Government Contracts

Relevant laws:

1987 Constitution

The New Civil Code

Anti Graft and Corruption

RA 9184 (see: https://www.coa.gov.ph/index.php/abc-help/category/5735-rules-on-government-
procurement)

BOT Law (see: https://ppp.gov.ph/in_the_news/the-philippine-bot-law/)

CASES:

1. OFFICE OF THE OMBUDSMAN, petitioner, vs. ANTONIO Z. DE GUZMAN, respondent. G.R. No.
197886, Oct. 4, 2017.

Syllabus:

Government Procurements; Bids and Bidding; As a general rule, all government procurement
must undergo competitive bidding. This ensures transparency, competitiveness, efficiency, and
public accountability in the procurement process.—The ratification of respondent’s
unauthorized acts does not necessarily mean that the May 7, 2004 contract was validly
executed. To determine if respondent committed grave misconduct when he entered into this
contract, it must first be determined if public bidding was necessary. As a general rule, all
government procurement must undergo competitive bidding. This ensures transparency,
competitiveness, efficiency, and public accountability in the procurement process. However, the
government entity may, subject to certain conditions, resort to alternative methods of
procurement namely: (1) limited source bidding, (2) direct contracting, (3) repeat order, (4)
shopping, and (5) negotiated procurement. The procuring entity must ensure that in any of
these methods, it secures the most advantageous price for the government.

Same; Negotiated Procurements; In negotiated procurement, “the Procuring Entity directly

negotiates a contract with a technically, legally and financially capable supplier, contractor or
consultant.”—In negotiated procurement, “the Procuring Entity directly negotiates a contract
with a technically, legally and financially capable supplier, contractor or consultant.” Resort to
negotiated procurement is allowed only under the following conditions: Section 53. Negotiated
Procurement.—Negotiated Procurement shall be allowed only in the following instances: (a) In
cases of two (2) failed biddings, as provided in Section 35 hereof; (b) In case of imminent danger
to life or property during a state of calamity, or when time is of the essence arising from natural
or man-made calamities or other causes where immediate action is necessary to prevent
damage to or loss of life or property, or to restore vital public services, infrastructure facilities
and other public utilities; (c) Take-over of contracts, which have been rescinded or terminated
for causes provided for in the contract and existing laws, where immediate action is necessary to
prevent damage to or loss of life or property, or to restore vital public services, infrastructure
facilities and other public utilities; (d) Where the subject contract is adjacent or contiguous to an
ongoing infrastructure project, as defined in the IRR: Provided, however, That the original
contract is the result of a Competitive Bidding; the subject contract to be negotiated has similar
or related scopes of work; it is within the contracting capacity of the contractor; the contractor
uses the same prices or lower unit prices as in the original contract less mobilization cost; the
amount involved does not exceed the amount of the ongoing project; and, the contractor has no
negative slippage: Provided, further, That negotiations for the procurement are commenced
before the expiry of the original contract. Whenever applicable, this principle shall also govern
consultancy contracts, where the consultants have unique experience and expertise to deliver
the require service; or, (e) Subject to the guidelines specified in the IRR, purchases of Goods
from another agency of the Government, such as the Procurement Service of the DBM, which is
tasked with a centralized procurement of commonly used Goods for the government in
accordance with Letter of Instruction No. 755 and Executive Order No. 359, Series of 1989.

Same; Same; Negotiated procurement under Republic Act (RA) No. 9184, Section 53(b) involves
situations beyond the procuring entity’s control. Thus, it speaks of “imminent danger . . . during
a state of calamity . . . natural or man-made calamities [and] other causes where immediate
action is necessary.”—Negotiated procurement under Republic Act No. 9184, Section 53(b)
involves situations beyond the procuring entity’s control. Thus, it speaks of “imminent
danger . . . during a state of calamity . . . natural or man-made calamities [and] other causes
where immediate action is necessary.”

Following the principle of ejusdem generis, where general terms are qualified by the particular
terms they follow in the statute, the phrase “other causes” is construed to mean a situation
similar to a calamity, whether natural or man-made, where inaction could result in the loss of
life, destruction of properties or infrastructures, or loss of vital public services and utilities. The
expiration of the mail carriage drivers’ employment contracts is not a calamitous event
contemplated under Republic Act No. 9184, Section 53(b).

Same; Same; Republic Act (RA) No. 9184, Section 5(j)(ii) defines head of the procuring entity as
“the governing board or its duly authorized official, for government-owned and/or -controlled
corporations.”—Respondent claims that even if public bidding was necessary, he cannot be held
liable for its non-conduct since he is not the head of the procuring entity. On the contrary,
Republic Act No. 9184, Section 5(j)(ii) defines head of the procuring entity as “the governing
board or its duly authorized official, for government-owned and/or-controlled corporations.” As
previously discussed, respondent’s acts, while initially unauthorized, were eventually ratified by
the Philippine Postal Corporation Board of Directors’ silence. Thus, he was considered “its duly
authorized official” in procuring Aboitiz One’s services. Office of the Ombudsman vs. De
Guzman, 841 SCRA 616, G.R. No. 197886 October 4, 2017

Facts:

The Postmaster General may only execute contracts for procurement of services with the Board
of Directors’ approval. However, this lack of authority may be ratified through the Board of
Directors’ silence or acquiescence. The ratification of the unauthorized act does not necessarily
mean that the contract is valid. If the contract is executed without complying with the laws on
procurement, the erring public official may be held administratively liable.
 Sometime in 2001, the Philippine Postal Corporation entered into a contract with Aboitiz Air
Transport Corporation (Aboitiz Air) for the carriage of mail at a rate of P5.00 per kilogram.5 This
contract would expire on December 31, 2002.

Sometime in October 2003, or after the expiry of its contract with Aboitiz Air, the Philippine
Postal Corporation purchased 40 vehicles for mail deliveries in Luzon. It also hired 25 drivers for
these vehicles on a contractual basis. All of these drivers’ contracts would expire on March 31,
2004, except that of a certain Oliver A. Cruz.

The Central Mail Exchange Center of the Philippine Postal Corporation conducted a post study of
the delivery system and found that the expenses for the salaries and maintenance of its vehicles
for Luzon deliveries were higher than its previous system of outsourcing deliveries to Aboitiz Air.
On April 15, 2004, it submitted a recommendation that the Philippine Postal Corporation would
save P6,110,152.44 per annum if deliveries were outsourced instead at the cost of P8.00 per
kilogram.

On April 29, 2004, the Board of Directors of the Philippine Postal Corporation held a Special
Board Meeting where De Guzman,9 the Officer-in-Charge, endorsed for approval the Central
Mail Exchange Center’s recommendation to outsource mail delivery in Luzon.

2. G.R. No. 229256. November 22, 2017. MARIETTA MAGLAYA DE GUZMAN, petitioner, vs. THE
OFFICE OF THE OMBUDSMAN and BESTFORMS, INCORPORATED, respondents.

SYLLABUS:

Bids and Bidding; Section 10, Article IV, in relation to Section 5, pars. (n) and (o), Article I, of
Republic Act (RA) No. 9184 mandates that all acquisition of goods, consulting services, and the
contracting for infrastructure projects by any branch, department, office, agency, or
instrumentality of the government, including state universities and colleges, government-owned
and/or -controlled corporations (GOCCs), government financial institutions, and local
government units shall be done through competitive bidding.—Section 10, Article IV, in relation
to Section 5, pars. (n) and (o), Article I, of RA 9184 mandates that all acquisition of goods,
consulting services, and the contracting for infrastructure projects by any branch, department,
office, agency, or instrumentality of the government, including state universities and colleges,
government-owned and/or -controlled corporations, government financial institutions, and local
government units shall be done through competitive bidding. This is in consonance with the
law’s policy and principle of promoting transparency in the procurement process,
implementation of procurement contracts, and competitiveness by extending equal opportunity
to enable private contracting parties who are eligible and qualified to participate in public
bidding.

Same; Alternative methods of procurement are allowed under Republic Act (RA) No. 9184
which would enable dispensing with the requirement of open, public but only in highly
exceptional cases and under the conditions set forth in Article XVI thereof.—Alternative
methods of procurement, however, are allowed under RA 9184 which would enable dispensing
with the requirement of open, public and competitive bidding but only in highly exceptional
cases and under the conditions set forth in Article XVI thereof. These alternative modes of
procurement include Limited Source Bidding and Negotiated Procurement.

Same; Section 13, Article V of Republic Act (RA) No. 9184 and Section 13, Rule V of
Implementing Rules and Regulations Part A (IRR-A) underscore that written invitations should be
sent to a Commission on Audit (COA) representative and to at least two (2) other observers to
sit in its proceedings.—Section 13, Article V of RA 9184 and Section 13, Rule V of IRR-A
underscore that written invitations should be sent to a COA representative and to at least two
(2) other observers to sit in its proceedings. It should be emphasized that both the law and the
IRR-A categorically state that these observers shall be invited to observe in all stages of the
procurement: SEC. 13. Observers.—To enhance the transparency of the process, the BAC shall,
in all stages of the procurement process, invite, in addition to the representative of the
Commission on Audit, at least two (2) observers to sit in its proceedings, one (1) from a duly
recognized private group in a sector or discipline relevant to the procurement at hand, and the
other from a nongovernment organization: Provided, however, That they do not have any direct
or indirect interest in the contract to be bid out. The observers should be duly registered with
the Securities and Exchange Commission and should meet the criteria, for observers as set forth
in the IRR.

Same; Sections 20 and 22 of Article VII of Republic Act (RA) No. 9184 mandate the Bids &
Awards Committee (BAC) to hold a pre-procurement and pre-bid conference on each and every
procurement, without making any qualifications nor exceptions as to which mode of
procurement these requirements are applicable to.—Sections 20 and 22 of Article VII of RA 9184
mandate the BAC to hold a pre-procurement and pre-bid conference on each and every
procurement, without making any qualifications nor exceptions as to which mode of
procurement these requirements are applicable to.

Same; Publication; As regards the publication and posting requirements, the Implementing Rules
and Regulations Part A (IRR-A) instructs that the advertisement or publication of the Invitation
to Apply for Eligibility to Bid (IAEB) in a newspaper of general circulation may be dispensed with
for alternative modes of procurement.—As regards the publication and posting requirements,
the IRR-A instructs that the advertisement or publication of the IAEB in a newspaper of general
circulation may be dispensed with for alternative modes of procurement. The Rules, however,
explicitly states that the IAEB shall still be posted at a conspicuous place in the premises of the
procuring entity concerned: Section 21. Advertising and Contents of the Invitation to Bid. x x x
21.2.4. For alternative methods of procurement as provided for in Rule XVI of this IRR-A,
advertisement in a newspaper as required in this Section may be dispensed with: Provided,
however, That posting shall be made in the website of the procuring entity concerned, if
available, the G-EPS, and posted at any conspicuous place reserved for this purpose in the
premises of the procuring entity concerned, as certified by the head of the BAC Secretariat of
the procuring entity concerned, during the same period as above.

Same; There is nothing in the law that allows the procuring entity to directly award a contract to
a participating bidder, even one who offered the best bid, whenever there is a failure of bidding.
—While De Guzman counters that the Rules allows the BAC to resort to Negotiated
Procurement based on a takeover of a previously awarded contract, her own assertion that the
 transaction was not purely a Negotiated Procurement but an award to a bidder who offered the
same lowest calculated bid during the same bidding held on March 30, 2006 all the more
highlights the circumvention of RA 9184 by the NPO-BAC. There is nothing in the law that allows
the procuring entity to directly award a contract to a participating bidder, even one who offered
the best bid, whenever there is a failure of bidding. On the contrary, the IRR-A specifically
directs that, for purposes of a negotiated procurement based on a takeover of contract, the
procuring entity must negotiate first with the second and third lowest calculated bidders, and in
the event that the negotiations fail, the procuring entity is still precluded from directly awarding
the contract. It must still produce a list of three eligible contractors to negotiate with.

Administrative Law; Misconduct; The misconduct is grave if it involves additional elements such
as corruption or willful intent to violate the law or to disregard established rules, which must be
proven by substantial evidence; otherwise, the misconduct is only simple.—Misconduct is a
transgression of some established and definite rule of action, more particularly, unlawful
behavior or gross negligence by a public officer. The misconduct is grave if it involves additional
elements such as corruption or willful intent to violate the law or to disregard established rules,
which must be proven by substantial evidence; otherwise, the misconduct is only simple.
Corruption, as an element of grave misconduct, consists in the fact of an official or fiduciary
person who unlawfully and wrongfully uses his station or character to procure some benefit for
himself or for another person, contrary to duty and the rights of others. In grave misconduct,
the elements of corruption, clear intent to violate the law, or flagrant disregard of an
established rule must be evident.

Bids and Bidding; Public biddings are held for the best protection of the public and to give the
public the best possible advantages by means of open competition among the bidders, and to
change them without complying with the bidding requirement would be against public policy.—
It bears reiteration that public biddings are held for the best protection of the public and to give
the public the best possible advantages by means of open competition among the bidders, and
to change them without complying with the bidding requirement would be against public policy.
What are prohibited are modifications or amendments which give the winning bidder an edge or
advantage over the other bidders who took part in the bidding, or which make the signed
contract unfavorable to the government.

3. G.R. No. 95398. August 16, 1991. MARIO R. MELCHOR, petitioner, vs. COMMISSION ON AUDIT,
respondent.

SYLLABUS:

The failure of the chief accountant to affix his signature to the contract was somehow made up
by his own certification which is the basis and more important validating document.—In the
case before us, the chief accountant issued a certificate of availability of funds but failed to sign
the contract as witness. But since Section 86 states that the certificate shall be attached to and
become an integral part of the proposed contract, then the failure of the chief accountant to
affix his signature to the contract was somehow made up by his own certification which is the
basic and more important validating document.
 Same; Same; Same; Same; The accountant’s certification not his signature as a contract witness
is the more reliable indicium of fund availability.—Since, under the above proviso, the
accountant’s signature shall have the effect of a certification, then it may be inferred that the
accountant’s certification, not his signature as a contract witness, is the more reliable indicium
of fund availability.

CASES IN BOT LAW

1. G.R. No. 217158, March 12, 2019. GIOS-SAMAR, INC., REPRESENTED BY ITS CHAIRPERSON
GERARDO M. MALINAO, PETITIONER, VS. DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS AND CIVIL AVIATION AUTHORITY OF THE PHILIPPINES, RESPONDENTS.
2. Osmeña III vs. Abaya, 781 SCRA 1, G.R. No. 211737, G.R. No. 214756 January 13, 2016

Same; 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.—Under the
ITPB, the PBAC reserves the right to waive any minor defects in the Qualification Documents,
and accept the offer it deems most advantageous to the government. 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.

Same; Build-Operate-and-Transfer; Under the Build-Operate-and-Transfer (BOT) Law

Implementing Rules and Regulations (IRR), the Pre-qualification, Bids and Awards Committee
(PBAC) shall be responsible for all aspects of the bidding process, including the interpretation of
the rules regarding the bidding, the conduct of bidding, evaluation of bids, resolution of disputes
between bidders, and recommendation for the acceptance of the bid award and/or for the
award of the project.—The issues raised against DIAL, as contained in the CAG’s report had been
addressed and resolved by the PBAC. In the same vein, GMR’s alleged violation of the conflict of
interest rule was found to be nonexistent. Contrary to petitioners’ asseveration, the
interpretation made by PBAC on this bidding rule was reasonable, fair and practical. Under the
BOT Law IRR, the PBAC shall be responsible for all aspects of the bidding process, including the
interpretation of the rules regarding the bidding, the conduct of bidding, evaluation of bids,
resolution of disputes between bidders, and recommendation for the acceptance of the bid
award and/or for the award of the project.

3. G.R. No. 192591. July 30, 2012. EFREN L. ALVAREZ, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.

Majority Opinion:
 Criminal Law; Anti-Graft and Corrupt Practices Act (R.A. No. 3019); It bears stressing that the
offense defined under Section 3 (e) of R.A. No. 3019 may be committed even if bad faith is not
attendant.—It bears stressing that the offense defined under Section 3 (e) of R.A. No. 3019 may
be committed even if bad faith is not attendant. Thus, even assuming that petitioner did not act
in bad faith, his negligence under the circumstances was not only gross but also inexcusable.
Submission of documents such as contractor’s license and company profile are minimum legal
requirements to enable the government to properly evaluate the qualifications of a BOT
proponent. It was unthinkable for a local government official, especially one with several
citations and awards as outstanding local executive, to have allowed API to submit a BOT
proposal and later award it the contract despite lack of a contractor’s license and proof of its
financial and technical capabilities, relying merely on a piece of information from a news item
about said contractor’s ongoing mall construction project in another municipality and verbal
representations of its president.

Dissenting Opinion from Justice Bersamin:

Bids and Bidding; View that there are conditions to be met before unsolicited proposals for
projects may be accepted by any government agency or local government unit on a negotiated
basis.―Unsolicited proposals for projects may be accepted by any government agency or local
government unit on a negotiated basis, provided that the following conditions are all met,
namely: (a) such projects involved a new concept or technology and/or are not part of the list of
priority projects; (b) no direct government guarantee, subsidy or equity is required; (c) the
government agency or local government unit has invited comparative or competitive proposals
by publication for three consecutive weeks in a newspaper of general circulation, and no other
proposal is received for a period of 60 working days; and (d) in the event another proponent
submits a lower price proposal, the original proponent shall have the right to match that price
within 30 working days.

Same; View that the Government is not legally precluded from consulting a private entity that
possesses the requisite expertise, skills and know-how on a particular undertaking, even if the
consultation is pursued with the end of ultimately engaging the private entity for the
undertaking.—I take the view, therefore, that the Government is not legally precluded from
consulting a private entity that possesses the requisite expertise, skills and know-how in a
particular undertaking, even if the consultation is pursued with the end of ultimately engaging
the private entity for the undertaking. My reason for taking the view is that the giving of undue
favors that our policies consistently condemn will be thwarted by the law’s several protective
measures in place to still afford the public an opportunity for fair competition.

Same; Build-Operate-Transfer; View that there are two ways provided in the Build-Operate-
Transfer Law on how the private sector may take on a project.—The BOT Law provides two ways
on how the private sector may take on a project, to wit: (a) through public bidding; and (b)
through unsolicited proposals. In the first way, an identified project is immediately thrown open
to the public for competition, while in the second, a proposal is first submitted before the public
is given the chance to compete. If the Government chooses to transact indiscriminately with the
public through regular bidding, the pertinent rules on unsolicited proposals find no application.
Conversely, if at the outset and to the exclusion of the public, negotiations take place between
the Government and a specific person, the ordinary bidding procedures are not at play.

Same; Same; View that any private corporation, on whose expertise, skills and know-how the
Government relies, if asked by the Government to conduct a study for a project, should not be
later on disqualified from making a proposal for the project.—The mere fact that the SB invited
API did not put API’s proposal outside the purview of an unsolicited proposal. Any private
corporation, on whose expertise, skills and know-how the Government relies, if asked by the
Government to conduct a study for a project, should not be later on disqualified from making a
proposal for the project. Nor should its proposal after the study be immediately considered as
outside the scope of an unsolicited proposal only because the initiative has not originated from
it. Should that be the case, the procedure for ordinary bidding will apply, and the corporation
will just have to find itself on the same footing as its competitors despite having expended so
much time, effort and resources on the study, wondering in uncertainty about whether its
substantial expenditures will ultimately blossom into a solid investment. Such innate unfairness
is precisely what the lawmakers sought to avoid, as can be gleaned from the Minutes of the
Senate deliberations.

Same; Same; Publication; View that anent Pinoy, the petitioner’s failure to present the affidavit
of the publisher attesting to Pinoy’s being a newspaper of general circulation was fatal to the
cause of the Prosecution, but not to the cause of the Defense.—Anent Pinoy, the petitioner’s
failure to present the affidavit of the publisher attesting to Pinoy’s being a newspaper of general
circulation was fatal to the cause of the Prosecution, but not to the cause of the Defense. There
was in favor of the petitioner the presumption of regularity in the performance of official duty
from his availing of the publication services of Pinoy as a newspaper of general circulation. The
presumption could be rebutted only by the Prosecution adducing clear and convincing
affirmative evidence of irregularity or failure to perform a duty. Towards that end, every
reasonable intendment was to be made in support of the presumption; in case of any doubt as
to an officer’s act being lawful or unlawful, the construction should be in favor of its lawfulness.
Without the Prosecution adducing such rebutting evidence, the presumption became conclusive
herein.

Criminal Law; Anti-Graft and Corrupt Practices Act (R.A. No. 3019); View on the Elements of
Violation of Section 3(e) of the Anti-Graft and Corrupt Practices Act.—The State must prove the
following essential elements of Section 3(e) offense, as follows: 1. The accused is a public officer
discharging administrative, judicial, or official functions; 2. The accused must have acted with
manifest partiality, evident bad faith, or gross inexcusable negligence; and 3. The action of the
accused caused undue injury to any party, including the Government, or gave any private party
unwarranted benefits, advantage or preference in the discharge of his functions.

Same; Same; View that Section 3(e) of Republic Act No. 3019 requires that partiality must be
manifest.—Section 3(e) of Republic Act No. 3019 requires that partiality must be manifest. But
the petitioner’s actuations could not be categorized as manifestly partial. His minimal
participation in the transaction could not be characterized by bias. His seeking the intervention
of both the SB and the PBAC before taking action in favor of API belied any partiality towards
API. He opted to share with the members of the SB and the PBAC the responsibility for making
any decision on the project.

Same; Same; View that Section 3(e) of Republic Act No. 3019 required that the gross negligence
must also be inexcusable. In other words, the gross negligence should have no excuse.—Section
3(e) of Republic Act No. 3019 required that the gross negligence must also be inexcusable. In
other words, the gross negligence should have no excuse. But that was not so herein, for,
according to Sistoza, gross inexcusable negligence―xxx does not signify mere omission of duties
nor plainly the exercise of less than the standard degree of prudence. Rather, it refers to
negligence characterized by the want of even the slightest care, acting or omitting to act in a
situation where there is a duty to act, not inadvertently but willfully and intentionally, with
conscious indifference to consequences insofar as other persons may be affected. It entails the
omission of care that even inattentive and thoughtless men never fail to take on their own
property, and in cases involving public officials it takes place only when breach of duty is flagrant
and devious. Alvarez vs. People, 677 SCRA 673, G.R. No. 192591 July 30, 2012