SURVEY OF SUPREME COURT DECISIONS ON PUBLIC PROCUREMENT

(Jurisprudence on Public Procurement)

CAPACITY DEVELOPMENT DIVISIONGovernment Procurement Policy Board

Technical Support Office (GPPB-TSO)

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Valid JV AgreementHarry Roque, et al. vs. COMELEC G.R. No. 188456 , September 10, 2009

•“Contrary to what the petitioners posit, the duly notarized JVA, as couched, explained the nature and the limited purpose of the joint venture and expressly defined, among other things, the composition, scope, and the 60-40 capital structure ...”

•Separate Concurring Opinion of Justice Renato Corona cited NPM 98-2004 (July 23, 2004) – RA 9284 and its IRR does not prescribe the standard form nor does it spell out the specific terms and conditions that should be included in the JVA. But for purposes of eligibility check, the JVAs are required to be notarized to be binding against third persons.

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Section 3 (a) R.A. 9184

Guingona, et al. vs. COMELEC G.R. No. 191846 , May 6, 2010

•Procurement of PCOs machines by the COMELEC for the automated elections.•Section 7 Article III

“The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions…”•Section 3 (a) RA 9184

“Transparency in the procurement process and in the implementation of procurement contracts.”

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Procurement Contract: Option to Purchase

Capalla vs. COMELEC G.R. No. 201112 , June 13, 2012

•A reading of the other provisions of the contract would show that the parties are given the right to amend the contract which may include the period within which to exercise the option. There is likewise no prohibition on the extension of the period, provided that the contract was still effective.

•The COMELEC still retains P50M of the amount due Smartmatic-TIM as performance security, which indicated that the contract is still effective and not yet terminated.

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Section 4, R.A. 9184

Abaya vs. Ebdane G.R. No. 167919 , February 14, 2007

–Loan Agreement, through Exchange of Notes, executed by the President with an IFI is an “Executive Agreement” and must be observed pursuant to “pacta sunt servanda.”

•DBM-PS vs. Kolonwel Trading G.R. No. 17560, June 8, 2007

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Nature of Public BiddingNational Power Corporation vs. Pinatubo Commercial, represented by Alfredo A. Dy G.R. No. 176006, March 26, 2010

The bidding process was not a “free-for-all” where any and all interested parties, qualified or not, could take part. RA 9184 categorically mandates that prospective bidders are subject to eligibility screening, and as earlier stated, bidding rules may specify other conditions or order that the bidding process be subjected to certain reservations or qualifications.

The competitiveness policy of a bidding process presupposes the eligibility and qualification of a contestant; otherwise, it defeats the principle that only “responsible” and “qualified” bidders can bid and be awarded government contracts. Our free enterprise system is not based on a market of pure and unadulterated competition where the State pursues a strict hands-off policy and follows the let-the-devil-devour-the-hindmost rule.

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Technical Specifications

COA vs. Link Worth Int’l., Inc. G.R. No. 182559 March 13, 2009

•Procuring entity must verify, inspect and test whether the technical specifications comply with its requirements

•It does not give occasion for procuring entity to arbitrarily exercise its discretion and brush aside the very requirements it specified

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Determination of the Nature of the Subject Matter of

ProcurementDepartment of Foreign Affairs and Bangko Sentral ng Pilipinas vs. Hon. Franco T. Falcon and BCA International Corporation G.R. No. 176657 September 1, 2010

•The e-Passport Project cannot be considered as "engineering works or a service contract" or as "related and necessary activities" under Republic Act No. 8975 which may not be enjoined.. Under Republic Act No. 8975, a "service contract" refers to "infrastructure contracts entered into by any department, office or agency of the national government with private entities and nongovernment organizations for services related or incidental to the functions and operations of the department, office or agency concerned."

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Determination of the Nature of the Subject Matter of

Procurement•Indeed, the reference to Section 30.4 of the IRR of Republic Act No. 9184 (a provision specific to the procurement of goods) in the BSP’s request for interest and to bid confirms that the e-Passport Project is a procurement of goods and not an infrastructure project. Thus, within the context of Republic Act No. 9184 – which is the governing law for the e-Passport Project – the said Project is not an infrastructure project that is protected from lower court issued injunctions under Republic Act No. 8975, which, to reiterate, has for its purpose the expeditious and efficient implementation and completion of government infrastructure projects.

