Session 2 Gov Con

ITFP vs.
COMELEC
There is grave abuse of discretion (1) when an act is done contrary to the Constitution, the law or jurisprudence; 1 or (2) when
it is executed whimsically, capriciously or arbitrarily out of malice, ill will or personal bias. 2 In the present case, the
Commission on Elections approved the assailed Resolution and awarded the subject Contract not only in clear violation of
law and jurisprudence, but also in reckless disregard of its own bidding rules and procedure. For the automation of the
counting and canvassing of the ballots in the 2004 elections, Comelec awarded the Contract to "Mega Pacific Consortium"
an entity that had not participated in the bidding. Despite this grant, the poll body signed the actual automation Contract with
"Mega Pacific eSolutions, Inc.," a company that joined the bidding but had not met the eligibility requirements.
Comelec awarded this billion-peso undertaking with inexplicable haste, without adequately checking and observing
mandatory financial, technical and legal requirements. It also accepted the proferred computer hardware and software even
if, at the time of the award, they had undeniably failed to pass eight critical requirements designed to safeguard the integrity
of elections, especially the following three items:
They failed to achieve the accuracy rating criteria of 99.9995 percent set-up by the Comelec itself
They were not able to detect previously downloaded results at various canvassing or consolidation levels and to
prevent these from being inputted again
They were unable to print the statutorily required audit trails of the count/canvass at different levels without any
loss of data
Because of the foregoing violations of law and the glaring grave abuse of discretion committed by Comelec, the Court has
no choice but to exercise its solemn "constitutional duty" 3 to void the assailed Resolution and the subject Contract. The
illegal, imprudent and hasty actions of the Commission have not only desecrated legal and jurisprudential norms, but have
also cast serious doubts upon the poll bodys ability and capacity to conduct automated elections. Truly, the pith and soul of
democracy -- credible, orderly, and peaceful elections -- has been put in jeopardy by the illegal and gravely abusive acts of
Comelec.
The Case
Before us is a Petition4 under Rule 65 of the Rules of Court, seeking (1) to declare null and void Resolution No. 6074 of the
Commission on Elections (Comelec), which awarded "Phase II of the Modernization Project of the Commission to Mega
Pacific Consortium (MPC);" (2) to enjoin the implementation of any further contract that may have been entered into by
Comelec "either with Mega Pacific Consortium and/or Mega Pacific eSolutions, Inc. (MPEI);" and (3) to compel Comelec to
conduct a re-bidding of the project.
The Facts
The following facts are not disputed. They were culled from official documents, the parties pleadings, as well as from
admissions during the Oral Argument on October 7, 2003.
On June 7, 1995, Congress passed Republic Act 8046,5 which authorized Comelec to conduct a nationwide demonstration of
a computerized election system and allowed the poll body to pilot-test the system in the March 1996 elections in the
Autonomous Region in Muslim Mindanao (ARMM).
On December 22, 1997, Congress enacted Republic Act 84366 authorizing Comelec to use an automated election system
(AES) for the process of voting, counting votes and canvassing/consolidating the results of the national and local elections. It
also mandated the poll body to acquire automated counting machines (ACMs), computer equipment, devices and materials;
and to adopt new electoral forms and printing materials.
Initially intending to implement the automation during the May 11, 1998 presidential elections, Comelec -- in its Resolution
No. 2985 dated February 9, 19987 -- eventually decided against full national implementation and limited the automation to
the Autonomous Region in Muslim Mindanao (ARMM). However, due to the failure of the machines to read correctly some
automated ballots in one town, the poll body later ordered their manual count for the entire Province of Sulu. 8
In the May 2001 elections, the counting and canvassing of votes for both national and local positions were also done
manually, as no additional ACMs had been acquired for that electoral exercise allegedly because of time constraints.
1
On October 29, 2002, Comelec adopted in its Resolution 02-0170 a modernization program for the 2004 elections. It
resolved to conduct biddings for the three (3) phases of its Automated Election System; namely, Phase I - Voter Registration
and Validation System; Phase II - Automated Counting and Canvassing System; and Phase III - Electronic Transmission.
On January 24, 2003, President Gloria Macapagal-Arroyo issued Executive Order No. 172, which allocated the sum of P2.5
billion to fund the AES for the May 10, 2004 elections. Upon the request of Comelec, she authorized the release of an
additional P500 million.
On January 28, 2003, the Commission issued an "Invitation to Apply for Eligibility and to Bid," which we quote as follows:
"INVITATION TO APPLY FOR ELIGIBILITY AND TO BID
The Commission on Elections (COMELEC), pursuant to the mandate of Republic Act Nos. 8189 and 8436, invites
interested offerors, vendors, suppliers or lessors to apply for eligibility and to bid for the procurement by purchase,
lease, lease with option to purchase, or otherwise, supplies, equipment, materials and services needed for a
comprehensive Automated Election System, consisting of three (3) phases: (a) registration/verification of voters,
(b) automated counting and consolidation of votes, and (c) electronic transmission of election results, with an
approved budget of TWO BILLION FIVE HUNDRED MILLION (Php2,500,000,000) Pesos.
Only bids from the following entities shall be entertained:
a. Duly licensed Filipino citizens/proprietorships;
b. Partnerships duly organized under the laws of the Philippines and of which at least sixty percent
(60%) of the interest belongs to citizens of the Philippines;
c. Corporations duly organized under the laws of the Philippines, and of which at least sixty percent
(60%) of the outstanding capital stock belongs to citizens of the Philippines;
d. Manufacturers, suppliers and/or distributors forming themselves into a joint venture, i.e., a group of
two (2) or more manufacturers, suppliers and/or distributors that intend to be jointly and severally
responsible or liable for a particular contract, provided that Filipino ownership thereof shall be at least
sixty percent (60%); and
e. Cooperatives duly registered with the Cooperatives Development Authority.
Bid documents for the three (3) phases may be obtained starting 10 February 2003, during office hours from the
Bids and Awards Committee (BAC) Secretariat/Office of Commissioner Resurreccion Z. Borra, 7th Floor, Palacio
del Governador, Intramuros, Manila, upon payment at the Cash Division, Commission on Elections, in cash or
cashiers check, payable to the Commission on Elections, of a non-refundable amount of FIFTEEN THOUSAND
PESOS (Php15,000.00) for each phase. For this purpose, interested offerors, vendors, suppliers or lessors have the
option to participate in any or all of the three (3) phases of the comprehensive Automated Election System.
A Pre-Bid Conference is scheduled on 13 February 2003, at 9:00 a.m. at the Session Hall, Commission on
Elections, Postigo Street, Intramuros, Manila. Should there be questions on the bid documents, bidders are
required to submit their queries in writing to the BAC Secretariat prior to the scheduled Pre-Bid Conference.
Deadline for submission to the BAC of applications for eligibility and bid envelopes for the supply of the
comprehensive Automated Election System shall be at the Session Hall, Commission on Elections, Postigo Street,
Intramuros, Manila on 28 February 2003 at 9:00 a.m.
The COMELEC reserves the right to review the qualifications of the bidders after the bidding and before the
contract is executed. Should such review uncover any misrepresentation made in the eligibility statements, or any
changes in the situation of the bidder to materially downgrade the substance of such statements, the COMELEC
shall disqualify the bidder upon due notice without any obligation whatsoever for any expenses or losses that may
be incurred by it in the preparation of its bid."9
On February 11, 2003, Comelec issued Resolution No. 5929 clarifying certain eligibility criteria for bidders and the schedule
of activities for the project bidding, as follows:
2
"1.) Open to Filipino and foreign corporation duly registered and licensed to do business and is actually doing
business in the Philippines, subject to Sec. 43 of RA 9184 (An Act providing In the Modernization Standardization
and Regulation of the Procurement Activities of the Government and for other purposes etc.)
2.) Track Record:
a) For counting machines should have been used in at least one (1) political exercise with no less than
Twenty Million Voters;
b) For verification of voters the reference site of an existing data base installation using Automated
Fingerprint Identification System (AFIS) with at least Twenty Million.
3.) Ten percent (10%) equity requirement shall be based on the total project cost; and
4.) Performance bond shall be twenty percent (20%) of the bid offer.
RESOLVED moreover, that:
1) A. Due to the decision that the eligibility requirements and the rest of the Bid documents shall be
released at the same time, and the memorandum of Comm. Resurreccion Z. Borra dated February 7,
2003, the documents to be released on Friday, February 14, 2003 at 2:00 oclock p.m. shall be the
eligibility criteria, Terms of Reference (TOR) and other pertinent documents;
B. Pre-Bid conference shall be on February 18, 2003; and
C. Deadline for the submission and receipt of the Bids shall be on March 5, 2003.
2) The aforementioned documents will be available at the following offices:
a) Voters Validation: Office of Comm. Javier
b) Automated Counting Machines: Office of Comm. Borra
c) Electronic Transmission: Office of Comm. Tancangco"10
On February 17, 2003, the poll body released the Request for Proposal (RFP) to procure the election automation machines.
The Bids and Awards Committee (BAC) of Comelec convened a pre-bid conference on February 18, 2003 and gave
prospective bidders until March 10, 2003 to submit their respective bids.
Among others, the RFP provided that bids from manufacturers, suppliers and/or distributors forming themselves into a joint
venture may be entertained, provided that the Philippine ownership thereof shall be at least 60 percent. Joint venture is
defined in the RFP as "a group of two or more manufacturers, suppliers and/or distributors that intend to be jointly and
severally responsible or liable for a particular contract."11
Basically, the public bidding was to be conducted under a two-envelope/two stage system. The bidders first envelope or the
Eligibility Envelope should establish the bidders eligibility to bid and its qualifications to perform the acts if accepted. On
the other hand, the second envelope would be the Bid Envelope itself. The RFP outlines the bidding procedures as follows:
"25. Determination of Eligibility of Prospective Bidders
"25.1 The eligibility envelopes of prospective Bidders shall be opened first to determine their eligibility.
In case any of the requirements specified in Clause 20 is missing from the first bid envelope, the BAC
shall declare said prospective Bidder as ineligible to bid. Bid envelopes of ineligible Bidders shall be
immediately returned unopened.
"25.2 The eligibility of prospective Bidders shall be determined using simple pass/fail criteria and shall
be determined as either eligible or ineligible. If the prospective Bidder is rated passed for all the legal,
technical and financial requirements, he shall be considered eligible. If the prospective Bidder is rated
failed in any of the requirements, he shall be considered ineligible.
3
"26. Bid Examination/Evaluation
"26.1 The BAC will examine the Bids to determine whether they are complete, whether any
computational errors have been made, whether required securities have been furnished, whether the
documents have been properly signed, and whether the Bids are generally in order.
"26.2 The BAC shall check the submitted documents of each Bidder against the required documents
enumerated under Clause 20, to ascertain if they are all present in the Second bid envelope (Technical
Envelope). In case one (1) or more of the required documents is missing, the BAC shall rate the Bid
concerned as failed and immediately return to the Bidder its Third bid envelope (Financial Envelope)
unopened. Otherwise, the BAC shall rate the first bid envelope as passed.
"26.3 The BAC shall immediately open the Financial Envelopes of the Bidders whose Technical
Envelopes were passed or rated on or above the passing score. Only Bids that are determined to contain
all the bid requirements for both components shall be rated passed and shall immediately be considered
for evaluation and comparison.
"26.4 In the opening and examination of the Financial Envelope, the BAC shall announce and tabulate
the Total Bid Price as calculated. Arithmetical errors will be rectified on the following basis: If there is a
discrepancy between words and figures, the amount in words will prevail. If there is a discrepancy
between the unit price and the total price that is obtained by multiplying the unit price and the quantity,
the unit price shall prevail and the total price shall be corrected accordingly. If there is a discrepancy
between the Total Bid Price and the sum of the total prices, the sum of the total prices prevail and the
Total Bid Price shall be corrected accordingly.
"26.5 Financial Proposals which do not clearly state the Total Bid Price shall be rejected. Also, Total Bid
Price as calculated that exceeds the approved budget for the contract shall also be rejected.
27. Comparison of Bids
27.1 The bid price shall be deemed to embrace all costs, charges and fees associated with carrying out all
the elements of the proposed Contract, including but not limited to, license fees, freight charges and
taxes.
27.2 The BAC shall establish the calculated prices of all Bids rated passed and rank the same in
ascending order.
xxxxxxxxx
"29. Postqualification
"29.1 The BAC will determine to its satisfaction whether the Bidder selected as having submitted the
lowest calculated bid is qualified to satisfactorily perform the Contract.
"29.2 The determination will take into account the Bidders financial, technical and production
capabilities/resources. It will be based upon an examination of the documentary evidence of the Bidders
qualification submitted by the Bidder as well as such other information as the BAC deems necessary and
appropriate.
"29.3 A bid determined as not substantially responsive will be rejected by the BAC and may not
subsequently be made responsive by the Bidder by correction of the non-conformity.
"29.4 The BAC may waive any informality or non-conformity or irregularity in a bid which does not
constitute a material deviation, provided such waiver does not prejudice or affect the relative ranking of
any Bidder.
"29.5 Should the BAC find that the Bidder complies with the legal, financial and technical requirements,
it shall make an affirmative determination which shall be a prerequisite for award of the Contract to the
Bidder. Otherwise, it will make a negative determination which will result in rejection of the Bidders
bid, in which event the BAC will proceed to the next lowest calculated bid to make a similar
determination of that Bidders capabilities to perform satisfactorily." 12
4
Out of the 57 bidders,13 the BAC found MPC and the Total Information Management Corporation (TIMC) eligible. For
technical evaluation, they were referred to the BACs Technical Working Group (TWG) and the Department of Science and
Technology (DOST).
In its Report on the Evaluation of the Technical Proposals on Phase II, DOST said that both MPC and TIMC had obtained a
number of failed marks in the technical evaluation. Notwithstanding these failures, Comelec en banc, on April 15, 2003,
promulgated Resolution No. 6074 awarding the project to MPC. The Commission publicized this Resolution and the award
of the project to MPC on May 16, 2003.
On May 29, 2003, five individuals and entities (including the herein Petitioners Information Technology Foundation of the
Philippines, represented by its president, Alfredo M. Torres; and Ma. Corazon Akol) wrote a letter 14 to Comelec Chairman
Benjamin Abalos Sr. They protested the award of the Contract to Respondent MPC "due to glaring irregularities in the
manner in which the bidding process had been conducted." Citing therein the noncompliance with eligibility as well as
technical and procedural requirements (many of which have been discussed at length in the Petition), they sought a re-
bidding.
In a letter-reply dated June 6, 2003,15 the Comelec chairman -- speaking through Atty. Jaime Paz, his head executive assistant
-- rejected the protest and declared that the award "would stand up to the strictest scrutiny."
Hence, the present Petition.16
The Issues
In their Memorandum, petitioners raise the following issues for our consideration:
"1. The COMELEC awarded and contracted with a non-eligible entity; x x x
"2. Private respondents failed to pass the Technical Test as required in the RFP. Notwithstanding, such failure was
ignored. In effect, the COMELEC changed the rules after the bidding in effect changing the nature of the contract
bidded upon.
"3. Petitioners have locus standi.
"4. Instant Petition is not premature. Direct resort to the Supreme Court is justified." 17
In the main, the substantive issue is whether the Commission on Elections, the agency vested with the exclusive
constitutional mandate to oversee elections, gravely abused its discretion when, in the exercise of its administrative
functions, it awarded to MPC the contract for the second phase of the comprehensive Automated Election System.
Before discussing the validity of the award to MPC, however, we deem it proper to first pass upon the procedural issues: the
legal standing of petitioners and the alleged prematurity of the Petition.
This Courts Ruling
The Petition is meritorious.
First Procedural Issue:
Locus Standi of Petitioners
Respondents chorus that petitioners do not possess locus standi, inasmuch as they are not challenging the validity or
constitutionality of RA 8436. Moreover, petitioners supposedly admitted during the Oral Argument that no law had been
violated by the award of the Contract. Furthermore, they allegedly have no actual and material interest in the Contract and,
hence, do not stand to be injured or prejudiced on account of the award.
On the other hand, petitioners -- suing in their capacities as taxpayers, registered voters and concerned citizens -- respond
that the issues central to this case are "of transcendental importance and of national interest." Allegedly, Comelecs flawed
bidding and questionable award of the Contract to an unqualified entity would impact directly on the success or the failure of
the electoral process. Thus, any taint on the sanctity of the ballot as the expression of the will of the people would inevitably
affect their faith in the democratic system of government. Petitioners further argue that the award of any contract for
5
automation involves disbursement of public funds in gargantuan amounts; therefore, public interest requires that the laws
governing the transaction must be followed strictly.
We agree with petitioners. Our nations political and economic future virtually hangs in the balance, pending the outcome of
the 2004 elections. Hence, there can be no serious doubt that the subject matter of this case is "a matter of public concern and
imbued with public interest";18 in other words, it is of "paramount public interest"19 and "transcendental importance."20 This
fact alone would justify relaxing the rule on legal standing, following the liberal policy of this Court whenever a case
involves "an issue of overarching significance to our society." 21 Petitioners legal standing should therefore be recognized
and upheld.
Moreover, this Court has held that taxpayers are allowed to sue when there is a claim of "illegal disbursement of public
funds,"22 or if public money is being "deflected to any improper purpose";23 or when petitioners seek to restrain respondent
from "wasting public funds through the enforcement of an invalid or unconstitutional law." 24 In the instant case, individual
petitioners, suing as taxpayers, assert a material interest in seeing to it that public funds are properly and lawfully used. In
the Petition, they claim that the bidding was defective, the winning bidder not a qualified entity, and the award of the
Contract contrary to law and regulation. Accordingly, they seek to restrain respondents from implementing the Contract and,
necessarily, from making any unwarranted expenditure of public funds pursuant thereto. Thus, we hold that petitioners
possess locus standi.
Second Procedural Issue:
Alleged Prematurity Due to Non-Exhaustion of Administrative Remedies
Respondents claim that petitioners acted prematurely, since they had not first utilized the protest mechanism available to
them under RA 9184, the Government Procurement Reform Act, for the settlement of disputes pertaining to procurement
contracts.
Section 55 of RA 9184 states that protests against decisions of the Bidding and Awards Committee in all stages of
procurement may be lodged with the head of the procuring entity by filing a verified position paper and paying a protest fee.
Section 57 of the same law mandates that in no case shall any such protest stay or delay the bidding process, but it must first
be resolved before any award is made.
On the other hand, Section 58 provides that court action may be resorted to only after the protests contemplated by the
statute shall have been completed. Cases filed in violation of this process are to be dismissed for lack of jurisdiction.
Regional trial courts shall have jurisdiction over final decisions of the head of the procuring entity, and court actions shall be
instituted pursuant to Rule 65 of the 1997 Rules of Civil Procedure.
Respondents assert that throughout the bidding process, petitioners never questioned the BAC Report finding MPC eligible
to bid and recommending the award of the Contract to it (MPC). According to respondents, the Report should have been
appealed to the Comelc en banc, pursuant to the aforementioned sections of RA 9184. In the absence of such appeal, the
determination and recommendation of the BAC had become final.
The Court is not persuaded.
Respondent Comelec came out with its en banc Resolution No. 6074 dated April 15, 2003, awarding the project to
Respondent MPC even before the BAC managed to issue its written report and recommendation on April 21, 2003. Thus,
how could petitioners have appealed the BACs recommendation or report to the head of the procuring entity (the chairman
of Comelec), when the Comelec en banc had already approved the award of the contract to MPC even before petitioners
learned of the BAC recommendation?
It is claimed25 by Comelec that during its April 15, 2003 session, it received and approved the verbal report and
recommendation of the BAC for the award of the Contract to MPC, and that the BAC subsequently re-affirmed its verbal
report and recommendation by submitting it in writing on April 21, 2003. Respondents insist that the law does not require
that the BAC Report be in writing before Comelec can act thereon; therefore, there is allegedly nothing irregular about the
Report as well as the en banc Resolution.
However, it is obvious that petitioners could have appealed the BACs report and recommendation to the head of the
procuring entity (the Comelec chair) only upon their discovery thereof, which at the very earliest would have been on April
21, 2003, when the BAC actually put its report in writing and finally released it. Even then, what would have been the use of
protesting/appealing the report to the Comelec chair, when by that time the Commission en banc (including the chairman
himself) had already approved the BAC Report and awarded the Contract to MPC?
6
And even assuming arguendo that petitioners had somehow gotten wind of the verbal BAC report on April 15, 2003
(immediately after the en banc session), at that point the Commission en banc had already given its approval to the BAC
Report along with the award to MPC. To put it bluntly, the Comelec en banc itself made it legally impossible for petitioners
to avail themselves of the administrative remedy that the Commission is so impiously harping on. There is no doubt that they
had not been accorded the opportunity to avail themselves of the process provided under Section 55 of RA 9184, according
to which a protest against a decision of the BAC may be filed with the head of the procuring entity. Nemo tenetur ad
impossible,26 to borrow private respondents favorite Latin excuse. 27
Some Observations on the BAC Report to the Comelec
We shall return to this issue of alleged prematurity shortly, but at this interstice, we would just want to put forward a few
observations regarding the BAC Report and the Comelec en bancs approval thereof.
First, Comelec contends that there was nothing unusual about the fact that the Report submitted by the BAC came only after
the former had already awarded the Contract, because the latter had been asked to render its report and recommendation
orally during the Commissions en banc session on April 15, 2003. Accordingly, Comelec supposedly acted upon such oral
recommendation and approved the award to MPC on the same day, following which the recommendation was subsequently
reduced into writing on April 21, 2003. While not entirely outside the realm of the possible, this interesting and unique spiel
does not speak well of the process that Comelec supposedly went through in making a critical decision with respect to a
multi-billion-peso contract.
We can imagine that anyone else standing in the shoes of the Honorable Commissioners would have been extremely
conscious of the overarching need for utter transparency. They would have scrupulously avoided the slightest hint of
impropriety, preferring to maintain an exacting regularity in the performance of their duties, instead of trying to break a
speed record in the award of multi-billion-peso contracts. After all, between April 15 and April 21 were a mere six (6) days.
Could Comelec not have waited out six more days for the written report of the BAC, instead of rushing pell-mell into the
arms of MPC? Certainly, respondents never cared to explain the nature of the Commissions dire need to act immediately
without awaiting the formal, written BAC Report.
In short, the Court finds it difficult to reconcile the uncommon dispatch with which Comelec acted to approve the multi-
billion-peso deal, with its claim of having been impelled by only the purest and most noble of motives.
At any rate, as will be discussed later on, several other factors combine to lend negative credence to Comelecs tale.
Second, without necessarily ascribing any premature malice or premeditation on the part of the Comelec officials involved, it
should nevertheless be conceded that this cart-before-the-horse maneuver (awarding of the Contract ahead of the BACs
written report) would definitely serve as a clever and effective way of averting and frustrating any impending protest under
Section 55.
Having made the foregoing observations, we now go back to the question of exhausting administrative remedies.
Respondents may not have realized it, but the letter addressed to Chairman Benjamin Abalos Sr. dated May 29, 2003 28 serves
to eliminate the prematurity issue as it was an actual written protest against the decision of the poll body to award the
Contract. The letter was signed by/for, inter alia, two of herein petitioners: the Information Technology Foundation of the
Philippines, represented by its president, Alfredo M. Torres; and Ma. Corazon Akol.
Such letter-protest is sufficient compliance with the requirement to exhaust administrative remedies particularly because it
hews closely to the procedure outlined in Section 55 of RA 9184.
And even without that May 29, 2003 letter-protest, the Court still holds that petitioners need not exhaust administrative
remedies in the light of Paat v. Court of Appeals.29 Paat enumerates the instances when the rule on exhaustion of
administrative remedies may be disregarded, as follows:
"(1) when there is a violation of due process,
(2) when the issue involved is purely a legal question,
(3) when the administrative action is patently illegal amounting to lack or excess of jurisdiction,
(4) when there is estoppel on the part of the administrative agency concerned,
(5) when there is irreparable injury,
7
(6) when the respondent is a department secretary whose acts as an alter ego of the President bears the implied and
assumed approval of the latter,
(7) when to require exhaustion of administrative remedies would be unreasonable,
(8) when it would amount to a nullification of a claim,
(9) when the subject matter is a private land in land case proceedings,
(10) when the rule does not provide a plain, speedy and adequate remedy, and
(11) when there are circumstances indicating the urgency of judicial intervention." 30
The present controversy precisely falls within the exceptions listed as Nos. 7, 10 and 11: "(7) when to require exhaustion of
administrative remedies would be unreasonable; (10) when the rule does not provide a plain, speedy and adequate remedy,
and (11) when there are circumstances indicating the urgency of judicial intervention." As already stated, Comelec itself
made the exhaustion of administrative remedies legally impossible or, at the very least, "unreasonable."
In any event, the peculiar circumstances surrounding the unconventional rendition of the BAC Report and the precipitate
awarding of the Contract by the Comelec en banc -- plus the fact that it was racing to have its Contract with MPC
implemented in time for the elections in May 2004 (barely four months away) -- have combined to bring about the urgent
need for judicial intervention, thus prompting this Court to dispense with the procedural exhaustion of administrative
remedies in this case.
Main Substantive Issue:
Validity of the Award to MPC
We come now to the meat of the controversy. Petitioners contend that the award is invalid, since Comelec gravely abused its
discretion when it did the following:
1. Awarded the Contract to MPC though it did not even participate in the bidding
2. Allowed MPEI to participate in the bidding despite its failure to meet the mandatory eligibility requirements
3. Issued its Resolution of April 15, 2003 awarding the Contract to MPC despite the issuance by the BAC of its
Report, which formed the basis of the assailed Resolution, only on April 21, 2003 31
4. Awarded the Contract, notwithstanding the fact that during the bidding process, there were violations of the
mandatory requirements of RA 8436 as well as those set forth in Comelecs own Request for Proposal on the
automated election system
5. Refused to declare a failed bidding and to conduct a re-bidding despite the failure of the bidders to pass the
technical tests conducted by the Department of Science and Technology
6. Failed to follow strictly the provisions of RA 8436 in the conduct of the bidding for the automated counting
machines
After reviewing the slew of pleadings as well as the matters raised during the Oral Argument, the Court deems it sufficient to
focus discussion on the following major areas of concern that impinge on the issue of grave abuse of discretion:
A. Matters pertaining to the identity, existence and eligibility of MPC as a bidder
B. Failure of the automated counting machines (ACMs) to pass the DOST technical tests
C. Remedial measures and re-testings undertaken by Comelec and DOST after the award, and their effect on the
present controversy
A.
8
Failure to Establish the Identity, Existence and Eligibility of the Alleged Consortium as a Bidder
On the question of the identity and the existence of the real bidder, respondents insist that, contrary to petitioners
allegations, the bidder was not Mega Pacific eSolutions, Inc. (MPEI), which was incorporated only on February 27, 2003, or
11 days prior to the bidding itself. Rather, the bidder was Mega Pacific Consortium (MPC), of which MPEI was but a part.
As proof thereof, they point to the March 7, 2003 letter of intent to bid, signed by the president of MPEI allegedly for and on
behalf of MPC. They also call attention to the official receipt issued to MPC, acknowledging payment for the bidding
documents, as proof that it was the "consortium" that participated in the bidding process.
We do not agree. The March 7, 2003 letter, signed by only one signatory -- "Willy U. Yu, President, Mega Pacific eSolutions,
Inc., (Lead Company/ Proponent) For: Mega Pacific Consortium" -- and without any further proof, does not by itself prove
the existence of the consortium. It does not show that MPEI or its president have been duly pre-authorized by the other
members of the putative consortium to represent them, to bid on their collective behalf and, more important, to commit them
jointly and severally to the bid undertakings. The letter is purely self-serving and uncorroborated.
Neither does an official receipt issued to MPC, acknowledging payment for the bidding documents, constitute proof that it
was the purported consortium that participated in the bidding. Such receipts are issued by cashiers without any legally
sufficient inquiry as to the real identity orexistence of the supposed payor.
To assure itself properly of the due existence (as well as eligibility and qualification) of the putative consortium, Comelecs
