Case Digest (G.R. No. L-45268)
Facts:
The case involves D.M. Consunji, Incorporated (petitioner) filing a petition against the Commission on Audit (respondent) on July 23, 1991, to contest the decision denying the appeal from the Notice of Audit Disallowance No. FA-001 issued by the Corporate Auditor of the Metropolitan Waterworks and Sewerage System (MWSS). The matter relates to a contract for the Pump Lift Station and Rehabilitation at the Tondo Pump Station, known as Contract No. PS-1. In March 1981, MWSS published an invitation for public bidding for this contract, partially funded by a loan from the Asian Development Bank. The bidding occurred on May 27, 1981, where D.M. Consunji, Inc. was among the bidders; however, the lowest bid came from A.L. Sarmiento who, upon failure to comply with bid conditions, was disqualified. Subsequently, the contract was awarded to Erectors, Inc., the second-lowest bidder. Before finalization, Erectors, Inc. withdrew, leading the MWSS general manager to offer the contract to D.M
Case Digest (G.R. No. L-45268)
Facts:
- Background and Invitation to Bid
- The Metropolitan Waterworks and Sewerage System (MWSS) advertised an invitation for public bidding, in various metropolitan newspapers in March 1981, for the “Contract for Pump/Lift Stations and Rehabilitation: Tondo Pump Station” (Contract No. PS-1).
- The project was partially financed by a loan from the Asian Development Bank, and the bidding was scheduled to attract competitive offers in accordance with the Implementing Rules and Regulations of Presidential Decree No. 1594.
- Bidding Process and Awarding of the Contract
- The international competitive bidding was held on May 27, 1981, with three participants:
- A.L. Sarmiento
- Erectors, Inc.
- Petitioner, D.M. Consunji, Incorporated
- Although A.L. Sarmiento submitted the lowest bid, subsequent clarifications revealed its non-compliance with the bid conditions, rendering it ineligible for award.
- The contract was later awarded to Erectors, Inc., the second lowest bidder; however, before approval by the Office of the President, Erectors, Inc. withdrew its bid.
- Negotiation with the Petitioner and Formation of the Contract
- On August 9, 1982, the then General Manager of the MWSS issued a letter offering the contract to the petitioner.
- The letter referenced the original bidding on May 27, 1981 and explained that lower bidders had been unsuccessful.
- It inquired whether the petitioner could perform the works at a base contract amount of P68,394,000, subject to specific modifications and conditions (conversion of certain cost items, retention of escalation provisions, incorporation of revised documents, and adherence to financing procedures).
- The petitioner accepted the offer subject to modifications accepted by the MWSS.
- On October 1, 1982, the MWSS Board of Trustees adopted Resolution No. 132-82, formally awarding the contract to the petitioner at an adjusted amount of P71,943,000.
- A letter-agreement was entered into on October 5, 1982, and the formal contract was executed on December 14, 1982, then submitted for Presidential approval.
- The contract stipulated that the original contract time of 912 calendar days would remain effective and included provisions for an incentive bonus for early completion.
- Implementation, Price Escalation, and Subsequent Dispute
- The petitioner commenced work on April 3, 1983, and completed the project on August 26, 1985—37 days ahead of the contract expiry date.
- MWSS assumed operational responsibilities, including payment of power costs, upon taking over the facility.
- An “incentive bonus” was paid to the petitioner for the early completion of the project.
- In addition, pursuant to an escalation clause, the MWSS paid the petitioner a price escalation amounting to P24,883,439.71.
- The Corporate Auditor of the MWSS reviewed the escalation payments and determined that the allowable escalation should have amounted only to P20,982,834.25.
- The discrepancy of P3,900,605.45 was attributed to a difference in reckoning the escalation start date.
- According to the Corporate Auditor, the proper reckoning date should have been October 1, 1982, as stipulated in the contract, rather than the bidding date of May 1981.
- A Notice of Audit Disallowance No. FA-001 was issued on March 7, 1988, demanding reimbursement of the alleged overpayment.
- The petitioner argued that because the escalation from the bidding period (May 1981 to September 1982) was already incorporated into the contract’s base amount, subsequent escalation should apply only from October 1, 1982.
- Upon the petitioner’s appeal to the Commission on Audit (COA), the COA ruled on August 18, 1989, that the contract was not a bidded one but a negotiated contract.
- A motion for reconsideration was filed by the petitioner, which the COA dismissed on July 24, 1990.
- The petitioner then elevated the matter, questioning both the classification of the contract and the overpayment computation, leading to the present petition.
Issues:
- Whether Contract No. PS-1 is a bidded contract or a negotiated contract.
- The determination involves the proper application of Presidential Decree No. 1594 and its Implementing Rules and Regulations regarding awarding infrastructure contracts.
- The dispute centers on the sequence of events in the bidding process, including the disqualification of the lowest bidder and the withdrawal of the second lowest bidder.
- Whether the petitioner was overpaid an amount of P3,900,605.45 in price escalation.
- The issue involves the correct reckoning date for computing the Allowable Escalation Rate (AER).
- The petitioner contends that while the escalation from May 1981 to September 1982 had already been built into the contract price, the additional escalation should be computed from October 1, 1982.
- The proper application and interpretation of the escalation clause in government contracts, particularly how existing laws and circulars (e.g., COA Circular No. 267) influence the computation of price escalation.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)