GOVCON 2nd SYLLABUS: SESSION 3-5
Documents.
Session 3
Secs 37-42 Implementation and Termination of
Contract
ARTICLE XI: AWARD, IMPLEMENTATION AND TERMINATION
OF THE CONTRACT
SEC. 37. Notice and Execution of Award. Within a period not
exceeding fifteen (15) calendar days from the determination and declaration
by the BAC of the Lowest Calculated Responsive Bid or Highest Rated
Responsive Bid, and the recommendation of the award, the Head of the
Procuring Entity or his duly authorized representative shall approve or
disapprove the said recommendation. In case of approval, the Head of the
Procuring Entity or his duly authorized representative shall immediately
issue the Notice of Award to the bidder with the Lowest Calculated
Responsive Bid or Highest Rated Responsive Bid.
Within ten (10) calendar days from receipt of the Notice of Award, the
winning bidder shall formally enter into contract with the Procuring Entity.
When further approval of higher authority is required, the approving
authority for the contract shall be given a maximum of twenty (20) calendar
days to approve or disapprove it.
In the case of government-owned and/or -controlled corporations, the
concerned board shall take action on the said recommendation within thirty
(30) calendar days from receipt thereof.
The Procuring Entity shall issue the Notice to Proceed to the winning bidder
not later than seven (7) calendar days from the date of approval of the
contract by the appropriate authority. All notices called for by the terms of
the contract shall be effective only at the time of receipt thereof by the
contractor.
SEC. 38. Period of Action on Procurement Activities. The
procurement process from the opening of bids up to the award of contract
shall not exceed three (3) months, or a shorter period to be determined by the
procuring entity concerned. Without prejudice to the provisions of the
preceding section, the different procurement activities shall be completed
within reasonable periods to be specified in the IRR.
If no action on the contract is taken by the head of the procuring entity, or by
his duly authorized representative, or by the concerned board, in the case of
governmentowned and/or -controlled corporations, within the periods
specified in the preceding paragraph, the contract concerned shall be deemed
approved.
SEC. 39. Performance Security. Prior to the signing of the contract,
the winning bidder shall, as a measure of guarantee for the faithful
performance of and compliance with his obligations under the contract
prepared in accordance with the Bidding Documents, be required to post a
performance security in such form and amount as specified in the Bidding
SEC. 40. Failure to Enter into Contract and Post Performance
Security. If, for justifiable causes, the bidder with the Lowest Calculated
Responsive Bid or Highest Rated Responsive Bid fails, refuses or is otherwise
unable to enter into contract with the Procuring Entity, or if the bidder fails
to post the required performance security within the period stipulated in the
Bidding Documents, the BAC shall disqualify the said bidder and shall
undertake post-qualification for the next-ranked Lowest Calculated Bid or
Highest Rated Bid. This procedure shall be repeated until an award is made.
However, if no award is possible, the contract shall be subjected to a new
bidding.
In the case of a failure to post the required performance security, the bid
security shall be forfeited without prejudice to the imposition of sanctions
prescribed under Article XXIII .
SEC. 41. Reservation Clause. The Head of the Agency reserves the
right to reject any and all Bids, declare a failure of bidding, or not award the
contract in the following situations:
(a) If there is prima facie evidence of collusion between appropriate public
officers or employees of the Procuring Entity, or between the BAC and any of
the bidders, or if the collusion is between or among the bidders themselves,
or between a bidder and a third party, including any act which restricts,
suppresses or nullifies or tends to restrict, suppress or nullify competition;
(b) If the BAC is found to have failed in following the prescribed bidding
procedures; or
(c) For any justifiable and reasonable ground where the award of the contract
will not redound to the benefit of the government as defined in the IRR.
SEC. 42. Contract Implementation and Termination. The rules
and guidelines for the implementation and termination of contracts awarded
pursuant to the provisions of this Act shall be prescribed in the IRR. The
rules and guidelines shall include standard general and special conditions for
contracts.
1.Philippine National Railways v Kanlaon
Construction Enterprises, Co., Inc. G.R. No.
182967 , April 6, 2011
2.Quisumbing v Garcia , G.R. No. 175527
December 8, 2008
FACTS:
Gabriel Luis Quisumbing (Quisumbing), Estrella P. Yapha, Victoria G.
Corominas, and Raul D. Bacaltos (Bacaltos), collectively petitioners, assail
the Decision of the Regional Trial Court (RTC) of Cebu City, Branch 9, in Civil
Case No. CEB-31560, dated July 11, 2006, which declared that under the
pertinent provisions of Republic Act No. 7160 (R.A. No. 7160), or the Local
Government Code, and Republic Act No. 9184 (R.A. No. 9184), or the
Government Procurement Reform Act, respondent Cebu Provincial Governor
Gwendolyn F. Garcia (Gov. Garcia), need not secure the prior authorization
of the Sangguniang Panlalawigan before entering into contracts committing
the province to monetary obligations.
The subject COA report stated "Several contracts in the total amount of
P102,092,841.47 were not supported with a Sangguniang Panlalawigan
resolution
authorizing the Provincial Governor to enter into a contract, as required
under Section 22 of R.A. No. 7160."
Gov. Garcia sought for reconsideration from COA but without waiting for its
resolution, she instituted an action for Declaratory Relief where she alleged
that the infrastructure contracts complied with R.A. No. 9184 bidding
procedures and were entered into pursuant to the general and/or
supplemental appropriation ordinances passed by the Sangguniang
Panlalawigan, hence a separate authority to enter into such contracts was no
longer necessary.
The trial court declared that Gov. Garcia need not secure prior authorization
from the Sangguniang Panlalawigan . It further declared that the
Sangguniang Panlalawigan does not have juridical personality nor is it vested
by R.A. No. 7160 with authority to sue and be sued. It also ruled that it is only
when the contract (entered into by the local chief executive) involves
obligations which are not backed by prior ordinances that the prior authority
of the sanggunian concerned is required.
Petitioners insisted that prior authorization from the Sangguniang
Panlalawiganshould be secured before Gov. Garcia could validly enter into
contracts involving monetary obligations.
The Province of Cebu was operating under a reenacted budget in 2004. Gov.
Garcia
entered into contracts on behalf of the province while this reenacted budget
was in force.
ISSUE:
Whether or not prior approval by the Sangguniang Panlalawigan is required
before Gov. Garcia could have validly entered into the questioned contracts.
RULING:
The Court held that the case should be remanded to the lower court and
treated as an ordinary civil action rather than as a declaratory relief action.
The lower court was directed to admit further evidence in order to determine
the nature of the questioned contracts entered into by Gov. Garcia, and the
existence of ordinances authorizing her acts.
Nonetheless, the Supreme Court laid out the framework for the lower courts
guidance in resolving the issue.
Requirement of prior authorization by the Sanggunian
Sec. 22(c) of R.A. No. 7160 provides:
Sec. 22. Corporate Powers.(a) Every local government unit, as a
corporation, shall have the following powers:
xxx
(c) Unless otherwise provided in this Code, no contract may be entered into
by the local chief executive in behalf of the local government unit without
prior authorization by the sanggunian concerned. A legible copy of such
contract shall be posted at a conspicuous place in the provincial capitol or the
city, municipal or barangay hall.
Prior authorization by the sanggunian concerned is required before the local
chief executive may enter into contracts on behalf of the local government
unit.
Gov. Garcia argued that Sections 306 and 346 of R.A. No. 7160 are the
exceptions to Sec. 22(c) and operate to allow her to enter into contracts on
behalf of the Province of Cebu without further authority from the
Sangguniang Panlalawigan.
However, the Court noted that Sec. 306 of R.A. No. 7160 merely contains a
definition of terms. Read in conjunction with Sec. 346, Sec. 306 authorizes
the local chief executive to make disbursements of funds in accordance with
the ordinance authorizing the annual or supplemental appropriations. The
"ordinance" referred to in Sec. 346 pertains to that which enacts the local
government units budget, for which reason no further authorization from the
local council is required, the ordinance functioning, as it does, as the
legislative authorization of the budget.
To construe Sections 306 and 346 of R.A. No. 7160 as exceptions to Sec. 22(c)
would render the requirement of prior sanggunian authorization superfluous,
useless and
irrelevant. There would be no instance when such prior authorization would
be required. Yet, this is obviously not the effect Congress had in mind when it
required the prior authorization of the sanggunian concerned.
