EN BANC
[ G.R. No. 201112, June 13, 2012 ]
ARCHBISHOP FERNANDO R. CAPALLA v. COMELEC +
ARCHBISHOP FERNANDO R. CAPALLA, OMAR SOLITARIO ALI AND MARY ANNE L. SUSANO, PETITIONERS, VS. THE HONORABLE COMMISSION ON ELECTIONS, RESPONDENT.
[G.R. NO. 201121]
SOLIDARITY FOR SOVEREIGNTY (S4S), REPRESENTED BY MA. LINDA OLAGUER; RAMON PEDROSA, BENJAMIN PAULINO SR., EVELYN CORONEL, MA. LINDA OLAGUER MONTAYRE, AND NELSON T. MONTAYRE, PETITIONERS, VS. COMMISSION ON ELECTIONS, REPRESENTED BY ITS CHAIRMAN, COMMISSIONER SIXTO S. BRILLANTES,
JR., RESPONDENT.
[G.R. NO. 201127]
TEOFISTO T. GUINGONA, BISHOP BRODERICK S. PABILLO, SOLITA COLLAS MONSOD, MARIA CORAZON MENDOZA ACOL, FR. JOSE DIZON, NELSON JAVA CELIS, PABLO R. MANALASTAS, GEORGINA R. ENCANTO AND ANNA LEAH E. COLINA, PETITIONERS, VS. COMMISSION ON ELECTIONS AND SMARTMATIC TIM CORPORATION,
RESPONDENTS.
[G.R. NO. 201413]
TANGGULANG DEMOKRASYA (TAN DEM), INC., EVELYN L. KILAYKO, TERESITA D. BALTAZAR, PILAR L. CALDERON AND ELITA T. MONTILLA, PETITIONERS, VS. COMMISSION ON ELECTIONS AND SMARTMATIC-TIM CORPORATION, RESPONDENTS.
D E C I S I O N
PERALTA, J.:
Pursuant to its authority to use an Automated Election System (AES) under Republic Act (RA) No. 8436, as amended by RA No. 9369, or the Automation Law and in accordance with RA No. 9184, otherwise known as the Government Procurement Reform Act, the
Commission on Elections (Comelec) posted and published an invitation to apply for eligibility and to bid for the 2010 Poll Automation Project[1] (the Project). On March 18, 2009, the Comelec approved and issued a Request for Proposal[2] (RFP) for the Project consisting of the following components:
On June 9, 2009, the Comelec issued Resolution No. 8608 awarding the contract for the Project to respondent Smartmatic-TIM.[4] On July 10, 2009, the Comelec and Smartmatic-TIM entered into a Contract for the Provision of an Automated Election System for the May 10, 2010 Synchronized National and Local Elections,[5] (AES Contract, for brevity). The contract between the Comelec and Smartmatic-TIM was one of "lease of the AES with option to purchase (OTP) the goods listed in the contract." In said contract, the Comelec was given until December 31, 2010 within which to exercise the option.
On September 23, 2010, the Comelec partially exercised its OTP 920 units of PCOS machines with corresponding canvassing/consolidation system (CCS) for the special elections in certain areas in the provinces of Basilan, Lanao del Sur and Bulacan.[6] In a letter[7] dated December 18, 2010, Smartmatic-TIM, through its Chairman Cesar Flores (Flores), proposed a temporary extension of the option period on the remaining 81,280 PCOS machines until March 31, 2011, waiving the storage costs and covering the maintenance costs. The Comelec did not exercise the option within the extended period. Several extensions were given for the Comelec to exercise the OTP until its final extension on March 31, 2012.
On March 6, 2012, the Comelec issued Resolution No. 9373[8] resolving to seriously consider exercising the OTP subject to certain conditions. On March 21, 2012, the Comelec issued Resolution No. 9376[9] resolving to exercise the OTP the PCOS and CCS hardware and software in accordance with the AES contract between the Comelec and Smartmatic-TIM in connection with the May 10, 2010 elections subject to the following conditions: (1) the warranties agreed upon in the AES contract shall be in full force and effect; (2) the original price for the hardware and software covered by the OTP as specified in the AES contract shall be maintained, excluding the cost of the 920 units of PCOS and related peripherals previously purchased for use in the 2010 special elections; and (3) all other services related to the 2013 AES shall be subject to public bidding. On March 29, 2012, the Comelec issued Resolution No. 9377[10] resolving to accept Smartmatic-TIM's offer to extend the period to exercise the OTP until March 31, 2012 and to authorize Chairman Brillantes to sign for and on behalf of the Comelec the Agreement on the Extension of the OTP Under the AES Contract[11] (Extension Agreement, for brevity). The aforesaid Extension Agreement was signed on March 30, 2012.[12] On even date, the Comelec issued Resolution No. 9378[13] resolving to approve the Deed of Sale between the Comelec and Smartmatic-TIM to purchase the latter's PCOS machines (hardware and software) to be used in the upcoming May 2013 elections and to authorize Chairman Brillantes to sign the Deed of Sale for and on behalf of the Comelec. The Deed of Sale[14] was forthwith executed.
Claiming that the foregoing issuances of the Comelec, as well as the transactions entered pursuant thereto, are illegal and unconstitutional, petitioners come before the Court in four separate Petitions for Certiorari, Prohibition, and Mandamus imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Comelec in issuing the assailed Resolutions and in executing the assailed Extension Agreement and Deed.
G.R. No. 201112
In G.R. No. 201112, petitioners Archbishop Fernando R. Capalla, Omar Solitario Ali and Mary Anne L. Susano pray that a Temporary Restraining Order (TRO) be issued enjoining the Comelec from purchasing the PCOS machines until after final judgment of the instant case; a writ of prohibition be issued against the Comelec for the purchase of these defective PCOS machines; a writ of mandamus be issued compelling the Comelec to conduct the necessary bidding for the equipment and facilities which shall be used for the 2013 National and Local Elections; and to declare Comelec Resolution Nos. 9376, 9377, and 9378, on the purchase of PCOS machines, null and void.
Petitioners argue that if there is a necessity to purchase the PCOS machines, the Comelec should follow RA 9184 requiring competitive public bidding. They likewise argue that the OTP clause embodied in the contract with Smartmatic-TIM should be rendered invalid not only because the OTP has already lapsed but because of the fact that the OTP clause is a circumvention of the explicit provisions of RA 9184. Petitioners add that the current PCOS machines do not meet the rigorous requirements of RA 9369 that the system procured must have demonstrated capability and should have been successfully used in a prior electoral exercise here or abroad. Petitioners submit that there are intrinsic technical infirmities as regards the PCOS machines used during the 2010 elections which rendered it incapable for future use. Lastly, petitioners claim that the Comelec does not have the capability to purchase and maintain the PCOS machines, because of lack of trained manpower and technical expertise to properly maintain the PCOS machines; thus, the purchase is unfavorable to the general public.
G.R. No. 201121
In G.R. No. 201121, petitioners Solidarity for Sovereignty (S4S), represented by Ma. Linda Olaguer, Ramon Pedrosa, Benjamin Paulino, Sr., Evelyn Coronel, Ma. Linda Olaguer Montayre and Nelson T. Montayre, pray that a TRO be issued directing the Comelec to desist from implementing the contract; that Resolution No. 9376 be declared unconstitutional and all acts made pursuant thereto, including the purchase of the PCOS machines unlawful and void; that an Injunction be issued prohibiting the Comelec from further pursuing any act pursuant to Resolution No. 9376.[15]
Petitioners argue that the Comelec's act of exercising its OTP the PCOS machines from Smartmatic-TIM after the period had already lapsed is illegal and unlawful.[16] They explain that the period within which the Comelec may exercise the OTP could last only until December 31, 2010 without extension as provided in the Comelec's bid bulletin.[17] They further assert that the Comelec's acceptance of Smartmatic-TIM's unilateral extension of the option period constitutes substantial amendment to the AES contract giving undue benefit to the winning bidder not available to the other bidders.[18] Petitioners also contend that the Comelec's decision to purchase and use the PCOS machines is unconstitutional, as it allows the Comelec to abrogate its constitutional duty to safeguard the election process by subcontracting the same to an independent provider (Smartmatic-TIM), who controls the software that safeguards the entire election process. The purchase of the PCOS machines for use in the May 2013 elections would be tantamount to a complete surrender and abdication of the Comelec's constitutional mandate in favor of Smartmatic-TIM. The control of the software and process verification systems places the Comelec at the end of the process as it merely receives the report of Smartmatic-TIM. This, according to petitioners, amounts to a direct transgression of the exclusive mandate of the Comelec completely to take charge of the enforcement and administration of the conduct of elections. [19] Lastly, petitioners aver that the Comelec's act of deliberately ignoring the palpable infirmities and defects of the PCOS machines, as duly confirmed by forensic experts, is in violation of Section 2, Article V of the Constitution, as it fails to safeguard the integrity of the votes. They went on by saying that the subject PCOS machines lack security features which can guaranty the secrecy and sanctity of our votes in direct contravention of RA 9369 which requires that the automated election system must at least possess an adequate security feature against unauthorized access. In deciding to purchase the PCOS machines despite the above-enumerated defects, the Comelec's decision are claimed to be unconstitutional.[20]
G.R. No. 201127
In G.R. No. 201127, petitioners Teofisto Guingona, Bishop Broderick S. Pabillo, Solita Collas Monsod, Maria Corazon Mendoza Acol, Fr. Jose Dizon, Nelson Java Celis, Pablo R. Manalastas, Georgina R. Encanto and Anna Leah E. Colina pray that the Court issue a TRO enjoining and restraining respondents Comelec and Smartmatic-TIM from implementing Comelec Resolution No. 9376 and the Deed of Sale for the acquisition and purchase of the PCOS machines and related equipment; issue writ of preliminary injunction; declare Comelec Resolution No. 9376 void and unconstitutional and annul the Deed of Sale; and direct the Comelec to conduct public bidding soonest for the automated election system to be used for the 2013 elections.[21]
Petitioners fault the Comelec in totally disregarding the recommendation of the Comelec Advisory Council (CAC) not to exercise the OTP. They point out that in its Resolution No. 2012-2003, the CAC resolved to recommend that the Comelec should exert all efforts to procure the necessary AES only through public bidding. The CAC likewise allegedly recommended that the OTP should not be exercised if as a consequence, the rest of the system must come from the same vendor as the Comelec would lose the opportunity to look for better technology; would prevent the Comelec from taking advantage of the best possible technology available; would prevent other prospective vendors from competitively participating in the bidding process; and may erode the public trust and confidence in the electoral process. In its report to the Congressional Oversight Committee after the 2010 elections, the CAC supposedly concluded that the Comelec does not need to use the same PCOS machines and that the Comelec would be better off not exercising the OTP the PCOS machines so it can look for an even better solution for the May 2013 elections.[22] Like the other petitioners, it is their position that Comelec Resolution No. 9376 is totally null and void having been issued in violation of the express provisions of RA 9184 and the AES contract. According to petitioners, the Comelec itself provided in its bid bulletins for a fixed and determinate period, and such period ended on December 31, 2010. Thus, Smartmatic-TIM could not have unilaterally extended the option period and the Comelec could not have also given its consent to the extension. In extending the option period, it is tantamount to giving the winning bidder a benefit that was not known and available to all bidders during the bidding of the 2010 AES, which is a clear violation of the bidding rules and the equal protection clause of the Constitution.[23] Considering that the option period already expired, the purchase of the PCOS machines requires competitive public bidding. Lastly, petitioners claim that the Comelec committed grave abuse of discretion in opting to buy the PCOS machines and allied paraphernalia of Smartmatic-TIM for the 2013 elections, despite incontrovertible findings of the glitches, malfunctions, bugs, and defects of the same.[24]
G.R. No. 201418
In G.R. No. 201418, petitioners Tanggulang Demokrasya (Tan Dem), Inc., Evelyn L. Kilayko, Teresita D. Baltazar, Pilar L. Calderon and Elita T. Montilla pray that the Court annul Resolution No. 9376 and the March 30, 2012 Deed of Sale, and prohibit the Comelec and Smartmatic-TIM from implementing the same; and declare said Resolution and Deed of Sale invalid for having been issued and executed by the Comelec with grave abuse of discretion and for violating the provisions of R.A. 9184.[25]
Petitioners claim that the Comelec committed grave abuse of discretion amounting to lack or excess of jurisdiction in contracting for the purchase of AES goods and services from Smartmatic-TIM in spite of the below par performance of the latter's PCOS machines, CCS and other software and hardware in the May 2010 elections and non-compliance with the minimum functional capabilities required by law.[26] They echo the other petitioners' contention that the Comelec's decision to buy the CCS, PCOS machines, software and hardware of Smartmatic violates RA 9184's requirement of a prior competitive public bidding. Since the Comelec is bent on pursuing the purchase of the subject goods, which is an entirely new procurement, petitioners contend that there must be a public bidding. They argue that there is enough time to conduct public bidding for the 2013 elections, considering that for the May 2010 elections, the Comelec only had 10 months and they were able to conduct the public bidding. Petitioners are of the view that there is no more OTP to speak of, because the option period already lapsed and could not be revived by the unilateral act of one of the contracting parties.[27]
On April 24, 2012, the Court issued a TRO enjoining the implementation of the assailed contract of sale. The consolidated cases were later set for Oral Arguments on the following issues:
The parties were, thereafter, required to submit their Memoranda.
The petitions are without merit.
Simply stated, petitioners assail the validity and constitutionality of the Comelec Resolutions for the purchase of the subject PCOS machines as well as the Extension Agreement and the Deed of Sale covering said goods mainly on three grounds: (1) the option period provided for in the AES contract between the Comelec and Smartmatic-TIM had already lapsed and, thus, could no longer be extended, such extension being prohibited by the contract; (2) the extension of the option period and the exercise of the option without competitive public bidding contravene the provisions of RA 9184; and, (3) despite the palpable infirmities and defects of the PCOS machines, the Comelec purchased the same in contravention of the standards laid down in RA 9369.
For its part, the Comelec defends the validity and constitutionality of its decision to purchase the subject PCOS machines, pursuant to the OTP under the AES contract with Smartmatic-TIM, on the following grounds: (1) Article 6.6 of the AES contract which states the option period was amended by the extension agreement; (2) the exercise of the OTP is not covered by RA 9184, because it is merely an implementation of a previously bidded contract; (3) taking into account the funds available for the purpose, exercising the OTP was the prudent choice for the Comelec and is more advantageous to the government; and (4) the exercise of the OTP is consistent with the technical requirements of RA 9369.
Stated in another way, Smartmatic-TIM insists on the validity of the subject transaction based on the following grounds: (1) there is no prohibition either in the contract or provision of law for it to extend the option period; rather, the contract itself allows the parties to amend the same; (2) the OTP is not an independent contract in itself, but is a provision contained in the valid and existing AES contract that had already satisfied the public bidding requirements of RA 9184; (3) exercising the option was the most advantageous option of the Comelec; and (4) Smartmatic-TIM has an established track record in providing effective and accurate electoral solutions and its satisfactory performance has been proven during the 2010 elections. The alleged glitches in the May 2010 elections, if at all, are not attributable to the PCOS machines.
We agree with respondents.
At the outset, we brush aside the procedural barriers (i.e., locus standi of petitioners and the non-observance of the hierarchy of courts) that supposedly prevent the Court from entertaining the consolidated petitions. As we held in Guingona, Jr. v. Commission on Elections:[28]
Thus, in view of the compelling significance and transcending public importance of the issues raised by petitioners, the technicalities raised by respondents should not be allowed to stand in the way, if the ends of justice would not be subserved by a rigid adherence to the rules of procedure.[30]
Now on the substantive issues. In order to achieve the modernization program of the Philippine Electoral System, which includes the automation of the counting, transmission and canvassing of votes for the May 2010 national and local elections with systems integration and over-all project management in a comprehensive and well-managed manner,[31] the Comelec entered into an AES contract with Smartmatic-TIM for the lease of goods and purchase of services under the contract, with option to purchase the goods.
The option contract between the Comelec and Smartmatic-TIM is embodied in Article 4.3 of the AES contract to wit:
Article 6.6 thereof, in turn provides for the period within which the Comelec could exercise the option, thus:
The Comelec did not exercise the option within the period stated in the above provision. Smartmatic, however, unilaterally extended the same until its final extension on March 31, 2012. The Comelec, thereafter, accepted the option and eventually executed a Deed of Sale involving said goods. Now, petitioners come before the Court assailing the validity of the extension, the exercise of the option and the Deed of Sale. In light of the AES contract, can Smartmatic-TIM unilaterally extend the option period? Can the Comelec accept the extension?
We answer in the affirmative.
It is a basic rule in the interpretation of contracts that an instrument must be construed so as to give effect to all the provisions of the contract.[34] In essence, the contract must be read and taken as a whole.[35] While the contract indeed specifically required the Comelec to notify Smartmatic-TIM of its OTP the subject goods until December 31, 2010, a reading of the other provisions of the AES contract would show that the parties are given the right to amend the contract which may include the period within which to exercise the option. There is, likewise, no prohibition on the extension of the period, provided that the contract is still effective.
Article 2 of the AES contract lays down the effectivity of the contract, viz.:
Obviously, the contract took effect even prior to the 2010 elections. The only question now is whether its existence already ceased. Pursuant to the above-quoted provision, it is important to determine whether or not the performance security had already been released to Smartmatic-TIM. In Article 8 of the AES contract, performance security was defined and the rules in releasing said security were laid down, to wit:
Smartmatic-TIM categorically stated in its Consolidated Comment to the petitions that the Comelec still retains P50M of the amount due Smartmatic-TIM as performance security.[38] In short, the performance security had not yet been released to Smartmatic-TIM which indicates that the AES contract is still effective and not yet terminated. Consequently, pursuant to Article 19[39] of the contract, the provisions thereof may still be amended by mutual agreement of the parties provided said amendment is in writing and signed by the parties. In light of the provisions of the AES contract, there is, therefore, nothing wrong with the execution of the Extension Agreement.
Considering, however, that the AES contract is not an ordinary contract as it involves procurement by a government agency, the rights and obligations of the parties are governed not only by the Civil Code but also by RA 9184. In this jurisdiction, public bidding is the established procedure in the grant of government contracts. The award of public contracts, through public bidding, is a matter of public policy.[40] The parties are, therefore, not at full liberty to amend or modify the provisions of the contract bidded upon.
The three principles of public bidding are: (1) the offer to the public; (2) an opportunity for competition; and (3) a basis for the exact comparison of bids.[41] By its very nature, public bidding aims to protect public interest by giving the public the best possible advantages through open competition.[42] Competition requires not only bidding upon a common standard, a common basis, upon the same thing, the same subject matter, and the same undertaking, but also that it be legitimate, fair and honest and not designed to injure or defraud the government.[43] The essence of competition in public bidding is that the bidders are placed on equal footing which means that all qualified bidders have an equal chance of winning the auction through their bids.[44] Another self-evident purpose of public bidding is to avoid or preclude suspicion of favoritism and anomalies in the execution of public contracts.[45]
A winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon. However, such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and would constitute a denial to the other bidders of the opportunity to bid on the same terms.[46] The determination of whether or not a modification or amendment of a contract bidded out constitutes a substantial amendment rests on whether the contract, when taken as a whole, would contain substantially different terms and conditions that would have the effect of altering the technical and/or financial proposals previously submitted by the other bidders. The modifications in the contract executed between the government and the winning bidder must be such as to render the executed contract to be an entirely different contract from the one bidded upon.[47]
Public bidding aims to secure for the government the lowest possible price under the most favorable terms and conditions, to curtail favoritism in the award of government contracts and avoid suspicion of anomalies, and it places all bidders in equal footing. Any government action which permits any substantial variance between the conditions under which the bids are invited and the contract executed after the award thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which warrants proper judicial action.[48] If this flawed process would be allowed, public bidding will cease to be competitive, and worse, government would not be favored with the best bid. Bidders will no longer bid on the basis of the prescribed terms and conditions in the bid documents but will formulate their bid in anticipation of the execution of a future contract containing new and better terms and conditions that were not previously available at the time of the bidding. Such a public bidding will not inure to the public good.[49]
In Power Sector Assets and Liabilities Management Corporation (PSALM) v. Pozzolanic Philippines Incorporated,[50] the Court nullified the right of first refusal granted to respondent therein in the Batangas Contract for being contrary to public policy. The Court explained that the same violated the requirement of competitive public bidding in the government contract, because the grant of the right of first refusal did not only substantially amend the terms of the contract bidded upon so that resultantly the other bidders thereto were deprived of the terms and opportunities granted to respondent therein after it won the public auction, but also altered the bid terms by effectively barring any and all true bidding in the future.[51]
Also in Agan, Jr. v. Philippine International Air Terminals Co., Inc., (PIATCO),[52] this Court declared as null and void, for being contrary to public policy, the Concession Agreement entered into by the government with PIATCO, because it contained provisions that substantially departed from the Draft Concession Agreement included in the bid documents. The Court considered the subject contracts a mockery of the bidding process, because they were substantially amended after their award to the successful bidder on terms more beneficial to PIATCO and prejudicial to public interest.[53]
The same conclusions cannot be applied in the present case.
One. Smartmatic-TIM was not granted additional right that was not previously available to the other bidders. Admittedly, the AES contract was awarded to Smartmatic-TIM after compliance with all the requirements of a competitive public bidding. The RFP, Bid Bulletins and the AES contract identified the contract as one of lease with option to purchase. The AES contract is primarily a contract of lease of goods[54] listed in the contract and purchase of services[55] also stated in the contract. Section 4.3 thereof gives the Comelec the OTP the goods agreed upon. The same provision states the conditions in exercising the option, including the additional amount that the Comelec is required to pay should it exercise such right. It is, therefore, undisputed that this grant of option is recognized by both parties and is already a part of the principal contract of lease. Having been included in the RFP and the bid bulletins, this right given to the Comelec to exercise the option was known to all the bidders and was considered in preparing their bids. The bidders were apprised that aside from the lease of goods and purchase of services, their proposals should include an OTP the subject goods. Although the AES contract was amended after the award of the contract to Smartmatic-TIM, the amendment only pertains to the period within which the Comelec could exercise the option because of its failure to exercise the same prior to the deadline originally agreed upon by the parties. Unlike in PSALM, wherein the winning bidder was given the right of first refusal which substantially amended the terms of the contract bidded upon, thereby depriving the other bidders of the terms and opportunities granted to winning bidder after it won the public auction; and in Agan, Jr., wherein the Concession Agreement entered into by the government with PIATCO contained provisions that substantially departed from the draft Concession Agreement included in the bid documents; the option contract in this case was already a part of the original contract and not given only after Smartmatic-TIM emerged as winner. The OTP was actually a requirement by the Comelec when the contract of lease was bidded upon. To be sure, the Extension Agreement does not contain a provision favorable to Smartmatic-TIM not previously made available to the other bidders.
Two. The amendment of the AES contract is not substantial. The approved budget for the contract was P11,223,618,400.00[56] charged against the supplemental appropriations for election modernization. Bids were, therefore, accepted provided that they did not exceed said amount. After the competitive public bidding, Smartmatic-TIM emerged as winner and the AES contract was thereafter executed. As repeatedly stated above, the AES contract is a contract of lease with OTP giving the Comelec the right to purchase the goods agreed upon if it decides to do so. The AES contract not only indicated the contract price for the lease of goods and purchase of services which is P7,191,484,739.48, but also stated the additional amount that the Comelec has to pay if it decides to exercise the option which is P2,130,635,048.15. Except for the period within which the Comelec could exercise the OTP, the terms and conditions for such exercise are maintained and respected. Admittedly, the additional amount the Comelec needed to pay was maintained (less the amount already paid when it purchased 920 units of PCOS machines with corresponding CCS for the special elections in certain areas in the provinces of Basilan, Lanao del Sur and Bulacan) subject to the warranties originally agreed upon in the AES contract. The contract amount not only included that for the contract of lease but also for the OTP. Hence, the competitive public bidding conducted for the AES contract was sufficient. A new public bidding would be a superfluity.