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Splitting of Contracts

Balderbin v. Sandiganbayan G.R. Nos. 144950-71, March 22, 2007

•A BAC member, aware of the splitting of transactions of accounts, proceeded with signing the Abstract of Bids claiming that the same was done in good faith and that he did not participate in said splitting of accounts.

•The BAC member cannot claim good faith and avoid criminal liability. He knew of the splitting of contracts and the same cannot be ignored.

•Supreme Court cited COA Circular No. 76-41 in defining and identifying forms of splitting of contracts.

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Discretion to Accept or Reject A Bid

Albay Accredited Constructors Association v. Ombudsman G.R. No. 13351, January 30, 2006

•The bidder was required to submit a Contractor’s Confidential Pre-qualification Statement.

•In the evaluation of bids, Government reserves the right to waive consideration of minor deviations which do not affect the substance and validity of the bids. The discretion given to authorities to accept or reject a bid is of such wide latitude that courts will not interfere, unless it is apparent that it is exercised arbitrarily, or, used as a shield to a fraudulent award.

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Effect of Reservation Clause

National Power Corporation Vs. Philipp Brothers Oceanic, Inc. G.R. No. 126204 November 20, 2001

NAPOCOR was not bound under any contract to approve PHIBRO's pre-qualification requirements.

Where the right to reject is so reserved, the lowest bid or any bid for that matter may be rejected on a mere technicality.

Where the government as advertiser, availing itself of that right, makes its choice in rejecting any or all bids, the losing bidder has no cause to complain nor right to dispute that choice unless an unfairness or injustice is shown.

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Effect of Reservation Clause

•Verily, a reservation of the government of its right to reject any bid, generally vests in the authorities a wide discretion as to who is the best and most advantageous bidder. The exercise of such discretion involves inquiry, investigation, comparison, deliberation and decision, which are quasi-judicial functions, and when honestly exercised, may not be reviewed by the court.

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COA’s Presence in Public Bidding

Villanueva v. COA G.R. No. 151987. March 18, 2005

•Upon the agency that called for the bidding, therefore, rests the burden of ensuring that the process undertaken is above-board and that the outcome thereof is most advantageous to the government. The presence of the COA representative, as witness or observer, on the other hand, is fundamental only to the extent of guaranteeing documentary integrity and transparency in the bidding process.

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Perfection of Contract

The Insular Life Assurance Company, Ltd. Vs. Asset Builders Corporation, G.R. No. 147410 February 5, 2004

•The effect of giving the Notice of Award … would have been the perfection of the contract. No such acceptance was communicated to respondent; therefore, no consent was given. Without that express manifestation, as required by the terms of its proposal, there was no contract.

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Importance of Bid Security

The Insular Life Assurance Company, Ltd. Vs. Asset Builders Corporation G.R. No. 147410 February 5, 2004

The "bid bond is an indispensable requirement for the validation of a bid proposal. This requisite ensures the good faith of bidders and binds them to enter into a contract with the owner, should their proposal be accepted. One who submits a bid not only signifies assent to the terms and conditions of a proposal, but impliedly binds oneself to them, if and when the bid is considered. The Invitation to Bidders even provided that incomplete proposals might be sufficient cause for their rejection. If mere insufficiency of a bond required of a bidder is a ground for rejection, a fortiori, all the more so is the total want thereof.

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Honoraria

Sison vs. Tablang G.R. No. 177011, June 5, 2009

–Section 15 of R.A. 9184 authorizing grant of honoraria is not self-executing. It still needs an implementing guideline.

–Honorarium is something given not as a matter of obligation but in appreciation for services rendered. Section 15 uses the word “may”.

NOTE: DBM Circular No. 2004-5A, as amended by DBM Circurlar 2007-3

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Protest

Phil. Pharmawealth, Inc. v. Phil. Children’s Medical Center BAC, et. al. GR No. 167806 26 June 2006

•The doctrine of exhaustion of administrative remedies calls for resort first to the appropriate administrative authorities to accord them the prior opportunity to decide controversies within their competence before the same may be elevated to the courts of justice for review.

•Protest Mechanism under R.A. 9184 and its IRR must be observed.

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Protest

LRA v. Lanting Security and Watchman Agency GR No.181735 July, 20, 2010

•Sec. 55 of RA 9184, the Government Procurement Reform Act, sets three requirements that must be met by a party desiring to protest the decision of the Bids and Awards Committee (BAC): (1) the protest must be in writing, in the form of a verified position paper; (2) the protest must be submitted to the head of the procuring entity; and (3) the payment of a non-refundable protest fee.

