Commission On Audit

Handy Guide to the

AUDIT OF
PROCUREMENT
With Focus on the Contract
Implementation of Infrastructure Projects

December 2014
 Preface

This Handy Guide to the Audit of Procurement (With Focus on the Contract Implementation
of Infrastructure Projects) was made possible through Institutional Development Fund, IDF,
Grant No. TF011725, a financial assistance extended by the World Bank to the Republic of
the Philippines to provide assistance to the Philippine Government Procurement Policy Board
– Technical Support Office (GPPB–TSO) in Strengthening the Capacity of Procurement
Institutions for Effective Implementation and Enforcement of the Procurement Law.
Component 2 of the Grant includes the review of the effectiveness of the Public Procurement
System that entails the provision of technical assistance for reviewing and updating the Guide
in the Audit of Procurement (GAP), and thereafter the provision of training on the updated
GAP for the Commission on Audit (COA) auditors.

In order to implement Component 2 of the Project, a Memorandum of Agreement (MOA)

between GPPB-TSO and the COA was executed wherein COA committed under Component
2 of the IDF Project to undertake the review and update of the GAP and the training on the
updated GAP for COA Auditors. Under the said MOA, COA contracted the required
consultancy services in accordance with the World Bank Guidelines to faithfully implement
the conditions of IDF Project Component 2 under IDF Grant No. TF 011725.
 Table of Contents
Chapter 1 – Introduction ..........................................................................................................1
1.1 Purpose of the Handy Guide ....................................................................................... 1
1.2 Targeted Users of the Handy Guide ............................................................................ 1
1.3 Procurement and Contract Implementation as Audit Areas ........................................ 1
Chapter 2 – Audit Objectives and Procedures .........................................................................4
2.1 Instructions on the Use of the Guide ........................................................................... 4
2.2 Audit Focus ................................................................................................................. 5
2.3 Audit Objectives and Procedures ................................................................................ 5
2.4 Audit Responsibility.................................................................................................. 21
2.5 Applicability of the Guide to Procurement under Foreign-Assisted Projects
(FAPs) ....................................................................................................................... 23

List of Annexes

ANNEX 1 – R.A. 9184, GOVERNMENT PROCUREMENT REFORM ACT

ANNEX 2 – IRR OF R.A. 9184, 6th Edition, 2012
ANNEX 3 – PHILIPPINE BIDDING DOCUMENTS FOR PROCUREMENT OF
GOODS, 4th Edition, December 2010
ANNEX 4 – PHILIPPINE BIDDING DOCUMENTS FOR PROCUREMENT OF
INFRASTRUCTURE PROJECTS, 4th Edition, December 2010
ANNEX 5 – GENERIC PROCUREMENT MANUAL, Volume 1, Guidelines on
the Establishment of Procurement Systems and Organizations
ANNEX 6 – GENERIC PROCUREMENT MANUAL, Volume 2, Manual of
Procedures for the Procurement of Goods and Services
ANNEX 7 – GENERIC PROCUREMENT MANUAL, Volume 3, Manual of
Procedures for the Procurement of Infrastructure Projects
ANNEX 8 – COA CIRCULAR NO. 2012 - 003, October 29, 2012
ANNEX 9 – COA CIRCULAR NO. 2013 - 004, January 30, 2013
ANNEX 10 – COA MEMORANDUM NO. 2015-004, March 10, 2015
ANNEX 11 – GUIDELINES ON THE AUDIT OF FOREIGN-ASSISTED
PROJECTS (FAPs), User Manual
ANNEX 12 – COA RESOLUTION NO. 2015-014, April 6, 2015
ANNEX 13 – GPPB RESOLUTIONS
13.1 GPPB Resolution No. 25-2012, November 23, 2012,
Approving Amendments To The Philippine Bidding
Documents For The Procurement Of Goods, Infrastructure
Projects And Consulting Services
13.2 GPPB Resolution No. 11-2013, April 26, 2013, Approving
Amendments To The Philippine Bidding Documents For The
Procurement Of Goods [ITB and BDS Clause 29.2(a)],
Infrastructure Projects [ITB and BDS Clause 28.2(a)], and
Consulting Services [ITB and BDS Clause 27.2(a)]/
13.3 GPPB Resolution No. 12-2013, May 10, 2013, Approving the
Amendments of Sections 23.6, 24.6, and 53.5 of the Revised
Implementing Rules and Regulations of Republic Act No.
9184, and its Associated Provisions in the Implementing
Guidelines on Agency-To-Agency Agreements
13.4 GPPB Resolution No. 20-2013, July 30, 2013, Approving
Amendments to Sections 23.1(a)(vi), 23.5.1.4 and 23.5.2.6 of
the Revised Implementing Rules and Regulations of Republic
Act No. 9184; Clauses 5.5 and 12.1(a)(v) of the Instructions to
Bidders of the Philippine Bidding Documents for Goods; and
Clauses 5.5 AND 12.1(a)(vi) of the Instructions to Bidders of
the Philippine Bidding Documents for Infrastructure Projects
13.5 GPPB Resolution No, 21-2013, July 30, 2013, Approving
Amendments to Sections 23.1(a), 24.1(a) and 34.2 of the
Revised Implementing Rules and Regulations of Republic Act
no. 9184 and the Philippine Bidding Documents for Goods,
Infrastructure Projects and Consulting Services
13.6 GPPB Resolution No, 22-2013, July 30, 2013, Approving
Amendments to Sections 25.2(a)(iv), 25.2(b)(iv) and
25.2(c)(iv) of the Revised Implementing Rules and Regulations
of Republic Act No. 9184
13.7 GPPB Resolution No. 25-2013, August 30, 2013, Approving
Amendments to Sections 27.2, 27.5 and 39.2 of the Revised
Implementing Rules and Regulations of Republic Act No.
9184; the Philippine Bidding Documents for Goods,
Infrastructure Projects and Consulting Services; and, the
Guidelines for the Use of Bid Securing Declaration
 Chapter 1–Introduction

1.1 Purpose of the Handy Guide

This Handy Guide to the Audit of Procurement (with focus on the contract
implementation of infrastructure projects) is a more concise and updated version of the
Guide in the Audit of Procurement (GAP) Second Update – December 2014. The original
edition was prepared by the Technical Services Office of the Special Services Sector of
the Commission on Audit.

