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SUPREME COURT
Manila
THIRD DIVISION
DECISION
The Case
The Facts
As culled from the records, the facts are simple and undisputed.
Acting member per Special Order No. 1691 dated May 22, 2014.
Decision 2 G.R. No. 203655
1
Rollo, p. 71.
2
Id. at 74-88.
Decision 3 G.R. No. 203655
million, following the prescribed procedure outlined in the TOR and the
NEDA JV Guidelines.
3
Id. at 108.
4
Id. at 109.
Decision 4 G.R. No. 203655
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.
The Issue
Without a doubt, the issue in this case boils down to whether or not
the BCDA gravely abused its discretion in issuing Supplemental Notice No.
5, in unilaterally aborting the Competitive Challenge, and in subjecting the
development of the project to public bidding.
For its part, SMLI alleged in its petition that the Certification issued
by the BCDA and signed by the parties constituted a contract and that under
the said contract, BCDA cannot renege on its obligation to conduct and
complete the Competitive Challenge. The BCDA, on the other hand, relies
chiefly on the reservation clause in the TOR, which allegedly authorized the
agency to unilaterally cancel the Competitive Challenge. Respondents add
that the terms and conditions agreed upon are disadvantageous to the
government, and that it cannot legally be barred by estoppel in correcting a
mistake committed by its agents.
7
The invitation was also published in the January 2 and 9, 2013 issues of the Financial Times and
Philippine Daily Inquirer.
8
Rollo, pp. 218-222.
Decision 6 G.R. No. 203655
9
Item 5.6, NEDA JV Guidelines.
10
Item 7.3. (b), NEDA JV Guidelines provides:
7.3 Modes of Selecting a JV Partner
xxxx
b. Negotiated Agreements Negotiated agreements may be entered under the following
circumstances:
i. When a Government Entity receives an unsolicited proposal;
ii. When there is failure of competition when no proposals are received or no private sector
participant is found qualified and the Government Entity decides to seek out a JV partner; and
iii. When there is failure of competition, i.e., there is only a single interested party remaining as
defined under VIII(6) of Annex A.
11
Item 5.9, JV Guidelines
12
An Unsolicited Proposal refers to project proposals submitted by the private sector to
undertake Infrastructure or Development Projects without a formal solicitation issued by a Government
Entity. These projects may be entered into by the Government Entity on a negotiated basis, provided,
however, that there shall be no direct government guarantees for JVs resulting from an unsolicited
proposal. (NEDA JV Guidelines)
13
The Swiss Challenge is a system where [a] third party can bid on a project during a designated
period but the original proponent can counter match any superior offer. x x x From Toolkit for Public-
Private Partnerships in Roads & Highways. Available at
http://www.ppiaf.org/sies/ppiaf.org/files/documents/toolkits/highwaystoolkit/6/pdf-version/5-42/pdf. Last
accessed March 11, 2013. See also Osmea III. v. Social Security System, G.R. No. 165272, September 13,
2007, 533 SCRA 313. [Under the Swiss Challenge format, one of the bidders is given the option or
preferential right to match the winning bid.]
14
Joshi, Piyush and Anuradha, R.V., Study on Competition Concerns in Concession Agreements in
Infrastructure Sectors, Clarus Law Associates, June 2009. Available at
http://www.cci.gov.in/images/media/completed/ConAgreInfraSect_20100401141506.pdf. Last accessed
March 14, 2013.
Decision 7 G.R. No. 203655
Stage One
Submission and the Acceptance
or Rejection of the Unsolicited Proposal
15
Ravi Development v. Shree Krishna Prathisthan & Ors., Civil Appeal No. OF 2009, May 11,
2009. Available at www.indiankoon.org/doc/544860/. Last accessed March 14, 2013; See also, Verma,
Roopam, Swiss Challenge System for Infra Projects (2007). Available at
http://www.projectsmonitor.com/detailnews.asp?newsid=13923. Last accessed March 13, 2013.
16
See Hodges, John and Dellacha, Georgina, Unsolicited Infrastructure Proposals: How some
countries introduce competition and transparency, Gridlines, Note No. 19, March 2007. Available at
http://www.ppiaf.org/. Last accessed March 14, 2013.
17
Id.
