Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION
G.R. No. 203655

SM LAND, INC.,
Petitioner,

Present:
- versus VELASCO, JR., J., Chairperson,
PERALTA,
VILLARAMA, JR., *
MENDOZA, and
LEONEN,JJ.

BASES CONVERSION AND

DEVELOPMENT AUTHORITY
and ARNEL PACIANO D.
CASANOVA, ESQ., in his official
capacity as President and CEO of
Promulgated:
BCDA,
Respondents.
3~
x-------------------------------------------------------------------=--------=--=---x
DECISION
VELASCO, JR., J.:
The Case

Before Us is a Petition for Certiorari, Prohibition and Mandamus

under Rule 65 of the Rules of Court, with prayer for injunctive relief,
seeking to nullify and set aside the Bases Conversion and Development
Authority (BCDA) Supplemental Notice No. 5 as well as all other acts
pursued in furtherance thereof, and to order respondents to immelliately
conduct and complete the Competitive Selection Process on petitioner's duly
accepted unsolicited proposal.

The Facts
As culled from the records, the facts are simple and undisputed.
Pursuant to Republic Act No. (RA) 7227 or the "Bases Conversion
and Development Act of 1992," the BCDA opened for disposition and
development its Bonifacio South Property, a 33.1-hectare expanse located at
Taguig City that was once used as the command center for the country's
military forces. Jumping on the opportunity, petitioner SM Land, Inc.
(SMLI), on December 14, 2009, submitted to the BCDA an unsolicited
proposal for the development of the lot through a public-private joint venture
Acting member per Special Order No. 1691 dated May 22, 2014.

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G.R. No. 203655

agreement. The proposal guaranteed the BCDA secured payments

amounting to PhP 15,985/sqm or a total of PhP 8.1 billion.
Barely three months later, the initial proposal was followed by a
second one with guaranteed secured payments of PhP 31,139/sqm, totaling
PhP 20 billion. On May 4, 2010, however, SMLI submitted its third
unsolicited proposal with guaranteed secured payments amounting to
PhP 32,501/sqm for a total of PhP 22.6 billion.
Thereafter, the BCDA created a Joint Venture Selection Committee
(JV-SC) following the procedures prescribed under Annex C of the
Detailed Guidelines for Competitive Challenge Procedure for PublicPrivate Joint Ventures (NEDA JV Guidelines) promulgated by the National
Economic Development Authority (NEDA). The said committee
recommended the acceptance of the unsolicited proposal, which
recommendation was favorably acted upon by the BCDA.
Through a letter dated May 12, 2010, the BCDA communicated to
petitioner its acceptance of the unsolicited proposal. Despite its acceptance,
however, the BCDA clarified that its act should not be construed to bind the
agency to enter into a joint venture agreement with the petitioner but only
constitutes an authorization granted to the JV-SC to conduct detailed
negotiations with petitioner SMLI and iron out the terms and conditions of
the agreement.
Pursuant to this authorization, the JV-SC and SMLI embarked on a
series of detailed negotiations, and on July 23, 2010, SMLI submitted its
final revised proposal with guaranteed secured payments amounting to a
total of PhP 25.9 billion. Afterwards, upon arriving at mutually acceptable
terms and conditions, a Certification of Successful Negotiations
(Certification) was issued by the BCDA and signed by both parties on
August 6, 2010. Through the said Certification, the BCDA undertook to
subject SMLIs Original Proposal to Competitive Challenge pursuant
to Annex C and committed itself to commence the activities for the
solicitation for comparative proposals.1
In an attempt to comply with its obligations, the BCDA prepared for
the conduct of a Competitive Challenge to determine whether or not there
are other Private Sector Entities (PSEs) that can match the proposal of
SMLI, and concurrently ensure that the joint venture contract will be
awarded to the party that can offer the most advantageous terms in favor of
the government. In furtherance thereof, the agency issued Terms of
Reference (TOR),2 which mapped out the procedure to be followed in
connection with the Competitive Challenge. Consequently, SMLI was
required, as it did, to post a proposal security in the amount of PhP 187
1
2

Rollo, p. 71.
Id. at 74-88.

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G.R. No. 203655

million, following the prescribed procedure outlined in the TOR and the
NEDA JV Guidelines.
Afterwards, the BCDA set the Pre-eligibility Conference on
September 3, 2010. Invitations to apply for eligibility and to submit
comparative proposals were then duly published on August 12, 16 and 20,
2010. Hence, the pre-eligibility conference was conducted as scheduled. The
companies that participated in the conference included SMLI, as the Original
Proponent, and three (3) PSEs, namely Ayala Land, Inc., Rockwell Land
Corp., and Filinvest Land, Inc.
On Ayala Land, Inc.s request, the deadline for submission of
Eligibility Documents was scheduled on October 20, 2010 through
Supplemental Notice No. 1. However, the deadline was again moved to
November 19, 2010 to allow the BCDA, in conjunction with other national
agencies, to resolve issues concerning the relocation and replication of
facilities located in the subject property. For this purpose, the BCDA issued
Supplemental Notice No. 2.
Following a conference, the BCDA, on November 18, 2010, issued
Supplemental Notice No. 3, again rescheduling the submission deadline this
time to an unspecified future date pending final results of the policy review
by the Office of the President on the lease versus joint venture/sale mode
and other issues.3 Henceforth, the BCDA repeatedly postponed the
deadline of eligibility requirements until two (2) years have already elapsed
from the signing of the Certification without the Competitive Challenge
being completed.
Then, instead of proceeding with the Competitive Challenge, the
BCDA addressed a letter4 to Jose T. Gabionza, Vice President of SMLI,
stating that it will welcome any voluntary and unconditional proposal to
improve the original offer, with the assurance that the BCDA will
nonetheless respect any right which may have accrued in favor of SMLI.
SMLI, through a letter dated December 22, 2011, replied by increasing the
total secured payments to PhP 22.436 billion in over fifteen (15) years with
an upfront payment of PhP 3 billion. SMLI likewise proposed to increase the
net present value of the property to PhP 38,500.00/sqm. With this
accelerated terms of payment, the total inflow to be received by the BCDA
from the project after five (5) years would amount to PhP 9.289 billion. In
the same letter, SMLI clarified that its improved offer is tendered on reliance
of the BCDAs previous commitment to respect SMLIs status as the
Original Proponent.
Without responding to SMLIs new proposal, the BCDA sent a
memorandum to the Office of the President (OP) dated February 13, 2012,
3
4

Id. at 108.
Id. at 109.

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G.R. No. 203655

categorically recommending the termination of the Competitive Challenge.

