GENARO R. REYES CONSTRUCTION, INC. AND UNIVERSAL DOCKYARD LTD., PETITIONERS, VS. THE HONORABLE COURT OF APPEALS, THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, JOSE P. DE JESUS, R…

Herein petitioners Genaro G. Reyes Construction, Inc. (or GGRCI)
and Universal Dockyard Ltd. (or UDL) seek the nullification of the decision
dated October 20, 1992 and the resolution dated January 20, 1993 of the Eighth
Division of the Court of Appeals in CA-G.R. SP No. 28632. The said decision and resolution affirmed
the two orders issued by the Regional Trial Court of the National Capital
Judicial Region (Branch 15) dated June 22, 1992 and August 5, 1992 in its Civil
Case No. 92-61345 which denied herein petitioners’ application for a temporary
restraining order and a writ of preliminary injunction to enjoin the Department
of Public Works and Highways (DPWH) and then DPWH Secretary Jose P. de Jesus,
and others therein impleaded from enforcing and implementing the notice of
pre-termination of petitioners’ contract for the implementation of Lower Agusan
Development Project, Stage I, Phase 1, Butuan City, or any part thereof, to any person; and prohibiting said
defendants from bidding said project or any part thereof, or awarding it to any
person.

On March 1, 1992, the Government through respondent DPWH on one
hand, and the joint venture of Genaro G. Reyes Construction, Inc. (GGRCI),
Universal Dockyard, Ltd. (UDL), a British construction firm, Home Construction
(HC), and JPL Construction (JPLC), (represented by petitioner Genaro G. Reyes,
as President of lead contractor GGRCI) on the other hand, entered into a
“Contract for the construction of the flood control facilities and land
improvement works of the Lower Agusan Development Project, Stage 1, Phase 1,
Butuan City” (Annex B, Petition; pp. 75-88, Rollo).

In the bidding which preceded the awards by the DPWH of the
contract to the GGRCI, et al. Joint Venture, petitioners submitted the lowest
bid below the Approved Government Estimate (AGE) of P492,563,998.00.

The following bids were submitted:

1. Petitioner —
P445,858,196.02 — 9.45% below approved government estimate of P492,563,998.00.

2. D.M. Wenceslao &
Associates — P659,980,029.00 33.99% above government estimate.

3. Hanil Development
Corporation — P696,524,897.91 – 41% above government estimate.

4. F.F. Cruz and China
Stage Engineering — backed out.

5. C.M. Pancho and A.M.
Oreta – disqualified.

On May 8, 1992 the Notice to Proceed (Annex C, Petition; p. 89,
Rollo) was issued by DPWH Undersecretary Romulo Del Rosario. It was received by petitioners on May 9,
1992 and they forthwith mobilized and deployed their men and equipment. The notice to proceed specifically stated
that the contract would take effect not later than thirty days from its receipt
by petitioners.

On April 23, 1992, the other respondents, DPWH Project Engineers
Japanese Eiichiro Araide and Engineer Aquiles C. Sollano recommended
termination of the contract alleging that as of that date “the project
work progress is already 9.50 percent behind schedule (negative slippage)”
(Annex F, Petition; pp. 92-93, Rollo). Four days later, or on April 27, 1992, Consultant Eiichiro Araide gave
another figure of 9.8% negative slippage (Annex G, Petition; pp. 93-96, Rollo).

Under the law, specifically Presidential
Decree No. 1870, the Government (herein represented by the DPWH) is authorized
to take over delayed infrastructure projects only whenever a contractor is
behind schedule in its contract and incurs 15% or more negative slippage
based on its approved PERT/CM, and the implementing agency, at the discretion
of the Minister concerned, may undertake the administration of the whole or a
portion of the unfinished work or have the whole or portion of such unfinished
work done by another contractor through a negotiated contract at the current
valuation price.

Also, Department Order No. 102, Series of 1988 of the DPWH,
provides:

To insure timely and effective remedial steps in response to delays
in project implementation, all Project Managers (PMs), Regional Directors (RDs)
and District Engineers (DEs) concerned shall undertake the following calibrated
actions where contracts for infrastructure projects reach the levels of
negative slippage (attributable to the contractor) indicated below:

1. Negative Slippage of 5% (Early Warning
Stage). The contractor shall be given a
warning and required to submit a “catch-up” program to eliminate the
slippage. The PM/RD/DE shall provide
temporary supervision and monitoring of the work.

