2007-07-17

NPM 017-2007

Requesting Entity: Commission on Higher Education

Issues Concern: Procurement of Goods under an Exclusive Distributorship/Exclusive Publishing Partner

 

Details

Whether purchase of goods under an exclusive distributorship/exclusive publishing partner contract or goods protected under the Intellectual Property Rights would require to going through the usual or proper bidding procedure under R.A. 9184.

[D]irect contracting is applicable when the goods being procured are covered by a patent, trade secret, or copyright duly acquired under the law. Under the Intellectual Property Code of the Philippines (R.A. 8293) the registered owner of a patent, copyright, or any other form of intellectual property has exclusive rights over the product, design or process covered by such patent, copyright, or registration. Such exclusive right includes the right to use, manufacture, sell or otherwise derive economic benefit from the item, design or process (Section 4, Part 2, Volume 2, Manual of Procedures for the Procurement of Goods and Services).

On the other hand, under Section 50 (c), this condition anticipates a situation where the goods are sold by an exclusive dealer or distributor, or directly sold by the manufacturer. In this instance, it is highly unlikely that sub-dealers can sell the same at lower prices. Further, the procuring entity has not identified a suitable substitute for the product that can be procured at terms more advantageous to the government (Section 4, Part 2, Volume 2, Manual of Procedures for the Procurement of Goods and Services).

It also bears stressing that in order to justify the need to procure through direct contracting, the BAC should conduct a survey of the industry and determine the supply source. The survey should confirm the exclusivity of the source of goods to be procured. In all cases where direct contracting is contemplated, the survey must be conducted prior to the commencement of the procurement process. Moreover, the procuring entity must justify the necessity for an item that may only be procured through direct contracting, and it must be able to prove that there is no suitable substitute in the market that can be obtained at more advantageous terms (Section 4, Part 2, Volume 2, Manual of Procedures for the Procurement of Goods and Services). In addition, specifications for the procurement of goods shall be based on relevant characteristics and/or performance requirements (Section 18, R.A. 9184).