G.R. No. 117196 - Vergara vs. National Labor Relations Commission

Sto. Cristo Construction, a domestic corporation engaged in the construction business, was awarded several government contracts in 2010 for the rehabilitation and improvement of roads in Mexico, Pampanga.
The road projects were implemented and completed the same year.

In November 2010, the Quality Assurance Unit (QAU) of the Department of Public Works and Highways (DPWH) reassessed 10 projects implemented by the DPWH-Pampanga 1st District Engineering Office (DEO).
The reassessment yielded adverse findings which led the Audit Team Leader (ATL) to request COA Technical Inspectors to conduct an inspection.
The inspection report revealed an overstatement of embankment materials used in the projects, prompting further action.

Based on the adverse findings, the ATL issued four notices of disallowance disapproving payments totalling P22,626,714.71 for the 10 projects.
One of these, Notice of Disallowance (ND) No. 11-001-101-09/10, dated July 11, 2011, disallowed P14,926,319.76 corresponding to deficiencies arising from the overestimation of embankment materials in seven specific infrastructure projects.
Multiple persons were held liable under the ND, including:

Jose G. Datu – District Engineer (involved in program approval and inspection)
Manuel M. Pasco – Assistant District Engineer
Sotero L. Figueroa – Chief, Construction Section
Other DPWH officials and personnel, as well as Noel J. Cruz, the owner/manager of Sto. Cristo Construction

The recommendations of the ATL lacked sufficient factual and legal basis as the projects had undergone pre-audit before payments.
Subsequent reversals in pre-audit findings and the effects of external factors (e.g., typhoons affecting the projects) rendered the ND moot since payments had already been released.

On January 9, 2012, Engineer Jose Datu, District Engineer of DPWH-Pampanga 1st DEO, communicated the filing of an appeal from the notices of disallowance, asserting that contractors had been instructed to make corrective measures at their own expense during the warranty period.
On January 13, 2012, Audit Observation Memorandum (AOM) No. 12-001 was issued, which confirmed the overstatement in embankment materials and quantified the overestimates at P22,626,714.71.
Further assessments and communications followed, including:

A memorandum issued on November 13, 2013, by DPWH-Pampanga 1st DEO confirming inspection findings and noting that rectification works had been done outside the approved plan.
Petitioner’s filing of an appeal on February 27, 2014, claiming non-receipt of the ND and asserting that rectification works (executed under DPWH supervision) should mitigate the disallowance.

The COA Regional Office No. III, in Decision No. 2013-41 (June 3, 2013), affirmed the four notices of disallowance, emphasizing that post-audit procedures were available despite the use of pre-audit during implementation.
In Decision No. 2015-11 dated April 6, 2015, the COA declared the disallowances final and executory.
Petitioner sought reconsideration, but on March 15, 2018, the COA rendered Decision No. 2018-317, denying the appeal on the ND and the related motion for reconsideration for lack of merit.
The COA’s evaluation stressed that there was no sufficient evidence that the rectification works had been duly confirmed in compliance with COA standards and that the overestimation in embankment materials—due to deficient detailed engineering—formed the basis of the disallowance.

Whether the Commission on Audit (COA) committed grave abuse of discretion amounting to lack or excess of jurisdiction by sustaining the disallowance despite the rectification works claimed by the petitioner.
Whether the rectification measures undertaken by Sto. Cristo Construction, purportedly under the direction of DPWH officials, can be credited as sufficient compliance to offset the excess payment disallowed under ND No. 11-001-101-09/10.
Whether the petitioner’s right to due process was violated by the manner and timing of the service of the ND, and the subsequent handling of its appeal.