BAC should have examined the bidding documents submitted on behalf of MPC. They would have easily discovered the
following fatal flaws.
Two-Envelope,
Two-Stage System
As stated earlier in our factual presentation, the public bidding system designed by Comelec under its RFP (Request for
Proposal for the Automation of the 2004 Election) mandated the use of a two-envelope, two-stage system. A bidders first
envelope (Eligibility Envelope) was meant to establish its eligibility to bid and its qualifications and capacity to perform the
contract if its bid was accepted, while the second envelope would be the Bid Envelope itself.
The Eligibility Envelope was to contain legal documents such as articles of incorporation, business registrations, licenses
and permits, mayors permit, VAT certification, and so forth; technical documents containing documentary evidence to
establish the track record of the bidder and its technical and production capabilities to perform the contract; and financial
documents, including audited financial statements for the last three years, to establish the bidders financial capacity.
In the case of a consortium or joint venture desirous of participating in the bidding, it goes without saying that the Eligibility
Envelope would necessarily have to include a copy of the joint venture agreement, the consortium agreement or
memorandum of agreement -- or a business plan or some other instrument of similar import -- establishing the due existence,
composition and scope of such aggrupation. Otherwise, how would Comelec know who it was dealing with, and whether
these parties are qualified and capable of delivering the products and services being offered for bidding? 32
In the instant case, no such instrument was submitted to Comelec during the bidding process. This fact can be conclusively
ascertained by scrutinizing the two-inch thick "Eligibility Requirements" file submitted by Comelec last October 9, 2003, in
partial compliance with this Courts instructions given during the Oral Argument. This file purports to replicate the eligibility
documents originally submitted to Comelec by MPEI allegedly on behalf of MPC, in connection with the bidding conducted
in March 2003. Included in the file are the incorporation papers and financial statements of the members of the supposed
consortium and certain certificates, licenses and permits issued to them.
However, there is no sign whatsoever of any joint venture agreement, consortium agreement, memorandum of agreement, or
business plan executed among the members of the purported consortium.
The only logical conclusion is that no such agreement was ever submitted to the Comelec for its consideration, as part of the
bidding process.
It thus follows that, prior the award of the Contract, there was no documentary or other basis for Comelec to conclude that a
consortium had actually been formed amongst MPEI, SK C&C and WeSolv, along with Election.com and ePLDT.33 Neither
was there anything to indicate the exact relationships between and among these firms; their diverse roles, undertakings and
prestations, if any, relative to the prosecution of the project, the extent of their respective investments (if any) in the
supposed consortium or in the project; and the precise nature and extent of their respective liabilities with respect to the
9
contract being offered for bidding. And apart from the self-serving letter of March 7, 2003, there was not even any indication
that MPEI was the lead company duly authorized to act on behalf of the others.
So, it necessarily follows that, during the bidding process, Comelec had no basis at all for determining that the alleged
consortium really existed and was eligible and qualified; and that the arrangements among the members were satisfactory
and sufficient to ensure delivery on the Contract and to protect the governments interest.
Notwithstanding such deficiencies, Comelec still deemed the "consortium" eligible to participate in the bidding, proceeded
to open its Second Envelope, and eventually awarded the bid to it, even though -- per the Comelecs own RFP -- the BAC
should have declared the MPC ineligible to bid and returned the Second (Bid) Envelope unopened.
Inasmuch as Comelec should not have considered MPEI et al. as comprising a consortium or joint venture, it should not have
allowed them to avail themselves of the provision in Section 5.4 (b) (i) of the IRR for RA 6957 (the Build-Operate-Transfer
Law), as amended by RA 7718. This provision states in part that a joint venture/consortium proponent shall be evaluated
based on the individual or collective experience of the member-firms of the joint venture or consortium and of the
contractor(s) that it has engaged for the project. Parenthetically, respondents have uniformly argued that the said IRR of RA
6957, as amended, have suppletory application to the instant case.
Hence, had the proponent MPEI been evaluated based solely on its own experience, financial and operational track record or
lack thereof, it would surely not have qualified and would have been immediately considered ineligible to bid, as
respondents readily admit.
At any rate, it is clear that Comelec gravely abused its discretion in arbitrarily failing to observe its own rules, policies and
guidelines with respect to the bidding process, thereby negating a fair, honest and competitive bidding.
Commissioners Not Aware of Consortium
In this regard, the Court is beguiled by the statements of Commissioner Florentino Tuason Jr., given in open court during the
Oral Argument last October 7, 2003. The good commissioner affirmed that he was aware, of his own personal knowledge,
that there had indeed been a written agreement among the "consortium" members, 34 although it was an internal matter among
them,35 and of the fact that it would be presented by counsel for private respondent. 36
However, under questioning by Chief Justice Hilario G. Davide Jr. and Justice Jose C. Vitug, Commissioner Tuason in effect
admitted that, while he was the commissioner-in-charge of Comelecs Legal Department, he had never seen, even up to that
late date, the agreement he spoke of. 37 Under further questioning, he was likewise unable to provide any information
regarding the amounts invested into the project by several members of the claimed consortium. 38 A short while later, he
admitted that the Commission had not taken a look at the agreement (if any). 39
He tried to justify his position by claiming that he was not a member of the BAC. Neither was he the commissioner-in-
charge of the Phase II Modernization project (the automated election system); but that, in any case, the BAC and the Phase II
Modernization Project Team did look into the aspect of the composition of the consortium.
It seems to the Court, though, that even if the BAC or the Phase II Team had taken charge of evaluating the eligibility,
qualifications and credentials of the consortium-bidder, still, in all probability, the former would have referred the task to
Commissioner Tuason, head of Comelecs Legal Department. That task was the appreciation and evaluation of the legal
effects and consequences of the terms, conditions, stipulations and covenants contained in any joint venture agreement,
consortium agreement or a similar document -- assuming of course that any of these was available at the time. The fact that
Commissioner Tuason was barely aware of the situation bespeaks the complete absence of such document, or the utter
failure or neglect of the Comelec to examine it -- assuming it was available at all -- at the time the award was made on April
15, 2003.
In any event, the Court notes for the record that Commissioner Tuason basically contradicted his statements in open court
about there being one written agreement among all the consortium members, when he subsequently referred 40 to the four (4)
Memoranda of Agreement (MOAs) executed by them.41
At this juncture, one might ask: What, then, if there are four MOAs instead of one or none at all? Isnt it enough that there
are these corporations coming together to carry out the automation project? Isnt it true, as respondent aver, that nowhere in
the RFP issued by Comelec is it required that the members of the joint venture execute a single written agreement to prove
the existence of a joint venture. Indeed, the intention to be jointly and severally liable may be evidenced not only by a single
joint venture agreement, but also by supplementary documents executed by the parties signifying such intention. What then
is the big deal?
10
The problem is not that there are four agreements instead of only one. The problem is that Comelec never bothered to check.
It never based its decision on documents or other proof that would concretely establish the existence of the claimed
consortium or joint venture or agglomeration. It relied merely on the self-serving representation in an uncorroborated letter
signed by only one individual, claiming that his company represented a "consortium" of several different corporations. It
concluded forthwith that a consortium indeed existed, composed of such and such members, and thereafter declared that the
entity was eligible to bid.
True, copies of financial statements and incorporation papers of the alleged "consortium" members were submitted. But
these papers did not establish the existence of a consortium, as they could have been provided by the companies concerned
for purposes other than to prove that they were part of a consortium or joint venture. For instance, the papers may have been
intended to show that those companies were each qualified to be a sub-contractor (and nothing more) in a major project.
Those documents did not by themselves support the assumption that a consortium or joint venture existed among the
companies.
In brief, despite the absence of competent proof as to the existence and eligibility of the alleged consortium (MPC), its
capacity to deliver on the Contract, and the members joint and several liability therefor, Comelec nevertheless assumed that
such consortium existed and was eligible. It then went ahead and considered the bid of MPC, to which the Contract was
eventually awarded, in gross violation of the formers own bidding rules and procedures contained in its RFP. Therein lies
Comelecs grave abuse of discretion.
Sufficiency of the Four Agreements
Instead of one multilateral agreement executed by, and effective and binding on, all the five "consortium members" -- as
earlier claimed by Commissioner Tuason in open court -- it turns out that what was actually executed were four (4) separate
and distinct bilateral Agreements.42 Obviously, Comelec was furnished copies of these Agreements only after the bidding
process had been terminated, as these were not included in the Eligibility Documents. These Agreements are as follows:
A Memorandum of Agreement between MPEI and SK C&C
A Memorandum of Agreement between MPEI and WeSolv
A "Teaming Agreement" between MPEI and Election.com Ltd.
A "Teaming Agreement" between MPEI and ePLDT
In sum, each of the four different and separate bilateral Agreements is valid and binding only between MPEI and the other
contracting party, leaving the other "consortium" members total strangers thereto. Under this setup, MPEI dealt separately
with each of the "members," and the latter (WeSolv, SK C&C, Election.com, and ePLDT) in turn had nothing to do with one
another, each dealing only with MPEI.
Respondents assert that these four Agreements were sufficient for the purpose of enabling the corporations to still qualify
(even at that late stage) as a consortium or joint venture, since the first two Agreements had allegedly set forth the joint and
several undertakings among the parties, whereas the latter two clarified the parties respective roles with regard to the
Project, with MPEI being the independent contractor and Election.com and ePLDT the subcontractors.
Additionally, the use of the phrase "particular contract" in the Comelecs Request for Proposal (RFP), in connection with the
joint and several liabilities of companies in a joint venture, is taken by them to mean that all the members of the joint venture
need not be solidarily liable for the entire project or joint venture, because it is sufficient that the lead company and the
member in charge of a particular contract or aspect of the joint venture agree to be solidarily liable.
At this point, it must be stressed most vigorously that the submission of the four bilateral Agreements to Comelec after the
end of the bidding process did nothing to eliminate the grave abuse of discretion it had already committed on April 15, 2003.
Deficiencies Have Not Been "Cured"
In any event, it is also claimed that the automation Contract awarded by Comelec incorporates all documents executed by the
"consortium" members, even if these documents are not referred to therein. The basis of this assertion appears to be the
passages from Section 1.4 of the Contract, which is reproduced as follows:
"All Contract Documents shall form part of the Contract even if they or any one of them is not referred to or
mentioned in the Contract as forming a part thereof. Each of the Contract Documents shall be mutually
11
complementary and explanatory of each other such that what is noted in one although not shown in the other shall
be considered contained in all, and what is required by any one shall be as binding as if required by all, unless one
item is a correction of the other.
"The intent of the Contract Documents is the proper, satisfactory and timely execution and completion of the
Project, in accordance with the Contract Documents. Consequently, all items necessary for the proper and timely
execution and completion of the Project shall be deemed included in the Contract."
Thus, it is argued that whatever perceived deficiencies there were in the supplementary contracts -- those entered into by
MPEI and the other members of the "consortium" as regards their joint and several undertakings -- have been cured. Better
still, such deficiencies have supposedly been prevented from arising as a result of the above-quoted provisions, from which it
can be immediately established that each of the members of MPC assumes the same joint and several liability as the other
members.
The foregoing argument is unpersuasive. First, the contract being referred to, entitled "The Automated Counting and
Canvassing Project Contract," is between Comelec and MPEI, not the alleged consortium, MPC. To repeat, it is MPEI -- not
MPC -- that is a party to the Contract. Nowhere in that Contract is there any mention of a consortium or joint venture, of
members thereof, much less of joint and several liability. Supposedly executed sometime in May 2003, 43 the Contract bears a
notarization date of June 30, 2003, and contains the signature of Willy U. Yu signing as president of MPEI (not for and on
behalf of MPC), along with that of the Comelec chair. It provides in Section 3.2 that MPEI (not MPC) is to supply the
Equipment and perform the Services under the Contract, in accordance with the appendices thereof; nothing whatsoever is
said about any consortium or joint venture or partnership.
Second, the portions of Section 1.4 of the Contract reproduced above do not have the effect of curing (much less preventing)
deficiencies in the bilateral agreements entered into by MPEI with the other members of the "consortium," with respect to
their joint and several liabilities. The term "Contract Documents," as used in the quoted passages of Section 1.4, has a well-
defined meaning and actually refers only to the following documents:
The Contract itself along with its appendices
The Request for Proposal (also known as "Terms of Reference") issued by the Comelec, including the Tender
Inquiries and Bid Bulletins
The Tender Proposal submitted by MPEI
In other words, the term "Contract Documents" cannot be understood as referring to or including the MOAs and the Teaming
Agreements entered into by MPEI with SK C&C, WeSolv, Election.com and ePLDT. This much is very clear and admits of
no debate. The attempt to use the provisions of Section 1.4 to shore up the MOAs and the Teaming Agreements is simply
unwarranted.
Third and last, we fail to see how respondents can arrive at the conclusion that, from the above-quoted provisions, it can be
immediately established that each of the members of MPC assumes the same joint and several liability as the other members.
Earlier, respondents claimed exactly the opposite -- that the two MOAs (between MPEI and SK C&C, and between MPEI
and WeSolv) had set forth the joint and several undertakings among the parties; whereas the two Teaming Agreements
clarified the parties respective roles with regard to the Project, with MPEI being the independent contractor and
Election.com and ePLDT the subcontractors.
Obviously, given the differences in their relationships, their respective liabilities cannot be the same. Precisely, the very clear
terms and stipulations contained in the MOAs and the Teaming Agreements -- entered into by MPEI with SK C&C, WeSolv,
Election.com and ePLDT -- negate the idea that these "members" are on a par with one another and are, as such, assuming
the same joint and several liability.
Moreover, respondents have earlier seized upon the use of the term "particular contract" in the Comelecs Request for
Proposal (RFP), in order to argue that all the members of the joint venture did not need to be solidarily liable for the entire
project or joint venture. It was sufficient that the lead company and the member in charge of a particular contract or aspect of
the joint venture would agree to be solidarily liable. The glaring lack of consistency leaves us at a loss. Are respondents
trying to establish the same joint and solidary liability among all the "members" or not?
Enforcement of Liabilities Problematic
Next, it is also maintained that the automation Contract between Comelec and the MPEI confirms the solidary undertaking
of the lead company and the consortium member concerned for each particular Contract, inasmuch as the position of MPEI
12
and anyone else performing the services contemplated under the Contract is described therein as that of an independent
contractor.
The Court does not see, however, how this conclusion was arrived at. In the first place, the contractual provision being relied
upon by respondents is Article 14, "Independent Contractors," which states: "Nothing contained herein shall be construed as
establishing or creating between the COMELEC and MEGA the relationship of employee and employer or principal and
agent, it being understood that the position of MEGA and of anyone performing the Services contemplated under this
Contract, is that of an independent contractor."
Obviously, the intent behind the provision was simply to avoid the creation of an employer-employee or a principal-agent
relationship and the complications that it would produce. Hence, the Article states that the role or position of MPEI, or
anyone else performing on its behalf, is that of an independent contractor. It is obvious to the Court that respondents are
stretching matters too far when they claim that, because of this provision, the Contract in effect confirms the solidary
undertaking of the lead company and the consortium member concerned for the particular phase of the project. This assertion
is an absolute non sequitur.
Enforcement of Liabilities Under the Civil Code Not Possible
In any event, it is claimed that Comelec may still enforce the liability of the "consortium" members under the Civil Code
provisions on partnership, reasoning that MPEI et al. represented themselves as partners and members of MPC for purposes
of bidding for the Project. They are, therefore, liable to the Comelec to the extent that the latter relied upon such
representation. Their liability as partners is solidary with respect to everything chargeable to the partnership under certain
conditions.
The Court has two points to make with respect to this argument. First, it must be recalled that SK C&C, WeSolv,
Election.com and ePLDT never represented themselves as partners and members of MPC, whether for purposes of bidding
or for something else. It was MPEI alone that represented them to be members of a "consortium" it supposedly headed.
Thus, its acts may not necessarily be held against the other "members."
Second, this argument of the OSG in its Memorandum44 might possibly apply in the absence of a joint venture agreement or
some other writing that discloses the relationship of the "members" with one another. But precisely, this case does not deal
with a situation in which there is nothing in writing to serve as reference, leaving Comelec to rely on mere representations
and therefore justifying a falling back on the rules on partnership. For, again, the terms and stipulations of the MOAs entered
into by MPEI with SK C&C and WeSolv, as well as the Teaming Agreements of MPEI with Election.com and ePLDT
(copies of which have been furnished the Comelec) are very clear with respect to the extent and the limitations of the firms
respective liabilities.
In the case of WeSolv and SK C&C, their MOAs state that their liabilities, while joint and several with MPEI, are limited
only to the particular areas of work wherein their services are engaged or their products utilized. As for Election.com and
ePLDT, their separate "Teaming Agreements" specifically ascribe to them the role of subcontractor vis--vis MPEI as
contractor and, based on the terms of their particular agreements, neither Election.com nor ePLDT is, with MPEI, jointly and
severally liable to Comelec.45 It follows then that in the instant case, there is no justification for anyone, much less Comelec,
to resort to the rules on partnership and partners liabilities.
Eligibility of a Consortium Based on the Collective Qualifications of Its Members
Respondents declare that, for purposes of assessing the eligibility of the bidder, the members of MPC should be evaluated on
a collective basis. Therefore, they contend, the failure of MPEI to submit financial statements (on account of its recent
incorporation) should not by itself disqualify MPC, since the other members of the "consortium" could meet the criteria set
out in the RFP.
Thus, according to respondents, the collective nature of the undertaking of the members of MPC, their contribution of assets
and sharing of risks, and the community of their interest in the performance of the Contract lead to these reasonable
conclusions: (1) that their collective qualifications should be the basis for evaluating their eligibility; (2) that the sheer
enormity of the project renders it improbable to expect any single entity to be able to comply with all the eligibility
requirements and undertake the project by itself; and (3) that, as argued by the OSG, the RFP allows bids from
manufacturers, suppliers and/or distributors that have formed themselves into a joint venture, in recognition of the virtual
impossibility of a single entitys ability to respond to the Invitation to Bid.
Additionally, argues the Comelec, the Implementing Rules and Regulations of RA 6957 (the Build-Operate-Transfer Law) as
amended by RA 7718 would be applicable, as proponents of BOT projects usually form joint ventures or consortiums. Under
the IRR, a joint venture/consortium proponent shall be evaluated based on the individual or the collective experience of the
member-firms of the joint venture/consortium and of the contractors the proponent has engaged for the project.
13
Unfortunately, this argument seems to assume that the "collective" nature of the undertaking of the members of MPC, their
contribution of assets and sharing of risks, and the "community" of their interest in the performance of the Contract entitle
MPC to be treated as a joint venture or consortium; and to be evaluated accordingly on the basis of the members collective
qualifications when, in fact, the evidence before the Court suggest otherwise.
This Court in Kilosbayan v. Guingona46 defined joint venture as "an association of persons or companies jointly undertaking
some commercial enterprise; generally, all contribute assets and share risks. It requires a community of interest in the
performance of the subject matter, a right to direct and govern the policy in connection therewith, and [a] duty, which may be
altered by agreement to share both in profit and losses."
Going back to the instant case, it should be recalled that the automation Contract with Comelec was not executed by the
"consortium" MPC -- or by MPEI for and on behalf of MPC -- but by MPEI, period. The said Contract contains no mention
whatsoever of any consortium or members thereof. This fact alone seems to contradict all the suppositions about a joint
undertaking that would normally apply to a joint venture or consortium: that it is a commercial enterprise involving a
community of interest, a sharing of risks, profits and losses, and so on.
Now let us consider the four bilateral Agreements, starting with the Memorandum of Agreement between MPEI and WeSolv
Open Computing, Inc., dated March 5, 2003. The body of the MOA consists of just seven (7) short paragraphs that would
easily fit in one page! It reads as follows:
"1. The parties agree to cooperate in successfully implementing the Project in the substance and form as may be
most beneficial to both parties and other subcontractors involved in the Project.
"2. Mega Pacific shall be responsible for any contract negotiations and signing with the COMELEC and, subject to
the latters approval, agrees to give WeSolv an opportunity to be present at meetings with the COMELEC
concerning WeSolvs portion of the Project.
"3. WeSolv shall be jointly and severally liable with Mega Pacific only for the particular products and/or services
supplied by the former for the Project.
"4. Each party shall bear its own costs and expenses relative to this agreement unless otherwise agreed upon by the
parties.
"5. The parties undertake to do all acts and such other things incidental to, necessary or desirable or the attainment
of the objectives and purposes of this Agreement.
"6. In the event that the parties fail to agree on the terms and conditions of the supply of the products and services
including but not limited to the scope of the products and services to be supplied and payment terms, WeSolv shall
cease to be bound by its obligations stated in the aforementioned paragraphs.
"7. Any dispute arising from this Agreement shall be settled amicably by the parties whenever possible. Should the
parties be unable to do so, the parties hereby agree to settle their dispute through arbitration in accordance with the
existing laws of the Republic of the Philippines." (Underscoring supplied.)
Even shorter is the Memorandum of Agreement between MPEI and SK C&C Co. Ltd., dated March 9, 2003, the body of
which consists of only six (6) paragraphs, which we quote:
"1. All parties agree to cooperate in achieving the Consortiums objective of successfully implementing the Project
in the substance and form as may be most beneficial to the Consortium members and in accordance w/ the demand
of the RFP.
"2. Mega Pacific shall have full powers and authority to represent the Consortium with the Comelec, and to enter
and sign, for and in behalf of its members any and all agreement/s which maybe required in the implementation of
the Project.
"3. Each of the individual members of the Consortium shall be jointly and severally liable with the Lead Firm for
the particular products and/or services supplied by such individual member for the project, in accordance with their
respective undertaking or sphere of responsibility.
"4. Each party shall bear its own costs and expenses relative to this agreement unless otherwise agreed upon by the
parties.
14
"5. The parties undertake to do all acts and such other things incidental to, necessary or desirable for the attainment
of the objectives and purposes of this Agreement.
"6. Any dispute arising from this Agreement shall be settled amicably by the parties whenever possible. Should the
parties be unable to do so, the parties hereby agree to settle their dispute through arbitration in accordance with the
existing laws of the Republic of the Philippines." (Underscoring supplied.)
It will be noted that the two Agreements quoted above are very similar in wording. Neither of them contains any specifics or
details as to the exact nature and scope of the parties respective undertakings, performances and deliverables under the
Agreement with respect to the automation project. Likewise, the two Agreements are quite bereft of pesos-and-centavos data
as to the amount of investments each party contributes, its respective share in the revenues and/or profit from the Contract
with Comelec, and so forth -- all of which are normal for agreements of this nature. Yet, according to public and private
respondents, the participation of MPEI, WeSolv and SK C&C comprises fully 90 percent of the entire undertaking with
respect to the election automation project, which is worth about P1.3 billion.
As for Election.com and ePLDT, the separate "Teaming Agreements" they entered into with MPEI for the remaining 10
percent of the entire project undertaking are ironically much longer and more detailed than the MOAs discussed earlier.
Although specifically ascribing to them the role of subcontractor vis--vis MPEI as contractor, these Agreements are,
however, completely devoid of any pricing data or payment terms. Even the appended Schedules supposedly containing
prices of goods and services are shorn of any price data. Again, as mentioned earlier, based on the terms of their particular
Agreements, neither Election.com nor ePLDT -- with MPEI -- is jointly and severally liable to Comelec.
It is difficult to imagine how these bare Agreements -- especially the first two -- could be implemented in practice; and how a
dispute between the parties or a claim by Comelec against them, for instance, could be resolved without lengthy and
debilitating litigations. Absent any clear-cut statement as to the exact nature and scope of the parties respective
undertakings, commitments, deliverables and covenants, one party or another can easily dodge its obligation and deny or
contest its liability under the Agreement; or claim that it is the other party that should have delivered but failed to.
Likewise, in the absence of definite indicators as to the amount of investments to be contributed by each party,
disbursements for expenses, the parties respective shares in the profits and the like, it seems to the Court that this situation
could readily give rise to all kinds of misunderstandings and disagreements over money matters.
Under such a scenario, it will be extremely difficult for Comelec to enforce the supposed joint and several liabilities of the
members of the "consortium." The Court is not even mentioning the possibility of a situation arising from a failure of
WeSolv and MPEI to agree on the scope, the terms and the conditions for the supply of the products and services under the
Agreement. In that situation, by virtue of paragraph 6 of its MOA, WeSolv would perforce cease to be bound by its
obligations -- including its joint and solidary liability with MPEI under the MOA -- and could forthwith disengage from the
project. Effectively, WeSolv could at any time unilaterally exit from its MOA with MPEI by simply failing to agree. Where
would that outcome leave MPEI and Comelec?
To the Court, this strange and beguiling arrangement of MPEI with the other companies does not qualify them to be treated
as a consortium or joint venture, at least of the type that government agencies like the Comelec should be dealing with. With
more reason is it unable to agree to the proposal to evaluate the members of MPC on a collective basis.
In any event, the MPC members claim to be a joint venture/consortium; and respondents have consistently been arguing that
the IRR for RA 6957, as amended, should be applied to the instant case in order to allow a collective evaluation of
consortium members. Surprisingly, considering these facts, respondents have not deemed it necessary for MPC members to
comply with Section 5.4 (a) (iii) of the IRR for RA 6957 as amended.
According to the aforementioned provision, if the project proponent is a joint venture or consortium, the members or
participants thereof are required to submit a sworn statement that, if awarded the contract, they shall bind themselves to be
jointly, severally and solidarily liable for the project proponents obligations thereunder. This provision was supposed to
mirror Section 5 of RA 6957, as amended, which states: "In all cases, a consortium that participates in a bid must present
proof that the members of the consortium have bound themselves jointly and severally to assume responsibility for any
project. The withdrawal of any member of the consortium prior to the implementation of the project could be a ground for
the cancellation of the contract." The Court has certainly not seen any joint and several undertaking by the MPC members
that even approximates the tenor of that which is described above. We fail to see why respondents should invoke the IRR if it
is for their benefit, but refuse to comply with it otherwise.
B.
DOST Technical Tests Flunked by the Automated Counting Machines
15
Let us now move to the second subtopic, which deals with the substantive issue: the ACMs failure to pass the tests of the
Department of Science and Technology (DOST).
After respondent "consortium" and the other bidder, TIM, had submitted their respective bids on March 10, 2003, the
Comelecs BAC -- through its Technical Working Group (TWG) and the DOST -- evaluated their technical proposals.
Requirements that were highly technical in nature and that required the use of certain equipment in the evaluation process
were referred to the DOST for testing. The Department reported thus:
TEST RESULTS MATRIX47
Technical Evaluation of Automated Counting Machine
MEGA-PACIFIC TOTAL INFORMATION

