De Guzman vs. The Office of the Ombudsman and Bestforms, Inc.

In alternative modes of procurement under RA 9184, the procedural requirements of pre-procurement and pre-bid conferences, written invitations to the COA and at least two observers, and posting of the IAEB must still be observed; a procuring entity may not directly award a contract to a participating bidder after a failed bidding, and noncompliance supported by substantial evidence may constitute grave misconduct.

Marietta Maglaya De Guzman served as Sales & Promotion Supervisor V of the National Printing Office (NPO) and simultaneously chaired the NPO Bids & Awards Committee (NPO-BAC). Bestforms, Inc. was a private security printer that participated in NPO biddings for the printing of accountable forms of the Land Transportation Office. The governing statute is Republic Act No. 9184, the Government Procurement Reform Act, which requires competitive bidding as a general rule and permits alternative modes of procurement only under specified conditions. The NPO conducted annual accreditation of private security printers to ensure the security of government forms with money value.

On March 30, 2006 and April 12, 2006, the National Printing Office Bids & Awards Committee (NPO-BAC) conducted competitive public biddings for, among others, the printing of accountable forms of the Land Transportation Office (LTO). Bestforms, Inc. and Readyform, Inc. (RFI) secured the awards in those public biddings. For the March 30, 2006 bidding, Bestforms, Inc. and RFI were issued their respective Notices of Award on April 17 and April 25, 2006, while RFI was likewise issued a Notice of Award for the April 12, 2006 bidding.

Before Bestforms, Inc. could be issued a Notice of Award for the April 12 bidding, the NPO discovered that the corporation violated NPO rules on security printing based on an inspection conducted by the NPO Accreditation Committee and NPO-BAC at its printing facilities. The LTO also called the NPO’s attention to the substandard paperstock used by Bestforms, Inc. for the printing of LTO Certificates of Registration. To verify the allegation, the NPO submitted samples of the materials used by Bestforms, Inc. to the Philippine National Police (PNP) Crime Laboratory, which on May 17, 2006 issued Report No. 046-06 stating that the paper sample from Bestforms, Inc. was made of low-quality materials. The NPO then issued two Show Cause Letters to Bestforms, Inc., and the Accreditation Committee thereafter revoked Bestforms, Inc.’s accreditation as a private security printer of the NPO. As a result, Bestforms, Inc. was disqualified from participating in any bidding conducted by the NPO and its ongoing printing transactions were cancelled. Bestforms, Inc. did not appeal the revocation.

Consequently, the contracts awarded to Bestforms, Inc. during the March 30, 2006 bidding were subjected to a re-bidding through Limited Source Bidding on June 13 to 14, 2006. RFI won in these biddings and subsequently secured two Notices of Award both dated June 16, 2006. Aside from these two awards, the NPO similarly awarded to RFI, through Negotiated Procurement, the supply of LTO forms since the contracts awarded to Bestforms, Inc. on April 17, 2006 had been cancelled and considering further that RFI submitted the same bid price as that of Bestforms, Inc.

Subsequently, Bestforms, Inc. instituted an administrative complaint against the NPO officer-in-charge, Felipe Evardone, and the members of the NPO-BAC before the Office of the Ombudsman, alleging that the NPO officers and RFI knowingly and willfully conspired, colluded, and connived with each other to manipulate the award of the printing contracts to RFI. De Guzman held the position of Sales & Promotion Supervisor V in the NPO and simultaneously served as the Chairperson of the NPO-BAC.

The Ombudsman found De Guzman and her co-respondents guilty of grave misconduct and based its judgment on the failure of the NPO-BAC to observe the procedures laid down in Republic Act No. 9184 for the Limited Source Biddings conducted on June 13 and 14, 2006 and in entering into a Negotiated Procurement with RFI. According to the Ombudsman, the NPO-BAC failed to show that it (a) conducted a pre-procurement conference prior to the biddings pursuant to Section 20 of the IRR-A; (b) sent written invitations to the Commission on Audit and to two observers to attend the biddings in accordance with Section 13.1 of the IRR-A; (c) advertised the Invitation to Apply for Eligibility to Bid (IAEB) in a newspaper of general nationwide circulation for the period mandated by law; (d) posted the IAEB at the website of the Government Electronic Procurement Services and at a conspicuous place reserved for that purpose in the premises of the NPO; and (e) included the mandated contents of the IAEB in the advertisement and periods of posting, specifically the Approved Budget for the Contract or Ceiling Rate, required specifications for the forms to be printed, and the pertinent dates. The Ombudsman and the Court of Appeals also found that none of the conditions for negotiated procurement obtained and that the NPO-BAC failed to sufficiently justify its resort to Negotiated Procurement with RFI instead of competitive public bidding.

