Republic Act No. 12231 — Philippine Laws

Nineteenth Congress First Regular Session

Begun and held in Metro Manila, on Monday, the twenty-fifth day of July, two thousand twenty two.

[ REPUBLIC ACT NO. 12231, August 04, 2025 ]

AN ACT OPTIMIZING THE NATIONAL GOVERNMENT FOR EFFICIENT PUBLIC SERVICE DELIVERY

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title

This Act shall be known as the "Government Optimization Act".

Section 2. Declaration of Policy

It is hereby declared the policy of the State to promote and maintain effectiveness, efficiency, economy, equity, and ethical accountability in the government, enhance institutional capacity to improve public service delivery; and ensure the attainment of the country's societal and economic development goals and objectives. Consistent with this, the government shall provide adequate resources to support an organization's essential role, scope, and level of governance, and minimize, if not eliminate, redundancies, overlaps, and duplications in its operations and simplify its rules and regulations, systems and processes, while protecting the welfare of civil servants and other government workers.

Section 3. Definition of Terms

As used in this Act:

(a)Abolition refers to the dissolution of an agency or unit and the discontinuance of its operations, or the elimination of a position deemed obsolete, unnecessary, redundant, or overlapping;

(b)Affected Personnel refers to a government employee, whether regular, contractual, or casual, who may be affected by organizational actions arising from the results of the strategic review and study under the Government Optimization Program (GOP);

(c)Consolidation refers to the dissolution of two (2) or more agencies or units with duplicating or overlapping functions to create a new one;

(d)Creation refers to the establishment of an agency, unit, or position deemed necessary for the agency's operations or performance of essential functions;

(e)Deactivation refers to the act of making dormant or non-operational an agency or unit by phasing out its functions or transferring them to other agencies or units, and discontinuing the provision of resources. An agency or unit is rendered dormant or non-operational if it is defunded and its operation is terminated but its formal existence continues. A deactivated agency or unit is devoid of any activity, personnel, financial, and physical resources;

(f)Detailed Optimized Organizational Structure refers to the output of a government agency that provides information on the systematic arrangements and functions of the divisions and units within the organization. This shall be based on the Optimized Organizational Structure that shall be developed by the Committee on Optimizing the Executive Branch (COEB);

(g)Merger refers to the combination of two (2) or more agencies or units, whereby the identity of one is retained and the other agency/ies or unit/s is/are abolished or deactivated;

(h)Optimization refers to the process of analyzing and designing the appropriate roles, mandates, structures, functions, sizes, systems, and processes of government agencies to ensure effective, responsive, and efficient service delivery;

(i)Optimized Organizational Structure refers to the output of the COEB, which shall contain the appropriate structure of government agencies and their corresponding mandates and functions, resulting from the conduct of strategic review and study;

(j)Phase out refers to the gradual elimination or discontinuance of a function, program, activity, or project through the sequential or selective abolition of its parts, until the said function, program, activity, or project ceases to exist;

(k)Placement refers to the process of matching the position, qualifications, and skills of the personnel with the needs of the agencies, which occurs when the individual is assigned to a particular job;

(l)Scaling down refers to the reduction in the intensity or magnitude of a function, program, activity, or project either by eliminating selected components or reducing the geographical, demographic or clientele coverage, the types of services rendered, or the level of outputs;

(m)Staffing pattern refers to the staffing complement of an agency which shows the number of authorized positions by class and occupational group for each organizational unit within the agency;

(n)Strengthening refers to the act of increasing the targets of a core function, or its expected goods or services and their desired impact, or widening its clientele or geographical coverage by infusing additional physical, financial, and other resources to it; and

(o)Transfer refers to the movement of an agency or unit to another where it properly belongs or its functions are more aligned, or of a position or employee from one (1) organizational unit to another within the same department or agency, or from one (1) department or agency to another, with equivalent rank, level, or salary.

Section 4. Coverage

This Act shall cover all agencies of the Executive Branch, including departments, bureaus, offices, commissions, boards, councils, and all other entities attached to or under the administrative supervision, and government-owned or -controlled corporations (GOCCs) not covered by Republic Act No. 10149 or the "GOCC Governance Act of 2011".