2. Negative Slippage of 10% (“ICU”
Stage). The contractor shall be given a
second warning and required to submit a detailed action program on a
fortnightly (two weeks) basis which commits him to accelerate the work and
accomplish specific physical targets which will reduce the slippage over a
definite time period. Furthermore, the
contractor shall be instructed to specify the additional input resources —
money, manpower, materials, machines, and management in which he should
mobilize for this action program. The
PM/RD/DE shall exercise closer supervision and meet the contractor every other
week to evaluate the progress of work and resolve any problems and bottlenecks.

3. Negative Slippage of 15% (“make or
break” stage). The contractor
shall be issued a final warning and required to come up with a more detailed
program of activities with weekly physical targets together with the required
additional input resources. On-site
supervision shall be intensified, and evaluation of project performance will be
done at least once a week. At the same
time the PM/RD/DE shall prepare contingency plans for the termination and
rescission of the contract and/or take over of the work by administration or
contract.

4. Negative
Slippage beyond 15% (“terminal” stage). The PM/RD/DE shall contract and/or take over of the remaining
work by administration or assignment to another contractor/appropriate
agency. Proper transitory measures
shall be taken to minimize work disruptions, e.g.., take over by administration
while rebidding is going on.

Because of negative slippage of 9.50% as of April 23, 1992, or
9.86% as revised on April 27, 1992, respondent Project Director Antonio A.
Alpasan wrote a memorandum (Annex H, Petition; p. 98, Rollo) dated May 8, 1992
to respondent DPWH Undersecretary Romulo Del Rosario recommending either of two
alternatives:

1.  Negotiate
the entire balance of the work with the second lowest bidder, but if the second
lowest bidder is blacklisted, then to the third lowest bidder; or

2.  Rebid the whole balance
of the work or divide it into contract packages.

On May 14, 1992, DPWH Acting Secretary Gregorio Alvarez notified
petitioner GGRCI that its contract is being terminated (Annex D, Petition; p.
90, Rollo). Also on May 14, 1992,
respondent DPWH Undersecretary Romulo Del Rosario wrote respondent Secretary De
Jesus a memorandum (Annex I, Petition; p. 99, Rollo), “recommending that
the balance of the work be offered to the third lowest bidder, the Korean firm
of Hanil Development Corporation and that in the event that the negotiation
with Hanil fails, the balance of the work be repackaged into several components
for rebidding as soon as possible.

At this juncture, note must be taken of the circumstance that the
bid price of Hanil of P696,524,897.96 was 41.4% over and above the approved
government estimate (AGE) of P492,563,998.00 for the project. Hanil’s bid was higher by P254,666,701.94
vis-a-vis petitioners’ bid and contract price.

On May 14, 1992, respondent DPWH Secretary De Jesus wrote
petitioners that its contract for the project was terminated (Annex E, Petition;
p. 91, Rollo). On May 22, 1992,
petitioners wrote a letter requesting reconsideration of the termination order,
pointing out, inter alia, that:

…the bid of Hanil Corp. when the project was bidded 15 October
1990 was already P696,524,897.00, 41.4% above the Approved Agency Estimate
(AAE), which amounts to P492,563,998.00. Categorically, we are taking a price difference of P203,960,849.00,
which is obviously much to the disadvantage of the Department and the Filipino
people.

In comparison to the contract price of P445,858,196.00, 9.48% below
the AAE, the government and
Filipino people stand to earn a savings of P46,705,802.00 and P250,666,651
compared to Hanil’s bid price.

… Reviewing the incurred negative slippage in detail, it can
clearly be seen that the bulk can be attributed to the unaccomplished spoilbank
and dredging section of the project.

The spoilbank section, supposedly 100 hectares in area had right of
way problems; that is, only 40 hectares or 40% of the total area have been
acquired. (Annex J, Petition; pp. 100-­101, Rollo.)