18
Rollo, p. 373.
Decision 8 G.R. No. 203655
Stage Two
Detailed Negotiations
Stage Three
Competitive Challenge
19
Id. at 373-374.
20
Id. at 374-375.
21
Competitive Challenge is an alternative selection process wherein third parties shall be invited
to submit comparative proposals to an unsolicited proposal. Accordingly, the private sector entity that
submitted the unsolicited proposal is accorded the right to match any superior offers given by a
comparative private sector participant. (Item 5.8, NEDA JV Guidelines).
Decision 9 G.R. No. 203655
Material to the present case is the right to the conduct and completion
of a Competitive Challenge. Based on the NEDA JV Guidelines, it is
necessary that Stages One and Two of the Swiss Challenge shall have been
fruitful for this right to arise.
To recall, Stages One and Two of the framework deal with the
submission and evaluation of the unsolicited proposal and the conduct of the
detailed negotiations. Should the parties productively conclude the in-depth
negotiations, the guidelines require the preparation of the contract and
Philippines v. COMELEC, G.R. No. 159139, January 13, 2004, 419 SCRA 141, where the Court held that
the COMELEC flagrantly desecrated the public policy on public biddings when it violated RA 9184
(Government Procurement Reform Act); See also Power Sector Assets and Liabilities Management
Corporation v. Pozzolanic Philippines, Inc., G.R. No. 183789, August 24, 2011, 656 SCRA 214, where the
Court, citing Ongsiako v. Gamboa, 86 Phil. 50 (1950), declared that an agreement is against public policy if
it is injurious to the interest of the public, contravenes some established interest of society, violates some
public statute, is against good morals, tends to interfere with the public welfare of safety, or, as it is
sometimes put, if it is at war with the interests of society and is in conflict with the morals of the time.
28
Rollo, p. 76.
29
NEDA JV Guidelines.
Decision 11 G.R. No. 203655
2. Within seven (7) calendar days from the issuance of the Certification of
a successful negotiation referred to in Stage Two above, the JV-SC shall
publish the invitation for comparative proposals in accordance with
Section III.2. (Publication of Invitation to Apply for Eligibility and to
Submit Proposal) under Annex A hereof.
3. The [PSE] shall post the proposal security at the date of the first day of
the publication of the invitation for comparative proposals in the amount
and form stated in the tender documents.
5. Within seven (7) calendar days from the date of completion of the
Competitive Challenge, the JV-SC shall submit the recommendation of
award to the Head of the [GE]. Succeeding activities shall be in
accordance with Sections VIII. (Award and Approval of Contract) and X
(Final Approval) of Annex A hereof.31 (emphasis added)
30
Item 4, Stage Two, Annex C, NEDA JV Guidelines.
31
Annex C, NEDA JV Guidelines.
Decision 12 G.R. No. 203655
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:
32
Regalado v. Go, G.R. No. 167988, February 6, 2007, 514 SCRA 616.
33
Rollo, pp. 64-65.
Decision 13 G.R. No. 203655
The Reservation Clause only covers the Third Stage and cannot
prejudice SMLIs rights stemming from the first two stages
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)
34
Id. at 71.
35
Id. at 87.
36
Bouviers Law Dictionary, 3rd ed.
Decision 14 G.R. No. 203655
To anchor the real import of the clause on the basis only of a single
word may, however, result in a deviation from its true meaning by rendering
all the other terms unnecessary or insignificant. Such an interpretation would
run afoul Article 1373 of the Civil Code, which states that [i]f some
stipulation of any contract should admit of several meanings, it shall be
understood as bearing that import which is most adequate to render it
effectual. It is a cardinal rule in statutory construction that no word, clause,
sentence, provision or part of a statute shall be considered surplusage or
superfluous, meaningless, void and insignificant.38 For this purpose, an
interpretation which renders every word operative is preferred over that
which makes some words idle and nugatory.