The following positions shall be excluded in the coverage of this Act:

(a)Teaching and teaching-related positions in elementary, secondary, technical or vocational schools, state universities and colleges, and non-chartered tertiary schools; and

(b)Military and uniformed personnel in the Department of National Defense, the Department of the Interior and Local Government, the Department of Transportation, the Department of Environment and Natural Resources, and the Department of Justice: Provided, That the agencies to which these excluded positions belong shall ensure that the personnel involved conform with the qualifications and are actually performing the functions of such excluded positions.

The Legislature, Judiciary, Constitutional Commissions, and Office of the Ombudsman may, within their respective authorized appropriations, optimize their respective offices, consistent with the principles and guidelines contained in this Act, and within the parameters of the Unified Position Classification and Compensation System established under Republic Act No. 6758, as amended.

Local government units (LGUs) may also optimize their respective offices, consistent with the governing principles and guidelines contained in this Act and the provisions of Republic Act No. 7160 or the "Local Government Code of 1991", as amended, and subject to their financial capability.

The Governance Commission for GOCCs shall continue to exercise its authority under Republic Act No. 10149 to reorganize, merge, streamline, abolish, or privatize any GOCC, in consultation with the department to which the GOCC is attached.

Section 5. Governing Principles

The National Government shall implement the GOP in accordance with the following principles:

(a)The scope, level, and prioritization of government programs, activities, and projects, as well as the appropriate manner for providing public goods and services, shall be determined in accordance with the constitutional mandate, political and socio-economic contexts, objectives, and available resources of the government;

(b)The government shall establish a conducive policy environment to encourage the active engagement of the private sector and civil society organizations in the production and delivery of goods and services;

(c)The government shall recognize the principle of equal pay for equal work;

(d)The government shall respect the right to self-organization of employees in the public sector and shall encourage participation in matters affecting their rights;

(e)The delineation of functions and responsibilities between the National Government and LGUs in the provision of public goods and services shall be clearly defined, consistent with the provisions of Republic Act No. 7160, as amended, and other pertinent laws and issuances, to provide a more seamless, accessible, and responsive government service to the people;

(f)A whole-of-nation approach shall be adopted to ensure seamless operations of agencies within and across sectors to better anticipate and be more responsive to public needs;

(g)Government operations shall be simplified so that the agencies can focus on the performance of their core functions and the implementation of programs and projects that will lead to the attainment of the desired sectoral and national goals and outcomes;

(h)Government systems and processes shall be streamlined and modernized to facilitate the delivery and upgrade the quality of frontline services, improve policy formulation, planning, and performance evaluation, and raise the overall productivity of the public sector;

(i)Digitization and e-governance shall be utilized as a means to efficiently optimize government roles and provide prompt and effective services to the people;

(j)Government rules, procedures, and requirements shall be rationalized to reduce the regulatory burden on citizens, businesses, and other stakeholders, as well as reduce the administrative burden on the part of the government; and

(k)The organizational structure of an agency shall be designed and optimized to facilitate the effective, efficient, and economical implementation of programs and projects, and economical implementation of programs and projects, and attainment of organizational outputs and outcomes. The appropriate staffing mix shall be determined based on the skills and competencies required to effectively and efficiently carry out the agency mandate and functions.

Section 6. Authority of the President to Optimize the Operations of the Executive Branch

The President is hereby granted the following authority in optimizing the operations of the different agencies in the Executive Branch:

(a)To pursue the following functions shifts or modifications:

(1)Strengthen the functions of the agency that directly contribute to the targeted ultimate societal outcomes of the National Government and/or the targeted sector or subsector outcomes of the agency;

(2)Scale down, phase out, eliminate, or discontinue functions, programs, projects, or activities that can be better carried out or undertaken by the private sector, or have already been developed to LGUs consistent with the governing principles provided in this Act; and

(3)Transfer or integrate functions from one (1) agency to another which can better perform the same, or split functions of agencies, bureaus, and offices that may be conflicting or multifarious; and

(b)To implement the following organizational and staffing actions, upon determination by the COEB that it is in the best interest of the State to create, reorganize, merge, streamline, abolish, or deactivate agencies, offices, or units:

(1)Merge or consolidate agencies whose functions are unnecessarily overlapping or duplicating and can be undertaken by a single entity, or whose clients are similar or related, to rationalize the use of government resources;