The memorandum, in part, reads:
In view of the foregoing, may we respectfully recommend the Presidents
approval for BCDA to terminate the proceedings for the privatization and
development of the BNS/PMC/ASCOM/SSU Properties in Bonifacio
South through Competitive Challenge and proceed with the bidding of the
property.5

Alarmed by this development, SMLI, in a letter dated August 10,

2012, urged the BCDA to proceed with the Competitive Challenge as agreed
upon. However, the BCDA, via the assailed Supplemental Notice No. 5,
terminated the Competitive Challenge altogether. Said Supplemental Notice
pertinently reads:
This Supplemental Notice No. 05 is issued to inform the [PSEs]
that the Competitive Challenge for the Selection of BCDAs Private
Sector Partner for the Privatization and Development of the approximately
33.1-hectare BNS/PMC/ASCOM/SSU Properties in Bonifacio South is
hereby terminated. BCDA shall not dispose the property through
Competitive Challenge.6

To support its position, the BCDA invoked Article VIII of the TOR
on the subject Qualifications and Waivers, to wit:
The BCDA reserves the right to call off [the] disposition prior to
acceptance of the proposal(s) and call for a new disposition process under
amended rules and without any liability whatsoever to any or all the PSEs,
except the obligation to return the Proposal Security.

Thereafter, the BCDA informed SMLI of the OPs decision to subject

the development of the subject property to public bidding. When asked by
SMLI, the JV-SC manifested its conformity with the actions thus taken by
the BCDA and OP.
The JV-SCs declaration proved to be the last straw that fractured
SMLIs patience as it lost no time in interposing the instant recourse.
In the meantime, the BCDA issued in favor of SMLI Philippine
National Bank Check No. 11-634-610001-0 in the amount of
PhP 188,508,466.67 dated September 28, 2012. The check was sent through
registered mail with no explanation whatsoever accompanying the same,
although the BCDA admitted that its value corresponds to the proposal
security posted by SMLI, plus interest in an unspecified rate. SMLI
attempted to return the check but to no avail.
The BCDA likewise caused the publication of an Invitation to Bid
for the development of the subject property in the December 21, 2012 issue
5
6

Id. at 635.
Id. at 63.

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G.R. No. 203655

of the Philippine Star.7 This impelled SMLI to file an Urgent Manifestation

with Reiterative Motion to Resolve SMLIs Application for Temporary
Restraining Order (TRO) and Preliminary Injunction on the same day. By
Resolution8 of January 9, 2013, the Court issued the TRO prayed for by
petitioner and enjoined respondent BCDA from proceeding with the new
selection process for the development of the property.
The Issue
Without a doubt, the issue in this case boils down to whether or not
the BCDA gravely abused its discretion in issuing Supplemental Notice No.
5, in unilaterally aborting the Competitive Challenge, and in subjecting the
development of the project to public bidding.
For its part, SMLI alleged in its petition that the Certification issued
by the BCDA and signed by the parties constituted a contract and that under
the said contract, BCDA cannot renege on its obligation to conduct and
complete the Competitive Challenge. The BCDA, on the other hand, relies
chiefly on the reservation clause in the TOR, which allegedly authorized the
agency to unilaterally cancel the Competitive Challenge. Respondents add
that the terms and conditions agreed upon are disadvantageous to the
government, and that it cannot legally be barred by estoppel in correcting a
mistake committed by its agents.
The Courts Ruling
The petition is impressed with merit. SMLI has the right to a
completed competitive challenge pursuant to the NEDA JV Guidelines and
the Certification issued by the BCDA. The reservation clause adverted to by
the respondent cannot, in any way, prejudice said right.
The Procurement Process under the NEDA JV Guidelines
In resolving the case, discussing the procedure outlined under the
NEDA JV Guidelines and a brief backgrounder thereof is apropos.
To streamline the procurement process and expedite the acquisition of
goods and services, Executive Order No. (EO) 423 was issued on April 30,
2005, which prescribed the rules and procedures on the review and approval
of government contracts. The EO, in part, provides:
Section 8. Joint Venture Agreements. The NEDA, in consultation
with the GPPB, shall issue guidelines regarding joint venture agreements
with private entities with the objective of promoting transparency,
competitiveness, and accountability in government transactions, and,
7

The invitation was also published in the January 2 and 9, 2013 issues of the Financial Times and
Philippine Daily Inquirer.
8
Rollo, pp. 218-222.

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G.R. No. 203655

where applicable, complying with the requirements of an open and

competitive public bidding.

Taking its cue from the above-quoted provision, the NEDA

promulgated the NEDA JV Guidelines, which detailed two (2) modes of
selecting a private sector JV partner: by competitive selection or through
negotiated agreements.
Competitive selection involves a selection process based on
transparent criteria, which should not constrain or limit competition, and is
open to participation by any interested and qualified private entity.9
Selection by negotiated agreements10 or negotiated projects,11 on the other
hand, comes about as an end result of an unsolicited proposal12 from a
private sector proponent, or if the government has failed to identify an
eligible private sector partner for a desired activity after subjecting the same
to a competitive selection.
Relevant to the case at bar is the selection modality by negotiated
agreement arising from the submission and acceptance of an unsolicited
proposal, known as the Swiss Challenge method,13 in esse a hybrid
mechanism between the direct negotiation approach and the competitive
bidding route.14 With the availability of the Swiss Challenge method for
utilization by those in the private sector, PSEs have studied, formulated, and
submitted numerous suo moto or unsolicited proposals with the ultimate goal
of assisting the public sector in elevating the countrys place in the global
economy, as in the case herein.

Item 5.6, NEDA JV Guidelines.

Item 7.3. (b), NEDA JV Guidelines provides:
7.3 Modes of Selecting a JV Partner
xxxx
b. Negotiated Agreements Negotiated agreements may be entered under the following
circumstances:
i. When a Government Entity receives an unsolicited proposal;
ii. When there is failure of competition when no proposals are received or no private sector
participant is found qualified and the Government Entity decides to seek out a JV partner; and
iii. When there is failure of competition, i.e., there is only a single interested party remaining as
defined under VIII(6) of Annex A.
11
Item 5.9, JV Guidelines
12
An Unsolicited Proposal refers to project proposals submitted by the private sector to
undertake Infrastructure or Development Projects without a formal solicitation issued by a Government
Entity. These projects may be entered into by the Government Entity on a negotiated basis, provided,
however, that there shall be no direct government guarantees for JVs resulting from an unsolicited
proposal. (NEDA JV Guidelines)
13
The Swiss Challenge is a system where [a] third party can bid on a project during a designated
period but the original proponent can counter match any superior offer. x x x From Toolkit for PublicPrivate
Partnerships
in
Roads
&
Highways.
Available
at
http://www.ppiaf.org/sies/ppiaf.org/files/documents/toolkits/highwaystoolkit/6/pdf-version/5-42/pdf. Last
accessed March 11, 2013. See also Osmea III. v. Social Security System, G.R. No. 165272, September 13,
2007, 533 SCRA 313. [Under the Swiss Challenge format, one of the bidders is given the option or
preferential right to match the winning bid.]
14
Joshi, Piyush and Anuradha, R.V., Study on Competition Concerns in Concession Agreements in
Infrastructure
Sectors,
Clarus
Law
Associates,
June
2009.
Available
at
http://www.cci.gov.in/images/media/completed/ConAgreInfraSect_20100401141506.pdf. Last accessed
March 14, 2013.
10