Sec. 323 of R.A. No. 7160 provides that in case of a reenacted budget, "only
the annual appropriations for salaries and wages of existing positions,
statutory and contractual obligations, and essential operating expenses
authorized in the annual and supplemental budgets for the preceding year
shall be deemed reenacted and disbursement of funds shall be in accordance
therewith."
As indicated by the word "only" preceding the above enumeration, the items
for which disbursements may be made under a reenacted budget are
exclusive. Clearly, contractual obligations which were not included in the
previous years annual and supplemental budgets cannot be disbursed by the
local government unit. New contracts entered into by the local chief executive the appropriation ordinance nor encompassed within the regular personal
require the prior approval of the sanggunian. services and maintenance operating expenses
To give life to the intendment of the law and to avoid a construction which
would render Sec. 22(c) of R.A. No. 7160 meaningless, disbursement should
be understood to pertain to payments for statutory and contractual 3.Melchor v COA G.R. No. 84202,
obligations which the sanggunian has already authorized thru ordinances
enacting the annual budget and are therefore already subsisting obligations November 22, 1988
of the local government unit. Contracts are those which bind the local
government unit to new obligations for which the local chief executive needs
prior authority from the sanggunian.
Following are other provisions of R.A. No. 7160 which support petitioners 4.Vigilar v Aquino, G.R. No. 180388,
stand: (a) Sec. 465, Art. 1, Chapter 3 states that the provincial governor shall
"[r]epresent the province in all its business transactions and sign in its behalf
January 18, 2011
all bonds, contracts, and obligations, and such other documents upon Facts:
authority of theSangguniang Panlalawigan or pursuant to law or ordinances;"
(b) Sec. 468, Art. 3 also establishes the sanggunians power, as the provinces On 19 June 1992, petitioner Angelito M. Twao, then OfficerinCharge (OIC)-
legislative body, to authorize the provincial governor to negotiate and District Engineer of the Department of Public Works and Highways (DPWH)
contract loans, lease public buildings held in a proprietary capacity to private 2nd Engineering District of Pampanga sent an Invitation to Bid to
parties, among other things. respondent Arnulfo D. Aquino, the owner of A.D. Aquino Construction and
What the trial court should have done Supplies.
As things stand, the declaration of the trial court to the effect that no prior
authorization is required when there is a prior appropriation ordinance The bidding was for the construction of a dike by bulldozing a part of the
enacted does not put the controversy to rest. The question which should have
Porac River at Barangay AscomoPulungmasle, Guagua, Pampanga.
been answered by the trial court was whether, during the period in question,
there did exist ordinances (authorizing Gov. Garcia to enter into the
questioned contracts) which rendered the obtention of another authorization Subsequently, on 7 July 1992, the project was awarded to respondent, and a
from the Sangguniang Panlalawigan superfluous. It should also have "Contract of Agreement" was thereafter executed between him and concerned
determined the character of the questioned contracts, i.e., whether they were, petitioners for the amount of PhP1,873,790.69, to cover the project cost.
as Gov. Garcia claims, mere disbursements pursuant to the ordinances
supposedly passed by the sanggunian or, as petitioners claim, new contracts By 9 July 1992, the project was duly completed by respondent, who was then
which obligate the province without the provincial boards authority. issued a Certificate of Project Completion dated 16 July 1992.
Resort to appropriation ordinance is necessary
The question of whether a sanggunian authorization separate from the
appropriation ordinance is required should be resolved depending on the The certificate was signed by Romeo M. Yumul, the Project Engineer; as well
particular circumstances of the case. Should the appropriation ordinance, for as petitioner Romeo N. Supan, Chief of the Construction Section, and by
instance, already contain in sufficient detail the project and cost of a capital petitioner Twao.
outlay such that all that the local chief executive needs to do after undergoing
the requisite public bidding is to execute the contract, no further Respondent Aquino, however, claimed that PhP1,262,696.20 was still due
authorization is required, the appropriation ordinance already being him, but petitioners refused to pay the amount.
sufficient.
On the other hand, should the appropriation ordinance describe the
3
projects in generic terms such as "infrastructure projects," "inter-municipal He thus filed a Complaint for the collection of sum of money with damages
waterworks, drainage and sewerage, flood control, and irrigation systems before the Regional Trial Court of Guagua, Pampanga.
projects," "reclamation projects" or "roads and bridges," there is an obvious
need for a covering contract for every specific project that in turn requires :
approval by thesanggunian. Specificsanggunianapproval may also be Petitioners defense
required for the purchase of goods and services which are neither specified in
that the Complaint was a suit against the state;
that respondent failed to exhaust administrative remedies; and that the
"Contract of Agreement" covering the project was void for violating
Presidential Decree No. 1445, absent the proper appropriation and the
Certificate of Availability of Funds.
petitioners claim that the Complaint filed by respondent before the Regional
Trial Court was done without exhausting administrative remedies.
Petitioners aver that respondent should have first filed a claim before the
Commission on Audit (COA) before going to the courts.
Lower Court:
Department of Public Works and Highways is hereby ordered to pay the
plaintiff Arnulfo D. Aquino the following:
1. PhP1,873,790.69, Philippine Currency, representing actual amount for the
completion of the project done by the plaintiff;
2. PhP50,000.00 as attorneys fee and 3. Cost of this suit.
Court of Appeals:
It is to be noted that respondent was only asking for PhP1,262,696.20; the
award in paragraph 1 above, however,
conforms to the entire contract amount.
On appeal, the Court of Appeals reversed and set aside the Decision of the
lower court and disposed as follows:
Appeal is GRANTED. The "CONTRACT AGREEMENT" entered into between
the plaintiffappellees construction company, which he represented, and the
government, through the Department of Public Works and Highway (DPWH)
Pampanga 2nd Engineering District, is declared null and void ab initio.
In line with the pronouncement in Department of Health vs. C.V.
7 for it does not say that the state may not be sued under any
Canchela & Associates, Architects, the Commission on Audit (COA) is
hereby ordered to determine and ascertain with dispatch, on a quantum
meruit basis, the total obligation due to the plaintiffappellee for his
undertaking in implementing the subject contract of public works, and to
allow payment thereof, subject to COA Rules and Regulations, upon the
completion of the said determination.
No pronouncement as to costs.
Issue:
1. When the "Contract of Agreement" covering the project is void, should the
contractor who completed the project be paid? How?
2.WON the petitioner failed to exhaust administrative remedies?
SC Ruling:
1. Yes.The payment of the obligation due respondent on a quantum meruit
basis. The contracts were void for failing to meet the requirements mandated
by law; public interest and equity, however, dictate that the contractor should
be compensated for services rendered and work done.
The government project involved in this case, the construction of a dike, was
completed way back on 9 July 1992. For almost two decades, the public and
the government benefitted from the work done by respondent. Thus, the
Court of Appeals was correct in applying Eslao to the present case. In Eslao,
this Court stated:
The contractor should be duly compensated for services rendered, which
were for the benefit of the general public. To deny the payment to the
contractor of the two buildings which are almost fully completed and
presently occupied by the university would be to allow the government to
unjustly enrich itself at the expense of another. Justice and equity demand
compensation on the basis of quantum meruit.
Under these circumstances, respondent may not validly invoke the Royal
Prerogative of Dishonesty and conveniently hide under the State's cloak of
invincibility against suit, considering that this principle yields to certain
settled exceptions. True enough, the rule, in any case, is not absolute
circumstance.
To be sure, this Court as the staunch guardian of the citizens'
rights and welfare cannot sanction an injustice so patent on its
face, and allow itself to be an instrument in the perpetration
thereof. Justice and equity sternly demand that the State's cloak of
invincibility against suit be shred in this particular instance, and
that petitionerscontractors be duly compensated on the basis of
quantum meruit for construction done on the public works
housing project.
