SC Upholds COA Disallowance Against TIEZA for Over P2 Million Worth of Christmas Decorations
September 13, 2023
The Supreme Court has upheld the ruling of the Commission on Audit (COA) disallowing the payment of over PhP2,000,000.000 by the Tourism Infrastructure and Enterprise Zone Authority (TIEZA) for the installation of Christmas decorations and lightings in violation of the public procurement law.
In a Resolution, the Supreme Court En Banc dismissed the Petition for Certiorari filed by Mark T. Lapid, et al. assailing the COA decision which had upheld the Notice of Disallowance against payments made by TIEZA to Kabukiran Garden for the supply of Christmas decorations.
In 2011, TIEZA authorized the allocation of PhP2,500,000.00 for the Conceptualization, Supply, and Installation of Materials and Labor for the 2011 Christmas Decorations and Lightings for the Department of Tourism Building, Club Intramuros, and their Environs (Project). The contract for the Project was awarded to Kabukiran Garden through direct contracting. TIEZA paid Kabukiran Garden P2,339,958.19 for the Project.
However, the payment was subsequently disallowed by the COA Audit Team for TIEZA’s unjustified resort to direct contracting. Lapid, et al. as TIEZA officials, and Kabukiran Garden, as payee, were held liable for the disallowed amount. The disallowance was affirmed by the COA Proper, prompting the TIEZA officials to go to the Supreme Court.
The Court, in affirming the COA’s ruling, underscored how Republic Act No. 9184 (RA 9184) or the Government Procurement Reform Act aims to ensure transparency, competitiveness, efficiency, and accountability in the procurement process. “To eliminate any suspicion of favoritism or partiality in the execution of public contracts, as a general rule, the law requires that all government procurement must undergo competitive bidding,” stressed the Court.
Exceptions to the bidding requirement are alternative methods of procurement, including direct contracting, which is “a method of procurement that does not require elaborate bidding documents because the supplier is simply asked to submit a price quotation or a pro-forma invoice together with the conditions of sale, which offer may be accepted immediately or after some negotiations,” the Court held.
As an exception to the rule, resort to an alternative mode of procurement, such as direct contracting, must be clearly justified by the Procuring Entity, stressed the Court, consistent with the doctrine that “the party who invokes coverage under the exception to a general rule carries the burden to prove the fulfillment of the requisites thereof.”
Citing RA 9184 and its implementing rules, the Court held that there are certain conditions that must be present to justify the need to procure through direct contracting, one of which is when the items to be procured are “of proprietary nature which can be obtained only from the proprietary source, i.e., when patents, trade secrets and copyrights prohibit others from manufacturing the same item.”
In addition, the Government Procurement Policy Board’s Manual of Procedures for the Procurement of Goods and Services requires that prior to the commencement of the procurement process, a survey of the industry involved must be conducted to determine the supply source and confirm the exclusivity of the source of goods or services to be procured, said the Court.
The Court added that “the Procuring Entity must justify the necessity for an item that may only be procured through Direct Contracting, and it must be able to prove that there is no suitable substitute in the market that can be obtained at more advantageous terms.”
In the case of the TIEZA officials, the Court found that they failed to show that Kabukiran Garden has an interest in the conceptualization, supply, and installation of Christmas decorations which is protected by intellectual property.
Further, the TIEZA officials did not conduct the required survey to ensure the exclusivity of the source of the procured services and that there is no suitable alternative that can be obtained at a lower cost. The Court also noted COA’s observation that providers of Christmas decorations are abundant in the Philippines.
For failing to justify the TIEZA officials’ resort to direct contracting, the disallowance by the COA must be affirmed, ruled the Court. (Courtesy of the Supreme Court Public Information Office)
Full text of the Resolution in G.R. No. 249090 (Lapid, et al. v. Commission on Audit, July 11, 2023) at: https://sc.judiciary.gov.ph/249090-mark-t-lapid-miguelita-a-mariano-laura-a-garcia-racquel-a-gaerlan-guiller-b-asido-ivy-v-asetre-and-teresita-r-co-vs-commission-on-audit/