The request for reconsideration was reiterated on May 26, 1992
and June 14, 1992 (Annexes K and L, Petition; pp. 102-106, Rollo) inviting the
DPWH’s attention that: (a) based on
Hanil’s bid price the government stands to lose P250,666,651.00, apart from the
additional P100 Million worth in escalation price as indicated in the
recommendation of respondents Alpasa (Annex H, Petition) and Del Rosario (Annex
I, supra); (b) the delay and failure of the
DPWH Project Office (PMO) to procure the 100 hectares right of way for the
project’s spoilbank area (only 40 hectares was acquired by the DPWH) as
provided for in the tender documents, thereby contributing to a negative
slippage equivalent to 3% due to the suspension of work in that area because of
right of way problems.

On June 2, 1992, DPWH Secretary De Jesus terminated the contract
of the GGRCI, et al. Joint Venture (Annex M, Petition; p. 107, Rollo).

On October 8, 1992, respondent DPWH Undersecretary Romulo del
Rosario sent a letter (Annex N, Petition; pp. 108-110, Rollo) to Mr. Hideo
Tanaka, Chief Representative of Japan’s Overseas Economic Cooperation Fund (or
OECF) recommending that the termination of petitioners’ contract be lifted upon the following observations:

… some reasons contributed to the delay
covering the negative slippage was also due to the government’s fault, such as:

a.   Overlapping
of duties and responsibilities among the expatriates, the local consultants and
the field PMO.

b.   Unauthorized variation order with the project
manager and the expatriate consultant issuing it without prior authority from
the central office reducing the length of the flood wall from 5.825 km. to
1.868 km. and change it to levee, with a total cost reduction of P75,458,091.03.

c.   The right of way problem where the project
has a so-called spoiled bank section which is supposed to be 100 hectares and
the government has to secure the right-of-way. But as of the present, only about 40 hectares or 40% has been acquired,
out of which, about 20 hectares are contiguous while the remaining are
scattered. Because of this the
contractor found it difficult to pursue the project as it is quite unrealistic
to dispose of the dredged materials. Aside from this, there is also the right-of-way problems encountered in
the floodwall and levee construction.

3.    With the termination effected, the
contractor filed a case in the trial court twice denied by the trial
court. Right now the case has been
appealed to the Court of Appeals.

4.    The DPWH sent an investigating team to
verify the allegations of the contractor on the faults of the Government and
found to have been true.

5.    To resolve the issue, we have studied and
came up with three options to continue the project as presented in our report
to Secretary De Jesus (copy attached). Considering the advantages and disadvantages presented, we recommend
that the termination order be lifted and the contract with the joint venture be
pursued on the premise that the vigorous action of the contractor in pursuing
the case, it is evident that they have all the intention to finish the
project. Otherwise all their actions
would prove nothing and futile.

The above recommendation was based on the report of Andres
Canlas, DPWH Project Manager IV,
dated September 8, 1992 (Annex C-2, Urgent Motion for Issuance of Temporary
Restraining Order; p. 196, Rollo) that the negative slippage of the project was caused not only by the
contractor but also by the government side.

On May 28, 1992 GGRCI, et al. Joint Venture filed a case for
prohibition, specific performance, and injunction against respondent DPWH as
the sole defendant before the Regional Trial Court of Manila (Civil Case No.
92-61345). The joint venture
subsequently filed an Amended Petition impleading additional defendants
(respondents herein) and including claims for damages.

On June 25, 1992 and August 5, 1992, the regional trial court
issued orders denying the joint venture’s prayer for preliminary injunction
citing Section 1 of Presidential Decree No. 1818 providing that:

No court in the Philippines shall have jurisdiction to issue any
restraining order, preliminary injunction, or preliminary mandatory injunction
in any case, dispute or controversy involving any infrastructure project or a
mining, fishery, forest or other natural resource development of the government
or any public utility operated by the government including any other public
utilities for the transport of the goods or commodities, stevedoring and
arrastre contracts, to prohibit any person or persons, entity or government
official from proceeding with, or continuing the execution or implementation of
any such project, or the operation of such public utility, or pursuing any
lawful activity necessary for such execution, implementation or operation.

On August 11, 1992 the joint venture filed with the Court of
Appeals a petition for certiorari and prohibition with a prayer for a
writ of preliminary injunction to set aside the trial court’s orders.