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G.R. No. 203655

The development and adoption by several countries of the Swiss

Challenge scheme15 is attributed to the recognition that the private sector can
be an important source of technical and managerial expertise, as well as
financing, as evidenced by private companies practice of directly
approaching governments with new and innovative project ideas through
unsolicited proposals.16 Some states, however, frown on the practice since
transparency is allegedly compromised when the government directly
negotiates with a proponent. In this method, the Original Proponent, who
first submitted and secured acceptance of the unsolicited proposal, is given
the right to match the successful bid received in the competitive bid process
for the said project.17
Item III, Annex C of the NEDA JV Guidelines, where the Swiss
Challenge format is tucked in, maps out a three-stage framework, to which
Negotiated JV Agreements are to be mandatorily subjected, as summarized
below:
Stage One
Submission and the Acceptance
or Rejection of the Unsolicited Proposal
Stage One18 of the process involves the submission, evaluation, and
the acceptance of unsolicited proposals from private entities. The steps
involved are:
1. A PSE submits an unsolicited proposal to the government entity (GE)
or the GE seeks out a JV partner after a failed competition (open
bidding) for a JV activity or project.
2. The GE, through its JV-SC, undertakes the initial evaluation of the
proposal.
3. The head of the GE shall then either issue an acceptance or nonacceptance notice of the proposal.
a. An acceptance shall not bind the GE to enter into the JV activity,
but shall mean that authorization is given to proceed with detailed
negotiations on the terms and conditions of the JV activity.
b. In case of non-acceptance, the private sector entity shall be
informed of the reasons/grounds for such action.

15

Ravi Development v. Shree Krishna Prathisthan & Ors., Civil Appeal No. OF 2009, May 11,
2009. Available at www.indiankoon.org/doc/544860/. Last accessed March 14, 2013; See also, Verma,
Roopam,
Swiss
Challenge
System
for
Infra
Projects
(2007).
Available
at
http://www.projectsmonitor.com/detailnews.asp?newsid=13923. Last accessed March 13, 2013.
16
See Hodges, John and Dellacha, Georgina, Unsolicited Infrastructure Proposals: How some
countries introduce competition and transparency, Gridlines, Note No. 19, March 2007. Available at
http://www.ppiaf.org/. Last accessed March 14, 2013.
17
Id.
18
Rollo, p. 373.

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G.R. No. 203655

Stage Two
Detailed Negotiations
Stage Two19 entails negotiation on the terms and conditions of the JV
activity. Below is a summary of the parameters adhered to in detailed
negotiations, and the preparation of the proposal documents in case of
successful negotiations:
1. The parties shall negotiate on, among other things, the scope as well
as all legal, technical, and financial aspects of the JV activity.
2. The JV-SC shall determine the eligibility of the PSE to enter into the
JV activity in accordance with pre-set rules.
3. Negotiations shall comply with the process, requirements and
conditions as stipulated under Sections 6 (General Guidelines) and 7
(Process for Entering into JV Agreements) of the JV Guidelines.
a. If successful, the GE head and the representative of the PSE shall
issue a signed certification of successful negotiation to the effect
that:
a) an agreement has been reached;
b) the PSE is eligible to enter into the proposed JV activity; and
c) the GE shall commence the activities for the solicitation for
comparative proposals.
b. If an acceptable agreement is not reached, the GE may:
a) reject the proposal and thereafter accept a new one from
private sector participants; or
b) pursue the proposed activity through alternative routes other
than a joint venture.
4. After an agreement is reached, the contract documents, including the
selection documents for the competitive challenge, are prepared.
Stage Three
Competitive Challenge
In Stage Three,20 upon the successful completion of the detailed
negotiation phase, the JV activity shall be subjected to a competitive
challenge,21 which includes the observance of the following procedure:
1. Preparation and approval of all tender documents including the draft
contract before the invitation for comparative proposals is published.
2. Publication of the invitation for comparative proposals followed by the
posting by the PSE of the proposal security.
3. Determination of the eligibility of comparative proponents/PSEs,
issuance of supplemental competitive selection bulletins and pre19

Id. at 373-374.
Id. at 374-375.
21
Competitive Challenge is an alternative selection process wherein third parties shall be invited
to submit comparative proposals to an unsolicited proposal. Accordingly, the private sector entity that
submitted the unsolicited proposal is accorded the right to match any superior offers given by a
comparative private sector participant. (Item 5.8, NEDA JV Guidelines).
20

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G.R. No. 203655

selection conferences, submission, opening and evaluation of

comparative proposals.
4. In the evaluation of the comparative proposals as a prelude to determine
the best offer, the original proposal of the original proponent shall be
considered.
a. If the GE determines that an offer made by a comparative private
sector participant is more advantageous to the government than the
original proposal, the original proponent shall be given the right to
match such superior or more advantageous offer.
b. Should no matching offer be received, the JV activity shall be
awarded to the comparative private sector participant submitting the
most advantageous proposal.
c. If a matching offer is received, or if there is no comparative
proposal, the JV activity shall be awarded to the original proponent.
5. After the completion of the competitive challenge, the JV-SC shall
submit the recommendation of award to the head of the GE.22
6. Embarking on activities leading to the execution of the Final
Agreement.23
Deviation from the procedure outlined cannot be countenanced. Wellestablished is the rule that administrative issuancessuch as the NEDA JV
Guidelines, duly promulgated pursuant to the rule-making power granted by
statutehave the force and effect of law.24 Being an issuance in compliance
with an executive edict, the NEDA JV Guidelines, therefore, has the same
binding effect as if it were issued by the President himself. 25 As such, no
agency or instrumentality covered by the JV Guidelines26 can validly stray
from the mandatory procedures set forth therein, even if the other party
acquiesced therewith27 or not.
22

Rollo, p. 534. Article VIII, Annex A, NEDA JV Guidelines.

Id. at 537. Article X, Annex A, NEDA JV Guidelines.
24
Atlas Consolidated Mining and Development v. Commissioner of Internal Revenue, G.R. No.
159490, February 18, 2008, 456 SCRA 150; citing Eslao v. COA, G.R. No. 108310, September 1, 1994.
25
See Constantino, Jr. v. Cuisia, Jr., G.R. No. 106064, October 13, 2005, 472 SCRA 505, where
the Court affirmed the exercise by the Secretary of Finance, acting as the Presidents alter ego, of the
Presidents power to formulate a scheme for the implementation of a policy publicly expressed by the
President herself. There, the Court pronounced, As it was, the backdrop consisted of a major policy
determination made by then President Aquino that sovereign debts have to be respected and the
concomitant reality that the Philippines did not have enough funds to pay the debts. Inevitably, it fell upon
the Secretary of Finance, as the alter ego of the President regarding the sound and efficient management of
the financial resources of the Government, to formulate a scheme for the implementation of the policy
publicly expressed by the President herself.
26
See Item 4, NEDA JV Guidelines
[4.0 Coverage.
4.1 These guidelines shall apply to all government-owned and/or controlled corporations
(GOCCs), government corporate entities (GCEs), government instrumentalities with
corporate powers (GICPs), government financial institutions (GFIs), state universities
and colleges (SUCs), as defined under Section 5.0 and which are expressly authorized by
law or their respective charters to enter into JV Agreements. Local Government Units
(LGUs) are not covered by these Guidelines.
4.2 Transactions of GFIs in the ordinary course of business as part of their normal and
ordinary banking, financial or portfolio management operations shall not be covered by
the provisions of these Guidelines.]
27
See Article 1306, New Civil Code. [The contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.]; See also Information Technology Foundation of the
23