KEY REQUIREMENTS CONSORTIUM MANAGEMENT
QUESTIONS
YES NO YES NO
1. Does the machine have an accuracy rating of at least 99.995 percent
At COLD environmental condition
At NORMAL environmental conditions
At HARSH environmental conditions
2. Accurately records and reports the date and time of the start and end of counting of
ballots per precinct?
3. Prints election returns without any loss of date during generation of such reports?
4. Uninterruptible back-up power system, that will engage immediately to allow

operation of at least 10 minutes after outage, power surge or abnormal electrical
occurrences?
5. Machine reads two-sided ballots in one pass?
Note: This particular

requirement needs
further verification
6. Machine can detect previously counted ballots and prevent previously counted
ballots from being counted more than once?
7. Stores results of counted votes by precinct in external (removable) storage device?

requirement needs
8. Data stored in external media is encrypted?

requirement needs
16
9. Physical key or similar device allows, limits, or restricts operation of the machine?
10. CPU speed is at least 400mHz?

requirement needs
11. Port to allow use of dot-matrix printers?
12. Generates printouts of the election returns in a format specified by the

COMELEC?
Generates printouts
In format specified by COMELEC
13. Prints election returns without any loss of data during generation of such report?
14. Generates an audit trail of the counting machine, both hard copy and soft copy?
Hard copy
Soft copy

requirement needs
15. Does the City/Municipal Canvassing System consolidate results from all precincts
within it using the encrypted soft copy of the data generated by the counting machine
and stored on the removable data storage device? Note: This particular
requirement needs
16. Does the City/Municipal Canvassing System consolidate results from all precincts
within it using the encrypted soft copy of the data generated by the counting machine
and transmitted through an electronic transmission media? Note: This particular Note: This particular
requirement needs requirement needs
further verification further verification
17. Does the system output a Zero City/Municipal Canvass Report, which is printed
on election day prior to the conduct of the actual canvass operation, that shows that all
totals for all the votes for all the candidates and other information, are indeed zero or Note: This particular
null? requirement needs
18. Does the system consolidate results from all precincts in the city/municipality
17
using the data storage device coming from the counting machine?
requirement needs
19. Is the machine 100% accurate?

requirement needs
20. Is the Program able to detect previously downloaded precinct results and prevent
these from being inputted again into the System?
requirement needs
21. The System is able to print the specified reports and the audit trail without any
loss of data during generation of the above-mentioned reports?
Prints specified reports
Audit Trail
22. Can the result of the city/municipal consolidation be stored in a data storage
device?
requirement needs
23. Does the system consolidate results from all precincts in the provincial/district/
national using the data storage device from different levels of consolidation?
requirement needs
24. Is the system 100% accurate?

requirement needs
25. Is the Program able to detect previously downloaded precinct results and prevent
these from being inputted again into the System?
requirement needs
26. The System is able to print the specified reports and the audit trail without any
loss of data during generation of the abovementioned reports?
18
Prints specified reports
Audit Trail

requirement needs
27. Can the results of the provincial/district/national consolidation be stored in a data

