Cancel backhoe buy? No way, says PBAC chairman

By: JUNE S. BLANCO

ALLEGATIONS of overprice in the purchase of a Volvo backhoe with breaker led Gov. Erico Aumentado to ask Provincial Legal Officer Handel Lagunay as early as two weeks ago to examine the possibility of canceling the purchase “even at this late hour of the day” and recommend an alternative. Lagunay however said the provincial government can no longer cancel the purchase; the contract to buy has been perfected. He chairs the Prequalification of Bids and Awards Committee. (PBAC). Former OIC Gov. Victor de la Serna had furnished Aumentado with a copy of a quotation made out by Civic Merchandising, Inc. to an unknown person for P6.2 million for the same brand and model of backhoe. Lagunay said Article 1315 of the New Civil Code states that “Contracts are perfected by mere consent, and from that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.”

Considering that the contract was already awarded to Civic, the lone complying and responsive bidder, and the Letter of Credit (LC) was received on July 12, which commenced the 90-day period to deliver, the contract for the delivery thereof was already perfected. This means the ground to cancel the procurement under the Implementing Rules and Regulations Part-A of Republic Act (RA) 9184 or the Government Procurement Reform Act is no longer available.

The usual legal basis to cancel procurement is Section 41 wherein the procuring entity reserves the right to reject any and all bids, declare a failure of bidding, or not award the contract. However the situations enumerated do not apply because Section 41 is good only when the contract is not yet awarded. On the other hand, the New Civil Code provides grounds to annul a contract: rescission, annulment, declaration as unenforceable or declaration a void or inexistent. Lagunay said the closest remedy among the modes of cancellation to cancel the procurement based on the allegation of overprice is the annulment of a voidable contract.

Voidable or annullable contracts are those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. “If established that the excavator with breaker is overpriced, it can be argued that fraud has been committed which vitiated the consent of the provincial government and this gives rise to a cause of action to annul the contract,” he said.

To be successful in annulling the contract on the ground of fraud, Lagunay said the provincial government should prove the existence thereof – in this instance – by way of overprice as alleged. The Merriam-Webster Online Dictionary defines “overprice” as “to price too high.” The provincial government can verify if the price was in accord with the prevailing market price at the time of the procurement and if the total price quoted pertains to the excavator with breaker only or if it includes other necessary expenses and services to be rendered after delivery. However, a question on the margin of profit, computation for cost of money and other allowable additions to the basic cost consistent with existing government auditing rules can only be authoritatively determined by the Commission on Audit after it conducts a post-transaction audit.

Basis for allegation

The only basis of the allegation of overprice is the “revised quotation” dated Aug. 15 that de la Serna submitted. Accordingly, since the price of the heavy equipment is only P6.2 million while the provincial government is paying over P9.41 million, it is alleged that there is an overprice.

Disparity

But there are disparities in the purchased and quoted Volvo even if they are of the same EC210BLC model. The purchased model has a roll-over protection system (ROPS) cab equipment; the quoted one has only the seal type. The purchased one has a 1.22 cubic meter bucket size compared to the 0.92 cu. Meter for the latter. For attachment, the former has a brand new hydraulic breaker with piping kit; the latter has no breaker - only a piping kit. The former will be delivered to Tagbilaran City ; the latter will be delivered to Manila only. The buyer for the former is a local government unit and therefore qualifies for additional costs to consider while that for the latter is unknown and therefore government auditing rules do not apply. Additional costs include the transportation expenses and marine insurance from Manila to Tagbilaran, margin of profit and cost of money as allowed under government auditing rules.

Rigged?

Lagunay said based on the story that came out in one newspaper last Sunday, the only basis of the allegation that the bidding was rigged or manipulated is the minutes of the Bids and Awards Committee (BAC) proceedings. Because only one bidder submitted a bid, it is clear that the winning bidder was already determined beforehand, the story said. But the provincial legal officer said there is no truth to this allegation. Old procurement laws require at least three bidders otherwise the process will be declared a failure. RA 9184 states that the bidding process can still proceed even if only one bidder drops a bid. Lagunay explained that apparently the legislators abandoned the three-bidder requirement because if only one bidder is interested, he is forced to engage two other bidders to pose as “diers.” “This old practice was actually a mockery of the bidding process. At least, under the new bidding law, this travesty of bringing in ‘diers' is eliminated,” he explained. Three companies had responded and made inquiries after the procurement project was posted and advertised, including in the provincial government's website. The private and religious sectors were even duly notified in writing of the schedule of bidding activities. Only Civic and Monark Equipment, Inc. however submitted eligibility requirements; Maxima Equipment Co., Inc. did not. Ultimately, only Civic submitted a bid quotation. After evaluation, its bid was declared as “complying and responsive.” Why the two other companies did not pursue to submit their bids is already beyond the control of the BAC or the BAC Secretariat, Lagunay said.

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