The Handy Guide includes audit procedures addressed specifically to what are deemed
high-risk areas in the procurement process, and contract implementation of infrastructure
projects, in addition to updates made on the previous GAP due to recent revisions in the
Implementing Rules and Regulations (IRR) of Republic Act 9184, the Government
Procurement Reform Act.

The Handy Guide also attempts to integrate the various mandated functions of the
Technical Service Office to “review and evaluate contracts, and inspect and appraise
infrastructure projects” as provided by P.D. 1445, with other related compliance and
regularity audit functions, under the broader domain of “procurement audit”, to enable
better planning in the deployment and application of technical audit resources that will
effectively support the core audit function of the COA.

1.2 Targeted Users of the Handy Guide

The Handy Guide is intended for planners and implementers of audits (compliance,
regularity and technical) addressed to procurement of goods and works, and the contract
implementation phase of infrastructure projects.

1.3 Procurement and Contract Implementation as Audit Areas

Procurement and contract implementation are related and conjoined activities that are
considered part of the investment phase of the project development cycle as defined in
government-adopted procedural manuals on project development and evaluation 1 as
shown hereunder:

a. Pre-Investment Phase
Project concept or identification
Project definition or preparation
Project feasibility
Project approval and financing

1
Volume1- Reference Manual on Project Development and Evaluation NEDA, CIDA and UNDP
 b. Investment Phase
Detailed engineering/design
Project Implementation
procurement and contract implementation2

c. Post-investment Phase
Project operation
Ex-post evaluation

The Government Procurement Reform Act (RA No. 9184), recognizes and makes a
distinction between the “procurement process” and the “implementation of procurement
contracts” under Section 3 (a) when it states as one of the governing principles on
government procurement:

xxxxxxx

“Transparency in the procurement process and in the implementation of

procurement contracts.”
xxxxxxx

It can also be gleaned from the body of RA 9184 and its IRR that the procurement
process encompasses the various stages involved in the selection of suppliers, contractors
and consultants from posting of the invitation to bid until the award of the contract. The
stage covering implementation of procurement contracts starts with the issuance of the
Notice to Proceed (NTP) to the supplier, contractor or consultant after the award and the
signing of the contract. Contract Implementation Guidelines for the Procurement of
Infrastructure projects are contained separately in Annex E of the IRR of RA 9184.

Contract implementation is concerned mostly with ensuring that the terms of the
procurement with regard to the time for completion or delivery, the quality and the cost of
the item to be provided, are complied with. Its primary objective is seeing to it that time,
quality and cost controls provided for in the procurement contract are implemented and
complied with.

From the viewpoint of the public finance cycle, government procurement and contract
implementation activities occur during the budget execution phase. It is at this point when
the implementing agency prepares the specifications, technical requirements and bidding
documents for the project and carries out all procurement of goods, works and services
needed. Concurrently, budget execution covers “the various operational aspects of
budgeting such as the establishment of obligational authority ceilings, the evaluation of
work and financial plans for individual activities, the continuing review of government
fiscal position, the regulation of funds release, the implementation of cash payment
schedules and other related activities”3 .

2
Inserted italics ours.
3
State Audit Code, Tantuico, F. S., Jr.

2
National Budget Circular No. 539 defines “Budget execution as the phase in the budget
cycle where financial resources made available to an agency are utilized to implement
programs and projects for which they were approved under the annual General
Appropriations Act (GAA) which may start with pre-implementation activities prior to a
current year.”

Therefore, audit activities addressing procurement and contract implementation activities

of the agency may soon start after each stage in the budget execution phase (albeit
currently on a post-transaction or post-audit basis) in view of the need to see to it that the
purposes of the appropriations are duly observed in the obligations and payments process,
and that obligations are incurred in accordance with law.

3
 Chapter 2 – Audit Objectives and Procedures

2.1 Instructions on the Use of the Guide

The following tips are to be considered in the use of the Handy Guide:

1. This Handy Guide to the Audit of Procurement is based on the precept that: “Open
competition is the basis for efficient public procurement”4. The predominant risks to
the conduct of a transparent and fair procurement process are those acts committed by
participants (usually in connivance) that tend to defeat the purpose of competitive
bidding. Usually such illegal and unethical efforts employ schemes which tend to
restrain the natural rivalry of the parties, or operate to stifle or suppress competition
and thus produce a result disadvantageous to the public.

2. Rigged or contrived bidding is usually evidenced by a pattern of violations throughout

the procurement (and may start as early as the detailed engineering and bid documents
preparation phase) and contract implementation process.

An over-estimated or excessive ABC is usually accompanied by:

 a number of violations or lapses in the procurement process that tend to nullify
transparency and competition to favor a particular Bidder; and
 Unnecessary and unjustified variation orders and contract adjustments/price
escalation that unduly favor the Contractor at the expense of the government.

3. This Handy Guide to the Audit of Procurement (With Focus on Infrastructure

Contract Implementation) is intended to be an illustrative reference rather than an
exhaustive presentation of audit objectives and procedures addressed to the
procurement of goods and works, and the contract implementation phase of
infrastructure projects. It is based on an assessment of what are perceived as high risk
areas within the procurement and contract implementation process. The audit
objectives and procedures illustrated here may be further modified depending on the
auditor’s perception of a different set of risks.

4. Not all audit objectives and procedures in this Handy Guide are exact or verbatim
copies lifted from the larger or more exhaustive Guide in the Audit of Procurement
(GAP) prepared by the Technical Services Office, Special Services Sector of the
Commission on Audit which was first updated in December 2009 and then
subsequently updated again on December 2014. Some audit objectives and
procedures have been reworded and new ones developed to be more consistently
aligned with the risk statements.

4
Guidelines, Procurement of Goods, Works and Non-Consulting Services, Under IBRD Loans and IDA Credits
and Grants, January 2011, Revised July 2014

4
2.2 Audit Focus

The audit objectives, procedures and criteria described here are focused on specific
projects or contract packages for procurement and contract implementation as identified
by the audit supervisor or team leader. This is consistent with the audit focus as
determined in the main and original COA Guide to the Audit of Procurement (GAP).

Preliminary procurement audit planning activities such as familiarization with the

implementing agency’s mandate, organization and operations, including the identification
and prioritization of programs, projects activities to be subject to audit are deemed to
have been previously undertaken by the audit supervisor or team leader, before using the
Handy Guide as reference for the operational planning and implementation of the audit of
procurement for specific projects.

