Republic of the Philippines

COMMISSION ON AUDIT REGIONAL OFFICE NO. 11

Davao City

ASTERIO C. GALLARDO In Re: Notice of

Disallowance
BELTZASAR L. GELLA No. 12-002-101
NORMA B. OCCEÑA
PETER JAMES V. HAW TAY
ALANODIN B. IBRA
RODOLFO M. CRISTOBAL
Appellants,

vs.

AURORA L. LABAGALA
State Auditor __
ATTY. CONCEPCION C. LAGO
Supervising Auditor
Commission on Audit
Philippines Ports Authority
Davao City

x --------------------------------------------- x

JOINT APPEAL MEMORANDUM

Appellants, to this Honorable Commission, respectfully submit this Memorandum of

Appeal to the Notice of Disallowance with Number 12-002-101 and most respectfully
aver that:

PREFATORY STATEMENT

Well-entrenched in jurisprudence is the time-honored principle that the law bestows

upon a public official the presumption of regularity in the discharge of ones official
duties and functions. Convincing and strong evidence is indispensable to refute this
presumption. As in this instant case involves the performance by the undersigned of
their official functions.
 STATEMENT OF THE CASE

Appellants seek for the reversal of the audit allowance passed by the AURORA L.
LABAGALA , State Auditor IV and ATTY. CONCEPCION C. LAGO, Supervising Auditor of
Commission on Audit, Regional Office No. XI concerning the payment for the Project:
Construction of Makar Wharf Waste Water Treatment Facility, Port of General Santos,
General Makar to ALLADO CONSTRUCTION COMPANY in the amount of Pesos: Seven
Hundred Thousand Two Hundred Seventy Four and Forty Centavos (Php700,247.40).

TIMELINESS OF THE APPEAL

1. On January 10, 2013, Aurora L. Labagala, State Auditor IV, Resident Auditor of
the Philippine Ports Authority (PPA), PDO-Southern Mindanao issued Notice of
Disallowance (ND) with Number 12-002-101 against the appellants approved
by Atty. Concepcion C. Lago, Supervising Auditor (Annex “A”).

2. The said ND was received by appellants on January 11, 2013, hence, pursuant
to the 2009 Revised Rules of Procedure of the Commission on Audit, the
appellants have six (6)months from receipt of said ND within which to file
Appeal Memorandum or until July 11, 2013.

RELEVANT ANTECEDENTS

1. On December 11, 2009, in accordance with Republic Act (RA) No. 9184 and
its Revised Implementing Rules and Regulations (IRR), the Philippine Ports
Authority, PDO-Southern Mindanao (Procuring Entity) advertised in the
newspaper of general circulation and posted in the PPA website, Phil-GEPS
website as well as in its Bulletin Board of PDO-Southern Mindanao, an
Invitation to Bid for the Proposed Porject: Makar Wharf Waste Water
Treatment facility, Port of General Santos, General Santos City (Annex “B”).
There were five (5) Contractors who responded to said Invitation to Bid;

2. That it must be stressed that prior to the conduct of the bidding, the
preparation and review/evaluation of plans, specifications and other technical
details of the project were undertaken by competent, experience and duly
licensed Civil Engineer of the Procuring Entity;

3. That on January 4, 2013, an opening of bids for the aforesaid project was
conducted and was presided by Engr. Asterio C. Gallardo, Jr., Chairman of the
Bids and Awards Committee for Engineering Projects. Notices of Meeting was
issued to BAC Members and observers (Annex “C-1”) and letters to non-
 government organizations (Annex “C-2). Present in the said opening of bids
were members of the BAC, Technical Working Group (TWG), the Secretariat
and Engr. Silvino L. Presto, the representative from the Philippine Institute of
Civil Engineers (PICE). Out of the five (5) interested bidders, two (2)
contractors submitted their respective bids, namely: 1) Allado Construction
Co., Inc. and 2) I.M. Bongar Inc.;

4. That on the said opening of bidding, Allado Construction Company, Inc. was
declared initially as the lowest bid as read in the amount of
Php11,003,504.48;

5. The bid submitted by Allado Construction Company Inc. was declared as the
lowest calculated and responsive bid pursuant to the Revised IRR of RA 9184
after the bid evaluation and post qualification was conducted.

