DISPOSAL OF GOVERNMENT PROPERTY

Transcription

1 FC DISPOSAL OF GOVERNMENT PROPERTY December 2005 The information contained in this document is not to be communicated, either directly or indirectly to any person not authorized to receive it.

2 HEADQUARTERS TRAINING AND DOCTRINE COMMAND, PHILIPPINE ARMY Camp O Donnell, Brgy Sta Lucia, Capas, Tarlac F O R E W O R D The Training and Doctrine Command, Philippine Army has long been conducting training for the Army s personnel, mostly to strengthen their knowledge on FC Disposal of Government Property. The demands of such doctrine have been increasing; hence the need for comprehensive reference material (RM) for the Army school could not be overemphasized. We welcome the printing of this RM. This is the product of the fixing initiatives of our newly-invigorated Doctrine Center. This is expected to benefit the instructors and students of the Training and Doctrine Command as it discusses the salient features of Admin or Management. More importantly, researchers and writers of military doctrines will also find this reference material useful. By being aware of the importance as well as the substance of its contents, the users will be able to properly utilize and employ them in order to exploit their useful implication in the Army s operations. While the concepts and guidelines embodied in this RM have been thoroughly validated, these have been accredited by TRADOC for the use of all Army schools. This is to be further subjected to test and evaluation prior to the promulgation of CSAFP for widest dissemination. As such, we are soliciting your valued inputs and insights to make it more responsive and dynamic amidst the ever-changing operational environment. CARLOS B HOLGANZA Major General, AFP Commander i

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4 ACKNOWLEDGMENT This reference material entitled Disposal of Government Property is an adaptation of the readings on related laws, policies and guidelines on the disposal of properties that are being used for instructions at the Service Support Training Center, Army Support Command, Philippine Army. The accreditation of this reference material is part of the Army s initiative of standardizing and regulating the training literatures that will be used by Army schools and training units. Use of other literatures that may enhance appreciation of students on the contents of this material shall be subject to the accreditation procedure that will be facilitated by the Doctrine Center, Training & Doctrine Command, Philippine Army. iii

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6 PREFACE 1. Purpose This reference material is intended for use as training guide and reference text for Army personnel responsible for planning and implementing disposal of government properties. 2. Scope and Applicability This reference material provides guidelines and information on the disposal of government properties. It includes topics on identification and appraisal of the properties to be disposed of and the mode by which they will be disposed following certain general procedures. It also includes legal provisions, responsibilities, procedures, conditions and requirements that must be considered in disposal actions. This highly informative and prescriptive material is highly valuable to government agencies such as the Philippine Army. 3. User Information The proponent of this reference material is the Service Support Training Center, ASCOM, PA. However, Doctrine Center is responsible in the review and updating of this publication. Send comments and recommendations to Commanding General, TRADOC, PA, Fort Magsaysay, 3130 Nueva Ecija, Attn: Doctrine Center. 4. Gender Unless this publication states otherwise, masculine nouns and pronouns do not refer exclusively to men. v

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8 CONTENTS Foreword Acknowledgment Preface Contents i iii v vii Section Title Page CHAPTER 1 - DISPOSAL 1-1 Overview 1-1 CHAPTER 2 PROPERTY DISPOSAL 2-1 Introduction Disposal Activities/Processes Guidelines in the Sale of Properties Disposal Activities 2-21 ANNEX A Inventory and Inspection Report of A- 1 Unserviceable Property ANNEX B Waste Material Report Format B-1 ANNEX C Invoice Receipt for Property Format C-1 ANNEX D Table of Estinated Useful ives D-1 ANNEX E Table of Peso/Dollar Exchange Rate E-1 vii

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10 CHAPTER 1 DISPOSAL Section 1-1 Overview Disposal is the end of the life cycle of a government property. This chapter discusses the reason and the modes for disposing them, the types of assets that are subject to disposal, how they are inspected and appraised including the formula for their appraisal and the process and the documents required in their disposal. 1. Learning Objectives At the end of the chapter, you will be able to: a. Identify the assets that may be disposed off; b. Enumerate the modes of their disposal; c. Discuss the requirements in inspecting and appraising them; and d. Enumerate the general procedures that may be followed and the documents required in disposing these assets. 2. Basic Concepts. Despite the proliferation of various laws, rules and regulations governing disposal of property, a considerable quantity of unserviceable, no longer needed, obsolete, forfeited/seized, supplies, materials and equipment and valueless records which have grown into unmanageable and uneconomical proportions now exists in the various government agencies. To save on cost of maintaining such property there is a need for their disposal. Pursuant to EO No. 888 Sec. 1 and COA Cir. No the full and sole authority and responsibility for the divestment or disposal of properties and other assets owned by the National, Corporate and Local Government Units including its subsidiaries shall be lodged in heads of the departments, bureaus and offices or governing bodies or managing heads of the concerned entities. 3. Modes of Disposal a. Condemnation/Destruction of Property. Through pounding, burning, breaking, shredding, throwing or any other method by which the property is disposed beyond economic recovery. Destruction shall be made in the presence of the Disposal Committee. 1-1

11 b. Transfer of Property. Upon initiative of owning agency or submission of request to owning agency, this may be done either with or without cost. Cost herein refers to payment based on the appraised value of the property. c. Barter. An agency transfers property to another government agency in exchange for another piece of property. The value of the property transferred may not be equivalent to that being received. d. Donation of Property. May be to charitable, scientific, educational, or cultural institutions. e. Sale of Unserviceable Property 1) Sale thru Public Bidding as a general rules, is the mode of disposal. This is done thru sealed public bidding or when circumstances warrant, by viva voce. 2) Sale thru Negotiated Sale is resorted to as a consequence of failed bidding. 4. Property/Assets Subject to Disposal. The following are subject to disposal: a. Unserviceable property b. Confiscated/Seized property c. Property under distrait/levy/garnishment d. Unclaimed Motor Vehicles e. Real Property f. Valueless Records/Documents 5. Unserviceable Property. Pursuant to Sec. 79 of PD 1445 When government property has become unserviceable for the any cause or its no longer needed, it shall, upon application of the officer accountable therefore, be inspected by the head of the agency or his duly authorized representative x x x and if found to be valueless or unserviceable, it may be destroyed. If found valuable, it maybe sold at public auction to the highest bidder under the supervision of the proper committee on award or similar body x x x. In the event that public auction fails, the property may be sold at a private sale at such prices as may be fixed by the same committee or body concerned x x x. a. Determining Factors in the Disposal of Unserviceable Property 1-2

12 1) Property, which can no longer be repaired or reconditioned; 2) Property whose maintenance costs of repair more than outweighs the benefits and services that will be derived from its continued use; 3) Property that has become obsolete or outmoded because of changes in the technology; 4) Serviceable property that has been rendered unnecessary due to change in the agency s function or mandate; 5) Unused supplies, materials and spare parts that were procured in excess of requirements, and 6) Unused supplies and materials that has become dangerous to use because of long storage or use of which is determined to be hazardous. b. Submission of Documents Pertinent to the Disposal of Unserviceable Property. Accountable officials in possession of unserviceable property shall submit to the Disposal Committee through their respective heads of offices, the following accomplished form, as appropriate: 1) Inventory and Inspection Report of Unserviceable Property (Appendix 9-14) for semi-expendable materials and equipment and non-expendable supplies, accompanied by any of the following, whichever is appropriate: (a) Individual survey report, duly certified by the Supply Officer and Head of Agency (b) List of missing spare parts duly certified by the Supply Officer and Head of Agency vehicles, and (c) (d) Stencils of chassis and engine numbers of motor Current photographs in two positions. 2) Waste Materials Report (Appendix 9-12) for expandable materials, supplies and consumables including spare parts, empty containers, and remnants from destroyed or damaged fixed assets. 6. Confiscated/Seized Property. Properties which come into the ownership and possession of the government as a result of its implementation enforcement of laws and regulations and to avoid accumulation and loss of 1-3