At this juncture, it is worthy to point out that the TOR containing the
reservation clause details the requirements for eligibility to qualify as a PSE
that may submit its proposal for the JV,39 as well as the procedure to be
followed in the assessment of the eligibility requirements submitted and in
the conduct of the Competitive Challenge. It basically governs only part
and parcel of Stage Three of the Swiss Challenge Process, that is, the
requirements for and the determination of an interested PSEs
eligibility to participate in the Competitive Challenge. This conclusion is
deduced from the very provisions of the TOR, viz:
xxxx
I. GENERAL INFORMATION
xxxx
xxxx
xxxx
9. Due Diligence. x x x
xxxx
xxxx
xxxx
xxxx
.
VII. CHANGE IN MEMBERSHIP OF AN ELIGIBLE PSE.
xxxx
40
Id. at 74-88.
Decision 18 G.R. No. 203655
41
See RE: Problem of Delays in Cases Before the Sandiganbayan, A.M. No. 00-8-05-SC,
November 28, 2001, 370 SCRA 658.
42
See Central Bank of the Philippines v. Court of Appeals, No. L-33022, April 22, 1975, 63
SCRA 431.
Decision 19 G.R. No. 203655
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.
43
Domondon v. Sandiganbayan, G.R. No. 129904, March 16, 2000, 328 SCRA 292.
44
Cuerdo v. COA, No. L-84592, October 27, 1988, 166 SCRA 657.
45
Rollo, p. 635, BCDAs February 13, 2012 Memorandum to the President.
Decision 20 G.R. No. 203655
The price of the Bonifacio South properties has already been set by the
winning price in the bidding for the joint venture development of the
JUSMAG property (P31,111/sq.m.). Thus, BCDA has established the
benchmark for the price of the remaining Bonifacio South properties, of
which the JUSMAG property is the most prime. Logically the minimum
bid price under straight bidding for the BNS/PMC/ASCOM/SSU property,
which is a far less inferior property, would be P31,111/sq.m. However,
with SMs submission of a revised unsolicited proposal at P31,732/sq.m.
and later further revised to P32,500/sq.m., BCDA saw the opportunity to
negotiate for better terms and eventually arrived at a higher price of
P36,900/sq.m. In this case, BCDA deemed that going into Competitive
Challenge was more advantageous to the government than
Competitive Selection (straight bidding) because of the opportunity to
increase the price.
Despite this testament, the BCDA, over a year later, made a complete
turnaround stating that straight bidding will be best for the Government.47
As can be gleaned from the BCDAs Memorandum to the President dated
February 13, 2012, respondents themselves recommended to the President
that the selection proceedings be terminated. To reiterate:
46
Id. at 580-581.
47
Id. at 115.
48
Id. at 635.
Decision 21 G.R. No. 203655
negotiations are advantageous to it, lest it run the risk of being bound to a
project that is not beneficial to the government in the first place.
Overall, the foregoing goes to show that the BCDA failed to establish
a justifiable reason for its refusal to proceed with the Competitive Challenge
and for canceling the entire Swiss Challenge. Because of BCDAs mistaken
reliance on the TOR provision, and by changing its stand on the conduct of
the Competitive Challenge without pointing out with specificity the so-
called unfavorable terms, We are left to believe that the cancellation of the
Swiss Challenge was only due to BCDAs whims and caprices.
All told, the BCDAs acceptance of the unsolicited proposal and the
successful in-depth negotiation cannot be written off as mere mistake or
error that respondents claim to be reversible and not susceptible to the legal
bar of estoppel. The subsequent cancellation of the Competitive Challenge
on grounds that infringe the contractual rights of SMLI and violate the
NEDA JV Guidelines cannot be shrouded with legitimacy by invoking the
above-cited rule.
49
Leca Realty Corporation v. Republic, G.R. No. 155605, September 27, 2006, 503 SCRA 563.
50
Id.
Decision 22 G.R. No. 203655
Conclusion
wiped out should the agency decide to level the playing field and conduct
straight bidding instead? Evidently, this would not attract but would, in
contrast, repel investors from tendering offers. In addition, even if potential
investors do submit unsolicited or comparative proposals, the terms therein
might be driven to become less competitive due to the adjustment in the
balance of risks and returns on investment. Taking into account the
increased possibility of the development project not pushing through,
investors might not be too keen in guaranteeing a high amount of secured
payments for the same. These considerations further validate the need to
secure the private sectors trust and confidence in the government.
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.
WE CONCUR:
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.
As ociate Justice
Chairperson
CERTIFICATION