CSC MEMORANDUM CIRCULAR NO.

06-05
February 15, 2005
CSC MEMORANDUM CIRCULAR NO. 06-05
TO : All Heads of Constitutional Bodies;
Departments, Bureaus and Agencies
of the National Government; Local
Government Units; Government-Owned
or Controlled Corporations; and State
Universities and Colleges

SUBJECT : Guidelines on Designation

In its Resolution No. 050157 dated February 7, 2005, the Commission has adopted the
following guidelines on Designation in the civil service:

A. Employees to be designated should hold permanent appointments to career

positions.
B. Designees can only be designated to positions within the level they are
currently occupying. However, Division Chiefs may be designated to perform the
duties of third level positions.
First level personnel cannot be designated to perform the duties of second level
positions.
C. For positions with incumbents who temporarily cannot perform the duties
of the position (vacation or sick leave, study leave, scholarship; maternity leave,
special assignments), the designations should be synchronized with the absence of
the incumbent provided that in no case shall a designation exceed one (1) year.
D. For positions without incumbents, a designation may be made only for a
maximum of one (1) year.
E. Designations shall be made through an office order issued by the Head of
Agency or the Head of Office concerned.
F. Designees cannot be granted the salaries of the positions they are being
designated to, except allowances that go with performance of the functions such as
RATA.

These guidelines supplement Section 6(e) Rule III of CSC Memorandum Circular No. 40,
s. 1996 as amended by CSC Memorandum Circular No. 15, s. 1999.

(SGD.) KARINA CONSTANTINO-DAVID

Chairman
Re: Policy Guidelines for Contract of Services
x---------------------------------------------------------x

RESOLUTION NO. 020790

WHEREAS, Section 2 (1), Article IX-B of the 1987 Constitution provides that the Civil Service embraces
all branches, subdivisions, instrumentalities and agencies of the Government, including government-
owned or controlled corporations with original charters;

WHEREAS, Section 12 (3), Chapter 3, Title I (A), Book V of the Administrative Code of 1987 provides that
the Commission shall promulgate policies, standards and guidelines for the Civil Service and adopt plans
and programs to promote economical, efficient and effective personnel administration in the government;

WHEREAS, Section 12 (14), Chapter 3, Title I (A), Book V of the Administrative Code of 1987 provides
that the Commission shall take appropriate action on all appointments and other personnel matters in the
Civil Service;

WHEREAS, Section 1, Rule XI of the Revised Omnibus Rules on Appointments and other Personnel
Actions, CSC Memorandum Circular No. 40, series of 1998, as amended by CSC Memorandum Circular
No. 15, series of 1999, provides that contracts of services need not be submitted to the Commission as
services rendered thereunder are not considered government service;

WHEREAS, the Commission has been made aware that the practice of hiring personnel under contracts
of services and job orders entered into between government agencies and individuals has been used to
circumvent Civil Service rules and regulations particularly its mandate on merit and fitness in public
service;

NOW, THEREFORE, the Commission resolves to adopt the following policies and guidelines regarding
contracts of services and job orders entered into by all branches, subdivisions, instrumentalities and
agencies of the Government, including government-owned or controlled corporations with original
charters.

Section 1. Definitions. The terms hereunder shall be construed, as follows:

a. Individual Contract of Services/ Job Order - refers to employment described as

follows:
1. The contract covers lump sum work or services such as janitorial, security, or
consultancy where no employer-employee relationship exists between the
individual and the government;

2. The job order covers piece work or intermittent job of short duration not
exceeding six months and pay is on a daily basis;

3. The contract of services and job order are not covered by Civil Service law, rules
and regulations, but covered by Commission on Audit (COA) rules;

4. The employees involved in the contract or job order do not enjoy the benefits
enjoyed by government employees, such as PERA, ACA and RATA.

5. Services rendered thereunder are not considered as government service.

b. Institutional Contract of Services - refers to a contract of services entered into between

the hiring government agency and a private firm or non-governmental agency, through
public bidding or negotiated contracts and subject to pertinent COA rules and regulations.

In an institutional contract of services, the contracted agency is engaged to provide

personnel who shall perform lump sum work or service related to or incidental to the
hiring agency's functions and operations, for a specific period of time not exceeding six
(6) months. Provided, that such contract of services shall be entered into when it is
impractical or more expensive for the hiring government agency to directly undertake
such service.
 The personnel rendering the service remain the employees of the contracted
agency and are precluded from entering into an employer-employee relationship with the
hiring government agency.