The Solicitor General himself clarified during the oral arguments that the purchase price of the remaining PCOS machines stated in the assailed Deed of Sale was the price stated in Article 4.3 of the AES contract. Therefore, the said amount was already part of the original amount bidded upon in 2009 for the AES contract which negates the need for another competitive bidding.[57]
Third. More importantly, the amendment of the AES contract is more advantageous to the Comelec and the public.
The nature of an option contract was thoroughly explained in Eulogio v. Apeles,[58] to wit:
Also in Carceller v. Court of Appeals,[60] the Court described an option in this wise:
In Adelfa Properties, Inc. v. CA,[62] the Court described an option as:
From the foregoing jurisprudential pronouncements, an option is only a preparatory contract and a continuing offer to enter into a principal contract. Under the set-up, the owner of the property, which is Smartmatic-TIM, gives the optionee, which is the Comelec, the right to accept the former's offer to purchase the goods listed in the contract for a specified amount, and within a specified period. Thus, the Comelec is given the right to decide whether or not it wants to purchase the subject goods. It is, therefore, uncertain whether or not the principal contract would be entered into. The owner of the property would then have to wait for the optionee to make a decision. A longer option period would mean that more time would be given to the optionee to consider circumstances affecting its decision whether to purchase the goods or not. On the part of Smartmatic-TIM, it would have to wait for a longer period to determine whether the subject goods will be sold to the Comelec or not, instead of freely selling or leasing them to other persons or governments possibly at a higher price. This is especially true in this case as the terms and conditions for the exercise of the option including the purchase price, had been included in the AES contract previously bidded upon. The parties are bound to observe the limitations embodied therein, otherwise, a new public bidding would be needed.
We agree with respondents that the exercise of the option is more advantageous to the Comelec, because the P7,191,484,739.48 rentals paid for the lease of goods and purchase of services under the AES contract was considered part of the purchase price. For the Comelec to own the subject goods, it was required to pay only P2,130,635,048.15. If the Comelec did not exercise the option, the rentals already paid would just be one of the government expenses for the past election and would be of no use to future elections. Assuming that the exercise of the option is nullified, the Comelec would again conduct another public bidding for the AES for the 2013 elections with its available budget of P7 billion. Considering that the said amount is the available fund for the whole election process, the amount for the purchase or lease of new AES will definitely be less than P7 billion. Moreover, it is possible that Smartmatic-TIM would again participate in the public bidding and could win at a possibly higher price. The Comelec might end up acquiring the same PCOS machines but now at a higher price.
The advantage to the government of the exercise of the OTP was even recognized by petitioners, shown during the oral arguments:
Another reason posed by petitioners for their objection to the exercise of the option and the eventual execution of the March 30, 2012 Deed of Sale is the existence of the alleged defects, glitches, and infirmities of the subject goods. The technology provided by Smartmatic-TIM was not perfect, because of some technical problems that were experienced during the 2010 elections. Petitioners herein doubt that the integrity and sanctity of the ballots are protected because of these defects.
We do not agree.
Prior to the execution of the Deed of Sale, the Comelec and Smartmatic-TIM had agreed that the latter would undertake fixes and enhancements to the hardware and software to make sure that the subject goods are in working condition to ensure a free, honest, and credible elections. As former Commissioner Augusto C. Lagman admitted[65] during the oral arguments, there are possible software solutions to the alleged problems on the PCOS machines and it is not inherently impossible to remedy the technical problems that have been identified. While there is skepticism that Smartmatic-TIM would be able to correct the supposed defects prior to the 2013 elections because of its inaction during the two years prior to the exercise of the option, we agree with the opinion of Chairman Sixto S. Brillantes, Jr. that it is absurd to expect Smartmatic-TIM to invest time, money and resources in fixing the PCOS machines to the specifications and requirements of the Comelec when prior to the exercise of the OTP, they do not have the assurance from the Comelec that the latter will exercise the option.[66]
Moreover, as to the digital signature which appears to be the major concern of petitioners, it has been clarified during the oral arguments that the PCOS machines are capable of producing digitally-signed transmissions:
As the Comelec is confronted with time and budget constraints, and in view of the Comelec's mandate to ensure free, honest, and credible elections, the acceptance of the extension of the option period, the exercise of the option, and the execution of the Deed of Sale, are the more prudent choices available to the Comelec for a successful 2013 automated elections. The alleged defects in the subject goods have been determined and may be corrected as in fact fixes and enhancements had been undertaken by Smartmatic-TIM. Petitioners could not even give a plausible alternative to ensure the conduct of a successful 2013 automated elections, in the event that the Court nullifies the Deed of Sale.
WHEREFORE, premises considered, the petitions are DISMISSED. The Temporary Restraining Order issued by the Court on April 24, 2012 is LIFTED.
SO ORDERED.
Carpio, Del Castillo, Perez, and Mendoza, JJ., concur.
Velasco, Jr., J., I certy that J. Velasco, Jr., left his vote concurring with J. Peralta and will submit a separate concurring opinion.
Leonardo-De Castro, and Bersamin, JJ., pls. see concurring opinion.
Brion, Villarama, Jr., and Perlas-Bernabe, JJ., pls. see my dissenting opinion.
Abad, J., pls. see separate opinion.
Sereno, and Reyes, JJ., please see separate concuring opinion.
[1] Rollo (G.R. No. 201112), pp. 91-92.
[2] Annex "1"; Consolidated Comment (OSG); rollo (G.R. No. 201112), pp. 214-271.
[3] Id. at 214.
[4] Rollo (G.R. No. 201112), p. 95.
[5] Annex "A"; Petition, rollo (G.R. No. 201121), pp. 26-49.
[6] Rollo (G.R. No. 201112), p. 97.
[7] Annex "C", Petition, rollo (G.R. No. 201127), pp. 53-55.
[8] Annex "4", Consolidated Comment (OSG), rollo (G.R. No. 201112), pp. 277-282 .
[9] Annex "A", Petition, rollo (G.R. No. 201112), pp. 39-42.
[10] Annex "B", Petition, rollo (G.R. No. 201112), pp. 48-49.
[11] Annex "6", Consolidated Comment (OSG), rollo (G.R. No. 201112), pp. 315-317.
[12] Rollo (G.R. No. 201112), pp. 99-100.
[13] Annex "C"; Petition, rollo (G.R. No. 201112), pp. 50-51
[14] Annex "I"; Petition, rollo (G.R. No. 201127), pp. 81-86.
[15] Petition, rollo (G.R. No. 201121), p. 21.
[16] Id. at 9.
[17] Id. at 9.
[18] Id. at 10.
[19] Id. at 11-15.
[20] Id. at 15-21.
[21] Petition, rollo (G.R. No. 201127), p. 19.
[22] Id. at 9-11.
[23] Id. at 11-14.
[24] Id. at 14-17.
[25] Petition, rollo (G.R. No. 201413), pp. 21-22.
[26] Id. at 12-19.
[27] Id. at 19-21.
[28] G.R. No. 191846, May 6, 2010, 620 SCRA 448.
[29] Id. at 462.
[30] Roque, Jr. v. Commission on Elections, G.R. No. 188456, September 10, 2009, 599 SCRA 69, 112.
[31] Rollo (G.R. No. 201127), p. 28.
[32] Rollo (G.R. No. 201121), p. 33.
[33] Id. at 37.
[34] Adriatico Consortium, Inc. v. Land Bank of the Philippines, G.R. No. 187838, December 23, 2009, 609 SCRA 403, 416; Domingo Realty, Inc. v. Court of Appeals, G.R. No. 126236, January 26, 2007, 513 SCRA 40, 62.
[35] Catungal v. Rodriguez, G.R. No. 146839, March 23, 2011, 646 SCRA 130, 155; Adriatico Consortium, Inc. v. Land Bank of the Philippines, supra; Domingo Realty, Inc. v. Court of Appeals, supra.
[36] Rollo (G.R. No. 201121), p. 30
[37] Id. at 38-39.
[38] Rollo (G.R. No. 201112), p. 608.
[39] This contract and its Annexes may be amended by mutual agreement of the parties. All such amendments shall be in writing and signed by the duly authorized representatives of both parties.
[40] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, G.R. No. 183789, August 24, 2011, 656 SCRA 214, 241.
[41] Id. at 229; JG Summit Holdings, Inc. v. Court of Appeals, G.R. No. 124293, September 24, 2003, 412 SCRA 10, 32.
[42] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, supra note 40, at 231; Agan, Jr. v. Philippine International Air Terminals, Co., Inc., G.R. Nos. 155001, 155547 and 155661, May 5, 2003, 402 SCRA 612, 654.
[43] Id.; id.
[44] JG Summit Holdings, Inc. v. Court of Appeals, supra note 39, at 33.
[45] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, supra note 40, at 232.
[46] Supra note 40, at 233; Agan, Jr. v. Philippine International Air Terminals, Co., Inc., supra note 42, at 655-656.
[47] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, supra note 40, at 233.
[48] Agan, Jr. v. Philippine International Air Terminals Co., Inc., supra note 42, at 664.
[49] Agan, Jr. v. Philippine International Air Terminals Co., Inc., G.R. Nos. 155001, 155547 and 155661, January 21, 2004, 420 SCRA 575, 597.
[50] Supra note 40.
[51] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, supra note 40, at 228-233.
[52] Supra note 42.
[53] Agan, Jr. v. Philippine International Air Terminals Co., Inc., supra note 49, at 597.
[54] Goods refer to the precinct count optical scan (PCOS) machines and their peripherals, personal computers, servers, electronic transmission devices, printers, integrated software and other related equipment, both hardware and software, including all deliverable supplies, ballots and materials, except ballot boxes, as presented by TIM and SMARTMATIC in their Technical and Financial Proposals, all other materials necessary to carry out the Project.
[55] Services refer to all acts to be performed or provided by the PROVIDER to COMELEC for the operation and completion of the Project, enumerated and described in the Technical and Financial Proposals, as amended or expounded by the Bidding Documents, particularly in reference but not limited to Components 2 and 3.
[56] Rollo (G.R. No. 201112), p. 346.
[57] Transcript of Stenographic Notes (TSN), Oral Arguments, En Banc, May 8, 2012, pp.139-140.
[58] G.R. No. 167884, January 20, 2009, 576 SCRA 561.
[59] Eulogio v. Apeles, supra, at 572-573.
[60] 362 Phil. 332 (1999).
[61] Carceller v. Court of Appeals, supra.
[62] 310 Phil. 623 (1995).
[63] Adelfa Properties, Inc. v. CA, supra, at 640.
[64] TSN, Oral Arguments, En Banc, May 2, 2012, pp. 58-68.
[65] Id. at 184-185.
[66] Rollo (G.R. No. 201112), p. 47.
[67] TSN, Oral Arguments, En Banc, May 8, 2012, pp. 159-170.
CONCURRING OPINION
LEONARDO-DE CASTRO, J.:
I concur fully with the ponencia of the Honorable Associate Justice Diosdado M. Peralta after a careful consideration, among others, of the stipulations in the Contract for the Provision of the Automated Election System (AES) for the May 10, 2010 synchronized National and Local Elections (AES Contract, for brevity) and the undisputed facts relevant thereto.
I deemed it necessary to explain the legal basis of my concurrence with the majority opinion in view of the points of law which I raised in the course of the oral arguments in these cases, particularly those relating to the period within which the COMELEC shall exercise the option to purchase (OTP) the goods listed in Annex "L" of the AES Contract. The latter pertinently provides:
Questions were raised as to the validity of the extension of the OTP period agreed upon by the parties to the contract long after December 31, 2010. The Agreement on the Extension of the OTP under the AES Contract was signed only on March 30, 2012. Nonetheless, I have come to the conclusion that such an extension of the period to exercise the OTP was legal and valid.
It is important to consider that the OTP stipulation is an integral part of the AES Contract, which as of March 30, 2012 was still in effect, pursuant to Article 2 of the said Contract which reads:
The assertion of Smartmatic-TIM in its Consolidated Comment that COMELEC still retains the amount of Fifty Million Pesos of the performance security posted by Smartmatic-TIM, which was noted by Justice Peralta in his ponencia was not disputed. During the oral arguments, I inquired about the release of the Performance Security precisely because I believed it was crucial in determining when the AES Contract expired.
By virtue of the above-quoted stipulation and the COMELEC's retention of the Performance Security, the AES Contract, of which the OTP is a part, was still a subsisting contract as of March 30, 2012, the date the OTP extension agreement was signed.
The next question is: Can the period to exercise OTP be validly amended after December 31, 2010? I believe so considering that stipulations of the AES Contract, including Article 19 which allowed amendments of said contract, were still effective as of March 30, 2012. Morever, there is nothing in the AES Contract, particularly in par. 2.2, Article 2, which prohibits the extension of the period of the OTP. The said extension is the nature of an amendment to the AES Contract, which can be done while the said Contract still has life. It would have been a different matter if the AES Contract had already expired before the period of the OTP was extended by agreement of the parties. In that case, contractual stipulations, including that on the amendment of the contract will cease to have any force and effect and any contract for the purchase of goods would be an entirely different contract which should comply anew with government procurement laws and regulations.
It should likewise be stressed that the contracting parties stipulated, under par. 2.2 of Article 2, that the effectivity of the OTP cannot be prejudiced by the expiration of the AES Contract. In other words, the said parties intended that effectivity of the OTP may even outlive, or survive beyond, the term of the AES Contract, assuming that such period to exercise the OTP was agreed upon during the existence of the AES Contract.
Under the facts obtaining in these cases, the original period of the OTP expired before the termination of the AES Contract. Considering that OTP is just an adjunct of the main AES Contract, which still exists, and there being no express or implied ground in the contract to bar such extension or revival of the period, the validity of the latter must be upheld.
Moreover, I agree with the observation of Justice Peralta that the amendment of the period is not a substantial amendment of the AES Contract that would prejudice the other bidders to the said contract.
Accordingly, for the above-stated reasons and the other grounds discussed by Justice Peralta in his ponencia, I reiterate my concurrence to the dismissal of the present petitions.
CONCURRING OPINION
BERSAMIN, J.:
The consolidated petitions for certiorari, prohibition, and mandamus (with prayer for the issuance of temporary restraining order and/or writ of preliminary injunction) assail the exercise by the Commission on Elections (COMELEC) of its option to purchase under Article 4.3 of the July 10, 2009 Contract for the Provision of an Automated Election System for the May 10, 2010 Synchronized National and Local Elections (2009 Automation Contract). They claim that Resolution No. 9376 and the Deed of Sale executed on March 30, 2012 by and between the COMELEC and SMARTMATIC-TIM Corporation to concretize the COMELEC's exercise of its option to purchase under the 2009 Automation Contract were issued or done in grave abuse of discretion amounting to lack or excess of jurisdiction.
My personal persuasion is that all the petitions are inappropriate remedies against Resolution No. 9376 and the Deed of Sale executed on March 30, 2012. The Court should dismiss them for that reason.
Furthermore, I firmly urge that the Court outrightly dismiss the petitions for lack of jurisdiction over the subject matter.
But, even granting that the Court has jurisdiction over the subject matter of these actions, I respectfully submit that the COMELEC's exercise of its option to purchase beyond December 31, 2010 without a new public bidding was valid and should be upheld.
I.
Certiorari, Prohibition and Mandamus
are inappropriate remedies
I harbor serious misgivings about the propriety of the petitions for certiorari, prohibition, and mandamus as remedies to challenge Resolution No. 9376 and the March 30, 2012 Deed of Sale.
As a premise for my misgivings, I categorize the issuance of the assailed Resolution No. 9376 and the execution of the Deed of Sale on March 30, 2012 in terms of what function the COMELEC thereby discharged.
The Court has classified the functions the COMELEC exercises into the quasi-judicial, quasi-legislative, and administrative in Bedol v. Commission on Elections,[1] to wit:
action. It is true that pursuant to Section 2,[2] Rule 64 of the Rules of Court,[3] the remedy of an aggrieved party against a judgment or final order or resolution of the COMELEC is a special civil action of certiorari under Rule 65 brought in the Supreme Court. In Macabago v. Commission on Elections,[4] however, the Court has clarified that Rule 64 applies only to the judgments or final orders or final resolutions rendered by the COMELEC in the exercise of its quasi-judicial function (that is, "the power to resolve controversies arising from the enforcement of election laws, and to be the sole judge of all pre-proclamation controversies; and of all contests relating to the elections, returns, and qualifications"). In this connection, the Court, upon noting that Rule 64 likewise extends to the judgments, final orders or final resolutions of the Commission on Audit, has said in Dela Llana v. Commission on Audit,[5] viz:
While Rule 64 sets the procedure for reviewing the judgments, final orders or resolutions the COMELEC renders in its quasi-judicial capacity, Rule 65 provides another remedy to a party who is aggrieved by the act of the COMELEC in the exercise of its administrative function,[6] but the questioned act or issuance must have been attended by grave abuse of discretion amounting to lack or excess of jurisdiction.[7] Regardless of whether a petition is brought under Rule 64 or Rule 65, the following essential requisites must be attendant, namely: (a) the writ is directed against the COMELEC exercising its quasi-judicial functions, if the petition is for certiorari or prohibition, or exercising its ministerial function, if the petition is for prohibition or mandamus; (b) the COMELEC has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (c) there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law.
Evidently, the issuance of Resolution No. 9376 did not involve the investigation of facts, the conduct of hearings, or the weighing of evidence to resolve a controversy arising from the enforcement of election laws. As such, the resolution was not issued in the exercise of COMELEC's quasi-judicial function. The resolution was not also promulgated in the exercise of the COMELEC's administrative function, because it did not relate to the enforcement of election laws. Rather, the resolution resulted from the COMELEC's exercise of its quasi-legislative function, its aim being to implement Republic Act (RA) No. 8436,[8] as amended by RA No. 9369, through the adoption of an automated election system for the 2013 elections.
Considering that the assailed Deed of Sale entered into on March 30, 2012 pursuant to Resolution No. 9376 was clearly not the product of the COMELEC's quasi-judicial function, the Court cannot exercise its certiorari jurisdiction herein in order to review and set it aside.
Prohibition and mandamus are likewise inappropriate as remedies against Resolution No. 9376 and the Deed of Sale of March 30, 2012. In a special civil action for prohibition, the respondent tribunal, corporation, board, or person must exercise either judicial, quasi-judicial, or ministerial functions and must have acted without or in excess of jurisdiction or with grave abuse of discretion; the prohibition petitioner prays that judgment be rendered, commanding the respondent to desist from further proceeding in the action or matter specified in the petition.[9] In a special civil action for mandamus, the petitioner seeks to compel the performance of a ministerial duty.[10] The mandamus petitioner should show, on one hand, that he has a well-defined, clear and certain legal right in the performance of the act, and, on the other hand, that the respondent has the clear and imperative duty to do the act required to be done.[11] Without question, however, both remedies of prohibition and mandamus cannot review and correct the exercise by the COMELEC of its legislative or quasi-legislative function.[12]
I am constrained to find, therefore, that the consolidated petitions are inappropriate remedies. Upon that cause, I vote for their outright dismissal.
II.
The Court has no jurisdiction over
the subject matter of the actions
The visible objective of the consolidated petitions is to prevent the COMELEC from purchasing the PCOS machines and related election paraphernalia from SMARTMATIC-TIM. It is certain that the resolution of these cases would center on the validity and legality of the exercise by the COMELEC beyond December 31, 2010 of the option to purchase.
If that is certain, an ordinary civil action for the annulment of contract (i.e., Deed of Sale of March 30, 2012) is the appropriate and adequate remedy. Assailing the validity and legality of the exercise by the COMELEC beyond December 31, 2010 without a public bidding of the option to purchase is definitely an action whose subject matter is incapable of pecuniary estimation, considering that "the basic issue is something other than the right to recover a sum of money, or xxx the money claim is purely incidental to, or a consequence of, the principal relief sought like in suits to have the defendant perform his part of the contract (specific performance) and in actions for support, or for annulment of a judgment or to foreclose a mortgage."[13]
There is no question that the jurisdiction over an action whose subject matter is incapable of pecuniary estimation originally and exclusively pertains to the Regional Trial Court (RTC) by express provision of law.[14] The Court cannot arrogate unto itself the jurisdiction that it does not have under the Constitution and the laws on jurisdiction enacted by Congress. If the Court does so, its judgment will be void and ineffectual.
I humbly posit that the RTC still has exclusive and original jurisdiction notwithstanding that the petitioners' theory is that the assailed Resolution No. 9376 was invalid and illegal for violating RA No. 9184 (The Government Procurement Reform Act). I deem it not amiss to point out that the Court's power to evaluate and pass upon the validity of an implementing rule or regulation like Resolution No. 9376 is generally only appellate in nature.[15]
I concede that exceptional and compelling circumstances, such as the involvement of the national interest in a controversy and the serious implications on the national life of the issue, may justify a direct resort to the Court through the extraordinary remedies for the writs of certiorari, prohibition and mandamus. Yet, the Court should still desist from giving due course to and resolving the consolidated petitions upon bare assertions of transcendental importance or the paramountcy of public interest. Verily, jurisdiction over the subject matter of any action is determined by the basic allegations of the initiating pleading, but such determinant allegations should not include conclusions of fact and law; otherwise, the laws on jurisdiction and pleadings will be easily thrown in disarray. The Court cannot arbitrarily ignore the statutory rules on jurisdiction in order to repose in itself an original authority that the Constitution and the statutes have not seen fit to repose in the Court.
III.
Petitions are bereft of merit and substance
Assuming that I am wrong about the RTC having the exclusive and original jurisdiction over the subject matter of the consolidated petitions, as well as about the petitions not being the appropriate remedies to assail Resolution No. 9376 and the Deed of Sale of March 30, 2012, I must now submit that the petitions are really bereft of merit and substance.
The issue is whether the COMELEC acted with grave abuse of discretion amounting to lack or excess of jurisdiction in exercising the option to purchase beyond December 31, 2010. My submission is that the COMELEC did not.
The decisive query is: Was the extension of the period of the option to purchase beyond December 31, 2010 without another public bidding being first conducted pursuant to RA No. 9184 valid? In my view, it was.
I join Justice Peralta's persuasive showing that the COMELEC's exercise of the option and its entering into the purchase of the PCOS machines did not contravene the letter and spirit of RA No. 9184. I give my full concurrence to his submission that the purchase was in fact favorable to the Government and to the public interest. Accordingly, I uphold Resolution No. 9376 and the ensuing Deed of Sale.
