SUBIC BAY METROPOLITAN AUTHORITY, ET AL., PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

Subic Bay Metropolitan Authority versus Commission on Audit

The Case

This is a petition for certiorari under Rule 64 of the Rules of Court, filed by the Subic Bay Metropolitan Authority and several of its officers against the Commission on Audit. The petitioners ask the Supreme Court to annul and set aside the Commission's decision and resolution, which affirmed a notice of disallowance covering the payment of two million four hundred twenty thousand six hundred three pesos and ninety-nine centavos for the procurement of special and field uniforms of the Authority's employees. The case matters because it settles two things a Bar candidate must know cold: how the six-month appeal period to the Commission on Audit is counted when the last day falls on a weekend, and how strictly the alternative methods of procurement under the Government Procurement Reform Act are policed.

Procedural History

The Special Audit Team of the Subic Bay Metropolitan Authority issued a notice of disallowance against several officers, department heads, and suppliers. The petitioners appealed to the Commission on Audit Regional Office Number Three, which denied the appeal and affirmed the disallowance in full. Undaunted, the petitioners filed a petition for review before the Commission on Audit proper. The Commission dismissed the petition outright, holding that it was filed out of time, and declared the regional decision final and executory. A motion for reconsideration was denied. The petitioners then came to the Supreme Court by petition for certiorari under Rule 64, raising grave abuse of discretion and invoking the interest of substantial justice.

Facts

In 2009, the Authority procured uniforms through regular public bidding, and Topnotch Apparel Corporation won as the lowest bidder. The Authority later claimed, however, that the quality and craftsmanship of the uniforms were compromised. In a memorandum dated December 10, 2009, the Human Resource Management Officer recommended that departments with special and field uniforms be allowed to procure their own uniforms under a set of guidelines, that the budget for the uniforms be placed in a trust fund, and that payment be made only upon delivery and acceptance. The Administrator approved the recommendations and constituted a Uniform Committee.

Thereafter, the different department heads solicited price quotations from accredited suppliers, negotiated, and executed contracts, awarding to the supplier with the lowest quotation who met their specifications. The Uniform Committee supplied the pro-forma contracts and the process flowchart. After delivery and acceptance, the contractors were paid out of the trust fund.

On March 26, 2012, the Special Audit Team issued a notice of disallowance for the total amount, citing violations of the procurement law and its implementing rules: the requirements were not in the annual procurement plans, the procurement and bidding results were not posted in the electronic bulletin board, the process was not conducted by a duly created Bids and Awards Committee, and uniforms were procured through negotiated procurement without adhering to the set criteria. The disallowance named the officers, department heads, and suppliers, including the Administrator who approved payment.

Issues

• Whether or not the petition for review before the Commission on Audit was filed on time, and whether or not the procedural rules should be relaxed in the interest of substantial justice.
• Whether or not the petitioners validly resorted to negotiated procurement as an alternative method under the procurement law and its implementing rules.
• Whether or not the funds used to procure the uniforms were private funds, being the employees' uniform allowances pooled in a trust fund, and thus outside the reach of the procurement law.

Applicable Provisions

Section 48 of Presidential Decree Number 1445, the Government Auditing Code, provides:

SECTION 48. Appeal from decision of auditors. — Any person aggrieved by the decision of an auditor of any government agency in the settlement of an account or claim may within six months from receipt of a copy of the decision appeal in writing to the Commission.

This fixes the six-month period within which the petitioners had to appeal the notice of disallowance to the Commission.

Section 1 of Rule 22 of the Rules of Court provides:

If the last day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day.

This rule governs the counting of the period, applied by analogy and in a suppletory manner to appeals under the auditing code.

Section 48 of Republic Act Number 9184 provides:

SECTION 48. Alternative Methods. — Subject to the prior approval of the Head of the Procuring Entity or his duly authorized representative, and whenever justified by the conditions provided in this Act, the Procuring Entity may, in order to promote economy and efficiency, resort to any of the following alternative methods of Procurement:

(e) Negotiated Procurement — a method of Procurement that may be resorted under the extraordinary circumstances provided for in Section 53 of this Act and other instances that shall be specified in the IRR, whereby the Procuring Entity directly negotiates a contract with a technically, legally and financially capable supplier, contractor or consultant.

In all instances, the Procuring Entity shall ensure that the most advantageous price for the government is obtained.