2. No. It has been established that the doctrine of exhaustion of
administrative remedies and the doctrine of primary jurisdiction are not
9
ironclad rules. In Republic of the Philippines v. Lacap, this Court
enumerated the numerous exceptions to these rules, namely: (a) where there
is estoppel on the part of the party invoking the doctrine; (b) where the
challenged administrative act is patently illegal, amounting to lack of
jurisdiction; (c) where there is unreasonable delay or official inaction that
will irretrievably prejudice the complainant; (d) where the amount involved
is relatively so small as to make the rule impractical and oppressive; (e)
where the question involved is purely legal and will ultimately have to be
decided by the courts of justice; (f) where judicial intervention is urgent; (g)
where the application of the doctrine may cause great and irreparable
damage; (h) where the controverted acts violate due process; (i) where the
issue of nonexhaustion of administrative remedies has been rendered moot;
(j) where there is no other plain, speedy and adequate remedy; (k) where
strong public interest is involved; and (l) in quo warranto proceedings. In the
present case, conditions (c) and (e) are present.
The government project contracted out to respondent was completed almost
two decades ago. To delay the proceedings by remanding the case to the
relevant government office or agency will definitely prejudice respondent.
More importantly, the issues in the present case involve the validity and the
enforceability of the "Contract of Agreement" entered into by the parties.
These are questions purely of law and clearly beyond the expertise of the
Commission on Audit or the DPWH.
In Lacap, this Court said:
... It does not involve an examination of the probative value of the evidence
presented by the parties. There is a question of law when the doubt or
difference arises as to what the law is on a certain state of facts, and not as to
the truth or the falsehood of alleged facts. Said question at best could be
resolved only tentatively by the administrative authorities. The final decision
on the matter rests not with them but with the courts of justice. Exhaustion of
administrative remedies does not apply, because nothing of an administrative
nature is to be or can be done. The issue does not require technical
knowledge and experience but one that would involve the interpretation and
application of law.
JG Summit Holdings vs CA (supra) G.R. No.
124293 , Jan 31, 2005
Session 4
Sec 46 Lease Contracts
ARTICLE XIV: LEASE OF COMPUTERS, COMMUNICATIONS,
INFORMATION AND OTHER EQUIPMENT
SEC. 46. Lease Contracts. Lease of construction and office equipment,
including computers, communication and information technology equipment
are subject to the same public bidding and to the processes prescribed under
this Act.
5.Transfield Phils, Inc. v Luzon Hydro
Corporation, GR 146717, Nov 22, 2004
FACTS: On 26 March 1997, petitioner and respondent Luzon Hydro
Corporation (hereinafter, LHC) entered into a Turnkey Contract [3] whereby
petitioner, as Turnkey Contractor, undertook to construct, on a turnkey basis,
a seventy (70)-Megawatt hydro-electric power station at the Bakun River in
the provinces of Benguet and Ilocos Sur (hereinafter, the Project). Petitioner
was given the sole responsibility for the design, construction, commissioning,
testing and completion of the Project.[4]
The Turnkey Contract provides that: (1) the target completion date of
the Project shall be on 1 June 2000, or such later date as may be agreed
upon between petitioner and respondent LHC or otherwise determined
in accordance with the Turnkey Contract; and (2) petitioner is entitled to
claim extensions of time (EOT) for reasons enumerated in the Turnkey
Contract, among which are variations, force majeure, and delays caused
by LHC itself.[5] Further, in case of dispute, the parties are bound to
settle their differences through mediation, conciliation and such other
means enumerated under Clause 20.3 of the Turnkey Contract.[6]
To secure performance of petitioners obligation on or before the target
completion date, or such time for completion as may be determined by the
parties agreement, petitioner opened in favor of LHC two (2) standby letters
of credit both each in the amount of US$8,988,907.00.[9]
In the course of the construction of the project, petitioner sought various
EOT to complete the Project. The extensions were requested allegedly due to
several factors which prevented the completion of the Project on target date,
such as force majeure occasioned by typhoon Zeb, barricades and
demonstrations. LHC denied the requests, however. This gave rise to a series
of legal actions between the parties which culminated in the instant petition.
The first of the actions was a Request for Arbitration which LHC filed before
the Construction Industry Arbitration Commission (CIAC) on 1 June 1999.
[10]
This was followed by another Request for Arbitration, this time filed by
petitioner before the International Chamber of Commerce (ICC) [11] on 3
November 2000.
Meanwhile, foreseeing that LHC would call on the Securities pursuant to the
pertinent provisions of the Turnkey Contract, [12] petitioner in two separate
letters[13] both dated 10 August 2000 advised respondent banks of the
arbitration proceedings already pending before the CIAC and ICC in
connection with its alleged default in the performance of its obligations.
Asserting that LHC had no right to call on the Securities until the resolution
of disputes before the arbitral tribunals, petitioner warned respondent banks
that any transfer, release, or disposition of the Securities in favor of LHC or
any person claiming under LHC would constrain it to hold respondent banks
liable for liquidated damages.
As petitioner had anticipated, on 27 June 2000, LHC sent notice to petitioner
that pursuant to Clause 8.2[14] of the Turnkey Contract, it failed to comply
with its obligation to complete the Project. Despite the letters of petitioner,
however, both banks informed petitioner that they would pay on the
Securities if and when LHC calls on them.[15]
Petitioner as plaintiff filed a Complaint for Injunction, with prayer for
temporary restraining order and writ of preliminary injunction, against
herein respondents as defendants before the Regional Trial Court (RTC) of
Makati.[17] Petitioner sought to restrain respondent LHC from calling on the
Securities and respondent banks from transferring, paying on, or in any
manner disposing of the Securities or any renewals or substitutes thereof.
The trial court issued an Order, extending the temporary restraining order
for a period of seventeen (17) days or until 26 November 2000. [18]
The RTC, denied petitioners application for a writ of preliminary injunction.
It ruled that petitioner had no legal right and suffered no irreparable injury to
justify the issuance of the writ. Employing the principle of independent
contract in letters of credit, the trial court ruled that LHC should be allowed
to draw on the Securities for liquidated damages.
Petitioner elevated the case to the Court of Appeals via a Petition for
Certiorari under Rule 65, with prayer for the issuance of a temporary
restraining order and writ of preliminary injunction.
LHC claimed that petitioner had no right to restrain its call on and use of the
Securities as payment for liquidated damages. It averred that the Securities
are independent of the main contract between them as shown on the face of
the two Standby Letters of Credit which both provide that the banks have no
responsibility to investigate the authenticity or accuracy of the certificates or
the declarants capacity or entitlement to so certify.
The Court of Appeals issued a temporary restraining order, enjoining LHC
from calling on the Securities or any renewals or substitutes thereof and
ordering respondent banks to cease and desist from transferring, paying or in
any manner disposing of the Securities.
However, the appellate court failed to act on the application for preliminary
injunction until the temporary restraining order expired on 27 January 2001.
Immediately thereafter, representatives of LHC trooped to ANZ Bank and
withdrew the total amount of US$4,950,000.00, thereby reducing the
balance in ANZ Bank to US$1,852,814.00.
On 2 February 2001, the appellate court dismissed the petition for
certiorari. The appellate court expressed conformity with the trial courts
decision that LHC could call on the Securities pursuant to the first principle
in credit law that the credit itself is independent of the underlying transaction
and that as long as the beneficiary complied with the credit, it was of no
moment that he had not complied with the underlying contract.
ISSUES:
1. WHETHER THE INDEPENDENCE PRINCIPLE ON LETTERS OF
CREDIT MAY BE INVOKED BY A BENEFICIARY THEREOF WHERE THE
BENEFICIARYS CALL THEREON IS WRONGFUL OR FRAUDULENT.
2. WHETHER LHC HAS THE RIGHT TO CALL AND DRAW ON THE
SECURITIES BEFORE THE RESOLUTION OF PETITIONERS AND LHCS
DISPUTES BY THE APPROPRIATE TRIBUNAL.
3. WHETHER ANZ BANK AND SECURITY BANK ARE JUSTIFIED IN
RELEASING THE AMOUNTS DUE UNDER THE SECURITIES DESPITE
BEING NOTIFIED THAT LHCS CALL THEREON IS WRONGFUL.
4. WHETHER OR NOT PETITIONER WILL SUFFER GRAVE AND
IRREPARABLE DAMAGE
HELD:
1. YES. Article 3 of the UCP provides that credits, by their nature, are
separate transactions from the sales or other contract(s) on which they may
be based and banks are in no way concerned with or bound by such
contract(s), even if any reference whatsoever to such contract(s) is included
in the credit. Consequently, the undertaking of a bank to pay, accept and pay
draft(s) or negotiate and/or fulfill any other obligation under the credit is not
subject to claims or defenses by the applicant resulting from his relationships
with the issuing bank or the beneficiary. A beneficiary can in no case avail
himself of the contractual relationships existing between the banks or
between the applicant and the issuing bank.