2.3 Audit Objectives and Procedures

Audit Area Risk Statements Audit Objectives Audit Procedures

PROCUREMENT Procurement
OF GOODS AND objectives of
INFRASTRUCTURE competition, economy,
PROJECTS efficiency,
transparency, and
accountability may not
be achieved due to
non-compliance with
procedural and ethical
standards provided by
laws, rules and
regulations.

Procurement Planning 1. The items 1. To verify that 1.1 Review the following
procured may not be only items crucial documents:
necessary and crucial and necessary are  PE’s mandate, mission and
to the mandate and included in the its approved budget
operations of the PE, PPMPs and the  PPMP and APP;
or to the objectives of APPS.  project feasibility studies;
the infrastructure  preliminary and detailed
program/project. engineering reports or
documents specifying the
technical requirements for the
goods or infrastructure project
to be procured; and
 other relevant project
documents
1.2 Determine if the items or
projects proposed to be
procured are crucial and
necessary to the attainment of
the PE’s mandate, mission
and the sustainment of its
operations, in accordance

5
 Audit Area Risk Statements Audit Objectives Audit Procedures
with Section 7.1 of the IRR
of RA 9184 and COA
Circular No. 2012-003, dated
October 29, 2012,Updated
Guidelines on the Prevention
and Disallowance of
Irregular, Unnecessary,
Excessive, Extravagant and
Unconscionable
Expenditures
1.3 Take note of items or
infrastructure projects that
are not crucial or
unnecessary, if any.

Bid Documents 2. Technical 2. To verify and 2.1. Review detailed

Preparation/Detailed requirements for the ascertain the engineering documents to
Engineering goods and detailed soundness and determine that they comply
engineering for the adequacy of detailed with standards established by
infrastructure projects engineering for the the PE, and Annex “A” of the
may not be sound and infrastructure project IRR of RA 9184.
adequate with regard with regard to the 2.2 Take note of
to the prescribed rules conduct of all discrepancies, if any.
for establishing the detailed engineering
technical requirements activities and the
for the goods to be preparation of bid
procured, or the documents as
conduct of all required required by law.
detailed engineering
activities including the
preparation of bid
documents as required
by law.

3. Specifications 3. To verify that 3.1 Review specifications

prepared by the PE specifications for the for the goods or works to be
may unfairly restrict procurement of goods procured and ascertain that
competition. and infrastructure are they comply with Section 18
based on relevant of the IRR of RA 9184.
characteristics and/or 3.2 Take note of
performance discrepancies, if any.
requirements and no
reference to brand
names have been
allowed.

4. The Approved 4. To verify 4 1 Review the ABC and

Budget for the whether the determine if it is reasonable,
Contract (ABC) may Approved Budget for in accordance with the
be excessive. the Contract (ABC) is provisions and standards in
reasonable and Annex “A” Detailed
whether it has been Engineering for the
prepared in Procurement of Infrastructure
accordance with Projects of the IRR of RA
existing laws and PE 9184, and established or
guidelines.
accepted procedures for
preparation of the ABC

6
Audit Area Risk Statements Audit Objectives Audit Procedures
compatible with the
principles and procedures of
RA 9184 and its IRR, such as
DPWH Department Order
No. 72, Amendment to D.O.
29, Series of 2011 Re:
Revised Guidelines in the
Preparation of the Approved
Budget for the Contract
(ABC).
Ascertain that the ABC (and
its supporting Quantity and
Cost Estimates) accurately
and consistently reflects the
requirements as collectively
described in the plans,
specifications and the
Program of Work including
the proposed construction
schedule, estimated
manpower and equipment
requirements, and reflects
reasonable prevailing unit
costs of construction inputs
(materials, labor, equipment
rental or operating rates,
consumables, and the like).
4.2 Take note of
discrepancies which result in
an excessive ABC, if any.
4.3 In the case of LGUs
and other agencies which do
not adopt DPWH D.O. 72,
and whose provisions for
direct or indirect costs in the
ABC are deemed excessive,
request the PE to explain and
justify the valid
administrative, empirical and
rational basis for these
estimated costs and re-
evaluate the reasonableness
of the ABC. Take note of
baseless, arbitrary,
inconsistent and erroneous
computations or assumptions
in the cost estimates which
result in an unreasonable and
excessive ABC.

7
 Audit Area Risk Statements Audit Objectives Audit Procedures
5. Bidding 5. To verify whether 5.1 Request the PE for
documents or parts the PE adopts documentation of its
thereof maybe adequate procedures procedures and controls to see
divulged or released to see to it that in all to it that in all stages of the
prior to their official stages of the preparation of the Bidding
release to prospective preparation of the Documents, equal access to
bidders, or persons Bidding Documents, information is ensured, if any,
having direct or equal access to in accordance with Section 19
indirect interest in the information is of the IRR of RA 9184, and
project to be procured, ensured. determine whether these are
or to any party, except implemented.
those officially 5.2 Take note of any lack of
authorized in the controls or inadequacies, if
handling of the any.
documents.

Invitation to Bid 6. Publication of the 6. To verify if the 6.1 Prior to any procurement
bidding opportunity Invitation to Bid was based on the APP, request the
may not comply with posted in the manner BAC Secretariat for advance
law (with regard to required and within information on the first day of
medium used, the specified time. any posting.
frequency, location, 6.2 Verify that the posting of
clarity and the Invitation to Bid as
completeness of the required under Section 21.2.1
contents) to afford the of the IRR of RA 9184 has
widest competition.
been complied with.
6.3 Take note of
discrepancies or cases of non-
compliance, if any.

7. Transparency of the 7. To verify if the 7.1 From the BAC

procurement process BAC implements a Secretariat, obtain a copy of
may be compromised procedure for the policy on the mechanism
if the PE lacks the ensuring that that the for identifying/selecting the
procedure for the two (2) independent group (professional
identification and observers from a organizations; non-
selection of observers private group in a governmental organizations)
of the procurement sector or discipline from which Observers were
process from relevant to the invited for specific
professional procurement at hand, procurements.
organizations and and the NGO do not 7.2 Review the policy and
NGOs, to ensure that have a conflict of compare its provisions with
they are interest in the the requirements under
knowledgeable and procurement at hand. Section 13 of the IRR of RA
independent. No. 9184 pertaining to the
selection of Observers for
specific procurements.
7.3 Obtain and evaluate
documents from the BAC
Secretariat evidencing
implementation of the policy
(e.g. relevant Minutes of the
BAC’s meetings,
documentation of the pool of
relevant professional
organizations and non-
governmental organizations,

8
Audit Area Risk Statements Audit Objectives Audit Procedures
invitation letters).
7.4 Take note of
discrepancies or cases of non-
compliance, if any.

