What is the “Approved Budget for the Contract” or the ABC?

The ABC is the budget for the contract duly approved by the Head of the Procuring Entity, as provided for in:

  1. The GAA and/or continuing appropriations, in the case of NGAs;

  2. The corporate budget for the contract approved by the governing board, pursuant to E.O. No. 518, series of 1979, in the case of GOCCs and GFIs; and R.A. No. 8292, in the case of SUCs; or

  3. The budget approved by the Sanggunian in the case of LGUs.

Thus, the ABC referred to in R.A. 9184 and its IRR-A basically refers to the proposed budget for the project approved by the Head of the Procuring Entity based on the APP as consolidated from various PPMPs.2

What are the factors that should be considered in determining the ABC?

In determining the ABC, the PMO or end-user unit, with the assistance of the TWG (when necessary), must consider the different cost components, namely:

  1. The cost or market price of the product or service itself;

  2. Incidental expenses like freight, insurance, taxes, installation costs, training costs, if necessary, and cost of inspection;

  3. The cost of money, to account for government agencies usually buying on credit terms;

  4. Inflationary factor, since the planning phase is usually done one year ahead of the actual procurement date;

  5. Quantities, considering that buying in bulk usually means lower unit prices; and

  6. The supply of spare parts and/or maintenance services, if these are part of the contract package.
If the project or contract has a foreign component, it is also best to include a currency valuation adjustment factor, in order to address foreign exchange rate fluctuations between the planning phase and the actual procurement date. To determine the factor to be used, the PMO or end-user unit may request for guidance from the BSP, or refer to BSP forecasts, if available.

If the sum of the different cost components is lower than the appropriation for the procurement, then the ABC should be equal to the sum of the cost components. If the resulting sum is higher than the appropriation, it is advisable to review the technical specifications and the computation of the ABC. In any case, the ABC should not exceed the appropriation.

In case of adjustment of ABC due to failure of bidding, GPPB Resolution 07-2005 provides that the ABC may be adjusted upwards only under the following conditions:

  1. There has been failure of bidding for the second time due to all bids submitted exceeding the ABC or no bids have been submitted, or failure in the negotiated procurement after two failed biddings; and

  2. There has been previous modification of the terms, conditions and specifications of the project based on Section 35 of the IRR-A, except when the project is indivisible, where the technical component is an integral part of the whole that cannot be reduced, and it constitutes the minimum requirement of the Procuring Entity for which there are no substitutes.
GPPB Resolution 07-2005 further states that the ABC may be adjusted downwards if there is a need to reflect actual market prices and/or scope of work or suit actual field conditions of the project. Upon adjustment of ABC, the Procuring Entity must conduct re-bidding with readvertisement/ posting. Any succeeding adjustment of the ABC shall be in accordance with these guidelines.


2 For FAPs, reference to the standard bidding documents for the project should be made to determine the applicability of the ABC.

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