G.R. No. 218388 - Manila International Airport Authority vs. Commission on Audit

The project at issue is the NAIA Terminal 2 Development Project, initiated through an Agreement for Consulting Services between the petitioner, Manila International Airport Authority (MIAA), and the Aeroports de Paris-Japan Airport Consultants, Inc. Consortium (referred to as "the Consultant").
The consulting services were financed by Loan Agreement No. PH-136, executed between the Government of the Philippines and the Overseas Economic Cooperation Fund (OECF), which in turn was based on an Exchange of Notes dated August 16, 1993, between the Philippines and Japan.
The essential doctrine of pacta sunt servanda thereby invoked that international agreements, once validly entered, must be performed in good faith.

The original Agreement for Consulting Services was executed on April 15, 1994, covering 795 man-months of consulting services with a specified cost.
Due to delays in the project—attributable to extended prequalification, prolonged bidding, environmental clearances, and delays in site possession—there was a need to extend the duration and increase the man-months from 53 to 69 months, eventually totaling up to 1,083.81 man-months through the execution of three (and later four) Supplemental Agreements (SAs).
Each Supplemental Agreement was intended to account for additional work and costs while adjusting the total cost of services, with provisions detailing that additional man-months would be charged against the contingency fund as prescribed under the consultancy contract.

The COA, based on its audit and evaluation, initially found the remuneration cost excessive and eventually issued two Notices of Disallowance (ND Nos. (FMT) 99-00-04 and 2008-018) for charges related to the contingency, which exceeded the 5% ceiling provided under the NEDA Guidelines.
The COA’s evaluation determined that the actual disbursements for additional man-months—arising from the supplemental agreements—were improperly charged to contingency, thereby exceeding the mandated 5% cap.
Despite petitions and requests for reconsideration by MIAA, the COA affirmed its earlier decisions under COA CP Case No. 2011-294, leading to the issuance of COA LAO-Corporate Decision No. 2008-067.

The petitioner elevated the matter through petitions for certiorari, arguing that the COA gravely abused its discretion by misapplying the contingency ceiling provisions and by not recognizing the executive character of Loan Agreement No. PH-136.
The petitioner contended that, given the funding and the nature of the agreements, international law and the principle of pacta sunt servanda should govern the interpretation of the agreements, thereby allowing for a contingency rate that could differ from the domestic 5% ceiling under the NEDA Guidelines.

Whether the Commission on Audit (COA) acted with grave abuse of discretion, amounting to a lack or excess of jurisdiction, in affirming its earlier decisions and subsequently issuing Notices of Disallowance against the petitioner.
Whether the disallowance of amounts charged to contingency was proper given the contractual modifications contained in the supplemental agreements.

Whether Loan Agreement No. PH-136, executed in conjunction with an Exchange of Notes, qualifies as an executive agreement that should be governed by international law rather than domestic law (i.e., the NEDA Guidelines).
Whether the doctrine of pacta sunt servanda mandates that the intentions of the parties as expressed in the executive agreement and its accessory contracts (including the Agreement for Consulting Services and its supplemental agreements) should prevail over the rigid application of a 5% contingency ceiling.

Whether the additional costs incurred due to the extensions and supplemental agreements should be charged against the total cost of services as per the parties’ mutual intention, rather than being improperly absorbed by the contingency fund subject to the 5% limitation.
Whether the petitioner’s assertion that the normal practice under international financing allows for a 10% contingency should override the domestic limitation stated in the NEDA Guidelines.