(2)Transfer agencies, units, or positions to another department, agency, or unit where their functions are more aligned;

(3)Split agencies or units with multifarious functions that are distinct but equally important aspects of governance;

(4)Create new agencies, offices, or positions, as needed, to strengthen the capacity of government agencies to perform their mandate;

(5)Regularize ad hoc offices whose functions are vital and significant, and must continuously be undertaken by the government; and

(6)Abolish or deactivate agencies or units, subject to evaluation and favorable recommendation of the COEB, based on any of the following grounds:

(a)the functions are already redundant, no longer relevant or necessary, or can be better undertaken by another entity or subsumed under other departments/agencies/units;

(b)the agency is no longer achieving the objectives and purposes for which it was originally created;

(c)the agency's continued operation is not cost-effective since it does not generate the desired level of outputs and outcomes vis-a-vis the resource inputs; or

(d)the agency or unit has become non-operational or dormant and/or has outlived its purpose.

Section 7. Creation of the Committee on Optimizing the Executive Branch

There is hereby created a COEB to oversee the implementation of the GOP, pursuant to the provisions of this Act. The COEB shall be convened within thirty (30) days from the effectivity of this Act to commence the exercise of its powers and functions. It shall be composed of the following:

(a)The Executive Secretary as Chairperson;

(b)The Secretary of the Department of Budget and Management (DBM) as Co-Chairperson;

(c)The Secretary of the Department of Economy, Planning, and Development as member;

(d)The Chairperson of the Civil Service Commission (CSC) as member; and

(e)The Director-General of the Anti-Red tape Authority as member. The foregoing may appoint a representative who shall be at least a third (3rd) ranking official of the agency.

A government employee representative, who shall be the Public Sector Labor-Management Council (PSLMC) sectoral labor representative, depending on the agency or unit being considered for optimization, shall also be a member of the COEB.

The COEB shall organize subcommittees composed of experts on government operations, organizational development, and human resource management, with a secretariat for each subcommittee, composed of regular personnel from said agencies, to assist in the performance of its functions.

The DBM shall provide the necessary secretariat services to the COEB and designate focal persons for each subcommittee to ensure effective coordination.

Section 8. Powers and Functions of the Committee on optimizing the Executive Branch

The COEB shall:

(a)Develop the policies, frameworks, indicators, strategies, and mechanisms, in considerations of the lessons learned from previous efforts on reorganization, to be adopted in the implementation of the GOP;

(b)Develop a GOP Management Plan containing, among others, the activities, responsibilities, and resource requirements that shall be adopted to ensure its effective implementation and submit the same to the President within thirty (30) days from the issuance of the implementing rules and regulations (IRR);

(c)Conduct studies on the mandates, functions, programs, projects, operations, structures, and manpower complement of the different govenrment agencies and instrumentalities;

(d)Develop and prepare the Optimized Organizational Structure of concerned agencies and the corresponding executive issuances for approval by the President, in accordance with the provisions of Section 6 of this Act;

(e)Develop and prepare the overall change management program, which shall include communication plans, the appropriate Organizational Development Program, and other mechanisms to effectively manage the transition, ensure the smooth implementation of the GOP, and safeguard the welfare of employees affected by the optimization efforts;

(f)Monitor the different agencies' implementation of their respective approved optimization plans, and report to the President any issue that must be addressed;

(g)Engage the services of experts or consultants, through the DBM, to assist the COEB and its subcommittees in the performance of their functions; and

(h)Formulate the IRR of this Act.

Section 9

Conduct of Strategic Review and Study on the Mandates, Functions, Systems, Operations, and Processes of the Executive Branch. - Within the period prescribed in the IRR, the COEB shall conduct a strategic review and study on the roles, mandates, functions, programs, projects, operations, structures, and manpower complement of the different agencies under the Executive Branch for purposes of:

(a)Determining the role of the government, as well as the suitable extent of government intervention in the sectoral areas covered;

(b)Identifying, among others, areas of dysfunction and bureaucratic inefficiencies in the sectoral areas covered and concerned government agencies;

(c)Assessing the relevance of an agency's mandates, functions, programs, and projects in pursuit of the country's socio-economic and development goals and outcomes; and

(d)Providing recommendations on the appropriate roles, mandates, and functions of government agencies; organizational actions to improve efficiency and interoperability of government agencies; and necessary transformational and organizational changes that can be implemented in the sectoral areas and/or concerned agencies. The conduct of the strategic review and study shall be consistent with the governing principles set forth under Section 5 of this Act and may contain the recommended actions provided in Section 6 of this Act.