The existence of a binding option to purchase is not in dispute. The inclusion of the option to purchase was a requirement precisely mentioned in the Bid Bulletins and Section 28, Part V or Other Specifications of the request for proposal (RFP).[16] That option to purchase was irrevocable during its term because it was supported by a valuable consideration (that is, the contract price stipulated in the 2009 Automation Contract).[17]
The 2009 Automation Contract shows the following terms of the option to purchase, to wit:
Explaining the nature of an option contract, the Court has declared in Eulogio v. Spouses Apeles,[18] viz:
Here, the option to purchase was the unilateral undertaking of SMARTMATIC-TIM. A unilateral contract gives rise to an obligation that binds only one of the parties, which sets a unilateral contract poles apart from a bilateral contract that contemplates reciprocity of obligations. Professor Corbin, an eminent commentator on the law of contracts,[20] has expounded on the distinction of a unilateral contract from a bilateral one in this wise:
As used in the law of sales, an option, according to Limson v. Court of Appeals,[22] "is a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a time certain, or under, or in compliance with, certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale." By its juridical nature, an option contract creates a mere entitlement, right, or privilege on the part of the offeree who retains the discretionary prerogative whether to exercise it or not. Considering that the option is unilateral in essence, the offeror in an option to purchase creates a burden upon himself not to dispose of the subject matter of the option within the specified time set forth in the contract for the purpose of obtaining exclusivity of parties in a future contract conditioned upon the acceptance of
the offer.[23] It is plain, then, that a valid option contract is not a mere expression of a willingness to enter into a future contract; rather, it is already a committed offer, definite in its terms, that effectively induces the offeree-optionee to reasonably believe that the choice or preference to generate such forthcoming covenant stems from him. In Carceller v. Court of Appeals,[24] the Court has said that
Given the foregoing, all that was left to be done in order to create a bilateral promise to buy and to sell between the COMELEC and SMARTMATIC-TIM was the act of acceptance on the part of COMELEC of SMARTMATIC-TIM's committed offer.
That SMARTMATIC-TIM unilaterally made several extensions of the period to exercise the option to purchase without the corresponding agreement of the COMELEC was inconsequential to the valid and effective exercise of the option by the COMELEC. I reiterate that an offeror like SMARTMATIC-TIM retained the exclusive power to extend the option; and that nothing could prevent SMARTMATIC-TIM as the offeror from extending the offer even without the offeree's lack of consent. In point is Prof. Corbin's following discourse, to wit:
In other words, the extension made by SMARTMATIC-TIM prior to December 31, 2010 (the expiration of the original period) as well as the extensions subsequent thereto effectively preserved the option to purchase and stretched the lifespan of the option. This signifies that the option was still subsisting when the COMELEC decided to exercise it on March 21, 2012. The COMELEC's purchase of the PCOS machines and related paraphernalia through the Deed of Sale of March 30, 2012 thus only continued the covenants embodied in the 2009 Automation Contract, contrary to the petitioners' contentions.
The usage of the words "shall notify" in Article 6.6 of the 2009 Automation Contract, which provides that "COMELEC shall notify the PROVIDER on or before 31 December 2010 of its option to purchase the Goods as listed under Annex L", simply meant that the COMELEC should communicate its acceptance of the committed offer within the term stipulated, and did not refer to the consummation of the anticipated contract of sale. In that light, the communication by the COMELEC on March 21, 2012 of its acceptance was an act within the context of the 2009 Automation Contract.
Hence, I have no alternative except to reject the petitioners' allegations of grave abuse of discretion committed by the COMELEC in issuing its Resolution No. 9376.
IV.
Extension of the period of the option
to purchase was not a material or substantial
amendment of the 2009 Automation Contract;
Hence, no new public bidding is required
RA No. 9184 requires that, subject to certain exceptions, all procurements by the Government should be through competitive bidding.[28] Procurement is defined as the acquisition of goods and consulting services, and the contracting for infrastructure projects, including the lease of goods and real estate.[29] A public bidding provides the occasion for an open and fair competition among all bidders, and is designed to secure for the Government the lowest possible price under the most favorable terms and conditions, to curtail favoritism in the award of government contracts, and to avoid suspicion of anomalies.[30] It is intended to minimize occasions for corruption and temptations to commit abuse of discretion in awarding contracts on the part of government authorities.[31]
All procurement contracts must undergo a public bidding before they may be awarded. A publicly-bidded contract, once executed, may no longer be amended; otherwise, the policy behind the requirement of competitive bidding may be subverted. According to Caltex (Phil.), Inc. v. Delgado Bros., Inc.: [32]
Still, the Court has recognized that a publicly-bidded contract may be amended provided that the amendment is not material or substantial.[33]
When, then, is an amendment considered material or substantial as to demand another public bidding?
The leading case law on when an amendment of a publicly-bidded contract is material or substantial is Agan, Jr. v. Philippine International Air Terminals Co., Inc.,[34] which holds that an amendment is material if it permits a substantial variance between the terms and conditions under which the bids were invited and the terms and conditions of the contract executed after the bidding. Agan, Jr. fittingly elucidates as follows:
In short, the prohibition against amending a publicly-bidded contract extends only to a change in vital and essential particulars of the agreement that results in a substantially new contract.[38]
An example illustrative of a material change is seen in Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Inc..[39] The issue was whether the amendment made on a contract for the purchase of the fly ash produced by the Batangas Power Plant was valid or not. The contract had been amended after the bidding to include a right of first refusal to purchase the fly ash to be generated by power plants that would be put up by the National Power Corporation (NPC) in the future. The Court found that the amendment went beyond the scope of the original contract that had referred only to the Batangas Power Plant; and accordingly ruled that the amendment was material because it changed the terms of the bidding conducted; hence, the amendment was void. The Court further ruled that the amendment was especially repugnant because it also prejudiced biddings yet to be conducted as to the other power plants that NPC would be building later on, stating:
Here, however, the extensions of the timeline for the option to purchase did not amount to a material or substantial amendment of the 2009 Automation Contract. For sure, the bid documents specifically included the option to purchase the goods to be leased by COMELEC, as reflected in the RFP, which states:
Moreover, the change related only to the period of the option to purchase. That sort of change did not go beyond the subject of the contract that had been bidded out to the public because the price and other essential terms embodied in the 2009 Automation Contract remained the same; hence, the change was not material or substantial.
At any rate, extending the period of the option to purchase was entirely within the discretion of SMARTMATIC-TIM to make. There is no denying that the implementing rules and regulations of RA No. 9184 did provide that the terms stated in the bidding documents were only the minimum requirements of the procuring entity, and that the bidder was free to offer better terms.[40] In Bid Bulletin No. 13, the Special Bids and Awards Committee definitively stated that the option to purchase would not be considered in any way in determining the lowest calculated bid. Any better offer on the terms of the option to purchase would have had no bearing in determining the winning bidder because the winner would ultimately be determined based on the lowest price submitted.[41]
Understandably, there may be additional factors to consider in determining if an amendment is material. Thus, in Kenai Lumber Company, Inc. v. LeResche,[42] it was held that:
A consideration of these additional factors bolsters my conclusion that the extension of the period of the option to purchase was not a material amendment of the 2009 Automation Contract. I note, first of all, that the extension of the period of the option to purchase emanated from the apparent desire of SMARTMATIC-TIM to give to the COMELEC enough time to deliberate and to decide whether to avail itself of the option to purchase or not. The motivation for the extension was legitimate in view of the issues that arose even prior to the 2010 elections centering on the capability of SMARTMATIC-TIM to safeguard the votes as well as on the COMELEC's budgetary concerns, difficult issues that the COMELEC had to address first. Secondly, the need for extending the time on account of such issues and concerns was evidently not foreseen prior to the bidding and the execution of the 2009 Automation Contract. Thirdly, there was also nothing suspicious about the timing of the change because more than a year had already elapsed following the implementation of the 2009 Automation Contract. Finally, the 2009 Automation Contract permitted amendments to be mutually agreed upon by the parties, and the extent of the amendment which only refers to the period of the option to purchase is not substantial.
In summary, the extension of the period of the option to purchase did not amount to a material amendment of the 2009 Automation Contract. The extension of the period did not give rise to a new contract that would have necessitated the conduct of another public bidding.
ACCORDINGLY, I vote to dismiss all the petitions for certiorari, prohibition and mandamus.
[1] G.R. 179830, December 3, 2009, 606 SCRA 554, 569-571.
[2] Section 2. Mode of review. A judgment or final order or resolution of the Commission on Elections and the Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65, except as hereinafter provided. (n)
[3] Entitled Review Of Judgments And Final Orders Or Resolutions Of The Commission On Elections And The Commission On Audit.
[4] G.R. No. 152163, November 18, 2002, 392 SCRA 178, 183.
[5] G.R. No. 180989, February 7, 2012.
[6] Macabago v. Commission on Elections, G.R. No. 152163, November 18, 2002, 392 SCRA 178, 184; citing Canicosa v. Commission on Elections ,G.R. No.120318, December 5, 1997, 282 SCRA 512; and Cabagnot v. Commission on Elections, G.R. No. 124383, August 9, 1996, 260 SCRA 503.
[7] Macabago v. Commission on Elections, supra; citing Raymundo v. People Homesite and Housing Corp., No. L-38318, June 29, 1982, 114 SCRA 712; and Loong v. Commission on Elections, G.R. No. 133676, April 14, 1999, 305 SCRA 832.
[8] An Act Authorizing the Commission on Elections to Use an Automated Election System in the May 11, 1998 National or Local Elections and in Subsequent National and Local Electoral Exercises, Providing Funds Therefor and for Other Purposes.
[9] Ongsuco v. Malones, G.R. No. 182065, October 27, 2009, 604 SCRA 499, 515; Perez v. Court of Appeals, No. L-80838, November 29, 1988, 168 SCRA 236, 243.
[10] Ongsuco v. Malones, supra; Heirs of Sps. Luciano and Consolacion Venturillo v. Quitain, G.R. No. 157972, 30 October 2006, 506 SCRA 102, 110; Cariño v. Capulong, G.R. No. 97203, 26 May 1993, 222 SCRA 593, 602.
[11] Ongsuco v. Malones, supra; Social Justice Society v. Atienza, Jr., G.R. No. 156052, 7 March 2007, 517 SCRA 657, 664.
[12] Holy Spirit Homeowners Association, Inc. v. Defensor, G.R. No. 163980, August 3, 2006, 479 SCRA 581.
[13] Lapitan v. Scandia Inc., G. R. No. L-24668, July 31, 1968, 24 SCRA 479, 481; cited in subsequent cases like Singsong v. Isabela Sawmill, No. L-27343, February 28, 1979, 88 SCRA 623, 637; Russell v. Vestil, G.R. No. 119347, March 17, 1999, 304 SCRA 738, 744.
[14] Section 19(1), Batas Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980), which provides:
Section 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive original jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;
xxx
[15] Section 5, Article VIII, 1987 Constitution.
[16] The Bid Bulletins and Section 28, Part V, of the request for proposal (RFP) specifically required prospective bidders to include in their respective proposals an option to purchase "to be decided by COMELEC before December 31, 2010."
[17] In National Development Corporation v. Firestone Ceramics, Inc., G.R. No. 143590 (November 14, 2001), one of the issues pertains to the existence of a consideration in so far as it concerns the 'right of first option to purchase" provision incorporated in the lease contract. In determining whether it is a "paid-up option", this Court held that: "xxx the right of first refusal is an integral and indivisible part of a contract of lease and is inseparable from the whole contract. The consideration for the right is built into the reciprocal obligations of the parties. Thus, it is not correct for the petitioners to insist that there was no consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as the stipulation is part and parcel of the lease making the consideration for the lease the same as that of the option."
[18] G.R. No. 167884, January 20, 2009, 576 SCRA 561, 572-573.
[19] Bold underscoring supplied for emphasis.
[20] Professor Arthur Linton Corbin (1874 1967) was a professor of law in Yale Law School and a scholar of contract law. He helped to develop the philosophy of law known as legal realism, and his work on contracts is one of the most celebrated legal treatises of the Twentieth Century.
[21] Corbin on Contracts, One Volume Edition, West Publishing Co., 1952:156-7. Ch. 1 § 21, p. 31.
[22] G.R. No. 135929, April 20, 2001, 357 SCRA 209, 215.
[23] To the same effect is Uniq Computer Corp. v. United States, 20 Cl. Ct. 222, 231 (Cl. Ct. 1990), where the US Supreme Court said:
Stated differently, a noted text writer explains that an option contract is an agreement to keep an offer open for a prescribed period of time during which that offer is irrevocable. 1 S. Williston, A Treatise on the Law of Contracts § 61A (3d ed. 1957). An option is "a unilateral contract whereby the optionor for valuable consideration grants the optionee a right to make a contract of purchase but does not bind the optionee to do so; the optionor is bound during the life of the option, but the optionee is not." Id. The power conferred on the option holder is called the power of acceptance, who therefore has the legal authority to consummate the contemplated transaction by merely exercising that contractual right. The option giver, on the other hand, is bound to execute the exchange for the duration of the agreement. 1A A. Corbin, Corbin on Contracts, A Comprehensive Treatise on the Working Rules of Contract Law § 259 (1963).
[24] G.R. No. 124791, February 10, 1999, 302 SCRA 718.
[25] Carceller v. Court of Appeals and State Investment House, G.R. No. 124791, February 10, 1999, 302 SCRA 718, 724.
[26] Corbin on Contracts, Ch. 2, §35, p. 55.
[27] Id., pp. 56-58.
[28] RA No. 9184, Section 10.
[29] RA No. 9184, Section 5(n).
[30] Agan, Jr. v. Philippine International Air Terminals Co., Inc., G.R. No. 155001, May 5, 2003, 402 SCRA 612, 664.
[31] Manila International Airport Authority v. Olongapo Maintenance Services, Inc., G.R. Nos. 146184-85, January 31, 2008, 543 SCRA 269.
[32] Caltex (Phil.), Inc. v. Delgado Bros., Inc., et.al., 96 Phil. 368, 375 (1954).
[33] Supra, note 30; reiterated in Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, G.R. No. 183789, August 24, 2011, 656 SCRA 214.
[34] Supra, note 30.
[35] Id., pp. 654-655.
[36] Id., pp. 655-656 (bold underscoring supplied for emphasis).
[37] Id., pp. 663-664.
[38] Mata v. San Diego, No. L-30447, March 21, 1975, 63 SCRA 170, 178 (Emphasis supplied).
[39] G.R. No. 183789, August 24, 2011, 656 SCRA 214.
[40] 17.4. The specifications and other terms in the bidding documents shall reflect minimum requirements or specifications required to meet the needs of the procuring entity in clear and unambiguous terms. The bidder may submit an offer which provides for superior specifications and/or better terms and conditions to the Government at no extra cost. However, these shall not be given any bonus, credit or premium in the bid evaluation.
[41] 32.1. For the procurement of goods and infrastructure projects, the purpose of bid evaluation is to determine the Lowest Calculated Bid. This bid shall be subject to post-qualification in accordance with Rule X of this IRR-A to determine its responsiveness to the eligibility and bid requirements. If after post-qualification the Lowest Calculated Bid is determined to be post-qualified it shall be considered the Lowest Calculated Responsive Bid and the contract shall be awarded to the bidder.
32.2. For the procurement of goods and infrastructure projects, the Lowest Calculated Bid shall be determined in two steps:
a) The detailed evaluation of the financial component of the bids, to establish the correct calculated prices of the bids; and
b) The ranking of the total bid prices as so calculated from the lowest to the highest. The bid with the lowest price shall be identified as the Lowest Calculated Bid.
[42] 646 P.2d 215, 220 (1982 Alas).
[43] Kenai Lumber Company, Inc. v. LeResche, 646 P.2d 215, 220 (1982 Alas).
SEPARATE OPINION
ABAD, J.:
This case is about the circumstances that will justify a government agency's negotiated procurement of equipment and supplies.
The Facts and the Case
In 1997 Congress enacted Republic Act 8436 (R.A. 8436), otherwise known as the "Election Modernization Act", which authorized the Commission on Elections (COMELEC) to adopt an Automated Election System (AES) for the processes of voting, counting of votes, and canvassing or consolidation of results of the national and local elections. [1] The law also authorized COMELEC to procure the supplies, equipment, materials, and services that it needed for holding an AES through an expedited public bidding. A decade later, Congress enacted Republic Act 9369 (R.A. 9369) which amended R.A. 8436 and declared it the policy of the law to use an AES in all national and local elections.[2]
Following the requirements of the Government Procurement Act,[3] the COMELEC published and posted from March 13 to16, 2009, an invitation to interested parties to apply for eligibility and to bid for the procurement of counting machines, including the supply of ballot paper; electronic transmission services using public telecommunications networks; training; technical support; warehousing; deployment; installation; pull-out; systems integration; and overall project management, to be used in the automation of counting, transmission, and canvassing of votes for the May 10, 2010 synchronized national and local elections. The COMELEC also approved and issued a request for proposal (RFP) that would enable its Bids and Awards Committee (BAC) to accept bids for the lease of an AES, with an option to purchase.[4]
Ten prospective bidders paid for an RFP but only seven submitted bid proposals. Of the seven, only two bidders, Indra Consortium and SMARTMATIC-TIM, met the eligibility requirements. The COMELEC Special Bids and Awards Committee (SBAC) examined their technical proposals and found these acceptable. Upon opening of their financial proposals, however, Indra did not qualify with the result that SBAC issued Omnibus SBAC Resolution 09-007 declaring SMARTMATIC-TIM as the single complying calculated bid.[5]
The COMELEC Technical Working Group (TWG) also reported that SMARTMATIC-TIM's proposed AES "passed all tests as required in the 26-item criteria specified in the RFP."[6] The COMELEC Advisory Council (CAC) submitted its observations to the COMELEC noting that SMARTMATIC-TIM's Precinct Count Optical Scan (PCOS) machines had a 100% accuracy rating. As a result, COMELEC awarded the contract for the 2010 AES to SMARTMATIC-TIM.[7] The following day, COMELEC and SMARTMATIC-TIM entered into an AES contract that included an Option to Purchase (OTP) Clause that read:
On May 10, 2010 the Philippines held its first fully-automated nationwide elections, using SMARTMATIC-TIM automated system. Four months later on September 23, 2010 the COMELEC, exercising its option to purchase, acquired 920 PCOS machines for the special elections in certain areas in the Philippines.[9]
On December 18, 2010, as the deadline for exercising the option to purchase was nearing, SMARTMATIC-TIM wrote COMELEC a letter, unilaterally extending the period for the option to purchase from December 31, 2010 to March 31, 2011. Subsequently, on April 1, 2011 SMARMATIC wrote COMELEC another letter, offering a "Revised Extended Option to Purchase." On April 28, 2011 the COMELEC and SMARTMATIC signed a Term Sheet in connection with SMARTMATIC's April 1, 2011 letter. This Term Sheet included various items not covered by the original option to purchase. Months later, however, COMELEC cancelled the Term Sheet.
Apparently, COMELEC was hopeful in getting Congress to provide it the budget it needed for acquiring or leasing a new AES for the 2013 elections. Indeed, it asked Congress for P 10,436,300,399.00 for the lease of a new AES for the elections. On September 23, 2011 SMARTMATIC wrote COMELEC, inquiring about the status of the option to purchase the equipment and systems that were used in the 2010 elections. Evidently trying to put pressure on COMELEC to exercise the option, SMARTMATIC informed it that the price increase of 10% would remain in effect until September 30, 2011.[10] SMARTMATIC later recanted and offered to retain the original price until December 31, 2011 under certain conditions.[11] Yet again, the OTP was revised and COMELEC was warned that instead of the 10% increase, a 20% increase would be in effect from October 1 December 31, 2011.[12]
In October 2011 Congress passed the General Appropriations Act of 2012, allocating to COMELEC a budget of only P 7,962,221,000.00 for the 2013 elections,[13] ruling out the possibility of acquiring or leasing a new AES from other providers.
On February 6, 2012, the COMELEC Law Department expressed the view in a memorandum that COMELEC could still legally exercise its option to purchase from SMARTMATIC provided the period of the extension had not yet expired and that its offer was identical to that contained in their AES Contract. The CAC expressed the view, however, that COMELEC should not exercise its option to purchase if, as a consequence, the rest of the system must come from the same vendor."[14] With the little money allocated to it and time running out, the COMELEC resolved to seriously consider exercising that option subject to certain conditions.[15] The next day, the CAC advised COMELEC to ensure that it would have full control of the election process.[16]
Eventually, COMELEC accepted SMARTMATIC-TIM's March 31, 2012 offer to extend the period of its option to purchase.[17] On March 30, 2012 COMELEC entered into a contract with SMARTMATIC-TIM for the purchase of the PCOS machines and related systems used in the 2010 elections for P 1,833,274,457.09. COMELEC's intention was to directly manage the operation of the AES for the 2013 elections using those machines and systems.
On April 10, 2012 petitioners Archbishop Fernando R. Capalla, et al. came to this Court by a petition for certiorari, prohibition, and mandamus with prayer for temporary restraining order (TRO) against COMELEC, seeking the annulment of COMELEC's March 30, 2012 contract with SMARTMATIC-TIM. On April 24, 2010 the Court issued a TRO enjoining the implementation of the contract of sale pending hearing of the case. The Court likewise ordered the consolidation of the three petitions that sought identical relief and directed the COMELEC and SMARTMATIC-TIM to file their comment.
Question Presented
The central question presented in this case is whether or not COMELEC gravely abused its discretion in entering into a contract with SMARTMATIC-TIM for the purchase of its PCOS machines and related systems in connection with the forthcoming 2013 elections.
Discussion
The country made many attempts in the past to replace the manual elections that had been in use from the time of the founding of the Philippine government.[18] But circumstances did not permit the change even when at last Congress enacted the election modernization law. The bidding for the needed equipment and processes in connection with the 2001 elections was found riddled with irregularities and so had to be set aside.[19] Only in connection with the 2010 elections did the COMELEC succeed in meeting all that the law required, overcoming the objections of the cynics who cried mightily for a return to fully manual voting. The automated elections took place, producing results that were generally accepted by the electorates.
Then, the need to prepare for the 2013 elections came. Evidently, the COMELEC was open to using a new AES since it applied with Congress for the amount of money this will require and held out for as long as it could on its option to purchase from SMARTMATIC-TIM the equipment and systems used in the 2010 elections. When the money did not come, COMELEC settled for buying the latter equipment and systems under an extended option that the owners gave it.
But petitioners filed the present actions to block COMELEC's purchases basically on two grounds: 1) since its option period already expired, COMELEC actually bought SMARTMATIC-TIM's equipment and systems without the benefit of public bidding; and 2) these equipment and systems suffered from defects and glitches.
Petitioners are right that COMELEC's option to purchase under the AES contract for the 2010 elections already expired when it did not exercise the same on or before December 31, 2010, the deadline set in that contract. But COMELEC is also right that it bought SMARTMATIC-TIM's equipment and systems based on the terms of the option to purchase. These positions are not exactly incompatible. They can actually be reconciled.
True, COMELEC's original option had already expired when it made its purchase. The original contract was gone and the parties' rights and obligations under the same had in fact been extinguished. But SMARTMATIC-TIM made an offer to COMELEC for it to purchase the 2010 equipment and systems based on the terms provided in the expired option to purchase. And COMELEC accepted the offer, giving it a new option to purchase that it eventually exercised.
Petitioners are of course also right that COMELEC's purchase could not as a rule be made without the benefit of a public bidding where other parties can make offers to supply COMELEC with the equipment and systems that it needs for the 2013 elections. But R.A. 9184, the Government Procurement Act, allows certain exceptions to such requirement. It provides that the procuring government agency may, in order to promote economy and efficiency, resort to any of the alternative methods of procurement, including negotiated procurement, provided the procuring agency ensures the most advantageous price for the government.
Negotiated procurement is allowed, says the law, "when time is of the essence arising from natural or man-made calamities or other causes where immediate action is necessary to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public utilities."[20] The infrastructures needed to enable the people to exercise their right to vote is of course a public service that is as vital if not more vital than some roads and bridges.