Thus, the engagement of the issuing bank is to pay the seller or beneficiary of
the credit once the draft and the required documents are presented to it. The
so-called independence principle assures the seller or the beneficiary of
prompt payment independent of any breach of the main contract and
precludes the issuing bank from determining whether the main contract is
actually accomplished or not. Under this principle, banks assume no liability
or responsibility for the form, sufficiency, accuracy, genuineness, falsification
or legal effect of any documents, or for the general and/or particular
conditions stipulated in the documents or superimposed thereon, nor do they
assume any liability or responsibility for the description, quantity, weight,
quality, condition, packing, delivery, value or existence of the goods
represented by any documents, or for the good faith or acts and/or
omissions, solvency, performance or standing of the consignor, the carriers,
or the insurers of the goods, or any other person whomsoever.[39]
The independent nature of the letter of credit may be: (a) independence in
toto where the credit is independent from the justification aspect and is a
separate obligation from the underlying agreement like for instance a typical
standby; or (b) independence may be only as to the justification aspect like in
a commercial letter of credit or repayment standby, which is identical with
the same obligations under the underlying agreement. In both cases the
payment may be enjoined if in the light of the purpose of the credit the
payment of the credit would constitute fraudulent abuse of the credit.[40]
In a letter of credit transaction, such as in this case, where the credit is
stipulated as irrevocable, there is a definite undertaking by the issuing bank
to pay the beneficiary provided that the stipulated documents are presented
and the conditions of the credit are complied with. [41] Precisely, the
independence principle liberates the issuing bank from the duty of
ascertaining compliance by the parties in the main contract. As the principles
nomenclature clearly suggests, the obligation under the letter of credit is
independent of the related and originating contract. In brief, the letter of
credit is separate and distinct from the underlying transaction.
2. YES. Jurisprudence has laid down a clear distinction between a letter of
credit and a guarantee in that the settlement of a dispute between the parties
is not a pre-requisite for the release of funds under a letter of credit. In other
words, the argument is incompatible with the very nature of the letter of
credit. If a letter of credit is drawable only after settlement of the dispute on
the contract entered into by the applicant and the beneficiary, there would be
no practical and beneficial use for letters of credit in commercial
transactions.
Because parties and courts should not confuse the different functions of the
surety contract on the one hand and the standby credit on the other.
In the surety contract setting, there is no duty to indemnify the beneficiary
until the beneficiary establishes the fact of the obligors performance. The
beneficiary may have to establish that fact in litigation. During the litigation,
the surety holds the money and the beneficiary bears most of the cost of delay
in performance.
In the standby credit case, however, the beneficiary avoids that litigation
burden and receives his money promptly upon presentation of the required
documents. It may be that the applicant has, in fact, performed and that the
beneficiarys presentation of those documents is not rightful.
Furthermore, LHC has a right rooted in the Contract to call on the Securities.
3. YES. Pursuant to the independence principle the banks were under no
obligation to determine the veracity of LHCs certification that default has
occurred. Neither were they bound by petitioners declaration that LHCs call
thereon was wrongful. To repeat, respondent banks undertaking was simply
to pay once the required documents are presented by the beneficiary.
4. NO. At any rate, should petitioner finally prove in the pending arbitration
proceedings that LHCs draws upon the Securities were wrongful due to the
non-existence of the fact of default, its right to seek indemnification for
damages it suffered would not normally be foreclosed pursuant to general
principles of law.
Sec 48-54 Alternative Methods of Procurement
METHODS OF PROCUREMENT
SEC. 48. Alternative Methods. Subject to the prior approval of the
Head of the Procuring Entity or his duly authorized representative, and
whenever justified by the conditions provided in this Act, the Procuring
Entity may, in order to promote economy and efficiency, resort to any of the
following alternative methods of Procurement: (
a) Limited Source Bidding , otherwise known as Selective Bidding a method
of Procurement that involves direct invitation to bid by the Procuring Entity
from a set of preselected suppliers or consultants with known experience and
proven capability relative to the requirements of a particular contract;
(b)
Direct Contracting , otherwise known as Single Source Procurement a
method of Procurement that does not require elaborate Bidding Documents
because the supplier is simply asked to submit a price quotation or a pro-
forma invoice together with the conditions of sale, which offer may be
accepted immediately or after some negotiations;
(c)
Repeat Order a method of Procurement that involves a direct Procurement
of Goods from the previous winning bidder, whenever there is a need to
replenish Goods procured under a contract previously awarded through
Competitive Bidding;
(d)
Shopping a method of Procurement whereby the Procuring Entity simply
requests for the submission of price quotations for readily available off-the-
shelf Goods or ordinary/regular equipment to be procured directly from
suppliers of known qualification; or
(e)
Negotiated Procurement a method of Procurement that may be resorted
under the extraordinary circumstances provided for in Section 53 of this Act
and other instances that shall be specified in the IRR, whereby the Procuring
Entity directly negotiates a contract with a technically, legally and financially
capable supplier, contractor or consultant.
In all instances, the Procuring Entity shall ensure that the most
advantageous price for the Government is obtained.
SEC. 49. Limited Source Bidding. Limited Source Bidding may be
resorted to only in any of the following conditions:
(a) Procurement of highly specialized types of Goods and Consulting Services
which are known to be obtainable only from a limited number of sources; or
(b) Procurement of major plant components where it is deemed
advantageous to limit the bidding to known eligible bidders in order to
maintain an optimum and uniform level of quality and performance of the
plant as a whole.
SEC. 50. Direct Contracting. Direct Contracting may be resorted to
only in any of the following conditions:
(a) Procurement of Goods of proprietary nature, which can be obtained only
from the proprietary source, i.e. when patents, trade secrets and copyrights
prohibit others from manufacturing the same item;
(b) When the Procurement of critical components from a specific
manufacturer, supplier or distributor is a condition precedent to hold a
contractor to guarantee its project performance, in accordance with the
provisions of his contract; or,
(c) Those sold by an exclusive dealer or manufacturer, which does not have
subdealers selling at lower prices and for which no suitable substitute can be
obtained at more advantageous terms to the Government.
SEC. 51. Repeat Order. When provided for in the Annual Procurement
Plan, Repeat Order may be allowed wherein the Procuring Entity directly
procures Goods from the previous winning bidder whenever there arises a
need to replenish goods procured under a contract previously awarded
through Competitive Bidding, subject to post-qualification process prescribed
in the Bidding Documents and provided all the following conditions are
present:
(a) The unit price must be equal to or lower than that provided in the original
contract;
(b) The repeat order does not result in splitting of requisitions or purchase
orders;
(c) Except in special circumstances defined in the IRR, the repeat order shall
be availed of only within six (6) months from the date of the Notice to
Proceed arising from the original contract; and,
(d) The repeat order shall not exceed twenty-five percent (25%) of the
quantity of each item of the original contract.
SEC. 52. Shopping. Shopping may be resorted to under any of the
following instances:
(a) When there is an unforeseen contingency requiring immediate purchase:
Provided, however , That the amount shall not exceed Fifty Thousand Pesos
(P50,000); or
(b) Procurement of ordinary or regular office supplies and equipment not
available in the Procurement Service involving an amount not exceeding Two
Hundred Fifty Thousand Pesos (P250,000): Provided, however , That the
Procurement does not result in Splitting of Contracts: Provided, further ,
That at least three (3) price quotations from bona fide suppliers shall be
obtained.
The above amounts shall be subject to a periodic review by the GPPB. For
this purpose, the GPPB shall be authorized to increase or decrease the said
amount in order to reflect changes in economic conditions and for other
justifiable reasons.