Section 10. Prerequisites to Optimization

(a)Organizational Review and Study. - An agency covered under this Act shall conduct an organizational review and study of the agency's mandates, missions, objectives, functions, systems, procedures, programs, activities, projects, organizational structure, staffing patterns, and manpower complement. The study shall also include the evaluation of the qualifications and performance of all personnel.

(b)Optimization Plan. - The agency shall formulate an Optimization Plan consistent with the governing principles set forth under Section 5 of this Act, which shall include areas where improvements are necessary and areas where more resources need to be rechanneled as part of its institutional strengthening effort. The Optimization Plan may also include the agency's requirement for additional plantilla positions for its qualified casual or contractual personnel, as well as its job order or contract of service workers with a minimum of ten (10) years of continuous service in the agency, subject to a cap or quota as may be determined by the COEB and the existing civil service laws, rules, and regulations, and the CSC-approved Merit Selection Plan of the agency: Provided, That the optimized agency shall not be allowed to hire casual or contractual personnel, as well as job order or contract of service workers within five (5) years from the time the Optimization Plan is implemented.

The organizational review and study, and the Optimization Plan shall be submitted to the COED within the period prescribed in the IRR. The DBM and the CSC may extend, as necessary, assistance to the agencies in the preparation of the Optimization Plan.

The agency shall conduct the organizational review and study, and the Optimization Plan, in consultation with an employee representative, in the following order of preference:

(1)The sole and exclusive negotiating agent (SENA);

(2)The representative of its registered organization; or

(3)A nominee from its rank and file employees.

Section 11

Submission of the Optimized Organizational Structure and Proposed Executive Issuances to the President.- Within the period prescribed in the IRR, the COEB shall submit to the President the Optimized Organizational Structure of the concerned agencies and the corresponding executive issuances, taking into consideration the results and findings of the strategic review and study.

Section 12

Submission of the Detailed Optimized Organizational Structure and Staffing Pattern to the DBM.- Agency heads shall prepare and submit to the DBM the Detailed Optimized Organizational Structure and Staffing Pattern (OSSP), including its estimated cost, within the period prescribed in the IRR.

Section 13. Retirement Benefits and Separation Incentives for Personnel Who May be Affected by the GOP

The affected personnel hired on a permanent basis and with appointments attested by the CSC shall be entitled to retirement benefits and separation incentives.

(a)Qualified affected personnel shall be given the option to avail of any of the following retirement benefits under existing laws:

(1)Retirement gratuity provided under Republic Act No. 1616 or "AN Act Further Amending Section Twelve of Commonwealth Act Numbered One Hundred Eighty-Six, as Amended, By Prescribing Two Other Modes of Retirement, and for Other Purposes", as amended;

(2)Retirement benefit under Republic Act No. 660 or "An Act to Amend Commonwealth Act Numbered One Hundred and Eighty-Six Entitled 'An Act to Create and Establish a Government Service Insurance System, to Provide for its Administration, and to Appropriate the Necessary Funds Therefor,' and to Provide Retirement Insurance and for Other Purposes"; or

(3)Retirement, separation, or unemployment provided under Republic Act No. 8291, or "An Act Amending Presidential Decree No. 1146, as Amended, Expanding and Increasing the Coverage and Benefits of the Government Service Insurance System, Instituting Reforms Therein and for Other Purposes";

Provided, That affected personnel shall have a minimum of five (5) years of government service to avail of the separation benefits provided under this Act. The Government Service Insurance System (GSIS) shall formulate guidelines on the grant of separation or unemployment benefits to affected personnel. Qualified affected personnel availing the benefits under Republic Act No. 1616 shall be entitled to a refund of retirement premiums consisting of both personal and government shares, to be paid by the GSIS. The personnel shall be given the option to avail either the retirement gratuity benefit provided under Republic Act No. 1616 or the separation incentives under Section 13(b) of this Act, which shall be charged against the General Appropriations Act (GAA).