storage device?
requirement needs
According to respondents, it was only after the TWG and the DOST had conducted their separate tests and submitted their
respective reports that the BAC, on the basis of these reports formulated its comments/recommendations on the bids of the
consortium and TIM.
The BAC, in its Report dated April 21, 2003, recommended that the Phase II project involving the acquisition of automated
counting machines be awarded to MPEI. It said:
"After incisive analysis of the technical reports of the DOST and the Technical Working Group for Phase II
Automated Counting Machine, the BAC considers adaptability to advances in modern technology to ensure an
effective and efficient method, as well as the security and integrity of the system.
"The results of the evaluation conducted by the TWG and that of the DOST (14 April 2003 report), would show
the apparent advantage of Mega-Pacific over the other competitor, TIM.
"The BAC further noted that both Mega-Pacific and TIM obtained some failed marks in the technical evaluation.
In general, the failed marks of Total Information Management as enumerated above affect the counting machine
itself which are material in nature, constituting non-compliance to the RFP. On the other hand, the failed marks of
Mega-Pacific are mere formalities on certain documentary requirements which the BAC may waive as clearly
indicated in the Invitation to Bid.
"In the DOST test, TIM obtained 12 failed marks and mostly attributed to the counting machine itself as stated
earlier. These are requirements of the RFP and therefore the BAC cannot disregard the same.
"Mega-Pacific failed in 8 items however these are mostly on the software which can be corrected by
reprogramming the software and therefore can be readily corrected.
"The BAC verbally inquired from DOST on the status of the retest of the counting machines of the TIM and was
informed that the report will be forthcoming after the holy week. The BAC was informed that the retest is on a
different parameters theyre being two different machines being tested. One purposely to test if previously read
ballots will be read again and the other for the other features such as two sided ballots.
"The said machine and the software therefore may not be considered the same machine and program as submitted
in the Technical proposal and therefore may be considered an enhancement of the original proposal.
"Advance information relayed to the BAC as of 1:40 PM of 15 April 2003 by Executive Director Ronaldo T.
Viloria of DOST is that the result of the test in the two counting machines of TIM contains substantial errors that
may lead to the failure of these machines based on the specific items of the RFP that DOST has to certify.
OPENING OF FINANCIAL BIDS
"The BAC on 15 April 2003, after notifying the concerned bidders opened the financial bids in their presence and
the results were as follows:
19
Mega-Pacific:
Option 1 Outright purchase: Bid Price if Php1,248,949,088.00
Option 2 Lease option:
70% Down payment of cost of hardware or Php642,755,757.07
Remainder payable over 50 months or a total of Php642,755,757.07
Discount rate of 15% p.a. or 1.2532% per month.
Total Number of Automated Counting Machine 1,769 ACMs (Nationwide)
TIM:
Total Bid Price Php1,297,860,560.00
Total Number of Automated Counting Machine 2,272 ACMs (Mindanao and NCR only)
"Premises considered, it appears that the bid of Mega Pacific is the lowest calculated responsive bid, and therefore,
the Bids and Awards Committee (BAC) recommends that the Phase II project re Automated Counting Machine be
awarded to Mega Pacific eSolutions, Inc."48
The BAC, however, also stated on page 4 of its Report: "Based on the 14 April 2003 report (Table 6) of the DOST, it appears
that both Mega-Pacific and TIM (Total Information Management Corporation) failed to meet some of the requirements.
Below is a comparative presentation of the requirements wherein Mega-Pacific or TIM or both of them failed: x x x." What
followed was a list of "key requirements," referring to technical requirements, and an indication of which of the two bidders
had failed to meet them.
Failure to Meet the Required Accuracy Rating
The first of the key requirements was that the counting machines were to have an accuracy rating of at least 99.9995
percent. The BAC Report indicates that both Mega Pacific and TIM failed to meet this standard.
The key requirement of accuracy rating happens to be part and parcel of the Comelecs Request for Proposal (RFP). The
RFP, on page 26, even states that the ballot counting machines and ballot counting software "must have an accuracy rating
of 99.9995% (not merely 99.995%) or better as certified by a reliable independent testing agency."
When questioned on this matter during the Oral Argument, Commissioner Borra tried to wash his hands by claiming that the
required accuracy rating of 99.9995 percent had been set by a private sector group in tandem with Comelec. He added that
the Commission had merely adopted the accuracy rating as part of the groups recommended bid requirements, which it had
not bothered to amend even after being advised by DOST that such standard was unachievable. This excuse, however, does
not in any way lessen Comelecs responsibility to adhere to its own published bidding rules, as well as to see to it that the
consortium indeed meets the accuracy standard. Whichever accuracy rating is the right standard -- whether 99.995 or
99.9995 percent -- the fact remains that the machines of the so-called "consortium" failed to even reach the lesser of the two.
On this basis alone, it ought to have been disqualified and its bid rejected outright.
At this point, the Court stresses that the essence of public bidding is violated by the practice of requiring very high standards
or unrealistic specifications that cannot be met -- like the 99.9995 percent accuracy rating in this case -- only to water them
down after the bid has been award. Such scheme, which discourages the entry of prospective bona fide bidders, is in fact a
sure indication of fraud in the bidding, designed to eliminate fair competition. Certainly, if no bidder meets the mandatory
requirements, standards or specifications, then no award should be made and a failed bidding declared.
Failure of Software to Detect Previously Downloaded Data
Furthermore, on page 6 of the BAC Report, it appears that the "consortium" as well as TIM failed to meet another key
requirement -- for the counting machines software program to be able to detect previously downloaded precinct results
and to prevent these from being entered again into the counting machine. This same deficiency on the part of both
bidders reappears on page 7 of the BAC Report, as a result of the recurrence of their failure to meet the said key requirement.
20
That the ability to detect previously downloaded data at different canvassing or consolidation levels is deemed of utmost
importance can be seen from the fact that it is repeated three times in the RFP. On page 30 thereof, we find the requirement
that the city/municipal canvassing system software must be able to detect previously downloaded precinct results and
prevent these from being "inputted" again into the system. Again, on page 32 of the RFP, we read that the provincial/district
canvassing system software must be able to detect previously downloaded city/municipal results and prevent these from
being "inputted" again into the system. And once more, on page 35 of the RFP, we find the requirement that the national
canvassing system software must be able to detect previously downloaded provincial/district results and prevent these from
being "inputted" again into the system.
Once again, though, Comelec chose to ignore this crucial deficiency, which should have been a cause for the gravest
concern. Come May 2004, unscrupulous persons may take advantage of and exploit such deficiency by repeatedly
downloading and feeding into the computers results favorable to a particular candidate or candidates. We are thus
confronted with the grim prospect of election fraud on a massive scale by means of just a few key strokes. The marvels
and woes of the electronic age!
Inability to Print the Audit Trail
But that grim prospect is not all. The BAC Report, on pages 6 and 7, indicate that the ACMs of both bidders were unable to
print the audit trail without any loss of data. In the case of MPC, the audit trail system was "not yet incorporated" into its
ACMs.
This particular deficiency is significant, not only to this bidding but to the cause of free and credible elections. The purpose
of requiring audit trails is to enable Comelec to trace and verify the identities of the ACM operators responsible for data
entry and downloading, as well as the times when the various data were downloaded into the canvassing system, in order to
forestall fraud and to identify the perpetrators.
Thus, the RFP on page 27 states that the ballot counting machines and ballot counting software must print an audit trail of all
machine operations for documentation and verification purposes. Furthermore, the audit trail must be stored on the internal
storage device and be available on demand for future printing and verifying. On pages 30-31, the RFP also requires that the
city/municipal canvassing system software be able to print an audit trail of the canvassing operations, including therein such
data as the date and time the canvassing program was started, the log-in of the authorized users (the identity of the machine
operators), the date and time the canvass data were downloaded into the canvassing system, and so on and so forth. On page
33 of the RFP, we find the same audit trail requirement with respect to the provincial/district canvassing system software;
and again on pages 35-36 thereof, the same audit trail requirement with respect to the national canvassing system software.
That this requirement for printing audit trails is not to be lightly brushed aside by the BAC or Comelec itself as a mere
formality or technicality can be readily gleaned from the provisions of Section 7 of RA 8436, which authorizes the
Commission to use an automated system for elections.
The said provision which respondents have quoted several times, provides that ACMs are to possess certain features divided
into two classes: those that the statute itself considers mandatory and other features or capabilities that the law deems
optional. Among those considered mandatory are "provisions for audit trails"! Section 7 reads as follows: "The System shall
contain the following features: (a) use of appropriate ballots; (b) stand-alone machine which can count votes and an
automated system which can consolidate the results immediately; (c) with provisions for audit trails; (d) minimum human
intervention; and (e) adequate safeguard/security measures." (Italics and emphases supplied.)
In brief, respondents cannot deny that the provision requiring audit trails is indeed mandatory, considering the wording of
Section 7 of RA 8436. Neither can Respondent Comelec deny that it has relied on the BAC Report, which indicates that the
machines or the software was deficient in that respect. And yet, the Commission simply disregarded this shortcoming and
awarded the Contract to private respondent, thereby violating the very law it was supposed to implement.
C.
Inadequacy of Post Facto Remedial Measures
Respondents argue that the deficiencies relating to the detection of previously downloaded data, as well as provisions for
audit trails, are mere shortcomings or minor deficiencies in software or programming, which can be rectified. Perhaps
Comelec simply relied upon the BAC Report, which states on page 8 thereof that "Mega Pacific failed in 8 items[;] however
these are mostly on the software which can be corrected by re-programming x x x and therefore can be readily corrected."
The undersigned ponentes questions, some of which were addressed to Commissioner Borra during the Oral Argument,
remain unanswered to this day. First of all, who made the determination that the eight "fail" marks of Mega Pacific were on
21
account of the software -- was it DOST or TWG? How can we be sure these failures were not the results of machine defects?
How was it determined that the software could actually be re-programmed and thereby rectified? Did a qualified technical
expert read and analyze the source code49 for the programs and conclude that these could be saved and remedied? (Such
determination cannot be done by any other means save by the examination and analysis of the source code.)
Who was this qualified technical expert? When did he carry out the study? Did he prepare a written report on his findings?
Or did the Comelec just make a wild guess? It does not follow that all defects in software programs can be rectified, and the
programs saved. In the information technology sector, it is common knowledge that there are many badly written programs,
with significant programming errors written into them; hence it does not make economic sense to try to correct the programs;
instead, programmers simply abandon them and just start from scratch. Theres no telling if any of these programs is
unrectifiable, unless a qualified programmer reads the source code.
And if indeed a qualified expert reviewed the source code, did he also determine how much work would be needed to rectify
the programs? And how much time and money would be spent for that effort? Who would carry out the work? After the
rectification process, who would ascertain and how would it be ascertained that the programs have indeed been properly
rectified, and that they would work properly thereafter? And of course, the most important question to ask: could the
rectification be done in time for the elections in 2004?
Clearly, none of the respondents bothered to think the matter through. Comelec simply took the word of the BAC as gospel
truth, without even bothering to inquire from DOST whether it was true that the deficiencies noted could possibly be
remedied by re-programming the software. Apparently, Comelec did not care about the software, but focused only on
purchasing the machines.
What really adds to the Courts dismay is the admission made by Commissioner Borra during the Oral Argument that the
software currently being used by Comelec was merely the "demo" version, inasmuch as the final version that would actually
be used in the elections was still being developed and had not yet been finalized.
It is not clear when the final version of the software would be ready for testing and deployment. It seems to the Court that
Comelec is just keeping its fingers crossed and hoping the final product would work. Is there a "Plan B" in case it does not?
Who knows? But all these software programs are part and parcel of the bidding and the Contract awarded to the Consortium.
Why is it that the machines are already being brought in and paid for, when there is as yet no way of knowing if the final
version of the software would be able to run them properly, as well as canvass and consolidate the results in the manner
required?
The counting machines, as well as the canvassing system, will never work properly without the correct software programs.
There is an old adage that is still valid to this day: "Garbage in, garbage out." No matter how powerful, advanced and
sophisticated the computers and the servers are, if the software being utilized is defective or has been compromised, the
results will be no better than garbage. And to think that what is at stake here is the 2004 national elections -- the very basis of
our democratic life.
Correction of Defects?
To their Memorandum, public respondents proudly appended 19 Certifications issued by DOST declaring that some 285
counting machines had been tested and had passed the acceptance testing conducted by the Department on October 8-18,
2003. Among those tested were some machines that had failed previous tests, but had undergone adjustments and thus passed
re-testing.
Unfortunately, the Certifications from DOST fail to divulge in what manner and by what standards or criteria the condition,
performance and/or readiness of the machines were re-evaluated and re-appraised and thereafter given the passing mark.
Apart from that fact, the remedial efforts of respondents were, not surprisingly, apparently focused again on the machines --
the hardware. Nothing was said or done about the software -- the deficiencies as to detection and prevention of downloading
and entering previously downloaded data, as well as the capability to print an audit trail. No matter how many times the
machines were tested and re-tested, if nothing was done about the programming defects and deficiencies, the same danger of
massive electoral fraud remains. As anyone who has a modicum of knowledge of computers would say, "Thats elementary!"
And only last December 5, 2003, an Inq7.net news report quoted the Comelec chair as saying that the new automated poll
system would be used nationwide in May 2004, even as the software for the system remained unfinished. It also reported that
a certain Titus Manuel of the Philippine Computer Society, which was helping Comelec test the hardware and software, said
that the software for the counting still had to be submitted on December 15, while the software for the canvassing was due in
early January.
Even as Comelec continues making payments for the ACMs, we keep asking ourselves: who is going to ensure that the
software would be tested and would work properly?
22
At any rate, the re-testing of the machines and/or the 100 percent testing of all machines (testing of every single unit) would
not serve to eradicate the grave abuse of discretion already committed by Comelec when it awarded the Contract on April 15,
2003, despite the obvious and admitted flaws in the bidding process, the failure of the "winning bidder" to qualify, and the
inability of the ACMs and the intended software to meet the bid requirements and rules.
Comelecs Latest "Assurances" Are Unpersuasive
Even the latest pleadings filed by Comelec do not serve to allay our apprehensions. They merely affirm and compound the
serious violations of law and gravely abusive acts it has committed. Let us examine them.
The Resolution issued by this Court on December 9, 2003 required respondents to inform it as to the number of ACMs
delivered and paid for, as well as the total payment made to date for the purchase thereof. They were likewise instructed to
submit a certification from the DOST attesting to the number of ACMs tested, the number found to be defective; and
"whether the reprogrammed software has been tested and found to have complied with the requirements under Republic Act
No. 8436."50
In its "Partial Compliance and Manifestation" dated December 29, 2003, Comelec informed the Court that 1,991 ACMs had
already been delivered to the Commission as of that date. It further certified that it had already paid the supplier the sum of
P849,167,697.41, which corresponded to 1,973 ACM units that had passed the acceptance testing procedures conducted by
the MIRDC-DOST51 and which had therefore been accepted by the poll body.
In the same submission, for the very first time, Comelec also disclosed to the Court the following:
"The Automated Counting and Canvassing Project involves not only the manufacturing of the ACM hardware but
also the development of three (3) types of software, which are intended for use in the following:
1. Evaluation of Technical Bids
2. Testing and Acceptance Procedures
3. Election Day Use."
Purchase of the First Type of Software Without Evaluation
In other words, the first type of software was to be developed solely for the purpose of enabling the evaluation of the
bidders technical bid. Comelec explained thus: "In addition to the presentation of the ACM hardware, the bidders were
required to develop a base software program that will enable the ACM to function properly. Since the software program
utilized during the evaluation of bids is not the actual software program to be employed on election day, there being two (2)
other types of software program that will still have to be developed and thoroughly tested prior to actual election day use,
defects in the base software that can be readily corrected by reprogramming are considered minor in nature, and may
therefore be waived."
In short, Comelec claims that it evaluated the bids and made the decision to award the Contract to the "winning" bidder
partly on the basis of the operation of the ACMs running a "base" software. That software was therefore nothing but a
sample or "demo" software, which would not be the actual one that would be used on election day. Keeping in mind that the
Contract involves the acquisition of not just the ACMs or the hardware, but also the software that would run them, it is now
even clearer that the Contract was awarded without Comelec having seen, much less evaluated, the final product -- the
software that would finally be utilized come election day. (Not even the "near-final" product, for that matter).
What then was the point of conducting the bidding, when the software that was the subject of the Contract was still to be
created and could conceivably undergo innumerable changes before being considered as being in final form? And that is not
all!
No Explanation for Lapses in the Second Type of Software
The second phase, allegedly involving the second type of software, is simply denominated "Testing and Acceptance
Procedures." As best as we can construe, Comelec is claiming that this second type of software is also to be developed and
delivered by the supplier in connection with the "testing and acceptance" phase of the acquisition process. The previous
pleadings, though -- including the DOST reports submitted to this Court -- have not heretofore mentioned any statement,
allegation or representation to the effect that a particular set of software was to be developed and/or delivered by the supplier
in connection with the testing and acceptance of delivered ACMs.
23
What the records do show is that the imported ACMs were subjected to the testing and acceptance process conducted by the
DOST. Since the initial batch delivered included a high percentage of machines that had failed the tests, Comelec asked the
DOST to conduct a 100 percent testing; that is, to test every single one of the ACMs delivered. Among the machines tested
on October 8 to 18, 2003, were some units that had failed previous tests but had subsequently been re-tested and had passed.
To repeat, however, until now, there has never been any mention of a second set or type of software pertaining to the testing
and acceptance process.
In any event, apart from making that misplaced and uncorroborated claim, Comelec in the same submission also professes
(in response to the concerns expressed by this Court) that the reprogrammed software has been tested and found to have
complied with the requirements of RA 8436. It reasoned thus: "Since the software program is an inherent element in the
automated counting system, the certification issued by the MIRDC-DOST that one thousand nine hundred seventy-three
(1,973) units passed the acceptance test procedures is an official recognition by the MIRDC-DOST that the software
component of the automated election system, which has been reprogrammed to comply with the provisions of Republic Act
No. 8436 as prescribed in the Ad Hoc Technical Evaluation Committees ACM Testing and Acceptance Manual, has passed
the MIRDC-DOST tests."
The facts do not support this sweeping statement of Comelec. A scrutiny of the MIRDC-DOST letter dated December 15,
2003,52 which it relied upon, does not justify its grand conclusion. For claritys sake, we quote in full the letter-certification,
as follows:
"15 December 2003
"HON. RESURRECCION Z. BORRA
Commissioner-in-Charge
Phase II, Modernization Project
Commission on Elections
Intramuros, Manila
Attention: Atty. Jose M. Tolentino, Jr.
Project Director
"Dear Commissioner Borra:
"We are pleased to submit 11 DOST Test Certifications representing 11 lots and covering 158 units of automated
counting machines (ACMs) that we have tested from 02-12 December 2003.
"To date, we have tested all the 1,991 units of ACMs, broken down as follow: (sic)
1st batch - 30 units 4th batch - 438 units
2nd batch - 288 units 5th batch - 438 units
3rd batch - 414 units 6th batch - 383 units
"It should be noted that a total of 18 units have failed the test. Out of these 18 units, only one (1) unit has failed the
retest.
"Thank you and we hope you will find everything in order.
"Very truly yours,
"ROLANDO T. VILORIA, CESO III
Executive Director cum
24
Chairman, DOST-Technical Evaluation Committee"
Even a cursory glance at the foregoing letter shows that it is completely bereft of anything that would remotely support
Comelecs contention that the "software component of the automated election system x x x has been reprogrammed to
comply with" RA 8436, and "has passed the MIRDC-DOST tests." There is no mention at all of any software
reprogramming. If the MIRDC-DOST had indeed undertaken the supposed reprogramming and the process turned out to be
successful, that agency would have proudly trumpeted its singular achievement.
How Comelec came to believe that such reprogramming had been undertaken is unclear. In any event, the Commission is not
forthright and candid with the factual details. If reprogramming has been done, who performed it and when? What exactly
did the process involve? How can we be assured that it was properly performed? Since the facts attendant to the alleged
reprogramming are still shrouded in mystery, the Court cannot give any weight to Comelecs bare allegations.
The fact that a total of 1,973 of the machines has ultimately passed the MIRDC-DOST tests does not by itself serve as an
endorsement of the soundness of the software program, much less as a proof that it has been reprogrammed. In the first
place, nothing on record shows that the tests and re-tests conducted on the machines were intended to address the serious
deficiencies noted earlier. As a matter of fact, the MIRDC-DOST letter does not even indicate what kinds of tests or re-tests
were conducted, their exact nature and scope, and the specific objectives thereof. 53 The absence of relevant supporting
documents, combined with the utter vagueness of the letter, certainly fails to inspire belief or to justify the expansive
confidence displayed by Comelec. In any event, it goes without saying that remedial measures such as the alleged
reprogramming cannot in any way mitigate the grave abuse of discretion already committed as early as April 15, 2003.
Rationale of Public Bidding Negated
by the Third Type of Software