13 their economic value as well as to generate revenue for the government, the following confiscated/seized property are authorized to be disposed in accordance with existing laws, rules and regulations. a. Timber and other forest products b. Property in Customs Custody c. Narcotics and Dangerous Drug 7. Property under Distraint/Levy/Garnishment. Refers to the personal and/or real property of a taxpayer forfeited to the government for failure to pay taxes. Whenever a delinquent taxpayer fails to settle his tax liabilities, the government thru the BIR may issue and execute warrant of distraint, levy and/or garnishment of properties of the said taxpayer. The government is likewise authorized to administer, control and dispose of such properties. 8. Unclaimed Motor Vehicles. The government s campaign against car napping resulted to recoveries of stolen motor vehicles by the different law enforcement agencies of the government. Due to the absence of claimants and the real owners can no longer be determined those recovered vehicles remained unclaimed. To avoid accumulation and further deterioration of those motor vehicles as well as the incidence of unnecessary maintenance expenses to the government, disposal of said vehicles has been authorized. 9. Real Property. The issuance of Executive Order No. 285 dated July 25, 1987 transferred the functions of the Building Services and Real Property Management Office, as follows: a. DPWH 1) Inventory, inspection, appraisal & determination of the value of buildings owned by the national government. b. DENR 2) Disposal of government owned buildings. 1) Custody and administration of commercial, industrial and urban properties under the management of the abolished Building and Real Property Management Office, 2) Sale, lease, rental or transfer of these commercial, industrial and urban lands. c. Administrative Code of

14 1) Public Contracts & Conveyances (a) (b) Local Governments Officials authorized to convey real property Conveyance of National Government Property to (c) Conveyance and Contracts to which the Government is a Party d. Republic Act No. 477 dated 12 September An Act to provide for the administration and disposition of properties including the proceeds and income thereof transferred to the Republic of the Philippines, under the Philippine Property Act of 1946 and Improvements thereon transferred the National Abaca and Other Fibers Corporation under the provisions of EO No.99 dated 22 October e. Batas Pambansa Bldg. 233 dated 12 September An Act authorized the sale of Commercial and industrial Lands of the Public domain (commonly known as NAFCO lands), transferred from the Board of Liquidators. Lands acquired under the provision of this Act shall not be sold or otherwise alienated within a period of 5 years from such acquisition without prior approval. f. DBM-DENR-DPWH Joint Circular No. 1 dated 30 September ) Real property under national government jurisdiction enumerated under Chapter 1 of this Joint Circular may be disposed. 2) Procedural Guidelines is provided for under Chapter 1 of the DBM-DENR-DPWH Joint circular No. 1 dated 30 September (a) Sale of former alien-owned properties. All lands, which have been or may hereafter be transferred to the Republic of the Philippines under the provisions of EO No. 29 dated 25 October 1946 and EO No. 99 dated 22 October 1947, may be disposed of by sale. Sale of these lands may either be thru public auction or without public bidding. (1) Procedures for Sale without public bidding Upon a written application by the occupant to purchase the land be occupies, the Real Property Management Division, Lands Management Bureau of DENR process said application after of the land shall be made. Qualified applicants are notified in writing, personally or by registered mail of the award and the corresponding 1-5

15 cost of the lot. No absolute sale shall be executed if there is any pending administrative or court case involving the lot applied for. After full payment of the lot, the Deed of Absolute Sale shall be executed by and between the Secretary and the vendee. Upon approval of the Deed of Absolute Sale, the DENR shall cause the issuance of the title in the name of the vendee thru the proper government entity, the expense thereof to be defrayed by the vendee. (2) Procedures for Sale thru Public Auction Auction by sealed bids. Lands that may be sold thru Public or private domain of the public or private domain Unoccupied lands of the public Unoccupied reclaimed lands Occupied lands of the public domain by one who has no valid permit (squatters) Occupied lands of the public domain which are not sought to be purchased by their occupants. Occupied lands of the public domain for less than 10 years at the time of filing of hid application to purchase the land and improvements thereon. Occupied reclaimed lands of the public or private domain by one with a valid permit domain Occupied lands of the private Price of the land must be less than the appraised value of the land and improvement thereon as determined by the Appraisal Committee. Qualified applicants: otherwise disqualified by law i. Filipino citizen not 1-6

16 the family ii. Legal age or head of iii. Judicial entities who have acquired vested rights over the land pursuant to Opinion No. 133 s. of 1984 and 98 s. of 1985 of then Ministry of Justice and Judicial pronouncements (3) Procedures for Sale thru sealed bidding When an applicant made an applicant made improvement on the land or building by virtue of or lease granted to him by competent authority: the higher bidder Land/building is awarded to of the applicant, his bid shall be accepted. If 2 or more equal bids is that If his bid is not one of such equal and higher bids, he shall have the option to equal the highest bid. comply with requirements: When successful bidder fails to If other than the applicant, and does not reimburse the latter of the value of the improvements as deter-mined by the Appraisal Committee. Refuses or neglects to execute the necessary contract within 60 days from receipt of notice of award: cancelled and considered without force; i. Award automatically ii. Any deposit made by such bidder shall be deemed forfeited in favor of the government When no bid is received: Another bidding is called After the third bidding, and still no bid is received other than that of the applicant: i. Right to purchase the land and improvements on a price not less than assessed value of the land and improvement shall be awarded to the applicant upon payment within

17 days after receipt of request therefore or are least 10% of value of land and improvements or upon full payment thereof; be rejected ii. Otherwise, the bid shall No bid shall be considered unless accompanied by a de-posit either in cash, certified check or postal money order payable to DENR in an amount equivalent to 10% of the appraised value After deducting amount deposited at the bidding, balance may be paid in lump sum or in not more than 9 annual installments with an interest rate of 6% p.a. for any amount due and payable. Where a re-survey of re-location of the land applied for is necessary, all expenses therefore including the preparation of plans and other papers shall be defrayed by the purchaser Execution, transmission and approval of the conditional and absolute deeds of sale of property and issuance of titles thereto shall be governed in so far as applicable by the procedure & requisites in the award. (b) Sale of Residential, Commercial or Urban Lands, including Buildings and other improvement owned by the National government. Any person, not otherwise disqualified by law, may apply for purchase of this real property owned by the national government which are open for disposition: Provided that preference be given to educational, charitable, civic & other similar organizations. 10. Valueless Record/Documents. They include all record materials that have reached their prescribed retention periods and usefulness to the agency or the government as a whole. It excludes library and museum materials, documents submitted for copyright, models, copies of documents preserved for references, and stocks of publications and processed documents. a. The disposal shall be guided by EO No. 301 dated 26 July ) Provides for the decentralization of records disposal and mandated the Records Management & Archives Office (RMAO) of Department of Education to prescribe uniform standards or guidelines to be followed by government offices 2) For every records disposal undertaken by an agency, a report thereon shall be prepared and submitted to RMAO, describing briefly the records disposed of and the manner of their disposition. 1-8

18 b. Records. Records mean any paper, book, photograph, motion picture film, microfilm, sound recording, drawing, map or other document of any physical form or character whatever, or any copy thereof, that has been made by any entity or received by it in connection with the transaction of public business, and has been retained by that entity or its successors as evidence of the objectives, organization, functions, policies, decisions, procedures, operations or other activities of the government, or because of the information contained therein. c. Specific Activities and Procedures in the Disposal of Records 1) Inventory of Records Schedules 2) Observance of General/Agency s Records Disposition 3) Agency s Records Disposition schedule (Appendix 9-15), any revision or changes in the Schedule shall likewise be submitted for approval by the Director, RMAO, as the need arises. 4) Request for Authorization: (a) No agency shall destroy or sell any record without having first secured authority from the Director of RMAO. (b) Each agency shall submit to RMAO four (4) copies of accomplished Request for Authority to Dispose of Records. (Appendix 9-16) 5) Appraisal and examination of disposable records 6) Authority to Dispose (a) Vested on the RMAO director acting for the Dept. of Educations Secretary with the concurrence of the head of the agency concerned per recommendation of the Records Management analyst of RMAO who appraised the records (Appendix 9-17). (b) All records pertaining to claims and demands by the government of the Philippines either as a debtor or creditor, and are required to be audited shall not be destroyed or disposed of by the head of any entity under the authorization granted without the necessary clearance from the Commission on Audit, certifying among other things that the records for disposal are not involved in any case. 7) Safekeeping of valueless records until its disposal is authorized is lodged in the Records Officer who is in custody of the records holding of an agency 1-9

19 8) RMAO, together with the representative of Dept. of Education, may re-examine records for disposal as the need arises (a) Actual disposal of records shall be witnessed by representative of the agency concerned & RMAO: (1) To safeguard the sanctity of the records. (2) To check that the records to be disposed are the same records which were appraised and examined. (3) No insertions have been done 9) Authority to conduct Public Bidding (a) Each agency shall conduct public bidding for the disposal of valueless records once a year, preferably towards the end of the calendar year (1) Effective of contract of winning bidder shall be in January of the following year. contract (2) RMAO shall be furnished a copy of the 10) Certificate of Disposal of Records (Appendix 9-18) 11) Proceeds from sale of disposable valueless records shall be remitted to the National/Corporate/Local Fund 12) File Breaks are generally set during the slack periods of filing and servicing, usually at the end of the fiscal or calendar year. (a) Records are disposed of periodically, usually once a year, soon after a file break 11. Guidelines in Disposal (Refer to Appendix 6.0 for the General Disposition Schedule) a. General Procedures 1) Once supplies/property becomes unserviceable from any cause or are no longer needed, the officer immediately accountable therefore shall return the same to the Property Officer/equivalent position concerned. 2) The Property Officer/equivalent position shall file an application for disposal with appropriate documents to the COA Auditor. 1-10