• Retroactive Application of the Revised IRR: De Guzman argued that the Court of Appeals violated the Constitution when it retroactively applied the Revised IRR, which was non-existent at the time she committed the acts or omissions complained of; the applicable rules were the IRR-A, which took effect in October 2003.
• Compliance with Alternative Modes of Procurement: She maintained that the NPO-BAC complied with all the requirements of the law when it resorted to limited-source bidding and negotiated procurement, citing Memorandum Order No. 38 issued on November 19, 1998, which prescribed guidelines for contracting private security printers for accountable forms with money value and other specialized forms.
• Non-Applicability of Section 49.4 of the Revised IRR: She asserted that the Court of Appeals erred in holding that the NPO-BAC violated Section 49.4 of the Revised IRR respecting direct invitations to all suppliers in the pre-selected list and compliance with the procedure for competitive bidding, because those requirements did not yet exist when the limited-source biddings were conducted in 2006.
• Re-bid and Pre-bid Conference: She argued that the June 13 and 14, 2006 biddings were merely a re-bid of the March 30 and April 12, 2006 biddings, so a pre-bid conference was no longer necessary; the earlier pre-bid conference served as the pre-bid conference for the June 2006 biddings.
• Negotiated Procurement Based on Take-over: She contended that RA 9184 and its Rules allow the BAC to resort to negotiated procurement in case of a take-over of a previously awarded contract, contrary to the Court of Appeals’ conclusion that two failed biddings were a condition sine qua non; the NPO-BAC issued a Resolution on June 2, 2006 explaining that the resort to negotiated procurement with RFI was based on a take-over of Bestforms, Inc.’s contract due to the revocation of its accreditation.
• Disqualification of Second and Third Bidders: She explained that the second and third bidders submitted bid offers beyond the Approved Budget for the Contract, which automatically disqualified them from being considered in a negotiated procurement under Section 54.2 of the IRR-A.
• Penalty: She argued that dismissal from service was too harsh a penalty for the purported infraction.

• Applicable Procurement Rules: Whether the Court of Appeals violated the Constitution or erred in retroactively applying the Revised IRR, which took effect on September 2, 2009, to acts or omissions committed in 2006.
• Compliance with Limited Source Bidding and Negotiated Procurement: Whether the NPO-BAC complied with the requirements of RA 9184 and its IRR-A for limited-source bidding and negotiated procurement.
• Grave Misconduct: Whether De Guzman is liable for grave misconduct for the failure of the NPO-BAC to comply with the requirements under RA 9184 for limited-source bidding and negotiated procurement.
• Penalty: Whether dismissal from service is too harsh a penalty for the infraction.

• Applicable Procurement Rules: Yes, insofar as the Court of Appeals erroneously applied the Revised IRR; the applicable rules were the IRR-A, which took effect in October 2003. The error did not warrant reversal because the IRR-A likewise imposed the violated procedural requirements.
• Compliance with Limited Source Bidding and Negotiated Procurement: No. The requirements of pre-procurement and pre-bid conferences, written invitations to the COA and at least two observers, and posting of the IAEB must be followed in alternative modes of procurement, and the NPO-BAC failed to prove compliance; negotiated procurement based on take-over also required negotiation with the second and third lowest calculated bidders before any direct award.
• Grave Misconduct: Yes. The lack of official documents proving compliance with the bidding requirements constituted substantial evidence sufficient to establish De Guzman’s liability for grave misconduct.
• Penalty: No. Dismissal from service is the prescribed penalty for grave misconduct under Section 46, Rule 10 of the Revised Rules on Administrative Cases in the Civil Service.

