occur or failed to prevent the same.

Sec. 8. Liability of Public Officers. - Without prejudice to administrative,

criminal, and civil liabilities under Republic Act No. 3019, otherwise known as the "Anti- Graft and Corrupt Practices Act", Republic Act No. 12009, otherwise known as the "New Government Procurement Act", and other penal laws, any public official or

1 personnel found to have knowingly aided or abetted the participation or entry of a 2 disqualified private entity into contracts with government agencies and instrumentalities in violation of this Act, or found to have allowed or failed to prevent the violation of this Act despite knowledge thereof, shall be penalized with imprisonment of not less than one (1) year nor more than three (3) years, a fine of 6 not less than One hundred thousand pesos (P100,000.00), and perpetual 7 disqualification from public office: Provided, however, That this provision shall not apply to public officials and personnel with no participation or involvement whatsoever in the procurement process, award of contract, or contract execution or implementation.

Sec. 9. Implementing Rules and Regulations. - Within sixty (60) days from the

effectivity of this Act, the GPPB, PPP Center, Department of the Interior and Local Government, and Governance Commission for GOCCs, in consultation with other government agencies concerned, shall jointly promulgate the rules and regulations to effectively implement the provisions of this Act.

Sec. 10. Separability Clause. - If any portion or provision of this Act is declared

unconstitutional, the remainder of this Act or any provision not affected thereby shall remain in force and effect.

Sec. 11. Repealing Clause. - Republic Act No. 12009, otherwise known as the

"New Government Procurement Act", insofar as Sections 3, 5, 6, and 7 of this Act is 21 concerned, is hereby amended accordingly. All other laws, acts, presidential decrees, executive orders, issuances, presidential proclamations, rules and regulations or parts thereof, which are contrary to and inconsistent with any provision of this Act, are hereby repealed, amended or modified accordingly.

Sec. 12. Effectivity. - This Act shall take effect fifteen (15) days after its

complete publication in the Official Gazette or in a newspaper of general circulation. Approved,