8. Transparency of the 8. To verify whether 8.1 From the Minutes of the

procurement process invitations were BAC meeting on the selection
may be compromised issued and duly of the Observer from the
if independent received by “pool”, check for information
observers of the independent on the BAC’s evaluation in
procurement process observers as required regard to:
from professional by Section 13 of RA  the selection of the
organizations, CSOs 9184 and its IRR. organization from which
and COA are not (This objective and its the Observer will be
invited, or if invited attendant procedure invited;
are not present from and criteria are  knowledge, experience or
the posting of the included the topic on expertise in procurement or
Invitation to Bid until “VI. PRE-BID in the subject matter of the
Award of the Contract. CONFERENCE For contract to be bid;
procurement of goods  no actual or potential
with Approved conflict of interest in the
Budget for the contract to be bid; and
Contract of at least  conformed to other relevant
One Million Pesos (P criteria determined by the
1 Million) of the BAC.
GAP.) 8.2 From certified copies of
the invitations to the
Observers with evidence of
receipt, compare the date of
receipt with the 3-day
minimum requirement under
Section 13.3 of the IRR of
RA 9184.
8.3 Take note of
discrepancies or cases of non-
compliance, if any.

9 Independent 9. To verify if the 9.1 Request the PE for a

observers from BAC implements a documentation of BAC
professional procedure for procedures for ensuring that
organizations or CSOs ensuring that that the the 2 independent Observers
may have conflict of two (2) independent from the private sector and
interest. observers from the the NGO have no conflict of
private sector and the interest in the procurement at
NGO do not have a hand, if any.
conflict of interest in 9.2 Verify whether the
the procurement at BAC’s procedures require the
hand. two (2) Observers from the
private sector and the NGO to
accomplish and submit a
“Conflict of Interest Form” or
similar statement, indicating,
among others, the areas of
conflict, if any. The BAC
should prepare the Conflict of
Interest Form. If the BAC
does not prepare a Conflict of

9
 Audit Area Risk Statements Audit Objectives Audit Procedures
Interest Form, the CSO
Observer may prepare one, in
order to comply with Section
13.4(c) of the IRR of RA
9184.
9.3 Take note of cases of
non-compliance, if any.

Issuance of Bidding 10. Interference in the 10.. To verify if the 10.1 Compare the “period of
Documents equitable and efficient BAC made the availability of the Bidding
issuance of bid Bidding Documents Documents” indicated in the
documents in order to readily available to Invitation to Bid with the
favor certain all prospective first day of
prospective bidder/s. bidders from the time advertising/posting of the
the Invitation to Bid Invitation to Bid (day 1 of
was first advertised period) and the deadline for
up to the deadline for the submission of bids (last
the submission and day of period) and determine
receipt of bids to all compliance with Section 17.3
interested bidders. of the IRR of RA 9184.
10.2 Inspect the place and
address where Bidding
Documents may be inspected
and purchased at random
from the first day of posting
of the ITB until the deadline
for the submission of bids to
check that it is open and
manned during the hours
stipulated in the ITB.
10.3 On the first day of
posting, access the PhilGEPS
website, the website of the
procuring entity concerned, if
available.
10.4 Print the page where
the notice was posted (to form
part of the audit evidences).
10.5 Access the websites at
random from the first day of
posting up to the deadline for
the submission and receipt of
bids to verify the postings.

11. Issuance of 11. To verify whether 11.1 Request the PE for a

different works the PE has safeguards document outlining
requirements (plans, or controls to ensure mandatory safeguards and
specifications, contract that all prospective controls for ensuring equal
duration, Bill of bidders receive access to information as
Quantities) and exactly the same set required under Section 19 -
exclusively providing of approved bidding Access to Information of the
vital information to documents containing IRR of RA 9184, if any.
favor a particular exactly the same 11.2 Assess compliance with
prospective bidder. information required and effectiveness of these
Examples: for the preparation of safeguards, if any.
 location of a responsive bid, 11.3 Take note of any lack
acceptable sources including but not of procedures or cases of non-
of materials may be limited to the compliance with established

10
 Audit Area Risk Statements Audit Objectives Audit Procedures
purposely withheld description of procedures, if any.
from other technical
prospective bidders; requirements for
or goods and the
 plans and different works
specifications provided requirements (plans,
to other prospective specifications,
bidders may specify contract duration, Bill
additional but of Quantities) for
unnecessary or infrastructure projects
dispensable detailed and potential sources
work requirements to of indigenous
compel them to submit materials.
bids that are (Develop audit
significantly higher procedure and insert
than the favored under “Preparatory
bidder; or Activity: Bidding
 work quantities Documents for both
may be bloated or Goods and
excessively estimated Infrastructure” of the
and this information is GAP)
only confidentially
provided to the
favored bidder.

Submission and 12. Period from 12. To verify that the 12.1 Count the number of
Receipt of Bids issuance of bidding period from issuance days from the last day of
documents to the of bidding documents posting of the Invitation to
submission of bids to the submission of Bid (per printout of the web
may be too short for bids is sufficient for page with the date indicated
the preparation of the preparation of thereon) up to the deadline for
responsive and responsive and submission and receipt of
competitive bids. competitive bids. bids (per Bidding Documents)
and compare with the
 To verify if the maximum period of 45
BAC observed the calendar days for goods, and
maximum of 45 50- or 65-calendar-days for
calendar days from infrastructure projects.
the last day of posting 13.2 Take note of
of the Invitation to discrepancies or cases of non-
Bid up to the deadline compliance, if any.
for submission and
receipt of bids
 To verify if the
BAC observed the
maximum of 50 (or
65) calendar days
from the last day of
posting of the
Invitation to Bid up to
the deadline for
submission and
receipt of bids

13. Bid Security 13. To verify if the 13.1 Verify if the bid
offered may patently Bid Security is of the security is of the prescribed
not be of the prescribed form, form, amount and validity

11
 Audit Area Risk Statements Audit Objectives Audit Procedures
prescribed form, amount and validity period in accordance with
amount and validity period. Section 27 of the IRR of RA
period, or maybe fake. 9184.

