2004-06-10

PM 006-2004

Requesting Entity: Government Service Insurance System

Issues Concern: Request for Reconsideration of the Government Procurement Policy Board Opinion Excluding Reinsurance Services as an Example of Specialized Type of Procurement under Limited Source Bidding

 

Details

Whether or not reinsurance service is a specialized type of goods that may be procured through Limited Source Bidding.

Evidently, under the afore-quoted provision (Section 49, R.A. 9184 and IRR-A), reinsurance services do not fall under any of the foregoing circumstances. Such type of service cannot be classified as highly specialized goods, considering that there are a lot of insurance companies offering this kind of service. While there may be factors considered totally unique to a reinsurance service, such as, the financial standing, claims, paying habits, reciprocity, transaction behavior, among others, such factors do not classify reinsurance services as specialized goods. We agree with your observation that the placement of reinsurance contract for “jumbo accounts” is a specialized and technical activity, however, it must be noted that what is specialized is the activity of placement of reinsurance contract and not the reinsurance service itself.

Accordingly, there is no legal basis or even practical necessity for the GSIS to resort to Limited Source Bidding in the procurement of reinsurance services. While economy and efficiency may be a desirable end in resorting to the alternative methods of procurement, the GSIS has no other recourse, in the absence of the exceptional cases mentioned in the R.A. 9184 and its IRR-A, but to procure its reinsurance service through competitive bidding. Besides, we believe that the interests of Government agencies (as the assured) may still be adequately protected even if such service is procured through this mode considering that the GSIS may further strengthen the eligibility requirements for such contract, so that only those reinsurers who have the adequate facilities and capacity may be able to bid for those risks classified as “jumbo accounts”.