FACTS:

The petitioner, Bases Conversion and Development Authority (BCDA), filed a petition for certiorari seeking to annul a decision issued by the Commission on Audit (COA) in a case involving the disallowance of certain expenses. The antecedents of the case are as follows:

On July 9, 2001, BCDA entered into a contract with Design Science, Inc. (DSI) for the construction management services of the Two-Storey Philippine Army Officers' Clubhouse Building at Fort Bonifacio. The agreed consideration for DSI's services was P2,350,500.00, and the contract was initially set for seven months.

The project was later extended due to a time extension granted to the main contractor, Kanlaon Construction Enterprise Company, Inc. (KCECI). As a result, the contract with DSI was extended for one month, with a corresponding increase in the contract amount.

After conducting a consultancy contract review, the COA's Technical Services Office (TSO) found that the remuneration cost for the contract extension was higher than the estimated cost by COA. The TSO recommended deducting the excess amount from DSI's service fee.

The Project Manager of DSI sought a reconsideration of the TSO's findings, but the reduced remuneration cost was still declared higher than the COA's estimated cost. The difference was due to an unauthorized extension of services for certain personnel.

The BCDA Audit Team Leader issued an Audit Observation Memorandum disallowing the excess amount. This was affirmed by the COA's Legal and Adjudication Office-Corporate, and BCDA's plea for reconsideration was denied. BCDA then appealed to the COA Adjudication and Settlement Board (ASB).

The ASB rendered a decision denying BCDA's appeal and affirming the disallowance. It found the extension of services for certain personnel improper and unnecessary. The ASB also applied a provision in the National Economic Development Authority-Implementing Rules and Regulations (NEDA-IRR) governing increases in the cost of consulting services.

BCDA appealed the ASB decision to the COA proper, but their petition was denied. Hence, BCDA filed a petition for certiorari with the Supreme Court, raising the issue of whether the COA gravely abused its discretion in declaring the disbursements without legal basis.

ISSUES:

1. Whether or not the disbursement made for the remuneration pursuant to the extension of the CMS is without legal basis.

RULING:

1. The Court ruled that the disbursement made for the remuneration pursuant to the extension of the CMS is without legal basis. The disallowance of P117,760.00 was affirmed by the COA, stating that the extension of two months for the five personnel was unauthorized and unnecessary. The ASB also declared Section 8.1 of the NEDA-IRR applicable, which allows an increase in the cost of consulting services only when it is due to adjustment of rates, additional works, or reasonable delays in project implementation. The COA denied BCDA's petition for review and affirmed the disallowance of the amount. The Court found no grave abuse of discretion in the COA's decision.

PRINCIPLES:

• Disbursement of funds must have proper legal basis.

• Increase in the cost of consulting services is only allowed under certain conditions.