1

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 203655

August 13, 2014

SM LAND, INC., Petitioner,

vs.
BASES CONVERSION AND DEVELOPMENT AUTHORITY and ARNEL PACIANO
D. CASANOVA, ESQ., in his official capacity as President and CEO of
BCDA, Respondents.
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 1 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 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 favorablyacted 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 proposalsecurity in the amount of PhP 187 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 untiltwo (2)
years have already elapsed from the signing of the Certification without the
Competitive Challenge being completed.

Then, instead of proceeding withthe 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 itsimproved offer is tendered on reliance of the BCDAs previous commitment
torespect 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, 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 propertyto public bidding. When asked by SMLI, the JVSC 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 issuedin 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 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 Injunctionon the same day. By Resolution 8 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 agreedupon 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, 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 selectionor 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 byany
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 essea 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 motoor 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.
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 ofthe 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
or Rejection of the Unsolicited Proposal

the

Acceptance

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 proposalto 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.
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 isnot 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 pre-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.
SMLIs rights as an Original Proponent and BCDAs correlative duty under the NEDA
JV Guidelinesand 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 asan 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 Guidelinesreveals that certain rights are conferred to an
Original Proponent. Ascorrectly 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 onthe 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 ofthe 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 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 shallbe subjected to a competitive challenge, as follows:
1. The [GE] shallprepare 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 toin 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] shallpost 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 offerx x x. Should no matching offer be received within the
stated period, the JV activity shallbe 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 shallbe awarded
to the original proponent. If no comparative proposal isreceived by the [GE],
the JV activity shallbe 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 shallsubmit the recommendation of award
to the Head of the [GE]. Succeeding activities shall be in accordance with
Sections VIII. (Awardand 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. Itis a word of command, one which always has or must be
given
a
compulsory
meaning,
and
is
generally
imperative
or
32
mandatory. 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 theJV 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 inthe 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 proposalfor
the development of [the subject property]. x x x
WHEREAS, after evaluation of the unsolicited proposalsubmitted by SMLI in
accordance with the provisions of Annex "C" of the JV Guidelines, the [JV-SC]
created byBCDA x x x recommended to the BCDA Board, and the BCDA Board

10

approved, per Board Resolution No. 2010-05-100, the acceptance ofthe 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
negotiationson 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
inaccordance with Annex "C", Part III, Stage 2 (2) of the JV Guidelines;
WHEREAS, this Certificationisissuedpursuant 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 negotiationspursuant to Stage II of Annex C x x x reached an
agreement on the purpose, terms and conditions of the JV development of the
subjectproperty, which shall become the terms for the Competitive Challenge
pursuant to Annex C of the JV Guidelinesx 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 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
statedabove. 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 ableto 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 contractwherein
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 tosubject the terms agreed upon to a

11

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, 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
unnecessaryor insignificant. Suchan 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 clausecannot 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 inthe Competitive Challenge. This
conclusion is deduced from the very provisions of the TOR, viz:

12

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 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 PSEsto 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
procedurescontained 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 beduly acknowledged by each
PSEprior to the submission of eligibility documents and/or proposals and shall be
soindicated 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

13

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 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] Volume1, 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 PSEx 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 PSEx x x must have adequate capability to sustain the
financing requirements for the proposed development ofthe 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 x x
1.3.5. Financial Capacity to Undertake the
Project.
xxxx

14

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 PSEshall be
evaluated on a pass or fail basis to determine if the PSEx x x complies with or
satisfies all of the requirements specified in Article V hereof. x x x
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 tothe 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 notaffect 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 tocall 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, ascouched, 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

15

eligibility requirements for PSEs, the "disposition process" referred to inthe

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 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 antagonisticwith 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 negotiationsprove 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 byBCDA 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. AsWe 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 tolack of jurisdiction. It must be so 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

16

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 demonstratedthat 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
registeredmail the security posted by SMLI. Coupled with the factthat 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 government 45 deserves scant
consideration. On the contrary, the BCDAs statements have been inconsistentwhen
it comes to identifying the procurement process that would best serve the interest of
the state.
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
beP31,111/sq.m. However, with SMs submission of a revised unsolicited proposal

17

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
ofP36,900/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 tosubsequent price challenge will possibly drive up
the price even higher thanP38,900/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 issuch 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 Presidentdated 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-depthnegotiation 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 toSMLI, the Original
Proponent. This caveat forces BCDA to ensure that the terms agreed upon during
the detailed negotiations are advantageousto 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 showthat 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, Weare 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

18

turnedout 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 obligationswould 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 ofthe unsolicited proposal and the successful indepth 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.
Conclusion
To increase government prospects, participation in joint ventures has been
incentivized by granting rightsand advantages to the Original Proponent in the
Competitive Challenge phase of a Swiss Challenge. Faithful observance of these
provisions oflaw 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 ititself
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

19

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 law 52 wherein
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
ponenciaencompasses the reduction of the number of interested private sector
entities that would bewilling to submit suo motoproposals 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 asan Original
Proponent, under the NEDA JV Guidelines and the agreement between the parties,
can easily be wiped out should the agency decide tolevel 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.1wphi1 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 bythis Court
on January 9, 2013 is hereby madePERMANENT.
Respondent Bases Conversion and Development Authority and Arnel Paciano D.
Casanova, or whoever assumes the position of president of BCDA, are hereby
ORDEREDto conduct and complete the Competitive Challenge pursuant to the
Certification, TOR, and NEDA JV Guidelines.
Specifically, the BCDA and/or the JV-SC are DIRECTEDto 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;

20

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
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.