20 3) The COA Auditor shall inspect the items and determine whether the items are with or without value and forwards his/her recommendation to the Head of the Agency. 4) The Head of the Agency shall forward the documents to the Disposal Committee. 5) The Disposal Committee shall recommend to the Head of the Agency the mode of disposal as appropriate and deemed most advantageous to the government. 6) If found to be valuable the unserviceable property may be sold at public auction to the highest bidder under the supervision of the proper Committee on Award or similar body. 7) The awardee shall pay, claim and withdraw the property upon the determination of the awardee, the bid bond shall be considered as partial payment and the difference between such payment and the offered bid price shall be paid in the form of cash, cashier s manager s check of a reputable bank within the area where the bidding was held. Full payment shall be made within 5 working days from the date of the notice of award. In addition to the purchase price, any taxes, custom duties or charges in connection with the sale shall be done by the awardee. (a) Claim shall be made only by the awardee, after the bid price is fully paid as evidenced by an official receipt. The Disposal Committee shall effect it in the presence of the reporting accountable officer or his duly authorized representative and witnesses. (b) The property officer of the owning agency shall accomplish a tally-out sheet as evidence of actual delivery. Authorized agency official and the buyer acknowledge receipt of the items shall sign the tally-out sheet. (c) Claims shall be made only during official government working hours. (d) Claims shall be made within the period fixed by the Disposal Committee but not more than 30 days after awarding. Failure on the part of the awardee to claim the property within the stipulated period shall have the effect of cancellation of the award contract. The awardee shall then be charged storage fees and other incidental fees/cost or damages, i.e., cost incurred in the conduct of another public bidding or negotiation. If the property remains unclaimed over a prolonged period of time, ownership of the contracted awarded property shall automatically revert to the government. The government shall then have the right to dispose of the property thru whatever manner the Disposal Committee deems most advantageous to the government. 1-11

21 8) Upon disposal of property, the pertinent portions of the Inventory & Inspection Report, Report of Waste Materials or Invoice-Receipt for Property, whichever is applicable, shall be accomplished. These reports shall be the basis for dropping the property from the books of accounts and for taking up the proceeds from the sale of the property. 12. Membership of Disposal Committee. EO No. 309, reconstituted the membership of the Committee on Disposal as provided for under EO No. 888 a. Chairman A senior official with function not lower than the level of an Assistant Secretary for a department and Assistant Director for a bureau/agency or department head for a GOCC b. Member Head of Administrative Unit c. Member Head of the Property Unit A Secretariat and technical staff to be manned by existing personnel of the Agency concerned shall be formed to handle all the Committee s technical and administrative matters as well as the safekeeping and systematic filing of Committee documents and records. 13. Inspection and Appraisal of Property for Disposal. Inspection is conducted to observe the physical condition of the property to the disposed. An ocular inspection is usually done to have a first-hand observation of the conditions of the property. 14. General Procedures in Appraisal. The objective in computing the appraised value of the property is to set the government s minimum selling price so that the government shall receive fair compensation for the items sold. The Disposal Committee members, including the owning agency, shall each prepare its appraisal report. a. Conducting an ocular inspection of the property to be appraised to assess its physical condition b. Seek reference price information such as acquisition cost or current market price of similar property or replacement cost for a similar new property. c. Compute the appraised value following the revised formula on appraisal of government properties except real estate, antique property and works of art contained in Section 8.0 hereof, which takes into account the property s actual physical condition, the relevant reference price information, expected useful life of the property and the changes in the value of the property caused by depreciation, and those caused by changes in the value of the exchanges in the value of the exchange currency, the peso, and also appreciation in the value of the property occasioned by the reconditioning, 1-12

22 major repair or upgrade of property as well as favorable changes in the exchange value of the Philippine peso. 15. Preliminary Documentation. Before the appraiser commences the inspection of the property to be appraised, he has to check whether the corresponding from for disposal has been property accomplished. The forms used for disposal are: a. Inventory and inspection Report of Unserviceable Property (Appendix 9.14). This form is used for the disposal of vehicles, mechanized equipment, office equipment, furniture, and semi-expendable materials. When accomplished, this form should also contain the list of missing parts, if any, which should be accompanied by a certification b. of the property officer or custodian as to whether the missing parts were removed for future stock or have been utilized already for repair purchases. c. Waste Materials Report (Appendix 9-12). This form is used in the disposal of waste materials which result from the consumption or utilization of expendable materials, and covers damaged equipment parts, empty containers, and remnants salvaged from destroyed or damaged fixed assets. The appraiser shall likewise accomplish the checklist for unserviceable equipment. This checklist shall indicate the individual component/ part of the equipment with their condition; whether serviceable, missing, etc. the agency could device their own form most appropriate to the equipment for appraisal. If the property to be appraised is no longer available for inspection, as in the case of lost or burned equipment for which accountability is being assessed, the appraiser shall forego the ocular inspection, and proceed to the next succeeding appraisal step. 16. Inspection Process. In the conduct of the inspection of the property to be appraised shall perform the following, where applicable: a. Identify the property in accordance with its descriptions in the inventory list or directive. b. Check the condition of the property; determine whether operational, under repair, or irreparable. c. Determine if property is economically repairable and the most probable cost of its repairs, and current costs of spare parts. d. Check for the damaged/worn-out or missing parts. Careful determination of its present physical condition shall serve as basis for its depreciation and correct evaluation/valuation. 1-13

23 The objective of the inspection is to supplement theoretical computation of value with hand observation of the condition of the property. The depreciation refers to observed depreciation to distinguish the results of personal inspection from those of theoretical estimates. e. Verify stated rating, capacity, models, year of manufacture, serial number, chassis number, motor number, and other technical specifications, and accessories, if any. f. Determine the correct date when property has been acquired or its present age/number of years property has been actually used or operated. g. See if property is obsolete or is still being manufactured and if spare parts are still procurable in the market. If property is found obsolete, appraise the property as junk. h. Determine quality or degree of maintenance, repair, restoration or upgrading made, check logbook, if available. i. Determine the extent of use, mileage, rate of depreciation, and any excessive wear and tear. j. Determine whether property has still market demand; or the existence of probable buyers in the locality. k. Inspect the location of the properties and the available facilities for its transportation l. See if property is sheltered or exposed to elements and theft. m. If property is to be disposed of as junk, determine parts which could be salvaged or profitably used as engine, dynamo, wheels, tires, axles, body/chassis, etc. of motor vehicles. These salvaged parts could either be transferred to or used by other equipment or shall serve as its spare or standby parts. In cases where there are no equipment which could make use of these salvaged parts, determine if are available buyers of these parts and if disposing them separately from the equipment would bring the best returns to the agency. 17. Depreciation for Property/Equipment The cost of property, plant and equipment are allocated to the periods benefited through the provision of accumulated depreciation. Depreciation is the systematic and gradual allocation of the depreciable amount of asset over its useful life. 1-14

24 (Please refer to Appendix 7.0 for the Estimated Useful Lives) Depreciation shall be computed using the Straight Line Method. Depreciation shall start on the second month from purchase. A residual value equivalent to ten percent (10%) of the cost shall be set. Annual depreciation is computed as follows: Annual Depreciation Asset Cost less Estimated Residual/ Salvage Value Estimated Useful Life Asset Cost - Purchase or Acquired Value of the Asset Estimated Salvage Value 10% of the asset cost Estimated Useful Life - used as Estimated number of years the asset shall be determined by COA. 18. Reference Price Information in Appraisal. The appraiser shall gather the following reference price information as aid in his/her appraisal computation: a. Basic Price Information 1) Current Market Value (CMV) or the prevailing market advertised prices of used equipment/cars of the same make and model or similar models. acquired. 2) Acquisition cost (AS) or the price at which property was 3) Replacement Cost New (RCN) - price of comparable or similar new property for current year. b. Contributory/Other Price Information 1) Prices from second hand re-builders and re-conditioners of machinery, cars or equipment. year. 2) Currency exchange rates for acquisition year and current 19. General Guidelines and Principles in the Determination of the Appraised Value. a. Unserviceable property which can no longer be repaired or recondition shall be appraised at scrap or junk value. 1-15