Section 2. Execution of a Contract of Services or Job Order - The employment referred to in Section
1(a) requires the execution of either a contract of services or memorandum of agreement (MOA) or job
order between the government agency concerned and the individual, in accordance with the rules and
regulations of the COA.

With respect to institutional contracts of services defined in Section 1 (b), a contract of services or a
memorandum of agreement must be executed between the hiring government agency and the contracted
agency, also subject to the COA rules and regulations.

Section 3. The contract of services, MOA or job order shall not contain the following provisions:

a. The employee performs work or a regular function that is necessary and essential to the
agency concerned or work also performed by the regular personnel of the hiring agency;
b. The employee is required to report to the office and render service during the agency's
prescribed office hours from 8:00 am to 5:00 pm or for forty (40) hours per week;

c. The employee is entitled to benefits enjoyed by government employees such as ACA,

PERA and RATA and other benefits given by the agency such as mid-year bonus,
productivity incentive, Christmas bonus and cash gifts.

d. The employee's conduct and performance shall be under the direct control and
supervision of the government agency concerned.

e. The employee's performance shall be evaluated by the government agency.

Section 4. Prohibitions- The following are prohibited from being hired under a contract of services and
job order.

a. Those who have been previously dismissed from the service due to commission of an
administrative offense;
b. Those who are covered under the rules on nepotism;

c. Those who are being hired to perform functions pertaining to vacant regular plantilla
positions.

d. Those who have reached the compulsory retirement age except as to consultancy
services.

Section 5. Submission of Contract / MOA or Job Order for Review - The contract of services, MOA or
job order shall be submitted to the CSC Regional Office (CSCRO) having jurisdiction over the government
agency for review of its stipulations within thirty (30) days from the execution and signing of the contract
of services, MOA or job order which shall be the date indicated on the said instrument.

Section 6. No Rendition of Services - No service shall be rendered under the contract of services, MOA
or job order pending its review by the CSCRO.

Section 7. Findings of the Regional Offices- If the findings of the CSCRO show that the contract, MOA
or job order contains the prohibited stipulations, the CSCRO shall direct the agency concerned to delete
the necessary stipulations in order that the same may comply with the guidelines provided herein.

Section 8. Effect of Non-Submission of Contract / MOA - Failure of submission of the contract or MOA
for review by the CSCRO shall not invalidate the same. However, this would be without prejudice to the
filing of the charge for Neglect of Duty against the HRMO of the hiring agency and the officer who signed
the same. Furthermore, services rendered under said contract or MOA shall not be accredited as
government service.

Section 9. Contract of Services/Job Orders Subject to CSC Audit. As far as practicable, all contracts
of services and job orders shall be subject to audit by the CSCRO's insofar as their compliance with these
guidelines and to pertinent Civil Service rules and regulations.

Section 10. Effect on Existing Contracts of Services and Job Orders - All existing contracts of
services and job orders which are in any way inconsistent with these guidelines shall continue to be
effective until their termination or expiration. However, the same shall not be renewed unless they comply
with the guidelines herein.

Section 11. All other existing issuances that are inconsistent herewith are deemed repealed or amended.

Section 12. Effectivity - These guidelines shall take effect after fifteen (15) days from the date of
publication in a newspaper of general circulation.

Quezon City, June 5, 2002.

(Signed)
KARINA CONSTANTINO-DAVID
Chairman
(Signed) (Signed)
JOSE F. ERESTAIN, JR. J. WALDEMAR V. VALMORES
Commissioner Commissioner

Attested by:

(Signed)
ARIEL G. RONQUILLO
Director III

DUQUE, Francisco T.
Re: CSC Resolution No. 02-0790;
Request for Exemption
x----------------------------------------------x

RESOLUTION NO. 021273

Dr. Francisco T. Duque, M.D., M.Sc., President and CEO, Philippine Health Insurance Corporation
or Philhealth, requests the said agency's exemption from the coverage of CSC Resolution No. 02-0790,
dated June 5, 2002.

Dr. Duque interposes the present request in the light of the fact that the magnitude of the
MEDICARE functions transferred to Philhealth necessitated the hiring of extra personnel on a job order
basis, and that "non-renewal of their contracts will result to a severely compromised work processes." He
assures the Commission, nonetheless, that a proposal for the creation of contractual positions to be filled
up by qualified job order contractors had already been submitted to the Department of Budget and
Management (DBM) for its approval.

Furthermore, he seeks clarification on the following related issues:

"1. Are the provisions (of CSC Resolution No. 020790, dated June 5, 2002) applicable to contracts
executed before the effectivity of the Resolution but shall take effect by July 1, 2002, which is after the
effectivity of this Resolution?; and

"2. Is Section 3 applicable to both Individual and Institutional Contract of Services?"