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G.R. No. 203655

SMLIs rights as an Original Proponent and BCDAs correlative

duty under the NEDA JV Guidelines and the parties agreement
It is well to point out that after BCDA accepted the unsolicited
proposal of SMLI and after both parties herein successfully concluded the
detailed negotiations on the terms and conditions of the project, SMLI
acquired the status of an Original Proponent. An Original Proponent, per the
TOR, pertains to the party whose unsolicited proposal for the development
and privatization of the subject property though JV with BCDA has been
accepted by the latter, subject to certain conditions, and is now being
subjected to a competitive challenge.28
In this regard, SMLI insists that as an Original Proponent, it obtained
the right to a completed competitive challenge. On the other hand, the
BCDA argues that it can, at any time, withdraw from the disposition process
as it is not bound to enter into the proposed JV activity with SMLI.
Petitioners argument holds water.
A scrutiny of the NEDA JV Guidelines reveals that certain rights are
conferred to an Original Proponent. As correctly pointed out by SMLI, these
rights include:
1. The right to the conduct and completion of a competitive
challenge;
2. The right to match the superior or more advantageous offer, if any;
3. The right to be awarded the JV activity in the event that a matching
offer is submitted within the prescribed period; and
4. The right to be immediately awarded the JV activity should there be
no comparative proposals.29 (emphasis added)
Material to the present case is the right to the conduct and completion
of a Competitive Challenge. Based on the NEDA JV Guidelines, it is
necessary that Stages One and Two of the Swiss Challenge shall have been
fruitful for this right to arise.
To recall, Stages One and Two of the framework deal with the
submission and evaluation of the unsolicited proposal and the conduct of the
detailed negotiations. Should the parties productively conclude the in-depth
negotiations, the guidelines require the preparation of the contract and
Philippines v. COMELEC, G.R. No. 159139, January 13, 2004, 419 SCRA 141, where the Court held that
the COMELEC flagrantly desecrated the public policy on public biddings when it violated RA 9184
(Government Procurement Reform Act); See also Power Sector Assets and Liabilities Management
Corporation v. Pozzolanic Philippines, Inc., G.R. No. 183789, August 24, 2011, 656 SCRA 214, where the
Court, citing Ongsiako v. Gamboa, 86 Phil. 50 (1950), declared that an agreement is against public policy if
it is injurious to the interest of the public, contravenes some established interest of society, violates some
public statute, is against good morals, tends to interfere with the public welfare of safety, or, as it is
sometimes put, if it is at war with the interests of society and is in conflict with the morals of the time.
28
Rollo, p. 76.
29
NEDA JV Guidelines.

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11

G.R. No. 203655

selection documents for the competitive challenge.30 Following this, Stage

Three of the same rules provides that the GE shall subject the terms agreed
upon to a Competitive Challenge. Thus:
Stage Three Once the negotiations have been successfully completed,
the JV activity shall be subjected to a competitive challenge, as follows:
1. The [GE] shall prepare the tender documents pursuant to Section II
(Selection/Tender Documents) of Annex A hereof. The eligibility criteria
used in determining the eligibility of the [PSE] shall be the same as those
stated in the tender documents. x x x The Head of the [GE] shall approve
all tender documents including the draft contract before the publication of
the invitation for comparative proposals.
2. Within seven (7) calendar days from the issuance of the Certification of
a successful negotiation referred to in Stage Two above, the JV-SC shall
publish the invitation for comparative proposals in accordance with
Section III.2. (Publication of Invitation to Apply for Eligibility and to
Submit Proposal) under Annex A hereof.
3. The [PSE] shall post the proposal security at the date of the first day of
the publication of the invitation for comparative proposals in the amount
and form stated in the tender documents.
4. The procedure for the determination of eligibility of comparative
proponents/private sector participants, issuance of supplemental
competitive selection bulletins and pre-selection conferences, submission
and receipt of proposals, opening and evaluation of proposals shall follow
the procedure stipulated under Annex A hereof. In the evaluation of
proposals, the best offer shall be determined to include the original
proposal of the [PSE]. If the [GE] determines that an offer made by a
comparative private sector participant other than the original proponent is
superior or more advantageous to the government than the original
proposal, the [PSE] who submitted the original proposal shall be given the
right to match such superior or more advantageous offer x x x. Should
no matching offer be received within the stated period, the JV activity
shall be awarded to the comparative private sector participant submitting
the most advantageous proposal. If a matching offer is received within the
prescribed period, the JV activity shall be awarded to the original
proponent. If no comparative proposal is received by the [GE], the JV
activity shall be immediately awarded to the original private sector
proponent.
5. Within seven (7) calendar days from the date of completion of the
Competitive Challenge, the JV-SC shall submit the recommendation of
award to the Head of the [GE]. Succeeding activities shall be in
accordance with Sections VIII. (Award and Approval of Contract) and X
(Final Approval) of Annex A hereof.31 (emphasis added)

Anent the above-quoted directives, emphasis must be given to the

repeated use of the word shall. It is elementary that the word shall
underscores the mandatory character of the rule. It is a word of command,
30
31

Item 4, Stage Two, Annex C, NEDA JV Guidelines.

Annex C, NEDA JV Guidelines.

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G.R. No. 203655

one which always has or must be given a compulsory meaning, and is

generally imperative or mandatory.32 Considering the compulsory tenor of
the order, the rule could not be any clearerthat once the negotiations at
Stage Two shall have been successfully completed, it becomes
mandatory for the GE to subject the JV activity to a competitive
challenge. By the Guidelines explicit order, proceeding to Stage Three of
the process is compulsory, conditioned only on the successful conclusion of
Stage Two. The GE is not given any discretion to decide whether it will
proceed with the competitive challenge or not.
Furthermore, there is no question in the case at hand that the
unsolicited proposal for the development of the subject property passed
through scrutiny under the first two stages, resulting in the issuance and
signing of the Certification. As a matter of fact, this is clearly evinced in the
whereas clauses of the Certification, to wit:
WHEREAS, on 04 May 2010, BCDA received from [SMLI] an
unsolicited proposal for the development of [the subject property]. x x x
WHEREAS, after evaluation of the unsolicited proposal submitted by
SMLI in accordance with the provisions of Annex C of the JV
Guidelines, the [JV-SC] created by BCDA x x x recommended to the
BCDA Board, and the BCDA Board approved, per Board Resolution
No. 2010-05-100, the acceptance of the unsolicited proposal, subject to
the condition that such acceptance shall not bind BCDA to enter into a JV
activity, but shall mean that authorization is given to proceed with
detailed negotiations on the terms and conditions of the JV activity;
WHEREAS, pursuant to the authorization granted by the Board and issued
pursuant to Annex C, Part III, Stage One of the JV Guidelines, BCDA
went into detailed negotiations with SMLI. The JV-SC simultaneously
ascertained the eligibility of SMLI in accordance with Annex C, Part III,
Stage 2 (2) of the JV Guidelines;
WHEREAS, this Certification is issued pursuant to Annex C Part III,
Stage 2 (2) of the JV Guidelines;
NOW, THEREFORE, for and in consideration of the foregoing, BCDA
and SMLI, after successful negotiations pursuant to Stage II of Annex C
x x x reached an agreement on the purpose, terms and conditions of
the JV development of the subject property, which shall become the
terms for the Competitive Challenge pursuant to Annex C of the JV
Guidelines x x x.33 (emphasis added)

