EPISODE 78: Public Bidding vs. Negotiated Procurement

Welcome to the Supreme Court Podcast. All opinions expressed in this podcast do not reflect the views of the Supreme Court. For clarity, the text of the decision prevails. What happens when a public official bypasses the public bidding requirement in a government transaction? Can negotiated procurement justify disregarding public bidding, which is the default mode of procurement under RA-91-84? In 2009, former actor and Paxanhandaguna Mayor George Iar Eherse to Estregan and other local officials were charged with violating Republic Act No. 3019, or the Antigraph and Corrupt Practices Act. And Republic Act No. 91-84, or the Government Procurement Reform Act, for allegedly entering into a memorandum of agreement with first rapid scare ventures or FRVC without public bidding. Under this agreement, FRCV was to provide accident insurance for tourists and both men at the Paxanhandgourge Tourist Zone, even though the company did not have a license from the insurance commission. The Office of the Enbutzman filed charges against Estregan, Paxanhand Vice Mayor Chris Oztomoviliar, and six Councillors before the Sendingan Bion. Vice Mayor Viliar was acquitted for lack of evidence while Estregan, the Councillors and FRCV proprietor Marilyn Bruel were convicted. The Sendingan Bion found that Straygan acted with evident bad faith by using his office to bind the municipality of Paxanhand in a contract with FRCV without the requisite bids and awards committee evaluation. Viliating the Government Procurement Reform Act and the local government court. Estregan and the others appealed to the Supreme Court. With Estregan claiming that public bidding was not required for the municipality's accident insurance program and that the memorandum of agreement with FRCV did not constitute an insurance contract. The Supreme Court appealed the convictions of Estregan and Bruel for violation of Section 3E of the Antigraph and Corrupt Practices Act and sentenced them to up to 80 years in prison with perpetual disqualification from public office. The municipal councillors were acquitted on grounds of reasonable doubt. Hi, I'm Attorney Mike Navalio, Supreme Court Chief Communications Officer. It's the 18th of July 2025. Today we talk about the requirement of competitive public bidding in government procurements and its difference from negotiated procurement within the context of people of the Philippines versus George Hercito Estregan, GR #248699, penned by Supreme Court Associate Justice Ricardo Arrosario and decided on February 5, 2025. And joining us to talk about this case is Sandigan Bayan, Associate Justice Maria Teresa Dolores Sigómez, Estregan, Prof. Lecturer of the Philippine Judicial Academy. Just a stay, thank you again for coming on board and the Supreme Court podcast. Thank you to Attorney Mike. This is my second time and I've enjoyed it a lot. Alright. Perhaps we can begin our discussion just a stay with a brief explanation of what is public bidding and how is it important in government transactions? Yes. When we see public bidding, competitive process it all. So this is the time where the government will invite interested and qualified suppliers, contractors or consultants to submit sealed bids for the procurement of goods, infrastructure projects or consulting services. This is the default mode under Republic Act 1981-84. I have to mention Attorney Mike at this instance to clear some of the things we have seen. That 1981-84 is no longer the law. When it comes to procurement contracts, it supersedes that this is Republic Act 1-2009, where competitive public bidding is now any of the modes of procurement. So it doesn't matter if it's default. But for the purpose of this case, it's R-89984 and it's the default mode. Let me just also ask you just a stay, who can participate in public bidding and what types of projects or purchases require public bidding? Yes. So if 1981-84 is any interested and eligible supplier, contractor or consultant, whether local or foreign can participate in public bidding as long as they meet the eligibility requirements. It's important to Attorney Mike, the eligibility requirements. When we talk of eligibility requirements, it will typically include an assessment of legal, technical and financial capability. So when we talk of legal documents, it will include a license, a business registration, tax clearance, technical documents, we talk of relevant experience, expertise, equipment and personnel. Then financial documents, we talk of the prospective bidders, financial capacity to undertake the contract. So the types of projects that should require public bidding are procurement of goods such as some of our office in the United Office of Supplies, equipment, service vehicles, computers, ICT equipment, firearms, hand-held religious, fire security personnel, infrastructure projects to which may refer to buildings or their rehabilitation or renovation thereof. And then consulting services, which will refer to engineering and architectural designs, feasibility studies or legal auditing and financial consulting. In this case, there was a memorandum of agreement between the municipality of Pag Sanghan Laguna and first rapid scare ventures for first rapid to provide accident protection and assistance or APA. What was wrong with this agreement and why did it lead to graft charges against George Straggen? The Moa was supposed to generate a good intent to indemnify against freak accidents and provide protection and financial assistance for all tourists, including tourists shooting their rapids in Pag Sanghan Falls, and some of the boatmen who had to plight the route. However, the manner to which the contract was made was irregular. One of the agreements did not undergo the procurement process under R-A 1981-84, meaning the Bidgen Awards Committee did not conduct it. It was aggregated upon the municipal mayor himself when he used his own office to obligate the municipality to enter into a contract with first rapids without the requisite determination by the back of its qualification. And the mayor here is George Straggen. George Straggen, that's right. Famous George, mayor or your here? Yes. The second, the contract had no budget linkage. It had no approved budget for the contract or what we call the ABC, which is why the back refused to undergo procurement for it. Because a basic SAP B-1445 or the government auditing code of the Philippines that if there is no budget appropriation, there cannot be any procurement. But we talk about our annual procurement plans where there's an appropriation. This instance there was none. So the mayor could not even proceed with the procurement process. The third is, and this is the more important one, because it really delved into the violation of Section 3E of Republic Act 3019. The service provider or first rapids did not meet the eligibility requirements under the law requiring legal, financial and technical capacity to perform a government contract. And yet, the municipal mayor presented first rapids before the Sangunian Bayan as having the capacity to contract as if it was already prequalified as to its eligibility requirements. And there was an issue here about first rapids offering an insurance contract. How significant was this characterization of the MOA or the memorandum of agreement? Because it was the insurance commission itself, which says this is an insurance contract. So how significant was that discussion? Very significant because it will determine whether or not procurement will ensue. Because when the witness from the insurance commission stated that the MOA was a contract of insurance, it only meant that the MOA was within the coverage of the definition of goods under RA-9184, which means it should undergo procurement process. For the accused, because they wanted to get out of it by saying the MOA was only a special contract, it did not involve the municipal public funds, because it is taken from the both service fee that are that paid for by the tourists themselves. And so it is not an insurance contract, necessitating procurement. But these claims were all debunked by the Supreme Court stating that the MOA was indeed a contract of insurance. Because you look at the object, the consideration of the MOA, and it would say that it undertakes to indemnify against loss, damage or liability arising from an unknown or contingent event. So it was therefore a contract for the procurement of goods that needs procurement. Did it matter that because our CV was trying to wiggle its way out, it was not engaged in the insurance business, because it was just engaged in providing training to both men. Did that argument work for them? No, it did not also because other than a procurement for goods, which is an insurance contract, even if the accused would say that it was a service-oriented contract, it can likewise be qualified as a consulting services under Republic Act 91-84, which means that for the technical training provided, it will still also need procurement process. So whether it's a procurement for goods or procurement for consulting services, both will have to undergo competitive bidding, at least under R-A-91-84. Instead of going through public bidding, the default mode of procurement under R-A-91-84, The municipal council passed municipal ordinance number 15-20 or municipal ordinance number 15-2008, which authorized resort to the alternative method of procurement known as negotiated procurement. How is negotiated procurement different from public bidding and was the municipal council justified in resorting to it? Negotiated procurement is a method of procurement where the procuring entity directly negotiates a contract with a technically, legally, and financially capable supplier, contractor or consultant. However, under the IRR of Republic Act 1981-84, this may only be resorted to under extra-ordinary circumstances. So that the procurement should have been undertaken by back, and it should have recommended that default mode of competitive public bidding cannot be made. So it recommends an alternative mode in this circumstance negotiated procurement, but there are circumstances. Either of these circumstances, two failed bidings, and there are no bidings, so this did not qualify. Next, emergency cases. In case of imminent danger to life or property, if you are shooting the rapids, there is no imminent danger there. There could be freak accidents, but definitely it was not in the context of an emergency. Right. Now, in criminal cases involving a violation of Section 3E of RA3019, is it enough to show that there was a violation of the procurement loss, or are there other elements that you need to prove before you can say that you're guilty of this crime? Yes, that's a very relevant question that Torney might. Because for those who may not know this, there is a landmark case decided by Justice Kaguya in Martell versus People. GR number 22472023, February 2221, which stated that a violation of procurement law by itself does not automatically give rise to violation of RA3019. Now, there may be violations of the applicable procurement laws, but the same does not mean that the elements of violation of 3E of 3019 are already committed. Because for there to be a violation, there is a proof beyond reasonable doubt of the following elements. So, in the case of the court has to assess through the following elements. First, the first elements that the accuses the public, official performing official administrative or judicial functions. The second one is the violation of the procurement law cost and due injury to any party or gave any private party unwanted benefits, advantage or preference. That's why the technical authorities of Torney might allow me to state them, because in this case it involved unwanted benefits. So, Supreme Court decisions will refer to any advantage, preference or favor given to a private party by a public officer in the discharge of his official functions. The term unwanted benefit refers to any advantage, preference or favor given to a private party by a public officer in the discharge of his official functions, which is not merit-ed, deserved or legitimately obtained according to established procedures or laws. It essentially means a benefit that is not rightfully due to the recipient, but it seems like it's just a matter of time. And then the third element is the accused acted with evident bad faith, manifest partiality or gross inexcusable negligence. Again, these terms are really technical, manifest partiality it would refer to, clear showing of bias or an unwarranted favor towards a particular party. It's like regardless of the qualifications or the eligibility requirements, you just give due consideration or favor to that party. An evident bad faith, this will involve a dishonest intention or a deliberate intent to cause harm. So, if some of those elements or one of those elements just stay is not met, can the public official selfie libel for administrative charges? Yes, yes. Adversative charges, yes, other than criminal, that is correct. All right. Now, in the end here, the SC, the Supreme Court acquitted the municipal councillors, but it convicted the mayor, Stragan and Bruell, was the head of first rapids. Why was this the case? Did they perform different functions in a way? Why was their liability different? I guess this is where you understand what is proof beyond reasonable doubt is to arrive at the judgment of conviction. For the municipal councillors, the Supreme Court found that the prosecution failed to prove the elements of 3E, 3019, beyond reasonable doubt. Because when the municipal ordinance was passed, you were referring to 15, 2008, it merely authorized the municipal mayor to transact, negotiate and enter a contract between the municipality and, quote-unquote, any competent and qualified entity which can provide the APA services or the accident, protection and assistance. Meaning to say it did not specify who the contracting party was. It still depends on their determination and qualification, pre-qualification. But even assuming that resorting to negotiated procurement, because that was what the Sangu Nyang Bayan actually sanctioned or ratified to do for the municipal mayor, the municipal councillors did not show manifest partiality or unwarranted benefit towards the supplier, because the ordinance itself stated any competent and qualified entity, so such entity was yet to be determined, so there was no unwarranted benefit given. So, meaning to say the Supreme Court said it did not even prevent the municipal mayor from resorting to public meeting, because it only authorized it to enter into a contract for that in the committee agreement. So that was the reason why. So hence the acquital. But for the municipal mayor and the service provider, that's a different context. So under the umbrella of conspiracy, the municipal mayor showed manifest partiality and evident bad faith when he entered a MOA with first-trappity despite its lack of legal, financial and technical eligibility. If I would recall from the case, well, the certificate of authority, first-trappity, it's from the insurance commission, so how can it provide insurance indemnity contract? So how can it do that? Not only that, the registration department of trade and industry and the Bureau of Internal Revenue, it was made a few days before it submitted a written proposal for the indemnity agreement. So obviously it was a new company and if you check the records of the BIR and the DTI, it's business is really in relation to specialized services or other computer-related activities. It's not just a government official who's going to be held liable. If you are the service provider, enter into a contract with a government official, with a government entity and you're not qualified, you will also be liable under the same law. And just a reminder, just as you mentioned earlier, that there's not a new procurement law. Would this have changed the way this case was decided or what's the significance of the new law? The new law, the significance as far as this case is concerned, is that competitive bidding is no longer the default mode. But resorting to negotiated procurement, it will have the same circumstances. It will have the same exceptional circumstances before it is resorted to. So it's an emergency or two failed meetings and all the other circumstances. Lacking that still negotiated procurement cannot be resorted to. So in short, you're saying that the outcome of this case would have been the same, even if the new law were implemented. That's correct. Very, very interesting. And just to sum up our discussion, just to say, what happens when a public official bypasses the public bidding requirement in a government transaction? And can the use of negotiated procurement justify disregarding the legal process and establish procurement rules? Unfortunately, it cannot, despite the intent of the public official, bypassing the public bidding requirement in a government transaction under our A9-9184, to which this case is within that context. Without valid justification, it's a serious violation of Philippine procurement law. And it can result in criminal, civil and administrative liability as you were asking. So, that's all criminal, civil, administrative, to recall, negotiated procurement, it's exceptional, legally defined circumstances. If you don't meet that with a clear provision of the A9-9184, everything else is violated. I've met a lot of public officials who have been dismissed from their own jobs because of violations of procurement law. So it's really that unfortunate. So, just to say, last question for me, what's our key takeaway from this case? Yes. Public bidding is the rule. We're in the context of A9-9184. Negotiated procurement is the rare exception and not a loo poll. So if the public official disregards the bidding requirement without strictly following the conditions and procedures for alternative procurement, the act becomes illegal and may lead to serious sanctions that are criminal, civil and administrative in nature. For this indignation, sorry, if I have to put that in or not, I can say that 90% of the criminal cases filed in our court will involve issues on procurement. So that's one of the consequences I am referring to. That's why you really have anybody, a public official involved in the procurement process, should really know the technicalities involved in the procurement law. That's a very interesting statistic, just this day. And it's good to have you here, at least, because you can speak authoritatively about the most common cases before the Senegal Bind. So thank you once again for joining us in our-- Thank you for inviting us again, Sir. Sir, turn mic. All right. Thank you. And to our listeners, if you wish to read the full text of the decision of the Supreme Court, please visit the Supreme Court website at sc.judiciary.gov.ph and search for GR number 248-699. People of the Philippines versus George he has to do a strike on. Here's the fatin' de double trans Supreme Court information officer for recent updates about the court. From the Supreme Court of the Philippines, here's the latest. 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You are now up to date with the Philippine Supreme Court. I am Diffit and D. Double-Drand Supreme Court Information Officer. And that's our podcast this week. Join us again next time for a detailed discussion of select cases decided by the Supreme Court. I'm attorney Mike Navalio, your Supreme Court Chief Communications Officer. You can catch this podcast on the Supreme Court Public Information Office's accounts on X, Facebook, Instagram, YouTube, and Spotify. You can also catch previous editions on our website and on Spotify. This podcast episode was produced by the Supreme Court Public Information Office with attorney Karin Martinez, J. N. P. Liu, and may see ballers researchers. Brian Austria, Don Ryan Balza, Dorin Solanio, Austin Lyskade, and Bayer Batung as audio and video editors, and thank for us and Jerome Batumala, KS Web Editors.