14. There may be 14. To verify that 14.1 Verify the legal identity
“ghost bidders” who there are no of all bidders who have
do not legally exist, participating “ghost responded.
but are indicated in the bidders” who do not (NOTE; The legal existence
documentation of the legally exist. of losing bidders may also be
procurement process confirmed after award of the
as bona-fide bidders in contract through their
order to give a acknowledged receipt of
semblance of registered mail containing the
competition. notices by the BAC of the
decision to award the contract
to the successful bidder.
Notification of all losing
bidders is required under
Section 37.1.2. of the IRR of
RA 9184. Please refer to
Audit Procedure No. 19.1. )

Bid Evaluation 15. Bids may have 15. To verify if the 15.1 Observe the stages on
been unsealed prior to prescribed conditions Submission and Receipt of
their being opened in and procedures in the Bids, and Bid Evaluation,
public. submission and and/or review the Minutes of
receipt of bids were the Bid Opening to determine
followed (VIII. compliance with the
Submission, Receipt, requirements under Rule VIII
Opening of Bids & (Sections 23 to 29) and Rule
Preliminary IX (Sections 30 to 33) of the
Examination of Bids IRR of RA 9184.
for the Procurement 15.2 Take note of
of Goods and discrepancies or cases of non-
Infrastructure, pages compliance, if any.
107 and 301,
respectively of the
GAP)

16. The Lowest 16. To verify if the 16.1 Observe the Bid
Calculated Bid may be BAC disqualified Evaluation process and/or
higher than the ABC. bidders whose bids as analyze the TWG report, as
calculated were reviewed by the BAC,
higher than the ABC Minutes of the BAC meeting
(IX. Bid Evaluation on bid evaluation, Abstract of
for the Procurement Bids as Calculated, and
of Goods, p. 131 of Resolution of the BAC
the GAP) declaring the LCB, in regard
to disqualified bidders whose
bids are higher than the ABC
and verify compliance with
Section 31.1 of the IRR of
RA 9184.
16.2 Take note of
discrepancies or cases of non-
compliance, if any.

Post-Qualification 17. The BAC may 17. To verify if the 17.1 Observe the Post-

12
 Audit Area Risk Statements Audit Objectives Audit Procedures
recommend award to a BAC complied with Qualification process and/or
bidder who is not the required review the:
technically or conditions and  BAC Resolution declaring
financially capable to procedures in the the bidder with the LCB
successfully prosecute conduct of post-  Minutes of the BAC
the works to qualification (X. Post meetings on post-
completion, or to a Qualification for the qualification
bidder who has Procurement of  Other ancillary reports on
submitted fraudulent Goods and the Post-Qualification
statements of Infrastructure, pages conducted.
eligibility (Example: 137 and 327, 17.2 Determine compliance
insufficient contracting respectively of the with Rule X – Post-
capacity, track record, GAP) Qualification of the IRR of
conflict of interest) RA 9184.
17.3 Take note of
discrepancies or cases of non-
compliance, if any.

18. The BAC may 18. To verify and 18.1 Observe all stages of
declare a failure of validate the reasons the procurement process
bidding twice without for the declaration of and/or verify from the
justifiable cause, in a failure of bidding, Minutes of BAC meetings
order to resort to either by the BAC or and other records to
negotiated the HOPE. determine the reasons for
procurement. (Refer to Failure of declaration of a failure of
Bidding Declared By bidding.
the BAC and Failure 18.2 Validate the reasons of
of Bidding Declared the BAC and the HOPE for
by the HOPE, pages declaring a failure of bidding
169 and 175 and determine whether these
respectively, of the are in accordance with
GAP) Sections 35 and 41 of the IRR
of RA 9184.
18.3 Take note of instances
of non-compliance, if any.

Award of Contract 19. Award or 19. To verify whether 19.1 Determine the number
disapproval of the award or disapproval of days from the date of
Contract by the HOPE of the Contract by the receipt by the HOPE of the
may be delayed or may HOPE is made within recommendation for award to
exceed allowable time the time allowed by the date of approval and
limits law. compare with the 7-day or 15-
day period (for GOCCs/GFIs
) required under Sections
37.1.2 and 37.1.3
respectively, of the IRR of
RA 9184.
19.2Take note of instances of
non-compliance, if any.

20. The posted 20. To verify that the 20.1 Verify from the record
Performance Security performance security of receipt of the BAC the
may not be in was posted within the actual date of posting of the
accordance with the specified period after performance security and
conditions of the receipt of the Notice determine compliance with
contract. of Award, in the right Section 37.2.1 of the IRR of
form, amount, RA 9184.

13
 Audit Area Risk Statements Audit Objectives Audit Procedures
currency, issuing 20.2 Determine
entity and validity compliance of the amount,
period. currency, form, issuing
agency and validity period of
the performance security with
the requirements of Section
39 of the IRR of RA 9184.
20.3 Take note of cases of
non-compliance, if any.

21. The BAC or the 21. To verify if the 21.1 From the notices to the
PE may not comply following losing bidders, look for the
with transparency transparency date of its receipt and
requirements of the requirements on the compare with the 7-day or 15-
approval or approval or day requirement.
disapproval of the disapproval of the (NOTE; The legal existence
award of the contract. award were complied of losing bidders may also be
with: confirmed at this point
 the BAC shall through their acknowledged
notify all losing receipt of registered mail
bidders of its containing the notices by the
decision within the BAC of the decision to award
stipulated time; the contract to the successful
 The BAC, bidder. Please see Audit
through the Procedure No. 14.1.)
Secretariat, shall 21.2 Access the PhilGEPS
post, within three (3) website and the website of the
calendar days from procuring entity, and conduct
its issuance, the inspection of the area where
Notice of Award in the Notice of Award is to be
the PhilGEPS, the posted on the 3rd day from
website of the the issuance of the Notice of
procuring entity, if Award to the winning bidder.
any, and any 21.3 Access the PhilGEPS
conspicuous place in website and the website of the
the premises of the procuring entity where the
procuring entity. Notice to Proceed and the
 the PE shall post approved contract is to be
a copy of the Notice posted on the 15th calendar
to Proceed (NTP) day after the issuance of the
and the approved NTP.
contract in the 21.4 Take note of instances
PhilGEPS and the of non-compliance, if any.
website of the PE, if
any, within 15
calendar days from
the issuance of the
NTP

