Title
Agan, Jr. vs. Philippine International Air Terminals Co., Inc.
Case
G.R. No. 155001
Decision Date
May 5, 2003
AEDC proposed NAIA IPT III under BOT; PIATCO won bid but contracts voided for BOT Law, constitutional violations, and public interest concerns.
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Case Digest (G.R. No. 155001)

Facts:

Background and Initial Proposal

  1. In August 1989, the Department of Transportation and Communications (DOTC) engaged Aeroport de Paris (ADP) to conduct a comprehensive study of the Ninoy Aquino International Airport (NAIA) to assess its capacity to handle traffic up to 2010. ADP submitted a Draft Final Report in December 1989.
  2. In 1993, six prominent business leaders (John Gokongwei, Andrew Gotianun, Henry Sy, Sr., Lucio Tan, George Ty, and Alfonso Yuchengco) formed Asia's Emerging Dragon Corp. (AEDC) to explore the construction and operation of a new international airport terminal.
  3. On October 5, 1994, AEDC submitted an unsolicited proposal to the government for the development of NAIA International Passenger Terminal III (NAIA IPT III) under a Build-Operate-Transfer (BOT) arrangement under RA 6957, as amended by RA 7718 (BOT Law).

Bidding Process

  1. On December 2, 1994, the DOTC issued Dept. Order No. 94-832, creating the Prequalification Bids and Awards Committee (PBAC) for the NAIA IPT III project.
  2. On March 27, 1995, DOTC Secretary Jose Garcia endorsed AEDC's proposal to the National Economic and Development Authority (NEDA). NEDA approved the project on February 13, 1996.
  3. From June 7 to 21, 1996, the DOTC/MIAA published invitations for competitive proposals on AEDC's unsolicited proposal. The PBAC issued Bid Bulletins amending the Bid Documents, including financial and technical requirements.
  4. On September 20, 1996, the Paircargo Consortium (composed of People's Air Cargo and Warehousing Co., Inc., Phil. Air and Grounds Services, Inc., and Security Bank Corp.) submitted a competitive proposal. The PBAC prequalified the Paircargo Consortium on September 24, 1996.

AEDC's Reservations and PIATCO Contracts

  1. AEDC raised reservations about the Paircargo Consortium's financial capability, but the PBAC proceeded with the bidding process.
  2. The Philippine International Air Terminals Co., Inc. (PIATCO) was eventually awarded the project, and several agreements were executed:
    • Concession Agreement (July 12, 1997)
    • Amended and Restated Concession Agreement (November 26, 1999)
    • First Supplement (August 27, 1999)
    • Second Supplement (September 4, 2000)
    • Third Supplement (June 22, 2001)

Petitions and Legal Challenges

  1. Petitioners, including employees and unions of Philippine Airlines, filed petitions for prohibition under Rule 65 of the Revised Rules of Court, seeking to prohibit the implementation of the PIATCO Contracts. They argued that the contracts were unconstitutional and violated public policy.

Issue:

  1. Whether the PIATCO Contracts were valid and enforceable.
  2. Whether the bidding process complied with the BOT Law and its Implementing Rules and Regulations (IRR).
  3. Whether the PIATCO Contracts violated constitutional provisions, particularly on public utility and due process.
  4. Whether the government acted within its authority in entering into the PIATCO Contracts.

Ruling:

The Supreme Court declared the PIATCO Contracts null and void for the following reasons:

  1. Violation of the BOT Law: The bidding process did not comply with the BOT Law and its IRR. The PBAC failed to ensure that the Paircargo Consortium met the minimum financial and technical requirements.
  2. Constitutional Violations: The PIATCO Contracts contained provisions that violated the Constitution, particularly on public utility and due process. The contracts granted PIATCO exclusive rights to operate the terminal, which was deemed contrary to public interest.
  3. Lack of Authority: The government exceeded its authority in entering into the PIATCO Contracts, as they contained provisions that were not in the public interest and were detrimental to the state.

Ratio:

  1. Compliance with BOT Law: The Court emphasized that strict compliance with the BOT Law and its IRR is mandatory. The PBAC's failure to ensure that the Paircargo Consortium met the minimum requirements rendered the bidding process flawed.
  2. Public Interest: Contracts involving public utilities must prioritize public interest. The PIATCO Contracts granted excessive and exclusive rights to PIATCO, which were deemed detrimental to the public.
  3. Constitutional Safeguards: The Court reiterated that government contracts must adhere to constitutional safeguards, including due process and the prohibition against granting exclusive rights to private entities in public utilities.
  4. Government Authority: The government cannot enter into contracts that undermine public interest or violate constitutional provisions. The PIATCO Contracts were deemed invalid as they exceeded the government's authority and were contrary to public policy.

Conclusion:

The Supreme Court ruled in favor of the petitioners, declaring the PIATCO Contracts null and void. The Court emphasized the importance of adhering to legal and constitutional requirements in government contracts, particularly those involving public utilities.


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