While many large scale infrastructure and local government projects have traditionally required surety bonds to cover 100% of the contract value for large infrastructure projects, there is a growing trend in procurement to allow flexibility in reducing performance bonds primarily to encourage competition during the bidding process.
Understanding the financial risk of doing business with a supplier or vendor is vital to an organization’s long-term stability. A comprehensive financial condition analysis is a must in order to prequalify and assess the financial stability of every potential and current supplier, not just the big ones.
Updating the requirements to include a full financial condition analysis of a contractor or vendor would ensure that only those with appropriate and adequate financial capacity, proven financial performance and acceptable financial condition rating, as assessed against a qualification criteria, will have its bids and proposals progress into the next stage of evaluation.
The Philippine economy can expect to benefit from revived infrastructure spending in the latter half of this year. Given the importance of ensuring that planned infrastructure projects are not plagued by delays and cost overrun, it would be much appreciated to ensure that the bidding process is protected from one perennial reason for such problems: inappropriate and inadequate procurement.
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