SEC. 53. Negotiated Procurement. Negotiated Procurement shall be
allowed only in the following instances:
(a) In cases of two failed biddings, as provided in Section 35 hereof;
(b) In case of imminent danger to life or property during a state of calamity,
or when time is of the essence arising from natural or man-made calamities
or other causes where immediate action is necessary to prevent damage to or
loss of life or property, or to restore vital public services, infrastructure
facilities and other public utilities;
(c) Take-over of contracts, which have been rescinded or terminated for
causes provided for in the contract and existing laws, where immediate action
is necessary to prevent damage to or loss of life or property, or to restore vital
public services, infrastructure facilities and other public utilities;
(d) Where the subject contract is adjacent or contiguous to an on-going
infrastructure project, as defined in the IRR: Provided, however , That the
original contract is the result of a Competitive Bidding; the subject contract
to be negotiated has similar or related scopes of work; it is within the
contracting capacity of the contractor; the contractor uses the same prices or
lower unit prices as in the original contract less mobilization cost; the amount
involved does not exceed the amount of the ongoing project; and, the
contractor has no negative slippage: Provided, further , That negotiations for
the procurement are commenced before the expiry of the original contract.
Whenever applicable, this principle shall also govern consultancy contracts,
where the consultants have unique experience and expertise to deliver the
required service; or,
(e) Subject to the guidelines specified in the IRR, purchases of Goods from
another agency of the Government, such as the Procurement Service of the
DBM, which is tasked with a centralized procurement of commonly used
Goods for the government in accordance with Letters of Instruction No. 755
and Executive Order No. 359, series of 1989.
SEC. 54. Terms and Conditions for the use of Alternative
Methods. The specific terms and conditions, including the limitations
and restrictions, for the application of each of the alternative methods
mentioned in this Article shall be specified in the IRR.
6.Tatad v Garcia GR 114222,April 6, 1995
FACTS: In 1989, DOTC planned to construct a light railway transit line
along EDSA which shall traverse the cities of Pasay, Quezon, Mandaluyong
and Makati. The plan was referred to as EDSA Light Rail Transit III (EDSA
LRT III). On July 9, 1990, Republic Act No. 6957 entitled "An Act
Authorizing the Financing, Construction, Operation and Maintenance of
Infrastructure Projects by the Private Sector, and For Other Purposes,"
(Build-Operate-Transfer (BOT) Law) was signed by President Corazon C.
Aquino. In accordance with the provisions of R.A. No. 6957, DOTC issued
Department Orders Nos. 91-494 and 91-496, respectively creating the
Prequalification Bids and Awards Committee (PBAC) and the Technical
Committee. After its constitution, the PBAC issued guidelines for the
prequalification of contractors for the financing and implementation of the
project The notice, advertising the prequalification of bidders, was published
in three newspapers of general circulation once a week for three consecutive
weeks.
After evaluating the prequalification, bids, the PBAC issued a Resolution
declaring that of the five applicants, only the EDSA LRT Consortium "met the
requirements of garnering at least 21 points per criteria, except for Legal
Aspects, and obtaining an over-all passing mark of at least 82 points". The
Legal Aspects referred to provided that the BOT/BT contractor-applicant
meet the requirements specified in the Constitution and other pertinent laws.
Negotiations proceeded. Thereafter, EDSA LRT Consortium submitted its bid
proposal to DOTC. Finding this proposal to be in compliance with the bid
requirements, DOTC and respondent EDSA LRT Corporation, Ltd., in
substitution of the EDSA LRT Consortium, entered into an "Agreement to
Build, Lease and Transfer a Light Rail Transit System for EDSA" under the
terms of the BOT Law.
In a letter dated March 13, 1992, Executive Secretary Franklin Drilon
informed DOTC Secretary that the President could not grant the requested
approval for the following reasons: (1) that DOTC failed to conduct actual
public bidding in compliance with Section 5 of the BOT Law; (2) that the law
authorized public bidding as the only mode to award BOT projects, and the
prequalification proceedings was not the public bidding contemplated under
the law; (3) that Item 14 of the Implementing Rules and Regulations of the
BOT Law which authorized negotiated award of contract in addition to public
bidding was of doubtful legality; and (4) that congressional approval of the
list of priority projects under the BOT or BT Scheme provided in the law had
not yet been granted at the time the contract was awarded. The parties
entered into a "Revised and Restated Agreement to Build, Lease and Transfer
a Light Rail Transit System for EDSA and a "Supplemental Agreement to the
Revised and Restated Agreement to Build, Lease and Transfer a Light Rail
Transit System for EDSA". The President approved the agreements.
According to the agreements, private respondents shall undertake and
finance the entire project required for a complete operational light rail transit
system. Target completion date is approximately three years from the
implementation date of the contract inclusive of mobilization, site works,
initial and final testing of the system. Upon full or partial completion and
viability thereof, private respondent shall deliver the use and possession of
the completed portion to DOTC which shall operate the same. DOTC shall
pay private respondent rentals on a monthly basis through an Irrevocable
Letter of Credit. The rentals shall be determined by an independent and
internationally accredited inspection firm to be appointed by the parties. As
agreed upon, private respondent's capital shall be recovered from the rentals
to be paid by the DOTC which, in turn, shall come from the earnings of the
EDSA LRT III. After 25 years and DOTC shall have completed payment of the
rentals, ownership of the project shall be transferred to the latter for a
consideration of only U.S. $1.00.
On May 5, 1994, R.A. No. 7718, an "Act Amending Certain Sections of
Republic Act No. 6957, Entitled "An Act Authorizing the Financing,
Construction, Operation and Maintenance of Infrastructure Projects by the
Private Sector, and for Other Purposes" was signed into law. The law
expressly recognizes BLT scheme and allows direct negotiation of BLT
contracts.

PETITIONERS' CONTENTIONS: The Revised and Restated Agreement
and the Supplemental Agreement are unconstitutional and invalid for the
following reasons: (1) the EDSA LRT III is a public utility, and the ownership
and operation thereof is limited by the Constitution to Filipino citizens and
domestic corporations, not foreign corporations like private respondent; (2)
the Build-Lease-Transfer (BLT) scheme provided in the agreements is not the
BOT or BT Scheme under the law; (3) the contract to construct the EDSA
LRT III was awarded to private respondent not through public bidding which
is the only mode of awarding infrastructure projects under the BOT law; and
(4) the agreements are grossly disadvantageous to the government.
RESPONDENTS' CONTENTIONS: (1) Petitioners are not the real
parties-in-interest and have no legal standing to institute the present
petition; (2) The writ of prohibition is not the proper remedy and the petition
requires ascertainment of facts; (3) The scheme adopted in the Agreements is
actually a build-transfer scheme allowed by the BOT Law; (4) The nationality
requirement for public utilities mandated by the Constitution does not apply
to private respondent; (5) The Agreements executed by and between
respondents have been approved by President Ramos and are not
disadvantageous to the government; (6) The award of the contract to private
respondent through negotiation and not public bidding is allowed by the BOT
Law; and (7) Granting that the BOT Law requires public bidding, this has
been amended by R.A No. 7718 passed by the Legislature on May 12, 1994,
which provides for direct negotiation as a mode of award of infrastructure
projects.
ISSUE/S: (1) Whether or not the Agreements are constitutional?; (2)
Whether or not the scheme adopted in the Agreements is a build-transfer
scheme allowed by the BOT Law?; (3) Whether or not the award of the
contract to private respondent through negotiation is allowed by the BOT
Law?; (4) Whether or not the agreements are grossly disadvantageous to the
government?
