October 14, 2009

COA DECISION NO. 2009-101

SUBJECT : Appeal of Hon. Juliana A. Villasin, former Municipal Mayor, Atty. Aluino O. Ala,Former Municipal Accountant and Mr. Gil A. Acuin, Municipal Agricultural Technologist,All of the Municipal Government of Barugo, Leyte, from LAO-Local Resolution No.2007-028 Dated 11 December 2007, Denying their Motion for Reconsideration of LAO-Local Decision No. 2007-011 Dated 24 January 2007 Affirming Notice of Disallowance(ND) No. 05-131-101 (04) Dated 5 December 2005

DECISION

FACTS OF THE CASEThe subject matter of this appeal is the purchase of three thousand nine hundred (3,900) liters of Fil-Oceanliquid fertilizer from Bals Enterprises, at a cost of P500.00 per liter, for a total amount of P1,950,000.00. Thefertilizers were obtained as a result of the Memorandum of Agreement (MOA) dated 26 April 2004 enteredinto among the Municipality of Barugo, Leyte, represented by herein appellant, former Mayor Juliana A.Villasin, the Department of Agriculture (DA) — Regional Field Office No. 8, represented by its ExecutiveDirector Leo P. Caneda, and Congresswoman Trinidad G. Apostol. The MOA was executed to implement theDA Farm Inputs/Farm Implements Program pursuant to Republic Act (R.A.) No. 8435, otherwise known asthe Agricultural and Fisheries Modernization Act of 1997. As culled from the records, the fertilizers wereprocured through Direct Contracting because of the purported failure of the alleged public bidding, therebeing no bidders thereto. However, the Audit Team Leader of the Municipality of Barugo, after auditing thetransaction, issued Audit Observation Memorandum (AOM) Nos. 2004-001-300 (2004) dated 24 September2004 and 2005-001-300 (2004) dated 7 July 2005, due to the absence of certain bidding documentsrequired by the Implementing Rules and Regulations (IRR) of R. A. No. 9184 , and of the product registrationof Fil-Ocean liquid fertilizer from the Fertilizer and Pesticide Authority.Subsequently, the then Regional Legal and Adjudication Office (RLAO), COA Regional Office No. VIII, issuedND No. 05-131-101 (04) dated 5 December 2005, disallowing payment to Bals Enterprises in the amount ofP1,950,000.00, on the following grounds:

(1) Absence of a pre-bid conference required under Section 22, IRR-A of R. A. No. 9184;(2) A re-bidding was not conducted after the first failed bidding, in violation of Section 35(a)

of the IRR of R. A. No. 9184; and(3) No bidding documents were submitted as required under Section 17, Rule VI, of the IRR

of R.A. No. 9184.Named liable for the disallowance were the following: Hon. Juliana A. Villasin, Municipal Mayor, Aluino O. Ala,Municipal Accountant, Gil A. Acuin, Municipal Agricultural Technologist; the Chairman and all Members ofthe Bids and Awards Committee (BAC).The BAC Chairman, Engr. Judith M. Borrel, and BAC Vice-Chairman Engr. Teofilo Glenn M. Avestruz filedrequests for exclusion from liability. Likewise, Ms. Dinah G. Avorque, BAC member, also filed her ownseparate request for exclusion. These requests were granted by the RLAO as embodied in letters dated 4July 2006 and 5 July 2006, respectively. However, the Urgent Joint Motion for Reconsideration of Hon.Villasin, Mr. Ala and Mr. Acuin was denied in a 6 June 2006 letter. Their appeal to the Legal and AdjudicationOffice (LAO)-Local was denied under LAO-Local Decision No. 2007-011 dated 24 January 2007 and so wastheir Motion for Reconsideration which was decided under LAO — Local Resolution No. 2007-028 dated 11December 2007. Hence, this appeal, which is anchored on the following assignment of errors:

(1) The COA-LAO erred in claiming that competitive bidding is the only mode ofprocurement under the circumstances;

(2) The COA-LAO erred in finding irregularities in the distribution of the fertilizers based onthe combined "land-area based" method and those with the "no-land-area basis" method;

(3) The COA-LAO erred in finding disallowance based on alleged technical defects in thequality of the Fil-Ocean liquid fertilizer despite the technical evidence to the contrary; and

(4) The COA-LAO erred in finding noted disparities in denominating purchases in boxes vis-a-vis distribution in liters as a basis for disallowance.

ISSUEWhether or not there is merit in the herein appeal.DISCUSSIONThe appeal should be denied for lack of merit.The first assignment of error is unfounded. The assailed LAO-Local Decision No. 2007-011 did not contendthat competitive bidding was the only allowable mode of procurement for the fertilizer. What the decisionemphasized was that direct contracting should have been resorted to only after there was a failure ofbidding. That would have been the time when it could be ascertained that the fertilizers could be obtainedonly through other modes of procurement in accordance with the conditions prescribed by R.A. No. 9184.Under Section 50 of R.A. No. 9184, Direct Contracting may be resorted to only in any of the following

Under Section 50 of R.A. No. 9184, Direct Contracting may be resorted to only in any of the followingconditions:

(a) Procurement of goods of proprietary nature, which can be obtained only from theproprietary source, i.e. when patents, trade secrets and copyrights prohibit others frommanufacturing the same item;

(b) When the procurement of critical components from a specific manufacturer, supplier ordistributor is a condition precedent to hold a contractor to guarantee its projectperformance, in accordance with the provisions of his contract; or,

(c) Those sold by an exclusive dealer or manufacturer, which does not have sub-dealersselling at lower prices and for which no suitable substitute can be obtained at moreadvantageous terms of the government.

Further, appellants did not comply with the requirement of public bidding because reference to a specificbrand name (Fil-Ocean liquid fertilizer), as in this case, only ensured the failure of the bidding and defeatedthe mandated competitiveness of the bidding since there was only one supplier of Fil-Ocean liquid fertilizer.This was in violation of Section 18 of the same law which provides: "Reference to Brand Names. —Specifications for the Procurement of Goods shall be based on relevant characteristics and/or performancerequirements. Reference to brand names shall not be allowed." (Underscoring supplied)More importantly, records would show that there was no bonafide public bidding conducted as evidenced bythe following:First, the entire BAC membership, from its Chairman, Vice-Chairman and Member, unequivocally disclaimedany knowledge, much less participation and involvement, in the alleged conduct of public bidding. Thus, itmay be deduced that with the total exclusion of the BAC, it was only the herein appellants who conductedthe negotiation and the awarding of the contract to Bals Enterprises.It must be stressed that the BAC Chairman Engr. Judith M. Borrel and Vice-Chairman Engr. Teofilo Glenn M.Avestruz, as well as BAC Member Dinah G. Avorque, were ultimately excluded from the list of persons liablein the said disallowance. The grounds they relied upon in their requests for exclusion from liability havedecisive significance, and would spell the success or failure of this appeal. Engrs. Borrel and Avestruzsubmitted the following:

a. That the procuring agency undertook the transaction clandestinely.b. That the BAC Chairman had no knowledge when the transaction took place. She was

officially on leave of absence from 17-21 May 2004. (22 May was a Saturday and 23 Maywas a Sunday), and on maternity leave from 24 May 2004 to 16 July 2004.

c. That while the rules of procurement require the BAC Chairman to certify Invitations toApply for Eligibility and to Bid, she had not certified any such Invitation and she neversaw a copy of the alleged Invitation to Apply for Eligibility and to Bid. The BAC shall notvalidate the same for lack of knowledge.

d. That the BAC was not called to convene in order to act on the subject purchase. Neitherwas it ordered to conduct a pre-bid conference. The direct contracting should have beenrecommended or at least known by the BAC also. Technically, the BAC was bypassed.

BAC Member Ms. Avorque declared in her 26 June 2006 letter:a. That the BAC had no participation in the purchase of the fertilizer.b. That she was temporarily assigned at Isabel, Leyte from 23 April 2004 to 24 May 2004.c. That prior to said dates, she was not aware that the BAC convened.d. That there was no bidding conducted for that purpose.

Even the Minutes of the Sangguniang Bayan meeting on 24 September 2004 clearly affirmed the absence ora bidding on the subject procurement.The foregoing are statements and declarations from the BAC members themselves which were not refutedby herein appellants. Such statements deserve a lot of credence, coming as they did from the very personswhose mandate was to conduct the procurement process in accordance with law.Article V, Section 11 of R.A. No. 9184 directs that each procuring entity shall establish a single BAC for itsprocurement.Section 12 of said Article pertinently provides:

"Functions of the BAC. — The BAC shall have the following functions: advertise and/or post theinvitation to bid, conduct pre-procurement and pre-bid conferences, determine the eligibility ofprospective bidders, receive bids, conduct the evaluation of bids, undertake post-qualificationproceedings, recommend award of contracts to the Head of the Procuring Entity. . . ..In proper cases, the BAC shall also recommend to the Head of the Procuring Entity the use ofAlternative Methods of Procurement. . .The BAC shall be responsible for ensuring that the Procuring Entity abides by the standards set forthby this Act and the IRR. . ."

Even the tenor of the present appeal is to the effect that it was the herein appellants, to the exclusion of theBAC, who conducted the bidding, negotiation and finally the award to Bals Enterprises.Second, when the appellants posted the Invitation to Apply for Eligibility and to Bid, they performed an actthat did not belong to them and therefore such act was irregular. Appellants arrogated unto themselves thepowers and duties which are exclusively vested by law on the BAC. Consequently, the posting did not have

powers and duties which are exclusively vested by law on the BAC. Consequently, the posting did not haveany operative effect, whatsoever. It was as if there were no Invitation to Bid and no valid bidding processwas conducted. When the Procuring Entity is authorized by R.A. No. 9184 to avail of the alternative methodsof procurement, it was but in consequence of the prior recommendation of the BAC, and only after when theconditions prescribed by the law are satisfied. Hence, appellants' negotiation with Bals Enterprises underthe Direct Contracting and their awarding the contract thereto, were all tainted with irregularity, because ofthe total absence of the BAC's participation and involvement in the alleged bidding as well as the absenceof factual basis to purchase the fertilizers through Direct Contracting as prescribed by Section 50 of R.A. No.9184. The total exclusion of the BAC would also explain the non-conduct of pre-procurement conferencerequired under Section 20 of the law and the absence of the bidding documents listed in Section 17 of thesame law, which were among the grounds of ND No. 05-131-101 (04).Third, there is also credence to the contention stated in the 6 June 2006 answer of RLAO, COA RegionalOffice No. VIII to the Urgent Motion for Reconsideration that there was already a prior agreement betweenthe appellants and the supplier even before the invitation to bid was published. This contention was due tothe fact that the time/date of issuance of the purchase order and the time/date of delivery were separatedonly by a mere forty eight hours. Appellants tried to downplay this contention by saying that supplies werebeing held in Tacloban City as the seat of the Region. However, except for this statement, nowhere in therecords is it independently established that Bals Enterprises, which has a business address at Lot 18 Blk.16, Narra Street, Hobart Subdivision, Quezon City, was maintaining stocks in Tacloban City with the specificnames of its sales agents and addresses thereat where such stocks were allegedly maintained.Moreover, it appeared appellants have placed themselves in a contradictory position. In Item 4.d.4 of theAppeal Memorandum, appellants say that "There will never be enough to distribute to farmer-beneficiaries considering the meager amount of government support . . ." Then, in the thirdparagraph of the same Item, appellants say: "A ratio of '1 bag of palay seeds to liters (sic) of liquidfertilizers' was devised just so all farmer beneficiaries can partake of the government fertilizerassistance." These statements could not be reconciled with the statement in the third paragraph of Item5.3 of the Appeal Memorandum that while the MOA provided for P3M funding, "the municipal officialsONLY AVAILED of some P1.9 million of it."If the appellants were aware of the meager amount of government support and of the method devised — 1bag of palay seeds to a liter of fertilizer — just so all farmer-beneficiaries could partake of the fertilizerassistance, it should have availed of the entire P3M assistance, not just the P1.9M.It seems not farfetched to contend that availment of only P1.9 M instead of the entire P3M was a convenientway of evading the requirement of a pre-procurement conference of the BAC if the cost of the goods is P2Mand below. (Section 20.2, Rule VII of the IRR-A, R.A. 9184 ) That way, there was an added reason not toconvene the BAC for the purpose which appellants should have convened in compliance with Section 22.1,Rule VII of said IRR, requiring the BAC to hold a pre-bid conference for contracts with an approved budget ofmore than P1 M. Moreover, the availment of only P1.9 M did away with the publication of the Invitation toApply for Eligibility and to Bid in a newspaper of general circulation as required in Section 21.2.1 of the Rule.All of these merely restricted the dissemination of bid opportunities and participation of potential suppliers,contrary to one of the governing principles on government procurement under Section 3 of the IRR.Because of the absence of a public bidding, there was no factual basis for the availment of DirectContracting. It also follows that all the signatories of the documents supporting this alternative method ofprocurement should likewise be liable. In this regard, the inclusion of Mr. Reynaldo Bodo, MunicipalAgriculturist, as among the persons liable would be justified in view of his signature on the PurchaseRequest for 3,900 liters of Fil-Ocean liquid fertilizer.With respect to the second assignment of error, appellants tried to explain the distribution of fertilizer tobeneficiaries without listed land areas by saying that the distribution was based on two methods: the "land-area" method and the "no-land-area" method. Those without land areas fall under the latter method basedon the number of bags of palay seeds distributed.We consider the above justification as a mere afterthought. The area need not be accurate to the last squaremeter. A beneficiary could easily give a rough estimate as to the area he is tilling.As regards the third assignment of error, appellants did not submit any countervailing evidence to squarelyrefute the audit finding that the Fil Ocean liquid fertilizer was suitable only for vegetables and flower plants.What the appellants had submitted was a document showing the provisional registration for the use of Fil-Ocean Liquid Fertilizer on rice until 19 June 2006, not the efficacy of this fertilizer. Ironically, the documentis dated 16 May 2005, thus irrelevant to herein case, which transpired in May 2004. Appellants merely triedto shift the blame to Mr. Reynaldo Bodo, the Municipal Agriculturist, as the person who they say "authorizedand/or recommended the procurement", signed the purchase request, and who had direct responsibility forthe qualities of the fertilizer.Anent the fourth assignment of error, appellants have sufficiently explained the disparity: the quantityprocured was in liters while the quantity distributed was in number of liters based on land area. However,this will not overturn the finding of blatant irregularity in the procurement process as discussed earlier to liftthe disallowance.In sum, appellants could not escape liability because of the patent disregard of the law (Casal et al., vs. COA,509 SCRA 673, 30 November 2006) and regulations on procurement, and should be held personally liablepursuant to Section 103 of P.D. No. 1445 for their direct participation in the transaction from its inception upto its consummation (Albert vs. Gangan, 353 SCRA 673, 6 March 2001).RULINGWHEREFORE, premises considered, the instant appeal is DENIED. LAO-Local Resolution No. 2007-028 dated11 December 2007, denying the Motion for Reconsideration from LAO-Local Decision No. 2007-011 dated 24

11 December 2007, denying the Motion for Reconsideration from LAO-Local Decision No. 2007-011 dated 24January 2007 and Notice of Disallowance (ND) No. 05-131-101 (04) dated 5 December 2005, is herebyAFFIRMED with modification for the inclusion of Mr. Reynaldo Bodo, Municipal Agriculturist, as one of thepersons liable for signing the Purchase Request for 3,900 liters of Fil-Ocean liquid fertilizer. The Audit TeamLeader (ATL) of the Municipality of Barugo, Leyte shall issue a Supplemental ND to include Mr. ReynaldoBodo, Municipal Agriculturist, among the persons held liable in the disallowed transaction.

(SGD.) REYNALDO A. VILLARChairman

(SGD.) JUANITO G. ESPINO, JR.Commissioner

Copy furnished:Atty. Leticia E. AlaCounsel for AppellantsCruz Durian Alday and Cruz-MattersACC Law Building, 451-461 Cabildo St.Intramuros, ManilaThe Assistant CommissionerLegal Services SectorThis CommissionThe Assistant CommissionerLocal Government SectorThis CommissionThe Regional DirectorCOA Regional Office No. VIIICandahug, Palo, LeyteThe Audit Team LeaderMunicipality of BarugoLeyte