•Respondent’s letter of November 19, 2004 to the LRA Chair of the BAC-Procurement of Goods, Services and Materials (BAC-PGSM) cannot be considered as the protest required under sec. 55 of RA 9184 as it was not verified and the protest fee was not paid.

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Protest

First United Constructors Corp. vs. Poro Point Management Corp. G.R. No. 178799, January 19, 2009

•Petitioner violated doctrine of judicial hierarchy in directly filing its petition for Certiorari before the Supreme Court

–One must first invoke special and important reasons

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Negotiated Procurement: Delay in the Use of Funds

Nava vs. Palattao G.R. No. 16021 August 28, 2006

The head of the procuring entity persuaded his 7 Schools Division Superintendents to ignore Circular No. 85-55 (public bidding). As allegedly time was of the essence in making the purchases and if not done before the calendar year 1990, the funds allotted will revert back to the general fund.

There was no showing of any immediate and compelling justification for dispensing with the requirement of public bidding. Unsubstantiated reasoning that a public bidding would unnecessarily delay the purchase is unacceptable.

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Allied Supreme Court Decisions

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Macalintal vs. COMELECG.R. No. 157013 July 10, 2003

Facts:

Congress enacted R.A. 9189 (The Overseas Absentee Voting Act of 2003). The petitioner Macalintal questions, among others, the constitutionality Section 19 of R.A. 9189 which provides for the creation of a Joint Congressional Oversight Committee with the power to review, revise, amend and approve the implementing rules and regulations promulgated by the COMELEC. He contends that R.A. 9189 intrudes into the independence of the COMELEC which, as a constitutional body, is not under the control of either the executive nor the legislative departments of government; that only the COMELEC itself can promulgate rules and regulations which may be changed or revised only by the majority of its members.

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Macalintal vs. COMELECG.R. No. 157013 July 10, 2003

Issue:Whether or not Section 19 of R.A. 9189 is constitutional?

Ruling:The Commission on Elections is a constitutional body. It is

intended to play a distinct and important part in our scheme of government. In the discharge of its functions, it should not be hampered with restrictions that would be fully warranted in the case of a less responsible organization. The Commission may err, so may this court also.

By vesting itself with the powers to approve, review, amend, and revise the IRR for The Overseas Absentee Voting Act of 2003, Congress went beyond the scope of its constitutional authority. Congress trampled upon the constitutional mandate of independence of the COMELEC. Under such a situation, the Court is left with no option but to withdraw from its usual reticence in declaring a provision of law unconstitutional.

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G & S Transport Corporation Vs. Court of Appeals, G.R. No. 120287

May 28, 2002Facts:

MIAA initiated proceedings for public bidding to choose two (2) concessionaires of the coupon taxi services at the NAIA. Five (5) firms pre-qualified to join the bidding including petitioner G & S and respondents Two Thousand (2000) Transport Corporation (2000 TRANSPORT) and Nissan Car Lease Philippines, Inc. (NISSAN), after complying with the terms of reference, the instructions to bidders and the invitation to bid.

MIAA selected 2000 TRANSPORT and NISSAN as the winning bidders and issued in their favor the respective notice of awards of the coupon taxi service concession.  

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G & S Transport Corporation Vs. Court of Appeals, G.R. No. 120287

May 28, 2002Issue:

Whether or not permanent injunction to bar the award of the concession to 2000 Transport and Nissan is proper?

Ruling:- Indeed the determination of the winning bidders should be left to the sound judgment of the MIAA which is the agency in the best position to evaluate the proposals and to decide which bid would most complement the NAIA's services. The Terms of Reference for Coupon Taxi Service Concession observed, "[t]he professional transport service plays a very important role in enhancing and maintaining a good image of the country that will speak of trust, honesty, efficiency and modernity."

- In this regard only the most advantageous bids would be selected on the basis of the best bid offer in relation to the bidders' existing facilities, financial standing, organizational set-up, relevant experience, quality, capability and kind of services offered.

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Commission on Elections Vs. Judge Ma. Luisa Quijano-Padilla (G. R. No.