The petition in CA-G.R. 28632 was dismissed by respondent Court
of Appeals in a decision dated October 20, 1992 (Annex A, Petition; pp. 68-75,
Rollo) and a subsequent motion for reconsideration was denied in a resolution
dated January 20, 1993 (Annex A-1, Petition; p. 77, Rollo).

Much reliance is placed on the prohibition embodied in Section 1
of Presidential Decree No. 1818 which forbids any Court in the Philippines,
including this Court, from issuing any restraining order, preliminary
injunction, or preliminary mandatory injunction in any case, dispute or
controversy involving, as in the case at bar, an infrastructure project, to
prohibit any person or entity from continuing with the execution or
implementation of such project. It is
on the basis of such provision that the door is being closed on petitioners’
prayer for redress.

Such proposition is not well-taken.

Against the backdrop of the undisputed facts that (a) respondents
terminated petitioners’ contract based on slippage of 9.86% and (b) the
contributory fault of the government which substantially added to the slippage
— the primary question that presents itself is whether the termination was
proper even if the slippage had not reached the 15% level mentioned by the law
as to justify termination. This is a
legal, not a factual question. In
consequence, if the termination be adjudged unjustified, are the courts
powerless to intervene due to the caveat under the aforequoted Section 1
of Presidential Decree No. 1818?

Although we entertain serious doubts in regard to the
constitutionality of Presidential Decree No. 1818, we nonetheless feel that
said decree finds no application to the case at bench. It will be observed that what Presidential
Decree No. 1818 proscribes is the issuance of a writ of injunction to impede
or, in the language of the statute:

. . . to prohibit any person or persons, entity or government
official from proceeding with, or continuing the execution or implementation
of any such project, or the operation of such public utility, or pursuing
any lawful activity necessary for such execution, implementation or operation.

In the case at bench, the net effect of
granting the petition is not to stave off implementation of a
government project but precisely to say to public respondents that they ought
to implement the award and should not thus cancel the contract of petitioners
inasmuch as the negative slippage is less than the minimum level specified by
Presidential Decree No. 1870. Hence,
the proscription under Presidential Decree No. 1818 is inapplicable since we
are not restraining implementation of a government project. Verily, we are instructing public
respondents to allow petitioners to proceed with the project.

In the determination of whether respondents have acted within the
bounds of the law when they terminated the contract based on the admitted 9.86%
slippage, resort must be had to the very law, Presidential Decree No. 1870 and
DPWH Circular No. 102, upon which respondents anchor their authority to
terminate the contract.

The pertinent provisions of Presidential Decree No. 1870 give the
implementing agency (in this instance, the DPWH) authority to terminate the
contract whenever the contractor is behind schedule in its contract work and
incurs 15% or more negative slippage based on its approved PERT/CPM. Section 1 of Presidential Decree No. 1870
reads thus:

1. Whenever a
contractor is behind schedule in the contract work and incurs 15% or more
negative slippage based on its approved PERT/CPM, the implementing agency,
at the discretion of the Ministry concerned, may undertake by administration
the whole or a portion of the unfinished work done by another qualified
contractor through negotiated contract at the current valuation prices.

Now Circular No. 102, Series of 1988, promulgated to implement
Presidential Decree No. 1870, provides four stages of negative slippage with
which calibrated action, at each stage, has to be undertaken as remedial steps
to correct delays in project implementation, as follows:

1) Negative slippage of 5% (“early
warning” stage). Contractor is
given a warning;

2) Negative slippage of 10% (“ICU”
stage). The contractor is given a
second warning.

3) Negative slippage of 15% (“make or
break” stage). The contractor
shall be issued a final warning;

4) Negative slippage beyond 15%
(“terminal” stage). The
PM/RD/DE shall initiate termination/rescission of the contract and/or take-over
of the remaining work by administration or assignment to another
contractor/appropriate agency.