HELD: (1) CONSTITUTIONAL. What private respondent owns are the rail
tracks, rolling stocks like the coaches, rail stations, terminals and the power
plant, not a public utility. While a franchise is needed to operate these
facilities to serve the public, they do not by themselves constitute a public
utility. What constitutes a public utility is not their ownership but their use to
serve the public. The Constitution, in no uncertain terms, requires a franchise
for the operation of a public utility. However, it does not require a franchise
before one can own the facilities needed to operate a public utility so long as
it does not operate them to serve the public. The right to operate a public
utility may exist independently and separately from the ownership of the
facilities thereof. One can own said facilities without operating them as a
public utility, or conversely, one may operate a public utility without owning
the facilities used to serve the public. The devotion of property to serve the
public may be done by the owner or by the person in control thereof who may
not necessarily be the owner thereof. While private respondent is the owner
of the facilities necessary to operate the EDSA. LRT III, it admits that it is not
enfranchised to operate a public utility. In view of this incapacity, private
respondent and DOTC agreed that on completion date, private respondent
will immediately deliver possession of the LRT system by way of lease for 25
years, during which period DOTC shall operate the same as a common carrier
and private respondent shall provide technical maintenance, personnel
training, and repair services to DOTC. The mere formation of a public utility
corporation does not ipso facto characterize the corporation as one operating
a public utility. The moment for determining the requisite Filipino nationality
is when the entity applies for a franchise, certificate or any other form of
authorization for that purpose
(2) ALLOWED. The BOT scheme is expressly defined as one where the
contractor undertakes the construction and financing in infrastructure
facility, and operates and maintains the same. The contractor operates the
facility for a fixed period during which it may recover its expenses and
investment in the project plus a reasonable rate of return thereon. After the
expiration of the agreed term, the contractor transfers the ownership and
operation of the project to the government. In the BT scheme, the contractor
undertakes the construction and financing of the facility, but after
completion, the ownership and operation thereof are turned over to the
government. The government, in turn, shall pay the contractor its total
investment on the project in addition to a reasonable rate of return. There is
no mention in the BOT Law that the BOT and BT schemes bar any other
arrangement for the payment by the government of the project cost. The law
must not be read in such a way as to rule out or unduly restrict any variation
within the context of the two schemes. Emphasis must be made that under
the BOT scheme, the owner of the infrastructure facility must comply with
the citizenship requirement of the Constitution on the operation of a public
utility. No such a requirement is imposed in the BT scheme. The BLT scheme
in the challenged agreements is but a variation of the BT scheme under the
law. As a matter of fact, the burden on the government in raising funds to pay
for the project is made lighter by allowing it to amortize payments out of the
income from the operation of the LRT System.
(3) ALLOWED. Subsequent congressional approval of the list including "rail-
based projects packaged with commercial development opportunities" under
which the EDSA LRT III projects falls, amounts to a ratification of the prior
award of the EDSA LRT III contract under the BOT Law. The records show
that only one applicant passed the prequalification process. Since only one
was left, to conduct a public bidding in accordance with Section 5 of the BOT
Law for that lone participant will be an absurb and pointless exercise.
Contrary to the comments of the Executive Secretary Drilon, Section 5 of the
BOT Law in relation to Presidential Decree No. 1594 allows the negotiated
award of government infrastructure projects. Where there is a lack of
qualified bidders or contractors, the award of government infrastructure
contracts may he made by negotiation. Presidential Decree No. 1594 is the
general law on government infrastructure contracts while the BOT Law
governs particular arrangements or schemes aimed at encouraging private
sector participation in government infrastructure projects. The two laws are
not inconsistent with each other but are in pari materia and should be read
together accordingly. The challenged agreements have been approved by
President Ramos himself. Although then Executive Secretary Drilon may
have disapproved the "Agreement to Build, Lease and Transfer a Light Rail
Transit System for EDSA," there is nothing in our laws that prohibits parties
to a contract from renegotiating and modifying in good faith the terms and
conditions thereof so as to meet legal, statutory and constitutional
requirements. Under the circumstances, to require the parties to go back to
step one of the prequalification process would just be an idle ceremony.
Useless bureaucratic "red tape" should be eschewed because it discourages
private sector participation, the "main engine" for national growth and
development, and renders the BOT Law nugatory.
(4) ADVANTAGEOUS. The terms of the agreements were arrived at after a
painstaking study by DOTC. The determination by the proper administrative
agencies and officials who have acquired expertise, specialized skills and
knowledge in the performance of their functions should be accorded respect
absent any showing of grave abuse of discretion. Government officials are
presumed to perform their functions with regularity and strong evidence is
necessary to rebut this presumption. Petitioners have not presented evidence
on the reasonable rentals to be paid by the parties to each other. The matter
of valuation is an esoteric field which is better left to the experts and which
this Court is not eager to undertake.
Secs. 55-58 Protest Mechanisms
ARTICLE XVII: PROTEST MECHANISM
SEC. 55. Protests on Decisions of the BAC. Decisions of the BAC in
all stages of procurement may be protested to the head of the procuring
entity and shall be in writing. Decisions of the BAC may be protested by
filing a verified position paper and paying a nonrefundable protest fee. The
amount of the protest fee and the periods during which the protests may be
filed and resolved shall be specified in the IRR.
SEC. 56. Resolution of Protests. The protests shall be resolved strictly
on the basis of records of the BAC. Up to a certain amount to be specified in
the IRR, the decisions of the Head of the Procuring Entity shall be final.
SEC. 57. Non-interruption of the Bidding Process. In no case shall
any protest taken from any decision treated in this Article stay or delay the
bidding process. Protests must first be resolved before any award is made.
SEC. 58. Report to Regular Courts; Certiorari. Court action may be
resorted to only after the protests contemplated in this Article shall have been
completed. Cases that are filed in violation of the process specified in this
Article shall be dismissed for lack of jurisdiction. The regional trial court
shall have jurisdiction over final decisions of the head of the procuring entity.
Court actions shall be governed by Rule 65 of the 1997 Rules of Civil
Procedure.
This provision is without prejudice to any law conferring on the Supreme
Court the sole jurisdiction to issue temporary restraining orders and
injunctions relating to Infrastructure Projects of Government.
LRA v Lanting Security and Watchman Agency
GR 181735 (supra)
COA v Linkworth International GR 182559
(supra)
Vigilar v Aquino,G.R. No. 180388 (supra)
Secs. 59-60 Settlement of Disputes
ARTICLE XVIII: SETTLEMENT OF DISPUTES
SEC. 59. Arbitration. Any and all disputes arising from the
implementation of a contract covered by this Act shall be submitted to
arbitration in the Philippines according to the provisions of Republic Act No.
876, otherwise known as the "Arbitration Law": Provided, however , That,
disputes that are within the competence of the Construction Industry
Arbitration Commission to resolve shall be referred thereto. The process of
arbitration shall be incorporated as a provision in the contract that will be
executed pursuant to the provisions of this Act: Provided, That by mutual
agreement, the parties may agree in writing to resort to alternative modes of
dispute resolution.
SEC. 60. Appeals. The arbitral award and any decision rendered in
accordance with the foregoing Section shall be appealable by way of a petition
for review to the Court of Appeals. The petition shall raise pure questions of
law and shall be governed by the Rules of Court.
7.Gammon Philippines, Inc v Metro Rail
Transit Development Corp GR 144792, Jan 31,
2006
Session 5
Sec. 65 Penal Clause
ARTICLE XXI: PENAL CLAUSE
SEC. 65. Offenses and Penalties. (a) Without prejudice to the
provisions of Republic Act No. 3019, otherwise known as the Anti-Graft and
Corrupt Practices Act and other penal laws, public officers who commit any
of the following acts shall suffer the penalty of imprisonment of not less than
six (6) years and one (1) day, but not more than fifteen (15) years:
(1) Open any sealed Bid including but not limited to Bids that may have been
submitted through the electronic system and any and all documents required
to be sealed or divulging their contents, prior to the appointed time for the
public opening of Bids or other documents.
(2) Delaying, without justifiable cause, the screening for eligibility, opening of
bids, evaluation and post evaluation of bids, and awarding of contracts
beyond the prescribed periods of action provided for in the IRR.
(3) Unduly influencing or exerting undue pressure on any member of the
BAC or any officer or employee of the procuring entity to take a particular
action which favors, or tends to favor a particular bidder.
(4) Splitting of contracts which exceed procedural purchase limits and
competitive bidding.
(5) When the head of the agency abuses the exercise of his power to reject any
and all bids as mentioned under Section 41 of this Act with manifest
preference to any bidder who is closely related to him in accordance with
Section 47 of this Act.
When any of the foregoing acts is done in collusion with private individuals,
the private individuals shall likewise be liable for the offense.
In addition, the public officer involved shall also suffer the penalty of
temporary disqualification from public office, while the private individual
shall be permanently disqualified from transacting business with the
Government.
(b) Private individuals who commit any of the following acts, including any
public officer, who conspires with them, shall suffer the penalty of
imprisonment of not less than six (6) years and one (1) day but not more than
fifteen (15) years:
(1) When two or more bidders agree and submit different Bids as if they were
bona fide, when they knew that one or more of them was so much higher than
the other that it could not be honestly accepted and that the contract will
surely be awarded to the pre-arranged lowest Bid.