(b)In addition to said retirement benefits, the affected personnel retiring or separated shall be entitled to the following separation incentives as applicable:

(1)One half (1/2) of the actual monthly basic salary for every year of government service, for those who have rendered five (5) to less than eleven (11) years of service;

(2)Three-fourths (3/4) of the actual monthly basic salary for every year of government service, computed starting from the first year, for those who have rendered eleven (11) to less than twenty-one (21) years of service;

(3)The actual monthly basic salary for every year of government service, computed starting from the first year, for those who have rendered twenty-one (21) to less than thirty-one (31) years of service; and

(4)One and one-fourth (1 1/4) of the actual monthly basic salary for every year of government service, computed starting from the first year, for those who have rendered thirty-one (31) years of service and above. The actual monthly basic salary shall refer to the affected personnel's salary as of the date of approval of the agency's Detailed Optimized OSSP by the DBM:

Provided, That for the purpose of computing the total amount of separation incentives that affected personnel will receive, only the government service rendered up to age fifty-nine (59) and a fraction thereof will be counted. Government service from the age of sixty (60) will no longer be subject to the separation incentives provided therein, without affecting the original incentive factor determined based on the actual years of service of the affected personnel, as applicable:

Provided, further, That to comply with the required number of years of service under Republic Act No. 8291, the portability scheme under Republic Act No. 7699 or "An Act Instituting Limited Portability Scheme in the Social Security Insurance Systems by Totalizing the Workers' Creditable Services or Contributions in Each of the Systems" may be applied, subject to existing policies and guidelines:

Provided, finally, That affected personnel who retired or were separated from the service as a result of the implementation of the GOP shall not be reemployed in any agency of the National Government, including GOCCs, for a period of five (5) years, except in the exigency of service or as teaching or medical staff in educational institutions and hospitals, respectively.

The number of personnel who will avail of separation incentives under Section 13(b) of this Act shall in no case exceed the number of positions declared for abolition.

The specific guidelines to carry out the provisions of this section shall be prescribed in the IRR of this Act.

Section 14. Other Benefits of Retired or Separated Personnel

The affected personnel who retired, or were separated from service shall be entitled to the following benefits, among others, under applicable laws:

(a)Refund of Pag-IBIG Contributions. - All affected personnel who are members of the Pag-IBIG Fund shall be entitled to the refund of their contributions (both personal and government), pursuant to existing rules and regulations of the Home Development Mutual Fund; and

(b)Commutation of Unused Vacation and Sick Leave Credits. - All affected personnel shall be entitled to the commutation of unused vacation and sick leave credits in accordance with existing rules and regulations.

Section 15. Period of Availability of the Retirement Benefits and Separation Incentives

The retirement benefits and separation incentives provided under this Act shall be available within sixty (60) days from the issuance of the Notice of Organization, Staffing, and Compensation Action (NOSCA) by the DBM to the concerned agencies.

Section 16. Option for Affected Personnel Who Opt Not to Retire or Separate from the Service

The affected personnel who opt not to retire or separate from the service shall, if qualified, occupy vacant positions within the agency without reduction in salary.

Alternatively, affected personnel may apply for transfer to other departments/agencies/GOCCs, subject to CSC rules and regulations.

The personnel shall be subject to a reskilling and upskilling program to capacitate them for redeployment.

The personnel movement, including the conduct of reskilling and upskilling, shall be completed within the period approved by the COEB.

Section 17

Non-interruption of Government Service During the Transition Period; Change Management Program. - This Act, or any guidelines, rules, or regulations issued in pursuance hereof, or any initiative related to the implementation of the recommendations under the strategic review and study conducted through the GOP, shall ot operate to suspend or exempt any government office or personnel from compliance with the provisions of Republic Act No. 11032 or the "Ease of Doing Business and Efficient Government Service Delivery Act of 2018".

The agencies shall implement their respective approved Detailed Optimized OSSP in such a manner that government operation will not be delayed or disrupted. For this purpose, agencies affected by the GOP shall be given a period of one (1) year from the approval of the NOSCA to fully implement their respective Detailed optimized OSSPs.