• Applicable Procurement Rules: The Court agreed with De Guzman that the IRR-A, effective October 2003, governed the 2006 procurements, and that the Court of Appeals erred in applying the Revised IRR effective September 2, 2009. This did not exonerate De Guzman, however, because the IRR-A itself contained the requirements for limited-source bidding and negotiated procurement that the NPO-BAC failed to observe. The Court thus proceeded to assess liability under the IRR-A.
• Compliance with Limited Source Bidding and Negotiated Procurement: RA 9184 requires competitive bidding as the general rule, with alternative methods allowed only in highly exceptional cases and under the conditions in Article XVI. Even in alternative modes, the law and IRR-A require pre-procurement and pre-bid conferences on each and every procurement, written invitations to a COA representative and at least two observers in all stages, and posting of the IAEB at the procuring entity’s website, the G-EPS, and a conspicuous place. The NPO-BAC did not present a certification of the BAC Secretariat head attesting to posting or copies of written invitations to observers; De Guzman’s bare claims and general denials were insufficient. For negotiated procurement based on take-over, Section 54.2(e) of the IRR-A required negotiation starting with the second lowest calculated bidder at the original bid price, then the third lowest, and if both failed, a short list of at least three eligible contractors; direct award to RFI was not allowed. The records showed no compliance with these requirements.
• Grave Misconduct: Misconduct is a transgression of an established and definite rule of action, more particularly unlawful behavior or gross negligence by a public officer. It is grave if it involves corruption or willful intent to violate the law or to disregard established rules, proven by substantial evidence; otherwise it is simple. In administrative cases, a fact may be deemed established if supported by substantial evidence, or such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. The absence of official documents proving compliance with the bidding requirements constituted substantial evidence that De Guzman and the other NPO-BAC members grossly disregarded RA 9184 and were manifestly remiss in their duties, resulting in undue benefit to RFI. Such blatant and palpable disregard amounted to a willful intent to subvert the law’s policy of transparency and accountability in government contracts.
• Penalty: Under Section 46, Rule 10 of the Revised Rules on Administrative Cases in the Civil Service, grave misconduct is punishable by dismissal from the service. The Ombudsman’s penalty of dismissal, with forfeiture of benefits except accrued leave credits and with prejudice to re-employment in the government, was therefore proper.

• Competitive Bidding as General Rule; Alternative Modes as Exceptions — RA 9184 mandates all procurement through competitive bidding, except as provided in Article XVI. Alternative methods such as limited-source bidding and negotiated procurement are allowed only in highly exceptional cases and under the conditions set forth by law. The Court applied this by requiring strict compliance with the conditions for limited-source bidding and negotiated procurement.
• Procedural Requirements in Alternative Modes of Procurement — The requirements of pre-procurement and pre-bid conferences, written invitations to the COA and at least two observers, and posting of the IAEB must still be followed in alternative modes of procurement. The Court held that the NPO-BAC failed to comply with these requirements, and that De Guzman’s bare claims of compliance were insufficient.
• Negotiated Procurement Based on Take-Over of Contract — Under Section 54.2(e) of the IRR-A, when negotiated procurement is based on a take-over of a rescinded or terminated contract, the procuring entity must negotiate first with the second lowest calculated bidder at the original bid price; if negotiation fails, with the third lowest; if that fails, it must invite a short list of at least three eligible contractors and negotiate starting with the lowest bidder. A direct award to a participating bidder after a failed bidding is not allowed. The Court found no evidence of compliance with this procedure.
• Substantial Evidence in Administrative Cases — Under Section 5, Rule 133 of the Rules of Court, a fact may be deemed established in administrative or quasi-judicial bodies if supported by substantial evidence, defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion; it is more than a mere scintilla. The standard is satisfied when there is reasonable ground to believe that a person is responsible for the misconduct complained of, even if the evidence is not overwhelming or preponderant. The Court held that the lack of official documents proving compliance with bidding requirements constituted substantial evidence of grave misconduct.
• Grave Misconduct — Misconduct is a transgression of an established and definite rule of action, more particularly unlawful behavior or gross negligence by a public officer. It is grave if it involves corruption or willful intent to violate the law or to disregard established rules, proven by substantial evidence; otherwise it is simple. The elements of corruption, clear intent to violate the law, or flagrant disregard of an established rule must be evident. The Court found these elements present in the NPO-BAC’s gross disregard of RA 9184.
• Negative Allegations — Negative allegations need not be proved even if essential to one’s cause of action or defense if they constitute a denial of the existence of a document the custody of which belongs to the other party. The Court applied this to Bestforms, Inc.’s allegation of non-compliance with bidding procedures, which was a negative allegation, while the NPO-BAC had custody of the documents proving compliance.
• Public Bidding and Public Policy — Public biddings are held for the best protection of the public and to give the public the best possible advantages through open competition; modifications or amendments that give the winning bidder an edge or advantage over other bidders, or that make the signed contract unfavorable to the government, are prohibited. The Court held that the NPO-BAC’s deviations circumvented RA 9184 and violated this policy.