Respondent Comelec tries to assuage this Courts anxiety in these words: "The reprogrammed software that has already
passed the requirements of Republic Act No. 8436 during the MIRDC-DOST testing and acceptance procedures will require
further customization since the following additional elements, among other things, will have to be considered before the final
software can be used on election day: 1. Final Certified List of Candidates x x x 2. Project of Precincts x x x 3. Official
Ballot Design and Security Features x x x 4. Encryption, digital certificates and digital signatures x x x. The certified list of
candidates for national elective positions will be finalized on or before 23 January 2004 while the final list of projects of
precincts will be prepared also on the same date. Once all the above elements are incorporated in the software program, the
Test Certification Group created by the Ad Hoc Technical Evaluation Committee will conduct meticulous testing of the final
software before the same can be used on election day. In addition to the testing to be conducted by said Test Certification
Group, the Comelec will conduct mock elections in selected areas nationwide not only for purposes of public information but
also to further test the final election day program. Public respondent Comelec, therefore, requests that it be given up to 16
February 2004 to comply with this requirement."
The foregoing passage shows the imprudent approach adopted by Comelec in the bidding and acquisition process. The
Commission says that before the software can be utilized on election day, it will require "customization" through addition of
data -- like the list of candidates, project of precincts, and so on. And inasmuch as such data will become available only in
January 2004 anyway, there is therefore no perceived need on Comelecs part to rush the supplier into producing the final (or
near-final) version of the software before that time. In any case, Comelec argues that the software needed for the electoral
exercise can be continuously developed, tested, adjusted and perfected, practically all the way up to election day, at the same
time that the Commission is undertaking all the other distinct and diverse activities pertinent to the elections.
Given such a frame of mind, it is no wonder that Comelec paid little attention to the counting and canvassing software
during the entire bidding process, which took place in February-March 2003. Granted that the software was defective, could
not detect and prevent the re-use of previously downloaded data or produce the audit trail -- aside from its other
shortcomings -- nevertheless, all those deficiencies could still be corrected down the road. At any rate, the software used for
bidding purposes would not be the same one that will be used on election day, so why pay any attention to its defects? Or to
the Comelecs own bidding rules for that matter?
Clearly, such jumbled ratiocinations completely negate the rationale underlying the bidding process mandated by law.
At the very outset, the Court has explained that Comelec flagrantly violated the public policy on public biddings (1) by
allowing MPC/MPEI to participate in the bidding even though it was not qualified to do so; and (2) by eventually awarding
the Contract to MPC/MPEI. Now, with the latest explanation given by Comelec, it is clear that the Commission further
desecrated the law on public bidding by permitting the winning bidder to change and alter the subject of the Contract (the
software), in effect allowing a substantive amendment without public bidding.
25
This stance is contrary to settled jurisprudence requiring the strict application of pertinent rules, regulations and guidelines
for public bidding for the purpose of placing each bidder, actual or potential, on the same footing. The essence of public
bidding is, after all, an opportunity for fair competition, and a fair basis for the precise comparison of bids. In common
parlance, public bidding aims to "level the playing field." That means each bidder must bid under the same conditions; and
be subject to the same guidelines, requirements and limitations, so that the best offer or lowest bid may be determined, all
other things being equal.
Thus, it is contrary to the very concept of public bidding to permit a variance between the conditions under which bids are
invited and those under which proposals are submitted and approved; or, as in this case, the conditions under which the bid is
won and those under which the awarded Contract will be complied with. The substantive amendment of the contract bidded
out, without any public bidding -- after the bidding process had been concluded -- is violative of the public policy on public
biddings, as well as the spirit and intent of RA 8436. The whole point in going through the public bidding exercise was
completely lost. The very rationale of public bidding was totally subverted by the Commission.
From another perspective, the Comelec approach also fails to make sense. Granted that, before election day, the software
would still have to be customized to each precinct, municipality, city, district, and so on, there still was nothing at all to
prevent Comelec from requiring prospective suppliers/bidders to produce, at the very start of the bidding process, the "next-
to-final" versions of the software (the best software the suppliers had) -- pre-tested and ready to be customized to the final
list of candidates and project of precincts, among others, and ready to be deployed thereafter. The satisfaction of such
requirement would probably have provided far better bases for evaluation and selection, as between suppliers, than the so-
called demo software.Respondents contend that the bidding suppliers counting machines were previously used in at least
one political exercise with no less than 20 million voters. If so, it stands to reason that the software used in that past electoral
exercise would probably still be available and, in all likelihood, could have been adopted for use in this instance. Paying for
machines and software of that category (already tried and proven in actual elections and ready to be adopted for use) would
definitely make more sense than paying the same hundreds of millions of pesos for demo software and empty promises of
usable programs in the future.
But there is still another gut-level reason why the approach taken by Comelec is reprehensible. It rides on the perilous
assumption that nothing would go wrong; and that, come election day, the Commission and the supplier would have
developed, adjusted and "re-programmed" the software to the point where the automated system could function as
envisioned. But what if such optimistic projection does not materialize? What if, despite all their herculean efforts, the
software now being hurriedly developed and tested for the automated system performs dismally and inaccurately or, worse,
is hacked and/or manipulated?54 What then will we do with all the machines and defective software already paid for in the
amount of P849 million of our tax money? Even more important, what will happen to our country in case of failure of the
automation?
The Court cannot grant the plea of Comelec that it be given until February 16, 2004 to be able to submit a "certification
relative to the additional elements of the software that will be customized," because for us to do so would unnecessarily
delay the resolution of this case and would just give the poll body an unwarranted excuse to postpone the 2004 elections. On
the other hand, because such certification will not cure the gravely abusive actions complained of by petitioners, it will be
utterly useless.
Is this Court being overly pessimistic and perhaps even engaging in speculation? Hardly. Rather, the Court holds that
Comelec should not have gambled on the unrealistic optimism that the suppliers software development efforts would turn
out well. The Commission should have adopted a much more prudent and judicious approach to ensure the delivery of tried
and tested software, and readied alternative courses of action in case of failure. Considering that the nations future is at stake
here, it should have done no less.
Epilogue
Once again, the Court finds itself at the crossroads of our nations history. At stake in this controversy is not just the business
of a computer supplier, or a questionable proclamation by Comelec of one or more public officials. Neither is it about
whether this country should switch from the manual to the automated system of counting and canvassing votes. At its core is
the ability and capacity of the Commission on Elections to perform properly, legally and prudently its legal mandate to
implement the transition from manual to automated elections.
Unfortunately, Comelec has failed to measure up to this historic task. As stated at the start of this Decision, Comelec has not
merely gravely abused its discretion in awarding the Contract for the automation of the counting and canvassing of the
ballots. It has also put at grave risk the holding of credible and peaceful elections by shoddily accepting electronic hardware
and software that admittedly failed to pass legally mandated technical requirements. Inadequate as they are, the remedies it
proffers post facto do not cure the grave abuse of discretion it already committed (1) on April 15, 2003, when it illegally
made the award; and (2) "sometime" in May 2003 when it executed the Contract for the purchase of defective machines and
non-existent software from a non-eligible bidder.
26
For these reasons, the Court finds it totally unacceptable and unconscionable to place its imprimatur on this void and illegal
transaction that seriously endangers the breakdown of our electoral system. For this Court to cop-out and to close its eyes to
these illegal transactions, while convenient, would be to abandon its constitutional duty of safeguarding public interest.
As a necessary consequence of such nullity and illegality, the purchase of the machines and all appurtenances thereto
including the still-to-be-produced (or in Comelecs words, to be "reprogrammed") software, as well as all the payments made
therefor, have no basis whatsoever in law. The public funds expended pursuant to the void Resolution and Contract must
therefore be recovered from the payees and/or from the persons who made possible the illegal disbursements, without
prejudice to possible criminal prosecutions against them.
Furthermore, Comelec and its officials concerned must bear full responsibility for the failed bidding and award, and held
accountable for the electoral mess wrought by their grave abuse of discretion in the performance of their functions. The
State, of course, is not bound by the mistakes and illegalities of its agents and servants.
True, our country needs to transcend our slow, manual and archaic electoral process. But before it can do so, it must first
have a diligent and competent electoral agency that can properly and prudently implement a well-conceived automated
election system.
At bottom, before the country can hope to have a speedy and fraud-free automated election, it must first be able to procure
the proper computerized hardware and software legally, based on a transparent and valid system of public bidding. As in any
democratic system, the ultimate goal of automating elections must be achieved by a legal, valid and above-board process of
acquiring the necessary tools and skills therefor. Though the Philippines needs an automated electoral process, it cannot
accept just any system shoved into its bosom through improper and illegal methods. As the saying goes, the end never
justifies the means. Penumbral contracting will not produce enlightened results.
WHEREFORE, the Petition is GRANTED. The Court hereby declares NULL and VOID Comelec Resolution No. 6074
awarding the contract for Phase II of the AES to Mega Pacific Consortium (MPC). Also declared null and void is the subject
Contract executed between Comelec and Mega Pacific eSolutions (MPEI). 55 Comelec is further ORDERED to refrain from
implementing any other contract or agreement entered into with regard to this project.
Let a copy of this Decision be furnished the Office of the Ombudsman which shall determine the criminal liability, if any, of
the public officials (and conspiring private individuals, if any) involved in the subject Resolution and Contract. Let the
Office of the Solicitor General also take measures to protect the government and vindicate public interest from the ill effects
of the illegal disbursements of public funds made by reason of the void Resolution and Contract.
SO ORDERED.
Republic of the Philippines vs. Ignacio
This petition for review on certiorari seeks to reverse the (a) Decision dated April 17, 1990 (pp. 72-76, Rollo) of respondent
Judge Ignacio C. Capulong, in Civil Case No. 90-173, directing the Air Transportation Office (ATO) and its Pre-
qualification, Bidding and Award Committee (PBAC) to immediately convene or reconvene and to read and consider the
Inter Technical Pacific Phil., Inc.'s bid to furnish the necessary goods and services for works under the Nationwide Air
Navigation Facilities Modernization Project Phase II of the Air Transportation Office of the Department of Transportation
and Communications; (b) the Order dated May 22, 1990 (p. 77, Rollo) which denied petitioner's motion for reconsideration
of the said decision; and (c) Order dated February 12, 1990 (pp. 78-80, Rollo) which earlier granted Inter Technical Pacific
Inc.'s petition for the issuance of a writ of preliminary injunction.
The facts are as follows:
On July 26, 1989, the Air Transportation Office (ATO, for short) and its Pre-qualification, Bidding and Award Committee
(PBAC, for short) publicly invited prequalified bidders to furnish the necessary goods and services for works under the
Nationwide Air Navigation Facilities Modernization Project Phase II, a government infrastructure project financed from
proceeds of a loan (PH-P72) from the Overseas Economic Cooperation Fund of Japan (pp. 81-88, Rollo). Inter Technical
Pacific, Inc. (INTER TECHNICAL for short), a Filipino contractor, prequalified as a bidder and submitted its sealed bidding
documents contained in a set of one (1) original and eight (8) copies in bookbound form in six (6) volumes.
The bidding was conducted by the PBAC on November 10, 1989. The PBAC informed the public that only four (4)
prequalified bidders had submitted their bids and then announced that the approved government agency estimate for the
project was Eight Hundred Fifty Nine Million Four Hundred Seventy Two Thousand Seventy Four Pesos and Fifty Centavos
(P859,472,074.50). After the opening, examination and evaluation of the bids, the PBAC read the bids of the prequalified
bidders (p. 73, Rollo) as follows:
27
BRITISHIAL P916,731,100.42
ISRAELI KOORTRADE P954,536,621.05
JAPANESE TOYO MENKA P776,915.886.45
When INTER TECHNICAL's bidding documents were opened and examined, it was discovered that the entire set of bidding
documents and eight copies thereof did not contain a Form of Bid (see copy pp. 186-187, Rollo). The PBAC allegedly upon
the advice of the assisting Japanese consultants in the committee, refused to read INTER TECHNICAL's bid and rejected the
same as "non complying."
INTER TECHNICAL protested the action of the PBAC, explaining that the Form of Bid was inadvertently left in the office;
that its bid price was clearly spelled out in the bidding documents; that its bid was accompanied by a bid bond attached to the
documents; that it complied with all the requirements and that the "Form of Bid" was a mere formality which can be rectified
through cursory reading of the bidding documents it submitted; that it is willing to accomplish right then and there the "Form
of Bid" and fill in the data required without varying the data or figures already declared in the bidding documents submitted.
INTER TECHNICAL's authorized representative then publicly informed PBAC that its bid was Six Hundred Seven Million
One Hundred Sixty Nine Thousand and Four Hundred FORTY-FOUR PESOS and FIFTY CENTAVOS (P607,169,444.50).
Despite INTER TECHNICAL's plea, the PBAC adjourned the proceedings. INTER TECHNICAL appealed for
reconsideration to the ATO, PBAC and the Secretary of Transportation and Communications, attaching in its letters of appeal
the duly accomplished "Form of Bid," but all were not acted upon.
ATO, for its part, referred the matter to the Department of Justice which in its Opinion dated January 10, 1990 (pp. 87-89,
Rollo) ruled that INTER TECHNICAL's bid was invalid because the Form of Bid is an essential bidding requirement
embodying vital provisions, namely: 1) an agreement to be bound by his bid; 2) the obligation to submit a performance
guarantee; 3) the amounts of his bid bond, performance bond, and amount of third party insurance; 4) respective periods of
commencement of works, maintenance and completion; and 5) authority of the person signing. As legal basis for the ruling,
the Secretary of Justice cited paragraph 12.2 of the "Instructions to Bidders" which states: "Bids not fully complying with all
the requirements shall be disqualified," and Rule IB 2.8 of the Implementing Rules of Presidential Decree No. 1594 which
provides that a Bid Form is part of the contract for the project.
On January 22, 1990, INTER TECHNICAL filed a complaint for specific performance mandatory and prohibitory injunction
with prayer for preliminary injunction and restraining order against ATO and PBAC before the Regional Trial Court, NCJR,
Branch 134, Makati, docketed as Civil Case No. 90-173, seeking the issuance of a writ of preliminary injunction to enjoin
PBAC from awarding the subject contract and prayed that after trial, judgment be rendered ordering ATO and PBAC to read
and consider the bid of plaintiff and making the injunction, both prohibitory and mandatory, permanent. Upon filing of the
complaint, the court issued a temporary restraining order prayed for.
In their answer filed on February 13, 1990, ATO and PBAC alleged that the Form of Bid is an indispensable bid document
which is confirmed by the Department of Justice; that due to the importance of this Form of Bid, the failure to enclose this
document in the set of submitted bidding documents will nullify the bid as non-complying and it is as if no bid was
submitted to be considered or read. By way of Special and Affirmative Defenses, ATO and PBAC cited Presidential Decree
No. 1818 which deprives courts of jurisdiction to issue restraining orders, preliminary prohibitory and mandatory injunctions
in cases or controversies involving infrastructure projects of the government; that the acceptance or rejection of bids is
within the sole discretion of PBAC and, therefore, may not be enjoined by prohibitory or mandatory injunction, and finally,
that INTER TECHNICAL's complaint does not state a cause of action.
After hearing INTER TECHNICAL's petition for the issuance of a writ of preliminary injunction on January 29 and
February 2, 1990, respondent Judge Capulong issued an Order dated February 12, 1990 granting the issuance of a writ of
preliminary injunction, thus, enjoining ATO and PBAC from awarding the contract to the "second lowest bidder or
whomsoever" until further orders from the court. Respondent Judge ruled that INTER TECHNICAL submitted a bid bond
and bidder's bond which are indispensable to the validation of a bid proposal; that the bid price was spelled out in the INTER
TECHNICAL's Summary of Schedule Proposal; and that the tender of INTER TECHNICAL was the lowest and appeared to
be the most beneficial to the government; that the government of the Philippines will save P252,302,630.00 with INTER
TECHNICAL's supposed bid, and that not to read such bid will work injustice to INTER TECHNICAL (p. 78, Rollo).
On March 16, 1990, the Republic of the Philippines, represented by the ATO and PBAC of the Department of Transportation
and Communications, filed with the Court of Appeals a petition for certiorari and prohibition to nullify the Order dated
February 12, 1990 issued by respondent judge granting the petition of INTER TECHNICAL for the issuance of a writ of
preliminary injunction. A supplemental petition for injunction was thereafter filed on April 4, 1990 to enjoin respondent
judge from exercising jurisdiction in Civil Case No. 90-173 as it involves an infrastructure project covered by P.D. 1818 and
28
that the action in Civil Case No. 90-173 is in fact an action for mandamus and mandamus does not lie against discretionary
acts of petitioner.
While the petition of the Republic was pending before the Court of Appeals, respondent Judge rendered a decision dated
April 17, 1990 in Civil Case No. 90-173 directing ATO and PBAC to immediately convene or reconvene and to read and
consider INTER TECHNICAL's bid (P. 72, Rollo).
INTER TECHNICAL, on the other hand, filed a manifestation/motion dated April 26, 1990 informing the Court of Appeals
that the Republic's petition had become moot and academic in view of the decision dated April 17, 1990 in Civil Case No.
90-173.
After filing on May 2, 1990 its motion for reconsideration of the decision of April 17, 1990 in Civil Case No. 90-173 before
the RTC of Makati, Branch 134, the Republic filed on May 4, 1990 before the Court of Appeals an urgent motion reiterating
its prayer for the issuance of a restraining order and writ of preliminary prohibitory injunction as to respondent judge. This
was followed on May 18, 1990 by another urgent motion for issuance of restraining order and writ of preliminary prohibitory
injunction stating therein that respondent judge's decision of April 17, 1990 had not yet become final. Both were not
favorably acted upon by the Court of Appeals.
On May 22, 1990, respondent judge denied the motion for reconsideration filed by the Republic in Civil Case No. 90-173.
The Republic then filed a motion to withdraw petition for certiorari and supplemental petition with the Court of Appeals
pursuant to its commitment in its motion for extension of time within which to file petition for review on certiorari with this
Court. Such motion was granted by the Court of Appeals on July 29, 1990.
Hence, this petition.
After the required pleadings were filed by the parties, this Court, in the resolution of October 23, 1990 (p. 257-A, Rollo),
gave due course to the petition for review on certiorari and required the parties to submit their respective memoranda. In
compliance therewith, the Republic filed its memorandum on December 4, 1990, and INTER TECHNICAL, on January 10,
1991. The case was then submitted for deliberation. On April 26, 1991, the Solicitor General filed an Urgent Motion for
Early Resolution (p. 381, Rollo), manifesting that Acting Secretary Pete Nicomedes Prado of the Department of
Transportation and Communications urged him in a letter (p. 384, Rollo) to seek early resolution of the case because the final
disbursement by the Overseas Economic Cooperation Fund (OECF) of Japan which is financing the Nationwide Air
Navigation Facilities Modernization Project Phase II, subject this case, cannot be made later than May 30, 1991, after which
no other disbursement therefrom can be made; that the government is exerting efforts to secure an extension of the
disbursement period for the loan agreement and thus, save the project but that it foresees a considerable resistance from the
lending institution; and that construction of a new domestic terminal building can not commence unless the Nationwide Air
Navigation Facilities Modernization Project Phase II materializes. Such motion was noted in the resolution of April 30,
1991.
Considering that We already have deliberated on the petition and have reached a consensus on its merits favorable to the
petitioner as well as have assigned to this writer the task of making the opinion of the Court and in order that the project of
the government would not be prejudiced as time is of the essence in this case. We issued a resolution dated May 30, 1991. In
this resolution, We granted the petition, without prejudice to rendering an extended opinion in due course, and annulled and
set aside the respondent Judge's Order dated February 12, 1990, his decision dated April 17, 1990, his Order dated May 22,
1990 in Civil Case No. 90-173 as well as allowed the petitioner to proceed with the awarding of the contract (p. 387, Rollo).
Indeed, a careful and in-depth study of the records constrains Us to reverse the judgment and orders of the respondent court.
In this case, a controversy exists whether the failure of INTER TECHNICAL to enclose in its bidding documents the duly
accomplished and signed Form of Bid is, under the circumstances of the case, a valid ground for the PBAC of ATO to reject
its bid to furnish the necessary goods and services for works under the Nationwide Air Navigation Facilities Modernization
Project Phase II of the Air Transportation Office, Department of Transportation and Communication. The controversy gave
rise to the next question: may the respondent court step into the controversy by ordering the award and bidding committee to
reconvene and read INTER TECHNICAL's bid when the discretion to determine whether or not a bidder complies with the
bidding requirements lies with the said bidding committee.
Petitioner asserts that the Form of Bid is the central unifying document containing the substantial legal requirements of the
bid while the other documents, like the summary of bid or the bid bond, merely support the Form of Bid; that the Form of
Bid is the document which authenticates and summarizes the amounts on the Summary of Schedule Proposals; that in view
of the absence of a Form of Bid, INTER TECHNICAL in effect has not submitted a bid, thus since there is no bid, there is no
basis for claiming that INTER TECHNICAL is the lowest bidder.
29
In support of its contention that the Form of Bid is a principal document, petitioner cited the stipulations contained therein
which the bidder agrees to do and undertake, thus:
1. To undertake the work complete in conformity with the abovementioned documents (Conditions of
Contract, Technical Specifications, Bid Schedule and Drawings) for the specified sum (in foreign
currency and peso);
2. If bid is accepted, to commence the work within 30 days (mobilization period) after receipt of the
Employer's Notice to Commence Work and to complete and deliver the whole of the Works comprised in
the contract within 600 calendar days calculated from the last day of the aforesaid period in which the
Works are to be commenced;
3. If bid is accepted, to submit a Performance Guarantee with effectivity period to be specified in a