The discretion, therefore, of the DPWH to terminate or rescind
the contract comes into play only in the event the contractor shall have
incurred a negative slippage of 15% or more. In the instant case, the negative slippage of petitioners at the time they
were served the notice of termination was only 9.86%. Hence, respondents violated the law and committed an illegal act
and abused their discretion when they terminated petitioners’ contract based on
negative slippage of only 9.86%. Such
wrongful and illegal act is in derogation of petitioners’ right not to be
deprived of property without due process of law. Petitioners’ contract with the DPWH covering the project in question is a proprietary right
within the meaning of the Constitution and can only be rescinded strictly in
accordance with the governing law, Presidential Decree No. 1870, as implemented
by DPWH Circular No. 102. And relative
to this axiom, it has been previously emphasized that courts may declare an
action or resolution of an administrative authority to be illegal because it
violates or fails to comply with some mandatory provision of the law or because
it is corrupt, arbitrary, or capricious (Borromeo vs. City of Manila and
Rodriguez Lanuza, 62 Phil. 512; 516 [1935]; Annotation on the Power of
Judicial Review of Public Bidding and Awards of Government Contracts, 50 SCRA
491; 498 [1973])

The Office of the Solicitor General maintains that under
Paragraph 2 of Presidential Decree No. 1870, the DPWH may take over or award a
project to another contractor whenever work is not done on schedule, meaning
anywhere from zero slippage to 15% slippage. This would lead to hopeless contradiction between Paragraph 1 and
Paragraph 2. A law cannot possibly
negate in one paragraph what it grants in another. Paragraph 2 can only be interpreted as allowing discretion after
the 15% limit in Paragraph 1 is exceeded. It cannot be doubted that in cases of force majeure, revolution,
anomalous transactions in the DPWH itself, and other similar reasons, the Department
Head may still extend the contract beyond 15% slippage. Only then may sound discretion come in.

Paragraph 3 of Presidential Decree
No. 1870 refers to specific causes — (a) refusal of the contractor to
provide tools, equipment, and workers; (b) subletting or assigning the contract
to subcontractors without DPWH permission; and (c) willful violation of
covenants and agreements. Not one of
the above exists in the case at bench. Respondents cannot, as they allege, rely on the ordinary rules of
contract under the Civil Code that if the obligor does not comply with the
terms and conditions of the contract, the obligee has the right to ask for
rescission with damages. A special law
fixes the condition of slippage at 15%. This has to be followed. The law
on contracts cannot also penalize the obligor for faults of the obligee.

The 15% slippage required by Presidential Decree No. 1870 can be
likened to the 15-day reglementary period for appealing that cannot co-exist
with a contradictory provision allowing a court, in its discretion, to reduce the
period to one or two days. Fifteen days
means fifteen days. Fifteen percent
slippage does not mean 9.5%.

The six (6) instances cited as capable of offsetting or negating
the first requirement of 15% slippage would give the DPWH blanket prerogative
to terminate a contract at anytime and on the slightest pretext, including
those created by DPWH itself as in this case. It is a grant of arbitrary power. It is delegation running riot.

The requirement of public bidding might as well be
abolished. DPWH officials are compelled
by law to accept only the best bid in the award of contract. However, what is the point in conducting a
public bidding if, only a short while later, a winning bidder can be
disqualified on a one or two percent slippage caused by DPWH itself or a claim
that certain tools and equipment have not been provided or a pretext that any
term or condition has been violated. The 15% limiting point must be followed. The other provisions come in only if they caused the slippage to
go beyond 15%.

It is argued that this Court is not a trier of facts. However, neither can this Court ignore facts
coming from DPWH itself. Except for
general statements and conclusions, there is nothing presented by respondents
to show that the logical and convincing assertions of petitioner are not true.

According to respondents, petitioners failed to mobilize the
minimum equipment for the project and to send a sufficient number of
engineers. Respondents state that from
Day One, there should have been thirty-four (34) pieces of light and heavy
equipment but that petitioners dispatched only fourteen (14) to the job
site. Precisely, all these alleged
shortcomings of petitioners were clearly taken into consideration in arriving at
a conclusion that the negative slippage is only 9.50%.

