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DEPARTMENT OF BUDGET v. KOLONWEL TRADING

FACTS:

This case involves three consolidated petitions for review seeking to nullify and set aside the Order dated December 4, 2006, of the Manila Regional Trial Court (RTC), Branch 18, in SP Civil Case No. 06-116010. The case involves a special civil action for certiorari and prohibition filed by Kolonwel Trading (Kolonwel) against the Department of Budget and Management Procurement Service (DBM-PS), et al.

The controversy revolves around the bidding and contract awards for the supply and delivery of 17.5 million copies of Makabayan (social studies) textbooks and teachers manuals under a project of the Department of Education (DepEd).

In mid-2005, DepEd requested the services of DBM-PS for the procurement project, which is jointly funded by the World Bank (WB) and the Asian Development Bank (ADB). The Executive Director of the Government Procurement Policy Board (GPPB) stated that procurement for the textbooks, where funds are sourced from the World Bank Loan, should comply with the applicable guidelines of the foreign lending institution.

On October 27, 2005, the DBM-PS Inter-Agency Bids and Awards Committee (IABAC) called for a bidding for the supply of the textbooks and manuals. Only eleven bidders submitted proposals, including Watana Phanit Printing & Publishing Co., Ltd., Vibal Publishing House, Inc., Daewoo International Corporation, and Kolonwel.

Following the bid evaluation process, the IABAC resolved to recommend the failure of bids for all lots due to disqualifications and non-compliance of the bidders. The IABAC submitted the resolution to WB for review.

In April 2006, the WB disagreed with the finding of conflict of interest on the part of Vibal and Watana and asked the IABAC to review its evaluation. Kolonwel raised several issues and requested a reconsideration of its disqualification. The IABAC, in line with WB's position, recommended the contract award to certain bidders, which WB approved with no objection.

Notices of award and corresponding contracts were issued in September 2006. Kolonwel's requests for reconsideration were denied, and they subsequently filed a special civil action for certiorari and prohibition to nullify the IABAC resolutions and set aside the contract awards.

Kolonwel alleged, among other things, that the supply-awardees were rushing the implementation of the contracts to beat the loan closing-date deadline. A summary hearing on the application for a temporary restraining order was conducted by the Manila RTC.

The petitioners filed a petition for certiorari and prohibition with the Regional Trial Court (RTC) of Manila seeking to annul and set aside the resolution of the Infrastructure, Aid, Procurement and Technical Committee (IABAC) and subsequent actions of the Department of Education (DepEd) regarding a purchase-supply contract. The RTC granted the petition, annulled the IABAC resolution, and issued a final injunction.

The petitioners argued that the RTC lacked jurisdiction over the case as the respondent failed to observe the protest mechanism provided under the Government Procurement Reform Act (RA No. 9184). The respondents argued that they had already requested reconsideration from the IABAC but were denied, thereby allowing them to seek judicial relief.

The respondents also claimed that they were prevented from filing a protest because the government had not issued the Implementing Rules and Regulations (IRR) of RA No. 9184 for foreign-funded projects. The issue centered on whether the RTC had jurisdiction over the case despite the failure to comply with the protest procedure under RA No. 9184.

ISSUES:

  1. Whether the respondent availed itself of the protest procedure prescribed under Section 55 of R.A. No. 9184 before filing a petition for certiorari in the RTC.

  2. Whether the absence of an IRR for foreign-funded projects prevents the respondent from complying with the protest procedure.

  3. Whether the procedure for protest under Section 55.1 of IRR-A can be applied to foreign-funded procurement projects.

  4. Whether the WB Guidelines on Procurement under IBRD Loans have superiority over local laws on the matter.

  5. Whether foreign loan agreements with international financial institutions, such as Loan No. 7118-PH, are considered executive or international agreements within the purview of Section 4 of R.A. No. 9184.

RULING:

  1. The respondent did not avail itself of the protest procedure prescribed under Section 55 of R.A. No. 9184 before filing a petition for certiorari in the RTC. The respondent's letters requesting reconsideration of its disqualification did not meet the requirements of a protest under the law. The letters were not addressed to the head of the procuring entity, were unverified, and the payment of the protest fee was not complied with. Thus, the respondent's filing of the petition was premature and in violation of the protest process.

  2. The absence of an IRR for foreign-funded projects does not prevent the respondent from complying with the protest procedure. The specific office of an IRR for foreign-funded projects is limited to fixing the amount of the protest fee and the periods for filing and resolving protests. The absence of provisions on protest fee and reglementary period does not defer the implementation of the protest mechanism as a condition to resort to judicial relief. The respondent could have filed a protest and pursued it without paying the required protest fee, remitting the fee once the appropriate IRR fixed the protest fee.

  3. The Court held that the procedure for protest under Section 55.1 of IRR-A can be applied to foreign-funded procurement projects. The Court reasoned that there is no discernable justification why a different procedure should obtain with respect to foreign-funded procurement undertakings as opposed to a locally funded project. Congress did not intend such a variance in the protest procedure under R.A. No. 9184.

  4. The Supreme Court ruled in the affirmative for both issues. The Court held that the WB Guidelines on Procurement under IBRD Loans have superiority over local laws on the matter. It further held that foreign loan agreements with international financial institutions, such as Loan No. 7118-PH, are considered executive or international agreements within the purview of Section 4 of R.A. No. 9184. In light of this ruling, the assailed order of the Regional Trial Court of Manila was nullified and set aside.

PRINCIPLES:

  • The protest mechanism under R.A. No. 9184 is a built-in administrative remedy embodied in the law itself and must be complied with before resorting to judicial relief.

  • Cases filed in violation of the protest process provided under R.A. No. 9184 shall be dismissed for lack of jurisdiction.

  • The absence of an IRR does not prevent compliance with the protest procedure. The protest can be filed and pursued while waiting for the IRR to fix the amount of the protest fee.

  • The policy behind Section 77 of IRR-A, on the prospective or non-retroactive application of RA 9184 with respect to domestically-funded procurement projects, can be applied to foreign-funded procurement projects (Abaya v. Ebdane).

  • Courts are precluded by express legislative command from entertaining protests from decisions of the Bids and Awards Committees (BACs).

  • Congress has the power to define the court's jurisdiction and the parameters in the exercise of the functions of administrative agencies.

  • Pacta sunt servanda - the principle that agreements must be kept, which is embodied in Section 4 of R.A. No. 9184.

  • Loan agreements with international financial institutions may be considered as executive or international agreements within the purview of Section 4 of R.A. No. 9184.

  • The governing loan agreement shall primarily govern the procurement of goods necessary to implement the main project.