25 b. Unserviceable property which can still be repaired or reconditioned, and property no longer needed which are still functional shall be appraised at current market value, if such is available, if not it shall be appraised based on its Acquisition Cost (AC). If CMV and AC are both are available, the property shall be appraised at Sound Value. c. Antique property, works of art, and real estate is not covered under these guidelines. Antique property and works of art shall be appraised by the National Museum and real estate shall be appraised under a separate set of guidelines. d. For imported vehicles/mechanized equipment, each component that has no available local replacement shall be treated as junk, exclusive of the other component, which is available in the domestic market. 20. Guidelines in Observing Conditions of Property a. Very Good (VG) (80-100%). This term describe properly in excellent condition capable of being used to its fully specified purpose without being modified and not requiring any repairs or abnormal maintenance at the time of inspection or within the foreseeable future. b. Good Condition (G) (55-75%). This term describes a property has been modified or repaired and is being used at or near its fully specified utilization but the effects of age and/or utilization indicate that some minor repairs have to be made or that the item may have to be used to some slightly lesser degree than it fully specified utilization in the foreseeable future. c. Fair Condition (G) (35-50%). This term describes the property which are being used at some point below its fully specified utilization because at the effects of the age and or/utilization and which require general repairs and some replacement of minor elements/components in the foreseeable future to raise its level of utilization to or near their original specifications. d. Poor Condition (P) 15-30%). This term is used to describe a property which can only be used at some point well below its fully specified utilization and it is nor possible to realize full capability in its current condition without extensive repairs and/or the replacement of major elements in the very near future. e. Scrap Condition (S) (0-10%). This term is used to describe a property which is no longer serviceable and which cannot be utilized to any practical degree regardless of the extent of the repairs or modifications to which they may be subjected (beyond economical repair). This condition, which have used up to 100 percent of useful life or, which are 100 percent technologically or functionally obsolescent. 1-16

26 The gap in percentage allocation is aimed to delineate the closeness of factors between condition categories. The 4% difference in each case clearly seats the limits of percentage range. For furniture and non-mechanized implements, which have no major components but is treated as a whole unit, condition factor shall be equal to the condition rating of the unit itself. 1) Example (a) Condition Rating Very Good (b) Condition Factor -.8 to 1.0 With respect to vehicles, mechanized equipment, etc., which are made up of several components, the condition factor is the sum of condition rating x% weight of all components. See Table 1 for the component rating of vehicles, heavy equipment, window type air conditioning unit, manual typewriter and dental equipment. Theses component ratings were derive from the price of each component in relation to the total price of the property expressed in percentage. In case of property, which is no longer available for inspection, as in the case of lost or burned equipment for which accountability is being assessed, the condition factor shall be assumed to be 1.0? (Refer to Annex 8.0 for the Component Rating Tables) 21. Formula on Appraisal of Government Property except Real Property. Estate, Antique Property and Work of Arts a. Definition of Terms Used in Formula 1) Appraise Value (AV). An estimate or opinion of value of an adequately describe property as of a specific due transmitted in writing and supported by presentation and analysis of relevant and factual data. 2) Currency Fluctuation Factor (CFF). Refers to the adjustment factor used to take into account the devaluation or revaluation of the peso from the year of acquisition to the year of appraisal. 3) Current Market Value (CMV). Is the price estimated which the property will bring if exposed for sale in the open market, allowing a reasonable time to find a buyer who buys with knowledge of the actual condition and utility of the property. 1-17

27 4) Effective Remaining Useful Life (ERL). Refers to period of time (years) from the date of appraisal to the date when the property becomes non-operational. 5) Estimated Useful Life. Refers to the estimated period of time (years) for which a property is anticipated to be useful assuming normal utilization. (Refer to Appendix 8.0 for the Estimated Useful Life) 6) Junk Value. The price of scrap/junk metal or lumber prevailing in the local market. 7) Local Manufactured Properties. Refers to properties, which are one hundred percent (100%) sourced locally and no part of which is imported from other countries. (Ex. Furniture, steel cabinets, etc). 8) Price Index Factor (PIF). Refers to the adjustment factor, which reflects the changes that occur in the prices of commodities, raw materials, manufactured goods and the like from the year of acquisition of the year of appraisal. b. When Property is still Operational, Functional or can be Repaired: 1) When Current Market Value is available. CFI AV=CMVx CF2 Where: AV Appraised Value CMV Current Market Value CFI Condition Factor of the Property CF2 Condition Factor of the Advertised/Canvassed Property 2) When CMV, AC and RCN are all available, CMB shall be adopted in the computation of appraised value. The CMV shall be taken from the advertised prices of used equipment of the same make and model or similar models from newspapers, publications, of associations, etc. of general circulation. There should be at least two (2) advertised prices for similar properties, the lowest of which shall be considered as CMV in the computation of AV. 3) When Acquisition Cost (AC) is available The correct cost indicated in the ARE shall be reorganized as AC if the Purchase Order/Invoice are no longer available. 1-18

28 (a) For Imported Property: AV = (AC x CFF) c CF Where: AC Acquisition Cost CFF Current Fluctuation Factor P/Dollar Exchange rate on year of appraisal CFF = P/dollar exchange rate of year of acquisition CF Condition Factor of the Property (b) For Locally Manufactured Properties This formula shall apply to properties which are one hundred percent 100% sourced locally and no part of which is imported. (Ex Furniture, steel cabinets, etc.) AV = (AC x PIF) x CF Where: PIF Price Index Factor Price Index on one year of appraisal PIF = Price index on one year of acquisition 4) When replacement cost (New) is available this formula shall only apply if the CMV and AC are not available. ERL AV = RCN x EUL Where: RCN Replacement Cost New ERL Effective Remaining Useful Life EUL Estimated Useful Life 5) For waste materials and property, which is unserviceable and can no longer be repaired/reconditioned-the end user shall determine the unserviceability of the property and shall be supported with the History Card/Record and Check-list of Unserviceable Vehicles/Heavy Equipment. 1-19

29 AV = Junk Value 6) Where junk Value is based on prevailing price of scrap metal or lumber, whichever is appropriate. 7) Canvas for the current market rice per unit weight and multiply by the actual weight of the waste materials/property get the appraised value. 8) Computer and their peripherals shall be appraised based on their junk value due to obsolescence brought about by the rapid change and development in the industry. c. Adjustment of Appraised Value when Auction Bids are Low. In Sec. VII of COA Memorandum No the activities hereunder were performed by the Auditor. However, with the lifting of preaudit, these functions became the responsibility of the agency. If the after exposure of the property to public auction, as required under Sec. 79 of PD 1445, the highest bid falls below the government floor price the agency shall: 1) Determine whether the difference is excessive. The amount of deviation of the highest bid from the floor/reference value is considered excessive when it is greater than 10% of the floor/reference value plus the cost of calling another public auction. 2) If the difference is found not excessive, the agency shall continue with the sale of the unserviceable properties. If the difference is found to be excessive, the agency shall call for another public auction with the floor/ reference value reduced by 10%. 3) If the second auction still fails, i.e., the highest bid is still excessively lower than the reduced floor/reference value, then the sale may be negotiated with the highest bidder. d. Setting of Minimum Value. Pursuant to EO 888, Sec. 3(2), In case of conflict in appraisal, the Disposal Committee shall deliberate on the appropriate appraised value that the government shall set as the minimum bid price. If the Committee cannot arrive at a consensus, the Chairman shall adopt an appraised value, which he deems most advantageous to the government based on either of the following: member. 1) The highest appraised value submitted by a Committee 2) The average of the submitted appraised value plus 10%. 1-20

30 (a) (b) The minimum value shall be set depending on how the property shall be sold, i.e., by piece, by lot or all lot The minimum value shall be good for only six months. The final appraised value of all disposable property should consider the obsolescence, market demand, physical condition and result bidding for similar property. 22. Summary. In this chapter we learned that to economize in maintaining property that are no longer needed the agency head should make sure that they are disposed off through five (5) modes: sale, transfer, destruction, donation and barter. But before their disposal they must first be inspected and appraised to determine the best modes to follow. A formula is used by the inspector/appraiser to determine the best price when the property is sold. A disposal committee may be constituted to administer and manage the disposal process. 1-21

31 1-22

32 CHAPTER 2 PROPERTY DISPOSAL Section 2-1 Introduction 1. Background and Purpose. Property disposal is the third and last phase in the supply management cycle where the first two phases consist of procurement and utilization and maintenance. Disposal occurs when a piece of equipment of property can no longer provide efficient service on through still working has been rendered useless due to obsolescence. Disposal proceedings should be immediately initiated to avoid further deterioration of the property and consequent depreciation in its value. A systematic and timely disposal will yield benefits in terms of among other, a higher appraisal value and by enabling storage areas available for other purposes. To facilitate the disposal of the increasing quantity of serviceable equipment and property, the heads of the various department/agencies have been authorized to disposal of such equipment and property. Together with such authorization, condition procedure of government property disposal is prescribed. This manual aims to serve as guide to agencies by providing Informative and prescriptive materials on the legal previsions, responsibilities, procedures, conditions and requirements considering disposal actions. 2. Legal Bases. Disposal activities are governed primarily by the following issuances: a. Executive Order No. 888, Series of Executive Order No. 888 dated March 18, 1983 stipulates, among others: 1) The authority of the Minister (now Secretaries) and Heads of Ministries (now Department/Agencies) to dispose of their respective unserviceable equipment and disposable property; 2) The creation of a Disposal Committee in each department/agency to be composed of the representatives of the owning department/agency the Bureau of Supply Coordination and the Commission on Audit; 3) The creation of Regional Disposal Committees composed of the representatives of the regional offices of the owning department/agency, Bureau of Supply Coordination, and the Commission on Audit; 2-1

33 4) The duties of the Disposal Committee and Regional Disposal Committee disposal. 5) The submission of disposal documents and the modes of b. Executive Order No. 285, Series of Executive Order No. 285 dated July 25, 1987, on the other hand, provides, among others 1) The abolition of the General Services Administration and the transfer of its function to appropriate government agencies; 2) The mandate of the Systems and Procedures Bureau of the Department of Budget and Management to develop guidelines relative to disposal of government property. 3) The reconstitution of the Disposal Committee which shall now include the representative of the Department of Budget and Management in lieu of the Supply Coordination Office. 3. Agency Coverage. The guidelines prescribed in this manual shall apply to departments and agencies of the national government including their respective regional/field offices, state universities and colleges, and government-owned or controlled corporations. 4. Scope of Guidelines a. The guidelines contained herein shall refer to the disposal of government property which are unserviceable, obsolete, forfeited, abandoned, excess or surplus to the needs of the government, or junk or scrap materials. As used in this Manual, government property refers to personal property such as supplies, materials and equipment purchased or owned, stocked and used by the government in its operations. b. Disposal of the following property are likewise covered by these guidelines but shall be done in coordination with appropriate government agencies; 1) Musses materials required and preserved solely for exhibition; and antique property and works of art, which shall be referred to the Natural Resources for the determination of its disposition and appraisal of values; 2) Documents for copy--- in coordination with the 3) Models submitted in connection with applications for patents, in coordination with the Bureau of Patent, Trademarks and Technology Transfer. 2-2

34 c. Excluded from the coverage of this manual are: 1) Real Property which shall be government by the DBM- DENR, DPWH Joint Circular No. 1 dated September 30, Disposal of real property shall be done in coordination with the Department of Environment and Natural Resources. 2) Records which shall be government by the DECS Department order No. 13-A dated February 8, Definition of Terms. The following Terms which are used to refer to disposal government property are defined; must a. Abandoned Property. Is any personal property in the possession of government agency without a known owner. b. Beyond Economical Repair. Is when the cost of repair and maintenance becomes prohibitive and disadvantageous to the government consider such factors as: 1) Maintenance expenses 2) Downtime 3) Replacement cost of spare parts 4) Frequency of breakdown 5) Alternative modes such as rental of equipment outright replacement. c. Economical Repairable. Is that which can be rehabilitated and maintained at a cost economical to the agency, considering the five (5) factors mentioned in item 2.0 above. d. Equipment. Is any property, other than land, structures and fixed facilities, having a useful life greater than one year, the cost of which amounts to P1, or more (per COA Circular N B) and which when used does not suffer any material or substantial change or alteration in size or form. e. Excess Property. Is beyond the requirement of the owning agency but may still be needed in some other government agencies. f. Serviceable Property. That which may be consumed, spent, or used-up such as, supplies. g. Forfeited Property. Forfeited Property that which is required by summary process or by order of the count pursuant to any law in the Philippines. 2-3

35 h. Materials. That expendable commodities used by the government in the process of manufacture or construction including parts or remnant from destroyed or damaged fixed assets. i. Non-expendable Property. That which cannot be consumed, spent, used-up, such as, equipment. j. Obsolete Property. Obsolete That which has lost its efficacy either due technologies advancement, change of procedures, reorganization office, or completion of project. k. Scrap/Junk. Are fragments of discarded materials that has no value except for its basic materials contents and which cannot be reprocessed and be used in the operations of other government operations. l. Supplies. Are expendable commodities which are normally consumed within a year in connections with government operations. m. Surplus Property. That are excess personal property no longer needed by the government. n. Unserviceable Property. That which is beyond repair and has no more utilization potential. Section 2-2 Disposal Activities/Processes 6. Creation of the Disposal Committee a. Organization The creation of a Disposal Committee in each department and agency is provided in E.O 888. On the other hand, E.O. 285 Stipulated the reconstitution of the Disposal Committee as follows: Owning Department or Agency - Chairman Commission on Audit - Member Department of Budget and Management - Member The Regional Disposal Committee are organized in the same manner, with representatives from the following: Regional Office of Owning Dept/Agency - Chairman DBM Regional Office - Member COA Regional Office - Member 2-4

36 1) Functions (a) Disposal Committee/Regional Disposal Committee The functions of the Disposal Committees and the Regional Disposal Committees as provided in E.O. 888 are the following: (1) Inspection or authorized the department s/agency s field offices to inspect the unserviceable equipment and property in verify justification for disposal. (2) Set the final appraised value of all disposable property considering obsolescence, market demand, physical condition and result of previous bidding for similar property. (3) Recommend to the Head of the Department/Agency for approval, the manner of disposal. (4) Conduct public biddings for the sale of disposal property on an as is, where is basis and to recommend corresponding awards. Recommendations of Disposal Committees in the regions and in agencies attached to certain Departments shall be subject to the final approval of the Head of the Department concerned. (b) Chairman and Members of the Committee The Disposal Committee Chairman calls the meeting of the Committee and initiates the activities in the disposal process. In cases of conflicts or differences among the Committee members especially regarding varying appraised values, the Chairman should make the final decision as to which recommendation shall be submitted to the Head of the Department/Agency for Approval. The members are clothed with the authority to make decisions in behalf of their respective offices during the various committee deliberations. The members are expected undertake inspection, appraisal and valuation activities as a group or individual, and participate in the bidding and awarding activities. b. Secretariat Services. A secretariat and technical staff to be manned from the personnel of the agency shall be formed to handle all the Committee, technical and administrative matters as well as the safekeeping a systematic filling of Committee documents and records. c. Designation of the DBM Representative. The DBM representative to the Disposal Committee shall be designated by an 2-5

37 authorized DBM official upon submission by the agency of a letter requesting such designation. 7. Determination of Disposable Property. Any or all the following conditions shall constitute disposable property: a. Property which can no longer be repaired or reconditioned, b. Property whose maintenance cost/costs of repair more than outweigh the benefits and services that will be derived from its continued use, c. Property that has become obsolete or outmoded because of changes technology, d. Serviceable property that has been rendered unnecessary due to change in the agency s functions or mandate; e. Unused supplies, materials, and spare-parts that were procured in excess of requirements; and f. Unused supplies and materials that has become dangerous to use because of long storage or use of which is determined to be hazardous. 8. Submission of Documents pertaining to Disposable Property. Accountable officials in possession of unserviceable property shall submit to the Disposal Committee, through their respective heads of offices, the following accomplished forms, as appropriate: a. Inventory and Inspection Report (1 & 1 Report, otherwise known General Form No. 17-A). This form covers semi-expendable materials and equipment and non-expendable supplies and should be accomplished by any of the following as the case maybe: (see Annex -A) 1) Individual survey report, duly certified by the Supply Officer and Head of Agency. 2) List of missing spare parts, duly certified by the Supply Officer and Head of Agency. vehicles. 3) Stencils of chassis and engine numbers of motor 4) Current photographs in two (2) positions b. Report of Waste Materials (RWM otherwise known as General Form No. 64-A). This form covers expendable materials, supplies, and consumables including spare parts, empty containers, and remnants in destroyed or damaged fixed assets. (See Annex B) 2-6

38 c. Invoice-Receipt for Property (IRP otherwise known as General Form No. 30-A). This form covers government property transferred from another agency which has become unserviceable and duly recommended for disposal by the head of the agency. (See Annex C) 9. Inspection. a. Objective. Inspection is aimed at obtaining a first hand observation the physical and operational condition of the property and the marketability to attract prospective buyers. b. Conduct of Ocular Inspection. Inspection maybe done separately to each member of the Disposal Committee or as a group where practicable. In the conduct of ocular inspection, the following activities shall be performed, where applicable: c. Verify stated serial number, motor number, property number, and other specifications necessary for establishing correct identification of the property. d. Determine the physical condition/general appearance of the property relative to: 1) The equipment being operational, economically repaired or beyond economical repair; 2) The availability of spare parts and the obsolescence of the equipment and; 3) The quality, degree and extent of maintenance and to be done on equipment. 10. Appraisal. a. Objective. The objective in computing the appraised value of a property of disposal is to set the government s minimum selling that the government shall receive fair compensation for the items. The Disposal Committee members, including the owning agency each prepare its appraisal report. b. Basic of the Computation. After having conducted the ocular inspection and regardless of the mode of disposal to be undertaken, the appraised value shall be computed using as basis the information/data appearing in the Inventory & Inspection Report, Report of Waste Materials and Invoice Receipt of Property. The following basic variables are to be used: 1) year of acquisition 2-7

39 2) cost of acquisition 3) replacement cost c. Formulae. In the computation of the appraised value, any of the formulae as enumerated below in versions maybe used depending on the information available. Version 1 This is used for the types of property where the acquisition cost and year or acquisition are known. APPRAISED VALUE = RUV x CF x No. of Units Where, RUV = (AC SV) x R + SV L Figure 2.1 Version 2 this is used for all types of property where the acquisition Cost and year of acquisition are unknown, but year of acquisition and replacement cost can established. APPRAISED VALUE = RC x CF x UE x No. of units Figure 2.2 Version 3 this is used for all types of property where the acquisition cost is unknown, but year of acquisition and replacement cost can be established. APPRAISED VALUE = RC x AF x CF x No. of Units Figure 2.3 Legend: RUV Remaining Useful Value CF - Condition Factor CFF - Currency Fluctuation Factor AC - Acquisition Cost SV - Salvage Value R - Remaining Useful Life L - Estimated Service Life AS - Actual Service RC - Replacement Cost UF - Usage Factor AF - Age Factor 2-8

40 11. Definition of Terms (as used in the formulae) a. Acquisition Cost (AC). Refers to the price or amount at which the property was purchased or acquired. b. Replacement Cost (RC). Refers to the current market price of similar new equipment, or if the equipment is no longer available in the market due to product obsolescence, the market price of similar equipment which can functionally replaced the item appraised. c. Currency Fluctuation Factor (CFF) or P $ rate APPRIASAL YEAR over P to $ rate ACQUISITION YEAR. As used in Version 1, refers to the U.S. Dollar reference rate relative to the Philippine Peso at the time of appraisal/acquisition. See Annex D for Annual Average of US$ Guiding Rate. d. Estimated Service Life (L). As used in version 1, refers to the length of service life that maybe expected from particular equipment assuming normal utilization. (See Annex A for Cost of Estimated Service Life of Equipment/Property). e. Actual Service (AS). Is defined as the age of equipment/property from date of purchased or the difference between the year of disposal and the acquisition year. f. Remaining Useful Life (R). As used in version 1 refers to the difference between the Estimated Service Life (L) and the number of years of actual service (AS) of the property. As computed R is less than zero, R is assigned a value of zero. g. Salvage Value (SV). Is equivalent to ten percent (10%) of acquisition cost of the equipment/property. h. Physical Condition (PC). Refers to the condition of the property at the time of inspection relative to such observed factors as form, physical state, general appearance, degree detention/ obsolescence, completeness of component marketability of the property/components and other similar factors. i. Condition Factor (CF). As used in all versions, refers to the value, used for computational purposes, corresponding to the Physical Condition of the Equipment/property. PHYSICAL CONDITION OF A VALUE EXCELLENT 0.80 VERY GOOD 0.70 GOOD 0.60 SATISFACTORY 0.50 ADECUATE 0.40 FAIR 0.30 POOR 0.20 VERY POOR

41 j. Usage Factor (UF), as used in all versions, refers to wither the equipment/property has been used or not at all time of disposal. If the property has not been used, UF is assigned a constant value of 0.90; otherwise, it is equal to the values assigned to the Condition Factor (CF). VALUES OF THE USSAGE FACTOR: 1) IF UNUSED ) IF USED, and the physical condition is: EXCELLENT 0.80 VERY GOOD 0.70 GOOD 0.60 SATISFACTORY 0.50 ADEQUATE 0.40 FAIR 0.30 POOR 0.20 VERY POOR 0.10 k. Age Factor (AF). As used in version 3, refers to the remaining economic value of the property relative to the estimated useful life. (See Annex E for the Table of Estimated Service Life of Equipment/Property). The value of the AGE FACTOR (AF) is determined by evaluating first the Depreciation and reckon the corresponding value of the AGE FACTOR (AF). The computation for the value of Depreciation (D) is; D = L AS L If D is: Value of AF is: 1. D < = < D < = < D < = < D < = < D < = < D < = < D < = < D < = < D < = <D < = <D < = <D = <D < 0.50 D D > = l. Sample Computations 2-10

42 1) Version 1 Given: APPRAISED VALUE = RUV X CF X No of Units RUV = (AC SV) X R/L + FB Year of Acquisition: 1960 Year of Disposal 1991 Acquisition Cost P 50, Estimated Service Life 20 Years No. of Units one (1) Physical Condition poor Step 1. Compute Remaining Useful Life (R) R = L AS = 20 ( ) = = -11 (0). Since the value of R is negative, R is assigned a value of zero R = 0 Step 2. Compute for the Salvage Value (SV) SV = 10% Acquisition Cost = 10% P 50, = P 5, Step 3. Compute for the Remaining Useful Value (RUV) RUV = (AC SV) x R + SV L = (50,000 5,000) x 0 + 5, = (45,000 x 0 + 5,000 = 5,000 Step 4. Compute for the Currency Fluctuation Factor (CFF) 2-11

43 CFF = Peso to Dollar rate appraisal year Peso to Dollar rate acquisition year = = Step 5. Convert Physical Condition to Equivalent Numerical Value Using UF Table CF value for POOR = 0.20 Step 6. Compute for the Appraised Value APPRAISED VALUE = RUV X CF XCFF X No of Units = 5,000 x 0.20 x x 1 2) Version 2 = P 8, APPRAISED VALUE = RC X CF X UF X No. of Units Example No. 1 (Usage Factor = Used) Given: Year of Acquisition: unknown Acquisition Cost: unknown Replacement Cost: P 50, No. of Units one (1) Physical Condition: fair Usage Factor: used Step 1 Convert Physical Condition to Equivalent numerical value using UF Table CF value for FAIR = 0.30 Step 2 Convert observed usage Factor to equivalent numerical value using UF Table UF (used) value for FAIR =

44 Step 3 Compute for the Appraised Value APPRAISED VALUE = RC x CF X UF X No. of Units = P 4,500 Example No 2 (Usage Factor = Unused) = 50,000 X 0.30 X 0.30 X 1 Give: Year of Acquisition: unknown Acquisition Cost: unknown Replacement Cost: P 50, No. of Units: one (1) Physical Condition: Very Good Usage Factor: Unused Step 1 Convert Physical Condition to equivalent numerical Value using CF Table CF value for VERY GOOD = 0.70 Step 2 UF for unused property is constant UF = 0.90 Step 3 Compute for the APPRAISED VALUE APPRAISED VALUE = RC X CF X UF X No. of Units 3) Version 3 = 50, x 0.70 x 0.90 x 1 = P 31, APPRAISED VALUE = RC X AF X CF X No. of Units Given: Year of Acquisition: 1975 Year of Disposal: 1991 Acquisition Cost: unknown Replacement Cost P 50, Estimated Service Life 20 years No of Units: one (1) Physical Condition Satisfactory Step 1 Convert Physical Condition to equivalent for value using CF Table 2-13

45 CF value for SATISFACTORY = 0.50 Step 2 Compute for the Depreciation (D) D = L AS L = 20 ( ) 20 = = 0.20 Step 3 Convert Depreciation (D) equivalent Age Factor (AF) value using AF Table. AF value for D = 0.20 is now 13 of AF Table If D is: Value of AF is: 0 < D < 0.50 D Thus, AF = D = = 0.60 Step 4 Compute the APPRAISED VALUE APPRAISED VALUE = RC X AF X CF X No. of Units 12. Setting of Minimum Value. = 50,000 X 0.60 x 0.50 x 1 = P 15, a. Once all items listed in the I & I RWM of IRP have been computed, and the Total Appraised Value is determined, an Appraisal Report shall be prepared by each representative, and forwarded to the requesting agency through the Disposal Committee Chairman for appropriate consideration. b. In case of conflict of appraisal, the Disposal Committee shall deliberate on the appropriate appraised value that the government shall set as the minimum bid price. If the Committee cannot arrive at a consensus, the 2-14

46 Chairman shall adopt an appraised value which lie deems as advantageous to the government, based on either of the following: members 10% 1) The highest appraised value submitted by a Committee 2) The advantage of the submitted appraised values plus c. The minimum value shall be set depending on how the property shall be sold I, e by piece, by lot or by all lots. d. The minimum value set shall be good only for six months. If the property remains unsold after six months, a reappraisal must be conducted. 13. Modes of Disposal. The Disposal committee shall recommend to the head of agency the process mode of disposal. Property maybe disposed if any of the following: a. Conservation/Destruction of Property. Valueless, unsolvable or hazardous property may be condemn and destroyed by pounding, burning, breaking, shredding, throwing and other method by which the property is disposed beyond economical recovery. Destruction shall be made in the presence of the Disposal Committee. b. Transfer of Property. Upon the initiative of the owning agency or upon submission of request to the owning agency, property recommended for disposal is to be transferred to another government agency. Transfer shall be done either with or without cost. Cost in the case refers to payment based on the appraised value of the property. c. Barter. Barter is modified form of transfer of property wherein agency transfers property to another government agency in exchange for another place of property. The value of the property in transferred may or may not be equivalent to that being received. In effecting barter of property, The Invoice Receipt of Property (IRP of General Form No. 30-A) shall be prepared by each party and trammeled together with the property to the another party. d. Donation of Property. Property recommended for disposal may be donated to charitable scientific, educational or cultural associations on exceptional and meritorious cases with the approval of the COA and the DBM. 14. Bids of Property. a. Public Bidding. As a general rule, the disposal of government property shall be through sale by the public bidding. Public Bidding or when circumstances warrant, by viva voce. 2-15

47 1) Sealed Public Bidding. Public Bidding is characterized by the of sealed bids for prospective buyers, whereby the time, data and place opening of bids is indicated in the invitation to Bid; the evaluation of bid tenders by the Disposal Committee and the awarding to the highest complying bidder. The detailed procedures in public bidding are described in PART III. 2) Viva Voce. Disposal property of insignificant value of such nature that requires immediate disposal shall be sold through public auction by viva voce to be conducted by the Disposal Committee. Other situations/cases for viva voce are those involving the disposal of waste materials and/or spare parts of insignificant value. b. Negotiated Sale. Negotiated is another mode of sale of property which is resorted to the consequence of failed public bidding. (Details on this are described in PART III). 15. Dropping from the Books of Accounts. Upon disposal of property, the pertinent portion of the inventory of Inspection Report, Report of Waste Material or Invoice-Receipt of Property whichever applicable shall be accomplished. These reports shall be the basis for dropping the property from the books of accounts and for taking of the proceeds from sale of property. Section 2-3 Guidelines Procedures in the Sale of Property. 16. Pre Bidding Requirements a. Preparation of the invitation for Bid (ITB). The ITB is prepared by the owning agency and signed by the agency head or any authorized official. The ITB must contain the following: 1) The name of the owning agency such as: 2) Sufficient displays information o the items/lots for bidding (a) (b) (c) (d) location of the property to be disposed quantity name of items specifications, where necessary necessary 3) Date, time and place of pre bidding conference if 4) Date, time and place of submission and opening of bids. 2-16

48 5) Information on bidding requirements such as accomplishment of the bid tender, submission of bid boards terms of payment and claims among others. 6) Reservation cooperation on the part of government to accept rejects any of all bids. b. Publication of the ITB. The ITB must be published in a newspaper and general circulation if the cost of such publication does not exceed 50% of the value of the property. Otherwise, substitute publication may be availed of by copies of the ITB in conspicuous public place the area where the property is located or where the bidding will be conducted. Copies of the ITB may also be sent by mail or personnel delivery to prospective bidders. c. Schedule of Bidding. Bidding shall be scheduled on a date not less than seven (7) working days from date of issuance/publication/posting of the ITB. 17. Who may Participate in Public Bidding. Any person, partnership or corporation complying with the prescribed rules and regulations may participate in the sale by public bidding. 18. Accomplishment and Submission of Bids a. Preparation of Bid Tender. Any qualified bidder shall accomplish his Bid Tender clearly indicating the following among others: 1) The description of the items/lots with the corresponding bid offer clearly indicated in figures and in words. 2) The name and signature of the bidder 3) The business or residence address of the bidder 4) The business license number or Residence Certificate number of the bidder 5) Terms and conditions offered regarding bidders bond, payment default and delivery. b. A bidder shall accomplish the Bid Tender in at least three (3) copies preferably typewritten. Bid tenders should be properly signed and submitted to the Chairman of the Disposal Committee on or before the time scheduled for the opening of the bids. The envelope containing the bid tender should be seated and addressed properly and correctly. 1) If the items are being sold by lots, bidders shall submit bid tenders for different lots in separate envelopes. 2-17

49 2) If the items are being sold by lots and all lots where interested buyers may offer a bid for each lot or a single bid for all lots, the bid tends shall be submitted in only one envelope. c. Erasures or interlineations should be avoided or duly initialed by the bidder. 19. Bid Bond a. Bid bond per item/lot, as the case maybe, which shall accompany the bid tender or is presented at the time of the opening of bids, shall be required from its bidder and should be at least 10% of the minimum bid set by the government. b. Bid bonds should be in the form of cash, manager s check, or cashier s check acquired from the reputable bank within the area where bidding is to be held. 20. Defective Bids. Bids that are not prescribed form (e.g unsigned bids) and or those not accompanied or guaranteed by bid bonds at the time of the opening bids are considered defective bids. 21. Withdrawal of Bids a. A bidder maybe allowed to withdraw a bid tender before the time of opening of the bids. His bids shall be returned unopened. b. After the opening of the bids, no bidder shall be allowed to withdraw his offer unless the following conditions are met: 1) There is a mistake in the offer 2) The mistake refers to the object or principal conditions of the proposal. convincing. 3) The reason for such mistake must be conclusive and 22. The Abstract of Bids. All bids shall be opened at all time, date and place set in the invitation to bid under the direction of the Disposal Committee and in the presence of the COA Auditor. Bidders or their duly authorized representatives may witness the proceedings. The bid tender shall be signed by the members of the Disposal Committee immediately after it is opened and announced in order to confirm compliance with the requirements of the bidding. The bid tenders are filed for safekeeping by the Secretariat of the Disposal Committee. 2-18

50 23. The Abstract of Bids. An abstract of Bids in triplicate shall prepared during the bidding proper showing the name of owning agency, the date, time and place of bidding, names of bidders with their corresponding amount of bid tenders and bid bonds per item/lot, including reason for disqualification where applicable. The Abstract of Bids shall be signed by the members of the Disposal Committee. Purpose of the abstract of bids is to-know in matrix-summary form the individual bidders, their bids and bid bonds per item/lot and the confirmation of the Disposal Committee. Each member of the Committee shall be provided with a copy of the Abstract of Bids. 24. Unsuccessful Bidding. If the sale through public bidding is unsuccessful, a re-bidding shall be scheduled. Bidding maybe declared unsuccessful in any of the following cases: a. There is no bidding participant b. Only one (1) bidder submitted a bid tender for each lot. c. All bidders failed to comply with the terms and conditions prescribed in the invitation to bid. 25. Negotiated Sale. In case the second public bidding fails, the property maybe sold at a private or negotiated sale. Negotiation within one (1) month from the date of the second failed bidding shall be done with the bidders of the first and/or second failed bidding and other prospective bidders (such as those who obtained the forms but did not submit bid tenders) at a price not lower than 80% in the appraised value. If negotiation is done after one (1) month, participants in the negotiation shall be expanded to include other potential buyers aside from those above mentioned. If negotiation shall take place after six (6) months from date of second failed bidding, the property should be reappraised and sold at not lower than 90% of reappraised value. Bid bonds shall be required from all participants in the negotiation. Awarding of Bids. a. Award shall be given to the highest complying bidder. b. When two or more complying bidders made identical offers, public auction viva-voce between those who made identical bids shall be resorted to the price not less than the offered bids. c. Awarding of bids should be done immediately after the opening of bids if practicable. Bid bonds of losing bidders shall be returned immediately after the announcement of the winning bidder. 2-19