Here, the following circumstances gave COMELEC no choice but to enter into what amounts to a negotiated purchase:
First. The Constitution vests in Congress the power to make laws, including election laws.[21] Thus --
In the exercise of such power, Congress alone can determine the process by which elections are to be conducted. It alone can prescribe the use of a more advanced technology for enabling the people to exercise their fundamental right to vote.[23]
On the other hand, it is in the COMELEC that Constitution vests the power and duty to enforce all laws relative to the conduct of the elections.[24] Thus --
The COMELEC has no power to hold elections that are not in accord with the Election Modernization Act (R.A. 8436, as amended). Indeed, that Act is entitled "An Act Authorizing the Commission on Elections to Use an Automated Election System in the May 11, 1998 National or Local Elections and in Subsequent National and Local Electoral Exercises…" In this regard, Section 12 of the Act directs the COMELEC to procure a tested and successfully used AES for use in the 2010 election and "succeeding electoral exercises…" Thus
Although it is true that when the Court declared void the 2003 Purchase Contract for election automation machines (EAMs), COMELEC had valid recourse to the old system for the conduct of the 2007 elections. But the situation then was different. The AES that the original RA 8436 authorized had yet to be elevated to a compulsory mechanism. The failed implementation of an AES in the 1998 ARMM elections prevented COMELEC from a forward implementation of the AES under Section 6,[26] sending the process back to the drawing board.[27]
With the amendment of the Election Modernization Act, however, a return to the old system is no longer legally possible. To be faithful to its constitutional duty to enforce that law, COMELEC has to come up with an AES for the 2013 elections with whatever resources are available to it. The law does not contemplate any other system of elections.
With the functions of Congress and the COMELEC so clearly delineated by the Constitution, the Court must tread carefully when, as in this case, the mechanism for executing the preferred system of elections is assailed as invalid and its implementation, sought to be enjoined.[28] The Court must give the COMELEC substantial latitude to enforce the Election Modernization Act.[29] For, otherwise, the Court must assume responsibility for the consequences of meddling in something beyond its competence.[30]
Second. Although COMELEC has the duty to enforce and implement the law prescribing an AES for the 2013 national and local elections, it does not have the money to acquire or lease new equipment and systems for those elections.
Petitioners of course point out that the circumstances are not so extraordinary as to permit negotiated procurement since COMELEC had faced the same problems in 2009 yet was able to overcome them. COMELEC cannot use as an excuse its time and budgetary constraints since it should be able to convince Congress to grant what it needs for the 2013 automated elections.
But unlike the problems that it faced in connection with the 2010 elections, the solutions to its problems with respect to the 2013 elections are not up to COMELEC. Those solutions largely depend on the Executive Department and Congress. COMELEC requested the Department of Budget and Management (DBM) under the Office of the President for a P 12 billion budget to enable the election body to acquire or lease a new AES for the 2013 elections. But the DBM turned this down and allocated only P 7 billion for the automation of the 2013 elections. Of the P 7 billion, only P 2.2 billion has been earmarked for the acquisition of the machines needed for an AES.
In the 2010 elections, the COMELEC spent P 4.3 billion for the lease of 82,200 PCOS machines. If the COMELEC is to pursue its goal of achieving the 600:1 ratio or the same number of machines last elections, then it must have at least P 4.2 billion or even more, giving allowance for inflation, to be able to purchase machines of the same kind. If new biddings were held with the money it actually got, COMELEC would get only half of the desired number of machines. This result would cause pandemonium in the election precincts and dampening of the enthusiasm of voters.
COMELEC could of course plead with Congress to give it more money for the elections. But it had already done that. Unfortunately, Congress was not sympathetic and did not swell the amount of its budget. Although there is always a possibility that Congress may relent as some suggest can happen, that is a risk that the COMELEC, charged with making do with the resources given it, cannot afford. It could not postpone preparations at the risk of failed elections if Congress does not soon change its mind.
Third. Assuming that some funds would be available for acquiring or leasing a new AES for the 2013 elections, COMELEC does not have the time for holding a competitive bidding, evaluating the bids, and making an award with the expectations that the new AES will be in place by May 2013 for the national and local elections.
COMELEC cannot afford to procrastinate. There are less than twelve months between today and the May 2013 elections. Based on the 2010 elections timeline a new bidding for the 2013 elections would result in a logistical impossibility. The bidding process alone will take about four months. This means that the earliest COMELEC can make an award for the 2013 elections will be in mid-October. Since it would take based on experience about seven months from the signing of the AES Contract to complete the delivery of the fully customized hardware and software, delivery would be completed about mid-May 2013, already past the election Day. There would be no elections since it would take an additional three months more or less for testing the machines in their actual configuration with the ballots. Super human efforts could of course cause a miracle, but reasonableness in the exercise of discretion is not judged by the standards of miracles.
Fourth. COMELEC's negotiated purchase meets the last requirement, ensuring "that the most advantageous price for the government is obtained." Here, the procurement will enable the government to reap the following advantages:
a. The COMELEC needs to pay only 1/3 of the price of the PCOS machines, a saving of 2/3 of what it would cost COMELEC to lease machines of the same kind in a new bidding;
b. The COMELEC will spend less for voter education because the people are already familiar with the system;
c. The costs for training COMELEC personnel will also be reduced since they are already familiar with the handling and operation of the PCOS machines;
d. The purchase will promote standardization since the COMELEC already acquired 980 units of those PCOS machines; and
e. The usual glitches in new machines are unavoidable, whereas the glitches in the PCOS machines have been identified and could be addressed.
Petitioners would also have the sale of the PCOS machines to COMELEC nullified because of the alleged failure of the machines to comply with the minimum technical requirements of an AES and the glitches that occurred. Particularly, petitioners point to the absence of digital signatures, the existence of open console port in the machines, and the lack of a voter verified paper audit trail.
Based on the records and the admissions made during oral arguments, the disabling of the digital signatures and the lack of a voter verified paper audit trail cannot be attributed to the machines. This was done on orders of the COMELEC due to shortage of funds. These concerns are, therefore, not intrinsic to the machines itself. It is up to COMELEC, based on its best judgment, if there is a need to activate these features of the system. The presence of the open console port has not been a problem in the past election as this was covered and sealed on the election day to avoid unauthorized access.
More importantly, these alleged problems are not irremediable. As admitted by the parties, these can be rectified by simply activating these inherent features of the machines. Suffice it to say that the Court had already resolved the allegations regarding the failure of the machines to meet the requirements of the law in Roque v. COMELEC.[31] The Court determined that "the COMELEC has adopted a rigid technical evaluation mechanism, a set of 26-item/check list criteria … to ensure compliance with the above minimum system capabilities." Also, the "PCOS meets the minimum capabilities standards."
Lastly, the petitioners failed to substantiate their claims that the alleged defects in the PCOS machines resulted in cheating or fraud in the 2010 elections. Petitioners have been unable to cite even one decision rendered based on evidence that this was so. Petitioners claim are, to borrow the language of the COMELEC, anecdotal.
Consequently, I vote to DISMISS the consolidated petitions.
[1] An Act Authorizing the Commission on elections to Use an Automated Election System in the May 11, 1998 National or Local elections and in Subsequent National and Local Electoral Exercises, Providing Funds Therefor and for Other Purposes, Republic Act No. 8436 § 6 (Dec. 22, 1997).
[2] An Act Amending Republic Act No. 8436, entitled "An Act Authorizing the Commission on elections to Use an Automated Election System in the May 11, 1998 National or Local elections and in Subsequent National and Local Electoral Exercises, Providing Funds Therefor and for Other Purposes", Republic Act no. 9369 § 1 (Jan. 23, 2007)
[3] An Act Providing for the Modernization, Standardization and Regulation of the Procurement Activities of the Government and for Other Purposes, Republic Act No. 9184 art. VII, § 21 (Jan. 10, 2003).
[4] Office of the Solicitor General (OSG), Consolidated Comment, Annex "1" (April 30, 2012); Commission on Elections, Request for Proposal (Mar. 11, 2009).
[5] OSG, Consolidated Comment, 7.
[6] Id. at 9.
[7] Id.; Commission on Elections, Resolution No. 8608 (June 9, 2009).
[8] Solidarity for Sovereignty (S4S), Petition, Annex "A" 24 (April 3, 2012); Contract for the Provision of an Automated Election System for the May 10, 2010 Synchronized National and Local Elections 8 & 12 (July 10, 2009).
[9] S4S, Petition, Annex "C"; Contract of Sale (Sep. 23, 2010).
[10] Guigona, Memorandum, Annex "A" (May 18, 2012); Cesar Flores, Re: Final Extension of option to purchase (Mar. 23, 2011).
[11] Id. Annex "B"; Cesar Flores, Re: Final Extension of Option to Purchase (April 1, 2011).
[12] Id. Annex "C"; Cesar Flores, "Re: Option to Purchase, PCOS Machines (Sep. 23, 2011).
[13] General Appropriations Act, Republic Act No. 10155 (Dec. 15, 2011).
[14] Resolution 2012-003, Feb. 8, 2012.
[15] Resolution 9373, Mar. 6, 2012.
[16] Resolution 2012-005, Mar. 7, 2012.
[17] Resolution 9377, Mar. 29, 2012.
[18] The first attempt was in 1995. RA 8046 authorized a computerized election system. An Act Authorizing the Commission on Elections to Conduct a Nationwide Demonstration of a Computerized Election System and Pilot-test it in the March 1996 Elections in the Autonomous Region in Muslim Mindanao (ARMM) and for Other Purpose, Republic Act No. 8046 (1995).
[19] Information Technology Foundation of the Philippines v. COMELEC, G.R. No. 159139, Jan. 13, 2004
[20] RA 9184, § 53 (b) (emphasis supplied)
[21] R.A. No. 9369, § 1; See Bush v. Gore, 121 S. Ct. 525, 529 (2000).
[22] Section 1, Article VI, 1987 Constitution.
[23] See Matter of Municipal Election Held on May 10, 1994, for Three Positions on Sparta Tp. Council, 139 N.J. 553, 656 A.2d 5 (1995).
[24] Paragraph 1, Section 2, Article IX of the 1987 Constitution of the Philippines
[25] Section 2, Article IX, 1987 Constitution of the Philippines.
[26] Requiring the unconditional full automation in of elections.
[27] Loong v. COMELEC, G.R. No. 133676, April 14, 1999.
[28] See Burdick v. Takushi, 504 U.S. 428, 112 S. Ct. 2059, 119 L. Ed. 2D 245 (1992).
[29] See John Doe No. 1 v. Reed, 130 S. Ct. 2811 (2010).
[30] See Washington State Grange v. Washington State Republican Party, 128 S. Ct. 1184, 170 L. Ed. 2d 151 (U.S. 2008).
[31] G.R. No. 188456, September 10, 2009
Component 1: Paper-Based Automation Election System (AES)
1-A. Election Management System (EMS)
1-B. Precinct Count Optical Scan (PCOS) System
1-C. Consolidation/Canvassing System (CCS)
Component 2: Provision for Electronic Transmission of Election Results using Public Telecommunications Network
Component 3: Overall Project Management[3]
On June 9, 2009, the Comelec issued Resolution No. 8608 awarding the contract for the Project to respondent Smartmatic-TIM.[4] On July 10, 2009, the Comelec and Smartmatic-TIM entered into a Contract for the Provision of an Automated Election System for the May 10, 2010 Synchronized National and Local Elections,[5] (AES Contract, for brevity). The contract between the Comelec and Smartmatic-TIM was one of "lease of the AES with option to purchase (OTP) the goods listed in the contract." In said contract, the Comelec was given until December 31, 2010 within which to exercise the option.
On September 23, 2010, the Comelec partially exercised its OTP 920 units of PCOS machines with corresponding canvassing/consolidation system (CCS) for the special elections in certain areas in the provinces of Basilan, Lanao del Sur and Bulacan.[6] In a letter[7] dated December 18, 2010, Smartmatic-TIM, through its Chairman Cesar Flores (Flores), proposed a temporary extension of the option period on the remaining 81,280 PCOS machines until March 31, 2011, waiving the storage costs and covering the maintenance costs. The Comelec did not exercise the option within the extended period. Several extensions were given for the Comelec to exercise the OTP until its final extension on March 31, 2012.
On March 6, 2012, the Comelec issued Resolution No. 9373[8] resolving to seriously consider exercising the OTP subject to certain conditions. On March 21, 2012, the Comelec issued Resolution No. 9376[9] resolving to exercise the OTP the PCOS and CCS hardware and software in accordance with the AES contract between the Comelec and Smartmatic-TIM in connection with the May 10, 2010 elections subject to the following conditions: (1) the warranties agreed upon in the AES contract shall be in full force and effect; (2) the original price for the hardware and software covered by the OTP as specified in the AES contract shall be maintained, excluding the cost of the 920 units of PCOS and related peripherals previously purchased for use in the 2010 special elections; and (3) all other services related to the 2013 AES shall be subject to public bidding. On March 29, 2012, the Comelec issued Resolution No. 9377[10] resolving to accept Smartmatic-TIM's offer to extend the period to exercise the OTP until March 31, 2012 and to authorize Chairman Brillantes to sign for and on behalf of the Comelec the Agreement on the Extension of the OTP Under the AES Contract[11] (Extension Agreement, for brevity). The aforesaid Extension Agreement was signed on March 30, 2012.[12] On even date, the Comelec issued Resolution No. 9378[13] resolving to approve the Deed of Sale between the Comelec and Smartmatic-TIM to purchase the latter's PCOS machines (hardware and software) to be used in the upcoming May 2013 elections and to authorize Chairman Brillantes to sign the Deed of Sale for and on behalf of the Comelec. The Deed of Sale[14] was forthwith executed.
Claiming that the foregoing issuances of the Comelec, as well as the transactions entered pursuant thereto, are illegal and unconstitutional, petitioners come before the Court in four separate Petitions for Certiorari, Prohibition, and Mandamus imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Comelec in issuing the assailed Resolutions and in executing the assailed Extension Agreement and Deed.
In G.R. No. 201112, petitioners Archbishop Fernando R. Capalla, Omar Solitario Ali and Mary Anne L. Susano pray that a Temporary Restraining Order (TRO) be issued enjoining the Comelec from purchasing the PCOS machines until after final judgment of the instant case; a writ of prohibition be issued against the Comelec for the purchase of these defective PCOS machines; a writ of mandamus be issued compelling the Comelec to conduct the necessary bidding for the equipment and facilities which shall be used for the 2013 National and Local Elections; and to declare Comelec Resolution Nos. 9376, 9377, and 9378, on the purchase of PCOS machines, null and void.
Petitioners argue that if there is a necessity to purchase the PCOS machines, the Comelec should follow RA 9184 requiring competitive public bidding. They likewise argue that the OTP clause embodied in the contract with Smartmatic-TIM should be rendered invalid not only because the OTP has already lapsed but because of the fact that the OTP clause is a circumvention of the explicit provisions of RA 9184. Petitioners add that the current PCOS machines do not meet the rigorous requirements of RA 9369 that the system procured must have demonstrated capability and should have been successfully used in a prior electoral exercise here or abroad. Petitioners submit that there are intrinsic technical infirmities as regards the PCOS machines used during the 2010 elections which rendered it incapable for future use. Lastly, petitioners claim that the Comelec does not have the capability to purchase and maintain the PCOS machines, because of lack of trained manpower and technical expertise to properly maintain the PCOS machines; thus, the purchase is unfavorable to the general public.
In G.R. No. 201121, petitioners Solidarity for Sovereignty (S4S), represented by Ma. Linda Olaguer, Ramon Pedrosa, Benjamin Paulino, Sr., Evelyn Coronel, Ma. Linda Olaguer Montayre and Nelson T. Montayre, pray that a TRO be issued directing the Comelec to desist from implementing the contract; that Resolution No. 9376 be declared unconstitutional and all acts made pursuant thereto, including the purchase of the PCOS machines unlawful and void; that an Injunction be issued prohibiting the Comelec from further pursuing any act pursuant to Resolution No. 9376.[15]
Petitioners argue that the Comelec's act of exercising its OTP the PCOS machines from Smartmatic-TIM after the period had already lapsed is illegal and unlawful.[16] They explain that the period within which the Comelec may exercise the OTP could last only until December 31, 2010 without extension as provided in the Comelec's bid bulletin.[17] They further assert that the Comelec's acceptance of Smartmatic-TIM's unilateral extension of the option period constitutes substantial amendment to the AES contract giving undue benefit to the winning bidder not available to the other bidders.[18] Petitioners also contend that the Comelec's decision to purchase and use the PCOS machines is unconstitutional, as it allows the Comelec to abrogate its constitutional duty to safeguard the election process by subcontracting the same to an independent provider (Smartmatic-TIM), who controls the software that safeguards the entire election process. The purchase of the PCOS machines for use in the May 2013 elections would be tantamount to a complete surrender and abdication of the Comelec's constitutional mandate in favor of Smartmatic-TIM. The control of the software and process verification systems places the Comelec at the end of the process as it merely receives the report of Smartmatic-TIM. This, according to petitioners, amounts to a direct transgression of the exclusive mandate of the Comelec completely to take charge of the enforcement and administration of the conduct of elections. [19] Lastly, petitioners aver that the Comelec's act of deliberately ignoring the palpable infirmities and defects of the PCOS machines, as duly confirmed by forensic experts, is in violation of Section 2, Article V of the Constitution, as it fails to safeguard the integrity of the votes. They went on by saying that the subject PCOS machines lack security features which can guaranty the secrecy and sanctity of our votes in direct contravention of RA 9369 which requires that the automated election system must at least possess an adequate security feature against unauthorized access. In deciding to purchase the PCOS machines despite the above-enumerated defects, the Comelec's decision are claimed to be unconstitutional.[20]
In G.R. No. 201127, petitioners Teofisto Guingona, Bishop Broderick S. Pabillo, Solita Collas Monsod, Maria Corazon Mendoza Acol, Fr. Jose Dizon, Nelson Java Celis, Pablo R. Manalastas, Georgina R. Encanto and Anna Leah E. Colina pray that the Court issue a TRO enjoining and restraining respondents Comelec and Smartmatic-TIM from implementing Comelec Resolution No. 9376 and the Deed of Sale for the acquisition and purchase of the PCOS machines and related equipment; issue writ of preliminary injunction; declare Comelec Resolution No. 9376 void and unconstitutional and annul the Deed of Sale; and direct the Comelec to conduct public bidding soonest for the automated election system to be used for the 2013 elections.[21]
Petitioners fault the Comelec in totally disregarding the recommendation of the Comelec Advisory Council (CAC) not to exercise the OTP. They point out that in its Resolution No. 2012-2003, the CAC resolved to recommend that the Comelec should exert all efforts to procure the necessary AES only through public bidding. The CAC likewise allegedly recommended that the OTP should not be exercised if as a consequence, the rest of the system must come from the same vendor as the Comelec would lose the opportunity to look for better technology; would prevent the Comelec from taking advantage of the best possible technology available; would prevent other prospective vendors from competitively participating in the bidding process; and may erode the public trust and confidence in the electoral process. In its report to the Congressional Oversight Committee after the 2010 elections, the CAC supposedly concluded that the Comelec does not need to use the same PCOS machines and that the Comelec would be better off not exercising the OTP the PCOS machines so it can look for an even better solution for the May 2013 elections.[22] Like the other petitioners, it is their position that Comelec Resolution No. 9376 is totally null and void having been issued in violation of the express provisions of RA 9184 and the AES contract. According to petitioners, the Comelec itself provided in its bid bulletins for a fixed and determinate period, and such period ended on December 31, 2010. Thus, Smartmatic-TIM could not have unilaterally extended the option period and the Comelec could not have also given its consent to the extension. In extending the option period, it is tantamount to giving the winning bidder a benefit that was not known and available to all bidders during the bidding of the 2010 AES, which is a clear violation of the bidding rules and the equal protection clause of the Constitution.[23] Considering that the option period already expired, the purchase of the PCOS machines requires competitive public bidding. Lastly, petitioners claim that the Comelec committed grave abuse of discretion in opting to buy the PCOS machines and allied paraphernalia of Smartmatic-TIM for the 2013 elections, despite incontrovertible findings of the glitches, malfunctions, bugs, and defects of the same.[24]
In G.R. No. 201418, petitioners Tanggulang Demokrasya (Tan Dem), Inc., Evelyn L. Kilayko, Teresita D. Baltazar, Pilar L. Calderon and Elita T. Montilla pray that the Court annul Resolution No. 9376 and the March 30, 2012 Deed of Sale, and prohibit the Comelec and Smartmatic-TIM from implementing the same; and declare said Resolution and Deed of Sale invalid for having been issued and executed by the Comelec with grave abuse of discretion and for violating the provisions of R.A. 9184.[25]
Petitioners claim that the Comelec committed grave abuse of discretion amounting to lack or excess of jurisdiction in contracting for the purchase of AES goods and services from Smartmatic-TIM in spite of the below par performance of the latter's PCOS machines, CCS and other software and hardware in the May 2010 elections and non-compliance with the minimum functional capabilities required by law.[26] They echo the other petitioners' contention that the Comelec's decision to buy the CCS, PCOS machines, software and hardware of Smartmatic violates RA 9184's requirement of a prior competitive public bidding. Since the Comelec is bent on pursuing the purchase of the subject goods, which is an entirely new procurement, petitioners contend that there must be a public bidding. They argue that there is enough time to conduct public bidding for the 2013 elections, considering that for the May 2010 elections, the Comelec only had 10 months and they were able to conduct the public bidding. Petitioners are of the view that there is no more OTP to speak of, because the option period already lapsed and could not be revived by the unilateral act of one of the contracting parties.[27]
On April 24, 2012, the Court issued a TRO enjoining the implementation of the assailed contract of sale. The consolidated cases were later set for Oral Arguments on the following issues:
I. Whether or not the Commission on Elections may validly accept the extension of time unilaterally given by Smartmatic-TIM Corporation within which to exercise the option to purchase under Article 4 of the Contract for the Provision of an Automated Election System for the May 2010 Synchronized National and Local Elections; and
II. Whether or not the acceptance of the extension and the issuance of Comelec En Banc Resolution No. 9376 violate Republic Act No. 9184 or the Government Procurement Reform Act and its Implementing Rules, and Republic Act No. 9369 or the Automated Election Systems Act.
The parties were, thereafter, required to submit their Memoranda.
The petitions are without merit.
Simply stated, petitioners assail the validity and constitutionality of the Comelec Resolutions for the purchase of the subject PCOS machines as well as the Extension Agreement and the Deed of Sale covering said goods mainly on three grounds: (1) the option period provided for in the AES contract between the Comelec and Smartmatic-TIM had already lapsed and, thus, could no longer be extended, such extension being prohibited by the contract; (2) the extension of the option period and the exercise of the option without competitive public bidding contravene the provisions of RA 9184; and, (3) despite the palpable infirmities and defects of the PCOS machines, the Comelec purchased the same in contravention of the standards laid down in RA 9369.
For its part, the Comelec defends the validity and constitutionality of its decision to purchase the subject PCOS machines, pursuant to the OTP under the AES contract with Smartmatic-TIM, on the following grounds: (1) Article 6.6 of the AES contract which states the option period was amended by the extension agreement; (2) the exercise of the OTP is not covered by RA 9184, because it is merely an implementation of a previously bidded contract; (3) taking into account the funds available for the purpose, exercising the OTP was the prudent choice for the Comelec and is more advantageous to the government; and (4) the exercise of the OTP is consistent with the technical requirements of RA 9369.
Stated in another way, Smartmatic-TIM insists on the validity of the subject transaction based on the following grounds: (1) there is no prohibition either in the contract or provision of law for it to extend the option period; rather, the contract itself allows the parties to amend the same; (2) the OTP is not an independent contract in itself, but is a provision contained in the valid and existing AES contract that had already satisfied the public bidding requirements of RA 9184; (3) exercising the option was the most advantageous option of the Comelec; and (4) Smartmatic-TIM has an established track record in providing effective and accurate electoral solutions and its satisfactory performance has been proven during the 2010 elections. The alleged glitches in the May 2010 elections, if at all, are not attributable to the PCOS machines.