6. BAC for Engineering Projects approved the Post Qualification Report of the
TWG of which Allado Construction Company Inc. passed the post qualification
stage;

7. Consequently, Notice of Award was issued to Allado Construction Company

Inc. on __________________ which the contractor accepted. Later on, the
corresponding contract thereto was executed by the parties on
_________________.

8. On March 12, 2010, Mr. Abdussabor A. Sawadjaan, Port District Manager of

PPA, PDO-Sothern Mindanao submitted to the appellee Resident Auditor
Labagala all pertinent documents required for Contract Review in compliance
with COA Circular No. 2009-001 dated February 12, 2009 (Annex “J”).

9. After five (5) months or on August 9, 2010, the appellants received from the
appellees Audit Observation Memorandum (AOM) No. 10-001 dated 9, 2010
(Annex “M”);

10.On September 7, 2010, PDM Abdussabor A. Sawadjaan responded to the

aforesaid AOM No. 10-001 dated August 9, 2010 of the appellee State Auditor
Labagala which contains the comments/position of PPA, PDO-Southern
Mindanao:

11.On October 11, 2012, the procuring entity was surprised to receive an
Indorsement Letter dated September 21, 2012 from appellee State Auditor
Labagala concerning the Narrative Report of Mr. Delfin M. Corotan, State
Auditor II, COA Regional Office XI on the alleged deficiency of the post
qualification of the bidders conducted by the BAC members and TWG based
on his inspection conducted on the implemented project;

12.On January 10, 2013, the appellants received Notice of Disallowance No. 12-
002-001 stating the following findings:
 The amount of Php700,274.40 was disallowed in audit in
view of the observations/findings of the COA Technical
Inspector in the review of the contract documents of the
project of Construction of Makar Wharf Watse Water
Treatment facility, Port of general Santos. Review of the
documents disclosed that there was disparity on the unit
prices of the Pilot Lamp V Green and Laboratory Glasswares
as presented in the Bill of Quantities (BOQ) and the Detailed
Unit Price Analysis, shown as follows:

Bill of Quantity (BOO) Contractor’s Detailed Unit Price

Analysis (DUPA) Total Cost

Item
Description Qty UNIT TOTAL QTY UNIT TOATL DEDUCTIBLE ALLOWA
COST COST COST COST AMOUNT BLE
AMOUNT

1.Pilot
Lamp 7 9,586.66 67,108, 7 1,369.52 9,586.66 57,519.84 9,586.66
220 V 48
Green
2.
Laboratory 1 734,576.64 734,57 1 91,822.08 91,822.08 842,754.66 91,822.0
Glass 6.64 8
Wares

Total 700,274.40 101,408.

72
(Refer to the attached letter dated September 21, 2012 of Engr. Delfin
L. Corotan, State Auditor II, TECHITS, COA XI, Davao City for the
detailed audit observations shown as Annex A)

13.The procuring entity received on June 21, 2011 from COA a Consolidated
Management Letter on the Audit of the Philippine Ports Authority, Port District
Office-Southern Mindanao for the Period January 01 to December 31, 2010
dated May 9, 2011 containing, among others, their findings in the AOM 10-
001 and indicated, therein, that the subject contract was reviewed as to its
Auditorial, Legal and technical Aspects;

14.That said Consolidated Management letter from COA had presented its lone
recommendation which stated as follows:

“We recommend that the BAC, TWG and other participants of the
procurement process should ensure that the provisions of the Revised Implementing
rules and regulations of Republic Act No. 9184 are properly and consistently
observed in support of the government’s policy on the promotion of good
governance and the principle of transparency, accountability, equity, efficiency, and
economy in the procurement process. The seriousness of the government’s intent in
prescribing the procurement process is manifested under Articles XXI-XXIII of the
same law.”
 STATEMENT OF THE ISSUES

I.
WHETHER OR NOT THE NOTICE OF DISALLOWANCE
(ND) NO. 12-002-101 DATED JANUARY 10, 2013 WAS
ISSUED WITH LEGAL BASIS.

II.
WHETHER OR NOT SECTION 32.2.3 OF R.A. 9184
WILL APPLY IN CASE OF DISCREPANCIES BETWEEN
THE UNIT AND TOTAL COSTS OF THE DETAILED UNIT
PRICE ANALYSIS AND THE BILL OF QUANTITIES.