151992 September 18, 2002)Facts: 

PHOTOKINA won in a public bidding with a bid in the amount of P6.5 billion pesos. Both parties proceeded to formalize the contract. However, the budget appropriated for the modernization project under RA 8760 was only P1 billion and actual available funds under the CAF was only P1.2 billion.

Ruling:There is no way that a government agency could

enter into a contract with a bidder whose accepted bid was way beyond the amount appropriated by law for the project. The BAC should have rejected the bid for being excessive or should have withdrawn the Notice of Award on the ground that in the eyes of the law, the same is null and void.

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Julius G. Froilan vs. The Honorable Sandiganbayan

G.R. No. 115221 March 17, 2000Facts:

Bohol Agricultural College purchased chemicals priced at P10,633.00 from JDS Traders, which was one of the three suppliers requested by the College for quotations. Accused Froilan of the JDS Traders signed a certification stamped on the purchase order that he will refund the difference if the prices are found to be overpriced. Three years after, COA demanded the settlement from Froilan of a refund of the amount found to have been overpriced, P5,233.17. Notwithstanding the refund made by Froilan, an information for violation of Sec 3(g) of RA 3019 was filed against him.

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Julius G. Froilan vs. The Honorable Sandiganbayan

G.R. No. 115221 March 17, 2000Ruling:

It was not disputed that when the COA found an

overprice in the amount of P5,232.87 and sought a refund thereof, petitioner, true to his promise, did actually make a refund.

When the government is amply protected in a procurement transaction, the contract is not grossly and manifestly disadvantageous to it.

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Rodolfo Madrid, Jr. vs. Hon. Aniano A. Desierto,

G.R. No. 143684 July 31, 2000Facts:

The City Government of Legazpi City invited bidders to participate in the development and construction of the Legazpi City Public Market. The project was awarded to Liberty Commercial Center. A renewable 50-year contract of lease with Liberty was entered into by the city government. Liberty will construct a public market on the property of the government and thereafter pay the latter P5.5 million annually for the lease of the property. Transfer of ownership of the public market will be transferred to the city government at the end of the 50-year lease.

Complaint was filed against respondents before the Office of the Ombudsman on violations of Sec. 3(e), (g) and (j) of Republic Act No. 3019, which was dismissed.

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Rodolfo Madrid, Jr. vs. Hon. Aniano A. Desierto,

G.R. No. 143684 July 31, 2000Ruling:

The requirements under R.A. 6957 on approval from the ICC of NEDA Board refer to transaction under the build-operate-transfer scheme of the government and not to contract involving lease of property just like the one involved in the instant case.All the elements of a contract of lease are present in the transaction.(A transaction that would now fall under general procurement law or RA 9184, comment ours)There is a subject matter, the use of the property of the Legazpi City; a cause or consideration which is the amount of rental that shall be paid by the LCC; and consent among the parties. The mere provision in the contract that the building shall belong to the city government of Legazpi at the termination of the contract will not be sufficient to classify the transaction under the BOT scheme. This kind of provision is ordinary in long-term lease agreement.

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Rodolfo Madrid, Jr. vs. Hon. Aniano A. Desierto,

G.R. No. 143684 July 31, 2000

The option given to LCC to pay rent on a monthly basis (instead on an annual basis) is not prejudicial to the government. Whether the rent is paid monthly or annually would result in the same thing – the receipt by the government of the same sum of money. Mere reference made in the contract that the amount of rent shall be such amount annually does not necessarily mean that payment should be made in an annual basis.

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ANTONIO J. VILLEGAS vs. THE AUDITOR GENERAL

G.R. No. L-21352 November 29, 1966

Facts:During the rebidding conducted by the Committee on

Bids (composed of City Mayor, Treasurer and Auditor), it was alleged that the Mayor was represented by someone else. There was contention that the Committee on Bids was illegally convened as the law does not allow substitution.

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ANTONIO J. VILLEGAS vs. THE AUDITOR GENERAL

G.R. No. L-21352 November 29, 1966

Issue:Whether or not there can be valid substitution in the

Committee on Bids.

Ruling:Well established is the principle that judicial or quasi-

judicial powers may not be delegated. In the absence of constitutional or statutory authority, an administrative officer may not alienate or surrender his discretionary power or power's which require exercise of judgment, or deputize another for him with respect thereto. For, when a public official is granted discretionary power, it is so be presumed that so much is reposed on his integrity, ability, acumen, judgment.

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