We agree with respondents.
At the outset, we brush aside the procedural barriers (i.e., locus standi of petitioners and the non-observance of the hierarchy of courts) that supposedly prevent the Court from entertaining the consolidated petitions. As we held in Guingona, Jr. v. Commission on Elections:[28]
There can be no doubt that the coming 10 May 2010 [in this case, May 2013] elections is a matter of great public concern. On election day, the country's registered voters will come out to exercise the sacred right of suffrage. Not only is it an exercise that ensures the preservation of our democracy, the coming elections also embodies our people's last ounce of hope for a better future. It is the final opportunity, patiently awaited by our people, for the peaceful transition of power to the next chosen leaders of our country. If there is anything capable of directly affecting the lives of ordinary Filipinos so as to come within the ambit of a public concern, it is the coming elections, more so with the alarming turn of events that continue to unfold. The wanton wastage of public funds brought about by one bungled contract after another, in staggering amounts, is in itself a matter of grave public concern.[29]
Thus, in view of the compelling significance and transcending public importance of the issues raised by petitioners, the technicalities raised by respondents should not be allowed to stand in the way, if the ends of justice would not be subserved by a rigid adherence to the rules of procedure.[30]
Now on the substantive issues. In order to achieve the modernization program of the Philippine Electoral System, which includes the automation of the counting, transmission and canvassing of votes for the May 2010 national and local elections with systems integration and over-all project management in a comprehensive and well-managed manner,[31] the Comelec entered into an AES contract with Smartmatic-TIM for the lease of goods and purchase of services under the contract, with option to purchase the goods.
The option contract between the Comelec and Smartmatic-TIM is embodied in Article 4.3 of the AES contract to wit:
Article 4
Contract Fee and Payment
x x x x
4.3. OPTION TO PURCHASE
In the event the COMELEC exercises its option to purchase the Goods as listed in Annex "L", COMELEC shall pay the PROVIDER an additional amount of Two Billion One Hundred Thirty Million Six Hundred Thirty- Five Thousand Forty-Eight Pesos and Fifteen Centavos (Php2,130,635,048.15) as contained in the Financial Proposal of the joint venture partners Smartmatic and TIM.
In case COMELEC should exercise its option to purchase, a warranty shall be required in order to assure that: (a) manufacturing defects shall be corrected; and/or (b) replacements shall be made by the PROVIDER, for a minimum period of three (3) months, in the case of supplies, and one (1) year, in the case of equipment, after performance of this Contract. The obligation for the warranty shall be covered by retention money of ten percent (10%) of every option to purchase payment made.
The retention money will be returned within five (5) working days after the expiration of the above warranty, provided, however, that the goods supplied are in good operating condition free from patent and latent defects, all the conditions imposed under the purchase contract have been fully met, and any defective machines, except to those attributable to the COMELEC, have been either repaired at no additional charge or replaced or deducted from the price under the Option to Purchase.[32]
Article 6.6 thereof, in turn provides for the period within which the Comelec could exercise the option, thus:
Article 6
COMELEC's Responsibilities
x x x x
6.6. COMELEC shall notify the PROVIDER on or before 31 December 2010 of its option to purchase the Goods as listed in Annex "L."[33]
The Comelec did not exercise the option within the period stated in the above provision. Smartmatic, however, unilaterally extended the same until its final extension on March 31, 2012. The Comelec, thereafter, accepted the option and eventually executed a Deed of Sale involving said goods. Now, petitioners come before the Court assailing the validity of the extension, the exercise of the option and the Deed of Sale. In light of the AES contract, can Smartmatic-TIM unilaterally extend the option period? Can the Comelec accept the extension?
We answer in the affirmative.
It is a basic rule in the interpretation of contracts that an instrument must be construed so as to give effect to all the provisions of the contract.[34] In essence, the contract must be read and taken as a whole.[35] While the contract indeed specifically required the Comelec to notify Smartmatic-TIM of its OTP the subject goods until December 31, 2010, a reading of the other provisions of the AES contract would show that the parties are given the right to amend the contract which may include the period within which to exercise the option. There is, likewise, no prohibition on the extension of the period, provided that the contract is still effective.
Article 2 of the AES contract lays down the effectivity of the contract, viz.:
Article 2
EFFECTIVITY
2.1. This Contract shall take effect upon the fulfillment of all of the following conditions:
(a) Submission by the PROVIDER of the Performance Security;
(b) Signing of this Contract in seven (7) copies by the parties; and
(c) Receipt by the PROVIDER of the Notice to Proceed.
2.2. The Term of this Contract begins from the date of effectivity until the release of the Performance Security, without prejudice to the surviving provisions of this Contract, including the warranty provision as prescribed in Article 8.3 and the period of the option to purchase (Emphasis supplied).[36]
Obviously, the contract took effect even prior to the 2010 elections. The only question now is whether its existence already ceased. Pursuant to the above-quoted provision, it is important to determine whether or not the performance security had already been released to Smartmatic-TIM. In Article 8 of the AES contract, performance security was defined and the rules in releasing said security were laid down, to wit:
Article 8
Performance Security and Warranty
8.1. Within three (3) days from receipt by the PROVIDER of the formal Notice of Award from COMELEC, the PROVIDER shall furnish COMELEC with a Performance Security in an amount equivalent to five percent (5%) of the Contract Amount; which Performance Security as of this date has been duly received by COMELEC.
Within seven (7) days from delivery by the PROVIDER to COMELEC of the Over-all Project Management Report after successful conduct of the May 10, 2010 elections, COMELEC shall release to the PROVIDER the above-mentioned Performance Security without need of demand.[37]
Smartmatic-TIM categorically stated in its Consolidated Comment to the petitions that the Comelec still retains P50M of the amount due Smartmatic-TIM as performance security.[38] In short, the performance security had not yet been released to Smartmatic-TIM which indicates that the AES contract is still effective and not yet terminated. Consequently, pursuant to Article 19[39] of the contract, the provisions thereof may still be amended by mutual agreement of the parties provided said amendment is in writing and signed by the parties. In light of the provisions of the AES contract, there is, therefore, nothing wrong with the execution of the Extension Agreement.
Considering, however, that the AES contract is not an ordinary contract as it involves procurement by a government agency, the rights and obligations of the parties are governed not only by the Civil Code but also by RA 9184. In this jurisdiction, public bidding is the established procedure in the grant of government contracts. The award of public contracts, through public bidding, is a matter of public policy.[40] The parties are, therefore, not at full liberty to amend or modify the provisions of the contract bidded upon.
The three principles of public bidding are: (1) the offer to the public; (2) an opportunity for competition; and (3) a basis for the exact comparison of bids.[41] By its very nature, public bidding aims to protect public interest by giving the public the best possible advantages through open competition.[42] Competition requires not only bidding upon a common standard, a common basis, upon the same thing, the same subject matter, and the same undertaking, but also that it be legitimate, fair and honest and not designed to injure or defraud the government.[43] The essence of competition in public bidding is that the bidders are placed on equal footing which means that all qualified bidders have an equal chance of winning the auction through their bids.[44] Another self-evident purpose of public bidding is to avoid or preclude suspicion of favoritism and anomalies in the execution of public contracts.[45]
A winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon. However, such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and would constitute a denial to the other bidders of the opportunity to bid on the same terms.[46] The determination of whether or not a modification or amendment of a contract bidded out constitutes a substantial amendment rests on whether the contract, when taken as a whole, would contain substantially different terms and conditions that would have the effect of altering the technical and/or financial proposals previously submitted by the other bidders. The modifications in the contract executed between the government and the winning bidder must be such as to render the executed contract to be an entirely different contract from the one bidded upon.[47]
Public bidding aims to secure for the government the lowest possible price under the most favorable terms and conditions, to curtail favoritism in the award of government contracts and avoid suspicion of anomalies, and it places all bidders in equal footing. Any government action which permits any substantial variance between the conditions under which the bids are invited and the contract executed after the award thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which warrants proper judicial action.[48] If this flawed process would be allowed, public bidding will cease to be competitive, and worse, government would not be favored with the best bid. Bidders will no longer bid on the basis of the prescribed terms and conditions in the bid documents but will formulate their bid in anticipation of the execution of a future contract containing new and better terms and conditions that were not previously available at the time of the bidding. Such a public bidding will not inure to the public good.[49]
In Power Sector Assets and Liabilities Management Corporation (PSALM) v. Pozzolanic Philippines Incorporated,[50] the Court nullified the right of first refusal granted to respondent therein in the Batangas Contract for being contrary to public policy. The Court explained that the same violated the requirement of competitive public bidding in the government contract, because the grant of the right of first refusal did not only substantially amend the terms of the contract bidded upon so that resultantly the other bidders thereto were deprived of the terms and opportunities granted to respondent therein after it won the public auction, but also altered the bid terms by effectively barring any and all true bidding in the future.[51]
Also in Agan, Jr. v. Philippine International Air Terminals Co., Inc., (PIATCO),[52] this Court declared as null and void, for being contrary to public policy, the Concession Agreement entered into by the government with PIATCO, because it contained provisions that substantially departed from the Draft Concession Agreement included in the bid documents. The Court considered the subject contracts a mockery of the bidding process, because they were substantially amended after their award to the successful bidder on terms more beneficial to PIATCO and prejudicial to public interest.[53]
The same conclusions cannot be applied in the present case.
One. Smartmatic-TIM was not granted additional right that was not previously available to the other bidders. Admittedly, the AES contract was awarded to Smartmatic-TIM after compliance with all the requirements of a competitive public bidding. The RFP, Bid Bulletins and the AES contract identified the contract as one of lease with option to purchase. The AES contract is primarily a contract of lease of goods[54] listed in the contract and purchase of services[55] also stated in the contract. Section 4.3 thereof gives the Comelec the OTP the goods agreed upon. The same provision states the conditions in exercising the option, including the additional amount that the Comelec is required to pay should it exercise such right. It is, therefore, undisputed that this grant of option is recognized by both parties and is already a part of the principal contract of lease. Having been included in the RFP and the bid bulletins, this right given to the Comelec to exercise the option was known to all the bidders and was considered in preparing their bids. The bidders were apprised that aside from the lease of goods and purchase of services, their proposals should include an OTP the subject goods. Although the AES contract was amended after the award of the contract to Smartmatic-TIM, the amendment only pertains to the period within which the Comelec could exercise the option because of its failure to exercise the same prior to the deadline originally agreed upon by the parties. Unlike in PSALM, wherein the winning bidder was given the right of first refusal which substantially amended the terms of the contract bidded upon, thereby depriving the other bidders of the terms and opportunities granted to winning bidder after it won the public auction; and in Agan, Jr., wherein the Concession Agreement entered into by the government with PIATCO contained provisions that substantially departed from the draft Concession Agreement included in the bid documents; the option contract in this case was already a part of the original contract and not given only after Smartmatic-TIM emerged as winner. The OTP was actually a requirement by the Comelec when the contract of lease was bidded upon. To be sure, the Extension Agreement does not contain a provision favorable to Smartmatic-TIM not previously made available to the other bidders.
Two. The amendment of the AES contract is not substantial. The approved budget for the contract was P11,223,618,400.00[56] charged against the supplemental appropriations for election modernization. Bids were, therefore, accepted provided that they did not exceed said amount. After the competitive public bidding, Smartmatic-TIM emerged as winner and the AES contract was thereafter executed. As repeatedly stated above, the AES contract is a contract of lease with OTP giving the Comelec the right to purchase the goods agreed upon if it decides to do so. The AES contract not only indicated the contract price for the lease of goods and purchase of services which is P7,191,484,739.48, but also stated the additional amount that the Comelec has to pay if it decides to exercise the option which is P2,130,635,048.15. Except for the period within which the Comelec could exercise the OTP, the terms and conditions for such exercise are maintained and respected. Admittedly, the additional amount the Comelec needed to pay was maintained (less the amount already paid when it purchased 920 units of PCOS machines with corresponding CCS for the special elections in certain areas in the provinces of Basilan, Lanao del Sur and Bulacan) subject to the warranties originally agreed upon in the AES contract. The contract amount not only included that for the contract of lease but also for the OTP. Hence, the competitive public bidding conducted for the AES contract was sufficient. A new public bidding would be a superfluity.
The Solicitor General himself clarified during the oral arguments that the purchase price of the remaining PCOS machines stated in the assailed Deed of Sale was the price stated in Article 4.3 of the AES contract. Therefore, the said amount was already part of the original amount bidded upon in 2009 for the AES contract which negates the need for another competitive bidding.[57]
Third. More importantly, the amendment of the AES contract is more advantageous to the Comelec and the public.
The nature of an option contract was thoroughly explained in Eulogio v. Apeles,[58] to wit:
An option is a contract by which the owner of the property agrees with another person that the latter shall have the right to buy the former's property at a fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions; or which gives to the owner of the property the right to sell or demand a sale. An option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. It is simply a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something, i.e., the right or privilege to buy at the election or option of the other party. Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer.[59]
Also in Carceller v. Court of Appeals,[60] the Court described an option in this wise:
An option is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. It binds the party who has given the option, not to enter into the principal contract with any other person during the period designated and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate agreement distinct from the contract which the parties may enter into upon the consummation of the option.[61]
In Adelfa Properties, Inc. v. CA,[62] the Court described an option as:
An option, as used in the law on sales, is a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with, certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It is sometimes called an "unaccepted offer." x x x[63]
From the foregoing jurisprudential pronouncements, an option is only a preparatory contract and a continuing offer to enter into a principal contract. Under the set-up, the owner of the property, which is Smartmatic-TIM, gives the optionee, which is the Comelec, the right to accept the former's offer to purchase the goods listed in the contract for a specified amount, and within a specified period. Thus, the Comelec is given the right to decide whether or not it wants to purchase the subject goods. It is, therefore, uncertain whether or not the principal contract would be entered into. The owner of the property would then have to wait for the optionee to make a decision. A longer option period would mean that more time would be given to the optionee to consider circumstances affecting its decision whether to purchase the goods or not. On the part of Smartmatic-TIM, it would have to wait for a longer period to determine whether the subject goods will be sold to the Comelec or not, instead of freely selling or leasing them to other persons or governments possibly at a higher price. This is especially true in this case as the terms and conditions for the exercise of the option including the purchase price, had been included in the AES contract previously bidded upon. The parties are bound to observe the limitations embodied therein, otherwise, a new public bidding would be needed.
We agree with respondents that the exercise of the option is more advantageous to the Comelec, because the P7,191,484,739.48 rentals paid for the lease of goods and purchase of services under the AES contract was considered part of the purchase price. For the Comelec to own the subject goods, it was required to pay only P2,130,635,048.15. If the Comelec did not exercise the option, the rentals already paid would just be one of the government expenses for the past election and would be of no use to future elections. Assuming that the exercise of the option is nullified, the Comelec would again conduct another public bidding for the AES for the 2013 elections with its available budget of P7 billion. Considering that the said amount is the available fund for the whole election process, the amount for the purchase or lease of new AES will definitely be less than P7 billion. Moreover, it is possible that Smartmatic-TIM would again participate in the public bidding and could win at a possibly higher price. The Comelec might end up acquiring the same PCOS machines but now at a higher price.
The advantage to the government of the exercise of the OTP was even recognized by petitioners, shown during the oral arguments:
ASSOCIATE JUSTICE PERALTA:
May I just ask you, do you know the total value of the subject matter of this contract?
DEAN ESPEJO:
Php1.8 billion pesos, Your Honor.
ASSOCIATE JUSTICE PERALTA:
You're referring to the Deed of Sale.
DEAN ESPEJO:
Yes, Your Honor.
ASSOCIATE JUSTICE PERALTA:
The whole, the whole equipment, subject matter of the contract.
DEAN ESPEJO:
I think roughly, the original contract something like 10 billion I am not sure, Your Honor.
ASSOCIATE JUSTICE PERALTA:
10 billion pesos.
DEAN ESPEJO:
Yes, Your Honor.
ASSOCIATE JUSTICE PERALTA:
Okay. Now, in the original contract of July 10, 2009, the contract was not actually a purchase contract but merely a lease contract.
DEAN ESPEJO:
Yes, Your Honor.
ASSOCIATE JUSTICE PERALTA:
And the lease contract is 7.1 billion.
DEAN ESPEJO:
It says 7.1 billion.
ASSOCIATE JUSTICE PERALTA:
Okay. But it is here [denominated] as a lease contract.
DEAN ESPEJO:
Yes, Your Honor.
ASSOCIATE JUSTICE PERALTA:
So the value was 10 billion pesos then you just pay the difference between ten (10) and seven (7) you get 3 billion pesos to purchase all of these equipment.
DEAN ESPEJO:
Yes, Your Honor.
ASSOCIATE JUSTICE PERALTA:
Okay. Now, you look at your Deed of Sale, this is annexed to your petition, the value of the Deed of Sale is something like two billion one hundred thirty million (Php2,130,000,000).
DEAN ESPEJO:
Around that much, Your Honor.
ASSOCIATE JUSTICE PERALTA:
You add this at two [billion] one hundred thirty million and so to seven billion one ninety-one the subject matter of your original contract; you come up with something like over 9 billion pesos.
DEAN ESPEJO:
Close to Ten, Your Honor.
ASSOCIATE JUSTICE PERALTA:
Close to Ten.
DEAN ESPEJO:
Yes, Your Honor.
ASSOCIATE JUSTICE PERALTA:
So that's practically less than the total value of the equipment, because according to you the total value would come up to 10 billion pesos, you add up the Lease Contract of 7 billion and two billion, plus under this Deed of Sale which is the subject matter of this petition, you will come up with a little more than 9 billion pesos even less than the 10 billion pesos. Do you think that is disadvantageous to the government?
DEAN ESPEJO:
May I be allowed to explain?
ASSOCIATE JUSTICE PERALTA:
Go ahead, you go ahead, you have all the time.
DEAN ESPEJO:
It may appear advantageous, Your Honor please, but on the other hand, there are certain disadvantages there. For one thing, these are not brand new machines; these are refurbished existing machines which could be suffering from hardware or software problem. For the COMELEC to accept this, Your Honor please, each machine will have to be checked as to its hardware and software. Eighty-two thousand (82,000) PCOS machines, Your Honor please, what if half of them, [turn out] to be white elephants or malfunctioning, Your Honor please, then we will be acquiring eighty-two thousand (82,000) with fifty percent (50%) malfunctioning machines. There is a danger, Your Honor please, that does not appear to the naked eye. In any event, with respect to the financial figures there appears to be some advantages, Your Honor, please.
ASSOCIATE JUSTICE PERALTA:
x x x these are merely speculative. Your're only speculating that there are dangers, the dangers might not come, in fact, it might even be void or favorable. Okay, now my other question is, do you think that if this was bidden out under R.A. 9184 for the purchase of all these equipment, do you think that a bidder will come up with a bid of less than 2 billion pesos for the whole equipment? When according to you, the equipment in 2009 is 10 billion, and elections are very near already 2013, the filing of certificates of candidacy will be on the second to the last month of this year?
DEAN ESPEJO:
May I be allowed to answer that by way of a speculation, Your Honor.
ASSOCIATE JUSTICE PERALTA:
Go ahead, please.
DEAN ESPEJO:
I think bidder will find it difficult to match that.
x x x x
ASSOCIATE JUSTICE PERALTA:
Okay. My other question is this. Okay, now you admitted that the original value is 10 billion. Are you also aware that the budget of the COMELEC when they come up with this contract is 7 billion?
DEAN ESPEJO:
Yes, Your Honor.
ASSOCIATE JUSTICE PERALTA:
And the total value of the original contract is 10 billion. Do you think that the COMELEC will have money to purchase equipment valued at 10 billion pesos with only 7 billion pesos for the elections of 2013? Because the budget of 7 billion is not for the purpose only of the purchase of the equipment, but also includes for the budget of the elections, pre, during and post elections expenses.
DEAN ESPEJO:
Well, Your Honor please, the shortfall of 3 billion pesos can be remedied if Congress will appropriate additional amounts, if the President of this Republic will convince the legislature to appropriate an additional amount, I see no problem why the shortfall of 3 billion cannot be remedied, Your Honor please.
ASSOCIATE JUSTICE PERALTA:
Oh, that's again speculative.
DEAN ESPEJO:
Again, that's unfortunate that's my speculation.
ASSOCIATE JUSTICE PERALTA:
You will have first to go to Congress, then you go to Senate, and then you go to the President discounting the possibility of filing a petition to question the allocation of additional amount for the 2013 elections, by the time that all of these exercises are finished then election is there already.
DEAN ESPEJO:
Well, I'm hopeful, Your Honor please, that our Congressmen and our Senators will rise to the occasion and move fast and appropriate the needed amount of 3 billion pesos to help the COMELEC acquire the proper Automated election System.
x x x[64]
Another reason posed by petitioners for their objection to the exercise of the option and the eventual execution of the March 30, 2012 Deed of Sale is the existence of the alleged defects, glitches, and infirmities of the subject goods. The technology provided by Smartmatic-TIM was not perfect, because of some technical problems that were experienced during the 2010 elections. Petitioners herein doubt that the integrity and sanctity of the ballots are protected because of these defects.
We do not agree.
Prior to the execution of the Deed of Sale, the Comelec and Smartmatic-TIM had agreed that the latter would undertake fixes and enhancements to the hardware and software to make sure that the subject goods are in working condition to ensure a free, honest, and credible elections. As former Commissioner Augusto C. Lagman admitted[65] during the oral arguments, there are possible software solutions to the alleged problems on the PCOS machines and it is not inherently impossible to remedy the technical problems that have been identified. While there is skepticism that Smartmatic-TIM would be able to correct the supposed defects prior to the 2013 elections because of its inaction during the two years prior to the exercise of the option, we agree with the opinion of Chairman Sixto S. Brillantes, Jr. that it is absurd to expect Smartmatic-TIM to invest time, money and resources in fixing the PCOS machines to the specifications and requirements of the Comelec when prior to the exercise of the OTP, they do not have the assurance from the Comelec that the latter will exercise the option.[66]
Moreover, as to the digital signature which appears to be the major concern of petitioners, it has been clarified during the oral arguments that the PCOS machines are capable of producing digitally-signed transmissions:
JUSTICE CARPIO:
I have some questions. Counsel, the law requires that the election returns that are electronically transmitted must be digitally signed, correct?
ATTY. LAZATIN:
That's right, Your Honor.
JUSTICE CARPIO:
Now, but in the 2010 elections, all election returns electronically transmitted were NOT digitally signed, correct?
ATTY. LAZATIN:
They were, Your Honors, please…
JUSTICE CARPIO:
Why? How?
ATTY. LAZATIN:
Your Honor, as we explained in our presentation, the iButtons, Your Honor, contain the digital signatures…
JUSTICE CARPIO:
Yes, I understand that
ATTY. LAZATIN:
…and the iButtons [interrupted]
JUSTICE CARPIO:
because they are there, the machine is capable of producing digitally-signed transmissions. But you just said that the BEI Chairman did not input their private keys because there was no time. It requires five (5) months.
ATTY. LAZATIN:
Your Honor, as I said, there is a digital signature that was assigned to the BEI…to the BEIs, your Honor, okay. I am saying that there is digital signature. What I also said, Your Honor, is that there is also a possibility that another digital certificate or signature can come from another certification authority xxx
JUSTICE CARPIO:
No, that's a third party…that's a third-party certifier, but that's an option. The law does not require a third-party certification. It merely says that transmission must be digitally signed.
ATTY. LAZATIN:
That's right.