 The CSC issuance he adverted to enunciates the new policy guidelines recently adopted by the
Commission to govern the practice of service contracting in the public sector. The promulgation came on
the heels of the growing tendency among many government agencies to hire individuals on the basis of
service contracts or job orders as a a way of circumventing civil service rules and regulations particularly
those aimed at protecting and safeguarding the merit and fitness principle.

Under the new issuance, certain requirements have been imposed in the execution of contracts of
service, memorandum of agreements (MOAs) or job orders. It is stipulated under Section 3 thereof some
of the terms and conditions that should not be incorporated in such contracts, MOAs or job orders. More
specifically, it provides:

"Section 3. The contract of services, MOA or job order shall not contain the following provisions:

"a. The employee performs work or a regular function that is necessary and essential to the agency
concerned or work also performed by the regular personnel of the hiring agency;

"b. The employee is required to report to the office and render service during the agency's prescribed
office hours from 8:00 am to 5:00 pm or for forty (40) hours per week;

"c. The employee is entitled to benefits enjoyed by government employees such as ACA, PERA and
RATA and other benefits given by the agency such as mid-year bonus, productivity incentive, Christmas
bonus and cash gifts;

"d. The employee's conduct and performance shall be under the direct control and supervision of the
government agency concerned;

"e. The employee's performance shall be evaluated by the government agency."

It is also spelled out in the said issuance those individuals who are disqualified from being hired
under any of these modes, such as those who have been previously dismissed; those covered by
nepotism; and those who are compulsory retired save as to consultancy services. (Section 4) At the
same time, it is decreed therein the mandatory obligation of government agencies to submit, within thirty
(30) days from execution, their contracts of service, MOAs or job orders to the CSC Regional Offices
having jurisdiction over them for review of the stipulations, pending which, no services shall be rendered.
While failure to submit will not affect the validity of such contract or job order, it will open the responsible
official/s to possible administrative sanction.

Moreover, the issuance provides for its own effectivity. It declares that it shall take effect fifteen
(15) days after its publication on a newspaper of general circulation. The records disclose that it was
published in Today on June 7, 2002, thus, it formally entered into force and effect on June 23, 2002. Its
effectivity, however, is without prejudice to existing contracts of service or job orders, for Section 10 states
that "all existing contracts of services and job orders which are in any way inconsistent with these
guidelines shall continue to be effective until their termination or expiration". This is with the proviso that
"the same shall not be renewed unless they comply with the guidelines herein".

With these parameters in mind, the Commission shall now endeavor to address the concerns
raised. For clarity, the collateral issues shall be resolved first, before assessing the very merit of the
request.

The new policy issuance expressly declares that it shall not, in any way, affect the terms and
conditions of service contracts or job orders already existing or subsisting at the time of their entry into
force. Section 10 reads:

"Section 10. Effect on Existing Contracts of Services and Job Orders.- All existing contracts of
services and job orders which are in any way inconsistent with these guidelines shall continue to be
effective until their termination or expiration. However, the same shall not be renewed unless they comply
with the guidelines herein."

With nary a doubt, the above-quoted provision is put there in keeping with the constitutional
guaranty on the non-impairment of contract. Now, the provision speaks of "existing contracts of services
and job orders" as being excluded from the ambit of the CSC issuance. The logical questions that arise, in
reference to the query posed by Dr. Duque, are: What does the term "existing contracts" comprehend?
Does it contemplate the situation he described where the service contracts were executed prior to the
effectivity of the policy issuance, but made effective thereafter?
 The Commission is of the considered view that it does.

Based on existing jurisprudential pronouncements, it is said that a contract undergoes certain stages of
evolution. These are delineated, as follows:

1. preparation, conception or generation, which is the period of negotiation and bargaining, ending at the
moment of agreement of the parties;

2. perfection or birth of the contract, which is the moment when the parties come to agree on the terms of
the contract; and

3. consummation or death, which is the fulfillment or performance of the terms agreed upon in the
contract. (ABS-CBN Broadcasting Corporation vs. CA, 301 SCRA 572, citing the case of Toyota
Shaw, Inc. vs. CA, 244 SCRA 320)

From the foregoing, a contract comes into being at the precise moment that there is meeting or
concurrence of the minds between and among the parties. Once the parties agree as to the terms and
conditions, a contract is produced. Whether its effectivity is fixed at a later date does not detract from the
fact of its being already a legal, if not an objective, reality.

