Case Summary (G.R. No. 218461)
Factual Background
The project commenced in 1992 with multiple bids, wherein the EEI/Manalo Joint Venture emerged as the lowest bidder. By April 20, 1993, a construction contract was executed. During the project, the DOTC authorized several variation orders, leading to a total construction cost that exceeded COA’s initial estimated project cost. Notably, a Notice of Disallowance (ND) was issued against the project by COA Auditor on June 18, 1997, which disallowed an amount of approximately P54 million due to violations of cost estimation standards set by COA regulations.
Audit and Disallowance Process
The basis for the disallowance was the apparent excess in project costs as determined by the COA’s Special Task Force on Flagship Projects. The relevant regulations, particularly those articulated in the September 1991 COA Resolution, set strict thresholds for the acceptability of actual contract costs versus estimated costs. Following DOTC’s internal requests to reverse these decisions and subsequent assessments by COA, the original findings were partially lifted, although certain portions of the project costs remained disallowed.
COA Decisions
The initial audit findings were contested, and a subsequent series of endorsements by COA officials reflected a change in the treatment of the disallowance, putting into question the finality and applicability of earlier decisions. Petitioner Patdu asserted that the lifting of certain disallowances by COA was final and thus should not have been revisited nearly ten years later by COA Proper.
Issues Presented
The key legal issues revolve around the finality of the NGAO II Director's lifting of the disallowance, the applicability of the COA regulations pertaining to foreign-assisted projects, and whether the petitioner should face civil liability for the audit disallowances particularly relating to specific variation orders that he reviewed.
Court’s Ruling
The court ruled that the lifting of the disallowance by the NGAO II Director should have been regarded as final, immutable, and unalterable due to the absence of a conflicting appeal. Consequently, COA’s attempt to reverse or reinstate the disallowance after such an extended period constituted grave abuse of discretion.
On Civil Liability
The ruling further detailed that Patdu had not acted with bad faith or gross negligence in his review of the variation orders. Consequently, the evidence did not support a finding of civil liability on his part, especially given
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Factual Antecedents
- In 1992, the Philippine government, through the Department of Transportation and Communications (DOTC), initiated an international bidding process for the construction of the Davao Fishing Port Complex under the National Fishing Development Program.
- This project was classified as a foreign-assisted initiative funded by the Overseas Economic Cooperation Fund (OECF) of Japan, specifically under the 17th Yen Credit Package (PH-126).
- Three bidders participated: Hanil Development Company, a consortium of C. Itoh, F.F. Cruz and DMC, and the EEI/Manalo Joint Venture, which submitted the lowest bid of P347,000,005.00.
- The contract was finalized on April 20, 1993, with the EEI/Manalo Joint Venture tasked with executing the construction works.
- To incentivize early completion, DOTC agreed to pay an incentive bonus of P35,445,070.35 to the contractor for finishing the project in a reduced timeframe of 910 days.
- During construction, DOTC issued several variation orders totaling P7,450,855.91, which included changes to the original project design and specifications.
- Petitioner Patdu, as the project engineer, was responsible for reviewing the amounts stated in Variation Order Nos. 5, 7, and 8.
Notices of Disallowance
- On June 18, 1997, COA issued Notice of Disallowance (ND) No. 97-011-102 (DOTC) disallowing P53,951,955.03 due to the project's actual costs exceeding COA's estimated costs.
- COA's Special Task Force on Flagship Projects found the project's actual costs to be excessiv