This is the provision the petitioners invoke, and it confines negotiated procurement to extraordinary circumstances.

Section 53 of the implementing rules provides:

SECTION 53. Negotiated Procurement. Negotiated Procurement is a method of procurement of goods, infrastructure projects and consulting services, whereby the procuring entity directly negotiates a contract with a technically, legally and financially capable supplier, contractor or consultant only in the following cases:

(b) In case of imminent danger to life or property during a state of calamity, or when time is of the essence arising from natural or man-made calamities or other causes where immediate action is necessary to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public utilities.

(c) Take-over of contracts, which have been rescinded or terminated for causes provided for in the contract and existing laws, where immediate action is necessary to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public utilities.

These are the only grounds the Court examines, and the petitioners failed to bring themselves within either.

Section 54 of the same rules provides:

SECTION 54. Terms and Conditions for the Use of Alternative Methods. —

d) For item (b) of Section 53 of the Act and this IRR-A, the negotiation shall be made with a previous supplier, contractor or consultant of good standing of the procuring entity concerned, or a supplier, contractor or consultant of good standing situated within the vicinity where the calamity or emergency occurred. The award of contract shall be posted at the G-EPS website, website of the procuring entity, if any, and in conspicuous place within the premises of the procuring entity.

This supplies the additional posting and negotiation requirements that the petitioners also failed to meet.

Ruling

On the first issue, the Court found the petition partially meritorious and relaxed the procedural rules. Counting from receipt of the regional decision, the last day fell on a Saturday, and the petitioners filed on the next working day. The Court held that the computation rule in the Rules of Court may be applied by analogy or in a suppletory manner under the auditing code, in the interest of expeditious justice. Even granting the Commission's own count, which placed the last day on a Friday, the Court found genuine reasons to liberally apply the rules, because stubborn obedience to them would defeat rather than serve the ends of justice. The case, therefore, deserved adjudication on the merits.

On the second issue, the Court ruled against the petitioners. Public bidding is the general rule; alternative methods are mere exceptions, allowed only in highly exceptional cases and under the conditions set by law. It was incumbent on the petitioners to prove the definite and particular alternative method they availed of, and they failed. There was no calamity, no imminent danger to life or property, and no cause where immediate action was necessary. Neither was there a take-over of a rescinded or terminated contract; the contract with the previous supplier was neither rescinded nor terminated. The petitioners simply initiated a new procurement because they were unsatisfied with the previous supplier. The posting requirements were likewise not complied with. The Court held that the expenditure was irregular, incurred without adhering to established rules, regulations, procedural guidelines, policies, principles or practices that have gained recognition in law. Good faith and transparency, standing alone, cannot set aside the necessity of public bidding, and a terrible experience with a previous supplier is not a valid and legal ground to disregard the law.

On the third issue, the Court rejected the argument that the funds were private. The uniform allowances, though pooled in a trust fund, remained public funds, since the grant of clothing allowance was covered by the appropriations for the Authority and regulated by budget circulars.

Doctrine

First, the six-month period to appeal a notice of disallowance to the Commission on Audit is counted with the rule that if the last day falls on a Saturday, a Sunday, or a legal holiday, the period does not run until the next working day; the Rules of Court apply by analogy and in a suppletory manner under the auditing code.

Second, public bidding is the general rule and alternative methods of procurement are mere exceptions. A procuring entity that resorts to an alternative method must prove the definite and particular method and the exact ground under the law and its implementing rules. Negotiated procurement is allowed only in the extraordinary cases enumerated, such as imminent danger during a state of calamity or the take-over of a rescinded or terminated contract.

Third, dissatisfaction with a previous supplier is not a legal ground to dispense with public bidding, and a bare claim of good faith does not cure the defect.

Fourth, funds pooled in a trust fund for employees' uniform allowances remain public funds when covered by appropriations and budget circulars.

Disposition

The petition was granted only in the procedural sense, the case was remanded for adjudication on the merits, but the Court upheld the disallowance because the negotiated procurement did not comply with the law and its implementing rules.

Remember This

Memorize this line: public bidding is the general rule, and alternative methods of procurement are exceptions that must be strictly proved, ground by ground. Examiners use this case to test the counting of the appeal period to the Commission on Audit when the last day falls on a weekend, and to test whether a candidate can match a procurement method to its exact statutory ground.