JUSTICE CARPIO:
That's why Chairman Melo told Congress that it will cost one (1) billion to get a third-party certifier, but the law does not require it even now, if you said in your presentation that the BEI Chairman could not input their private key, that's generated because it takes five (5) months to do that and the list of BEI Chairman is known only one (1) month before the election, then how could there be a digital signature?
ATTY. LAZATIN:
Your Honor, as I mentioned it is a…not a customized or personal digital signature. It is a digital signature that is assigned by COMELEC.
JUSTICE CARPIO:
Assigned by COMELEC? How can…who inputs that digital signature?
ATTY. LAZATIN:
It is cranked out, Your Honor, and…
JUSTICE CARPIO:
No, your…it is trusted that the list of the BEI Chairman is known only one (1) month before, so how can the BEI Chairman input their digital signature five (5) months before?
ATTY. LAZATIN:
As I said, Your Honor, it is not a personal or customized signature. It is just like …
JUSTICE CARPIO:
It is a machine ID, in other words?
ATTY. LAZATIN:
No, let me explain it this way, Your Honor. The best example I can give, Your Honor, is …
JUSTICE CARPIO:
Okay, let us define first what a digital signature means.
ATTY. LAZATIN:
The Rules of Court, Your Honor, defines "digital signature" as the first one it is electronic signature consisting of a transformation of an electronic document or an electronic data message using an asymmetric or public Cryptosystem such that a person having the initial untransformed electronic document and the signer's public key can accurately determine: (i) whether the transformation was created using the private key that corresponds to the signer's public key; and (ii) whether the initial electronic document has been altered after the transformation was made.
JUSTICE CARPIO:
Therefore, digital signature requires private key and public key…
ATTY. LAZATIN:
Yes, Your Honor.
JUSTICE CARPIO:
…and this private key and public key are generated by an algorithm, correct?
ATTY. LAZATIN:
Yes, that's right, Your Honor.
JUSTICE CARPIO:
And there is another algorithm which, if you match…if you put together the private key and the message, will generate the signature.
ATTY. LAZATIN:
That's right, Your Honor.
JUSTICE CARPIO:
And the third algorithm, that if you put together the public key and the signature it will accept or reject the message, that's correct?
ATTY. LAZATIN:
That's correct, Your Honor.
JUSTICE CARPIO:
Now, was that used in the 2010 elections?
ATTY. LAZATIN:
Yes, your Honor.
JUSTICE CARPIO:
How was that private key generated?
ATTY. LAZATIN:
Again, Your Honor, as I said…
JUSTICE CARPIO:
Did the BEI Chairman know what that private key is?
ATTY. LAZATIN:
Your Honor, allow me to explain, Your Honor. The names, Your Honor, or the private keys are…were assigned to the BEIs Your Honor. In the same way, Your Honor, in the office my code name, Your Honor, or assigned to me is "00 xxx
JUSTICE CARPIO:
You mean to say the private key is embedded in the machine?
ATTY. LAZATIN:
No, Your Honor, it is embedded in the iButton and they are given a x x x
JUSTICE CARPIO:
Yes, in the machine…the iButton is in the machine.
ATTY. LAZATIN:
No, Your Honor.
JUSTICE CARPIO:
Where is it?
ATTY. LAZATIN:
It is a gadget, Your Honors, that is used…it is a separate gadget, your Honor xxx This is a sample of an iButton, your Honor, and in fact we said that we are prepared to demonstrate, Your Honor, and to show to this Court…
x x x x
JUSTICE CARPIO:
On election Day, where was the iButton placed? In the machine?
ATTY. LAZATIN:
To start the machine, Your Honor, you have to put it on top of that Button xxx
JUSTICE CARPIO:
In other words, whoever is in possession of that iButton can make a digitally-transmitted election return, correct?
ATTY. LAZATIN:
That's correct, Your Honor. Your Honor, together with the other BEIs because apart from this iButton, Your Honor, for authentication the BEIs, three of them, Your Honor, have an 8-digit PIN, Your Honor.
JUSTICE CARPIO:
How is that 8-digit PIN given to them?
ATTY. LAZATIN:
In a sealed envelope, Your Honor, these are x x x
JUSTICE CARPIO:
And then they also input that in the keyboard?
ATTY. LAZATIN:
Yes, Your Honor.
JUSTICE CARPIO:
In the display?
ATTY. LAZATIN:
Yes, Your Honor.
JUSTICE CARPIO:
So, that iButton contains the private key?
ATTY. LAZATIN:
Yes, Your Honor, that's my understanding.
JUSTICE CARPIO:
And who controls the public key? Who control[led] the public key in the last election?
ATTY. LAZATIN:
My understanding, Your honor, is COMELEC, your Honor.
JUSTICE CARPIO:
COMELEC had the public key?
ATTY. LAZATIN:
That's my understanding, Your Honor.
JUSTICE CARPIO:
And there was no certifying agency because it cost too much and the law did not require that?
ATTY. LAZATIN:
That's correct, Your Honor. But the machine, Your Honor, as I mentioned, is capable of accepting any number of digital signatures whether self-generated or by a third-party certification authority, Your Honor.
JUSTICE CARPIO:
Okay. So, whoever is in possession of that iButton and in possession of the four (4) PINS, the set of PINs, for the other BEI number, can send a transmission?
ATTY. LAZATIN:
Yes, Your Honor.
JUSTICE CARPIO:
The moment you are in possession of the iButton and the four (4) sets of PINs
ATTY. LAZATIN:
That's correct, Your Honor.
JUSTICE CARPIO:
If they can send an electronic transmission that's digitally signed and when received by the COMELEC and matched with the public key will result with an official election return, correct?
ATTY. LAZATIN:
That's correct. In the same way, Your Honor, that even if someone keeps his key or private key, Your Honor, if he is under threat he will also divulge it, Your Honor. It's the same.
JUSTICE CARPIO:
Okay, so whoever wants to send it, he will have to get the private key from the BEI Chairman and the PIN numbers from the other members…
ATTY. LAZATIN:
Yes, Your Honor.
JUSTICE CARPIO:
…before they can send the electronic transmission.
ATTY. LAZATIN:
Yes, Your Honor.
JUSTICE CARPIO:
Okay. That clarifies things. x x x[67]
As the Comelec is confronted with time and budget constraints, and in view of the Comelec's mandate to ensure free, honest, and credible elections, the acceptance of the extension of the option period, the exercise of the option, and the execution of the Deed of Sale, are the more prudent choices available to the Comelec for a successful 2013 automated elections. The alleged defects in the subject goods have been determined and may be corrected as in fact fixes and enhancements had been undertaken by Smartmatic-TIM. Petitioners could not even give a plausible alternative to ensure the conduct of a successful 2013 automated elections, in the event that the Court nullifies the Deed of Sale.
WHEREFORE, premises considered, the petitions are DISMISSED. The Temporary Restraining Order issued by the Court on April 24, 2012 is LIFTED.
SO ORDERED.
Carpio, Del Castillo, Perez, and Mendoza, JJ., concur.
Velasco, Jr., J., I certy that J. Velasco, Jr., left his vote concurring with J. Peralta and will submit a separate concurring opinion.
Leonardo-De Castro, and Bersamin, JJ., pls. see concurring opinion.
Brion, Villarama, Jr., and Perlas-Bernabe, JJ., pls. see my dissenting opinion.
Abad, J., pls. see separate opinion.
Sereno, and Reyes, JJ., please see separate concuring opinion.
[1] Rollo (G.R. No. 201112), pp. 91-92.
[2] Annex "1"; Consolidated Comment (OSG); rollo (G.R. No. 201112), pp. 214-271.
[3] Id. at 214.
[4] Rollo (G.R. No. 201112), p. 95.
[5] Annex "A"; Petition, rollo (G.R. No. 201121), pp. 26-49.
[6] Rollo (G.R. No. 201112), p. 97.
[7] Annex "C", Petition, rollo (G.R. No. 201127), pp. 53-55.
[8] Annex "4", Consolidated Comment (OSG), rollo (G.R. No. 201112), pp. 277-282 .
[9] Annex "A", Petition, rollo (G.R. No. 201112), pp. 39-42.
[10] Annex "B", Petition, rollo (G.R. No. 201112), pp. 48-49.
[11] Annex "6", Consolidated Comment (OSG), rollo (G.R. No. 201112), pp. 315-317.
[12] Rollo (G.R. No. 201112), pp. 99-100.
[13] Annex "C"; Petition, rollo (G.R. No. 201112), pp. 50-51
[14] Annex "I"; Petition, rollo (G.R. No. 201127), pp. 81-86.
[15] Petition, rollo (G.R. No. 201121), p. 21.
[16] Id. at 9.
[17] Id. at 9.
[18] Id. at 10.
[19] Id. at 11-15.
[20] Id. at 15-21.
[21] Petition, rollo (G.R. No. 201127), p. 19.
[22] Id. at 9-11.
[23] Id. at 11-14.
[24] Id. at 14-17.
[25] Petition, rollo (G.R. No. 201413), pp. 21-22.
[26] Id. at 12-19.
[27] Id. at 19-21.
[28] G.R. No. 191846, May 6, 2010, 620 SCRA 448.
[29] Id. at 462.
[30] Roque, Jr. v. Commission on Elections, G.R. No. 188456, September 10, 2009, 599 SCRA 69, 112.
[31] Rollo (G.R. No. 201127), p. 28.
[32] Rollo (G.R. No. 201121), p. 33.
[33] Id. at 37.
[34] Adriatico Consortium, Inc. v. Land Bank of the Philippines, G.R. No. 187838, December 23, 2009, 609 SCRA 403, 416; Domingo Realty, Inc. v. Court of Appeals, G.R. No. 126236, January 26, 2007, 513 SCRA 40, 62.
[35] Catungal v. Rodriguez, G.R. No. 146839, March 23, 2011, 646 SCRA 130, 155; Adriatico Consortium, Inc. v. Land Bank of the Philippines, supra; Domingo Realty, Inc. v. Court of Appeals, supra.
[36] Rollo (G.R. No. 201121), p. 30
[37] Id. at 38-39.
[38] Rollo (G.R. No. 201112), p. 608.
[39] This contract and its Annexes may be amended by mutual agreement of the parties. All such amendments shall be in writing and signed by the duly authorized representatives of both parties.
[40] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, G.R. No. 183789, August 24, 2011, 656 SCRA 214, 241.
[41] Id. at 229; JG Summit Holdings, Inc. v. Court of Appeals, G.R. No. 124293, September 24, 2003, 412 SCRA 10, 32.
[42] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, supra note 40, at 231; Agan, Jr. v. Philippine International Air Terminals, Co., Inc., G.R. Nos. 155001, 155547 and 155661, May 5, 2003, 402 SCRA 612, 654.
[43] Id.; id.
[44] JG Summit Holdings, Inc. v. Court of Appeals, supra note 39, at 33.
[45] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, supra note 40, at 232.
[46] Supra note 40, at 233; Agan, Jr. v. Philippine International Air Terminals, Co., Inc., supra note 42, at 655-656.
[47] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, supra note 40, at 233.
[48] Agan, Jr. v. Philippine International Air Terminals Co., Inc., supra note 42, at 664.
[49] Agan, Jr. v. Philippine International Air Terminals Co., Inc., G.R. Nos. 155001, 155547 and 155661, January 21, 2004, 420 SCRA 575, 597.
[50] Supra note 40.
[51] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, supra note 40, at 228-233.
[52] Supra note 42.
[53] Agan, Jr. v. Philippine International Air Terminals Co., Inc., supra note 49, at 597.
[54] Goods refer to the precinct count optical scan (PCOS) machines and their peripherals, personal computers, servers, electronic transmission devices, printers, integrated software and other related equipment, both hardware and software, including all deliverable supplies, ballots and materials, except ballot boxes, as presented by TIM and SMARTMATIC in their Technical and Financial Proposals, all other materials necessary to carry out the Project.
[55] Services refer to all acts to be performed or provided by the PROVIDER to COMELEC for the operation and completion of the Project, enumerated and described in the Technical and Financial Proposals, as amended or expounded by the Bidding Documents, particularly in reference but not limited to Components 2 and 3.
[56] Rollo (G.R. No. 201112), p. 346.
[57] Transcript of Stenographic Notes (TSN), Oral Arguments, En Banc, May 8, 2012, pp.139-140.
[58] G.R. No. 167884, January 20, 2009, 576 SCRA 561.
[59] Eulogio v. Apeles, supra, at 572-573.
[60] 362 Phil. 332 (1999).
[61] Carceller v. Court of Appeals, supra.
[62] 310 Phil. 623 (1995).
[63] Adelfa Properties, Inc. v. CA, supra, at 640.
[64] TSN, Oral Arguments, En Banc, May 2, 2012, pp. 58-68.
[65] Id. at 184-185.
[66] Rollo (G.R. No. 201112), p. 47.
[67] TSN, Oral Arguments, En Banc, May 8, 2012, pp. 159-170.
LEONARDO-DE CASTRO, J.:
I concur fully with the ponencia of the Honorable Associate Justice Diosdado M. Peralta after a careful consideration, among others, of the stipulations in the Contract for the Provision of the Automated Election System (AES) for the May 10, 2010 synchronized National and Local Elections (AES Contract, for brevity) and the undisputed facts relevant thereto.
I deemed it necessary to explain the legal basis of my concurrence with the majority opinion in view of the points of law which I raised in the course of the oral arguments in these cases, particularly those relating to the period within which the COMELEC shall exercise the option to purchase (OTP) the goods listed in Annex "L" of the AES Contract. The latter pertinently provides:
Article 6
COMELEC's Responsibilities
x x x x
6.6. The COMELEC shall notify the PROVIDER on or before 31 December 2010 of its option to purchase the Goods as listed in Annex "L".
Questions were raised as to the validity of the extension of the OTP period agreed upon by the parties to the contract long after December 31, 2010. The Agreement on the Extension of the OTP under the AES Contract was signed only on March 30, 2012. Nonetheless, I have come to the conclusion that such an extension of the period to exercise the OTP was legal and valid.
It is important to consider that the OTP stipulation is an integral part of the AES Contract, which as of March 30, 2012 was still in effect, pursuant to Article 2 of the said Contract which reads:
Article 2
EFFECTIVITY
2.1. This Contract shall take effect upon the fulfillment of all of the following conditions:
a) Submission by the PROVIDER of the Performance Security;
b) Signing of this Contract in seven (7) copies by the parties; and
c) Receipt by the PROVIDER of the Notice to Proceed
2.2. The Term of this Contract begins from the date of effectivity until the release of the Performance Security, without prejudice to the surviving provisions of this Contract, including the warranty provision as prescribed in Article 8.3 and the period of the option to purchase. (Emphasis supplied.)
The assertion of Smartmatic-TIM in its Consolidated Comment that COMELEC still retains the amount of Fifty Million Pesos of the performance security posted by Smartmatic-TIM, which was noted by Justice Peralta in his ponencia was not disputed. During the oral arguments, I inquired about the release of the Performance Security precisely because I believed it was crucial in determining when the AES Contract expired.
By virtue of the above-quoted stipulation and the COMELEC's retention of the Performance Security, the AES Contract, of which the OTP is a part, was still a subsisting contract as of March 30, 2012, the date the OTP extension agreement was signed.
The next question is: Can the period to exercise OTP be validly amended after December 31, 2010? I believe so considering that stipulations of the AES Contract, including Article 19 which allowed amendments of said contract, were still effective as of March 30, 2012. Morever, there is nothing in the AES Contract, particularly in par. 2.2, Article 2, which prohibits the extension of the period of the OTP. The said extension is the nature of an amendment to the AES Contract, which can be done while the said Contract still has life. It would have been a different matter if the AES Contract had already expired before the period of the OTP was extended by agreement of the parties. In that case, contractual stipulations, including that on the amendment of the contract will cease to have any force and effect and any contract for the purchase of goods would be an entirely different contract which should comply anew with government procurement laws and regulations.
It should likewise be stressed that the contracting parties stipulated, under par. 2.2 of Article 2, that the effectivity of the OTP cannot be prejudiced by the expiration of the AES Contract. In other words, the said parties intended that effectivity of the OTP may even outlive, or survive beyond, the term of the AES Contract, assuming that such period to exercise the OTP was agreed upon during the existence of the AES Contract.
Under the facts obtaining in these cases, the original period of the OTP expired before the termination of the AES Contract. Considering that OTP is just an adjunct of the main AES Contract, which still exists, and there being no express or implied ground in the contract to bar such extension or revival of the period, the validity of the latter must be upheld.
Moreover, I agree with the observation of Justice Peralta that the amendment of the period is not a substantial amendment of the AES Contract that would prejudice the other bidders to the said contract.
Accordingly, for the above-stated reasons and the other grounds discussed by Justice Peralta in his ponencia, I reiterate my concurrence to the dismissal of the present petitions.
BERSAMIN, J.:
The consolidated petitions for certiorari, prohibition, and mandamus (with prayer for the issuance of temporary restraining order and/or writ of preliminary injunction) assail the exercise by the Commission on Elections (COMELEC) of its option to purchase under Article 4.3 of the July 10, 2009 Contract for the Provision of an Automated Election System for the May 10, 2010 Synchronized National and Local Elections (2009 Automation Contract). They claim that Resolution No. 9376 and the Deed of Sale executed on March 30, 2012 by and between the COMELEC and SMARTMATIC-TIM Corporation to concretize the COMELEC's exercise of its option to purchase under the 2009 Automation Contract were issued or done in grave abuse of discretion amounting to lack or excess of jurisdiction.
My personal persuasion is that all the petitions are inappropriate remedies against Resolution No. 9376 and the Deed of Sale executed on March 30, 2012. The Court should dismiss them for that reason.
Furthermore, I firmly urge that the Court outrightly dismiss the petitions for lack of jurisdiction over the subject matter.
But, even granting that the Court has jurisdiction over the subject matter of these actions, I respectfully submit that the COMELEC's exercise of its option to purchase beyond December 31, 2010 without a new public bidding was valid and should be upheld.
Certiorari, Prohibition and Mandamus
are inappropriate remedies
I harbor serious misgivings about the propriety of the petitions for certiorari, prohibition, and mandamus as remedies to challenge Resolution No. 9376 and the March 30, 2012 Deed of Sale.
As a premise for my misgivings, I categorize the issuance of the assailed Resolution No. 9376 and the execution of the Deed of Sale on March 30, 2012 in terms of what function the COMELEC thereby discharged.
The Court has classified the functions the COMELEC exercises into the quasi-judicial, quasi-legislative, and administrative in Bedol v. Commission on Elections,[1] to wit:
The powers and functions of the COMELEC, conferred upon it by the 1987 Constitution and the Omnibus Election Code, may be classified into administrative, quasi-legislative, and quasi-judicial. The quasi-judicial power of the COMELEC embraces the power to resolve controversies arising from the enforcement of election laws, and to be the sole judge of all pre-proclamation controversies; and of all contests relating to the elections, returns, and qualifications. Its quasi-legislative power refers to the issuance of rules and regulations to implement the election laws and to exercise such legislative functions as may expressly be delegated to it by Congress. Its administrative function refers to the enforcement and administration of election laws. In the exercise of such power, the Constitution (Section 6, Article IX-A) and the Omnibus Election Code (Section 52 [c]) authorize the COMELEC to issue rules and regulations to implement the provisions of the 1987 Constitution and the Omnibus Election Code..I emphasize without hesitation that in order to properly proceed against the COMELEC, an aggrieved party must choose the proper remedy. The choice depends on which function quasi-judicial, quasi-legislative, and administrative the COMELEC has discharged in doing the assailed
The quasi-judicial or administrative adjudicatory power is the power to hear and determine questions of fact to which the legislative policy is to apply, and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. The Court, in Dole Philippines Inc. v. Esteva, described quasi-judicial power in the following manner, viz:
Quasi-judicial or administrative adjudicatory power on the other hand is the power of the administrative agency to adjudicate the rights of persons before it. It is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. The administrative body exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially of an executive or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it. In carrying out their quasi-judicial functions the administrative officers or bodies are required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them as basis for their official action and exercise of discretion in a judicial nature. Since rights of specific persons are affected, it is elementary that in the proper exercise of quasi-judicial power due process must be observed in the conduct of the proceedings
action. It is true that pursuant to Section 2,[2] Rule 64 of the Rules of Court,[3] the remedy of an aggrieved party against a judgment or final order or resolution of the COMELEC is a special civil action of certiorari under Rule 65 brought in the Supreme Court. In Macabago v. Commission on Elections,[4] however, the Court has clarified that Rule 64 applies only to the judgments or final orders or final resolutions rendered by the COMELEC in the exercise of its quasi-judicial function (that is, "the power to resolve controversies arising from the enforcement of election laws, and to be the sole judge of all pre-proclamation controversies; and of all contests relating to the elections, returns, and qualifications"). In this connection, the Court, upon noting that Rule 64 likewise extends to the judgments, final orders or final resolutions of the Commission on Audit, has said in Dela Llana v. Commission on Audit,[5] viz:
Public respondents aver that a petition for certiorari is not proper in this case, as there is no indication that the writ is directed against a tribunal, a board, or an officer exercising judicial or quasi-judicial functions, as required in certiorari proceedings. Conversely, petitioner for his part claims that certiorari is proper under Section 7, Article IX-A of the 1987 Constitution, which provides in part:
Section 7. xxx. Unless otherwise provided by this Constitution or by law, any decision, order, or ruling of each Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from receipt of a copy thereof.
Petitioner is correct in that decisions and orders of the COA are reviewable by the court via a petition for certiorari. However, these refer to decisions and orders which were rendered by the COA in its quasi-judicial capacity.
While Rule 64 sets the procedure for reviewing the judgments, final orders or resolutions the COMELEC renders in its quasi-judicial capacity, Rule 65 provides another remedy to a party who is aggrieved by the act of the COMELEC in the exercise of its administrative function,[6] but the questioned act or issuance must have been attended by grave abuse of discretion amounting to lack or excess of jurisdiction.[7] Regardless of whether a petition is brought under Rule 64 or Rule 65, the following essential requisites must be attendant, namely: (a) the writ is directed against the COMELEC exercising its quasi-judicial functions, if the petition is for certiorari or prohibition, or exercising its ministerial function, if the petition is for prohibition or mandamus; (b) the COMELEC has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (c) there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law.
Evidently, the issuance of Resolution No. 9376 did not involve the investigation of facts, the conduct of hearings, or the weighing of evidence to resolve a controversy arising from the enforcement of election laws. As such, the resolution was not issued in the exercise of COMELEC's quasi-judicial function. The resolution was not also promulgated in the exercise of the COMELEC's administrative function, because it did not relate to the enforcement of election laws. Rather, the resolution resulted from the COMELEC's exercise of its quasi-legislative function, its aim being to implement Republic Act (RA) No. 8436,[8] as amended by RA No. 9369, through the adoption of an automated election system for the 2013 elections.
Considering that the assailed Deed of Sale entered into on March 30, 2012 pursuant to Resolution No. 9376 was clearly not the product of the COMELEC's quasi-judicial function, the Court cannot exercise its certiorari jurisdiction herein in order to review and set it aside.
Prohibition and mandamus are likewise inappropriate as remedies against Resolution No. 9376 and the Deed of Sale of March 30, 2012. In a special civil action for prohibition, the respondent tribunal, corporation, board, or person must exercise either judicial, quasi-judicial, or ministerial functions and must have acted without or in excess of jurisdiction or with grave abuse of discretion; the prohibition petitioner prays that judgment be rendered, commanding the respondent to desist from further proceeding in the action or matter specified in the petition.[9] In a special civil action for mandamus, the petitioner seeks to compel the performance of a ministerial duty.[10] The mandamus petitioner should show, on one hand, that he has a well-defined, clear and certain legal right in the performance of the act, and, on the other hand, that the respondent has the clear and imperative duty to do the act required to be done.[11] Without question, however, both remedies of prohibition and mandamus cannot review and correct the exercise by the COMELEC of its legislative or quasi-legislative function.[12]
I am constrained to find, therefore, that the consolidated petitions are inappropriate remedies. Upon that cause, I vote for their outright dismissal.
The Court has no jurisdiction over
the subject matter of the actions
The visible objective of the consolidated petitions is to prevent the COMELEC from purchasing the PCOS machines and related election paraphernalia from SMARTMATIC-TIM. It is certain that the resolution of these cases would center on the validity and legality of the exercise by the COMELEC beyond December 31, 2010 of the option to purchase.
If that is certain, an ordinary civil action for the annulment of contract (i.e., Deed of Sale of March 30, 2012) is the appropriate and adequate remedy. Assailing the validity and legality of the exercise by the COMELEC beyond December 31, 2010 without a public bidding of the option to purchase is definitely an action whose subject matter is incapable of pecuniary estimation, considering that "the basic issue is something other than the right to recover a sum of money, or xxx the money claim is purely incidental to, or a consequence of, the principal relief sought like in suits to have the defendant perform his part of the contract (specific performance) and in actions for support, or for annulment of a judgment or to foreclose a mortgage."[13]
There is no question that the jurisdiction over an action whose subject matter is incapable of pecuniary estimation originally and exclusively pertains to the Regional Trial Court (RTC) by express provision of law.[14] The Court cannot arrogate unto itself the jurisdiction that it does not have under the Constitution and the laws on jurisdiction enacted by Congress. If the Court does so, its judgment will be void and ineffectual.
I humbly posit that the RTC still has exclusive and original jurisdiction notwithstanding that the petitioners' theory is that the assailed Resolution No. 9376 was invalid and illegal for violating RA No. 9184 (The Government Procurement Reform Act). I deem it not amiss to point out that the Court's power to evaluate and pass upon the validity of an implementing rule or regulation like Resolution No. 9376 is generally only appellate in nature.[15]
I concede that exceptional and compelling circumstances, such as the involvement of the national interest in a controversy and the serious implications on the national life of the issue, may justify a direct resort to the Court through the extraordinary remedies for the writs of certiorari, prohibition and mandamus. Yet, the Court should still desist from giving due course to and resolving the consolidated petitions upon bare assertions of transcendental importance or the paramountcy of public interest. Verily, jurisdiction over the subject matter of any action is determined by the basic allegations of the initiating pleading, but such determinant allegations should not include conclusions of fact and law; otherwise, the laws on jurisdiction and pleadings will be easily thrown in disarray. The Court cannot arbitrarily ignore the statutory rules on jurisdiction in order to repose in itself an original authority that the Constitution and the statutes have not seen fit to repose in the Court.
Petitions are bereft of merit and substance
Assuming that I am wrong about the RTC having the exclusive and original jurisdiction over the subject matter of the consolidated petitions, as well as about the petitions not being the appropriate remedies to assail Resolution No. 9376 and the Deed of Sale of March 30, 2012, I must now submit that the petitions are really bereft of merit and substance.
The issue is whether the COMELEC acted with grave abuse of discretion amounting to lack or excess of jurisdiction in exercising the option to purchase beyond December 31, 2010. My submission is that the COMELEC did not.
The decisive query is: Was the extension of the period of the option to purchase beyond December 31, 2010 without another public bidding being first conducted pursuant to RA No. 9184 valid? In my view, it was.
I join Justice Peralta's persuasive showing that the COMELEC's exercise of the option and its entering into the purchase of the PCOS machines did not contravene the letter and spirit of RA No. 9184. I give my full concurrence to his submission that the purchase was in fact favorable to the Government and to the public interest. Accordingly, I uphold Resolution No. 9376 and the ensuing Deed of Sale.
The existence of a binding option to purchase is not in dispute. The inclusion of the option to purchase was a requirement precisely mentioned in the Bid Bulletins and Section 28, Part V or Other Specifications of the request for proposal (RFP).[16] That option to purchase was irrevocable during its term because it was supported by a valuable consideration (that is, the contract price stipulated in the 2009 Automation Contract).[17]
The 2009 Automation Contract shows the following terms of the option to purchase, to wit:
4.3 OPTION TO PURCHASE
In the event COMELEC exercises its option to purchase the Goods as listed in Annex "L", COMELEC shall pay the PROVIDER as additional amount of Two Billion One Hundred Thirty Million Six Hundred Thirty Five Thousand Forty Eight Pesos and Fifteen Centavos (Php 2,130,635,048.15) as contained in the Financial Proposal of the joint venture partners SMARTMATIC and TIM.
In case COMELEC should exercise its option to purchase, a warranty shall be required in order to assure that: (a) manufacturing defects shall be corrected; and/or (b) replacements shall be made by the PROVIDER, for a minimum period of three (3) months, in the case of supplies, and one (1) year, in the case of equipment, after performance of this Contract. The obligation for the warranty shall be covered by retention money of ten percent (10%) of every option to purchase payment made.
The retention money will be returned within (5) working days after the expiration of the above warranty, provided however, that the goods supplied are in good operating condition free from patent and latent defects, all the conditions imposed under the purchase contract have been fully met, and any defective machines, except to those attributable to COMELEC, have been either repaired at no additional charge or replacement or deducted from the price under the Option to Purchase.
Explaining the nature of an option contract, the Court has declared in Eulogio v. Spouses Apeles,[18] viz:
An option is a contract by which the owner of the property agrees with another person that the latter shall have the right to buy the former's property at a fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions; or which gives to the owner of the property the right to sell or demand a sale. An option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. It is simply a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something, i.e., the right or privilege to buy at the election or option of the other party. Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer.[19]
It is also sometimes called an "unaccepted offer" and is sanctioned by Article 1479 of the Civil Code:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.
Here, the option to purchase was the unilateral undertaking of SMARTMATIC-TIM. A unilateral contract gives rise to an obligation that binds only one of the parties, which sets a unilateral contract poles apart from a bilateral contract that contemplates reciprocity of obligations. Professor Corbin, an eminent commentator on the law of contracts,[20] has expounded on the distinction of a unilateral contract from a bilateral one in this wise:
xxx. A unilateral contract consists of a promise or a group of promises made by one of the contracting parties only, usually assented to by the other or by someone acting on his behalf. There are many cases in which such an assent is not required. A bilateral contract consists of mutual promises, made in exchange for each other by each of the two contracting parties. In the case of a unilateral contract, there is only one promisor; and the legal result is that he is the only party who is under an enforceable legal duty. The other party to this contract is the one to whom the promise is made, and he is the only one for whom the contract creates an enforceable legal right. In a bilateral contract both parties are promisors and both parties are promisees; and the legal effect of such a contract is that there are mutual rights and there are mutual duties. The distinction between these two classes of contracts is of importance in the analysis of a contractual transaction and in determining its validity and its exact legal operation. xxx[21]
As used in the law of sales, an option, according to Limson v. Court of Appeals,[22] "is a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a time certain, or under, or in compliance with, certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale." By its juridical nature, an option contract creates a mere entitlement, right, or privilege on the part of the offeree who retains the discretionary prerogative whether to exercise it or not. Considering that the option is unilateral in essence, the offeror in an option to purchase creates a burden upon himself not to dispose of the subject matter of the option within the specified time set forth in the contract for the purpose of obtaining exclusivity of parties in a future contract conditioned upon the acceptance of
the offer.[23] It is plain, then, that a valid option contract is not a mere expression of a willingness to enter into a future contract; rather, it is already a committed offer, definite in its terms, that effectively induces the offeree-optionee to reasonably believe that the choice or preference to generate such forthcoming covenant stems from him. In Carceller v. Court of Appeals,[24] the Court has said that
(a)n option is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. It binds the party who has given the option, not to enter into the principal contract with any other person during the period designated, and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate agreement distinct from the contract which the parties may enter into upon the consummation of the option.[25]
Given the foregoing, all that was left to be done in order to create a bilateral promise to buy and to sell between the COMELEC and SMARTMATIC-TIM was the act of acceptance on the part of COMELEC of SMARTMATIC-TIM's committed offer.
That SMARTMATIC-TIM unilaterally made several extensions of the period to exercise the option to purchase without the corresponding agreement of the COMELEC was inconsequential to the valid and effective exercise of the option by the COMELEC. I reiterate that an offeror like SMARTMATIC-TIM retained the exclusive power to extend the option; and that nothing could prevent SMARTMATIC-TIM as the offeror from extending the offer even without the offeree's lack of consent. In point is Prof. Corbin's following discourse, to wit:
At the time that he makes his offer, the offeror has full control of its terms, of the person who shall have power to accept, of the mode of acceptance, and of the length of time during which the power of acceptance shall last. When he makes the offer he shall specify in it the time within which acceptance must occur; if he does so, the power of acceptance is limited accordingly.
The offeror's limitation of time is not operative if it is not communicated to the offeree so that he knows or should know of it; but if so communicated it operated with certainty. It makes no difference that the time specified is much less than a reasonable time. The offeror is the creator of the power; and it dies, just as it was born, by the will of its creator. He need make no offer at all; and he may so word his seeming offer that it is impossible of acceptance. x x x.[26]
xxx The time actually taken by the offeree may properly be held to be reasonable, if the offeror intended the power to last so long, even though on the facts known to him it was not at all reasonable for the offeree to think that he was accepting in time. A reasonable time may be longer than the offeror intended, but it can never be less. The primary and perhaps the sole purpose of limiting the power of acceptance to a reasonable time, is the protection of the offeror against results that he does not expect or foresee. If those results are caused by his own action, the law will compel him to abide by them for the protection of others; hence, an offeror may sometimes be bound by an acceptance that he did not expect. But he needs no protection against an acceptance that he in fact hoped for and meant to invite, even though he did not expressly state as long a time as intended.
x x x
The power of acceptance will last much longer than it otherwise would in case the conduct of the offeror reasonably leads the offeree to believe that the offer is still open. An offer is operative as long as the offeror says that it shall be; likewise it is operative as long as his conduct leads the offeree to believe that it is. x x x.[27]
In other words, the extension made by SMARTMATIC-TIM prior to December 31, 2010 (the expiration of the original period) as well as the extensions subsequent thereto effectively preserved the option to purchase and stretched the lifespan of the option. This signifies that the option was still subsisting when the COMELEC decided to exercise it on March 21, 2012. The COMELEC's purchase of the PCOS machines and related paraphernalia through the Deed of Sale of March 30, 2012 thus only continued the covenants embodied in the 2009 Automation Contract, contrary to the petitioners' contentions.
The usage of the words "shall notify" in Article 6.6 of the 2009 Automation Contract, which provides that "COMELEC shall notify the PROVIDER on or before 31 December 2010 of its option to purchase the Goods as listed under Annex L", simply meant that the COMELEC should communicate its acceptance of the committed offer within the term stipulated, and did not refer to the consummation of the anticipated contract of sale. In that light, the communication by the COMELEC on March 21, 2012 of its acceptance was an act within the context of the 2009 Automation Contract.
Hence, I have no alternative except to reject the petitioners' allegations of grave abuse of discretion committed by the COMELEC in issuing its Resolution No. 9376.
Extension of the period of the option
to purchase was not a material or substantial
amendment of the 2009 Automation Contract;
Hence, no new public bidding is required
RA No. 9184 requires that, subject to certain exceptions, all procurements by the Government should be through competitive bidding.[28] Procurement is defined as the acquisition of goods and consulting services, and the contracting for infrastructure projects, including the lease of goods and real estate.[29] A public bidding provides the occasion for an open and fair competition among all bidders, and is designed to secure for the Government the lowest possible price under the most favorable terms and conditions, to curtail favoritism in the award of government contracts, and to avoid suspicion of anomalies.[30] It is intended to minimize occasions for corruption and temptations to commit abuse of discretion in awarding contracts on the part of government authorities.[31]
All procurement contracts must undergo a public bidding before they may be awarded. A publicly-bidded contract, once executed, may no longer be amended; otherwise, the policy behind the requirement of competitive bidding may be subverted. According to Caltex (Phil.), Inc. v. Delgado Bros., Inc.: [32]
[T]he due execution of a contract after public bidding is a limitation upon the right of the contracting parties to alter or amend it without another public bidding, for otherwise what would a public bidding be good for if after the execution of a contract after public bidding, the contracting parties may alter or amend the contract, or even cancel it, at their will? Public biddings are held for the protection of the public, and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers the best terms is awarded the contract subject of the bid, and it is obvious that such protection and best possible advantages to the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding.
Still, the Court has recognized that a publicly-bidded contract may be amended provided that the amendment is not material or substantial.[33]
When, then, is an amendment considered material or substantial as to demand another public bidding?
The leading case law on when an amendment of a publicly-bidded contract is material or substantial is Agan, Jr. v. Philippine International Air Terminals Co., Inc.,[34] which holds that an amendment is material if it permits a substantial variance between the terms and conditions under which the bids were invited and the terms and conditions of the contract executed after the bidding. Agan, Jr. fittingly elucidates as follows:
An essential element of a publicly bidded contract is that all bidders must be on equal footing. Not simply in terms of application of the procedural rules and regulations imposed by the relevant government agency, but more importantly, on the contract bidded upon. Each bidder must be able to bid on the same thing. The rationale is obvious. If the winning bidder is allowed to later include or modify certain provisions in the contract awarded such that the contract is altered in any material respect, then the essence of fair competition in the public bidding is destroyed. A public bidding would indeed be a farce if after the contract is awarded, the winning bidder may modify the contract and include provisions which are favorable to it that were not previously made available to the other bidders.[35]
x x x
While we concede that a winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon, such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and would constitute a denial to the other bidders of the opportunity to bid on the same terms. Hence, the determination of whether or not a modification or amendment of a contract bidded out constitutes a substantial amendment rests on whether the contract, when taken as a whole, would contain substantially different terms and conditions that would have the effect of altering the technical and/or financial proposals previously submitted by other bidders. The alterations and modifications in the contract executed between the government and the winning bidder must be such as to render such executed contract to be an entirely different contract from the one that was bidded upon.[36]
x x x
[A]mendments to the contract bidded upon should always conform to the general policy on public bidding if such procedure is to be faithful to its real nature and purpose. By its very nature and characteristic, competitive public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. It has been held that the three principles in public bidding are (1) the offer to the public; (2) opportunity for competition; and (3) a basis for the exact comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive character of the system and thwarts the purpose of its adoption.[37]
In short, the prohibition against amending a publicly-bidded contract extends only to a change in vital and essential particulars of the agreement that results in a substantially new contract.[38]
An example illustrative of a material change is seen in Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Inc..[39] The issue was whether the amendment made on a contract for the purchase of the fly ash produced by the Batangas Power Plant was valid or not. The contract had been amended after the bidding to include a right of first refusal to purchase the fly ash to be generated by power plants that would be put up by the National Power Corporation (NPC) in the future. The Court found that the amendment went beyond the scope of the original contract that had referred only to the Batangas Power Plant; and accordingly ruled that the amendment was material because it changed the terms of the bidding conducted; hence, the amendment was void. The Court further ruled that the amendment was especially repugnant because it also prejudiced biddings yet to be conducted as to the other power plants that NPC would be building later on, stating:
The grant of the right of first refusal in this case did not only substantially amend the terms of the contract bidded upon, so that resultantly, the other bidders thereto were deprived of the terms and opportunities granted to respondent after it won the public auction, it so altered the bid terms the very admission by all parties that the disposal of fly ash must be through public bidding by effectively barring any and all true biddings in the future. The grant of first refusal was a grant to respondent of the right to buy fly ash in all coal-fired plants of NPC.
Here, however, the extensions of the timeline for the option to purchase did not amount to a material or substantial amendment of the 2009 Automation Contract. For sure, the bid documents specifically included the option to purchase the goods to be leased by COMELEC, as reflected in the RFP, which states:
28. The offer shall be for a one-time lease basis for Component 1-A, 1-B and 1-C.
28.1 An offer for an option to purchase by component to be decided by COMELEC before December 31, 2010 shall be included by the bidder in its proposal.
28.2 The price of the option-to-purchase shall not exceed 50% of the lease price of the equipment.
Moreover, the change related only to the period of the option to purchase. That sort of change did not go beyond the subject of the contract that had been bidded out to the public because the price and other essential terms embodied in the 2009 Automation Contract remained the same; hence, the change was not material or substantial.
At any rate, extending the period of the option to purchase was entirely within the discretion of SMARTMATIC-TIM to make. There is no denying that the implementing rules and regulations of RA No. 9184 did provide that the terms stated in the bidding documents were only the minimum requirements of the procuring entity, and that the bidder was free to offer better terms.[40] In Bid Bulletin No. 13, the Special Bids and Awards Committee definitively stated that the option to purchase would not be considered in any way in determining the lowest calculated bid. Any better offer on the terms of the option to purchase would have had no bearing in determining the winning bidder because the winner would ultimately be determined based on the lowest price submitted.[41]
Understandably, there may be additional factors to consider in determining if an amendment is material. Thus, in Kenai Lumber Company, Inc. v. LeResche,[42] it was held that:
Not all amendments to competitively bid contracts are prohibited, only those regarded as material. The concept of materiality in this context has not been satisfactorily captured in a single phrase. One court has spoken of "an essential change of such magnitude as to be incompatible with the general scheme" of competitive bidding; another has phrased the question to be whether the amendment "so varied from the original plan, was of such importance, or so altered the essential identity or main purpose of the contract, that it constitutes a new undertaking." These formulations simply recognize that the materiality concept prohibits those changes which tend to be subversive of the purpose of competitive bidding. In determining whether an amendment has this tendency, courts have found the following factors to be of importance:
(1) the legitimacy of the reasons for the change;
(2) whether the reasons for the change were unforeseen at the time the contract was made;
(3) the timing of the change;
(4) whether the contract contains clauses authorizing modifications;
(5) the extent of the change, relative to the original contract.[43]
A consideration of these additional factors bolsters my conclusion that the extension of the period of the option to purchase was not a material amendment of the 2009 Automation Contract. I note, first of all, that the extension of the period of the option to purchase emanated from the apparent desire of SMARTMATIC-TIM to give to the COMELEC enough time to deliberate and to decide whether to avail itself of the option to purchase or not. The motivation for the extension was legitimate in view of the issues that arose even prior to the 2010 elections centering on the capability of SMARTMATIC-TIM to safeguard the votes as well as on the COMELEC's budgetary concerns, difficult issues that the COMELEC had to address first. Secondly, the need for extending the time on account of such issues and concerns was evidently not foreseen prior to the bidding and the execution of the 2009 Automation Contract. Thirdly, there was also nothing suspicious about the timing of the change because more than a year had already elapsed following the implementation of the 2009 Automation Contract. Finally, the 2009 Automation Contract permitted amendments to be mutually agreed upon by the parties, and the extent of the amendment which only refers to the period of the option to purchase is not substantial.
In summary, the extension of the period of the option to purchase did not amount to a material amendment of the 2009 Automation Contract. The extension of the period did not give rise to a new contract that would have necessitated the conduct of another public bidding.
ACCORDINGLY, I vote to dismiss all the petitions for certiorari, prohibition and mandamus.
[1] G.R. 179830, December 3, 2009, 606 SCRA 554, 569-571.
[2] Section 2. Mode of review. A judgment or final order or resolution of the Commission on Elections and the Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65, except as hereinafter provided. (n)
[3] Entitled Review Of Judgments And Final Orders Or Resolutions Of The Commission On Elections And The Commission On Audit.
[4] G.R. No. 152163, November 18, 2002, 392 SCRA 178, 183.
[5] G.R. No. 180989, February 7, 2012.
[6] Macabago v. Commission on Elections, G.R. No. 152163, November 18, 2002, 392 SCRA 178, 184; citing Canicosa v. Commission on Elections ,G.R. No.120318, December 5, 1997, 282 SCRA 512; and Cabagnot v. Commission on Elections, G.R. No. 124383, August 9, 1996, 260 SCRA 503.
[7] Macabago v. Commission on Elections, supra; citing Raymundo v. People Homesite and Housing Corp., No. L-38318, June 29, 1982, 114 SCRA 712; and Loong v. Commission on Elections, G.R. No. 133676, April 14, 1999, 305 SCRA 832.
[8] An Act Authorizing the Commission on Elections to Use an Automated Election System in the May 11, 1998 National or Local Elections and in Subsequent National and Local Electoral Exercises, Providing Funds Therefor and for Other Purposes.
[9] Ongsuco v. Malones, G.R. No. 182065, October 27, 2009, 604 SCRA 499, 515; Perez v. Court of Appeals, No. L-80838, November 29, 1988, 168 SCRA 236, 243.
[10] Ongsuco v. Malones, supra; Heirs of Sps. Luciano and Consolacion Venturillo v. Quitain, G.R. No. 157972, 30 October 2006, 506 SCRA 102, 110; Cariño v. Capulong, G.R. No. 97203, 26 May 1993, 222 SCRA 593, 602.
[11] Ongsuco v. Malones, supra; Social Justice Society v. Atienza, Jr., G.R. No. 156052, 7 March 2007, 517 SCRA 657, 664.
[12] Holy Spirit Homeowners Association, Inc. v. Defensor, G.R. No. 163980, August 3, 2006, 479 SCRA 581.
[13] Lapitan v. Scandia Inc., G. R. No. L-24668, July 31, 1968, 24 SCRA 479, 481; cited in subsequent cases like Singsong v. Isabela Sawmill, No. L-27343, February 28, 1979, 88 SCRA 623, 637; Russell v. Vestil, G.R. No. 119347, March 17, 1999, 304 SCRA 738, 744.
[14] Section 19(1), Batas Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980), which provides:
Section 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive original jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;
[15] Section 5, Article VIII, 1987 Constitution.
[16] The Bid Bulletins and Section 28, Part V, of the request for proposal (RFP) specifically required prospective bidders to include in their respective proposals an option to purchase "to be decided by COMELEC before December 31, 2010."
[17] In National Development Corporation v. Firestone Ceramics, Inc., G.R. No. 143590 (November 14, 2001), one of the issues pertains to the existence of a consideration in so far as it concerns the 'right of first option to purchase" provision incorporated in the lease contract. In determining whether it is a "paid-up option", this Court held that: "xxx the right of first refusal is an integral and indivisible part of a contract of lease and is inseparable from the whole contract. The consideration for the right is built into the reciprocal obligations of the parties. Thus, it is not correct for the petitioners to insist that there was no consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as the stipulation is part and parcel of the lease making the consideration for the lease the same as that of the option."
[18] G.R. No. 167884, January 20, 2009, 576 SCRA 561, 572-573.
[19] Bold underscoring supplied for emphasis.
[20] Professor Arthur Linton Corbin (1874 1967) was a professor of law in Yale Law School and a scholar of contract law. He helped to develop the philosophy of law known as legal realism, and his work on contracts is one of the most celebrated legal treatises of the Twentieth Century.
[21] Corbin on Contracts, One Volume Edition, West Publishing Co., 1952:156-7. Ch. 1 § 21, p. 31.
[22] G.R. No. 135929, April 20, 2001, 357 SCRA 209, 215.
