G.R. No. 201112 ARCHBISHOP FERNANDO R. CAPALLA, OMAR SOLITARIO ALI and MARY ANNE L. SUSANO, Petitioners, versus 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, versus COMMISSION ON ELECTIONS, 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, versus 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, versus COMMISSION ON ELECTIONS and SMARTMATIC-TIM CORPORATION, Respondents.

Promulgated:

June 13, 2012

x-----------------------------------------------------------------------------------------x

DISSENTING OPINION

BRION, J.:

I dissent and thereby join the Dissenting Opinion of my esteemed colleague, Justice Martin S. Villarama, Jr. In this Dissent, I further stress the grounds cited by J. Villarama on why: (i) the COMELEC-SMARTMATIC-TIMs Agreement on the Extension of the Option to Purchase Under the Contract for the Provision of an Automated Election System for the May 10, 2010 synchronized National and Local Elections; (ii) the Deed of Sale of March 30, 2012; and (iii) the COMELEC Resolution No. 9378 (approving the Deed of Sale) are null and void from the strict point of contract law, the law on government procurement, and the constitutional set-up of COMELEC independence.

A. Government contracts are generally governed by the same principles applicable to ordinary contracts

A contract is a meeting of the minds between the contracting parties with respect to an object certain and with respect to the cause which shall constitute the contract.[1] As part of the liberties of the people in a democracy, the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient. Except insofar as they may be contrary to law, morals, good customs, public order, or public policy,the contract validly entered into is the law itself for the contracting parties.[2]

A government or public contract, such as the 2009 Contract for an Automated Election System (AES contract), is defined as a contract entered into by officers (the COMELEC) acting on behalf of the State, and in which the entire people of the State are directly interested. It relates wholly to matters of public concern (the conduct of an election process), and affects private rights only insofar as the statute confers such rights when its provisions are carried out by the implementing officer undertaking his tasks.[3]

A government contract is essentially similar to a private contract contemplated under the Civil Code. The legal requisites of consent of the contracting parties, an object certain which is the subject matter, and cause or consideration of the obligation must likewise concur. Otherwise, there is no government contract to speak of.[4] The pertinent provisions of the Civil Code on the particular kind of contract involved generally apply as well to a government contract.

However, since a government contract would generally involve the disbursement of public funds, several laws and regulations, otherwise not applicable in an ordinary contract, would have to be observed.[5] These laws are aimed not only to ensure the correct expenditure of these funds, but, most importantly, the protection of public interest in ensuring transparency and the most advantage to the government.

The AES contract is basically a contract for the lease of goods and specified services[6] for the amount of Seven Billion One Hundred Ninety-One Million Four Hundred Eighty-Four Thousand Seven Hundred Thirty-Nine Pesos and Forty-Eight Centavos (P7,191,484,739.48).[7] Side by side with the contract of lease is an option in favor of the COMELEC to purchase the goods as listed in Annex L of the AES contract upon payment of an additional amount of Two Billion One Hundred Thirty Million Six Hundred Thirty Five Thousand Forty Eight Pesos and Fifteen Centavos (P2,130,635,048.15).[8]

Article 6.6 of the AES contract provides that the option to purchase (OTP) shall be exercised by COMELEC on or before December 31, 2010. The Request for Proposal for the Automation Contract and various Bid Bulletins[9] issued by the Special Bids and Awards Committee of the COMELEC state that COMELECs OTP is exercisable only until December 31, 2010.

B. The COMELECs OTP under the AES contract is partly an option contract

As characterized above, the AES contract is partly an option contract. Carceller v. Court of Appeals[10] explains the nature of an option[11] contract:

An option [contract] 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 [to] which the parties may enter upon the consummation of the option. [citations omitted, emphases ours]

The option aspect of the contract, in contemplation of or preparatory to the principal contract of sale, is distinct from the contract of lease already perfected and consummated by the parties.[12] By virtue of the option, SMARTMATIC-TIM, as owner, agreed with COMELEC that it shall have the right or privilege to buy the leased goods at a fixed price, to be exercised within a specified period. If the right is not exercised within this period, the option terminates and the owner is released from any obligation to respect the others right or privilege to buy.[13]

As authorized by the AES contract, COMELEC exercised the OTP for the 2010 special elections in the ARMM by purchasing 920 units of Precinct-Count Optical Scan System (PCOS) machines and 36 units of Consolidated Canvassing System (CCS). No further action was taken by COMELEC on the OTP for the remainder of the goods under the option (81,280 PCOS machines and 1,684 CCS) on or before 31 December 2010.[14] Under these developments, the option clearly lapsed.

The COMELEC inaction is highlighted by SMARTMATIC-TIMs unilateral offers to extend the period for the COMELECs exercise of its OTP (through its letters of December 18, 2010, March 23, 2011, April 1, 2011 and September 23, 2011), which the COMELEC clearly ignored before the lapse of the option period. With the expiration of the period, the option itself ceased to exist. There was thus no option that could be extended. Interestingly, even SMARTMATIC-TIM itself admitted that the period for the OTP already lapsed after December 31, 2010. In its several letters to the COMELEC, SMARTMATIC-TIM disowned any legal obligation to sell to the COMELEC the goods covered by the COMELECs OTP simply because the option already expired after December 31, 2010.[15]

Significantly, the Government Procurement Policy Board Technical Support Office joins me in this view. In its issued opinion, it clearly said:[16]

The contractual relation between COMELEC and SMARTMATIC-TIM, specifically on the exercise by the former of the OTP, is deemed automatically terminated upon the expiration of the option on 31 December 2010. When the option to purchase expired on December 31, 2010, there is nothing more to extend thereafter because the existing offer that served as basis of the option to purchase had already ceased to exist, particularly, when COMELEC did not accept the unilateral and voluntary extension made by SMARTMATIC-TIM on 18 December 2011. Consequently, the subsequent extensions have no leg to stand on, so to speak, as the original offer, that is, the offer for COMELEC to exercise the option to purchase, was already non-existent. Concomitantly, the succeeding offers made by SMARTMATIC-TIM proposing to extend the option to purchase until 31 December 2011 are regarded as new offers that need to comply with existing laws, rules, and regulations on government contracting before it may be accepted legally. [emphasis and italics supplied]

For a better understanding of this conclusion, it must be appreciated that contracts undergo three distinct stages, to wit: negotiation, perfection or birth, and consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of their agreement. Perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract, i.e., consent, object and price. Consummation occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in its extinguishment[.][17]

The parties were very much aware of this crucial contract stages by providing an effectivity provision in the AES contract, as follows:

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. [italics and emphases supplied]

While it may be true that the AES contract still technically subsists by reason of the COMELECs retention of SMARTMATIC-TIMs performance security worth P50 million, its continued effectivity is without prejudice to x x x the period of the option to purchase. Under these terms, the parties themselves clearly therefore recognized that the OTP and the period for its exercise stand differently from the main contract of lease of goods and services. This legal reality directly refutes the ponencias position.

In the present case, COMELEC and SMARTMATIC-TIMs intention to extend an already expired option period could not have validly gone past the negotiation stage. Specifically, SMARTMATIC-TIM formally made an offer to the COMELEC to extend the original period and, upon its lapse, to provide for a new period to exercise the same option; these, COMELEC simply ignored. Thus, this offer is merely an imperfect promise (politacion) that, by reason of lack of acceptance before the expiration of the period, did not give rise to any binding commitment.[18]

The Government Procurement Policy Board Technical Support Offices Opinion (on the Purchase of Goods for the Automated Election System [AES] Under an Expired Option to Purchase and Institutional Development of a Canvassing and Consolidation System [CCS]) is partly instructive in characterizing SMARTMATIC-TIMs offer:[19]

Absent any mutual agreement, which must be reduced in writing and signed by the authorized representatives of both parties, the Extended or Revised OTP did not serve as a valid amendment to the OTP provisions of the Contract. Accordingly, Article 19 of the Contract renders the unilateral extension of the period and amendment of the terms of the OTP ineffectual. As such, the proposals may be treated as new offers, which are separate and distinct from the original contract. [italics and emphasis supplied]

C. The period of the OTP is not covered by Article 19 of the AES contract

Since the revised and extended OTP is nothing but a new offer, could the COMELEC have validly accepted it after the expiration of the period under the AES contract?

On the assumption that the original period under the OTP may be extended prior to its expiration, the AES contract itself requires that the amendment of its provisions requires the mutual agreement of the parties.[20] In fact, this is even a debatable assumption considering that the period for the exercise of the option is a substantial particular in the option contract.

It should be considered in this regard that the subject of the OTP is, collectively and broadly speaking, a technological system in the conduct of an election. To my mind, a change in technology over a short period of time through the advent of a more advanced technology is a vital reason for limiting the period within which the option must be exercised. Therefore, the fact that the original price in the AES contract is maintained is no argument, in favor of the modification of the period of the OTP. If indeed the original expiration date of the OTP is legally insignificant in view of the deemed-sold provision under Article 5.11 of the AES contract,[21] I see no reason why SMARTMATIC-TIM would make several unilateral offers to the COMELEC before and after the expiration of the period of the OTP.

Contrary to the respondents claim, the period is actually for the benefit of both parties and not just of the COMELEC alone. A seven-month period (reckoned from the conduct of the elections) within which the OTP may be exercised is a reasonable period to evaluate the pros and cons of the technology used in the previous 2010 elections, which may affect the COMELECs decision to exercise the option or not. Should the COMELEC refuse to exercise the option, the parties obviously anticipated that, at least, the COMELEC would still have the remaining more than two years (prior to the conduct of the next national and local elections) to look for another technological system and make the necessary administrative, technical and legal preparations. SMARTMATIC-TIM, on the other hand, could still competitively market its PCOS machines, etc. to other countries or users. Thus, the extension or renewal of the option period on the pretext that it is beneficial to the COMELEC seriously ignores these considerations.

In San Diego v. Municipality of Naujan, Province of Mindoro,[22] involving the extension of the period of the lease contract before its expiration without public bidding, the Court ruled:

There is no doubt that the original lease contract in this case was awarded to the highest bidder, but the reduction of the rental and the extension of the term of the lease appear to have been granted without previous public bidding. In the case of Caltex (Phil.), Inc., et al. vs. Delgado Bros., Inc., et al., x x x the amendment to an arrastre contract was declared null and void on the ground that it was made without previous public bidding. In so declaring, this Court has adopted the following opinion:

x x x x

Furthermore, it has been ruled that statutes requiring public bidding apply to amendments of any contract already executed in compliance with the law where such amendments alter the original contract in some vital and essential particular. Inasmuch as the period in a lease is a vital and essential particular to the contract, we believe that the extension of the lease period in this case, which was granted without the essential requisite of public bidding, is not in accordance with law. And it follows the Resolution 222, series of 1951, and the contract authorized thereby, extending the original five-year lease to another five years are null and void as contrary to law and public policy.[23] [citations omitted, emphases and underscoring ours]

The above rationale for prohibiting the extension of the period of the main contract of lease should equally apply to the period of the OTP; this period of the option is a vital and essential particular to the contract. With the short interval of three years before the next elections, the extension of the period beyond what was originally intended tends to give the winning bidder (SMARTMATIC-TIM) undue advantage in securing the contract of sale, not on the basis of having the best possible advantages for the public, but on the convenient excuse that the next election is already a matter of urgency[24] and its equipment, having been previously used, needs only to be improved to replicate the 2010 election results.

If the legality of the extension of the period of the OTP prior to its expiration is already legally problematic, then a fortiori the revival of a lapsed period by mutual agreement of the parties must suffer the same fate and even worse. It must at least be subjected to competitive bidding, or invalidated for fatal infirmity based on other grounds. I note that in Roque, Jr. v. Commission on Elections,[25] filed before the 2010 elections, even the majority conceded that the real worth of the PCOS system and the machines will of course come after they shall have been subjected to the gamut of acceptance tests. The real test came during the actual elections where, unfortunately, serious deficiencies and issues affecting the integrity of the PCOS system surfaced, compromising some of the minimum system capabilities mandated by law.[26]

If the present case simply involves an ordinary contract where, ordinarily, only the pertinent provisions of the Civil Code would apply, I would not perhaps have qualms with the suggestion that since the option period was a limitation imposed by SMARTMATIC-TIM on the COMELECs right to exercise its OTP, then nothing prevents SMARTMATIC-TIM from waiving the period it imposed. The present case, however, involves not just any government contract but one involving a constitutional office tasked with the independent enforcement and administration of all laws and regulations relating to the conduct of elections to public office to ensure a free, orderly and honest electoral exercise; it involves an ambitious step to replicate the first ever automated election held in 2010 by purchasing, out of the national coffers, the same PCOS machines and the CCS hardware and software worth billions of pesos. The respondents sorely miss this point of distinction between a government contract, on one hand, and an ordinary contract, on the other hand, by approaching the issue from the perspective of a purely private contract.

D. COMELEC gravely abused its discretion when it entered into the March 30, 2012 Deed of Sale with SMARTMATIC-TIM without competitive bidding, as mandated by Republic Act No. 9184

1. The 2009 AES contract and the March 30, 2012 Deed of Sale are different contracts

In my view, the PCOS hardware and software for the 2013 elections under the March 30, 2012 Deed of Sale between COMELEC and SMARTMATIC-TIM amounts to a new procurement[27] that is distinct and separate from the AES contract with OTP, and thus necessitates the conduct of another competitive bidding.[28]

It must be emphasized at this point that the original AES contract was only for the lease (with OTP) of the goods, as stated in Annex L of the said contract. Clearly, this original contract is entirely different from the new contract generated by COMELECs acceptance of SMARTMATIC-TIMs revised and extended OTP and as evidenced by the March 30, 2012 Deed of Absolute Sale that called for the purchase of remaining hardware and software, as listed in Annex E and Annex E-1. This is plainly evident from Section 2 of the Deed of Absolute Sale which states:

2. For and in consideration of the amount of One Billion Eight Hundred Thirty Three Million Two Hundred Seventy Four Thousand Four Hundred Fifty Seven Pesos and Nine Centavos (Php 1,833,274,457.09) (Purchase Price), the BUYER hereby purchases the hardware and software listed in Annex E and Annex E-1 from the SELLER subject to the terms and conditions set forth in Annex D. The Purchase Price shall be paid by the BUYER in accordance with the payment schedule attached as Annex F. The BUYER shall pay the Purchase Price to the SELLER via irrevocable letter of credit issued by Land Bank of the Philippines.

From another point of view, considering that the COMELEC allowed the original OTP under the AES contract to expire (thus, the juridical relation between COMELEC and SMARTMATIC-TIM concerning the OTP has already been severed), the exercise of the option became the road not taken on the part of the COMELEC; it can no longer pursue the OTP route in order to purchase the remaining hardware and software under the AES contract for the purpose of the 2013 National and Local Elections. To illustrate, Justice Teresita J. Leonardo-de Castro astutely raised during the oral arguments the legal absurdity of an extension of a contract - in this case, the option contract - that has already expired, viz.:

JUSTICE DE CASTRO: I think you go back to the question of when is there an extension. You have to explain to us whether this is an extension or a revival or a resurrection of an expired contract because you cannot extend something, which is already expired. So it is important for you to explain, to justify to the Court why you still consider this as an extension covered by the Procurement Act when this does not come within the general concept of extension, which is extending something, which is still alive; that is the essence of an extension. You do not extend something, which is already dead. And why is this very material for the Procurement Act? If the contract has already expired, then the provisions of that contract are no longer applicable. So the provisions of the contract, which has already expired, can be subject to renegotiation. And did COMELEC renegotiate the terms of the contract after it has allowed this extension that you referred to?

SOLICITOR GENERAL JARDELEZA: In our view, Your Honor, it was not a renegotiation except for the term because in fact under the Deed of Sale they have the same terms, the same price, the same object, which is the PCOS machines. If there was ever renegotiation, it was the insistence of the COMELEC that, Please give or you must give additional fixes and enhancements at no additional cost. I concede that there was (sic) some negotiations on that, Your Honor. But again I go back to the spirit of the Procurement Law; if the extensions, if the enhancements, are for the benefit of the government agency, we respectfully submit, given if it is a resurrected contract, the resurrection is at the forbearance of the vendor. If the vendor agrees to resurrect, again our humble submission is, this to the advantage of the government.

x x x x

JUSTICE DE CASTRO: There is a very technical legal problem here because if the contract has already expired, then that opens up all the stipulations in the contract. And so I am wondering if we can just assume that this is to the benefit of the government because there was already bidding before. But as we know were dealing with technology and technology changes in just a few months and this technology was developed in 2009, used in 2010 and (interrupted)

SOLICITOR GENERAL JARDELEZA: I couldnt agree more, Your Honor, in fact thats why I started, what was the initial wish of the COMELEC? They wish to have more machines, brand new machines but it comes with a price; thats why [COMELEC] asked for 12 billion. But if that was not going to be, as this cannot be, the options of the COMELEC are so constricted that they are settling for the PCOS machines is the only viable commercial technical available, Your Honor. As I said, if they have to go bidding, I go to my question, how much, how many can 2.2 billion buy or lease? That is the problem confronting the COMELEC, Your Honor. They wish they had more; they wish they had more money; they wish they had more machines; they wish six hundred (600) hundred voters per precinct so that if there are no long queues, they will not be castigated in public but that wish was not going to be, Your Honor.

JUSTICE DE CASTRO: But the problem is, if the contract has already expired, then the government is not bound by the terms and conditions stated in the original contract. And so it will not be sufficient to say that SMARTMATIC made some changes without cause because you open up, if this is a new contract then you open up all the provisions there; all the stipulations can be subject to renegotiation more so, if the offer came from SMARTMATIC and not from the government. Thats how I look at it. Thats why I am very concerned in distinguishing between an extension of the contract and a revival of an old contract because it would seem that if you revive an old contract then you are bound by the substantive provisions of that contract; you cannot get away from it, if you consider this as an extension. But if you consider it as a new contract, because the original has already expired then the government will have more leeway in negotiating new terms and conditions. If it will be more beneficial for the government to purchase this because it was already leased before and therefore, this can be acquired at lower costs, now the question is, How much should the government pay for it and what should be the terms and conditions of that new contract? I just hope I am not asking you to answer this now; but this is something that you should explain in your memorandum.[29] [italics and emphases supplied]

Unfortunately, no sufficient nor convincing explanation was ever given in the respondent COMELECs Memorandum.

2. Deed of Sale circumvented the competitive bidding law

Justice Antonio T. Carpio, for his part, emphasized the great repercussions on government procurement, in particular, on the circumvention of the law on competitive bidding should the Court accept COMELECs incongruous theory that an expired contract can be resurrected without need for competitive bidding by mutual agreement of the parties, or in this case, a unilateral offer on the part of SMARTMATIC-TIM, viz.:

JUSTICE CARPIO: You said that even if the contract is already dead, it can still be resurrected by mutual agreement of the parties or by unilateral offer of SMARTMATIC in this case, unilaterally extended the option to purchase.

SOLICITOR GENERAL JARDELEZA: Yes, Your Honor.

JUSTICE CARPIO: Now, again, my problem is that, if you allow this then government agencies will follow that. They will say to the contractor, the contract is already terminated, why dont you offer an extension or make an offer of an option to purchase so that we dont have to go to bidding. Then we have a problem again because all agencies will follow this, then instead of the requirement of public bidding the existing contractor after his contract has expired will just make an offer again of an extension. So, how do you prevent that?

SOLICITOR GENERAL JARDELEZA: My answer Your Honor, is we go back to the rules established by this Court in Agan v. PIATCO. If there is a change whether the change is period, whether the change is profit, whether the change is can you operate the MIAA it always goes back to whether at the end of the day, the change is substantial, alters the basis parameters as to at the end is an advantage to the government.

JUSTICE CARPIO: That element of whether it is advantageous to the government or not. If you use that as a reason then everybody will say this offer is advantageous to the government, there is no need for a bidding because we are offering a very low price. So the moment, you use that as a valid argument everybody will use it, that is why a bidding is required whether you assert that you are offering the lowest possible price already, it still has to go through a bidding. Its not enough that SMARTMATIC will say this is the best price that the government can ever get. Because the law still requires a public bidding. Because if you accept that argument, this is already the best price then all agencies will do that, then the bidding will be, then there will be no more bidding.

x x x x

SOLICITOR GENERAL JARDELEZA: Our answer to that respectfully, Your Honor, is that all our arguments today, are founded on the basis that there must be, there should be a public bidding. All were saying in this particular case is, there was already a public bidding and the lesson of Agan v. PIATCO is of course, there must be a bidding but after the bidding, can you change, can you tweak the contract and the guidelines are there, established by this Court. Yes, you may, provided you do not violate 1, 2, 3. But just for avoidance of doubt, Your Honor, no way are we suggesting that public bidding be dispense with.

JUSTICE CARPIO: Well, yes, we agree with that but what you are saying here now is despite the lapse, expiration of the contract, we should accept the extension and extend the option to purchase, in other words, if we are extending the contract, if we do that then other agencies will follow that and thats the problem. We are not deciding this for this particular case so if you can find another reason why there should be an exemption to the bidding, maybe that would be better. But to say that a dead contract can be resurrected is something else because that will have great repercussions on procurement of government goods for the government. [30]

As previously emphasized, this case involves not only an ordinary commercial contract but a government contract that is primarily governed by our procurement laws. Section 12 of Republic Act No. 9369,[31] or the Automation Law, reinforces this principle when it authorized the COMELEC to procure, in accordance with existing laws, by purchase, lease, rent or other forms of acquisition, the supplies, equipment, software, etc., for the Automated Election System. Thus, in view of the expired OTP, COMELEC could not have legally accepted SMARTMATIC-TIMs offer of a revised and extended OTP nor could it have legally entered into a contract of sale with SMARTMATIC-TIM for the purchase of the remaining goods without having to go through a competitive bidding as required by law. The law, in this case, is Section 10 of Republic Act No. 9184 which states:

Section 10. Competitive Bidding. - All Procurement shall be done through Competitive Bidding, except as provided for in Article XVI of this Act. [emphasis supplied]

Significantly, the pervasive state policy on public or competitive bidding for government procurement has been the prevailing policy since 1900 when the United States Philippine Commission introduced the American practice of public bidding through Act No. 22. It required the Chief Engineer, United States Army for the Division of the Philippine Islands, acting as [a] purchasing agent under the control of the then Military Governor, to advertise and call for a competitive bidding for the purchase of the necessary materials and lands to be used for the construction of highways and bridges in the Philippine Islands.[32]

More than a century later and touted as a world-class piece of legislation,[33] Republic Act No. 9184 (otherwise known as the Government Procurement Act of 2003) was passed, upholding the enduring policy that competitive bidding is the primary mode of procurement; as a rule, government acquisition shall be done through competitive bidding except for the alternative methods of procurement explicitly provided by law. The Court, in Manila International Airport Authority v. Olongapo Maintenance Services, Inc.,[34] echoed this rule when it held that competitive bidding may not be dispensed with nor circumvented, and alternative modes of procurement for public service contracts and for supplies, materials, and equipment may only be resorted to in the instances provided for by law.[35]

The rationale behind the requirement of public bidding, as a mode of awarding contracts, is to ensure that the people get maximum benefits and quality services from the contracts. More significantly, the strict compliance with the requirements of a public bidding echoes the call for transparency in government transactions and accountability of public officers. Public biddings are intended to minimize occasions for corruption and temptations to abuse of discretion on the part of government authorities in awarding contracts.[36]

3. Reasonableness of SMARTMATIC-TIM bid price

In the course of the oral argument, Justice Carpio also raised the lack of evaluation by COMELEC on whether the bid price of SMARTMATIC-TIM for the OTP was reasonable. This, to my mind, is a significant observation that even more underpins the requirement of a competitive bidding with respect to the COMELECs exercise of the OTP under the AES contract since competitive bidding is regarded as the only the accepted method for arriving at a fair and reasonable price for the government and it ensures that overpricing and favoritism, and other anomalous practices are eliminated or minimized.[37] The following oral arguments exchanges are instructive on this point:

JUSTICE CARPIO: But with respect to the option to purchase, it look[s] like the COMELEC merely said that the purchase price in the option to purchase must not be, must not exceed 50% of the lease.

SOLICITOR GENERAL JARDELEZA: Yes, Your Honor.

JUSTICE CARPIO: So, it looks like there was no evaluation whether the bid price of SMARTMATIC for the option to purchase was reasonable. The COMELEC just said the bid price for the option to purchase must not be more than 50% of the lease, correct?

SOLICITOR GENERAL JARDELEZA: If your Honor please, may I explain. The bid terms said the maximum price for this contract is 11.2 billion.

And then it told the bidders, you also will be subject to an option to purchase and the term is, on the option to purchase should not be more than 50% of the base price and to be exercised within a year but the bid bulletin, I recall no. 13, said that however, this is what the COMELEC said, however when we decide on the best bid for the government, while you bidders will have to tell us how much is your option price, at the end of the day, the COMELEC will look only at your top price which is a maximum of 11 billion. That is why SMARTMATIC won at 7.1. Our understanding then under the circumstances is, the option price was something that will bind the vendor if and when COMELEC chooses to exercise the option.

x x x x

JUSTICE CARPIO: Because they did not make a detailed evaluation whether the 1.8 billion option price for the machine was reasonable or not. They looked at the other side, whether the rental rate was reasonable or not, correct?

SOLICITOR GENERAL JARDELEZA: I would characterize it this way. Your Honor, with your permission. Yes, they were primarily and principally concerned with the top line lease the 7 billion, based on a budget of 2011. But they told all bidders but I want an option and tell me what is your option price and Bid Bulletin 13 said, having told me what your option price is, I will still decide based on the top price but if I decide to exercise the option then you are bound but what you declare to me is 50% of your base price.

JUSTICE CARPIO: Yes, because if the purpose of the procurement law is there must be a bidding whether it is a lease or a purchase, if you combine both under a lease with option to purchase there must be a competitive bidding in both and a competitive evaluation in both, the rental rate and the option rate. Because there may be a situation where a bidder will bring down his rental rate and jack up his option to purchase price rate and there will be connivance. Of course, he will win, in the lease rate competition, he will be very low. But once a contract is signed the agency will now exercise the option to purchase and that will be grossly disadvantageous to the government. How will you prevent this? Because if we are saying that, incidentally you agree with me that this is the first time that a case like this is being decided by the Court under government procurement where a lease contract has an option to purchase and you are asking us for the validity, correct?

SOLICITOR GENERAL JARDELEZA: Yes, Your Honor.

JUSTICE CARPIO: So, if we say that a government agency can do this, bid out the lease with an option to purchase and we say thats okay then a lot of agencies will follow this. But how do you prevent a situation where a bidder will drive down his rental rate and jack up his option to purchase rate, how do you prevent that?

SOLICITOR GENERAL JARDELEZA: Then my answer will be twofold, Your Honor. No. 1, if you assume honesty and the bidder lowers the top price but jacks up the option price, if you assume honesty, the agency will not exercise his option because the option price is going less

JUSTICE CARPIO: But.

SOLICITOR GENERAL JARDELEZA: If you may I proceed, Your Honor. If we assume dishonesty, I am afraid it is going to be difficult, theres no answer to that, Your Honor.

JUSTICE CARPIO: Thats why the law requires bidding because the law cannot assume honesty. Thats the reason for the bidding because if we assume that all government officials will act honestly, then we dont need a public bidding that is required.

x x x x

JUSTICE CARPIO: So, how do you now prevent that situation? Because you are asking us to legitimize this bid for lease with purchase and how do you prevent the situation, where the bidder will drive down his rental rate and jack up his purchase rate?

SOLICITOR GENERAL JARDELEZA: The answer, Your Honor is that if the bidder brings down his lease price and the government leases it at a very low price then the government will be advantaged so much because all the government has to do is not to exercise the very high option price. So my answer is, the commercial, the way an option to purchase operates is the answer to the question on how to police it, Your Honor.

JUSTICE CARPIO: Yes, but that will open the door to connivance where both the procuring agency and the bidder, will agree that the bid price for their lease rate will go down while the option price for the purchase of the equipment will go up. So, how do you prevent that? Could you not prevent that by requiring an evaluation of both, the rental rate and the option rate. Both must be evaluated.

SOLICITOR GENERAL JARDELEZA: That could be conceivable yes, Your Honor.

JUSTICE CARPIO: Yes, that is why my question is, was this done in this case? Was there an evaluation of the rental rate? Yes there was but was there an evaluation of the purchase rate? Because it merely says not more than 50% of the rental rate. Why 50, why not 30, why not 20, what is the basis for 50?

SOLICITOR GENERAL JARDELEZA: I would not know the basis, Your Honor.

JUSTICE CARPIO: Yes, that is why I am asking why 50, why not 30, why not 40? There has to be a basis. It looks very arbitrary to me and I have not come across any evaluation of the purchase rate.

SOLICITOR GENERAL JARDELEZA: Youre right, Your Honor.[38] [italics and emphases supplied]

4. COMELEC is not excused from competitive bidding

Given the requirement of strict adherence to the requirements of competitive bidding and the overarching public policy that mandates competitive bidding except for specific alternative modes of government procurement, COMELEC comes to Court with a heavy and unenviable burden of justifying its non-compliance with the competitive bidding requirement of Republic Act No. 9184. Stated differently, in the event any of the alternative procurement modality is available for use by a procuring entity, it is necessary to show why an alternative mode of procurement was resorted to[39] considering that the law mandates that alternative methods shall only be resorted to in the highly exceptional cases, as provided for by law.[40]

In these highly exceptional cases, the law recognizes that certain unique circumstances require the use of the alternative methods of procurement.[41] However, the selection of the method of procurement is dependent on the presence or absence of specific conditions that justify the use of a particular method. Specifically, the Implementing Rules and Regulations of Republic Act No. 9184 mandates the use of alternative methods of procurement in some exceptional cases, provided that:[42]

1. There is prior approval of the Head of the Procuring Entity on the use of alternative methods of procurement, as recommended by the BAC;

2. The conditions required by law for the use of alternative methods are present; and

3. In resorting to any of the alternative methods of procurement, the Procuring Entity must ensure that the method chosen promotes economy and efficiency, and that the most advantageous price for the government is obtained. [italics and emphases supplied]

In this regard, COMELEC contends that the exercise of the OTP can be justified and is analogous to the following alternative modes of procurement, namely: direct contracting, negotiated procurement and ordering agreement. I fully concur with Justice Villarama that the COMELEC failed to substantiate that the conditions specifically required by law for the use of alternative methods of procurement are present. With respect to direct contracting,[43] the COMELEC must show that it resorted to the same under the following conditions:

a. Procurement of Goods of proprietary nature, which can be obtained only from the propriety source, i.e. when patents, trade secrets and copyrights prohibit others from manufacturing the same items;

b. When the Procurement of critical components from a specific manufacturer, supplier, or distributor is a condition precedent to hold a contractor to guarantee its project performance, in accordance with the provisions his contract; or,

c. Those sold by an exclusive dealer or manufacturer, which does not have sub-dealers selling at lower prices and for which no suitable substitute can be obtained at more advantageous terms to the government.

I cannot agree with the COMELECs argument that the purchase of the remaining goods under the OTP for the 2013 elections may be justified on conditions (a) and (c).

On the one hand, condition (a) is applicable only when the goods or services being procured are covered by a patent, trade secret or copyright duly acquired under the law. Under the Intellectual Property Code of the Philippines (Republic Act No. 8293), the registered owner of a patent, a copyright or any other form of intellectual property has exclusive rights over the product, design or process covered by such patent, copyright or registration. Such exclusive right includes the right to use, manufacture, sell, or otherwise to derive economic benefit from the item, design or process.[44]

On the other hand, in condition (c), exclusive dealership does not per se give rise to the use of direct contracting as an alternative mode. The supplier/contractor/manufacturer must prove through proper documentation that it is the sole source of the said goods, equipment, or services required. This condition anticipates a situation where the goods are sold by an exclusive dealer or distributor, or directly sold by the manufacturer. In this instance, it is highly unlikely that sub-dealers can sell the same at lower prices. Further, the procuring entity has not identified a suitable substitute for the product that can be procured at terms more advantageous to the government.[45]

In the present case, the COMELEC cannot use the justification that the software is proprietarily owned by Dominion considering that the same is a mere component of the entire Automated Election System. It must be emphasized that under the March 30, 2012 Deed of Sale, the COMELEC obligated itself to purchase not only the PCOS software but also the PCOS hardware, canvassing system and servers as listed in Annexes E and E-1 of the same deed.[46] The COMELEC also failed to substantiate that SMARTMATIC-TIM is the sole manufacturer of the PCOS machines which again remain to be a mere component of the Automated Election System under the AES contract. Finally, I agree with the ponencia that the COMELEC also failed to prove that no suitable substitute to the PCOS is available or can be obtained at terms more advantageous to the government.

In its memorandum, the COMELEC also contends that its exercise of the OTP is also analogous to a negotiated procurement[47] considering that time is of the essence and immediate action is necessary to restore vital public service because the acquisition of a new Automated Election System is a near commercial, as well as a logistical, impossibility.[48] This claim is utterly preposterous as it does not even approximate the extraordinary and unique circumstances which justify the use of negotiated procurement instead of a competitive bidding. Section 53(b) of Republic Act No. 9184 provides that negotiated procurement shall be allowed only in the following circumstances:

b. In case of imminent danger to life or property during a state of calamity, or 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. [italics and emphasis supplied]

To my mind, the above provision speaks for itself; it requires immediate action through a negotiated procurement instead of the lengthy process of competitive bidding because of a calamity, whether natural or man-made, or to prevent damage to or loss of life or property, or to restore vital public services, infrastructure facilities and other public services.

The COMELECs insistence that the exercise of the OTP is analogous to an ordering agreement is also similarly absurd.[49] GPPB Resolution No. 06-2005 entitled Guidelines on the Use of an Ordering Agreement under the Government Procurement Act mandates that items covered by ordering agreements are limited only to those, although identified, becomes necessary only upon the happening of a fortuitous event where the exact time of the need of such parts cannot be accurately pre-determined; and it is inadvisable for procuring entities to carry it on stock or commit to purchase a certain quantity within a given period. Under this resolution, an ordering agreement is defined as

Ordering Agreement. Refers to a written instrument of understanding, negotiated between the procuring entity and the Lowest Calculated and Responsive Bidder and used to expedite the procurement process when anticipated needs for specific items are not known. It grants the procuring entity the option to either place an order or not buy at all, within a given period of time. The Ordering Agreement shall contain (1) terms and clauses applying to future contracts (orders) between the parties during its term, (2) a description, as specific as practicable, of supplies to be delivered including lead time for the receipt thereof, and (3) methods for issuing and delivering future orders under the ordering agreement. [emphases supplied]

The peculiar situations that call for an ordering agreement clearly do not obtain in the present case considering that the COMELEC is fully aware that the items to be purchased under the March 30, 2012 Deed of Sale shall be for the purposes of the May 2013 elections. This fact alone obviates the need to resort to an ordering agreement. Worse, had COMELEC even bothered to read in full GPPB Resolution No. 06-2005, it would have discovered that an ordering agreement must still undergo competitive bidding, viz.:

5. COMPETITIVE BIDDING

5.1. The procuring entity shall package the contract for Ordering Agreements in the most practicable manner and conduct the bidding using the single stage, three-envelope procedure as prescribed in Sections 23 and 25 of R.A. 9184 and its IRR-A, whereby bidders are to bid on a per item basis as presented in the Ordering Agreement List. For this purpose, the procuring entity, through its BAC, shall prepare separate Technical Specifications and/or Terms of Reference for every line item to be bid out and indicate, among others; (1) an estimate of the budgetary allocation for each item, (2) the estimated quantity it may procure when needed, and (3) the requested delivery lead time from execution of Delivery Order Contract or from any date determined by the procuring entity.

In sum, it is apparent that the COMELEC - by accepting SMARTMATIC-TIMs offer of a revised and extended OTP despite a lapsed/or expired OTP and by entering into a Contract of the Sale with the latter - has circumvented the mandatory requirement of a competitive public bidding. This clearly amounts to a grave abuse of discretion on the part of the COMELEC.[50]

E. Independence of the COMELEC under the Deed of Sale: Subject of continuing Dissent in Roque v. COMELEC

If a contract is constitutionally infirm, chances are, the subsequent act rooted from the same contract would, in one way or another, inherit the same or similar infirmity under the same legal consideration.[51] This is one such case.

In Roque, Jr. v. Commission on Elections,[52] I registered my dissent based primarily on the COMELECs failure to observe Section 26 of Republic Act No. 8436 the very law which mandated the COMELEC to undertake an automated election system. Section 26 of Republic Act No. 8436 reads:

Section 26. Supervision and control. The System shall be under the exclusive supervision and control of the Commission. For this purpose, there is hereby created an information technology department in the Commission to carry out the full administration and implementation of the System.

The Commission shall take immediate steps as may be necessary for the acquisition, installation, administration, storage and maintenance of equipment and devices, and to promulgate the necessary rules and regulations for the effective implementation of this Act. [emphases and underscoring supplied]

Based on this provision vis--vis the pertinent provisions of the AES contract,[53] I considered the COMELECs role in the election process under an automated system of elections as an abdication of its exclusive role in the conduct of elections under the Constitution and the law. Section 26 of Republic Act No. 8436 obviously envisioned that the COMELEC would empower itself in the field of information technology as a necessary prerequisite for embarking in a historic first step to automate our elections riddled with fraud and violence. Additionally, the Congress required the COMELEC to create or establish (i) an Advisory Council and (ii) a Technical Evaluation Committee to help the COMELEC keep up with an entirely new system.

While the COMELEC complied with the laws mandate to automate our election system, which in its judgment is the most suitable technology, it cannot choose not to fully comply with the minimum system requirements required by law by the hollow interpretation of its duty of exclusive control and supervision of the system.

True, Article 6.7 of the AES contract provides that the entire processes of voting, counting, transmission, consolidation and canvassing of votes shall be conducted by COMELECs personnel and officials; but this is an empty provision when cast against the actual conduct of the election process vis--vis the COMELECs constitutional and statutory role. I already noted in my Dissent in Roque that the blurry roles of both the COMELECs Project Management Office and its Information Technology Department under the automated election compromised the independence of the COMELEC since the very Request for Proposal issued long ago by the COMELEC calls for a complete systems provider with whom the COMELEC would have a shared responsibility.

In the present case, Sections 10 and 11 of the very Deed of Sale between COMELEC and SMARTMATIC-TIM acknowledge that there are remaining issues to be dealt with by the parties such as the need to improve the preparations, training and the conduct for the 2013 elections that are not covered by the Deed; and hence the need for a continuing review of this Agreement. Notwithstanding, the sale of the PCOS machines, etc. to COMELEC, SMARTMATIC-TIMs role in the election process, as noted in my Dissent in Roque, has not been reduced to a significant degree simply because the COMELEC continues to refuse to abide by the terms of Section 26 of Republic Act No. 8436. Sections 10 and 11 of the Deed of Sale state:

10. The parties acknowledge that there is a need to improve the preparations, training and the conduct for the 2013 elections. Towards such end, the parties undertake to comply with their respective obligations to be agreed upon by the parties not later than seven working (7) days from the date of this Agreement. As a commitment of the SELLER to the BUYER, the SELLER has also agreed to the new additional modifications requested by the BUYER set forth in Annex D hereof.

11. In order to ensure the successful implementation of the 2013 elections, there shall be a continuing review of this Agreement and the procedures by the parties.

The parties are aware that every situation cannot be provided for in this Agreement, and upon the occurrence of such situation for which there is no specific provision in this Agreement or there is no agreement in the application thereof, the parties shall forthwith meet and attempt to resolve the matter immediately, amicably and in good faith with the successful implementation of the 2013 Elections in mind.

Finally, Section 13 of the Deed of Sale ensures the continuity of the AES contract by providing that

13. All the provisions in the AES Contract consistent with this Agreement shall be in full force and effect. In case of conflict between the terms of this Agreement and the terms of the AES Contract, the terms of this Agreement prevail. [italics and emphasis supplied]

The following exchanges with the Solicitor General provide us with illuminating clarification of the present situation:

JUSTICE BRION: But the PCOS machine is. would need service, the machine itself would need services in the course of its operation when and if there would be a purchase, who would provide the services?

SOLICITOR GENERAL JARDELEZA: My understanding, Your Honor, is that the COMELEC as it will become the new owner of the PCOS, will essentially supply the manpower. But I understand that, at no cost, SMARTMATIC will still field its people. Just to make sure that there is a safety net for the use of the machines, Your Honor.

JUSTICE BRION: Would the two services that would not be provided by SMARTMATIC, would this be dependent somehow on the PCOS machine?

SOLICITOR GENERAL JARDELEZA: I dont think so, Your Honor. The other services as I said will be bidded out. And in fact SMARTMATIC can bid and it will depend on whether they win or not.

JUSTICE BRION: When and if the sale pushes through you would have a system whereby PCOS machines would be used and the management of the system using PCOS machines would be provided by a third party, not the SMARTMATIC and COMELEC?

SOLICITOR GENERAL JARDELEZA: Yes, Your Honor, not necessarily SMARTMATIC. But if they win in the bidding then they will be part of the

JUSTICE BRION: No, lets not go to the you are referring to the bidding for services?

SOLICITOR GENERAL JARDELEZA: Yes, Your Honor.

JUSTICE BRION: Okay. So, well have a system where management will be provided by a third party and then we have a system where the PCOS would be owned by COMELEC together with the software but there are attendant services still that would be provided by SMARTMATIC, right?

SOLICITOR GENERAL JARDELEZA: Yes, Your Honor. Now on the management, the management will be no different from the management in 2009. This is a management contracted out with a third party under the direction and control of the COMELEC.

JUSTICE BRION: Supposedly, under the direction and control of the COMELEC. Now, what about the third component, the canvassing and consolidation, canvassing and transmission? Would this not be dependent on the PCOS machine?

SOLICITOR GENERAL JARDELEZA: In a sense, Your Honor, because the what will be canvassed will be the results or the printouts from the PCOS machines. In that sense but the canvassing itself now will be under the COMELEC and if they contract out what used to be done by SMARTMATIC in 2009, then there could be a provider for that. Again, our caveat, under the supervision and control of the COMELEC.

JUSTICE BRION: Under the supervision and control. so, the role of SMARTMATIC would stop when the results are out. And then there would be consolidation, canvassing and transmission. Using the same PCOS machine, where there has been a guarantee by SMARTMATIC that they would service these machines insofar as hardware and software are concerned. But there would still be a third party involved. Another service provider insofar as consolidation, canvassing and transmission would be concerned, right?

SOLICITOR GENERAL JARDELEZA: Thats my understanding, Your Honor.

JUSTICE BRION: So what would come out is a very mixed-up system where you have the COMELEC depending on a third party service provider for management, the COMELEC owning supposedly the PCOS machine and the software but depending on its on SMARTMATIC for the servicing out the technical aspects of these machines now owned by the COMELEC then comes the consolidation, canvassing and transmission which are dependent on the PCOS machine that will now be serviced by still another third party but SMARTMATIC would still have a role because of the warranties that they have stated in the contract of sale. Im quite confused by the resulting situation. Can you explain to me, can you clarify that?

SOLICITOR GENERAL JARDELEZA: Our explanation, Your Honor, is that in effect as compared to 2009 and assuming SMARTMATIC doesnt win the bid for services, what will be new will be possibly a new provider for any or all of the essential services And to your concerns, Your Honor, we respectfully submit what we have is the experience of the COMELEC in the 2010 election. So our humble submission is that, all of these activities are still under the direct supervision and control of the COMELEC. Yes, they do have providers yes, there will be a new provider. But the experience of the COMELEC, the guarantee of new independent providers, independent for (sic) SMARTMATIC in our view is the informed judgment of the COMELEC on how to improve the election system for 2013.

JUSTICE BRION: Would not the result be down the road after the sale pushes through when the bidding for the services come there would be the position of the COMELEC, []then perhaps we should give the services again to SMARTMATIC because they are in the best position, they have been with us in the 2009 contract in the 2010 elections.[] And now they own they used to own the PCOS and are in the best position to service these machines, to provide management because they had been there before, to provide services for consolidation, canvassing and transmission because they had been there before; it is then to the best interest of this government to stick with SMARTMATIC, would this not be the result?

SOLICITOR GENERAL JARDELEZA: No, Your Honor. The COMELEC cannot do that. And they will not do that under the terms of the resolution.

JUSTICE BRION: But I thought that the SMARTMATIC can still bid for the other services that are not included in the deed of sale?

SOLICITOR GENERAL JARDELEZA: Yes, Your Honor. Because under the procurement law as we speak there is nothing that will legally disqualify them. Im trying to explain, when the COMELEC decided that only the machines will [be] bought from SMARTMATIC, all other services will be bidded out. There is no legal impediment for SMARTMATIC to bid, to participate to bid.

JUSTICE BRION: Yes. Precisely. Thats what I am saying.[54] [italics and emphases supplied]

In other words, had only the COMELEC faithfully complied with Section 26 of Republic Act No. 8436 and undertook the automation of election system in line with the laws intent for the COMELEC itself to keep pace along with the new system, the government would not be a captive market of SMARTMATIC-TIM for the subsequent elections. COMELEC, unfortunately, cannot do so without SMARTMATIC-TIM by its side as it is not, up to now, technologically up to date and self-sufficient as its independence requires.

In any case, should the COMELEC choose to purchase election related hardware and software, and the accompanying system from a new provider, the same advantage that SMARTMATIC-TIM now enjoys would be enjoyed as well by this provider in a subsequent bidding, for the rendition of technical services to make the system fully functional. However, since the COMELEC does not, at any time, appear to consider Section 26 of Republic Act No. 8436, the subsequent bidding for services (for technical support involving the operation of the items purchased from SMARTMATIC-TIM) would result in the same scheme of a shared responsibility that would put the COMELEC in continuous violation of the law and the Constitution. To my mind, this is constitutionally objectionable.

It is in light of the foregoing that I dissent from the majoritys conclusions.

ARTURO D. BRION

Associate Justice

[3] 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, 274.

[5] For example: Republic Act No. 6957, as amended by Republic Act No. 7718 (AN ACT AUTHORIZING THE FINANCING, CONSTRUCTION, OPERATION AND MAINTENANCE OF INFRASTRUCTURE PROJECTS BY THE PRIVATE SECTOR, AND FOR OTHER PURPOSES); Presidential Decree No. 1445 (GOVERNMENT AUDITING CODE OF THE PHILIPPINES); Republic Act No. 9184 (AN ACT PROVIDING FOR THE MODERNIZATION, STANDARDIZATION AND REGULATION OF THE PROCUREMENT ACTIVITIES OF THE GOVERNMENT AND FOR OTHER PURPOSES) which expressly repealed Presidential Decree No. 1594 (PRESCRIBING POLICIES, GUIDELINES, RULES AND REGULATIONS FOR GOVERNMENT INFRASTRUCTURE CONTRACTS).

[6] Article 3, Scope of the Project, AES Contract.

[9] Bid Bulletin No. 10 dated April 15, 2009, Bid Bulletin No. 19 dated April 19, 2009 and Bid Bulletin No. 21 dated April 20, 2009.

[11] Articles 1324 and 1479 of the Civil Code read:

Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.

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.

[12] Carceller v. Court of Appeals, supra note 10.

[13] Manila International Airport Authority v. Olongapo Maintenance Services, Inc., G.R. Nos. 146184-85, 161117, and 167827, January 31, 2008, 543 SCRA 269; and Adelfa Properties, Inc. v. CA, 310 Phil. 623 (1995).

[14] Dennis S. Santiago, Executive Director III, Government Procurement Policy Board, Technical Office, Legal Opinion Re: Purchase of Goods for the Automated Election System Under an Expired Option to Purchase and Institutional Development of a Canvassing and Consolidation System (CCS) dated March 28, 2012, p. 2.

[15] In its letter dated March 23, 2011 (not attached to any of the petitions), SMARTMATIC-TIM acknowledged that the OTP expired last 31 December 2010 without the COMELEC formally responding to its offer to extend the OTP. SMARTMATIC-TIM further stated that no legal basis exists for an option to purchase beyond the original contract. (Memorandum, Re: Expiration of the Option to Purchase Under the 2009 AES contract with SMARTMATIC-TIM of Commissioner Augusto C. Lagman [Member, 2013 Steering Committee] to the 2013 Steering Committee dated February 6, 2012, p. 5). In its April 1, 2011 letter, SMARTMATIC-TIM stressed that it has no obligation to sell the equipment to COMELEC anymore, and will only decide to do so, if COMELECs request is convenient for the company, and if the equipment, in total or partiality, is still available. (Dennis S. Santiago, supra note 14) SMARTMATIC-TIM also stated that it will immediately start marketing these PCOS to other countries, and thus, dont have any need of keeping them further in the Philippines. (Article 3, Scope of the Project, 2009 AES contract, supra note 6, at 5) SMARTMATIC-TIM reiterated the same stance in its September 23, 2011 letter when it insisted that SMARTMATIC will decide on any request for purchase, if said request is convenient for the company, and if the equipment, in total or partiality, is still available. (supra note 14)

[17] Sargasso Construction & Development Corporation/Pick & Shovel, Inc./Atlantic Erectors, Inc. (Joint Venture) v. Philippine Ports Authority, supra note 3.

[18] Diamante v. Court of Appeals, G.R. No. 51824, February 7, 1992, 206 SCRA 52.

[20] See NFA v. CA, 323 Phil. 558 (1996). Article 19 of the AES contract reads:

ARTICLE 19 AMENDMENTS

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.

[21] The provision states:

5.11. All Goods or Equipment in the possession of COMELEC because of any election contest or audit requirement after December 31, 2010 shall be considered sold to COMELEC pursuant to its purchase option under this Contract, and COMELEC shall pay the corresponding price within the first five (5) business days of January 2011. In the case the election protest was due to any defect in the machines or the system or that the audit will show the same, COMELEC shall return the machines to the PROVIDER for full refund.

[25] G.R. No. 188456, September 10, 2009, 599 SCRA 69, 138.

[27] Section 5 (n) of Republic Act No. 9184 defines procurement as the acquisition of Goods, Consulting Services, and the contracting for Infrastructure Projects by the Procuring Entity. Procurement shall also include the lease of goods and real estate. The lease coverage under the law refers to lease contracts pertaining to [l]ease of construction and office equipment, including computers, communication and information technology equipment (Article XIV, Section 46, RA 9184) and lease purchases or lease to own and similar variations (Section 46, Rule XIV, Revised IRR). See Atty. F. B. Nocor, The Philippine Government Procurement Reform Act (Republic
Act No. 9184) and the Revised IRR, Annotated, A Handbook on Public Bidding, 2011 ed., p. 9.

[31] SEC. 10. Section 8 of Republic Act No. 8436 is hereby amended to read as follow[s]:

"SEC. 12. Procurement of Equipment and Materials. - To achieve the purpose of this Act, the Commission [is] 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 [abroad]. Participation in the 2007 pilot exercise shall not be conclusive of the system's fitness.

"In determining the amount of any bid from a technology, software or equipment supplier, the cost to the government of its deployment and implementation shall be added to the bid price as integral thereto. The value of any alternative use to which such technology, software or equipment can be put for public use shall not be deducted from the original face value of the said bid."

[32] Abaya v. Ebdane, Jr., G.R. No. 167919, February 14, 2007, 515 SCRA 720, 759.

[33] Plugging the Loopholes of the Philippine Procurement System, PB-0805, Senate Economic Planning Office Policy Brief, citing Former World Bank Philippines Country Director Joachim von Amsberg who recognized the GPRA as a legislation with world class quality during a press conference in 2007.

[37] National Power Corporation v. Civil Service Commission and Rodrigo A. Tanfelix, G.R. No. 152093, January 24, 2012. See also Dennis S. Santiago, supra note 14.

[39] Dennis S. Santiago, supra note 14, at 4, citing Cabrera v. Hon. Marcelo, 487 Phil. 427 (2004).

[40] See Handbook on Philippine Government Procurement, Fourth Ed., Government Procurement Policy Board and Technical Support Office, September 2007, p. 93.

[41] The IRR provision states:

1.1 In accordance with Section 10 of this IRR-A, as a general rule, the Procuring Entities shall adopt public bidding as the general mode of procurement and shall see to it that the procurement program allows sufficient lead time for such public bidding. Alternative methods shall be resorted to only in the highly exceptional cases provided for in this Rule. (Id.)

[42] See Manual of Procedures for the Procurement of Goods and Services, p. 81.

[43] Section 48(b) of Republic Act No. 9184 defines Direct Contracting, otherwise known as Single Source Procurement as a method of procurement of Goods that does not require elaborate bidding documents. The supplier is simply asked to submit a price quotation or a pro-forma invoice together with the conditions of sale. The offer may be accepted immediately or after some negotiations.

[44] Manual of Procedures for the Procurement of Goods and Services, supra note 42, at 84.

[46] Section 2 of the March 30, 2012 Deed of Sale provides:

2. For and in consideration of the amount of One Billion Eight Hundred Thirty Three Million Two Hundred Seventy Four Thousand Four Hundred Fifty Seven Pesos and Nine Centavos (Php 1,833,274,457.09) (Purchase Price), the BUYER hereby purchases the hardware and software listed in Annex E and Annex E-1 from the SELLER subject to the terms and conditions set in accordance with the payment schedule attached as Annex F. The BUYER shall pay the Purchase Price to the SELLER via irrevocable letter of credit issued by the Land Bank of the Philippines.

[47] Section 53 of Republic Act No. 9184 states that negotiated procurement is a method of procurement of goods, infrastructure projects and consulting services, whereby the procuring entity directly negotiates a contract with a technically, legally and financially capable supplier, contractor or consultant.

[50] There is grave abuse of discretion (1) when an act is done contrary to the Constitution, the law or jurisprudence; (2) when it is executed whimsically, capriciously or arbitrarily out of malice, ill will or personal bias. Information Technology Foundation of the Phils. v. COMELEC, 464 Phil. 173 (2004).

[53] Articles 3.3, 6.7 and 7.4 which read:

3.3. The PROVIDER shall be liable for all its obligations under this Project, and the performance of portions thereof by other persons or entities not parties to this Contract shall not relieve the PROVIDER of said obligations and concomitant liabilities.

SMARTMATIC, as the joint venture partner with the greater track record in automated elections, shall be in charge of the technical aspects of the counting and canvassing software and hardware, including transmission configuration and system integration. SMARTMATIC shall also be primarily responsible for preventing and troubleshooting technical problems that may arise during the election.

The PROVIDER must provide to SMARTMATIC at all times the support required to perform the above responsibilities.

6.7. Subject to the provisions of the General Instructions to be issued by the Commission En Banc, the entire processes of voting, counting, transmission, consolidation and canvassing of votes shall be conducted by COMELECs personnel and officials, and their performance, completion and final results according to specifications and within the specified periods shall be the shared responsibility of COMELEC and the PROVIDER.

7.4. Upon delivery of the Goods, in whole or in part, to the warehouses as approved by COMELEC, the Equipment shall be under the custody, responsibility and control of the PROVIDER.