Moreover, the Certification further discloses that the BCDA has the
obligation to subject SMLIs unsolicited proposal to a Competitive
Challenge, to which SMLI assented. As provided:
BCDA and SMLI have agreed to subject SMLIs Original Proposal to
Competitive Challenge pursuant to Annex C Detailed Guidelines for
32
33

Regalado v. Go, G.R. No. 167988, February 6, 2007, 514 SCRA 616.
Rollo, pp. 64-65.

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G.R. No. 203655

Competitive Challenge Procedure for Public-Private Joint Ventures

of the NEDA JV Guidelines, which competitive challenge process shall
be immediately implemented following the Terms of Reference (TOR)
Volumes 1 and 2. BCDA shall, thus, commence the activities for the
solicitation for comparative proposals with the publication of the
Invitation to Apply for Eligibility and to Submit Comparative Proposals
(IAESCP) thrice for two (2) consecutive weeks in three (3) major
newspapers starting on 10 August 2010, on which date SMLI shall post
the required Proposal Security as stated above. Pursuant to Annex C of the
NEDA JV Guidelines, if, after solicitation of comparative proposals,
BCDA determines that an offer by a comparative PSE is found to be
superior to SMLIs Original Proposal, SMLI shall be given the right to
match such superior offer within the period prescribed in the attached
TOR Volumes 1 and 2. If SMLI is able to match such superior offer,
SMLI shall be issued the Notice of Award, subject to Item No. 19 above.
In the event, however, that SMLI is unable to match the superior offer, the
comparative PSE which submitted such superior offer shall be awarded
the contract, subject to Item No. 19 above.34 (emphasis added)

By their mutual consent and in signing the Certification, both

parties, in effect, entered into a binding agreement to subject the
unsolicited proposal to the Competitive Challenge. Evidently, the
certification partakes of a contract wherein BCDA committed itself to
proceed with the Third Stage of the process and simultaneously grants SMLI
the right to expect that the BCDA will fulfill its obligations under the same.
The preconditions to the conduct of the Competitive Challenge having been
met, what is left, therefore, is to subject the terms agreed upon to a
Competitive Challenge pursuant to Stage Three, Annex C of the NEDA
JV Guidelines.
The Reservation Clause only covers the Third Stage and cannot
prejudice SMLIs rights stemming from the first two stages
In an attempt to advance its claim, BCDA invokes the reservation
clause in Article VIII of the TOR on Qualifications and Waivers. To
reiterate, said provision reads:
3. BCDA further reserves the right to call off this disposition prior to
acceptance of the proposal(s) and call for a new disposition process
under amended rules, and without any liability whatsoever to any or all of
the PSEs, except the obligation to return the Proposal Security.35
(emphasis ours)

The BCDA insists that the disposition process to which the

reservation clause refers is the entire Swiss Challenge, and not merely Stage
Three thereof regarding the Competitive Challenge. This interpretation does
not come as a surprise considering the terms technical meaning, that is,
alienation of property;36 the transfer of the property and possession of lands,
34

Id. at 71.
Id. at 87.
36
Bouviers Law Dictionary, 3rd ed.
35

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G.R. No. 203655

tenements, or other things from one person to another; or the voluntary

resignation of title to real estate by one person to another and accepted by
the latter, in the forms prescribed by law.37 On the basis of said definition,
indeed, the reservation clause seemingly refers to the Swiss Challenge itself
since in the case at bar, it is the Swiss Challenge, not the competitive
challenge, that is the avenue for the disposition.
To anchor the real import of the clause on the basis only of a single
word may, however, result in a deviation from its true meaning by rendering
all the other terms unnecessary or insignificant. Such an interpretation would
run afoul Article 1373 of the Civil Code, which states that [i]f some
stipulation of any contract should admit of several meanings, it shall be
understood as bearing that import which is most adequate to render it
effectual. It is a cardinal rule in statutory construction that no word, clause,
sentence, provision or part of a statute shall be considered surplusage or
superfluous, meaningless, void and insignificant.38 For this purpose, an
interpretation which renders every word operative is preferred over that
which makes some words idle and nugatory.
We find that the reservation clause cannot justify the cancellation of
the entire procurement process. Respondent cannot merely harp on the lone
provision adverted to without first explaining the context surrounding the
reservation clause. The said provision cannot be interpreted in a vacuum and
should instead be read in congruence with the other provisions in the TOR
for Us to fully appreciate its import.
At this juncture, it is worthy to point out that the TOR containing the
reservation clause details the requirements for eligibility to qualify as a PSE
that may submit its proposal for the JV,39 as well as the procedure to be
followed in the assessment of the eligibility requirements submitted and in
the conduct of the Competitive Challenge. It basically governs only part
and parcel of Stage Three of the Swiss Challenge Process, that is, the
requirements for and the determination of an interested PSEs
eligibility to participate in the Competitive Challenge. This conclusion is
deduced from the very provisions of the TOR, viz:
These [TOR] describe the procedures that shall be followed in connection
with the disposition of the approximately Three Hundred Thirty-one
Thousand Three Hundred Twenty-seven square meters (331,327 sq.m.) or
33.1-hectare Bonifacio Naval Station (BNS)/Philippine Marine Corps
(PMC)/Army Support Command (ASCOM)/Service Support Unit (SSU)
Properties in Bonifacio South (the Property), located along Lawton
Avenue, Fort Bonifacio, Taguig City, Metro Manila, Philippines.
These TOR are issued in two (2) volumes: Volume 1 Eligibility
Documents; and Volume 2 Tender Documents. This first volume
37

Blacks Law Dictionary, 2nd ed.

Philippine Health Care Providers, Inc. v. CIR, G.R. No. 167330, September 18, 2009, 600
SCRA 413.
39
Rollo, p. 74.
38

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G.R. No. 203655

details the requirements for eligibility to qualify as a Private Sector

Entity (PSE) that may submit Technical and Financial Proposals for the
Joint Venture (JV) Privatization and Development of [the] subject
Property, and the procedures involved in the entire Competitive
Challenge procedure. [PSEs] which shall be declared eligible shall be
issued the second volume of the TOR which details the requirements and
procedures for the submission of Technical and Financial Proposals, with
the end-view of determining a Winning PSE for subject JV
development.
xxxx
I.