[23] To the same effect is Uniq Computer Corp. v. United States, 20 Cl. Ct. 222, 231 (Cl. Ct. 1990), where the US Supreme Court said:
Stated differently, a noted text writer explains that an option contract is an agreement to keep an offer open for a prescribed period of time during which that offer is irrevocable. 1 S. Williston, A Treatise on the Law of Contracts § 61A (3d ed. 1957). An option is "a unilateral contract whereby the optionor for valuable consideration grants the optionee a right to make a contract of purchase but does not bind the optionee to do so; the optionor is bound during the life of the option, but the optionee is not." Id. The power conferred on the option holder is called the power of acceptance, who therefore has the legal authority to consummate the contemplated transaction by merely exercising that contractual right. The option giver, on the other hand, is bound to execute the exchange for the duration of the agreement. 1A A. Corbin, Corbin on Contracts, A Comprehensive Treatise on the Working Rules of Contract Law § 259 (1963).
[24] G.R. No. 124791, February 10, 1999, 302 SCRA 718.
[25] Carceller v. Court of Appeals and State Investment House, G.R. No. 124791, February 10, 1999, 302 SCRA 718, 724.
[26] Corbin on Contracts, Ch. 2, §35, p. 55.
[27] Id., pp. 56-58.
[28] RA No. 9184, Section 10.
[29] RA No. 9184, Section 5(n).
[30] Agan, Jr. v. Philippine International Air Terminals Co., Inc., G.R. No. 155001, May 5, 2003, 402 SCRA 612, 664.
[31] Manila International Airport Authority v. Olongapo Maintenance Services, Inc., G.R. Nos. 146184-85, January 31, 2008, 543 SCRA 269.
[32] Caltex (Phil.), Inc. v. Delgado Bros., Inc., et.al., 96 Phil. 368, 375 (1954).
[33] Supra, note 30; reiterated in Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, G.R. No. 183789, August 24, 2011, 656 SCRA 214.
[34] Supra, note 30.
[35] Id., pp. 654-655.
[36] Id., pp. 655-656 (bold underscoring supplied for emphasis).
[37] Id., pp. 663-664.
[38] Mata v. San Diego, No. L-30447, March 21, 1975, 63 SCRA 170, 178 (Emphasis supplied).
[39] G.R. No. 183789, August 24, 2011, 656 SCRA 214.
[40] 17.4. The specifications and other terms in the bidding documents shall reflect minimum requirements or specifications required to meet the needs of the procuring entity in clear and unambiguous terms. The bidder may submit an offer which provides for superior specifications and/or better terms and conditions to the Government at no extra cost. However, these shall not be given any bonus, credit or premium in the bid evaluation.
[41] 32.1. For the procurement of goods and infrastructure projects, the purpose of bid evaluation is to determine the Lowest Calculated Bid. This bid shall be subject to post-qualification in accordance with Rule X of this IRR-A to determine its responsiveness to the eligibility and bid requirements. If after post-qualification the Lowest Calculated Bid is determined to be post-qualified it shall be considered the Lowest Calculated Responsive Bid and the contract shall be awarded to the bidder.
32.2. For the procurement of goods and infrastructure projects, the Lowest Calculated Bid shall be determined in two steps:
a) The detailed evaluation of the financial component of the bids, to establish the correct calculated prices of the bids; and
b) The ranking of the total bid prices as so calculated from the lowest to the highest. The bid with the lowest price shall be identified as the Lowest Calculated Bid.
[42] 646 P.2d 215, 220 (1982 Alas).
[43] Kenai Lumber Company, Inc. v. LeResche, 646 P.2d 215, 220 (1982 Alas).
ABAD, J.:
This case is about the circumstances that will justify a government agency's negotiated procurement of equipment and supplies.
In 1997 Congress enacted Republic Act 8436 (R.A. 8436), otherwise known as the "Election Modernization Act", which authorized the Commission on Elections (COMELEC) to adopt an Automated Election System (AES) for the processes of voting, counting of votes, and canvassing or consolidation of results of the national and local elections. [1] The law also authorized COMELEC to procure the supplies, equipment, materials, and services that it needed for holding an AES through an expedited public bidding. A decade later, Congress enacted Republic Act 9369 (R.A. 9369) which amended R.A. 8436 and declared it the policy of the law to use an AES in all national and local elections.[2]
Following the requirements of the Government Procurement Act,[3] the COMELEC published and posted from March 13 to16, 2009, an invitation to interested parties to apply for eligibility and to bid for the procurement of counting machines, including the supply of ballot paper; electronic transmission services using public telecommunications networks; training; technical support; warehousing; deployment; installation; pull-out; systems integration; and overall project management, to be used in the automation of counting, transmission, and canvassing of votes for the May 10, 2010 synchronized national and local elections. The COMELEC also approved and issued a request for proposal (RFP) that would enable its Bids and Awards Committee (BAC) to accept bids for the lease of an AES, with an option to purchase.[4]
Ten prospective bidders paid for an RFP but only seven submitted bid proposals. Of the seven, only two bidders, Indra Consortium and SMARTMATIC-TIM, met the eligibility requirements. The COMELEC Special Bids and Awards Committee (SBAC) examined their technical proposals and found these acceptable. Upon opening of their financial proposals, however, Indra did not qualify with the result that SBAC issued Omnibus SBAC Resolution 09-007 declaring SMARTMATIC-TIM as the single complying calculated bid.[5]
The COMELEC Technical Working Group (TWG) also reported that SMARTMATIC-TIM's proposed AES "passed all tests as required in the 26-item criteria specified in the RFP."[6] The COMELEC Advisory Council (CAC) submitted its observations to the COMELEC noting that SMARTMATIC-TIM's Precinct Count Optical Scan (PCOS) machines had a 100% accuracy rating. As a result, COMELEC awarded the contract for the 2010 AES to SMARTMATIC-TIM.[7] The following day, COMELEC and SMARTMATIC-TIM entered into an AES contract that included an Option to Purchase (OTP) Clause that read:
4.3 OPTION TO PURCHASE
In the event COMELEC exercises its option to purchase the Goods as listed in Annex "L", COMELEC shall pay the PROVIDER an additional amount of Two Billion One Hundred Thirty million Six Hundred Thirty Five Thousand Forty Eight Pesos and Fifteen Centavos (Php2,130,635,048.15) as contained in the Financial Proposal of the joint venture partners SMARTMATIC and TIM.
...
6.6 COMELEC shall notify the PROVIDER on or before 31 December 2010 of its option to purchase the Goods as listed in Annex "L".[8]
On May 10, 2010 the Philippines held its first fully-automated nationwide elections, using SMARTMATIC-TIM automated system. Four months later on September 23, 2010 the COMELEC, exercising its option to purchase, acquired 920 PCOS machines for the special elections in certain areas in the Philippines.[9]
On December 18, 2010, as the deadline for exercising the option to purchase was nearing, SMARTMATIC-TIM wrote COMELEC a letter, unilaterally extending the period for the option to purchase from December 31, 2010 to March 31, 2011. Subsequently, on April 1, 2011 SMARMATIC wrote COMELEC another letter, offering a "Revised Extended Option to Purchase." On April 28, 2011 the COMELEC and SMARTMATIC signed a Term Sheet in connection with SMARTMATIC's April 1, 2011 letter. This Term Sheet included various items not covered by the original option to purchase. Months later, however, COMELEC cancelled the Term Sheet.
Apparently, COMELEC was hopeful in getting Congress to provide it the budget it needed for acquiring or leasing a new AES for the 2013 elections. Indeed, it asked Congress for P 10,436,300,399.00 for the lease of a new AES for the elections. On September 23, 2011 SMARTMATIC wrote COMELEC, inquiring about the status of the option to purchase the equipment and systems that were used in the 2010 elections. Evidently trying to put pressure on COMELEC to exercise the option, SMARTMATIC informed it that the price increase of 10% would remain in effect until September 30, 2011.[10] SMARTMATIC later recanted and offered to retain the original price until December 31, 2011 under certain conditions.[11] Yet again, the OTP was revised and COMELEC was warned that instead of the 10% increase, a 20% increase would be in effect from October 1 December 31, 2011.[12]
In October 2011 Congress passed the General Appropriations Act of 2012, allocating to COMELEC a budget of only P 7,962,221,000.00 for the 2013 elections,[13] ruling out the possibility of acquiring or leasing a new AES from other providers.
On February 6, 2012, the COMELEC Law Department expressed the view in a memorandum that COMELEC could still legally exercise its option to purchase from SMARTMATIC provided the period of the extension had not yet expired and that its offer was identical to that contained in their AES Contract. The CAC expressed the view, however, that COMELEC should not exercise its option to purchase if, as a consequence, the rest of the system must come from the same vendor."[14] With the little money allocated to it and time running out, the COMELEC resolved to seriously consider exercising that option subject to certain conditions.[15] The next day, the CAC advised COMELEC to ensure that it would have full control of the election process.[16]
Eventually, COMELEC accepted SMARTMATIC-TIM's March 31, 2012 offer to extend the period of its option to purchase.[17] On March 30, 2012 COMELEC entered into a contract with SMARTMATIC-TIM for the purchase of the PCOS machines and related systems used in the 2010 elections for P 1,833,274,457.09. COMELEC's intention was to directly manage the operation of the AES for the 2013 elections using those machines and systems.
On April 10, 2012 petitioners Archbishop Fernando R. Capalla, et al. came to this Court by a petition for certiorari, prohibition, and mandamus with prayer for temporary restraining order (TRO) against COMELEC, seeking the annulment of COMELEC's March 30, 2012 contract with SMARTMATIC-TIM. On April 24, 2010 the Court issued a TRO enjoining the implementation of the contract of sale pending hearing of the case. The Court likewise ordered the consolidation of the three petitions that sought identical relief and directed the COMELEC and SMARTMATIC-TIM to file their comment.
The central question presented in this case is whether or not COMELEC gravely abused its discretion in entering into a contract with SMARTMATIC-TIM for the purchase of its PCOS machines and related systems in connection with the forthcoming 2013 elections.
The country made many attempts in the past to replace the manual elections that had been in use from the time of the founding of the Philippine government.[18] But circumstances did not permit the change even when at last Congress enacted the election modernization law. The bidding for the needed equipment and processes in connection with the 2001 elections was found riddled with irregularities and so had to be set aside.[19] Only in connection with the 2010 elections did the COMELEC succeed in meeting all that the law required, overcoming the objections of the cynics who cried mightily for a return to fully manual voting. The automated elections took place, producing results that were generally accepted by the electorates.
Then, the need to prepare for the 2013 elections came. Evidently, the COMELEC was open to using a new AES since it applied with Congress for the amount of money this will require and held out for as long as it could on its option to purchase from SMARTMATIC-TIM the equipment and systems used in the 2010 elections. When the money did not come, COMELEC settled for buying the latter equipment and systems under an extended option that the owners gave it.
But petitioners filed the present actions to block COMELEC's purchases basically on two grounds: 1) since its option period already expired, COMELEC actually bought SMARTMATIC-TIM's equipment and systems without the benefit of public bidding; and 2) these equipment and systems suffered from defects and glitches.
Petitioners are right that COMELEC's option to purchase under the AES contract for the 2010 elections already expired when it did not exercise the same on or before December 31, 2010, the deadline set in that contract. But COMELEC is also right that it bought SMARTMATIC-TIM's equipment and systems based on the terms of the option to purchase. These positions are not exactly incompatible. They can actually be reconciled.
True, COMELEC's original option had already expired when it made its purchase. The original contract was gone and the parties' rights and obligations under the same had in fact been extinguished. But SMARTMATIC-TIM made an offer to COMELEC for it to purchase the 2010 equipment and systems based on the terms provided in the expired option to purchase. And COMELEC accepted the offer, giving it a new option to purchase that it eventually exercised.
Petitioners are of course also right that COMELEC's purchase could not as a rule be made without the benefit of a public bidding where other parties can make offers to supply COMELEC with the equipment and systems that it needs for the 2013 elections. But R.A. 9184, the Government Procurement Act, allows certain exceptions to such requirement. It provides that the procuring government agency may, in order to promote economy and efficiency, resort to any of the alternative methods of procurement, including negotiated procurement, provided the procuring agency ensures the most advantageous price for the government.
Negotiated procurement is allowed, says the law, "when time is of the essence arising from natural or man-made calamities or other causes where immediate action is necessary to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public utilities."[20] The infrastructures needed to enable the people to exercise their right to vote is of course a public service that is as vital if not more vital than some roads and bridges.
Here, the following circumstances gave COMELEC no choice but to enter into what amounts to a negotiated purchase:
First. The Constitution vests in Congress the power to make laws, including election laws.[21] Thus --
Section 1. The legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives, except to the extent reserved to the people by the provision on initiative and referendum.[22]
In the exercise of such power, Congress alone can determine the process by which elections are to be conducted. It alone can prescribe the use of a more advanced technology for enabling the people to exercise their fundamental right to vote.[23]
On the other hand, it is in the COMELEC that Constitution vests the power and duty to enforce all laws relative to the conduct of the elections.[24] Thus --
Sec. 2. The Commission on Elections shall exercise the following powers and functions :
(1) Enforce and administer all laws and regulations relative to the conduct of an election, plebiscite, initiative, referendum, and recall.[25]
xxxx
The COMELEC has no power to hold elections that are not in accord with the Election Modernization Act (R.A. 8436, as amended). Indeed, that Act is entitled "An Act Authorizing the Commission on Elections to Use an Automated Election System in the May 11, 1998 National or Local Elections and in Subsequent National and Local Electoral Exercises…" In this regard, Section 12 of the Act directs the COMELEC to procure a tested and successfully used AES for use in the 2010 election and "succeeding electoral exercises…" Thus
SEC.12. Procurement of Equipment and Materials. - To achieve the purpose of this Act, the Commission in authorized to procure, in accordance with existing laws, by purchase, lease, rent or other forms of acquisition, supplies, equipment, materials, software, facilities, and other service, from local or foreign sources free from taxes and import duties, subject to accounting and auditing rules and regulation. With respect to the May 10, 2010 election and succeeding electoral exercises, the system procured must have demonstrated capability and been successfully used in a prior electoral exercise here or board. Participation in the 2007 pilot exercise shall not be conclusive of the system's fitness. (Emphasis supplied.)
xxxx
Although it is true that when the Court declared void the 2003 Purchase Contract for election automation machines (EAMs), COMELEC had valid recourse to the old system for the conduct of the 2007 elections. But the situation then was different. The AES that the original RA 8436 authorized had yet to be elevated to a compulsory mechanism. The failed implementation of an AES in the 1998 ARMM elections prevented COMELEC from a forward implementation of the AES under Section 6,[26] sending the process back to the drawing board.[27]
With the amendment of the Election Modernization Act, however, a return to the old system is no longer legally possible. To be faithful to its constitutional duty to enforce that law, COMELEC has to come up with an AES for the 2013 elections with whatever resources are available to it. The law does not contemplate any other system of elections.
With the functions of Congress and the COMELEC so clearly delineated by the Constitution, the Court must tread carefully when, as in this case, the mechanism for executing the preferred system of elections is assailed as invalid and its implementation, sought to be enjoined.[28] The Court must give the COMELEC substantial latitude to enforce the Election Modernization Act.[29] For, otherwise, the Court must assume responsibility for the consequences of meddling in something beyond its competence.[30]
Second. Although COMELEC has the duty to enforce and implement the law prescribing an AES for the 2013 national and local elections, it does not have the money to acquire or lease new equipment and systems for those elections.
Petitioners of course point out that the circumstances are not so extraordinary as to permit negotiated procurement since COMELEC had faced the same problems in 2009 yet was able to overcome them. COMELEC cannot use as an excuse its time and budgetary constraints since it should be able to convince Congress to grant what it needs for the 2013 automated elections.
But unlike the problems that it faced in connection with the 2010 elections, the solutions to its problems with respect to the 2013 elections are not up to COMELEC. Those solutions largely depend on the Executive Department and Congress. COMELEC requested the Department of Budget and Management (DBM) under the Office of the President for a P 12 billion budget to enable the election body to acquire or lease a new AES for the 2013 elections. But the DBM turned this down and allocated only P 7 billion for the automation of the 2013 elections. Of the P 7 billion, only P 2.2 billion has been earmarked for the acquisition of the machines needed for an AES.
In the 2010 elections, the COMELEC spent P 4.3 billion for the lease of 82,200 PCOS machines. If the COMELEC is to pursue its goal of achieving the 600:1 ratio or the same number of machines last elections, then it must have at least P 4.2 billion or even more, giving allowance for inflation, to be able to purchase machines of the same kind. If new biddings were held with the money it actually got, COMELEC would get only half of the desired number of machines. This result would cause pandemonium in the election precincts and dampening of the enthusiasm of voters.
COMELEC could of course plead with Congress to give it more money for the elections. But it had already done that. Unfortunately, Congress was not sympathetic and did not swell the amount of its budget. Although there is always a possibility that Congress may relent as some suggest can happen, that is a risk that the COMELEC, charged with making do with the resources given it, cannot afford. It could not postpone preparations at the risk of failed elections if Congress does not soon change its mind.
Third. Assuming that some funds would be available for acquiring or leasing a new AES for the 2013 elections, COMELEC does not have the time for holding a competitive bidding, evaluating the bids, and making an award with the expectations that the new AES will be in place by May 2013 for the national and local elections.
COMELEC cannot afford to procrastinate. There are less than twelve months between today and the May 2013 elections. Based on the 2010 elections timeline a new bidding for the 2013 elections would result in a logistical impossibility. The bidding process alone will take about four months. This means that the earliest COMELEC can make an award for the 2013 elections will be in mid-October. Since it would take based on experience about seven months from the signing of the AES Contract to complete the delivery of the fully customized hardware and software, delivery would be completed about mid-May 2013, already past the election Day. There would be no elections since it would take an additional three months more or less for testing the machines in their actual configuration with the ballots. Super human efforts could of course cause a miracle, but reasonableness in the exercise of discretion is not judged by the standards of miracles.
Fourth. COMELEC's negotiated purchase meets the last requirement, ensuring "that the most advantageous price for the government is obtained." Here, the procurement will enable the government to reap the following advantages:
a. The COMELEC needs to pay only 1/3 of the price of the PCOS machines, a saving of 2/3 of what it would cost COMELEC to lease machines of the same kind in a new bidding;
b. The COMELEC will spend less for voter education because the people are already familiar with the system;
c. The costs for training COMELEC personnel will also be reduced since they are already familiar with the handling and operation of the PCOS machines;
d. The purchase will promote standardization since the COMELEC already acquired 980 units of those PCOS machines; and
e. The usual glitches in new machines are unavoidable, whereas the glitches in the PCOS machines have been identified and could be addressed.
Petitioners would also have the sale of the PCOS machines to COMELEC nullified because of the alleged failure of the machines to comply with the minimum technical requirements of an AES and the glitches that occurred. Particularly, petitioners point to the absence of digital signatures, the existence of open console port in the machines, and the lack of a voter verified paper audit trail.
Based on the records and the admissions made during oral arguments, the disabling of the digital signatures and the lack of a voter verified paper audit trail cannot be attributed to the machines. This was done on orders of the COMELEC due to shortage of funds. These concerns are, therefore, not intrinsic to the machines itself. It is up to COMELEC, based on its best judgment, if there is a need to activate these features of the system. The presence of the open console port has not been a problem in the past election as this was covered and sealed on the election day to avoid unauthorized access.
More importantly, these alleged problems are not irremediable. As admitted by the parties, these can be rectified by simply activating these inherent features of the machines. Suffice it to say that the Court had already resolved the allegations regarding the failure of the machines to meet the requirements of the law in Roque v. COMELEC.[31] The Court determined that "the COMELEC has adopted a rigid technical evaluation mechanism, a set of 26-item/check list criteria … to ensure compliance with the above minimum system capabilities." Also, the "PCOS meets the minimum capabilities standards."
Lastly, the petitioners failed to substantiate their claims that the alleged defects in the PCOS machines resulted in cheating or fraud in the 2010 elections. Petitioners have been unable to cite even one decision rendered based on evidence that this was so. Petitioners claim are, to borrow the language of the COMELEC, anecdotal.
Consequently, I vote to DISMISS the consolidated petitions.
[1] An Act Authorizing the Commission on elections to Use an Automated Election System in the May 11, 1998 National or Local elections and in Subsequent National and Local Electoral Exercises, Providing Funds Therefor and for Other Purposes, Republic Act No. 8436 § 6 (Dec. 22, 1997).
[2] An Act Amending Republic Act No. 8436, entitled "An Act Authorizing the Commission on elections to Use an Automated Election System in the May 11, 1998 National or Local elections and in Subsequent National and Local Electoral Exercises, Providing Funds Therefor and for Other Purposes", Republic Act no. 9369 § 1 (Jan. 23, 2007)
[3] An Act Providing for the Modernization, Standardization and Regulation of the Procurement Activities of the Government and for Other Purposes, Republic Act No. 9184 art. VII, § 21 (Jan. 10, 2003).
[4] Office of the Solicitor General (OSG), Consolidated Comment, Annex "1" (April 30, 2012); Commission on Elections, Request for Proposal (Mar. 11, 2009).
[5] OSG, Consolidated Comment, 7.
[6] Id. at 9.
[7] Id.; Commission on Elections, Resolution No. 8608 (June 9, 2009).
[8] Solidarity for Sovereignty (S4S), Petition, Annex "A" 24 (April 3, 2012); Contract for the Provision of an Automated Election System for the May 10, 2010 Synchronized National and Local Elections 8 & 12 (July 10, 2009).
[9] S4S, Petition, Annex "C"; Contract of Sale (Sep. 23, 2010).
[10] Guigona, Memorandum, Annex "A" (May 18, 2012); Cesar Flores, Re: Final Extension of option to purchase (Mar. 23, 2011).
[11] Id. Annex "B"; Cesar Flores, Re: Final Extension of Option to Purchase (April 1, 2011).
[12] Id. Annex "C"; Cesar Flores, "Re: Option to Purchase, PCOS Machines (Sep. 23, 2011).
[13] General Appropriations Act, Republic Act No. 10155 (Dec. 15, 2011).
[14] Resolution 2012-003, Feb. 8, 2012.
[15] Resolution 9373, Mar. 6, 2012.
[16] Resolution 2012-005, Mar. 7, 2012.
[17] Resolution 9377, Mar. 29, 2012.
[18] The first attempt was in 1995. RA 8046 authorized a computerized election system. An Act Authorizing the Commission on Elections to Conduct a Nationwide Demonstration of a Computerized Election System and Pilot-test it in the March 1996 Elections in the Autonomous Region in Muslim Mindanao (ARMM) and for Other Purpose, Republic Act No. 8046 (1995).
[19] Information Technology Foundation of the Philippines v. COMELEC, G.R. No. 159139, Jan. 13, 2004
[20] RA 9184, § 53 (b) (emphasis supplied)
[21] R.A. No. 9369, § 1; See Bush v. Gore, 121 S. Ct. 525, 529 (2000).
[22] Section 1, Article VI, 1987 Constitution.
[23] See Matter of Municipal Election Held on May 10, 1994, for Three Positions on Sparta Tp. Council, 139 N.J. 553, 656 A.2d 5 (1995).
[24] Paragraph 1, Section 2, Article IX of the 1987 Constitution of the Philippines
[25] Section 2, Article IX, 1987 Constitution of the Philippines.
[26] Requiring the unconditional full automation in of elections.
[27] Loong v. COMELEC, G.R. No. 133676, April 14, 1999.
[28] See Burdick v. Takushi, 504 U.S. 428, 112 S. Ct. 2059, 119 L. Ed. 2D 245 (1992).
[29] See John Doe No. 1 v. Reed, 130 S. Ct. 2811 (2010).
[30] See Washington State Grange v. Washington State Republican Party, 128 S. Ct. 1184, 170 L. Ed. 2d 151 (U.S. 2008).
[31] G.R. No. 188456, September 10, 2009