(2) When a bidder maliciously submits different Bids through two or more
persons, corporations, partnerships or any other business entity in which he
has interest to create the appearance of competition that does not in fact exist
so as to be adjudged as the winning bidder.
(3) When two or more bidders enter into an agreement which call upon one
to refrain from bidding for Procurement contracts, or which call for
withdrawal of Bids already submitted, or which are otherwise intended to
secure an undue advantage to any one of them.
(4) When a bidder, by himself or in connivance with others, employ schemes
which tend to restrain the natural rivalry of the parties or operates to stifle or
suppress competition and thus produce a result disadvantageous to the
public.
In addition, the persons involved shall also suffer the penalty of temporary or
perpetual disqualification from public office and be permanently disqualified
from transacting business with the Government.
(c) Private individuals who commit any of the following acts, and any public
officer conspiring with them, shall suffer the penalty of imprisonment of not
less than six (6) years and one (1) day but not more than fifteen (15) years:
(1) Submit eligibility requirements of whatever kind and nature that contain
false information or falsified documents calculated to influence the outcome
of the eligibility screening process or conceal such information in the
eligibility requirements when the information will lead to a declaration of
ineligibility from participating in public bidding.
(2) Submit Bidding Documents of whatever kind and nature that contain
false information or falsified documents or conceal such information in the
Bidding Documents, in order to influence the outcome of the public bidding.
(3) Participate in a public bidding using the name of another or allow another
to use ones name for the purpose of participating in a public bidding.
(4) Withdraw a Bid, after it shall have qualified as the Lowest Calculated
Bid/Highest Rated Bid, or refuse to accept an award, without just cause or for
the purpose of forcing the Procuring Entity to award the contract to another
bidder. This shall include the non-submission within the prescribed time, or
delaying the submission of requirements such as, but not limited to,
performance security, preparatory to the final award of the contract.
(d) When the bidder is a juridical entity, criminal liability and the accessory
penalties shall be imposed on its directors, officers or employees who actually
commit any of the foregoing acts.

8.Veloso v Sandiganbayan GR No. 89043-
65, July 16, 1990
9.Luspo v People of the Philippines GR
188487, Feb 14, 2011
G.R. No. 188556 February 14, 2011
J. Nachura
Sec. 65 Penal Clause
DOCTRINES:
Splitting, defined:
As defined in COA Circular No. 76-41 dated July 30, 1976, splitting,
in its literal sense, means dividing or breaking up into separate parts or
portions, or an act resulting in fissure, rupture, or breach. Within the sphere
of government procurement, splitting is associated with requisitions,
purchase orders, deliveries, and payments. One form of splitting is the
breaking up of payments which consist in making two or more payments for
one or more items involving one purchase order. Splitting is intended to do
away with and circumvent control measure, such as the reviewing authority
of a superior official. In this case, the ASA of P10,000,000.00 was split by
Duran and Montano into 100 checks of P100,000.00 each to elude the
reviewing authority of Director Sistoza, Regional Director, North CAPCOM.
Penal and Civil Liability for Violation of Section 3(e), R.A. No.
3019
The penalty for violation of Section 3(e) of R.A. No. 3019 is
"imprisonment for not less than six years and one month nor more than
fifteen years, and perpetual disqualification from public office.
FACTS:
This case is about the ghost purchase of the combat, clothing, and
individual equipment (CCIE) in Regions 7 and 9 and North Capital
Command (CAPCOM) of Philippine National Police (PNP).
1. The investigation report disclosed that, on August 11, 1992, the Office of
the Directorate for Comptrollership (ODC) issued two (2) Advices of Sub-
Allotment (ASAs), each amounting to P5 million, purportedly for the
purchase of CCIE for the North CAPCOM. The ASAs were approvedfor
the chief Director General Nazareno by Director Guillermo Domondon
(Domondon), Chief Director of ODC, and signed for him by Police
Superintendent Van Luspo (Luspo), Chief, Fiscal Division, Budget and
Fiscal Services of the ODC.
2. Upon receipt of the ASAs, MONTANO, Chief Comptroller, North
CAPCOM, directed DURAN, Chief, Regional Finance Service Unit, North
CAPCOM, to prepare and draw 100 checks of P100 thousand each,
for a total of P10 million.
3. The checks were all dated August 12, 1992 and payable respectively to DI-
BEN Trading,
MT Enterprises, J-MOS Enterprises, and Triple 888 Enterprises, each to
receive 25 checks.
All enterprises were owned and operated by Margarita Tugaoen
(TUGAOEN), who collected the proceeds of the checks from the United
Coconut Planters Bank (UCPB), Cubao Branch, on August 12, 13, and 14,
1992.
4. In a sworn statement dated March 5, 1993 taken by Insp. Felicidad
Ramos, a member of the investigating committee, Tugaoen admitted that
she did not deliver any CCIE in exchange for the P10 million
worth of checks, because the amount was allegedly intended as
payment for the previously accumulated debts of the PNP.
5. The nondelivery was confirmed by P/CInsp. Isaias Braga (Braga), Chief
Logistics Officer, North CAPCOM, and Rolando Flores, Supply
Accountable Officer, North CAPCOM. Both declared that, while they
received CCIE in 1992, the same came from the PNP Logistics Command
and NOT from Tugaoen, and that the value of the items they received was
just P5,900,778.80 and had no relation at all to the P10 million CCIE
purchase under investigation. Their statements were corroborated by
P/Supt. Jesus Arceo, Chief of the Supply Center of PNP Logistics
Command.
ISSUE:
Whether the petitioners are liable for violation of Section 3(e) of RA
3019, the Anti-Graft and Corrupt Practices Act?
RULING:
1. Yes with respect to MONTANO, DURAN, and TUGAOEN. These three
are found guilty beyond reasonable doubt for violation of Section 3(e) of
RA 3019, the Anti-Graft and Corrupt Practices Act and are ORDERED to
solidarily indemnify the PNP of P10 million.
2. No with respect to LUSPO. He is hereby acquitted.
RATIO:
1. MONTANO, DURAN, and TUGAOENare found GUILTY of
violation of Section 3(e) of RA 3019.
In Cabrera v. Sandiganbayan (2004), the Court explained that
there are two ways for a public official to violate this provision in the
performance of his functions, namely: (a) by causing undue injury to any
party, including the government; or (b) by giving any private party any
unwarranted benefits, advantage, or preference. In that case, the Court
enumerated the essential elements of the offense, viz.:
1. The accused must be a public officer discharging administrative, judicial, or
official functions;
2. He must have acted with manifest partiality, evident bad faith, or gross
inexcusable negligence; and
3. His action caused undue injury to any party, including the government,
or gave any private party unwarranted benefits, advantage, or preference in
the discharge of his functions.
1st element:
Montano is the Chief Comptroller, North CAPCOM while is the Chief,
Regional Finance Service Unit, North CAPCOM.
On the other hand, the indictment against Tugaoen, a private
individual, is sanctioned by Section 1 of R.A. No. 3019, thus:
Section 1. Statement of policy. It is the policy of the Philippine
Government, in line with the principle that a public office is
a public trust, to repress certain acts of public officers
and private persons alike which constitute graft or
corrupt practices or which may lead thereto.
2nd element:
In the recent Albert v. Sandiganbayan (2009), we reiterated the
definitions of such modalities, viz.:
There is manifest partiality when there is a
clear, notorious, or plain inclination or predilection to favor
one side or person rather than another. "Evident bad
faith" connotes not only bad judgment but also palpably
and patently fraudulent and dishonest purpose to do moral
obliquity or conscious wrongdoing for some perverse
motive or ill will. "Evident bad faith" contemplates a state
of mind affirmatively operating with furtive design or with
some motive or self-interest or ill will or for ulterior
purposes. "Gross inexcusable negligence" refers to
negligence characterized by the want of even the slightest
care, acting or omitting to act in a situation where there is
a duty to act, not inadvertently but willfully and
intentionally, with conscious indifference to consequences
insofar as other persons may be affected.
Evident bad faith and manifest partiality are imputed to Luspo,
Duran, and Montano when they caused the preparation, issuance, release,
and payment of P10,000,000.00, without supporting documents, to DI-BEN
Trading, MT Enterprises, J-MOS Enterprises, and Triple 888 Enterprises, all
owned and operated by Tugaoen.