Alternative Methods 22. The alternative 22. To verify the 22.1 Refer to the same audit
of Procurement method of existence of the objective and the
procurement or conditions to justify corresponding procedures for
implementation the use of the various Alternative Methods
resorted to is not alternative mode of of Procurement in the GAP.
justified or necessary, payment.
and the setting aside
of stringent

14
 Audit Area Risk Statements Audit Objectives Audit Procedures
competition
requirements is
exploited to favor
certain suppliers or
contractors.
23. Splitting of 23. To verify that the 23.1 Verify that no
contracts may be PE has not resorted to splitting of contracts has been
resorted to as a splitting of contracts committed in resorting to the
contrived justification for the purpose of alternative procurement
for the alternative evading or methods of “Shopping” and
method of circumventing the “Small Value Procurement”
procurement in order requirements of law in violation of Section54.1 of
to circumvent the and the IRR of RA the IRR of RA 9184.
requirement for public 9184, especially the
bidding or approval of necessity of public
higher authorities. bidding and the
requirements for the
alternative method of
procurement.

Ethical Standards 24. Commission of 24. To observe, 24.1 Observe the

unlawful acts during verify and report if procurement process and
the procurement and there are prima facie review all bids and
selection process may indications of accomplished bid documents
prevent the attainment corrupt, fraudulent, accepted by the BAC for any
of project objectives. collusive, and prima facie evidence of
coercive acts corrupt, fraudulent, collusive,
committed during the and coercive acts as defined
procurement, to in ITB Clause 3.1, committed
warrant the rejection during the procurement.
of any and all bids, 24.2 Confirm the legal
declare a failure of existence of the bidders, who
bidding, or not award submitted bids during Bid
the contract. Evaluation and Post
Qualification of Bidders.
(Refer to Audit Procedure
Nos. 14.1 and 21.1.)
24.3 Take note and report
unlawful acts or conflicts of
interest, if any.

25. Conflict of 25. To verify 25.1 Observe the

interest during the whether the BAC has procurement process and
procurement and complied with the review all bids and
selection process may accomplished bid documents
requirements to
prevent the attainment accepted by the BAC.
of project objectives. disqualify bidders 25.2 Verify whether the
found to have BAC validated the sworn
conflicting interests. affidavit of the qualifying
bidder that it has no conflict
of interest in the project being
bid, as required Section 47 of
the IRR of RA 9184 and ITB
Clause 4.
25.3 Document all
observations of prima facie
violations of conflict of

15
 Audit Area Risk Statements Audit Objectives Audit Procedures
interest prohibitions under the
IRR of RA 9184, if any.

Contract The infrastructure

Implementation of project may not be
Infrastructure Projects completed in
accordance with the
terms of the contract
with regard to time,
quality, cost,
subcontracting and
other standards.

Contract Cost 1. The contract cost 1. To verify whether 1.1 Ascertain if the contract
may be excessive the contract cost is cost (and its supporting
reasonable Quantity and Unit Price)
accurately and consistently
reflects the requirements as
collectively described in the
plans, specifications and the
Program of Work including
the proposed construction
schedule, estimated
manpower and equipment
requirements, and reflects
reasonable prevailing unit
costs of construction inputs
(materials, labor, equipment
rental or operating rates,
consumables, and the like).
1.2 Take note of
discrepancies, if any.

Progress Payments 2. Payment may be 2. To determine that 2.1 Review progress

made for work that has all payments made payments
not been accomplished under the contract are 2.2 Inspect and validate
in accordance with the in accordance with work accomplished.
plans and drawings. contract terms and 2.3 Adopt
that work paid for “GEOTAGGING” to further
under the contract are document and validate
existent at the findings.
prescribed location, 2.4 Take note of
in the prescribed discrepancies between actual
dimensions and on work as verified and the work
the basis of an actual reported in the Statement of
accurate Work Accomplished (SWA)
measurement of and progress billings, and
quantities. instances of non-compliance,
if any.

Variation Orders 3. The issuance of 3. To determine that 3.1 Conduct inspection to

unnecessary and over- all payments for verify the need or justification
priced additive additional work made for the variation orders.
variation orders. under the contract are 3.2 Review and validate
in accordance with additional/deductive work
contract terms, and quantities and costs.
that Variation Orders 3.3 Use “GEOTAGGING” to

16
 Audit Area Risk Statements Audit Objectives Audit Procedures
are justified, further document and validate
necessary, duly findings.
approved and the 3.4 Take note of unnecessary
costs are reasonable. and over-priced variation
orders, and other
discrepancies if any.

Quality Control 4. The acceptance 4. To determine 4.1 Inspect and take needed
and payment of whether work measurements of the work
defective work. requirements as accomplished and paid to the
expressed in the Contractor based on the latest
technical Statement of Work
specifications and Accomplished and determine
plans are strictly whether there are observable
complied with under defects.
the contract. 4.2 In case of noticeable
defects in the work, conduct
further investigation on the
reliability of quality control
tests performed whether they
are conducted by accredited
testing centers. Conduct
independent tests if
necessary.
4.3 Take note of any
discrepancy or observable
defect in the work, if any.

Contract Time 5. The 5. To determine 5.1 Review suspension

Extension and issuance/granting of whether suspension orders, contract time
Suspension unjustified suspension of the work, contract extensions and additional
of work and contract time extensions due contract time granted (or
time extensions. to unforeseen delays deducted) due to variation
and additional work orders and determine whether
are reasonable and these are justified under the
justified. GCC, and Sections 9 and 10
of Annex “E” Contract
Implementation Guidelines
for the Procurement of
Infrastructure Projects of the
IRR of RA 9184.
5.2 Take note of any
suspension of the work or
contract time extensions that
are not justified or
reasonable.

Liquidated Damages 6. Liquidated 6. To determine 6.1 Determine the new

damages may not be whether completion intended completion date for
imposed in spite of of the work under the the project based on the NTP
substantial delays in contract is delayed to and the contract time, plus
the prosecution and warrant the any time extension duly
completion of the imposition of granted.
work. liquidated damages 6.2 Verify the actual work
and/or rescission of accomplishment as of the
the contract. intended completion date.
6.3 Determine whether
completion of work is

17
 Audit Area Risk Statements Audit Objectives Audit Procedures
delayed and whether the PE
has imposed the correct
amount of liquidated damages
as specified under Section 68,
and Section 8 of Annex “E”,
of the IRR of RA 9184.
6.4 Take note of instances
of failure to impose liquidated
damages, if any.

