The Supreme Court has affirmed the ruling of the Commission on Audit (COA) which disallowed the payment of P2.3 million for the conceptualization, supply, and installation of Christmas decorations and lightings for the Department of Tourism (DOT) building and its environs in Manila in 2011.

With the ruling, the SC dismissed the petition filed by Mark T. Lapid, Miguelita A. Mariano, Laura A. Garcia, Racquel A. Gaerlan, Guiller B. Asido, Ivy V. A etre, and Teresita R. Co who were the then officers of the Tourism Infrastructure and Enterprise Zone Authority (TIEZA).

On Nov. 11, 2011, TIEZA issued a resolution that allocated P2.5 million for the Christmas decorations and lightings for the DOT building in Manila.

Through direct contracting, the project was awarded to Kabukiran Garden which was paid P2,339,958.19 for the project.

However, on Jan. 3, 2013 the COA audit team disallowed the payment and issued a notice of disallowance (ND) for the amount paid to Kabukiran due to direct contracting instead of public bidding. The audit team held Kabukiran and the TIEZA officials liable for the disallowed amount.

When COA affirmed the disallowance, the TIEZA officials elevated the case to the SC.

In affirming COA’s ruling, the SC cited the importance of compliance with Republic Act No. 9184, the Government Procurement Reform Act, to ensure transparency, competitiveness, efficiency, and accountability in the procurement process.

The SC pointed out that “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.”

It said that as exception to the rule, resort to an alternative mode of procurement, such as direct contracting, must be clearly justified by the procuring entity.

It pointed out that RA 9184 and its implementing rules provide 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.”

Also, it said 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.

The SC said 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 a resolution, the SC also said:

“The Court finds that the COA did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in disallowing the payments made to Kabukiran Garden for the Project.

“The petitioners (Lapid and his group) miserably failed to show that Kabukiran Garden has an interest in the conceptualization, supply, and installation of Christmas decorations which is protected by intellectual property laws and thus cannot be offered by other entities. As aptly observed by the COA, providers of Christmas decorations are abundant in the Philippines.

“There is likewise no showing that a survey of the industry was conducted 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.

“It bears stressing that the resort to an alternative mode of procurement such as direct contracting instead of competitive bidding must be clearly justified.

“Accordingly, the Court finds that the COA did not err, much less commit any grave abuse of discretion, when it disallowed the subject expenditures for failure to observe the proper procedure for procurement under RA No. 9184.

“Wherefore, the Petition for Certiorari is dismissed. The Decision No. 2018-059, dated Jan. 23, 2018, of the Commission on Audit is Affirmed.”