In the situation detailed by Dr. Duque, when Philhealth and the individual employees affixed their
signatures in their respective service contracts, there was unequivocally a meeting of the minds, so that
thereupon, there commenced a contractual tie between the agency and these individual employees.
Since these service contracts were perfected prior to the effectivity of the policy issuance in question,
these contracts can be said to lie within the purview of the clause "existing contracts of services and job
orders," excepted from the scope and coverage of the issuance in question.

The above conclusion is further borne out when due account is taken of the doctrine of non-
impairment of contracts. "Laws existing at the time of the execution of contracts are the ones applicable
to such transactions and not later statutes, unless the latter provide that they shall have retroactive effect.
Later statutes will not, however, be given retroactive effect if to do so will impair the obligation of
contracts, for the Constitution prohibits the enactment of a law impairing the obligation of contracts. x x x
And a statute which authorizes any deviation from the terms of the contract by postponing or accelerating
the period of performance which it prescribes, imposing conditions not expressed in the contract, or
dispensing with those which are however minute or apparently immaterial in their effect upon the
contract, impairs the obligation, and such statute should not therefore be applied retroactively." (Agpalo,
Statutory Construction, Third Edition [1995], p. 289)

At the time the service contracts Dr. Duque alluded to were entered into between Philhealth and
the employees concerned, the governing rules were those spelled out under Rule XI of the Revised
Omnibus Rules on Appointments and Other Personnel Actions. Subsequent to the execution of these
contracts, however, CSC Resolution No. 02-0790, dated June 5, 2002, was promulgated. As previously
mentioned, this latter enactment imposes new and substantive requirements relating to the execution of
service contracts. Consequently, it cannot be made to apply retroactively so as to modify the service
contracts already perfected without contravening the non-impairment of contract guaranty.

With respect to the second query, it should be clarified that Section 3 of the CSC issuance applies
to both individual and institutional contracts of service. Aside from the fact that the provision in issue
speaks of "contract of services" without making any distinctions, there is also no cogent reason why the
two types of contract of service should be treated differently. While these contracts differ essentially
insofar as it concerns the manner of execution and the contracting parties involved, their legal implication
cannot be any different-- they basically do not give rise to government employment. The incorporation of
Section 3 in the CSC issuance only serves to highlight and underscore the point that service contracts, be
they individual or institutional, do not occasion employer-employee relationship.

Having disposed of the peripheral matters, the merit of the request for exemption shall now be
inquired into.

As earlier mentioned, Dr. Duque premises the present request on the ground that with the transfer
of MEDICARE functions to Philhealth, one of the priority programs of the present dispensation, additional
manpower is needed to cope with the volume and magnitude of work. Such added personnel can only be
accommodated through contract of service arrangements due to lack of plantilla items.

The Commission takes judicial notice of the fact that Philhealth is a newly-organized government
agency, and thus, still deep in the process of fine-tuning its operational systems and processes. It also
notes that a proposal for the creation of additional positions in the said agency is pending approval by the
DBM.

Nonetheless, it is not convinced that the foregoing are sufficient considerations for exempting the
agency from the coverage of the policy issuance. It should be noted that the policy issuance in question is
actually intended as a measure to clean up or put in order the workings of the bureaucracy. It is meant to
put a stop to the indiscriminate practice of agencies of entering into service contracts whose terms and
conditions are suspect. In not a few instances in the past, the government had ended up being in the
short end of the bargain. It has been observed that the standard clause of "no employer-employee
relationship" had been overly abused. Unscrupulous service contractors would foist the same to evade
any administrative liability incurred during the term of their contracts, but then go on to apply for
retirement benefits, by alleging circumstances purportedly indicating the exercise of control and
supervision by the agency in order to establish the presence of employment relationship. It was for the
purpose of curbing this untoward happenstance and all other inimical off-shoots of hastily formulated or
"un-sanitized" service contracts that the policy issuance was conceived.

Now, the grounds for exemption being invoked by the Philhealth are not enough to tilt the weight
of the scale in its favor vis-a-vis the overriding objective of the policy issuance as elucidated above. More
so, the fact that it is still in the process of fine-tuning its operational systems should be a greater reason
why it should now be placed within the coverage of the issuance. It may not be amiss to mention also that
instead of hiring additional manpower, Philhealth should consider maximizing the potential of its existing
personnel complement by adopting innovative measures like job rotation or time-shifting.