Contract Price 7. The granting of 7. To determine that 7.1 Validate justifications

Adjustment and unnecessary, excessive all adjustments to the and review computations for
Escalation contract price contract price and the contract price
adjustments or contract price adjustment/escalation to
escalation. escalation are determine whether these are
reasonable and in accordance with Section 61
calculated according - Contract Prices, and
to the terms of the Appendix 9 - Revised
contract. Guidelines for Contract Price
Escalation, of the Revised
IRR of RA 9184, 6th Edition,
2012.
7.2 Take note of incidents
of non-compliance with
contract terms and/or any
discrepancy, if any.

Subcontracting 8. The selection and 8. To determine 8.1 Request for a list of all
engagement of whether the PE has subcontracts approved by the
subcontractors may not ensured that PE including the eligibility
be in accordance with conditions of the documents required to be
the conditions of the contract with regard submitted by subcontractors
contract. to sub-contracting are under ITB Clause 12 for the
(Subcontractors may complied with. infrastructure contract being
not be eligible, may (Subcontractors are implemented and determine
have conflict of eligible, have no whether the subcontractors
interest and/or have conflict of interest, comply with the eligibility
not been approved to are approved by the criteria in the BDS.
work on the project, PE for work on the (NOTE: To validate that the
and the total amount of project, and the total list includes all
all subcontracts may amount of all subcontractors, or as an
exceed 50% of the subcontracts do not alternative in case the PE
value of the contracted exceed 50% of the does not cooperate, the
works.) Auditor may invoke or cite
value of the
Clause 34.3. of the GCC
contracted works.)
which states: “The
Contractor shall permit the
Funding Source named in the
SCC to inspect the
Contractor’s accounts and
records relating to the
performance of the
Contractor and to have them
audited by auditors appointed
by the Funding Source, if so
required by the Funding
Source.”)
8.2 Review all subcontracts

18
 Audit Area Risk Statements Audit Objectives Audit Procedures
and determine whether:
 Subcontractors are eligible
and have no conflict of
interest
 Subcontractors are
approved by the PE for work
on the project
 The total amount of all
subcontracts do not exceed
50% of the value of the
contracted works
as required under Clause 8 –
Subcontracting of the GCC,
ITB and the BDS of the
Philippine Bidding
Documents, 4th Edition.
8.3 Take note of any
incidents of non-compliance
with contract terms and/or
any discrepancy, if any.

Contract Completion 9. The Contractor 9. To determine 9.1 Review contract

may fail to issue a whether the completion and turnover
warranty against Contractor issued a documents to determine
Structural Defects or warranty against compliance.
Failures, after final Structural Defects or 9.2 Take note of incidents
acceptance of the Failures, after final of non-compliance with
Works. acceptance of the contract terms and/or any
Works by the discrepancy, if any.
Procuring Entity.
Transparency 10. The implementing 10. To verify that 10.1 The SA/ATL and
Requirements agency’s (IA) non- the IA strictly Technical Audit Specialist
compliance with complies with the shall ascertain compliance of
information and information and the IA with the requirements
publicity requirements publicity of COA Circular No. 2013-
for infrastructure requirements under 004, dated January 30, 2013.
projects may result in COA Circular No. 10.2 The ATLs and SAs
the implementation of 2013-004, dated shall submit reports of non-
“ghost projects” that January 30, 2013. compliance, if any.
have already been 10.3 As an enhancement,
undertaken and geo-tagged photos of
completed by other signboards for infrastructure
agencies.(Example: projects and their immediate
Farm to market roads location should be taken by
implemented and the Technical Audit Specialist
completed with and crossed-checked for
national funds by the overlap with other concurrent
Agrarian Reform PPAs by other IAs
Development Program implementing similar projects
(ARDP) may be in a particular locality.
proposed for
procurement by the
LGU in the locality,
resulting in the loss
and wastage of public
funds.)

19
 Audit Area Risk Statements Audit Objectives Audit Procedures
Ethical Standards 11. The commission 11. To verify if the 11.1 Request the PE or scan
of unlawful acts during PE has determined media for information on
contract prima facie that the prima facie unlawful deeds by
implementation may Contractor has the Contractor relative to
prevent the attainment engaged, before or contract acquisition and
of project objectives. during the implementation.
implementation of the 11.2 Observe the
contract, in unlawful procurement process, collate,
deeds and behaviors review and analyze all
relative to contract procurement documents
acquisition and including results of the audit
implementation that and determine whether there
would warrant the is any prima facie evidence
termination of the that the Contractor has
contract under Clause engaged, before or during the
18.3(h) of the GCC. implementation of the
contract, in unlawful deeds
and behaviors relative to
contract acquisition and
implementation as defined in
Paragraph 18.3(h) of the
GCC, PBDs for Infrastructure
Projects, 4th Edition.
11.3 Take note of prima
facie evidence of unlawful
deeds and behaviors relative
to contract acquisition and
implementation or areas for
improvement, if any.

20
2.4 Audit Responsibility
The following table is based on an analysis of the competency requirements (non-
technical and technical) of the different procedures derived from a risk-based approach in
the audit of procurement and infrastructure contract implementation. It also shows certain
procurement audit procedures wherein the collaboration of the Auditor and the Technical
Audit Specialist are required. The competency requirements outlined in the table may be
considered together with other risk indicators attributable to the type, amount and
complexity of the goods or infrastructure projects which are the subject of procurement,
in prioritizing audit work in order to maximize effectiveness in the face of limited audit
resources.

