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OPINION: Implications of GPPB Prescribed Form of Contract

07 Oct

The Government Procurement Policy Board (GPPB) prescribed a form of Contract Agreement which procuring entities shall follow. But what if the procuring entity drafts and executes a contract not following the prescribed form? What are the implications of such deviations?

  1. It is contrary to law[1]which requires procuring entities to follow a prescribed form;
  2. It is contrary to public policy,[2]as the contract agreement cannot be simplified without disparaging deviations from the strict requirement of applicable laws, rules and regulations;

Requirements of Government Procurement Reform Act

Standardization of procurement process and forms[3] are necessary to systematize, avoid confusion and ensure transparency of the public procurement. For this purpose:

“[T]he GPPB shall pursue the development of generic procurement manuals and standard bidding forms, the use of which once issued shall be mandatory upon all Procuring Entities.[4](emphasis supplied)

The standard bidding forms are more commonly known as “bidding documents”. Section 17 of the law enumerates the form and contents of Bidding Documents:[5]

The Bidding Documents shall be prepared by the Procuring Entity following the standard forms and manuals prescribed by the GPPB. The Bidding Documents shall include the following:

xxx

(j) Form of Contract, and General and Special Conditions of Contract.

xxx(emphasis supplied)

The GPPB already released the standard Philippine Bidding Documents[6] (PBDs) that shall serve as the template for procuring entities to prepare their own bidding documents, adopting the appropriate provisions pertinent to their agency and deleting those not applicable to them. The latest was the Fourth Edition, as harmonized with Development Partners,[7] approved on 17 December 2010.[8]

Included in the PBDs are prescribed forms among others Omnibus Sworn Statement,[9] Bid Form[10] and Contract Agreement.[11]

Authority of the GPPB to Prescribe Forms and Manuals

The cited authorities above[12] gave us the clear mandate of GPPB. The GPPB was created to establish, formulate, and amend when necessary, the Implementing Rules and Regulations.[13] The powers, duties and responsibilities under the former Procurement Policy Board were also absorbed by the GPPB.[14]

It is also by these statutory powers the GPPB issues resolutions and guidelines, including such forms and manuals. Once issued, they shall be mandatory upon all procuring entities.[15]

Ordinary Contract vs. Government Contract

A contract refers to the meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.[16] The general rule under the Civil Code is that contracts are obligatory regardless of the form, subject to certain exceptions.

Article 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the requisites for their validity are present. However, when the law requires that a contract be in some form in order to be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised.

Article 1357.If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.

(emphases supplied)

Government contracts on the other hand, particularly those arising from or as a result of public procurement is a special contract which is primarily governed by special laws. The case of Capalla v. COMELEC[17] taught us that parties to a government contract are not at full liberty to amend or modify the provisions of the contract bidded upon.Award of public contracts through public bidding is a matter of public policy.[18] Provisions of applicable laws, especially provisions relating to matters affected with public policy, are deemed written into such government contract which is imbued with public interest.[19] Under procurement related contracts, the rights and obligations of the parties are governed not only by the Civil Code but also by R.A. No. 9184, among others.

Effects of Introducing a Different Form of Contract

There are at least two schools of thought:

The first would treat such government contracts as VOID for being executed against the mandatory law[20] particularly R.A. No. 9184.

The second would consider such contracts valid but irregular or illegal.

We fear the first.

As already discussed, the “Contract Agreement” form in the PBD is theGPPB PRESCRIBED format and not a mere sample form. The GPPB, being the policy making body of the government on procurement matters, cannot be disregarded. R.A. 9184 passes upon GPPB the authority to prescribe forms and guidelines necessary for effective implementation of the law.

In introducing another form, we might be omitting essential provisions in relation to existing laws, rules and regulations already consolidated by the GPPB. In Agan, Jr. v. Philippine International Air Terminals Co., Inc., (PIATCO):[21]

[T]his 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 bidderon terms more beneficial to PIATCO and prejudicial to public interest.

 (emphases supplied)

In considering the second school of thought, we may disregard our fears and continue with a valid contract. The remedy provided by law is to compel each other to observe that form, considering the contract may already have been perfected.

However, we cannot prevent the Commission on Audit (COA) in issuing observations and findings particularly in not complying with the prevailing laws, rules and regulations related to disbursement of public funds following its constitutional mandate and in accordance with the Auditing Code of the Philippines (P.D. No. 1445). Depending upon the appreciation of the Resident COA Auditor, such violation of R.A. No. 9184 may result to an Audit Observation Memorandum (AOM), a Notice of Suspension (NS), or worst, Notice of Disallowance (ND). This is also without prejudice to any administrative liability for “conduct prejudicial to the best interest of service” under Civil Service laws and rules.

Recommendations

It is recommended that the use of any other form other than that  prescribed by the GPPB be abandoned, the former being: (a) contrary to law; and (b) contrary to public policy. 

It is also recommended that the contracts already perfected and reduced to the form other than that prescribed by R.A. No. 9184 through the GPPB be executed in the prescribed form as discussed in this advisory.

#

[1] Republic Act No. 9184, An Act Providing for the Modernization, Standardization, and Regulation of the Procurement Activities of the Government and for Other Purposes”
[2]Archbishop Capalla, et. al v. Commission on Elections, G.R. No. 201112, 13 June 2012
[3]Id at 1., Article I, Section 6
[4]Id., ¶ 2
[5]Id., Article VI, Section 17
[6] First Edition thru GPPB Resolution No. 10-2004; Second Edition thru GPPB Resolution No. 10-2005; Third Edition thru GPPB Resolution No. 05-2009
[7]particularly Asian Development Bank, Japan International Cooperation Agency and World Bank except for Consulting Services
[8] GPPB Resolution No. 06-2010, “Approving and Adopting the Fourth Edition of the Philippine Bidding Documents for Goods and Infrastructure Projects (As Harmonized with Development Partners) and Consulting Services
[9]Id. at 1, Implementing Rules and Regulations, Sections 25.2(a)(iv), 25.2(b)(iv), 25.2(c)(vi)
[10]Id., Section 32.2.2; also see Annex “G” clause 10.2(i)
[11]Id., Section 37.2.3(a); also see Annex “G” clause 10.2(i)
[12]supra
[13]Id. at 1, Article XX
[14] Executive Order No. 359 Series of 1989
[15]supra n.3
[16] Civil Code of the Philippines, Article 1305
[17]supra n.2
[18] Black’s Law Dictionary, Fifth Ed., p.1087
[19]Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, G.R. No. 183789, August 24, 2011, 656 SCRA 214, 240, 243, citing Halagueña v. Philippine Airlines, Inc., G.R. No. 172013, October 2, 2009, 602 SCRA 297, 313 and Sargasso Construction & Development Corporation/Pick & Shovel, Inc/Atlantic Erectors, Inc. (Joint Venture) v. Philippine Ports Authority, G.R. No. 170530, July 5, 2010, 623 SCRA 260, 279-280.
[20] Civil Code of the Philippines, Article 5
[21] G.R. Nos.155001, 155547, 155661, 05 May 2003
 
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Posted by on October 7, 2015 in BAC^k Issues, Government Procurement

 

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