Petitioners, of
course, deny the allegation of delay. They state that they mobilized surveyors, engineers, and laborers;
brought all the necessary equipment to the job site, constructed bunk houses,
relocated buildings such as those of the Pagatpatan Elementary School. Petitioners’ engineers were old hands of
DPWH and familiar with every aspect of the construction. The best evidence that the statements of
petitioners are more accurate than those of respondents is that the DPWH
Investigating Team went to the
jobsite and thereafter filed a lengthy report. It was on the basis of the report that then Undersecretary del Rosario
later recommended that the termination order be reconsidered and revoked and
that petitioners should be allowed to continue with the construction under the
original contract. The Undersecretary
did not mention what respondents now allege in their memorandum.

Common sense also dictates that 34 pieces of light and heavy equipment cannot all be used
simultaneously on Day One. More so,
because the right of way was admittedly not secured by DPWH. The machinery would only be idle or get in
each other’s way.

Assuming respondents to be correct that there was a three-month
delay in commencing the job, the slippage is still 9.86% inspite of all
petitioners’ alleged shortcomings. Petitioners claim to have mobilized the men and the materials on time
and attribute the delay to DPWH but emphasize that “whatever dates are
chosen and whatever causes are adduced by the respondents and given the worst
scenario, the slippage does not go beyond 9.85%, still not a basis to cancel
the contract” (p. 4, Petitioners’ Memorandum dated February 2, 1994).

Respondents keep on blaming petitioners for delay but their own DPWH
Investigating Team and the second highest official of the DPWH laid the blame
on the government engineers and purchasing officials.

The right of way problem calls for special mention. The letter of DPWH Undersecretary Romulo del
Rosario dated October 8, 1992 recommended the lifting of the cancellation of
the contract, because of, among other things, the right-of-way problem.

It was ascertained during the hearing conducted by the Court on
January 12, 1994 that of the 100-hectare spoiled bank section, only 40 hectares
have been acquired. Half of this 40
hectares is broken down into small parcels separate from each other. In the other half, DPWH paid the landowners
but took no steps to attend to the tenants who refused and continue to refuse
to vacate their farms unless compensated. The dredging on the river shall result in 1,300,000 cubic meters of mud,
silt, and debris flowing into the area. Unless a ring embankment is constructed around the entire 100 hectares,
the mud and silt would inundate neighboring areas. Petitioners cannot possibly start dredging until after the 100
hectares are acquired because this would drown or bury the people, work
animals, and farms in the still-to-be acquired 60 hectares, not to mention the
tenants who refuse to leave their farms in the 40 hectares already purchased
until compensation benefits are given to them.

The Solicitor General has also failed to explain the purchase of
non-essential areas. There was no
explanation for the sudden change from a reinforced concrete floodwall to an
earthen levee along a six kilometer stretch of the project. The concrete floodwall calls for the
purchase of a 10-meter wide strip of land along it. The earthen levee requires a 35-meter wide adjacent strip of
land. Anywhere up to 25 meters wide and
six kilometers long of expensive urban land had to be purchased to cover up the
use of right-of-way funds where it is not essential.

There should likewise be an explanation why an extra P71,000,000
in addition to the earlier amount of P51,000,000 had to be appropriated for
right of way.

What is appalling and seemingly anomalous is the recommendation
of respondent officials to offer the project to Hanil Corporation, the third lowest bidder, and whose bid had
been previously disqualified for being 41.40% over and above the government
estimate for the project of P492,563,998.00. Indeed, the Hanil bid was P696,524,897.96, or higher by P254,666,701.94
as compared to petitioners’ bid and contract price of P445,858,196.02.

Respondents’ wrongful termination of the contract which
petitioners agreed to execute, and have in fact executed partially, at the
price of P445,858,196.02 and in offering it to Hanil, a disqualified bidder
which previously entered with a bid of P696,524,817.96, would result in a financial
loss to the government in the amount of no less than P254,666,201.94, Hence,
respondents would seem to appear to be entering into a negotiated contract
grossly disadvantageous to the government.

The intent of the law (P.D. 1870) in allowing the government to
take over delayed construction projects with negative slippage of 15% or more
is primarily “to save money and to avoid dislocation of the financial
projections and/or cash flow of the government”, as clearly stated in the
3rd preambulatory clause of said decree, as follows:

Whereas, any delay in the completion of the contract in accordance
with the approved PERT/CPM and/or contract time as stipulated, will not only dislocate
the financial projections and/or the cash flow of the Government on these
projects, but also unduly prejudice the public interest sought to be
subserved by the timely completion of the infrastructure project.