Person Responsible
Audit Objectives and Procedures Technical Audit
Auditor
Specialist
PROCUREMENT OF GOODS AND INFRASTRUCTURE PROJECTS

Procurement Planning 1 

Bid Documents Preparation/Detailed Engineering 2 

Bid Documents Preparation/Detailed Engineering 3 

Bid Documents Preparation/Detailed Engineering 4 

Bid Documents Preparation/Detailed Engineering 5 

Invitation to Bid 6 

Invitation to Bid 7 

Invitation to Bid 8 

Invitation to Bid 9 

Issuance of Bidding Documents 10 

Issuance of Bidding Documents 11 

Submission and Receipt of Bids 12 

Submission and Receipt of Bids 13 

21
 Person Responsible
Audit Objectives and Procedures Technical Audit
Auditor
Specialist
Submission and Receipt of Bids 14 

Bid Evaluation 15 

Bid Evaluation 16 

Post-Qualification 17 

Post-Qualification 18 

Award of Contract 19 

Award of Contract 20 

Award of Contract 21 

Alternative Methods of Procurement22 

Alternative Methods of Procurement 23 

Ethical Standards 24 

Ethical Standards 25 

CONTRACT IMPLEMENTATION OF INFRASTRUCTURE PROJECTS

Contract Cost 1 

Progress Payments 2 

Variation Orders 3 

Quality Control 4 

Contract Time Extension and Suspension 5 

Liquidated Damages 6 

22
 Person Responsible
Audit Objectives and Procedures Technical Audit
Auditor
Specialist
Contract Price Adjustment and Escalation 7 

Subcontracting 8  

Contract Completion 9 

Transparency Requirements 10  

Ethical Standards 11  

2.5 Applicability of the Guide to Procurement under Foreign-Assisted

Projects (FAPs)

Audit risk statements, objectives and procedures reflected in this Handy GAP are based
on procurement procedures and standards provided for under R.A. 9184, its IRR, 6 th
Edition, 2012, the Philippine Bidding Documents (PBDs), 4th Edition, December 2010
and other amendments approved under recent GPPB Resolutions (cited in the Annexes to
this Handy GAP) that are not yet reflected in the latest editions of the IRR and the PBDs.

This Handy GAP also provides a more detailed reference in the planning and execution of
the audit of procurement for Foreign-Assisted Projects (FAP) that can be used in
conjunction with the COA “Guidelines on the Audit of Foreign-Assisted Projects”
(GAFAP) institutionalized by COA Memorandum No. 2015-004 dated March 10, 2015.
The GAFAP also contains a generic procurement audit program with a statement of risks,
audit objectives and procedures addressed to FAPs. Inasmuch as the recent versions of
IRR and PBDs of R.A. 9184 on which the updated Handy GAP is based, are already
harmonized with procurement procedures of foreign development partners (ADB, JICA
and World Bank) who provide funding assistance for various projects of the GOP, audit
procedures for the audit of procurement under FAPs will simply involve formulation of
risk statements peculiar to the FAP and the stipulation of procurement criteria (eligibility
of bidder, procedures for bid evaluation, etc.) already provided in the harmonized IRR
and PBDs as applicable to foreign bidders and FAPs. This will readily apply to the audit
of FAPs wherein procurement procedures under R.A. 9184 are found acceptable by the
international funding institution, in whole, or with some modifications, as stipulated in
the loan or grant conditions.

23
 LIST OF ANNEXES
ANNEX 1 – R.A. 9184, GOVERNMENT PROCUREMENT REFORM ACT

ANNEX 2 – IRR OF R.A. 9184, 6th Edition, 2012

ANNEX 3 – PHILIPPINE BIDDING DOCUMENTS FOR PROCUREMENT OF

GOODS, 4th Edition, December 2010

ANNEX 4 – PHILIPPINE BIDDING DOCUMENTS FOR PROCUREMENT OF

INFRASTRUCTURE PROJECTS, 4th Edition, December 2010

ANNEX 5 – GENERIC PROCUREMENT MANUAL, Volume 1, Guidelines on

the Establishment of Procurement Systems and Organizations

ANNEX 6 – GENERIC PROCUREMENT MANUAL, Volume 2, Manual of

Procedures for the Procurement of Goods and Services

ANNEX 7 – GENERIC PROCUREMENT MANUAL, Volume 3, Manual of

Procedures for the Procurement of Infrastructure Projects

ANNEX 8 – COA CIRCULAR NO. 2012 - 003, October 29, 2012

ANNEX 9 – COA CIRCULAR NO. 2013 - 004, January 30, 2013

ANNEX 10– COA MEMORANDUM NO. 2015-004, March 10, 2015

ANNEX 11 – GUIDELINES ON THE AUDIT OF FOREIGN-ASSISTED

PROJECTS (FAPs), User Manual

ANNEX 12 – COA RESOLUTION NO. 2015-014, April 6, 2015

ANNEX 13 – GPPB RESOLUTIONS

13.1 GPPB Resolution No. 25-2012, November 23, 2012,

Approving Amendments To The Philippine Bidding
Documents For The Procurement Of Goods, Infrastructure
Projects And Consulting Services

13.2 GPPB Resolution No. 11-2013, April 26, 2013, Approving

Amendments To The Philippine Bidding Documents For The
Procurement Of Goods [ITB and BDS Clause 29.2(a)],
Infrastructure Projects [ITB and BDS Clause 28.2(a)], and
Consulting Services [ITB and BDS Clause 27.2(a)]/

13.3 GPPB Resolution No. 12-2013, May 10, 2013, Approving the
Amendments of Sections 23.6, 24.6, and 53.5 of the Revised
Implementing Rules and Regulations of Republic Act No.
9184, and its Associated Provisions in the Implementing
Guidelines on Agency-To-Agency Agreements

24
13.4 GPPB Resolution No. 20-2013, July 30, 2013, Approving
Amendments to Sections 23.1(a) (vi), 23.5.1.4 and 23.5.2.6 of
the Revised Implementing Rules and Regulations of Republic
Act No. 9184; Clauses 5.5 and 12.1(a)(v) of the Instructions to
Bidders of the Philippine Bidding Documents for Goods; and
Clauses 5.5 AND 12.1(a)(vi) of the Instructions to Bidders of
the Philippine Bidding Documents for Infrastructure Projects

13.5 GPPB Resolution No, 21-2013, July 30, 2013, Approving

Amendments to Sections 23.1(a), 24.1(a) and 34.2 of the
Revised Implementing Rules and Regulations of Republic Act
no. 9184 and the Philippine Bidding Documents for Goods,
Infrastructure Projects and Consulting Services

13.6 GPPB Resolution No, 22-2013, July 30, 2013, Approving

Amendments to Sections 25.2(a)(iv), 25.2(b)(iv) and
25.2(c)(iv) of the Revised Implementing Rules and Regulations
of Republic Act No. 9184

13.7 GPPB Resolution No. 25-2013, August 30, 2013, Approving

Amendments to Sections 27.2, 27.5 and 39.2 of the Revised
Implementing Rules and Regulations of Republic Act No.
9184; the Philippine Bidding Documents for Goods,
Infrastructure Projects and Consulting Services; and, the
Guidelines for the Use of Bid Securing Declaration

25