written advice to be made by ATO and PBAC or, in the event that this guarantee is deemed insufficient,
sureties acceptable to ATO and PBAC from a bank to be jointly and severally bound, for the faithful and
satisfactory performance of the contract.
4. To abide by this Bid for a period of 120 calendar days from the date set for the opening of Bids and it
shall remain binding upon the (bidder) and may be accepted at any time before the expiration of that
period;
5. Unless and until a formal Agreement is prepared and executed, this Bid, together with the (agency's)
acceptance thereof, shall constitute a binding contract between them;
6. The understanding that the agency is not bound to accept the lowest or any Bid the agency may
receive. (see Annex 1, Form of Bid, p. 186, Rollo)
Without a duly accomplished Form of Bid submitted before the opening of bids, petitioner argues that a prospective bidder
will not be bound by the foregoing stipulations. Consequently, for lack of a Form of Bid, INTER TECHNICAL was not
bound to complete the project for a specific compensation.
The arguments set forth by the petitioner are persuasive. The Form of Bid, as technically used in this case, contains the offer
to undertake the works for a specified sum of money expressed in foreign currency and Philippine peso and, it stipulates the
terms and conditions in the call for bid which the bidder, thru its duly authorized signing representative, agrees to undertake
and abide once the bid is accepted by the PBAC. Specifically, it is a standard form made available to prequalified bidders;
containing the bidder's "offer to undertake the work complete in conformity with the above-mentioned documents" to wit:
Conditions of Contract, Technical Specifications, Bid Schedule and Drawings" for specified sum of money, one in foreign
currency and the other in Philippine pesos. In essence, a duly accomplished and signed Form of Bid submitted to the bidding
committee together with the written acceptance by the government agency constitutes a binding preliminary contract
governing the relationship between the bidder and the government agency concerned during the examination and evaluation
period of the bid proposal until the Notice of Award is given to and the Project Contract is executed by the winning bidder. If
there is no duly accomplished and signed Form of Bid submitted to the bidding committee, there is nothing to accept on the
part of the government agency.
Under Section 5 of Presidential Decree No. 1594 (June 11, 1978), the law which prescribes the policies, guidelines, rules and
regulations for government infrastructure contracts, the contract may be awarded to the lowest bidder whose bid as evaluated
complies with all the terms and conditions in the call for bid, thus:
Sec. 5. Award and Contract. The contract may be awarded to the lowest pre-qualified bidder whose
bid as evaluated complies with all the terms and conditions in the call for bid and is the most
advantageous to the Government.
To guarantee the faithful performance of the contractor, he shall, prior to the award, post a performance
bond, in an amount to be established in accordance with the rules and regulations to be promulgated
under Section 12 of this Decree.
All awards and contracts duly executed in accordance with the provisions of this Decree shall be subject
to the approval of the Minister of Public Works, Transportation and Communications, the Minister of
Public Highways, or the Minister of Energy, as the case may be.
It is not disputed by petitioner that INTER TECHNICAL submitted a Bid Bond in the form of an Irrevocable Domestic
Standby Letter of Credit No. SFM-L-027-89 in the amount not exceeding the Philippine peso equivalent of US$800,000.00
30
issued on behalf of INTER TECHNICAL by the Philippine National Bank in favor of ATO and PBAC. However, a careful
examination of the records of the case reveals that the filing of said Bid Bond together with the other bid documents does not
constitute substantial compliance with the stipulations contained in the Form of Bid under Presidential Decree No. 1594 and
its Rules and Regulations and, more particularly, the Instructions to Bidders made available to prequalified bidders in the
instant case.
There is no question that the Bid Bond is an indispensable requirement for the validation of a bid proposal. The bond insures
good faith of the bidders and binds them to enter into a contract with the Government should their proposal be accepted (see
Padilla v. Zaldivar, L-22789, October 30, 1964, 12 SCRA 260). Yet, there is nothing in the Bid Bond submitted in the instant
case which guarantees that INTER TECHNICAL will commence the work within 30 days (mobilization period) after receipt
of Employer's Notice to Commence Work and to complete and deliver the whole of the work within 600 days as provided in
stipulation no. 2 of the Form of Bid. Nowhere in the Bid Bond does INTER TECHNICAL agree to abide by the bid for a
period of 120 calendar days from the date set for the opening of the bid. Besides, the Bid Bond does not contain any
undertaking that it shall remain binding upon INTER TECHNICAL and may be accepted at any time before the expiration of
that period as provided in stipulation no. 4 of the Form of Bid. There is likewise no formal acknowledgment on the part of
INTER TECHNICAL that the PBAC and ATO are not bound to accept the lowest or any bid they may receive as provided in
stipulation no. 6 of the Form of Bid. Lastly, the Bid Bond does not even state the amount of the bid expressed in foreign
currency and Philippine peso as clearly required in the Form of Bid.
The Irrevocable Domestic Standby Letter of Credit merely states that drafts shall be drawn under the letter of credit in the
event INTER TECHNICAL withdraws its bid before the expiration of the specified period; or after being awarded the
contract, INTER TECHNICAL refuses or fails to furnish the performance bond within the required period, thus:
This Credit is available by the Beneficiary's sight drafts ("Drafts") in duplicate drawn on us without
recourse to the drawer. Drawing against this Credit shall be made by the beneficiary only upon failure of
the Accountee to fulfill its obligation under the Bid.
Drafts drawn under this Credit must be accompanied by the following:
1. Original of this Credit
2. Beneficiary's certificate stating:
a) that the Accountee Inter-Technical Pacific Philippines, Inc. has withdrawn its bid
before the expiration of the specified period; or
b) that after being awarded the contract, refuses or fails to furnish the performance
bond within the required period.
In other words, the letter of credit merely guarantees that INTER TECHNICAL will not withdraw its bid before the
expiration of the period specified by ATO and PBAC and that after being awarded the contract, it will furnish the
performance bond within the period required by ATO and PBAC. Clearly then, the letter of credit standing alone does not
guarantee that INTER TECHNICAL will enter into a contract under the terms and conditions stipulated in the Form of Bid.
It must be noted that prior to the opening of the bids on November 10, 1989, PBAC was guided by the existing rules and
regulations formulated pursuant to Section 12 of P.D. 1594. In the evaluation of the bids, PBAC was guided by Rule IB 2.3
of the Implementing Rules and Regulations of P.D. 1594 which provides, thus:
IB 2.3 Evaluation of Bids. A bid which does not comply with the conditions or requirements of the
bid documents shall be rejected by the PBAC (or the Bid and Award Committee as the case may be)
giving the reason or reasons for its rejection. The Government, however, in the evaluation of bids
received, reserves the right to waive the consideration of minor deviations in the bids received which do
not affect the substance and validity of the bids. (84 OG No. 23, p. 3350)
The PBAC was also guided by the following rules, among others, under the Instruction to Bidders, thus.
OPENING AND EXAMINATION OF BIDS
17.1 At the time, date and place advised in the Invitation to Bid, Bids will be publicly opened and
witnessed for examination and evaluation of the Prequalification, Bidding and Award Committee PBAC
created for the purpose. Bidders or their authorized representatives are instructed to be present during the
opening of bids.
31
17.2 Prior to the opening and reading of the separately sealed Bid Price of the Works, contents of the
Individual Bid shall be examined as to their conformity and agreement with the Bidding requirements,
and Bids not fully complying with all requirements shall be disqualified. (Emphasis supplied)
17.3 Only Bids considered satisfactory by the Committee will qualify for the opening and reading of the
separately sealed Bid Price for the Works. Percentage deductions, contingent or otherwise quoted in
accordance with the provisions of Clause B.13 hereof, will be publicly announced as component of the
Bid. (p. 285, Rollo)
INTER TECHNICAL calls the attention of the Court that the Form of Bid is but a mere formality which does not affect the
substance and validity of its bid. It asserts that it submitted a duly accomplished and signed Form of Bid the day after the
bids were opened on November 10, 1989 and its intention to comply with its alleged bid is shown by the filing of the instant
case before the RTC; and that the Form of Bid is only a surplusage which could be dispensed with as long as a bid bond is
submitted. To bolster its argument, INTER TECHNICAL urges Us to consider an Opinion No. 142-A, Series of 1952 of the
Secretary of Justice which stated that the failure of the lowest bidder to secure a license as a transportation operator at the
time of the opening of the bids does not affect its bid. The Secretary of Justice at that time considered the following peculiar
circumstances of the case: that the bidder then had a pending application for such license; that while he was not a licensed
operator on the date the bids were opened, his application as a transportation operator was approved before an award of the
contract was made to any of its him that there being no awards as yet, the bids are still under consideration; and that since he
qualified prior to the date of the awarding of bids, his bid should be considered, otherwise the interests of the government
would be sacrificed for a mere technicality.
We are unconvinced, PBAC was guided by the rules, regulations or guidelines existing before the bid proposals were opened
on November 10, 1989. The basic rule in public bidding is that bids should be evaluated based on the required documents
submitted before and not after the opening of bids. Otherwise, the foundation of a fair and competitive public bidding would
be defeated. Strict observance of the rules, regulations, and guidelines of the bidding process is the only safeguard to a fair,
honest and competitive public bidding.
In underscoring the Court's strict application of the pertinent rules, regulations and guidelines of the public bidding process.
We have ruled in C & C Commercial vs. Menor (L-28360, January 27, 1983, 120 SCRA 112), that Nawasa properly rejected
a bid of C & C Commercial to supply asbestos cement pressure which bid did not include a tax clearance certificate as
required by Administrative Order No. 66 dated June 26, 1967. In Caltex (Phil.) Inc., et. al. vs. Delgado Brothers, Inc. et. al.,
(96 Phil. 368, 375), We stressed that public biddings are held for the protection of the public and the public should be given
the best possible advantages by means of open competition among the bidders.
Basically, the purpose of the statute requiring competitive bidding is that each bidder, actual or possible, shall be put upon
the same footing. Therefore, authorities should not be permitted to waive any substantial variance between the conditions
under which bids are invited and the proposal submitted. If one bidder is relieved from conforming to the conditions which
impose some duty upon him, or lay the ground for holding him to a strict performance of his contract, that bidder is not
contracting in fair competition with those bidders who propose to be bound by all the conditions (Case vs. Inhabitants of
Treton, 76 N.J.L. 696, 74 A. 672; Lupter et. al. vs. Atlantic County, et, al., 87 N.J. Eq. 491, 100 A. 927, cited in Cobacha and
Lucenario, Law on Public Bidding and Government Contracts, p. 7).
INTER TECHNICAL's failure to comply with what is perceived to be an elementary and customary practice in a public
bidding process, that is, to enclose the Form of Bid in the original and eight separate copies of the bidding documents
submitted to the bidding committee is fatal to its cause. All the four pre-qualified bidders which include INTER
TECHNICAL were subject to Rule IB 2.1 of the Implementing Rules and Regulations of P.D. 1594 in the preparation of
bids, bid bonds, and pre-qualification statement and Rule IB 2.8 which states that the Form of Bid, among others, shall form
part of the contract. INTER TECHNICAL's explanation that its bid form was inadvertently left in the office (p. 6,
Memorandum for Private Respondent, p. 355, Rollo) will not excuse compliance with such a simple and basic requirement in
the public bidding process involving a multi-million project of the Government. There should be strict application of the
pertinent public bidding rules, otherwise the essential requisites of fairness, good faith, and competitiveness in the public
bidding process would be rendered meaningless.
The 1952 Opinion of the Secretary of Justice is not relevant to this present case. A meticulous examination of the opinion
reveals that the invitation to bid issued by the Department of Agriculture and Natural Resources contained no requirement
that the bidder must be a duly licensed transportation operator at the time of the opening of the bids. The invitation to bid
expressly provided that a bid not conforming with the specifications therein contained will not be considered. The
circumstances in the case at bar are exactly the opposite of the situation in the 1952 Opinion. In the Instruction to Bidders,
notably 17.2 thereof (supra), copies of which were furnished to all the four prequalified bidders, it was categorically
provided that bids not fully qualifying shall be disqualified. Furthermore, the Implementing Rules and Regulations of P.D.
1594, IB 2.3, emphasizes that a bid which does not comply with the conditions or requirements of the bid documents shall be
rejected by the PBAC giving the reason or reasons for its rejection (supra). Such rule cannot be treated lightly in view of PD
No. 1594, Sec. 12, which makes the implementing rules and regulations applicable to all contracts for infrastructure and
32
other construction projects of all government agencies including government-owned or controlled corporations and other
instrumentalities. Given such clear and manifest intention of the law, INTER TECHNICAL's plea cannot be heeded.
As stated earlier, the controversy in the instant case, arose from a complaint instituted by INTER TECHNICAL before the
RTC of Makati to compel PBAC to read it's bid. On the face of the allegations in the complaint, it is clear that the complaint
is actually one for mandamus.
As a rule, mandamus lies only to compel an officer to perform a ministerial duty and not a discretionary act. In Meralco
Securities Corporation v. Savellano (L-36748, October 23, 1982, 117 SCRA 804, 812), We ruled that "(d)iscretion when
applied to public functionaries, means a power or right conferred upon them by law of acting officially, under certain
circumstances, uncontrolled by the judgment or conscience of others. A purely ministerial act or duty in contradiction to a
discretional act is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to
the mandate of a legal authority, without regard to or the exercise of his own judgment upon the propriety or impropriety of
the act done. If the law imposes a duty upon a public officer and gives him the right to decide how or when the duty shall be
performed, such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the same
requires neither the exercise of official discretion or judgment." As a general rule, a writ of mandamus will not issue to
control or review the exercise of discretion of a public officer since it is his judgment that is to be exercised and not that of
the court (see Magtibay vs. Garcia, G.R. No. L-28971, January 28, 1983, 120 SCRA 370). Thus, the courts will not interfere
to modify, control or inquire into the exercise of this discretion unless it be alleged and proven that there has been an abuse
or an excess of authority on the part of the officer concerned (see Calvo v. de Gutierrez, et al., 4 Phil, 2033).
A perusal of INTER TECHNICAL's complaint shows that it is bereft of any allegation that ATO and PBAC committed grave
abuse of discretion in rejecting its bid. It did not submit proof that ATO and PBAC acted arbitrarily, fraudulently and against
the interest of the public when they rejected its bid. Apparently, INTER TECHNICAL's belated allegation of grave abuse of
discretion in their comment on the herein petition for review on certiorari is a mere afterthought.
Under Rule IB 2.3 of the Rules implementing Presidential Decree No. 1594, and in the Invitation to Bid (p. 81, Rollo), the
Government has expressly reserved the right to reject any or all bids. PBAC's authority to evaluate the bids during the
opening and examination thereof clearly indicates its discretion to determine compliance or non-compliance with the bidding
requirements. Consequently, when PBAC made a preliminary evaluation of the required documents and found INTER
TECHNICAL's bid non-complying for lack of a Form of Bid, the former merely exercised its discretion under the law. In the
absence of an allegation and proof that PBAC committed grave abuse of discretion, the respondent judge committed an error
in directing and ordering ATO and PBAC to do an act which clearly involves the exercise of discretion on their part.
Finally, INTER TECHNICAL insinuates that the Japanese consultants of the project made the decision to reject INTER
TECHNICAL's bidding documents. A careful review of the records indicates that this insinuation obviously seeks to confuse
the issues submitted to this Court. On the contrary, We find the following unrebutted facts: that INTER TECHNICAL was
given every opportunity before the ATO and PBAC to be heard and tender its explanation for not enclosing the duly
accomplished and signed Form of Bid; that the other bidders were even present and allowed to speak; that the PBAC's final
decision to reject INTER TECHNICAL's bidding documents came only after the issues were extensively discussed not only
by the PBAC members but the other bidders as well; and that the Japanese consultants were merely allowed to give their
opinion on the matter and it was the PBAC which made the final decision. To that extent therefore, the fairness, good faith,
competitiveness, and stability of the public bidding process were not undermined where, as in the instant case, a decision
was reached after due deliberation in the presence of all parties concerned.
ACCORDINGLY, the petition is GRANTED. Respondent Judge's Order dated February 12, 1990, his decision dated April
17, 1990, as well as his Order dated May 22, 1990 in Civil Case No. 90-173 are hereby ANNULLED and SET ASIDE. As a
consequence thereof, petitioner is allowed to proceed with the awarding of the bid contract.
SO ORDERED.
Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Padilla, Bidin, Sarmiento, Grio-Aquino, Regalado and Davide, Jr.,
JJ., concur.
Gancayco, J., is on leave.
Bagatsing vs. Executive Secretary
The petition for prohibition in G.R. No. 112399 sought: (1) to nullify the bidding conducted for the sale of a block of shares
constituting 40% of the capital stock (40% block) of Petron Corporation (PETRON) and the award made to Aramco
Overseas Company, B.V. (ARAMCO) as the highest bidder in the bidding conducted on December 15, 1993; and (2) to stop
the sale of said block of shares to ARAMCO. The Supplemental Petition in said case sought to annul the bidding of the 40%
block held on December 15, 1993 and to set aside the award given to ARAMCO (Rollo, pp. 94-99).
33
The petition for prohibition and certiorari in G.R. No. 115994 sought to annul the sale of the same block of Petron shares
subject of the petition in G.R. No. 112399.
The petition in G.R. No. 112399 asked for the issuance of a temporary restraining order to stop respondents from selling the
40% block to a foreign buyer (Rollo, p. 15). The petition for a temporary restraining order was reiterated in a motion filed
subsequently (Rollo, pp. 107-108).
The petition in G.R. No. 115994 asked for the issuance of a temporary restraining order and a writ of preliminary injunction
to restrain and enjoin public respondents "from proceeding with the projected initial public offering on July 18, 1994 of the
20% of Petron" (Rollo, p. 33).
The Urgent Supplemental Petition in said case reiterated the prayer for the immediate issuance of a preliminary injunction to
enjoin the initial public offering of the Petron shares (Rollo, pp. 223-225).
Actions on the petitions and motions for the issuance of a temporary restraining order and a writ of preliminary injunction
were deferred.
The petition in G.R. No. 112399 was filed by Representative Amado S. Bagatsing while the petition in G.R. No. 115994 was
filed by Senators Neptali A. Gonzales, Ernesto A. Maceda, John H. Osmea and Wigberto E. Taada, Representatives Joker
Arroyo and Amado D. Bagatsing and former Senator Rene A.V. Saguisag all in their capacity as members of Congress,
taxpayers and concerned citizens, except in the case of Mr. Saguisag, who sued as a private law practitioner, member of the
Integrated Bar of the Philippines, taxpayer and concerned citizen.
Respondent Monico V. Jacob was impleaded in G.R. No. 115994 in his capacity as President of respondent Philippine
National Oil Company (PNOC). At the time of the filing of the petition, he had ceased to be the President of PNOC and a
member of its governing board. However, he is the Chairman of the Board of Directors and Chief Executive Officer of
PETRON, a respondent in both cases. He asked for the dismissal of the petition on the ground that having ceased to be
PNOC President, petitioners had no more cause of action against him. We deny the motion in view of the fact that the
petition questions his acts as President of PNOC.
In G.R. No. 115994, ARAMCO entered a limited appearance to question the jurisdiction over its person, alleging that it is a
foreign company organized under the laws of the Netherlands, that it is not doing nor licensed to do business in the
Philippines, and that it does not maintain an office or a business address in and has not appointed a resident agent for the
Philippines (Rollo, p. 240).
PETRON was originally registered with the Securities and Exchange Commission (SEC) in 1966 under the corporate name
"Esso Philippines, Inc." (ESSO) as a subsidiary of Esso Eastern, Inc. and Mobil Petroleum Company, Inc.
In 1973, at the height of the world-wide oil crisis brought about by the Middle East conflicts, the Philippine government
acquired ESSO through the PNOC. ESSO became a wholly-owned company of the government under the corporate name
PETRON and as a subsidiary of PNOC.
In acquiring PETRON, the government aimed to have a buffer against the vagaries of oil prices in the international market. It
was felt that PETRON can serve as a counterfoil against price manipulation that might go unchecked if all the oil companies
were foreign-owned. Indeed, PETRON helped alleviate the energy crises that visited the country from 1973 to 1974, 1979 to
1980, and 1990 to 1991.
PETRON owns the largest, most modern complex refinery in the Philippines with a nameplate capacity of 155,000 barrels
per stream day. It is also the country's biggest combined retail and wholesale market of refined petroleum products. In 1992,
it garnered a 39.8% share of all domestic products sold, and at year end its assets totalled P24.4 billion. PETRON's income
as of September 1993 was P2.7 billion. It is listed as the No. 1 corporation in terms of assets and income in the Philippines.
On December 8, 1986, President Corazon C. Aquino promulgated Proclamation No. 50 in the exercise of her legislative
power under the Freedom Constitution.
The Proclamation is entitled "Proclaiming and Launching a Program for the Expeditious Disposition and Privatization of
Certain Government Corporations and/or the Assets thereof, and Creating the Committee on Privatization and the Asset
Privatization Trust."
34
Implicit in the Proclamation is the need to raise revenue for the Government and the ideal of leaving business to the private
sector. The Government can then concentrate on the delivery of basic services and the performance of vital public functions.
On December 2, 1991, President Fidel V. Ramos noted that "[t]he privatization program has proven successful and beneficial
to the economy in terms of expanding private economic activity, improving investment climate, broadening ownership base
and developing capital markets, and generating substantial revenues for priority government expenditure," but "[t]here is still
much potential for harnessing private initiative to undertake in behalf of government certain activities which can be more
effectively and efficiently undertaken by the private sector" (G.R. No. 112399, Rollo, p. 31).
In its meeting held on September 9, 1992, the PNOC Board of Directors approved Specific Thrust No. 6 and moved "to
bring to the attention of the Administration the need to privatize Petron whether or not there will be deregulation [of the oil
industry]" (G.R. No. 112399, Rollo p. 67).
In a letter dated October 21, 1992, Secretary Ramon R. Del Rosario, as Chairman of the Committee on Privatization,
endorsed to President Ramos the proposal of PNOC to "privatize 65% of the stock of Petron, open to both foreign as well as
domestic investors." Secretary Del Rosario added: "The entry of foreign investors in this field is expected to result in
improved technology and know-how and will enable Petron to have access to international information network as well as
access to external markets and refining contracts" (G.R. No. 112399, Rollo, p. 72).
On January 4, 1993, a follow-up letter was sent by Secretary Del Rosario informing the President that: "The privatization of
Petron, recommended by both the management of Philippine National Oil Company (PNOC) and the Committee on
Privatization (COP), will send the right signals that may re-ignite investor interest in the Philippines for 1993" (G.R. No.
112399, Rollo, p. 73).
In a letted dated January 6, 1993, Secretary designate Delfin L. Lazaro of the Department of Energy, favorably endorsed for
approval the plan to sell up to 65% of the capital stock of PETRON. He also noted that the said plan was "consistent with the
Energy Sector Action Plan approved by the President and the Cabinet on November 27, 1992" (G.R. No. 112399, Rollo, p.
74).
On January 12, 1993, the Cabinet approved the privatization of PETRON as part of the Energy Sector Action Plan.
On March 25, 1993, the Government Corporate Monitoring and Coordinating Committee (GCMCC) recommended a 100%
privatization of PETRON.
On March 31, 1993, the PNOC Board of Directors passed a resolution authorizing the company to negotiate and conclude a
contract with the consortium of Salomon Brothers of Hongkong Limited and PCI Capital Corporation for financial advisory
services to be rendered to PETRON.
On April 1, 1993, the GCMCC recommended to COP the privatization of only 65% of the capital stock of PETRON, instead
of the 100% privatization previously recommended.
On June 10, 1993, in a letter addressed to Secretary Ernesto C. Leung, the COP Chairman, President Ramos approved the
privatization of PETRON up to a maximum of 65% of its capital stock.
The Petron Privatization Working Committee (PWC) was thus formed. It finalized a privatization strategy with 40% of the
shares to be sold to a strategic partner and 20% to the general public through the initial public offering and employees stock
option plan.
The Commission on Audit (COA) was consulted as to the valuation methodologies and privatization process. The
privatization plan was also presented to the COP on July 23, 1993, and to the President on July 31, 1993 for their approval.
On August 10, 1993, the President approved the 40% 40% 20% privatization strategy of PETRON. In the press release
on the presidential approval of the said privatization, the Office of the President commented:
For Petron, gaining a long-term strategic partner that will ensure stable crude oil supplies and/or advance
its technological and financial position will be a definite advantage. In addition, its partial privatization
will provide the flexibility and level playing field it needs to remain a major, and therefore influential
player in the oil industry. In 1992, Petron dominated the oil industry with a commanding 40% market
share (G.R. No. 112399, Rollo, p. 83).
35
The invitation to bid was published in several newspapers of general circulation, both local and foreign. The deadline for the
submission of proposals was set for December 15, 1993 at 5:00 P.M.
PETRON furnished the Office of the Solicitor General (OSG) with copies of the draft of the stock purchase agreement and
shareholders' agreement, with a request for the review of the same.
In a meeting of the Petron PWC held on December 15, 1993 at 12:00 noon, it decided that Westmont Holdings
(WESTMONT) was disqualified from participating in the bidding for its alleged failure to comply with the technical and
financial requirements for a strategic partner.
Salomon Brothers valued PETRON at US$600 million and the 40% block at US$240 million. For the entire Petron shares,
respondent Secretary Lazaro proposed a valuation of US$1.4 billion; Petron management, US$857 million; and Frances
Onate, a member of the Petron PWC, a valuation of US$743 million to US$1 billion.
Finally, the floor price bid for the 40% block was fixed at US$440 million.
The bids of Petroliam Nasional Berhad (PETRONAS), ARAMCO and WESTMONT were submitted while the floor price
was being discussed.
At about 6:15 P.M. and before the bids were opened, WESTMONT through its representative, Manuel Estrella, submitted
additional documents to prove its financial capability to carry out the purchase of the 40% block. The PNOC Board of
Directors adopted Resolution No. 865, S. 1993, rejecting the bid of WESTMONT for not having met the pre-qualification
criteria of financial capability, long-term crude supply availability, and technical and management expertise in the oil
business. It was further resolved that the bid submitted by WESTMONT would be returned unopened.
At 6:30 P.M., the other two bids were opened. The bid of ARAMCO was for US$502 million while the bid of PETRONAS
was for US$421 million. The PNOC Board of Directors then passed Resolution No. 866, S. 1993, declaring ARAMCO the
winning bidder.
On December 15, 1993, the OSG informed PETRON that the drafts of the stock purchase agreement and shareholders'
agreement contained no legally objectionable provisions and could be the basis for PETRON's negotiation with the winning
bidder.
On December 16, 1993, respondent Monico Jacob, in his capacity as President and Chief Executive Officer of PNOC,
endorsed to the COP the bid of ARAMCO for approval. The COP gave its approval on the same day. Also on the same day,
Manuel Estrella filed a complaint in behalf of WESTMONT with PNOC, questioning the award of the 40% block of Petron
shares to ARAMCO. The COP answered Estrella's letter on January 14, 1994, explaining why WESTMONT's bid was
returned unopened.
On February 3, 1994, PNOC and ARAMCO signed the Stock Purchase Agreement and on March 4, 1994, the two
companies signed the Shareholders' Agreement.
Public respondents submitted to the Securities and Exchange Commission (SEC) a proposed price for the initial public
offering of the 20% block set for July 18, 1994, the second phase of PETRON's privatization. PETRON proposed a price of
between P7.00 and P16.00 per share but the SEC approved a price of P9.00 per share.
II
PETRON questions the locus standi of petitioners to file the action (Rollo, pp. 479-484). Petitioners however, countered that
they filed the action in their capacity as members of Congress.
In Philippine Constitution Association v. Hon. Salvador Enriquez, G.R. No. 113105, August 19, 1994, we held that the
members of Congress have the legal standing to question the validity of acts of the Executive which injures them in their
person or the institution of Congress to which they belong. In the latter case, the acts cause derivative but nonetheless
substantial injury which can be questioned by members of Congress (Kennedy v. James, 412 F. Supp. 353 [1976]). In the
absence of a claim that the contract in question violated the rights of petitioners or impermissibly intruded into the domain of
the Legislature, petitioners have no legal standing to institute the instant action in their capacity as members of Congress.
However, petitioners can bring the action in their capacity as taxpayers under the doctrine laid down in Kilosbayan, Inc. v.
Guingona, 232 SCRA 110 (1994). Under said ruling, taxpayers may question contracts entered into by the national
government or government-owned or controlled corporations alleged to be in contravention of the law. As long as the ruling
36
in Kilosbayan on locus standi is not reversed, we have no choice but to follow it and uphold the legal standing of petitioners
as taxpayers to institute the present action.
III
A. Petitioners in G.R. Nos. 112399 and 115994 claim that the inclusion of PETRON in the privatization program
contravened the declared policy of the State to dispose of only non-performing assets of the government and government-
owned or controlled corporations which have been found unnecessary or inappropriate for the government sector to
maintain. They contend that PETRON is neither a non-performing asset nor is it unnecessary or inappropriate for the
government to maintain or operate (G.R. No. 112399, Rollo, pp. 3-4, 8-13; G.R. No. 115994, Rollo, pp. 14-17, 216-217).
To say that only non-performing assets should be the subject of privatization does not conform with the realities of economic
life. In the world of business and finance, it is difficult to sell a business in dire, financial distress. As entrepreneur Don
Eugenio Lopez used to advert to his younger executives: "Don't buy headaches. Don't even accept them if they are offered to
you on a silver platter." It is only in a fire sale that the government can expect to get rid of its non-performing assets, more so
if the sequencing pattern insisted by petitioners (initial public offering of 10% block to small investors) is followed.
While Proclamation No. 50 mandates that non-performing assets should promptly be sold, it does not prohibit the disposal of
the other kinds of assets, whether performing, necessary or appropriate.
Section 1 of the Proclamation reads:
Statement of Policy. It shall be the policy of the State to promote privatization through an orderly,
coordinated and efficient program for the prompt disposition of the large number of non-performing
assets of the government financial institutions, and certain government-owned or controlled corporations
which have been found unnecessary or inappropriate for the government sector to maintain.
The said provision classifies two types of assets: (1) Non-performing assets of government financial institutions; and (2)
Government-owned or controlled corporations which have been found unnecessary or inappropriate for the government
sector to maintain.
Under the Proclamation, it is the COP which is tasked with the duty of identifying and arranging the sale of government
assets. Section 5(1) of the Proclamation provides:
Powers and Functions. The Committee shall have the following powers and functions:
(1) To identify to the President of the Philippines, and arrange for transfer to the National Government
and/or to the Trust and the subsequent divestment to the private sector of (a) such non-performing assets
as may be identified by the Committee, and approved by the President, for transfer from the government
banks for disposal by the Trust or the government banks, and (b) such government corporations, whether
parent or subsidiary, and/or such of their assets, as may have been recommended by the Committee for
disposition, and Provided, that no such identification, recommendation or approval shall be necessary
where a parent corporation decides on its own to divest of, in whole or in part, or liquidate a subsidiary
corporation organized under the Corporation Code; Provided further, that any such independent
disposition shall be undertaken with the prior approval of the Committee and in accordance with the
general disposition guidelines as the Committee may provide; Provided, finally, that in every case the
sale or disposition shall be approved by the Committee with respect to the buyer and price only;
(Emphasis supplied).
xxx xxx xxx
After a long study by PNOC, PETRON was found to be "inappropriate or unnecessary" for the government to maintain
because refining and marketing of petroleum is an aspect of the industry which is better left to the private sector. In making
such finding, PNOC was guided by Section 4(a) of Proclamation No. 50, which provides:
. . . (a) divesting to the private sector in the soonest possible time through the appropriate disposition
entities, those assets with viable productive potential as going concerns, taking into account where
appropriate the implications of such transfers on sectoral productive capacities and market limitation, . . .
. These objectives are to be pursued within the context of furthering the national economy through
strengthened and revitalized private enterprise system.
37
The decision of PNOC to privatize PETRON and the approval of the COP of such privatization, being made in accordance
with Proclamation No. 50, cannot be reviewed by this Court. Such acts are exercises of the executive function as to which
the Court will not pass judgment upon or inquire into their wisdom (Llamas v. Orbos, 202 SCRA 844 [1991]).
Such identification by the COP of the government corporations to be privatized was not even necessary in the case of
PETRON. Under Section 5(1) of Proclamation No. 50 ". . . [N]o such identification, recommendation or approval shall be
necessary where a parent corporation decides on its own to divest of, in whole or in part, or liquidate a subsidiary
corporation organized under the Corporation Code; . . . ."
The only participation of the COP in the sale of the Petron shares by PNOC, the parent corporation, was the approval of the
buyers and price. The last sentence of paragraph (1) of Section 5 provides:
. . . Provided, finally, that in every case the sale or disposition shall be approved by the Committee with
respect to the buyer and price only.
PNOC, in privatizing PETRON, was simply exercising its corporate power to dispose of all or a portion of its shares in a
subsidiary. PNOC was created under P.D. No. 334, as amended by P.D. No. 927, which empowers it to acquire shares of the
capital stock of any other corporation and to dispose of the same shares.
Besides, if only non-performing assets are intended to be sold, it would be unnecessary to provide in the Proclamation for
the rehabilitation of government corporations to make the same more attractive to investors and potential buyers.
Section 5 (5) of Proclamation No. 50 provides:
In its discretion, to approve or disapprove, subject to the availability of funds for such purpose, the
rehabilitation of assets pending disposition by the Trust or any other government agency authorized by
the Committee, or the Trust with the approval of the Committee, Provided that, the budget for each
rehabilitation project shall be likewise subject to prior approval by the Committee.
Nowhere in the Proclamation can one infer that it prohibits a partial privatization of vital, appropriate and performing
corporations owned by the government.
Proclamation No. 50 contained an Annex listing the corporations to be privatized and those to be retained. While PETRON
was mentioned among the corporations to be retained, Section 6 of the Proclamation directed a continuing study on what
corporations should be recommended for privatization.
It is markworthy that the said Annex did not indicate the percentage of shares that will be privatized or that will be retained.
It can be interpreted to mean that all the shares of the corporations in the list to be privatized may be sold, while only some
of the shares of the other corporations may be sold. It is also worthy of note that the list of corporations to be retained added
the phrase "As of 31 August 1992," meaning that any of the corporations mentioned therein may be delisted after that date if
a study would justify such action.
The government is not disposing of all of its shares in PETRON but is retaining a 40% block. Together with the widely-held
20% of the private sector control of PETRON by the government is assured. With such equity in PETRON, the government
can also maintain a window to the oil industry and at the same time share in the profits of the company.
The privatization of PETRON could well be undertaken under laws other than Proclamation No. 50.
Of significance is Section 2(c) of R.A. No. 7181, which provides that:
Privatization of government assets classified as a strategic industry by the National Economic and
Development Authority shall first be approved by the President of the Philippines (Emphasis supplied).
Section 6, the repealing clause of R.A. No. 7181, expressly repealed Sections 3 and 10 of Proclamation No. 50 and all other
laws, orders and rules and regulations which are inconsistent therewith.
The only requirement under R.A. No. 7181 in order to privatize a strategic industry like PETRON is the approval of the
President. In the case of PETRON's privatization, the President gave his approval not only once but twice.
38
PETRON's privatization is also in line with and is part of the Philippine Energy Program under R.A. No. 7638. Section 5(b)
of the law provides that the Philippine Energy Program shall include a policy direction towards the privatization of
government agencies related to energy.
Under P.D. No. 334, the law creating PNOC, said corporation is granted the authority "[t]o establish and maintain offices,
branches, agencies, subsidiaries, correspondents or other units anywhere as may be needed by the Company and reorganize
or abolish the same as it may deem proper."
B. Petitioners next question the regularity and validity of the bidding (G.R. No. 112399, Rollo, pp. 97-99; G.R. No. 115994,
Rollo, pp. 17-24, 221). Petitioners in G.R. No. 115994 claim that the public bidding was tainted with haste and arbitrariness
and that there was a failed bidding because there was only one offeror (Rollo, pp. 17-24).
Taking the cudgels for WESTMONT, petitioners urge that said bidder was only given two days to conduct a review
PETRON's vast business operations in order to comply with the technical and financial requirements for pre-qualification.
Petitioners also complain that the pre-qualification and actual bidding were conducted on the same day, thus denying a
disqualified bidder an opportunity to protest or to appeal. They question the fixing of the floor price on the same day as the
public bidding and only after the bids had been submitted. Likewise, they say that the approval of the bid of ARAMCO by
the Assets Privatization Trust on the same day it is submitted is anomalous (G.R. No. 115994, Rollo, pp. 22-24).
On the claim that there was a failed bidding, petitioners contend that there were only three bidders. One of them,
PETRONAS, submitted a bid lower than the floor price while a second, failed to pre-qualify. Citing Section V-2-a of COA
Circular No. 89-296 dated January 27, 1989, they argue that where only one bidder qualifies, there is a failure of public
auction (G.R. No. 115994, Rollo, p. 22).
When a failure of bidding takes place is defined in Circular No. 89-296 of the Commission on Audit, which prescribes the
"Audit Guidelines on the Divestment or Disposal of Property and other Assets of the National Government Agencies and
Instrumentalities, Local Government Units and Government-Owned or Controlled Corporations and their Subsidiaries."
V. MODES OR DISPOSAL/DIVESTMENT:
xxx xxx xxx
2 Sale Thru Negotiation
For justifiable reasons and as demanded by the exigencies of the service, disposal thru negotiated sale
may be resorted to and undertaken by the proper committee or body in the agency or entity concerned
taking into consideration the following factors:
a. There was a failure of public auction. As envisioned in this Circular, there is a failure of public auction
in any of the following instances:
1 if there is only one offeror.
In this case, the offer or bid, if sealed, shall not be opened.
2 if all the offers/tenders are non-complying or unacceptable.
A tender is non-complying or unacceptable when it does not comply with the

prescribed legal, technical and financial requirement for pre-qualification.
Under said COA Circular, there is a failure of bidding when: 1) there is only one offeror; or (2) when all the offers are non-
complying or unacceptable.
In the case at bench, there were three offerors: SAUDI ARAMCO, PETRONAS and WESTMONT.
While two offerors were disqualified, PETRONAS for submitting a bid below the floor price and WESTMONT for technical
reasons, not all the offerors were disqualified. To constitute a failed bidding under the COA Circular, all the offerors must be
disqualified.
39
Petitioners urge that in effect there was only one bidder and that it can not be said that there was a competition on "an equal
footing" (G.R. No. 112399, Rollo, p. 122). But the COA Circular does not speak of accepted bids but of offerors, without
distinction as to whether they were disqualified.
The COA itself, the agency that adopted the rules on bidding procedure to be followed by government offices and
corporations, had upheld the validity and legality of the questioned bidding. The interpretation of an agency of its own rules
should be given more weight than the interpretation by that agency of the law it is merely tasked to administer.
The case of Danville Maritime, Inc. v. Commission on Audit, 175 SCRA 701 (1989), relied upon by petitioner, is
inappropriate. In said case, there was only one offeror in the bidding. The Court said: ". . . [I]f there is only one participating
bidder, the bidding is non-competitive and, hence, falls short of the requirement. There would, in fact, be no bidding at all
since, obviously, the lone participant cannot compete against himself."
C. According to petitioners, the law mandates the offer for sale of 10% of the Petron shares to small investors before a sale
of the 40% block of shares to ARAMCO can be made.
They theorize that the best way to determine the real market price of Petron shares was to first have a public offering as
required by R.A. No. 7181. The reverse procedure followed by private respondents, according to petitioners, gave
unwarranted benefits to private respondents because they bought the Petron shares at only P6.70 per share when the shares
fetched as high as P16.00 per share in the stock market (G.R. No. 115994, Rollo, pp. 24-27).
To bolster their theory, petitioners cite Section 2(d) of R.A. No. 7181, which provides:
A minimum of ten (10) percent of the sale of assets in corporation form shall first be offered to small
local investors including Filipino Overseas Workers and where practicable also in the sale of any
physical asset.
Petitioners also invoke the Implementing Guidelines promulgated to implement R.A. No. 7181, which provides:
In the sale of assets in corporate form, at least 10% of the total shares for privatization shall first be
offered to small local investors. Employees Stock Ownership Plans (ESOPS) and public offerings shall
count towards compliance with these provisions . . . (Sec. 3).
We agree with PETRON that the language of Section 2(d) of R.A. No. 7181 does not mandate any sequencing for the
disposition of shares in a government-owned corporation being privatized.
It is the unfortunate use of the word "first" in Section 2(d) of R.A. No. 7181 that threw petitioners off track and caused them
to misread the provision as one requiring a mandatory sequencing of the sale. As a wit once said, if a centipede would be
compelled to follow a prescribed sequencing of its steps, it could never move an inch.
A reasonable reading of the provision is that it merely gives a right of first refusal by the small investors vis-a-vis the 10%
block of shares. As far as the 10% block is concerned, the small investors shall have a first chance to subscribe thereto
whenever it is offered. The offer may be made before, after or simultaneous with the offer of the shares to strategic partners
or major investors depending on the prevailing condition of the market. Certainly, in an initial public offering, it is good
judgment and business sense that should prevail, rather than the rigid and inflexible rules of step one, step two, etc.
The Rules and Regulations issued by the COP to implement R.A. No. 7181 set aside 10% of the shares subject of the
privatization to be offered first to the small local investors, and made clear that as far as said 10% block is concerned, the
small investors shall have the first crack to buy the same. These Rules have been consistently applied in previous
privatizations, and they constitute a contemporaneous construction and interpretation of a law by the implementing,
administrative agency. Such construction is accorded great respect by the Court (Nestle Philippines, Inc. v. Court of Appeals,
203 SCRA 504 [1991]).
What Congress clearly mandated in R.A. No. 7181 was that at least 10% of the shares of a privatized corporation must be
reserved and offered for sale to the general public. In the deliberation of the Congressional Committee on Government-
Owned and Controlled Corporations on December 18, 1991, the Committee spoke of having the 10% set aside without
impeding the privatization process.
Note that when the bidding of the 40% block of Petron shares had been announced, the 10% block for offering to the small
local investors had been identified, reserved and set aside. This is more than a substantial compliance with the mandate of
law.
40
There is great risk in first making an initial public offering of the 10% block before bidding out the 40% block to a strategic
partner. It may happen that the price of the shares offered initially to the public plunges below the offering price approved by
the SEC.
The sensitive market forces involved in initial public offerings render unrealistic any legislative mandate to follow a
sequencing in the sale of government-owned shares in the market. The legislators, practical men of affairs as they are, were
aware of the vagaries, variables and vicissitudes of the stock market when they enacted R.A. No. 7181. It is more reasonable
to read the said law as leaving to the COP and the government corporations concerned to determine the sequencing of the
sale to strategic investors and the general public. To require the offer of 10% to the general public before the sale of a block
to a strategic partner may delay or even impede the entire privatization program.
The clear policy behind Proclamation No. 50 is to give the COP and APT maximum flexibility in their operation to ensure
the most efficient implementation of the privatization program.
Under Section 5(3) of the Proclamation, full powers are given the COP to establish "mandatory as well as indicative
guidelines for . . . the disposition
of . . . assets." Under Section 12(2) thereof, the APT is given the "widest latitude of flexibility . . . particularly in the areas
of . . . disposition . . . ."
Petitioners can not rely on Opinion No. 126, Series of 1992 dated September 28, 1992. The query posed to the Secretary of
Justice in said opinion was the legality of the plan of National Development Corporation to pass on to the prospective buyer
of its shares in a local bank the responsibility of complying with the requirement prescribed in Section 2(d) of R.A. No. 7181
that a minimum of 10% of the shares of a corporation "shall first be offered to small local investors . . . ." The Secretary of
Justice naturally opined that said proposal could not legally be done on the principal ground that the "observance of this legal
requirement is incumbent upon the disposition entity, which in this case is NDC, but as contemplated, the sale to small
investors shall be undertaken by the private buyer of the [local bank's] shares." The query posed to the Secretary of Justice
was not about the sequencing of the sale of the 10% block.
We can not see how the failure to dispose the 10% block to the general public before the sale of the 40% block to ARAMCO
gave the latter unwarranted benefits.
Actually ARAMCO paid a total of P14,671,985,306.00 for the acquisition of the Petron shares. This aggregate amount
represents in peso terms: (1) the US$502 million winning bid paid by ARAMCO to PNOC on March 4, 1994; and (2) the
additional amount of US$30,327,987.00 remitted on July 11, 1994, representing the "purchase price adjustment" stipulated
in the Stock Purchase Agreement. Consequently, ARAMCO's acquisition cost was P7.336 per share.
A fair comparison between the ARAMCO price and the IPO price should take into consideration the levels of financial, legal
and miscellaneous costs directly related to the ARAMCO purchase, including the consequent opportunity cost or income to
PNOC and the National Government, had the proceeds been invested in Philippine Treasury Bills from March 4 and July 11,
respectively, to September 7, 1994. On this basis, the effective proceeds on the ARAMCO purchase amount to P7.8559 per
share, and not P6.70 as claimed by petitioners (G.R. No. 115994, Rollo, pp. 506-507). On the other hand, the seller's
expenses incurred in connection with the IPO, including taxes and other fees paid to the National Government, reached a
total of P833.081 million or P0.833 per share (G.R. No. 115944, Rollo, p. 507).
To make further a fair comparison between the two prices, the proceeds from the IPO should be net of PNOC's share in
PETRON's net income from March to August 1994, because in effect it was giving up this amount in favor of the IPO
investors. As projected, the total net income of PETRON from March to August 1994 is P1,870,500.00. Twenty percent of
this is P374,100.00 which translates to a per share reduction of P0.3741 from the IPO proceeds. This would further erode the
effective proceeds from the IPO sale to P7.7929 per share.
Finally, cash dividends of P2 billion and property dividends of P153 million, or a total of P2.153 billion was declared and
transferred to PNOC before the ARAMCO purchase was effected. Imputing such dividends would translate the effective
proceeds to PNOC from the ARAMCO sale to P8.2865 per share (P7.8559 plus P0.4306 [or 40% of P2.153 Billion]). Using
this figure, the IPO proceeds of P7.7929 per share is definitely lower than the ARAMCO proceeds of P8.2865.
Unlike the ordinary buyers of shares listed in the stock exchange, ARAMCO, as a strategic investor, had to spend for the due
diligence review of the business and records of PETRON.
Aside from this monetary considerations, PNOC derived the following value-added benefits:
1) PNOC is assured of an adequate supply of crude oil. The element of uncertainty on sources of crude oil supply is reduced,
if not eliminated, ARAMCO being the world's largest known producer and exporter of five different types of crude oil.
41
2) PNOC's refinery can achieve optimum efficiency because of better crude slates.
3) ARAMCO has to hold on to the Petron shares for the next five years. Aside from its stabilizing effect on the market price
of Petron shares, this holding period will prevent ARAMCO from deriving any speculative gains. Unlike ARAMCO, the
buyers of the IPO can sell their shares any time without constraints.
4) ARAMCO's presence in PETRON has a tremendous, unquantifiable influence in investor's confidence in PETRON as a
publicly-listed company. This confidence could not be generated if PETRON's partner has a bad track record.
5) ARAMCO will assist PNOC in raising funds to finance the more than P12 billion in projected capital expenditures
required over the next four years to make PETRON competitive.
The pricing of shares of stock is a highly specialized field that is better left to the experts. It involves an inquiry into the
earning potential, dividend history, business risks, capital structure, management, asset values of the company; the prevailing
business climate; the political and economic conditions; and a myriad of other factors that bear on the valuation of shares
(Van Horne, Financial Management and Policy 652-653 [8th ed.]); Leffler and Farwell, The Stock Market 573-575 [3rd
ed.]).
D. Finally, petitioners contend that PETRON is a public utility, in which foreign ownership of its equity shall not exceed
40% thereof and the foreign participation in the governing body shall be limited to their proportionate share in its capital.
According to petitioners, ARAMCO is entitled only to a maximum of four seats in the ten-man board but was given five
seats (G.R. No. 112389, Rollo, pp. 30-64; G.R. No. 115994, Rollo, pp. 30-31, 202-212).
This issue hinges on whether the business of oil refining is a "public utility" within the purview of Section 11, Article XII of
the 1987 Constitution (adopted from Sec. 5, Art. XIV of the 1973 Constitution), which provides:
No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the laws
of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such
franchise, certificate or authorization be exclusive in character for a longer period than fifty years.
Neither shall any such franchise or right be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress when the common good so requires. The State shall
encourage equity participation in public utilities by the general public. The participation of foreign
investors in the governing body of any public utility enterprise shall be limited to their proportionate
share in its capital and all the executive and managing officers of such corporation or association must
be citizens of the Philippines (Emphasis supplied).
Implementing Section 8 of Article XIV of the 1935 Constitution, the progenitor of Section 5 of Article XIV of the 1973
Constitution, is Section 13(b) of the Public Service Act, which provides:
The term "public service" includes every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional, or accidental and done for general business purposes, any common carrier,
railroad, street railway, . . . and other similar public services: . . . .
More pertinent is Section 7 of R.A. No. 387, the Petroleum Act of 1949, which provides:
Petroleum operation a public utility. Everything relating to the exploration for and exploitation of
petroleum which may consist naturally or below the surface of the earth, and everything relating to the
manufacture, refining, storage, or transportation by special methods of petroleum, as provided for in this
Act, is hereby declared to be of public utility (Rollo, p. 519; Emphasis supplied).
A "public utility" under the Constitution and the Public Service Law is one organized "for hire or compensation" to serve the
public, which is given the right to demand its service. PETRON is not engaged in oil refining for hire and compensation to
process the oil of other parties.
Likewise, the activities considered as "public utility" under Section 7 of R.A. No. 387 refer only to petroleum which is
indigenous to the Philippines. Hence, the refining of petroleum products sourced from abroad as is done by Petron, is not
within the contemplation of the law.
We agree with the opinion of the Secretary of Justice that the refining of imported crude oil is not regulated by, nor is it
within the scope and purview of the Petroleum Act of 1949. He said:
42
Examination of our statute books fails to reveal any law or legal provision which, in explicit terms, either
permits or prohibits the establishment and operation of oil refineries that would refine only imported
crude oil (Opinion, No. 267, S. 1955).
WHEREFORE, the petitions are DISMISSED.
Danville vs. COA
In the petition for review in G.R. No. 85285, petitioner seeks to set aside the letter-directive of respondent Commission on
Audit (COA for brevity) disapproving the result of the public bidding held by the Philippine National Oil Company (PNOC
for brevity) of the sale of its tanker-vessel "T/T Andres Bonifacio" on the ground that only one bidder submitted a bid and to
direct COA to approve the said sale.
In the early part of 1988, the PNOC, through its Board of Directors, passed a resolution authorizing the sale by public
bidding of its fourteen-year old turbine tanker named "T/T Andres Bonifacio" due to old age and the high cost of
maintenance. Accordingly, a Disposal Committee was created to undertake the auction sale subject to existing rules and
regulations of the COA. Under the "Amended Terms and Conditions of the Bidding," 1 its floor price was pegged at US$14
million with sealed bids to be dropped at the designated bid box not later than the scheduled bidding date on September 1,
1988 together with the bid deposit at 10% of the floor price.
Notice of the bidding was advertised in newspapers of general circulation, here and abroad, for 3 consecutive days. Sixty-
five foreign embassies were also formally notified.
The bidding did not take place as originally scheduled and instead it was held on September 15,1988 with representatives of
various local and international companies in attendance. Petitioner Danville Maritime, Inc., a Liberian corporation, was the
sole bidder with a bid of US$14,158,888.88. The Disposal Committee declared the bid of petitioner to be the winning bid
and directed it to transmit to the PNOC 10% of their bid which they immediately complied with.
On September 17,1988, the PNOC and petitioner executed a "Memorandum of Agreement" for the sale of the "T/T Andres
Bonifacio" which provides among others that:
1. The sale of the Vessel is subject to the Seller obtaining all clean Philippine Government's approvals
and/or clearances required under existing laws, rules and regulations including such approvals from the
Office of the President of the Philippines, the Commission on Audit (COA), The Board of Directors of
PNOC, the Maritime Industry Authority (MARINA), the Philippine Coast Guard (PCG), The Central
Bank of the Philippines (CB), (Export Licence), and any Philippine documentation necessary, within
thirty (30) calendar days from the date of this Agreement. In the event of the approvals from either of the
government agencies mentioned aboved being unobtainable within the state period, or such request for
approval is denied, then this Agreement shag be null and void and the Seller is not liable for any
damages whatsoever. 2
On September 20, 1988, the COA thru its State Auditor IV Tobias P. Lozada issued a memorandum to the Chairman of the
Disposal Committee advising the latter to wit 1) that the proposed contract must first be submitted to COA for review before
it is signed; 2) that the public bidding conducted suffers from the deficiency of lack of competition as there was only one
bidder and; 3) that the alternative mode of award, i.e., negotiation with the lone bidder may not be resorted to as there has
been less than two public biddings held. 3
In a letter of September 28, 1988, the PNOC thru its President Manuel Estrella requested for the formal approval of the COA
of the sale of the subject vessel in favor of petitioner. 4
On October 6, 1988, the PNOC received a telex from Fearnly Finans, a Norwegian company, offering to buy the vessel on
negotiated sale for a price of at least US$1 million higher than the bid given on September 15, 1988 by petitioner. 5 This
offer was rejected by the PNOC in a telex of the following day. 6
On October 12,1988, the PNOC received the now questioned letter- directive of the COA dated October 10, 1988 denying
the request of PNOC for approval of the proposed sale to the petitioner which reads as follows:
October 10,1988
President Manuel A. Estrella
43
Philippine National Oil Company
Makati, Metro Manila
Dear President Estrella:
This refers to your letter dated September 28, 1988 requesting the approval of this Commission of the sale of the vessel
'Andres Bonifacio' in favor of Danville Maritime Ltd. of Liberia.
The only issue to be resolved is whether a single bid, which satisfies the minimum price requirement, may be accepted
without undertaking a second bid solicitation as required in COA Circular No. 86-264 as follows:
b. If the first bidding fails, readvertise and conduct a second bidding.
c. If the second bidding fails, a negotiated sale may be resorted to subject to the approval of the
Commission on Audit.' (Sec. 4.1.4, COA Circular No. 86-264).
Bidding Failure
The aforecited COA Circular No. 86-264, which is entitled 'General Guidelines on the divestment of assets of government-
owned and/ or controlled corporations, and their subsidiaries,' does not provide what constitute a failure in public bidding.
However, the 1988 Amendments to the Implementing Rules and Regulations to P.D. No. 1594 (Prescribing Policies,
Guidelines, Rules and Regulations for Government Infrastructure Contracts) provides, in so far as pertinent, as follows:
IB 2-3 EVALUATION OF BIDS
xxx
At the time of opening of bids, there shall be at least two (2) competing bidders. In case there is only one bidder, the bid shall
be returned unopened and the project shall be advertised anew for bidding. Should after rebiding, there be still only one
bidder, the project, may be undertaken by administration or thru negotiated contract giving preference to the lone bidder.
While P.D. No. 1594 pertains only to infrastructure service contracts, its provisions governing the evaluation of bids partake
of a National Government policy in the matter of public biddings, and hence are equally applicable to those conducted for
assets disposition.
Another Interested Buyer
Only last week, I received a telex from Per Olav Karlsen, Managing Director, Fearnley Finans (Prosjekt),
manifesting interest in buying the vessel T/T Andres Bonifacio for a guaranteed price of at least US $ l
million higher than the bid offer of Danville Maritime Ltd. In the same telex it was informed that a
separate communication was sent to the President, PNOC, quoted as follows:
RE: SALE OF T/T ANDRES BONIFACIO
WE WOULD LIKE TO REITERATE OUR INTEREST IN BUYING THE T/T ANDRES BONIFACIO.
WE ARE WILLING TO GUARANTEE A PRICE OF AT LEAST US$ 1 MILLION HIGHER THAN
THE BID GIVEN ON SEPTEMBER 15,1988, ON A NEGOTIATED SALE.
On the same day you will recall that we discussed over the phone the matter of Mr. Karlsen's offer,
which you described as a 'nuisance offer,' and to which I replied that the only way to find out if such is
so, is to accept Mr. Karlsen's offer. It, therefore, surprises us no end to receive a copy of your cable
replay to Mr. Karlsen dated October 7, 1988 categorically rejecting his offer of at least US$ 1 million
over and above the bid of Danville Maritime Ltd., purportedly for the reason that existing government
policy as well as the disposal rules approved by ... Board do not allow PNOC to accept the terms and
conditions under which you have offered to buy the tanker.
COA Position
44
This Commission cannot see its way clear why the Disposal Committee took upon itself to award the
vessel, in apparent haste, to the lone bidder Danville Maritime, Ltd. in spite of the aforecited regulations.
On top of this is your perfunctory rejection of a bid offer which will benefit your Corporation with US$
1 million more in terms of sales proceeds. In order, therefore, to cast aside any cloud of doubt as to the
motives of the management of PNOC especially in view of the significantly higher price offer of Fearnly
Finans, coupled with the fact that the Government is presently so concerned about transparency in
government transactions, this Commission hereby directs a public rebidding of the vessel 'Andres
Bonifacio,' copy of the notice of such rebidding furnished Fearnly Finans.
Please be guided accordingly.
Very truly yours,
(SGD.)EUFEMIO C. DOMINGO
Chairman 7
The following day, petitioner was informed that the PNOC Board of Directors had ordered a rebidding for the sale of the
vessel pursuant to the COA directive.
In a letter dated October 13, 1988, petitioner requested the PNOC to join them in a contemplated appeal to this Court to
question the COA directive. 8 This request was not answered by the PNOC. Hence, this petition for certiorari wherein
petitioner questions the letter-directive of the COA dated October 10, 1988.
Simultaneously with this petition, a separate complaint for injunction and damages was filed by petitioner before the
Regional Trial Court of Makati seeking to enjoin the PNOC from conducting a rebidding and/or from selling to other parties
the vessel "T/T Andres Bonifacio" due to the COA directive disapproving the proposed sale to petitioner which is docketed
as Civil Case No. 88-2194, to extend the period of compliance with paragraph No. 1 of the Memorandum Agreement and for
damages. 9
The principal question in this petition is whether or not the public respondent COA committed a grave abuse of discretion
when it ruled that there was a failure of bidding when only one bid was submitted and subsequently ordered a rebidding.
Petitioner's argument is as follows: The COA was in grave error in its perception that when there is only one actual bid
submitted, there is consequently no competition and thus there is a "failure of bidding." Competition as an essential element
of public bidding merely means that the bidding be conducted fairly and openly, with equal opportunity among potential
bidders to submit bids without being stifled by factors other than those contained in properly promulgated guidelines. In the
bidding conducted on September 15, 1988, every potential bidder was given a fair and equal opportunity to bid. The fact that
it was only petitioner which submitted a bid does not affect the validity of the bidding conducted, more so, since it was
conducted in the presence of and without objections from the COA representative.
Petitioner further argues that the disposal of government assets is governed by Section 79 of P.D. 1445, otherwise known as
"The Government Auditing Code of the Philippines" which provides:
SECTION 79. Destruction or sale of unserviceable property. When government property has become
unserviceable for any cause, or is no longer needed, it shall, upon application of the officer accountable
therefor, be inspected by the head of the agency or his duly authorized representative in the presence of
the auditor concerned and, if found to be valueless or unsaleable, it may be destroyed in their presence. If
found to be valuable, it may be sold at public auction to the highest bidder under the supervision of the
proper committee on award or similar body in the presence of the auditor concerned or other duly
authorized representative of the Commission, after advertising by printed notice in the Official Gazette,
or for not less than three consecutive days in any newspaper of general circulation, or where the value of
the property does not warrant the expense of publication, by notices posted for a like period in at least
three public places in the locality where the property is to be sold. In the event that the public auction
fails, the property may be sold at a private sale at such price as may be fixed by the same committee or
body concerned and approved by the Commission.
and COA Circular No. 86-264, prescribing the general guidelines for the divestment or disposal of assets of government-
owned and/or controlled corporation, and their subsidiaries, which sets forth the following procedure:
4. 1.4.
45
xxx xxx xxx
b. If the first bidding fails, readvertise and conduct a second bidding.
c. If the second bidding fails, a negotiated sale may be resorted to subject to the
approval of the Commission on Audit.
Petitioner points out that both P.D. 1445 and COA Circular No. 86- 264 do not define "failure of public bidding," so the
COA committed a grave error when it declared that a one-bidder situation constitutes such "failure of public bidding."
COA in its questioned letter-directive acknowledged the fact that COA Circular No. 86-264 does not define what constitutes
a failure of public bidding. Nevertheless, as aforestated COA applied the provisions of the 1988 Amendments to the
Implementing Rules and Regulations to P.D. 1594 (Prescribing Policies, Guidelines, Rules and Regulations for Government
Infrastructure Contracts), hereinabove reproduced in the COA letter as follows-
IB 2-3 EVALUATION OF BIDS
xxx
At the time of opening of bids, there shall be at least two (2) competing bidders. In case there is only one
bidder, the bid shall be returned unopened and the project shall be advertised anew for bidding. Should
after rebidding, there be still only one bidder, the project may be undertaken by administration or thru
negotiated contract giving preference to the lone bidder.
The COA opined that while P.D. No. 1594 pertains only to infrastructure contracts, its provisions governing the evaluation of
bids partake of a national government policy in the matter of public bidding, and hence, are equally applicable to those
conducted for disposition of government assets.
The COA earlier informed the PNOC in its Memorandum dated September 20, 1988 that the award of the contract to a lone
bidder suffers from the deficiency of lack of competition, which is a condition sine qua non in public biddings. For this
reason it declared the bidding conducted to be a failure in its subsequent letter of October 10, 1988.
We see no reason to disturb the interpretation given by the COA to the term "public bidding" and what constitutes its
"failure." No less than the Constitution has ordained that the COA shall have exclusive authority to define the scope of its
audit and examination, establish the techniques and methods required therefore, and promulgate accounting and auditing
rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant,
or unconscionable expenditures, or use of government funds and properties. 10
The COA, realizing that the applicable law and rules and regulations as to the disposal of government assets failed to provide
for a clear definition of "failure of public bidding," of government assets, properly considered the definition under the
implementing rules of P.D. 1594 which governs infrastructure projects to be applicable in the disposition of government
assets.
There is no doubt that awards of public contracts thru public bidding is a matter of public policy as can be gleaned from
Section 4 of P.D. 1594 which provides that construction projects shall generally be undertaken by contract after "competitive
public bidding." Section 79 of P.D. 1445 likewise requires public auction to be the primary mode of disposal of public assets.
By its very nature and characteristic, a competitive public bidding aims to protect the public interest by giving the public the
best possible advantages thru open competition. 11 Another self-evident purpose of public bidding is to avoid or preclude
suspicion of favoritism and anomalies in the execution of public contracts. 12 Public bidding of government contracts and for
disposition of government assets have the same purpose and objectives. Their only difference, if at all, is that in the public
bidding for public contracts the award is generally given to the lowest bidder while in the disposition of government assets
the award is to the highest bidder.
It must be in this light, that the COA declared the subject public bidding to be a failure in this case, applying the same policy
as in government infrastructure contracts.
The phrase "public auction" or "public bidding" imports a sale to the highest bidder with absolute freedom for competitive
bidding. 13 Competitive bidding requires that there be at least two (2) bidders who shall compete with each other on an equal
footing for winning the award. If there is only one participating bidder, the bidding is non-competitive and, hence, falls short
of the requirement. There would, in fact, be no bidding at all since, obviously, the lone participant cannot compete against
himself. 14
46
Moreover, the "Amended Terms and Conditions of Bidding/ Sale" in this case provides.
6. If there is/are any other qualified bid(s) submitted lower than by not more than US$500,000 from the
highest qualified bid submitted, an open auction shall be conducted exclusively among all of such
bidders, inclusive of the bidder making the highest (sealed) bid; however, only those who submitted bids
of at least US$14,000,000 shall be qualified to participate therein. The open auction shall be conducted
between 5:00 P.M. to 8:00 P.M. of the bidding date upon opening of the sealed bids; for this reason, it is
suggested that all bidders be represented during the bid-opening processes, possessed of sufficient
authorizations from their respective principals to bid the latter in the open auction, the original copies of
which authorizations should be readily available for examination by the Seller as to the authenticity and
sufficiency thereof.
xxx x x x xxx
9. The bid deposit of losing bidders will be returned to them as soon as the highest bid has been
determined. However, the next highest bidder may elect to leave his deposit if he wishes to automatically
succeed the highest bidder should the highest bidder default on its obligations under paragraph 12
hereof. 15
From the foregoing terms and conditions of the bid one can easily glean that it is contemplated that there
be at least two bidders. This is evident from the foregoing provisions that when the next highest qualified
bid submitted is lower than by not more than $ 500,000 from the highest qualified bid submitted, an
open auction shall be conducted exclusively among all such bidders; and that the next highest bidder
instead of withdrawing his bid deposit may elect to leave his deposit so he may automatically succeed
the highest bidder should the latter default in his obligation.
Under COA Circular No. 88-264 hereinabove reproduced, it is provided that if the first bidding fails, a second bidding must
be conducted after advertising same. It is only when the second bidding fails that a negotiated sale may be undertaken. Thus
a negotiated sale with a single bidder is allowed only after the second bidding fails. The only logical conclusion therefrom is
that in the lst and 2nd bidding, there should at least be two (2) bidders, otherwise there is a failure of bidding.
Petitioner acknowledges that in a public bidding there must be competition that is legitimate, fair and honest invoking the
following citations:
Competition must be legitimate, fair and honest. In the field of government contract law, competition
requires, not only bidding upon a common standard, a common basis, upon the same thing, the same
subject matter, the same undertaking,' but also that it be legitimate, fair and honest; and not designed to
injure or defraud the government. Any form of agreement entered into between bidders which has a
tendency to restrain natural rivalry and competition of the parties, or operates to stifle or suppress
competition is against public policy and therefore void. As stated by the Court in Re Salmon, 145 Fed.
649, 652. 'It is a uniform, inflexible rule of law that all such combinations, the effect of which is to stifle
competition in bidding at public or private sales, or in the letting of public works ... are immoral, vicious,
and void." (Lucenario, Ibid, pp. 70-71; citing Flynn Const., et al., Leininger, et al., supra 43 Am. Jur.
774; Hunt v. Elliot, 80 Ind. 245, 41 Am. Repl. 794; Pike v. Balch, 38 Mc. 302, 61 Am. Dec. 248; Smith
v. Ullman, 58 Md. 183, 42 Am. Rep. 329; 2 R.C.L. Sec. 18, p. 134; 45 A.L.R. 549; As to the rule on the
matter in England and Canada, see annotation in 45 A.L.R. 553; 20 Ann. Cas. 387.)
Competitive bidding is an essential element of an auction sale, and such a sale should be conducted
fairly and openly with full and free opportunity for competition among bidders. It is the policy of the law
that a fair price be received by the parties interested in the property sold and that this be not prevented by
the stifling of competition among bidders.' (7 Am. Jur. 2d p. 246). 16
It is imperative that such "extraneous" factors as "any conduct, artifice, agreement or combination the purpose and effect of
which is to stifle fair competition and chill bidding" 17 must be avoided in public bidding. Examples of these stifled biddings
are the following:
l) Agreement to combine interest and divide the profit;
2) Agreement to withdraw from the bidding;
3) Agreement to bid on separate portion of the work;
47
4) Pre-arranged or rigged bidding;
5) Combination among bidders and a public official; and
6) Agreement to submit identical or uniform bids. 18
No doubt a one bidder situation tends to stifle fair competition. The requirement of having at least two bidders prevents any
such conduct, artifice, agreement or combination that jeopardizes the integrity of the bidding.
Well settled is the rule that the construction by the office charged with implementing and enforcing the provisions of a
statute should be given controlling weight. 19 In the absence of error or abuse of power or lack of jurisdiction or grave abuse
of discretion already conflicting with either the letter or the spirit of a legislative enactment creating or charging a
governmental agency with the administration and enforcement thereof, the action of the agency would not be disturbed by
the judicial department. 20
In the case at bar, there is no showing that the COA committed grave abuse of discretion. COA has clearly shown its position
to the PNOC in its questioned letter-directive advising the latter of its misgivings as to why the award was given to the lone
bidder inspite of regulations previously made known to PNOC and to top it all, why the PNOC perfunctorily rejected a much
higher bid which appears to be more beneficial to the corporation. Rather than condemn the COA as petitioner proposes, the
COA should be commended for its zeal and care in insuring that the disposition of the subject vessel would be in a manner
most advantageous to the government. A rebidding removes any suspicion that may arise out of the sale of the vessel to
petitioner under present circumstances.
The Court holds that a second public bidding is ordained so that all government transactions would be competitive and above
board.
Under COA Circular No. 86-257, a proposed contract for the disposal of capital assets shall be submitted for examination
and review of the head of the auditing unit concerned before the same is signed by the contracting government official. The
transaction constituting the disposal of capital assets shall be audited before the transaction is consummated. 21 COA had
advised the PNOC in its memorandum of September 20,1988 that the proposed contract of sale for the vessel should be
reviewed by COA before it is signed. Unfortunately, PNOC proceeded with the execution of the Memorandum of Agreement
much earlier, that is on September 17, 1988, before the COA was asked to pass upon the same. Nevertheless, it is therein
stipulated that the sale of the vessel is subject to the seller (PNOC) obtaining all required clearances which includes approval
of the COA, otherwise, the agreement shall be null and void. 22
Petitioner cannot argue that the bidding was valid as the COA representative then present made no objections to the same.
The role of said COA representative at the time of bidding was only as a witness to insure documentary integrity, i.e., by
ensuring that every document is properly Identified and/or marked and that the records of the bidding are securely kept. 23
Nevertheless as above stated, soon after the bidding, the COA sent its memorandum to the PNOC that there is a failure of
public bidding due to the one-bidder situation. Moreover, said memorandum of agreement with the PNOC was still subject
to COA approval as embodied in the same and in consonance with existing rules and regulations. Nonetheless, the
subsequent disapproval of the sale by COA did not thereby bar petitioner from participating in the rebidding ordered by the
COA.
The Court takes note of the fact that simultaneously with the filing of the instant petition on October 17, 1988, as above
related petitioner filed a similar complaint for injunction and damages against the PNOC before the Regional Trial Court of
Makati. This is clearly a case of forum shopping which calls for the dismissal of both actions, in this Court as well as in the
lower court. 24 A reading of the allegations of the complaint filed with Regional Trial Court and those of the instant petition
show that both actions arose from the same transaction, involving the same subject matter, facts and circumstances.
In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein PNOC in
the case before the lower court and the COA in the case before this Court and sought what seems to be different reliefs.
Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10, 1988 and to direct said
body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner, while in the
complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other
parties the vessel "T/T Andres Bonifacio," and for an extension of time for it to comply with the paragraph I of the
memorandum of agreement and damages. One can see that although the relief prayed for in the two (2) actions are ostensibly
different, the ultimate objective in both actions is the same, that is, the approval of the sale of vessel in favor of petitioner,
and to overturn the letter-directive of the COA of October 10, 1988 disapproving the sale.
Thus, on March 3, 1989, COA filed in this Court the petition for prohibition with prayer for a temporary restraining order,
docketed as G.R. No. 87150, against RTC Judge Leticia P. Morales who is the Presiding Judge of Branch 40, of the RTC of
Makati, Metro Manila to whom said RTC case (Civil Case No. 88-194) is assigned and the herein petitioner in G.R. No.
48
85285, on the ground that under the Constitution only this Court can pass upon a decision of the COA as the letter-directive
in question 25 so that the respondent court has no jurisdiction over the subject matter. On March 8, 1989, this Court required
respondents to comment on the petition and issued a restraining order enjoining the respondent judge from proceeding with
the case. Said comment has been submitted.
In the meanwhile petitioner in G.R. No. 85285 asked leave to file a reply to the respondents' comment. The reply having
been filed by petitioner, upon order of the court, respondent filed a rejoinder. A supplementary reply was also filed by
petitioner.
In the recent case of Palm Avenue Realty Development Corporation, et al. vs. Presidential Commission on Good
Government, et al., 26 this Court held
...The filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court
despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-shopping.
Both actions unquestionably involve the same transactions, the same essential facts and circumstances.
The petitioners' claim of absence of Identity simply because the PCGG had not been impleaded in the
RTC suit and the suit did not involve certain acts which transpired after its commencements is specious.
In the RTC action, as in the action before this Court, the validity of the contract to purchase and sell of
September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the propriety of
implementing the same (by paying the pledgee banks the amount of their loans, obtaining the release of
the pledged shares, etc.) were the basic issues. So, too, the relief was the same the prevention of such
implementation and/or the restoration of the status quo ante. When the acts sought to be restrained took
place anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC, suit did
not become functus officio. It remained an effective vehicle for obtention of relief and petitioners'
remedy in the premises was plain and patent: the filing of an amended and supplemental pleading in the
RTC suit, so as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined
but nonetheless done. The remedy was certainly not the institution of another action in another forum
based on essentially the same facts. The adoption of this latter recourse renders the petitioners amenable
to disciplinary action and both their actions, in this Court as well as in the Court a quo is dismissible.
The said RTC case should therefore be dismissed for forum shopping as well as the herein petition in G.R. No. 85285.
And with more reason, as emphasized in the petition in G.R. No. 87150, the RTC court has no jurisdiction to review a
decision of the COA under the Constitution. 27 This is a matter within the exclusive jurisdiction of this Court. Although
apparently said Civil Case 88-2194 against PNOC was intended to stop a rebidding of the vessel in question, necessarily in
the same proceeding, the trial court must determine if the COA committed a grave abuse of discretion in disapproving the
sale of the vessel to respondent Danville Maritime, Inc. This it has no power to do.
WHEREFORE, the herein petition in G.R. No. 85285 is hereby DISMISSED for lack of merit. On the other hand, the
petition in G.R. No. 87150 is granted, the restraining order this Court issued on March 8, 1989, is hereby made permanent
and the said RTC Civil Case No. 88-2194 of the Regional Trial Court of Makati is hereby ordered DISMISSED. This
decision is immediately executory.
SO ORDERED,
49

Session 2 Gov Con

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Session 2 Gov Con

Загружено:

Авторское право:

Доступные форматы

ITFP vs.

"INVITATION TO APPLY FOR ELIGIBILITY AND TO BID

Only bids from the following entities shall be entertained:

a. Duly licensed Filipino citizens/proprietorships;

e. Cooperatives duly registered with the Cooperatives Development Authority.

2.) Track Record:

RESOLVED moreover, that:

B. Pre-Bid conference shall be on February 18, 2003; and

2) The aforementioned documents will be available at the following offices:

a) Voters Validation: Office of Comm. Javier

b) Automated Counting Machines: Office of Comm. Borra

c) Electronic Transmission: Office of Comm. Tancangco"10

"25. Determination of Eligibility of Prospective Bidders

27. Comparison of Bids

Hence, the present Petition.16

"1. The COMELEC awarded and contracted with a non-eligible entity; x x x

"3. Petitioners have locus standi.

This Courts Ruling

The Petition is meritorious.

First Procedural Issue:

Locus Standi of Petitioners

Second Procedural Issue:

Alleged Prematurity Due to Non-Exhaustion of Administrative Remedies

The Court is not persuaded.

Some Observations on the BAC Report to the Comelec

"(1) when there is a violation of due process,

(2) when the issue involved is purely a legal question,

(5) when there is irreparable injury,

(7) when to require exhaustion of administrative remedies would be unreasonable,

(8) when it would amount to a nullification of a claim,

Main Substantive Issue:

Validity of the Award to MPC

A. Matters pertaining to the identity, existence and eligibility of MPC as a bidder

Commissioners Not Aware of Consortium

Sufficiency of the Four Agreements

A Memorandum of Agreement between MPEI and SK C&C

A Memorandum of Agreement between MPEI and WeSolv

A "Teaming Agreement" between MPEI and Election.com Ltd.

A "Teaming Agreement" between MPEI and ePLDT

Deficiencies Have Not Been "Cured"

The Contract itself along with its appendices

The Tender Proposal submitted by MPEI

Enforcement of Liabilities Problematic

Enforcement of Liabilities Under the Civil Code Not Possible

Eligibility of a Consortium Based on the Collective Qualifications of Its Members

DOST Technical Tests Flunked by the Automated Counting Machines

TEST RESULTS MATRIX47

Technical Evaluation of Automated Counting Machine

MEGA-PACIFIC TOTAL INFORMATION

1. Does the machine have an accuracy rating of at least 99.995 percent

At COLD environmental condition

At NORMAL environmental conditions

At HARSH environmental conditions

4. Uninterruptible back-up power system, that will engage immediately to allow

5. Machine reads two-sided ballots in one pass?

Note: This particular

7. Stores results of counted votes by precinct in external (removable) storage device?

Note: This particular

8. Data stored in external media is encrypted?

Note: This particular

10. CPU speed is at least 400mHz?

Note: This particular

11. Port to allow use of dot-matrix printers?

12. Generates printouts of the election returns in a format specified by the