WHEREFORE, the Commission hereby rules, as follows:

1. Contracts of service, memorandum of agreements and job orders executed or perfected

before but made effective after the effectivity of CSC Resolution No. 02-790, dated June
5, 2002, shall form part of the "existing contracts of services and job orders" within the
contemplation of Section 10 of the said resolution. However, Philhealth is directed to
submit an inventory of all its service contracts to the Civil Service Commission-National
Capital Region (CSC-NCR);
2. The strictures of Section 3 of the resolution in question shall be applicable to both
individual and institutional contracts of services;

3. The request of the Philippine Health Insurance Corporation to be exempted from CSC
Resolution No. 02-0790, dated June 5, 2002, is DENIED. All contracts entered on or after
the date of effectivity of the latter resolution should be submitted to the appropriate CSC
regional office for review not later than three (3) days from the execution thereof. To
facilitate the review process, the Philhealth, instead of submitting contracts on a
piecemeal basis, may submit to the CSC-NCR a standard or pro-forma contract of
service. If the standard contract is found to be in conformity with the policy issuance, it
may then serve as basis for the subsequent hiring of people, especially in situations
where time is of the essence or in other analogous circumstances. Nonetheless,
executed service contracts shall still be submitted, with the resume of the individuals
hired, in order to ensure that no departure has been made from the reviewed standard
service contract; and

4. Service contracts, which remain unchanged even after the declaration by the
Commission or its appropriate regional office that a provision or provisions thereof are
invalid, shall be forwarded to the Commission on Audit for appropriate action.

Quezon City, OCT 01 2002

(Signed)
KARINA CONSTANTINO-DAVID
Chairman
(Signed)
JOSE F. ERESTAIN, JR.
Commissioner

(Signed)
 J. WALDEMAR V. VALMORES
Commissioner
Attested by:

(Signed)
ARIEL G. RONQUILLO
Director III

FPG/RTM/X1/Y22/jca196
NDC-02-0697
20020619-085
/duque’r

COA reminds LGUs: No gifts, bonuses to job

order workers
By Gregg M. Rubio/ATO (The Freeman) | Updated July 31, 2014 - 12:00am
2 36 googleplus0 4

CEBU, Philippines - The Commission on Audit has warned local government units not to grant
cash gifts, year-end bonuses and productivity enhancement incentives to job order personnel as
the disbursement of public funds for the said purposes are illegal.

COA cited Section 4 of the Budget Circular 2010 – 1 which enumerates the exclusions from the
coverage in the rules and regulations on the payment of cash gifts and year-end bonus the
government personnel hired without employee-employer relationships and funded from non-
personal services appropriations or budgets.

Also excluded are individuals or groups of people whose services are engaged through job
orders, contracts of services or other similarly situated.

Item 5 of the Civil Service Commission (CSC) Memorandum Circular No. (MC) No. 38, s.
1993, also states that, “contract of services and job orders are different from contractual
appointment and plantilla appointment of casual employees, respectively, which are required to
be submitted to CSC for approval.”

Contracts of services and job orders cover lump sum work or services such as janitorial, security
or consultancy services where no employer-employee relationship exists.

COA said the job order covers piece works or intermittent jobs of short durations not exceeding
six months, on a daily basis.

Freeman ( Article MRec ), pagematch: 1, sectionmatch:

It said that contracts of services and job orders are not covered by the Civil Service Law and
rules and regulations, but are covered by COA rules.

The employees involved in the contracts or job orders do not enjoy the benefits of regular
government employees.
 It further said that the services rendered under contracts of services and job orders are not
considered government services.

In its 2013 audit report, COA found that the Municipality of Balamban granted cash gifts, year-
end bonuses and productivity enhancement bonuses of P10,000; P17,700 and P40,000,
respectively.

The municipal accountant told COA that these job orders were given a contract of one year
assigned as barangay bookkeepers and part of the stipulation in the contract was the granting of
the cash gift and year-end bonus. The funding source of the salaries and benefits of these job
orders were the contributions of the barangays for hiring them.

It was further learned that the position of the barangay bookkeepers was given to the job orders
that are not under the Plantilla.

“The absence of an approved plantilla contractual appointment shows that there was no
employer-employee relationship between the LGU and the concerned personnel, hence they are
not entitled to the benefits enjoyed by government employees,” COA said.

It added that although the grant of the said benefits was embodied in the contract of service, the
contract was executed without legal basis because the persons they hired are on the job order
basis, thus there is no employer-employee relationship.

COA recommended the municipality to immediately stop the granting of cash gifts and year-end
bonuses to job order personnel to avoid personal liability for illegal disbursements and require
the refund of disbursed funds totaling to P67,700. — (FREEMAN)

Freeman ( Article MRec ), pagematch: 1, sectionmatch:

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