3rdelement:
The last essential element of the offense, damage or injury to the
government, is amply substantiated by the certification executed by Romulo
Tuscano of the PNP Logistic Support Service, indicating that there is NO
available record regarding the DELIVERY OF P10 MILLION WORTH OF
CCIE for North CAPCOM in 1992.
In fact, Tugaoen herself admitted that she did not deliver any CCIE in
exchange for her receipt of P10 million.
2. LUSPO is ACQUITTED.
Luspo, in the same manner as Domondon, had satisfactorily adduced
evidence of good faith to overturn and repudiate the imputation of evident
bad faith against him. He committed no prohibited act in signing and issuing
the assailed ASAs because there is ample documentary and testimonial
evidence showing that:
(1) Luspo was duly authorized by Domondon to release personal services
funds by signing ASAs in the latters behalf, which is merely a ministerial
duty. Luspos signature in the ASAs is attributable to Domondon who, in
turn, was authorized by Nazareno to release funds for personnel services
through the issuance of an ASA.
(2) Contrary to the prosecutions contention, the issuance of ASAs by the
ODC in favor of PNP regional commands did not have to be preceded by
a program request from the Office of the Directorate for Personnel as
shown in the Delegation of Authority and its Schedule of Delegation issued by
Nazareno on March 20, 1992; and
(3) There is no need for the DBMs prior authority before the ODC can
release funds for personnel services 01, under which CCIE are categorized, as
shown by GHQ Circular No. 8, dated 1985.
10.Office of the President v Cataquiz GR
183445, Sept 14, 2011
Jessie D. Tolentino
11385146
Office of the President and Presidential Anti-Graft Commission
vs. CalixtoCataquiz

Doctrine:
Board Resolution No. 28 simply set forth the guidelines for the public
bidding of the remaining free fishpen areas in Laguna de Bay. It did not
require presidential approval because it did not regulate any fisheries
development activities. Hence, the questioned resolution cannot be declared
invalid on the basis of the CAs ratiocination that the resolution lacked the
approval of the President.
Facts:
Respondent Cataquiz, then General Manager of the Laguna Lake
Development Authority, was being ousted in a petition by a majority of the
members of the Management Committee and the rank and file employees of
the Laguna Lake Development Authority (LLDA), on the grounds of corrupt
and unprofessional behavior and management incompetence.
In an investigation into the allegations against Cataquiz ordered by Secretary
Gozunof the DENR, it was determined that respondent may be found guilty
for acts prejudicial to the best interest of the government and for violations of
several pertinent laws and regulations specifically the Board Resolution No.
28 which requires public bidding of the remaining free fish pen areas in
Laguna de Bay. It was recommended that the case be forwarded to the
Presidential Anti-Graft Commission.
Later, a duly organized employees union of the LLDA, CELLDA, filed a
complaint before the PAGC charging Cataquiz with violations of RA 3019
(The Anti-Graft and Corrupt Practices Act), The Administrative Code and The
Code of Conduct and Ethical Standards for Public Officials and Employees.
The Office of the President adopted the findings and recommendations of
PAGC, and dismissed the respondent from service. The decision was
amended by the OP imposing the penalties of disqualification from re-
employment and forfeiture of retirement benefits because the penalty of
dismissal was no longer available to him because of his replacement as
General Manager of LLDA.
The Court of Appeals reversed the decision. Meanwhile, the Office of the
Ombudsman recommended the dismissal of the charges against respondent
for violation of RA No. 3019.
Issue: WON Board Resolution No. 28 which requires public bidding of the
remaining free fishpen areas in Laguna de Bay is valid even without the
approval of the President.
Ruling:
Yes. A careful perusal of the PAGCs discussion on the violation of the
questioned board resolution discloses that PAGC was undoubtedly referring
to Board Resolution No. 28 which approved the policy guidelines for public
bidding of the remaining free fishpen areas in Laguna de Bay, and not
Resolution No. 68 which had nothing at all to do with fishpen awards.
Therefore, the reference to Board Resolution No. 68, instead of Board
Resolution No. 28, in the PAGC Resolution is unmistakably a typographical
error on the part of PAGC but, nonetheless, rectifiable.
Moreover, the respondents counter-affidavit shows that he had knowledge of
the fact that he was being charged with violation of Board Resolution No. 28.
He even argued that the said resolution was an invalid and illegal
administrative rule. His position was that the resolution issued by the Board
of Directors of LLDA was an unreasonable exercise of its legislative power
because the enabling law of LLDA, R.A. No. 4850, did not require the public
bidding of free fishpen areas. Then, in his motion for reconsideration before
the OP, he argued that the resolution was invalid because it was never
approved by the President, contrary to Section 4(k) of R.A. No. 4850.
The Revised Laguna de Bay Zoning and Management Plan allocated 10,000
hectares of the lake surface areas for fishpen operators. In the event that the
area would not be fully occupied after all qualified operators had been
assigned their respective fishpen areas, the residual free areas would be
opened for bidding to other prospective qualified applicants. Accordingly,
Board Resolution No. 28 simply set forth the guidelines for the public
bidding of the remaining free fishpen areas in Laguna de Bay. It did not
require presidential approval because it did not regulate any fisheries
development activities. Hence, the questioned resolution cannot be declared
invalid on the basis of the CAs ratiocination that the resolution lacked the
approval of the President.
The petition is granted.
Sec. 67-68 Civil Liabilities W/N the imposition of the 2% interest of the amount adjudged in
ARTICLE XXII CIVIL LIABILITY favor of Consunji is proper
SEC. 67. Civil Liability in Case of Conviction. Without prejudice to
administrative sanctions that may be imposed in proper cases, a conviction Held:
under this Act or Republic Act No. 3019 shall carry with it civil liability,
which may either consist of restitution for the damage done or the forfeiture Yes. The Court in its decision cited as primary basis the
in favor of the government of any unwarranted benefit derived from the act
agreement/contract of the parties. It must be noted that the
or acts in question or both, at the discretion of the courts.
SEC. 68. Liquidated Damages. All contracts executed in accordance agreement provided Consunjitwo options in case of delay in monthly
with this Act shall contain a provision on liquidated damages which shall be payments, to wit: a) suspend work on the project until payment is
payable in case of breach thereof. The amount thereof shall be specified in remitted by the owner or b) continue the work but the owner shall be
the IRR.
required to pay interest at a rate of two percent (2%) per month or a
fraction thereof. Evidently, Consunji chose the latter option, as the
11.Arwood Industries Inc. v Consunji
condominium project was in fact already completed.
Arwood Industries Inc. v DM Consunji, Inc. GR 142277, Dec
Moreover, as to Arwoods contention that the amount claimed does
11, 2002
not refer to monthly progress billings. The Court pointed out that it
(Arwood) did not provide an answer on what the amount represented.
This left the Courtwith no choice but to agree with Consunji that the
Facts: phrase "monthly progress billings" refers to a portion of the contract
price payable by Arwoodto Consunjibased on the percentage of
Petitioner Arwood Industries Inc. (Arwood) and respondent DM
completion of the project or on work accomplished at a particular
Consunji (Consunji) entered into a contract of Civil, Structural and
stage. It refers to that portion of the contract price still to be paid as
Architectural Works Agreement (Agreement) for the construction of
work progresses, after the downpayment is made.
Arwoods condominium project. The contract price aggregated for
20,800,000 php. Despite the completion of the condominium project, As a final point, the Court also explained that even if there was a
the amount of P962,434.78 remained unpaid by Arwood. Repeated default of stipulation or agreement on interest, respondent may still
demands by Consunji for Arwood to pay went unheeded. recover on the basis of the general provision of law, which is Article
2209 of the Civil Code. The provision provides that the payment of
Thus, Consunji filed its complaint for the balance of the contract price
penalty interest is in the rate agreed upon or if there was no
and for damages against Arwoodwith interest of 2% per month or a
agreement on the regular interest, then payment would consist of legal
fraction thereof, from November 1990 up to the time of payment.
interest or six percent (6%) per annum.
The lower court sided with Consunji. The Court of Appeals upheld the
lower courts decision but deleted the attorneys fees saying that the
same had no basis since it was not mentioned in the body of the
decision.

Issue: