Local government units (LGUs) should charge and collect liquidated damages from suppliers for delays in the deliveries of their purchases, the Commission on Audit (COA) said.

It cited the case of Lemery town in Batangas which failed to collect liquidated damages for late deliveries of drugs, medicines, and laboratory equipment the municipality purchased in 2023.

It its 2023 annual audit report, the COA said Lemery town purchased drugs, medicines, and laboratory equipment for P1.01 million but the purchases were not delivered within the time specified in the purchase orders.

It pointed out that the corresponding liquidated damages amounting to P32,566.44 were not deducted from the payment to the supplier.

The COA said the non-collection of liquidated damages is contrary to Item 3.1 of Annex D of the 2016 Revised Implementing Rules and Regulations of Republic Act No. 9184, the Government Procurement Reform Act, which states that the "supplier shall be liable for damages for the delay and shall pay the procuring entity liquidated damages."

The town of Lemery bought P458,071.29 worth of drugs and medicines, and laboratory equipment worth P643,571.43 for its Rural Health Unit (RHU). The delivery of drugs and medicines should have been completed by Feb. 4, 2023; however, several partial deliveries were made which were beyond the specified time.

The COA said the municipal accountant and health officer explained that there was a shortage of supplies from the supplier due to high demand in consumption.

The delivery of various laboratory equipment for the Municipal Medical Laboratory was likewise delayed, it said. The date of the actual receipt of the laboratory equipment, as per Delivery Receipt No. 2701 dated Sept. 29, 2022 and Delivery Receipt No. 2750 dated Dec. 16, 2022, were not indicated by the staff of the RHU.

It noted that the supplier only issued its Charge Sales Invoice No. 1578 on Dec. 16, 2022, which is already 78 days behind its target date of delivery. At the same time, it said the laboratory equipment was only inspected and accepted by the inspection officer and the municipal health officer on Dec. 19, 2022.

"Although full delivery of the items was not complied within the period specified in the Purchase Order, liquidated damages amounting to P32,566.44 was not charged against the payment made to the supplier contrary to the aforecited provision of RA 9184," the COA said.

"Thus, the late delivery of the drugs and medicines and various laboratory equipment resulted in the delayed provision of health services to the constituents of the municipality, and the non-withholding of liquidated damages from the payment to the suppliers posed a risk of non-recovery thereof," it added.

The COA recommended that the general services office ensure the complete delivery of goods and services procured within the schedule stipulated in purchase orders or contracts, while the municipal accountant should strictly impose liquidated damages against payments to suppliers who incurred delays in conformity with the provisions of the contracts.

It asked the officials of Lemery town to go after the supplier who incurred late delivery of drugs and medicines and laboratory equipment, and ask for the P32,566.44 liquidated damages, or deduct the amount from any money due the supplier.