Cash on delivery.

This is an ideal financial arrangement for both business  and government.

The real-time settlement of obligations makes every transaction current, making it convenient for all contracting parties.

The private business entity avoids going into arrears and piling up receivables; the government is assured of quality equipment or machinery or excellent service delivery.

In short, value for money for both parties.

Quite curiously, President Aquino has issued an order allowing advance payments of up to 15 percent for government supply contracts with local companies.

And – get this – it turned out that the exclusive privilege has  long been enjoyed by foreign entities. 

The privilege, which was formerly limited to foreign suppliers, will now be extended to all contracts for supplies, goods, and materials regardless of source under Memorandum Order 15.

Under MO 15, P-Noy also increased the allowable amount of advance payment from 10 percent to 15 percent of the contract’s value.

Talk of generous advances.

The only consolation? At least the Palace has leveled the playing field for both foreign and local contractors.

The President said amending the Government Procurement Reform Act of 2003 is “consistent with the policy of giving equal opportunities to local suppliers”.

The advance payment can be made within 60 days from the signing of the contract, he said.

In the past, such advances have led to sloppy project execution or substandard materials.     Luckily, under the new MO,  financial safeguards have been put in place. 

In order to provide sufficient safeguards for the government, the Government Procurement Policy Board will require an irrevocable letter of credit or a bank guarantee before any advance payments can be made.

Executive Secretary Paquito Ochoa Jr. said the requirement will ensure that state funds stay protected in case the deal turns sour.

“The purpose of the prohibition against advance payment is to protect the government from the possibility of not receiving goods, supplies and materials for which it has already paid,” Ochoa was quoted by a broadsheet as saying. .

“However, this problem is squarely addressed by the requirement of prior submission of an irrevocable letter of credit or bank guarantee from which the government may seek reimbursement when necessary and without complication,” he stressed.

We wish this Tuwid na Daan administration all the luck with this new payment system because it direly needs it considering how the usual thieves in government get better at outsmarting state paymasters and auditors.