DISCUSSIONS

I. THE NOTICE OF
DISALLOWANCE (ND)
NO. 12-002-101 DATED
JANUARY 10, 2013 WAS
WITHOUT OF LEGAL
BASIS

The amount of Php700,274.40 was disallowed in audit in view of the

observations/findings of the COA Technical Inspector in the review of the contract
documents of the project of Construction of Makar Wharf Watse Water Treatment
facility, Port of general Santos. Review of the documents disclosed that there was
disparity on the unit prices of the Pilot Lamp V Green and Laboratory Glasswares as
presented in the Bill of Quantities (BOQ) and the Detailed Unit Price Analysis.

Such disallowance was based on the letter dated September 21, 2012 of Engr.
Delfin L. Corotan, State Auditor II, TechITS, COA XI, Davao City which states:

Table 1.0 –Deductible amount to be corrected due to erroneous input in the BOQ.

Bill of Quantity (BOO) Contractor’s Detailed Unit

Price Analysis (DUPA) Total Cost

Item
Description Qty UNIT TOTAL QTY UNIT TOATL DEDUCTIBLE ALLOWABL
COST COST COST COST AMOUNT E AMOUNT

1.Pilot Lamp
220 V Green 7 9,586.66 67,108,48 7 1,369.52 9,586.66 57,519.84 9,586.66
2. Laboratory
 Glass Wares 1 734,576.64 734,576.64 1 91,822.08 91,822.08 842,754.66 91,822.08

Total 700,274.40 101,408.72

THAT IN THE PARAGRAPH IMMEDIATELY AFTER THE ABOVE TABLE,

MR. COROTAN ALLEGED:

“Had the BAC evaluated properly the contractor’s incorrect entry of the unit
costs in the BOQ for the pilot lamp and laboratory glasswares it could have
affected/changed the total calculated bid price (as corrected), from Php
11,003,504.48 to Php 10,303,230.08.

Otherwise, if the bidder does not accept the arithmetical corrections done
by the BAC on its bid, the BAC may disqualify the bid and forfeit the bid security
of the bidder.”

THAT IN THE SUCCEEDING PARAGRAPHS AND TABLES OF THE

NARRATIVE REPORT, MR. COROTAN LENGTHILY TOOK ISSUES OF THE

PROPRIETY OF THE VARIATION ORDERS MADE ON THE PROJECT AND

EXPRESSLY FAULTED THE BAC-EP AND THE TWG AS THE APPLELLANTS

FOUND ABSOLUTELY DISTURBING THE PENULTIMATE PARAGRAPH OF HIS

NARRATIVE REPORT, QUOTED IN TOTO, VIZ:

“Also, in my opinion had the BAC question during the detailed evaluation
regarding the conflicting unit cost of said laboratory and electrical materials that
escalated incredibly without factual basis (DUPA) and should had BAC imposed
Section 32.1 – Bid Evaluation for the Procurement of Goods and Infrastructure
Projects of IRR of GPRA 9184 which states: Members of the BAC, including its
staff and personnel, as well its Secretariat and TWG ,xxx”mays ask in writing
the bidder for clarification of its bid. All responses to requests for clarification
shall be in writing”they have possibly corrected the computation errors and other
bid modifications and could have come up to a final contract cost amenable to
both parties and could have avoided the aggravated circumstances during the
implementation stage particularly the issuance of Variation Orders”.
(Underscoring Mr. Corotan)(ANNEX )

That it must be underscored that COA Circular No. 2009-001 (Annex “K”) mandates
the COA Audit team to conduct Auditorial Review within five (5) tp twenty (20) days
from receipt of the Contract and its supporting documents including bid documents,
stating further, that within five (5) days after the completion of the Auditorial
Review, the same shall be forwarded to the COA Technical Audit Specialist (TAS)
who shall then, conduct and complete the Technical Review within fourteen (14)
days upon receipt from the former;

That the aforesaid AOM No. 10-001, did not mention any observation regarding the
Technical Aspect of the contract nor stated any information that the contract was
still under technical review which the procuring entity took as an implied
manifestation that the contract was free of any technical deficiency;