GENERAL INFORMATION
xxxx
2. Publication of Invitation for Comparative Proposals.
BCDA shall publish x x x the Invitation to Apply for
Eligibility and to Submit a Comparative Proposal (IAESCP).
This shall serve to inform and to invite the prospective PSEs
to the Competitive Challenge procedure at hand. x x x
3. Joint Venture Agreement. x x x the ultimate objective of
BCDA in qualifying prospective PSEs to be eligible to submit
Technical and Financial Proposals is to select a partner in the
unincorporated/contractual [JV] for the privatization and
development of the subject Property. x x x
xxxx
4.

Amendment of these TOR. x x x Should any of the

information and/or procedures contained in these TOR be
amended or replaced, the JV-SC shall inform and send
Supplemental Notices to all PSEs. To ensure all PSEs are
informed of any amendments, all PSEs are requested to inform
BCDA of their contact [details]. In addition, receipt of all
Supplemental Notices shall be duly acknowledged by each
PSE prior to the submission of eligibility documents and/or
proposals and shall be so indicated therein.

5. Pre-Eligibility Conference. Interested parties are invited to

attend a Pre-Eligibility Conference for prospective PSEs x x x.
6. One-on-One Meetings. Prospective PSEs may request for
one-on-one meetings with the JV-SC or its duly authorized
representatives. x x x
xxxx
9. Due Diligence. x x x
The PSE shall investigate x x x [and] carefully examine [the]
conditions of and at the Property and its surrounding vicinities
affecting the actual execution and such other information as to
allow the PSE to make a competitive estimate. The PSE, by
the act of submitting its proposal, acknowledges that it has

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G.R. No. 203655

inspected the Property and accepted all the terms and

conditions for this competitive challenge as set in TOR
Volumes 1 and 2.
xxxx
V.

APPLICATION FOR ELIGIBILITY

1. Eligibility Requirements. Only eligible PSEs shall be allowed
to submit comparative Technical and Financial Proposals, or
collectively, the Tender Documents x x x. Hence, interested
PSEs are invited to apply for eligibility and to participate in the
Competitive Challenge procedure. Aside from being required
to purchase the [TOR] Volume 1, for a non-refundable fee x
x x, a PSE shall be considered eligible if it satisfies all of the
following requirements:
1.1. Legal Requirements. The PSE must be a duly
registered and existing corporation authorized by Philippine
Laws to own, hold or develop lands in the Philippines. x x
x
1.2. Technical Requirements.
1.2.1. Firm Experience. The PSE x x x shall have
completed within a period of ten (10) years from the
date of submission and receipt of Proposals, a
similar or related development project x x x.
1.2.2. Key Personnel. x x x
1.3. Financial Capability. The PSE x x x must have
adequate capability to sustain the financing requirements
for the proposed development of the Property. This shall be
measured in terms of:
1.3.1. Net Worth. x x x
1.3.2. Good financial standing. x x x
1.3.3. No Arrears. x x x
1.3.4. Timely and complete Payment of Taxes. x
xx
1.3.5. Financial Capacity to Undertake the
Project.
xxxx
2. Required Eligibility Documents. The PSEs x x x that wish
to be considered for eligibility are required to submit x x x the
following documents:
xxxx

VI.

EVALUATION OF ELIGIBILITY
1. Opening of Eligibility Documents. x x x
2. Evaluation Process. Eligibility Documents submitted by the
PSE shall be evaluated on a pass or fail basis to determine if
the PSE x x x complies with or satisfies all of the requirements
specified in Article V hereof. x x x

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G.R. No. 203655

3. Motion for Reconsideration/Appeal on Eligibility. A

prospective PSE determined as Ineligible has seven (7)
calendar days upon written notice within which to file a motion
for reconsideration to the JV-SC. x x x
4. No Eligible [PSEs]. In the event that no PSE be found eligible
or no PSE submitted itself to eligibility check for the
Competitive Challenge procedure, BCDA shall proceed to the
issuance of Notice of Award to SMLI, as the original
proponent for the subject JV project.
xxxx
.
VII. CHANGE IN MEMBERSHIP OF AN ELIGIBLE PSE.
xxxx
VIII. QUALIFICATIONS AND WAIVERS
1. BCDA reserves the right to reject any or all Eligibility
Documents, to waive any defect or informality thereon or
minor deviations, which do not affect the substance and
validity of the proposal.
2. BCDA reserves the right to review other relevant information
affecting the PSE or its Eligibility Documents before its
declaration as eligible to participate further in the selection
process, and be allowed to submit a Final Proposal. Should
such review uncover any misrepresentations made in the
eligibility documents, or any change in the situation of the
PSE, which affects its eligibility, BCDA may disqualify the
PSE from obtaining any award/contract.
3. BCDA further reserves the right to call of this disposition prior
to acceptance of the proposal(s) and call for a new disposition
process under amended rules, and without any liability
whatsoever to any or all the PSEs, except the obligation to
return the Proposal Security x x x.40 (emphasis ours; citation
omitted)

A cursory reading of the TOR, as couched, readily shows that it

focuses only on the eligibility requirements for PSEs who wish to challenge
SMLIs proposal as well as the procedure to be followed by the BCDA JVSC in the evaluation of the PSEs submittals. We thus find merit in SMLIs
thrust that since the TOR governs the eligibility requirements for PSEs, the
disposition process referred to in the reservation clause could only
refer to the eligibility process in Stage Three of the Swiss Challenge and
not the entire Swiss Challenge process itself. We are convinced that the
said provision does not authorize BCDA to abort the entire procurement
process and cannot impair any of SMLIs statutorily and contractuallyconferred rights stemming from the first two stages conclusion. To rule
otherwise would grant the GE unbridled authority to thrust aside the
40

Id. at 74-88.

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G.R. No. 203655

agreement between the parties after successful detailed negotiations. It

would disregard the fact that through the said covenant, the GE bound itself
to conduct and complete the Competitive Challenge pertaining to SMLIs
proposal.
Provisions of the TOR cannot prevail over the NEDA JV Guidelines
In the same vein, We cannot also agree with respondents contention
that the term disposition in the assailed reservation clause refers to the
entire Swiss Challenge itself and authorizes the BCDA to abandon the
negotiations even at Stage Three of the process for this would result in an
interpretation that is antagonistic with the NEDA JV Guidelines.
A review of the outlined three-stage framework reveals that there are
only two occasions where pre-termination of the Swiss Challenge process is
allowed: at Stage One, prior to acceptance of the unsolicited proposal; and
at Stage Two, should the detailed negotiations prove unsuccessful. In the
Third Stage, the BCDA can no longer withdraw with impunity from
conducting the Competitive Challenge as it became ministerial for the
agency to commence and complete the same. Thus, acceding to the
interpretation of the TOR offered by BCDA will, in effect, result not
only in the alteration of the agreement between the parties but also of
the NEDA JV Guidelines itself, both of which has the force and effect of
law.
The interpretation offered by BCDA is, therefore, unacceptable.
Between procedural guidelines promulgated by an agency pursuant to its
rule-making power and a condition unilaterally designed and imposed for
the implementation of the same, the former must prevail. BCDA does not
wield any rule-making power such that it can validly alter or abandon a clear
and definite provision in the NEDA JV Guidelines under the guise of a
condition under the TOR. As We have time and again harped, the ones dutybound to ensure observance with laws and rules should not be the ones to
depart therefrom.41 A contrary rule would open the floodgates to abuses and
anomalies more detrimental to public interest.42 For how can others be
expected to respect the rule of law if the very persons or entities tasked to
administer laws and their implementing rules and regulations are the first to
violate them, blatantly or surreptitiously?
BCDA gravely abused its discretion when it issued Supplemental
Notice No. 5 in breach of its contractual obligation to SMLI
Grave abuse of discretion implies such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction. It must be so
41

See RE: Problem of Delays in Cases Before the Sandiganbayan, A.M. No. 00-8-05-SC,
November 28, 2001, 370 SCRA 658.
42
See Central Bank of the Philippines v. Court of Appeals, No. L-33022, April 22, 1975, 63
SCRA 431.

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G.R. No. 203655

patent and gross as to amount to an evasion of positive duty or to a virtual

refusal to perform the duty enjoined or to act at all in contemplation of law.43
While it is the general policy of the Court to sustain the decisions of
administrative authorities, not only on the basis of the doctrine of separation
of powers but also for their presumed expertise in the laws they are entrusted
to enforce, when said decisions and orders are tainted with unfairness or
arbitrariness that would amount to grave abuse of discretion, the Courts are
duty-bound to entertain petitions questioning the formers rulings or
actions.44
In the present case, the Court finds that BCDA gravely abused its
discretion for having acted arbitrarily and contrary to its contractual
commitment to SMLI, to the damage and prejudice of the latter. It veritably
desecrated the rules the Government itself set in the award of public
contracts.
To review, We have demonstrated that the BCDA is duty-bound to
proceed with and complete the competitive challenge if the detailed
negotiations proved successful. Afterwards, it becomes mandatory for the
competitive challenge to proceed. Whatever rights and obligations that may
have accrued to the parties by that time can no longer be altered by a new
disposition process. At most, the reservation clause in the TOR can only
serve to alter the rules of the eligibility process under the Competitive
Challenge.
In the case at bar, however, BCDA, in its mistaken reliance on the
reservation clause, aborted not just the eligibility process of the Competitive
Challenge but the entire Swiss Challenge. Even though the language of
Supplemental Notice No. 5 at first blush appears to limit its application to
the Third Stage of the framework, BCDAs actuations say otherwise.
Worthy of reiteration at this point is the fact that after BCDA issued the
assailed notice, the agency also returned through registered mail the security
posted by SMLI. Coupled with the fact that BCDA subjected the property
instead to straight bidding, it becomes obvious that BCDA no longer intends
to comply with its obligations to SMLI and that it abandoned the Swiss
Challenge process altogether, in contravention of its statutory and
contractual obligations.
Moreover, the asseveration of the BCDA in its last ditch effort to
salvage its positionthat the withdrawal is justified since it allegedly found
that the revised SMLI proposal shall not yield the best value for the
government45deserves scant consideration. On the contrary, the BCDAs
statements have been inconsistent when it comes to identifying the
procurement process that would best serve the interest of the state.

43

Domondon v. Sandiganbayan, G.R. No. 129904, March 16, 2000, 328 SCRA 292.
Cuerdo v. COA, No. L-84592, October 27, 1988, 166 SCRA 657.
45
Rollo, p. 635, BCDAs February 13, 2012 Memorandum to the President.
44

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G.R. No. 203655

Noticeably, in its November 8, 2010 Memorandum, the BCDA

posited that competitive challenge is more advantageous to the government
than straight bidding, to wit:
The price of the Bonifacio South properties has already been set by the
winning price in the bidding for the joint venture development of the
JUSMAG property (P31,111/sq.m.). Thus, BCDA has established the
benchmark for the price of the remaining Bonifacio South properties, of
which the JUSMAG property is the most prime. Logically the minimum
bid price under straight bidding for the BNS/PMC/ASCOM/SSU property,
which is a far less inferior property, would be P31,111/sq.m. However,
with SMs submission of a revised unsolicited proposal at P31,732/sq.m.
and later further revised to P32,500/sq.m., BCDA saw the opportunity to
negotiate for better terms and eventually arrived at a higher price of
P36,900/sq.m. In this case, BCDA deemed that going into Competitive
Challenge was more advantageous to the government than
Competitive Selection (straight bidding) because of the opportunity to
increase the price.
Furthermore, subjecting the price to subsequent price challenge will
possibly drive up the price even higher than P38,900/sq.m. These
opportunities cannot be taken advantage of under a straight bidding where
failure of bidding would likely ensue if in case BCDA immediately sets
the price of the property too high. The competition in the real estate
industry and as experienced by BCDA is such that the other developers
will usually challenge the original proposal to up the ante as they cannot
allow the original proponent to get the property easily.46

Despite this testament, the BCDA, over a year later, made a complete
turnaround stating that straight bidding will be best for the Government.47
As can be gleaned from the BCDAs Memorandum to the President dated
February 13, 2012, respondents themselves recommended to the President
that the selection proceedings be terminated. To reiterate:
In view of the foregoing, may we respectfully recommend the Presidents
approval for BCDA to terminate the proceedings for the privatization and
development of the BNS/PMC/ASCOM/SSU Properties in Bonifacio
South through Competitive Challenge and proceed with the bidding of the
property.48

The BCDA offered no explanation to reconcile its opposing positions.

It also neglected to inform SMLI of the provisions in its proposal that it
deemed disadvantageous to the government. The sweeping statement of the
BCDA that the terms are disadvantageous cannot be accepted at face value,
bearing in mind that a fruitful in-depth negotiation necessarily implies that
BCDA found the terms offered by SMLI acceptable. Consider also that
should the Competitive Challenge prove to be unsuccessful, it has no other
recourse but to award the project to SMLI, the Original Proponent. This
caveat forces BCDA to ensure that the terms agreed upon during the detailed
46

Id. at 580-581.
Id. at 115.
48
Id. at 635.
47

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G.R. No. 203655

negotiations are advantageous to it, lest it run the risk of being bound to a
project that is not beneficial to the government in the first place.
Overall, the foregoing goes to show that the BCDA failed to establish
a justifiable reason for its refusal to proceed with the Competitive Challenge
and for canceling the entire Swiss Challenge. Because of BCDAs mistaken
reliance on the TOR provision, and by changing its stand on the conduct of
the Competitive Challenge without pointing out with specificity the socalled unfavorable terms, We are left to believe that the cancellation of the
Swiss Challenge was only due to BCDAs whims and caprices.
Acceptance of Unsolicited Proposal vis--vis Estoppel
Lastly, respondents argue that the government cannot be estopped by
the mistakes or errors of its agents, implying that when it issued the
Certification, it committed a lapse of judgment as it later discovered that the
terms of the proposal allegedly turned out to be disadvantageous to the
Government. Thus, according to them, it cannot be compelled to proceed
with the Competitive Challenge.
We are very much aware of the time-honored rule that the
government cannot be estopped by the mistakes or errors of its agents.49
Suffice it to state, however, that this precept is not absolute. As
jurisprudence teaches, this rule on estoppel cannot be used to perpetrate an
injustice.50
In the case at bar, it is evident that to allow BCDA to renege on its
statutory and contractual obligations would cause grave prejudice to
petitioner, who already invested time, effort, and resources in the study and
formulation of the proposal, in the adjustment thereof, as well as in the
negotiations. To permit BCDA to suddenly cancel the procurement process
and strip SMLI of its earlier-enumerated rights as an Original Proponent at
this pointafter the former has already benefited from SMLIs proposal
through the acquisition of information and ideas for the development of the
subject propertywould unjustly enrich the agency through the efforts of
petitioner. What is worse, to do so would be contrary to BCDAs
representations and assurances that it will respect SMLIs earlier acquired
rights, which statements SMLI reasonably and innocently believed.
All told, the BCDAs acceptance of the unsolicited proposal and the
successful in-depth negotiation cannot be written off as mere mistake or
error that respondents claim to be reversible and not susceptible to the legal
bar of estoppel. The subsequent cancellation of the Competitive Challenge
on grounds that infringe the contractual rights of SMLI and violate the
NEDA JV Guidelines cannot be shrouded with legitimacy by invoking the
above-cited rule.
49
50

Leca Realty Corporation v. Republic, G.R. No. 155605, September 27, 2006, 503 SCRA 563.
Id.

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G.R. No. 203655

Conclusion
To increase government prospects, participation in joint ventures has
been incentivized by granting rights and advantages to the Original
Proponent in the Competitive Challenge phase of a Swiss Challenge.
Faithful observance of these provisions of law that grant the aforesaid rights,
may it be sourced from a bilateral contract or executive edict, aids in
improving government reliability. This, in turn, heavily correlates with
greater availability of options when entering into future joint venture
agreements with private sector entities via public-private enterprises as it
will attract investors to contribute in formulating a roadmap towards a
nationwide infrastructure development.
Needless to say, allowing government agencies to retract their
commitments to the project proponents will essentially render inutile the
incentives offered to and have accrued in favor of the private sector entity.
Without securing these rights, the business community will be wary when it
comes to forging contracts with the government. Simply put, the failure of
the government to abide by the rules it itself set would have detrimental
effects on the private sectors confidence that the government will comply
with its statutory and contractual obligations to the letter.
In the case at bench, considering the undisputed facts presented before
Us, We cannot sustain the BCDAs arguments that its withdrawal from the
negotiations is permissible and was not done with grave abuse of discretion.
Being an instrumentality of the government, it is incumbent upon the BCDA
to abide by the laws, rules and regulations, and perform its obligations with
utmost good faith. It cannot, under the guise of protecting the public interest,
disregard the clear mandate of the NEDA JV Guidelines and
unceremoniously disregard the very commitments it made to the prejudice of
the SMLI that innocently relied on such promises.51 It is in instances such as
thiswhere an agency, instrumentality or officer of the government evades
the performance of a positive duty enjoined by law52wherein the exercise
of judicial power is warranted. Consistent with Our solemn obligation to
afford protection by ensuring that grave abuses of discretion on the part of a
branch or instrumentality of the government do not go unchecked, the
Petition for Certiorari must be granted and the corresponding injunctive
relief be made permanent.
As a final note, it is worth mentioning that the foreseeable
repercussion of a contrary ponencia encompasses the reduction of the
number of interested private sector entities that would be willing to submit
suo moto proposals and invest in government projects. After all, what would
be the point of developing ideas and allocating resources in the formulation
of PPP projects when ones rights as an Original Proponent, under the
NEDA JV Guidelines and the agreement between the parties, can easily be
51
52

See Central Bank of the Philippines v. Court of Appeals, supra note 42.
See Ligeralde v. Patalinghug, G.R. No. 168796, April 15, 2010, 618 SCRA 315.

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G.R. No. 203655

wiped out should the agency decide to level the playing field and conduct
straight bidding instead? Evidently, this would not attract but would, in
contrast, repel investors from tendering offers. In addition, even if potential
investors do submit unsolicited or comparative proposals, the terms therein
might be driven to become less competitive due to the adjustment in the
balance of risks and returns on investment. Taking into account the
increased possibility of the development project not pushing through,
investors might not be too keen in guaranteeing a high amount of secured
payments for the same. These considerations further validate the need to
secure the private sectors trust and confidence in the government.
WHEREFORE, premises considered, the petition is hereby
GRANTED. The assailed Supplemental Notice No. 5 dated August 6, 2012
issued by the BCDA is hereby ANULLED and SET ASIDE. The
Temporary Restraining Order issued by this Court on January 9, 2013 is
hereby made PERMANENT.
Respondent Bases Conversion and Development Authority and Arnel
Paciano D. Casanova, or whoever assumes the position of president of
BCDA, are hereby ORDERED to conduct and complete the Competitive
Challenge pursuant to the Certification, TOR, and NEDA JV Guidelines.
Specifically, the BCDA and/or the JV-SC are DIRECTED to carry
out the following:
1. Publish, within seven (7) calendar days from finality of this
Decision, the Invitation to Apply for Eligibility and to Submit a
Comparative Proposal (IAESCP) in three (3) newspapers of
general nationwide circulation for two (2) consecutive weeks, and
in the BCDA website (www.bcda.gov.ph), in accordance with
Section III.2. (Publication of Invitation to Apply for Eligibility
and to Submit Proposal), Section III (Project Rationale), Item 5 of
the TOR, and Section III (General Information), Item 2
(Publication of Invitation for Comparative Proposals) of the
TOR;
2. Immediately make the necessary adjustments to the timetable of
activities set forth in Supplemental Notice No. 1, considering that
the periods specified therein have already lapsed, without
awaiting the lapse of the period for publication;
3. Strictly adhere to the TOR, Supplemental Notice No. 1, as
adjusted, the Certification of Successful Negotiations, and the
NEDA JV Guidelines, in the conduct and completion of the
Swiss Challenge procedure on SM Land Inc.s unsolicited
proposal accepted by the BCDA; and

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G.R. No. 203655

4. Perform any and all acts necessary to carry out and complete
Stage Three of the Swiss Challenge pursuant to the provisions of
the TOR and NEDA JV Guidelines, including, but not limited to,
subjecting petitioner's unsolicited proposal to a competitive
challenge.
In the event that SM Land, Inc. already obtained from BCDA the
amount representing its Proposal Security, SM Land, Inc. is hereby
DIRECTED to re-post the Proposal Security, in the same amount as the
previous one, on the first day of the publication of the invitation for
comparative proposals, per the NEDA JV Guidelines.

SO ORDERED.

PRESBITER

J. VELASCO, JR.

Decision

G.R. No. 203655

25

WE CONCUR:

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.

As ociate Justice
Chairperson

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the
Division Chairperson's Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice