tatad v. garcia digest

VILLARAMA, BIANCA DANICA S. CASE # 14 PAGE 1

TATAD v. GARCIA G.R. No. 114222 06 Apri l 1995 Quiason, J. Topic: Presumption of Regularity of Performance; Strong Evidence SUMMARY: Out of the groups interested in building the EDSA LRT III, only one (a corporation organized under HK laws) satisfied the prequalification requirements. As such, DOTC awarded the contract to it by negotiation and not by public bidding. The parties entered into agreements initially without congressional or presidential approval. Petitioners questioned the validity of the proceedings conducted. SC dismissed the petition.

NATURE: Petition under Rule 65 to prohibit respondents (DOTC Sec. Garcia, Jr., and EDSA LRT Consortium) from further implementing the agreement to build an LRT system in EDSA N.B. Several DOTC Secretaries and Executive Secretaries were involved in this case. It's best not to focus on their names. FACTS:

1989 - DOTC planned to construct an LRT line along EDSA (EDSA LRT III). 1990 - RA 6957, the "Build-Operate-Transfer (BOT) Law" was passed. It recognized 2 schemes for the

financing, construction, and operation of gov't projects: BOT and BT (Build-Transfer). 1991 - The Prequalification Bids and Awards Committee (PBAC) issued guidelines for the prequalification of

contractors. These were published in 3 newspapers of general circulation weekly for 3 consecutive weeks. Of the 5 groups that submitted prequalification bids, only EDSA LRT Consortium, organized under HK laws,

met the requirement of 21 points per criterion (except Legal Aspects), garnering a total of 82/100. DOTC Sec. Prado sent Pres. Cory 2 letters recommending the award of the project to the Consortium and

requesting authority to negotiate with it. Exec. Sec. Orbos directed DOTC to proceed. Consortium submitted its bid proposal which DOTC found satisfactory. DOTC and EDSA LRT Corporation (in

substitution of Consortium; hereinafter "Corp") entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA".

1992 - DOTC Sec. Prado requested presidential approval of the contract, but Exec. Sec. Drilon said the President could not grant the approval for the ff. reasons:

(1) DOTC failed to conduct actual public bidding in compliance with the BOT Law 5; (2) The prequalification proceedings was not the public bidding contemplated under the law; (3) Item 14 of the IRR of the BOT Law which authorized negotiated award of contract in addition to public

bidding was of doubtful legality; (4) Congressional approval of the list of priority projects under the BOT/BT Scheme provided in the law had

not yet been granted at the time the contract was awarded DOTC and Corp entered into a Revised Agreement, claiming that the DOTC has full authority to sign the

Agreement without need of approval by the President. They also entered into a Supplemental Agreement to clarify their respective rights and responsibilities. DOTC Sec. Garcia submitted both to Pres. FVR for approval. FVR approved them. Under the agreements, this is how the BOT scheme will work:

o Corp shall undertake and finance the project. Upon viability thereof, Corp shall deliver the use and possession to DOTC which shall operate the same. DOTC shall pay monthly rentals. After 25 years and DOTC has completed the payments, ownership shall be transferred for $1.

1994 - RA 7718 amending the BOT Law was passed. It expressly recognizes the Build-Lease-Transfer (BLT) scheme and allows direct negotiation of BLT contracts.

PETITIONERS ARGUE: The Revised and Supplemental Agreements are unconstitutional/ invalid because:

(1) EDSA LRT III is a public utility, and the ownership and operation thereof is limited by the Constitution to Filipino citizens and domestic corporations, not foreign corporations like private respondent;

(2) The BLT scheme provided in the agreements is not the BOT or BT scheme under the law; (3) The contract was awarded to private respondent not through public bidding which is the only mode of

awarding infrastructure projects under the BOT law; and (4) The agreements are grossly disadvantageous to the government.

Bianca Danica Villarama










VILLARAMA, BIANCA DANICA S. CASE # 14 PAGE 2

ISSUES, HOLDING, RATIO: (SC dismissed the pet it ion.)

(1) W/N respondent EDSA LRT Corp, Ltd., a foreign corporation, can own EDSA LRT III, a public utility Loaded question. EDSA LRT Corp only owns the facilities used by the public utility, not the utility itself. The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof.

One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the facilities used to serve the public.

While Corp owns the facilities necessary to operate the EDSA LRT III (tracks, carriages, terminals, etc.), it admits that it does not have the franchise required by the Constitution to be able to operate a public utility. This is why the parties agreed that upon completion, the project will immediately be delivered by way of lease to DOTC, which shall operate the LRT as a common carrier.

In sum, Corp will not run the LRT and collect fees from the riding public. It will have no dealings with the public and the public will have no right to demand any services from it. Its role is only that of a lessor.

o Distinguished from Kilosbayan v. Guingona: In that case, the Court found that PGMC's participation was not confined to the construction and setting up of the online lottery system. It spilled over to the actual operation thereof. Here, Corp does not participate in the operation.

(2) W/N the BLT scheme in the Agreements is recognized under the BOT Law and its IRR YES. The BLT scheme is but a variation of the BT scheme under the law. There is no mention in the BOT Law that

the BOT and BT schemes bar any other arrangement for the payment by the government of the project cost. The law must not be read in such a way as to rule out or unduly restrict any variation within the context of the two schemes. No statute can be enacted to anticipate and provide all the fine points and details for the multifarious and complex situations that may be encountered in enforcing the law.

The burden on the government in raising funds to pay for the project is made lighter by allowing it to amortize payments from the LRT's income.

It is of no significance that the rents shall be paid in USD. It is a high-priority project certified by Congress and NEDA, hence outside the operation of the Uniform Currency Act.

(3) W/N the award through negotiation and before Congressional approval invalidates the award NO. This does not suffice to invalidate the award. Subsequent Congressional approval amounts to a ratification of the

prior award of the EDSA LRT IIII contract. The agreements have also been approved by Pres. FVR. Since only 1 applicant passed the prequalification process, to conduct a public bidding for that lone participant would

be an absurd and pointless exercise. PD 1594, "Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts," allows

the negotiated award of government projects in exceptional cases such as when there is a lack of qualified bidders or contractors, the award of government infrastructure contracts may be made by negotiation. PD 1594 is the general law on government infrastructure contracts while the BOT Law governs particular arrangements or schemes aimed at encouraging private sector participation. The 2 laws are not inconsistent with each other but are in pari materia and should be read together accordingly.

Petitioners' claim that the BLT scheme and direct negotiation of contracts are not contemplated by the BOT Law has now been rendered moot and academic by RA 7718. It is a curative statute, which makes valid that which before enactment of the statute was invalid.

If the prequalification process was actually tainted by foul play, why didn't any of the competing firms bring the matter before the PBAC or intervene in this petition?

(4) W/N the Agreements are grossly disadvantageous to government NO. Government officials are presumed to perform their functions with regularity and strong evidence is

necessary to rebut this presumption. Petitioners have not presented evidence on the reasonable rentals to be paid by the parties to each other. The matter of valuation is an esoteric field which is better left to the experts and which this Court is not eager to undertake.

The terms of the agreements were arrived at after a painstaking study by DOTC. The determination by the proper administrative agencies and officials who have acquired expertise, specialized skills and knowledge in the performance of their functions should be accorded respect, absent any showing of grave abuse of discretion. The discretion to award a contract is vested in the agencies entrusted with that function.

That the grantee of a government contract will profit therefrom and to that extent the government is deprived of the profits if it engages in the business itself, is not worthy of being raised as an issue. In all cases where a party enters into a contract with the government, he does so not out of charity and not to lose money, but to gain pecuniarily.












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