Facts:

The case involves a petition for certiorari and mandamus filed by Bureau Veritas, represented by Theodor H. Hunermann, against several respondents including the Office of the President, Secretary of Finance, Secretary of Trade and Industry, Governor of the Central Bank of the Philippines, Commissioner of Customs, and Societe Generale de Surveillance S.A. (SGS). The petition was resolved by the Supreme Court on February 3, 1992. The background of the case dates back to February 13, 1986, when the Philippine Government entered into an agreement with SGS for a Comprehensive Import Supervision Scheme (CISS) intended to conduct pre-shipment inspections on imports to prevent revenue fraud. The scheme initially covered three Asian countries but was later expanded to include several others.

In August 1990, before the expiration of the SGS contract, the CISS Subcommittee published an invitation for pre-qualification and bidding process for pre-shipment inspection services, resulting in

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Facts:

Background and Contractual Framework

• On February 13, 1986, the Government of the Philippines entered into an agreement with private respondent SGS for a Comprehensive Import Supervision Scheme (CISS), which involved pre-shipment inspections to verify the quality, quantity, and price of imports.
• The purpose of the CISS was to prevent undervaluation, misdeclaration, and overvaluation of imports that might result in revenue losses to the Government.
• Under the scheme, a Clean Report of Finding (CRF) was issued if a shipment was found in order, which was a precondition for beneficiaries drawing on Letters of Credit (L/Cs).

The Bidding Process for Expanded Coverage

• Prior to the expiration of the original SGS contract, on August 16, 1990, the CISS Subcommittee published an “Invitation to Pre-qualify and Bid” in the Manila Bulletin inviting registered firms to participate in the pre-qualification and public bidding for pre-shipment inspection services.
• Standard Pre-qualification and Bid Forms were issued at a pre-bidding conference on September 4, 1990, with the Form expressly reserving the Government’s right to reject any bid or part thereof and to accept an offer most advantageous to it.
• Four bidders pre-qualified and submitted sealed bids on November 6, 1990: Bureau Veritas (Petitioner), SGS, Cotecna-International Limited (CIL), and Specialist Services International Limited (SSI).

Discrepancies in Bid Submissions and Tax Assumptions

• In its Original Bid, Bureau Veritas did not specify any assumed tax rate, although it referenced BIR Ruling 537 (dated November 14, 1988) to indicate that the then Inspector was exempt from all Philippine taxes.
• In contrast, other bidders indicated explicit assumptions regarding the tax component in their bids: SGS quoted fees inclusive of a 35% tax, while CIL and SSI had their respective tax assumptions, ranging from 0% to 10%.
• During a clarificatory meeting on March 20, 1991, the CISS Subcommittee requested bidders to indicate if their bids should be evaluated on a net basis (i.e., excluding taxes), and all bidders initially agreed, though differences in tax assumptions already existed.

Submission of Revised Fees by Bureau Veritas

• On March 29, 1991, Bureau Veritas submitted a letter to the CISS Subcommittee indicating its intention to “remove the taxes” from its Original Bid to align with the new evaluation on a net basis, effectively lowering its fees from the originally quoted ones.
• A detailed comparison showed that the revised figures were lower than those in the Original Bid, claiming that the reduction corresponded to the amount of Philippine taxes allegedly imputed in its bid.
• Other bidders protested this alteration, arguing that Bureau Veritas had changed its bid after learning of the other bids, thereby attempting to secure an undue advantage.

Awarding and Approval of the CISS Contract

• Following bid evaluation on a net basis, the CISS Subcommittee evaluated the proposals with the criterion of delivering the “least Government payout.”
• The Subcommittee recommended that the contract for global coverage be awarded solely to SGS, whose bid indicated the lowest net fees relative to the alternatives.
• On August 16, 1991, the Secretary of Finance announced the awarding of the contract to SGS, and on August 23, 1991, the Government executed the Agreement for CISS with SGS.
• The contract was subsequently approved by Memorandum Order No. 391, signed by President Corazon C. Aquino on September 2, 1991.

Petition for Certiorari and Mandamus by Bureau Veritas

• Bureau Veritas petitioned for certiorari and mandamus, challenging both the execution of the Agreement for CISS and the subsequent approval by the Office of the President.
• The petitioner alleged that public respondents committed grave abuse of discretion by changing the bid evaluation rule from “inclusive” to “exclusive” of taxes and by rejecting its revised fees.
• Central to the controversy was whether Bureau Veritas had properly imputed any tax rate in its bid and, if so, whether it was entitled to revise its bid after bid disclosure.

Clarification on Tax Assumptions and Bid Validity

• Documents submitted by Bureau Veritas, including a purported “Original Bid” cover page indicating a 35% tax rate, were scrutinized; the Court noted discrepancies as such a figure was not found in the verified Original Bid.
• Bureau Veritas maintained that its fees were inclusive of a “zero tax rate” based on its assumption of tax exemption under BIR Ruling 537, and that any later reduction was due to an accounting of the alleged tax component.
• The Court observed that any alteration in the bid after submission conflicted with the requirement of bid finality as stipulated in the Bid Form.

Administrative Discretion and Evaluation Process

• The CISS Subcommittee, faced with varying assumptions on tax inclusivity, adopted a uniform basis by evaluating all bids on a net basis.
• The decision for re-evaluation was supported by a Memorandum dated March 7, 1991, which stressed the need for a common denominator to compare bids properly.
• The overall evaluation and awarding process adhered to public bidding protocols, culminating in the award of the contract to SGS on the ground that it resulted in the least Government payout.

Issue:

Whether public respondents committed grave abuse of discretion in:

• Changing the bid evaluation rule from “inclusive” to “exclusive” of Philippine taxes, and
• Rejecting the revised fees submitted by Bureau Veritas after bid submission, thereby allegedly prejudicing its chances given its claim of tax exemption.

• Whether Bureau Veritas improperly attempted to modify its Original Bid post-disclosure by submitting a revision that purportedly deducted an imputed tax, despite the original bid being final.

• Whether the award of the CISS contract to SGS, based on an evaluation that favoured the lowest net fees (i.e., least Government payout), was made in an arbitrary, whimsical, or biased manner.

• Whether the differing assumptions on tax rates among the bids could justify special treatment or necessitate equity in reconsidering the bid revision submitted by Bureau Veritas.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)