51 d. In case of deferment of award a temporary receipt shall be issued by the agency to acknowledge submission of bid tenders. Once the Disposal Committee completes its deliberations and determines the winning bidder, bid bonds of losing bidders shall be returned upon presentation of the receipt immediately after awarding of the winning bidder. Deferment of the award shall not exceed five (5) working days from date of opening of bids. 26. Payment a. Upon determination of the awardees, the bid bond shall be considered as partial payment and the difference between such payment and the offered bid price shall be paid in the form of cash, cashier s check or manager s check of a reputable bank within the area where the bidding was held. Full payment shall be made within five (5) working days from the date of the notice of award. b. In case of failure of full payment within the prescribed period, the awards maybe penalized through cancellation of the award and forfeiture of the bid bond in favor of the government. 27. Claiming of Award. a. Claims shall be made only by the awardees, after the bid price is fully paid as evidenced by an official receipt. It shall be affected in the presence of the reporting accountable officer or his duly authorized representative and witness by the Disposal Committee. b. The property either of the owning agency shall accomplish a tally out sheet as evidence of actual delivery. The tally out sheet shall be signed by authorized agency official and the buyer acknowledging receipt of the items. c. Claim shall be made only during official government working hours. d. Claims shall be made within the period fixed by the Disposal Committee but not more than 30 days after awarding. Failure on the part of the awardees to claim the property within the stipulated period, shall have the effect on cancellation of the award/contract. The awardees shall then be charged storage fees and other incidental fees/cost or damage, i.e cost incurred in the conduct of another public bidding or negotiation. If the property remains unclaimed over a prolonged period of time, ownership of the contracted/awarded property shall automatically revert to the government. The government shall the have the right to dispose the property through whatever manner the Disposal Committee deems most advantageous to the government. 28. Taxes Custom Duties, Cost or Charges. The buyer of disposable property shall pay in addition to the purchase price any taxes, customs duties, cost or charges of any kind of nature whatever levied or to be levied in 2-20

52 connection with the sale of property. All expenses intended to the withdrawal of the property shall be borne by the awardee. Section 2-4 Disposal Activities. 29. Introduction. The milestone to achieve materials disposal activity has a long way to underscore. This activity starts at the time equipment has ceased to operate. This is based from the time it was acquired until it becomes valueless. Any supply activity has a disposal program for its obsolete, unserviceable, and excess property integrated into supply system. The disposal program is caused by technological development, which at times renders equipment and support stocks for the equipment obsolete virtually overnight and by equipment rendered unserviceable through normal operation of force majeure. The military establishment using a variety of equipment and supply materials has a disposal program for obsolete, unserviceable, and excess materials. The philosophy of the program is one that accepts the fact that the disposal proceeds are integral phase of the supply system and are used to purge the active stocks of materials and equipment which are no longer required for support of the units in the field. 30. Objectives of the Disposal Program. The ultimate objective of the disposal of unserviceable property as well as ensure the proper utilization of disposable property and the proceeds of the sale thereof. This is substantiated by the following specific objectives. a. To effect maximum utilization of excess property throughout the various branches of service of the AFP. b. To declare excess materials for disposal (only such quantities of items which will deteriorate in long storage), and c. To dispose obsolete, unserviceable, and excess materials no longer required by any unit of the AFP through sale to the general public and integrated government owned or controlled corporations in the most expeditious and business-like manner consistent with the necessity to obtain maximum net return to the AFP in general. 31. References. Disposal activities in the AFP are govern by the following references: a. Executive Order 888, Series of 1983 Re: Authority of Secretaries and Heads of Department/Agencies to dispose of their respective unserviceable equipment and disposal property. b. Executive Order 285, Series of 1987 Re: Abolition of the General Services, Creation of the System and Procedures Bureau, DBM and the Reconstitution of the Disposal Committee; 2-21

53 c. National Budget Circular No.425 dated 28 January 1992 RE: Manual on Disposal of Government; and d. Ministry Order No. 124 for then Ministry of Defense 32. Modes of Disposal a. The above cited references grant the authority of the Heads of Department/Agencies to dispose their respective unserviceable equipment and disposable property through the creation of a Disposal Committee in its Department/Agency. The Disposal Committee is composed of the owning Department or Agency as Chairman and the COA and DBM as members. The condemnation and or destruction of property is one of the modes of disposal available to the Disposal Committee. Especially, valueless/unsaleable or hazardous property maybe condemned and destroyed by pounding, burning, breaking, shredding, throwing, or any other method by which the property is disposed beyond economic recovery. Destruction and condemnation shall be made in the presence of the Disposal Committee. Upon disposal of the property, the SAO shall accomplish the appropriate document for dropping the property from the Book of Accounts. b. Other modes of disposal are barter, donation, and sale which require the same procedures as the Disposal Committee may deem proper to determine and recommend. The basic elements of disposal by sale are segregation, looting, describing merchandising, and marketing. The flow chart on material disposal by sale is shown in Figure 8-1 ENDORSE APPROVAL MAJ SVCS/ AFPLC CSAFP OF CONTRACT SND SEGREGATIONAL,LOTING REQUEST APPROVAL APPROVAL/ DESCRIBING, MERCHANDIZING OF CONTRAC DISAPPROVAL AND MARKETING OF CONTACT REQUEST AUTHORITY TO DISPOSE THRU PUBLIC BIDDING CSAFP MAJ SVCS/ AFPLC CSAFP ENDORSE APPROVAL FORIMPLEMENTATION FOR IMPLEMENTATION TO DISPOSE BIDDING & PREPARATION OF THE DISPOSAL OF CONTRACT/APPROVAL CONTRACT OF CONTRACT SND APPROVAL/DISPPROVAL Figure 2.4 Disposal flow chart. CSAFP MAJ SVCS/ AFPLC 2-22

54 33. Authority to Dispose. Unless specific authority is granted the Supply Centers of the Major Services in the case of MAO (Non-Republic) items and the Report of Waste Material for Common (Republic) Items may be disposed through sale destruction, or transfer to other activities. 34. Requirement And Attachments a. Request for the Authority to Dispose requires the following: 1) Inventory and Inspection Report 2) Agency appraisal report by the Disposal Committee 3) COA inspection and appraisal report 4) Copy of PTIS 5) Photos/list of items for disposal b. Request for Approval of Contract of Sale requires the following: 1) SDN approved Authority to Dispose; 2) Inventory and Inspection Report, 3) COA inspection and appraisal report, 4) Publication of Invitation to Bid 5) Minutes of Pre-Auction Conference 6) Minutes of Final Auction Conference 7) Duly accomplished Bid Tender (Winning Bidder) together with the Official Receipt (OR) for the 10% Bid Bond. 8) Abstract of Bids duly signed by the Disposal Committee 9) Contract of Sale duly signed by Thru Channel 35. Excess of Allowances. AFP Unit s/offices maintaining stocks in accordance with allowance publications will turn-in to their respective Supply Centers quantities of items in excess of their authorized allowances. 36. Non-Moving Items Covered By Allowance Publications. All items not covered by all allowance publications with are maintained in authorized have not been utilized for the past twelve or more months and will not be used foreseeable future will be turned-in to their respective Major Supply Centers. Replacement peculiar to such equipment shall also be turned-in. these shall 2-23

55 eventually be turned-in the Defense Property Disposal Office with the accompanying DD Form Obsolete Items. All unused equipment which have been rendered obsolete as reserve modernization programs shall be turned-in to their respective Major Supply Center. Repair parts peculiar to such equipment shall also be turned-in. these shall eventually turned-in to Defense Property Disposal Office with accompanying DD Form Unserviceable Materials. All unserviceable materials with metal scrap value shall be turned-in to respective Major Supply Centers. Those without any metal scrap value should turned-in. Instead, the Holding activity will dispose of same, except organizational equipment. 39. Organizational Equipment For Disposal. All unserviceable equipment with or without scrap value which are covered with Invoice Receipt for Property (IR General Form No. 30A) shall be turned-in to Major Supply Center. A Property Turn-in Slip shall be prepared in at least ten (10) copies. To unserviceable organizational equipment which issued through Requisition and Issues Vouchers (RIV s Gen Form No. 15A) shall be turned-in to Holding activities appropriate disposal. 2-24

56 ANNEX A Inventory and Inspection Report of Unserviceable Property A-1

57 A-2

58 ANNEX B Waste Material Report Format B-1

59 B-2

60 ANNEX C Invoice Receipt for Property Format C-1

61 C-2

62 ANNEX D D-1

63 D-2