The termination of petitioners’ contract does not, therefore,
subserve public interest. On the other
hand, it would result in a huge dislocation of the financial projections and/or
cash flow of the Government. On this
score, it has been said as a general doctrine that though the law be fair on
its face, and impartial in appearance, yet if it is applied and administered by
the public authorities charged with their administration and thus representing
the government itself, with an evil eye and unequal hand so as practically to
make unjust and illegal discrimination, the denial of equal justice is still
within the prohibition of the Constitution. (Yick Wo vs. Hopkins, 128 U.S. 356; Ex parte Virginia, 100
U.S. 339; Henderson vs. Mayor, 92 U.S. 259; Chy Lung vs. Freeman,
92 U.S. 175; Ned vs. Delaware, 103 U.S. 320; Soon Hing vs. Crowley,
113 U.S. 703).

If the unjust and unlawful acts of respondents are not struck
down and respondents are not restrained, the Government stands to lose from
Three Hundred Fifty Million (P350 Million) Pesos additional expenditures. Under Presidential Decree No. 1870 when the
project is rebidded or awarded through negotiated contract, compensation is at “current
valuation price” (Sec. 1, P.D. 1870). Considering the increase in prices of labor and materials, it is a
certainty that any new bidder would ask for prices much higher than the already
high prices which the losing bidders offered in the March 1, 1991 bidding. Tremendous loss of taxpayers’ money thus is
inevitable. This Court cannot,
therefore, close its eyes to the resultant evil which will be inflicted not
only upon petitioners, but also on the Filipino people and the dissipation of
taxpayers’ money arising from the unjust termination of petitioners’ contract
and the rebidding to or renegotiation with other parties of the project. Public interest and the stakes of the
Government dictate the issuance of the writs of injunction and prohibition
restraining respondents from enforcing the order terminating petitioners’
contract for the construction of the flood control facilities and land
improvement works of the Lower Agusan Development Project, Stage I, Phase 1.

It may be emphasized that the law fixing the stages of negative
slippage before termination of a contract may be effected and the undisputed
loss of P350 million if the termination is pushed through are not the only
reasons why this petition should be granted.

By the very admissions of respondent DPWH, such as the October 8,
1992 letter of Undersecretary Roberto del Rosario to the Japanese consultant,
earlier cited, the main cause of the delay was due to respondent DPWH officials
and not to petitioner. A total of P51
million was appropriated and released to acquire rights of way or to buy the
lands upon which the flood control project would be constructed. The farmers and landowners refused to move
out when the funds to compensate them were not forthcoming. This was the main cause of the 9.6% slippage
and it is not attributable to petitioners.

The DPWH Team which
investigated the causes of slippage further found that there was an overlapping
of duties and responsibilities among the Japanese consultant, the local
consultants, and the Field Project Manager, thus sustaining petitioners’ claim
of unwarranted delays in the approval of work and equipment, not to mention
changes of orders which left petitioners wondering what to do and whom to
follow.

There is ample evidence in the record before us to show that the DPWH was responsible for the main
causes of the delay. As stated by
petitioners, DPWH, in failing to
comply with its obligations seemingly wants the contractors to work in a most
unorthodox if not unthinkable manner to justify irregular purchases
which should not have been made.

In fine, not only was the slippage within legally tolerable
limits but the causes of the slippage are attributable to respondent DPWH officials. The inflexible stance of respondents towards
the compromise offers of petitioners, even before this Court ordered them to
explore such a possibility, but especially after we asked them to do so,
convinces the Court all the more that there are irregularities which
respondents are sweeping under the rug. The record also shows that even after the stop-work order was given and
while petitioners were trying to have it reconsidered, they continued working
full force on the project thus minimizing or eliminating the slippage which
caused the disputed problems.

WHEREFORE, the petition is hereby GRANTED and the decision
dated October 20, 1992, as well as the resolution dated January 20, 1993 of the
Court of Appeals in CA-G.R. SP No. 28632 are hereby SET ASIDE.

SO ORDERED.

Bidin and Romero JJ., concur.

Feliciano, (Chairman), and
Vitug, JJ., see dissenting opinion.