REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE AIR TRANSPORTATION OFFICE AND ITS PRE-QUALIFICATION, BIDDING AND AWARD COMMITTEE OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNIC…

Republic of the Philippines versus Inter Technical Pacific

The Case

This is a petition for review on certiorari brought by the Republic of the Philippines, represented by the Air Transportation Office and its Prequalification, Bidding and Award Committee of the Department of Transportation and Communications, against Inter Technical Pacific, Incorporated, a Filipino contractor. The Republic asks the Supreme Court to reverse the orders and decision of the Regional Trial Court of Makati, Branch 134, which had compelled the bidding committee to reconvene and to read and consider Inter Technical's bid for the Nationwide Air Navigation Facilities Modernization Project Phase II, a government infrastructure project financed by a loan from the Overseas Economic Cooperation Fund of Japan. The case matters because it fixes the line between a genuine bidding requirement and a mere formality, and because it marks the limit of judicial interference with the discretion of a government bidding committee.

Procedural History

Inter Technical filed a complaint for specific performance, mandatory and prohibitory injunction, with a prayer for a preliminary injunction and restraining order, before the Regional Trial Court of Makati, Branch 134. The trial court, through Judge Ignacio C. Capulong, issued a temporary restraining order upon the filing of the complaint, and after hearings on the application for a preliminary injunction, issued an order dated February 12, 1990 granting the writ and enjoining the Air Transportation Office and its committee from awarding the contract. The Republic elevated that order to the Court of Appeals by a petition for certiorari and prohibition, later supplemented. While that petition was pending, the trial court rendered its decision dated April 17, 1990, directing the committee to immediately convene or reconvene and to read and consider Inter Technical's bid. The Republic moved for reconsideration, which the trial court denied in its order dated May 22, 1990. The Republic then withdrew its petition before the Court of Appeals, which granted the withdrawal, and brought the matter to the Supreme Court by petition for review on certiorari. The Supreme Court gave due course to the petition and, on May 30, 1991, granted it without prejudice to an extended opinion, annulling the trial court's orders and decision and allowing the Republic to proceed with the award.

Facts

On July 26, 1989, the Air Transportation Office and its Prequalification, Bidding and Award Committee publicly invited prequalified bidders to furnish the goods and services for the Nationwide Air Navigation Facilities Modernization Project Phase II. Inter Technical prequalified and submitted its sealed bidding documents in one original and eight copies, in bookbound form, in six volumes. The bidding was conducted on November 10, 1989, and the committee announced that the approved government agency estimate was 859,472,074 pesos and fifty centavos.

When Inter Technical's documents were opened and examined, the entire set and its eight copies did not contain a Form of Bid. On the advice of the assisting Japanese consultants, the committee refused to read the bid and rejected it as non-complying. Inter Technical protested, explaining that the Form of Bid was inadvertently left in its office, that its bid price was clearly spelled out in the documents, that a bid bond accompanied the documents, and that it was willing to accomplish the Form of Bid right then and there without varying any figure. Its authorized representative then publicly announced a bid of 607,169,444 pesos and fifty centavos. The committee nonetheless adjourned, and the appeals to the Air Transportation Office, the committee, and the Secretary of Transportation and Communications were not acted upon.

The Air Transportation Office referred the matter to the Department of Justice, which in its opinion dated January 10, 1990 ruled the bid invalid because the Form of Bid is an essential bidding requirement. Inter Technical then filed its complaint before the Regional Trial Court of Makati, which issued a temporary restraining order, then a writ of preliminary injunction, and finally the decision of April 17, 1990 ordering the committee to read and consider the bid. The trial court found that the government would save 252,302,630 pesos with Inter Technical's supposed bid and that not to read it would work injustice.

Issues

• Whether or not the failure of Inter Technical to enclose in its bidding documents a duly accomplished and signed Form of Bid is a valid ground for the Prequalification, Bidding and Award Committee to reject its bid.
• Whether or not the trial court may step into the controversy by ordering the bidding committee to reconvene and read Inter Technical's bid, when the discretion to determine compliance with the bidding requirements lies with that committee.

Applicable Provisions

Section 5 of Presidential Decree Number 1594 provides:

SEC. 5. Award and Contract. - The contract may be awarded to the lowest prequalified 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.

This provision makes clear that only a bid that complies with all the terms and conditions of the call for bid may be awarded the contract.

Rule IB 2.3 of the Implementing Rules and Regulations of Presidential Decree Number 1594 provides:

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.

This rule confirms that non-compliance with bid requirements is a ground for rejection, and that only minor deviations not affecting substance and validity may be waived.

The Instructions to Bidders provide:

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.

This instruction governed the committee on the day of the bidding and expressly disqualifies bids that do not fully comply with all requirements.

Ruling

On the first issue, the Court held that the omission of the Form of Bid was a valid ground for rejection. The Form of Bid is the central unifying document containing the bidder's offer to undertake the work for a specified sum, and it embodies the stipulations that bind the bidder once the bid is accepted. Without a duly accomplished and signed Form of Bid submitted before the opening of bids, there is nothing for the government agency to accept. The Court rejected the argument that the bid bond supplied substantial compliance, because the bid bond did not contain the undertakings found in the Form of Bid, such as the commitment to commence and complete the work within the stated periods, to abide by the bid for 120 calendar days, and to acknowledge that the agency is not bound to accept the lowest or any bid. The Court also rejected the appeal to a 1952 opinion of the Secretary of Justice, finding the circumstances different and the argument unconvincing.

On the second issue, the Court held that the trial court erred in substituting its judgment for that of the committee. The discretion to determine whether a bidder complies with the bidding requirements lies with the Prequalification, Bidding and Award Committee, and the courts may not by injunction compel it to read and consider a bid that it validly rejected as non-complying.

Doctrine

A bid that does not comply with all the terms and conditions of the call for bid may be rejected, and only minor deviations that do not affect the substance and validity of the bid may be waived. The Form of Bid is a substantial and indispensable requirement, not a mere formality, because it contains the bidder's offer and the stipulations that bind the bidder upon acceptance. The acceptance or rejection of bids is committed to the discretion of the bidding committee, and the courts will not interfere with the exercise of that discretion absent a clear showing of grave abuse.

Disposition

The Supreme Court granted the petition, annulled and set aside the trial court's order of February 12, 1990, its decision of April 17, 1990, and its order of May 22, 1990, and allowed the Republic to proceed with the awarding of the contract.

Remember This

The single line worth memorizing is that the Form of Bid is a substantial requirement, not a mere formality, and its absence leaves nothing for the government to accept. Examiners use this case to test the limits of judicial review over the discretionary acts of a government bidding committee and the distinction between a substantial bid requirement and a waivable minor deviation.