Agencies and personnel shall perform their respective functions, duties, and responsibilities in a holdover capacity until the transition has been completed.

Agencies shall ensure that a change management program is carried out to ensure smooth and effective transition.

Section 18. Joint Congressional Oversight Committee on the Government Optimization Program

There is hereby created an Oversight Committee to oversee, monitor, and evaluate the implementation of this Act.

The Oversight Committee shall be composed of vie (5) members each from the Senate and the House of Representatives. This shall include the Chairpersons of the Senate Committees on Civil Service, Government Reorganization and Professional Regulation, and Finance, and the Chairperson of the House Committee on Government Reorganization, and Appropriations. The President of the Senate and the Speaker of the House of Representatives shall each designate the remaining three (3) members from the Senate and the House, respectively, one (1) of whom shall be from the minority.

Section 19. Conduct of an Impact Assessment

The DBM shall commission an independent impact assessment of the GOP to be conducted three (3) years after its completion to determine, among others, the effects and gains of its implementation.

Section 20. Report to Congress

The President shall submit a report to Congress on the results of the GOP after the completion of its implementation.

Section 21

Provisions Applicable to Other Branches of Government, Constitutional Commission, Office of the Ombudsman, and the LGUs. - The governing principles, policies, standards, guidelines, conditions, and limitations provided in this Act shall be followed in the implementation of the GOP by the other branches of government, Constitutional Commissions, the Office of the Ombudsman, and the LGUs.

The heads of said offices shall issue their respective IRRs and furnish a copy thereof to the Senate Committee on Civil Service, Government Reorganization and professional Regulation, and Finance, the House Committees on Government Reorganization, and Appropriations, and the DBM.

Section 22. Funding Requirements

The amounts necessary for the initial implementation of this Act shall be charged against any applicable appropriation items under the current GAA, subject to existing budgeting, accounting, and auditing laws, rules, and regulations. Subsequent amounts need to continue the implementation of the GOP shall be included in the annual GAA, subject to usual budgetary process.

In the event that the Legislature, Judiciary, Constitutional Commissions, and Office of the Ombudsman optimize their respective offices in accordance with the provisions of this Act, the funds necessary for this purpose shall likewise be sourced from any applicable appropriations under the GAA.

The amount needed to implement the GOP of GOCCs not covered by Republic Act No. 10149 shall be sourced from their respective corporate funds, In case of funding deficiency, the National Government may assist in the payment of separation incentives of the affected personnel whose salaries and other compensation are covered by Republic Act No. 6758, as amended.

In case the LGUs pursue optimization efforts consistent with the provisions of this Act and Republic Act No. 7160, as amended, the amounts needed for the purpose shall be drawn from their respective local government funds.

Section 23. Sunset Provision

The authority given to the President under this Act shall end five (5) years after the effectivity of this Act.

Section 24. Implementing Rules and Regulations

Within sixty (60) days from its convening, the COEB shall issue the necessary rules and regulation for the effective implementation of the provisions of this Act.

Section 25. Separability Clause

If any provision of this Act is declared unconstitutional, the remaining hereof not otherwise affected shall remain in full force and effect.

Section 26. Repealing Clause

All laws, presidential decrees, executive orders, letters of instruction, proclamations, or administrative regulations that are inconsistent with the provisions of this Act are hereby repealed, amended, or modified accordingly.

Section 27. Effectivity

This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation.

Approved,

| | (Sgd.) FERDINAND MARTIN G. ROMUALDEZ Speaker of the House of Representatives | (Sgd.) FRANCIS "CHIZ" G. ESCUDERO President of the Senate |

This Act was passed by the Senate of the Philippines as Senate Bill No. 2252 on December 16, 2024 and adopted by the House of Representatives as an amendment to House Bill No. 7479 on January 15, 2025.

REGINALD S. VELASCO

Secretary General House of Representatives

RENATO N. BANTUG, JR.

Secretary of the Senate

Approved: AUG 04 2025

FERDINAND ROMUALDEZ MARCOS JR.

President of the Philippines

For information and research only, and not legal advice. This text may not reflect later amendments. For certified copies, refer to the Official Gazette or the issuing agency.

In plain language