• "The requirements of a pre-bid conference, written invitation to observers, and posting of the IAEB must still be followed in alternative modes of procurement" — This heading states the Court’s core procedural holding that alternative procurement does not dispense with these requirements.
• "Contrary, to De Guzman's position, the language of the law and the IRR-A is clear: such requirements must be followed in any and all types of procurement. Not all procedures followed in competitive biddings are dispensed with when an agency or office resorts to any of the alternative modes of procurement." — The Court rejects the argument that re-bidding or alternative procurement excuses compliance with the procedural requirements.
• "There is nothing in the law that allows the procuring entity to directly award a contract to a participating bidder, even one who offered the best bid, whenever there is a failure of bidding." — The Court explains why the NPO-BAC’s direct award to RFI under negotiated procurement was not allowed.
• "The lack of official documents proving compliance with the bidding requirements constitutes the substantial evidence that sufficiently establishes De Guzman's liability for grave misconduct." — The Court ties the evidentiary burden and absence of records to the finding of grave misconduct.

• Lagoc vs. Malaga, G.R. No. 184785, July 9, 2014, 729 SCRA 421, 427 — Cited for the purpose of competitive public bidding: to protect public interest by giving the public the best possible advantages through open competition and to avoid suspicion of favoritism and anomalies in the execution of public contracts.
• Danville Maritime, Inc. vs. Commission on Audit, 256 Phil. 1092, 1103 (1989) — Cited in Lagoc vs. Malaga for the same principle on competitive public bidding.
• Capalla vs. Commission on Elections, G.R. No. 2011212, October 23, 2012, 684 SCRA 367 — Cited for the rule that alternative methods of procurement are allowed under RA 9184 and for the principle that prohibited modifications or amendments are those giving the winning bidder an edge or advantage over other bidders or making the signed contract unfavorable to the government.
• Philippine Savings Bank vs. Geronimo, G.R. No. 170241, April 19, 2010, 618 SCRA 368, 376 — Cited for the rule that negative allegations need not be proved if they constitute a denial of the existence of a document the custody of which belongs to the other party.
• Office of the Ombudsman vs. Mallari, G.R. No. 183161, December 3, 2014, 743 SCRA 587 — Cited for the definition of substantial evidence and for the definition of grave misconduct and corruption.
• Office of the Ombudsman vs. Castro, G.R. No. 172637, April 22, 2015, 757 SCRA 73 — Cited for the substantial evidence standard in administrative cases.
• Office of the Ombudsman vs. Agustino, G.R. No. 204171, April 15, 2015, 755 SCRA 568 — Cited for the elements of grave misconduct.
• Gupilan-Aguilar vs. Office of the Ombudsman, G.R. No. 197307, February 26, 2014, 717 SCRA 503 — Cited for the rule that the absence of substantial evidence is not shown by stressing that there is contrary evidence on record.

• Section 10, Article IV, Republic Act No. 9184 — Requires all procurement to be done through competitive bidding, except as provided in Article XVI. The Court used this as the general rule against which the NPO-BAC’s resort to alternative modes was measured.
• Section 5, paragraphs (n) and (o), Article I, Republic Act No. 9184 — Cited in relation to Section 10 for the policy and principle of promoting transparency in the procurement process and competitiveness by extending equal opportunity to eligible and qualified private contracting parties. The Court applied this policy in requiring strict compliance with procurement procedures.
• Section 49, Republic Act No. 9184 — Allows Limited Source Bidding only for highly specialized types of goods and consulting services obtainable only from a limited number of sources, or for major plant components under specified conditions. The Court examined this provision in assessing the NPO-BAC’s limited-source biddings.
• Section 53, Republic Act No. 9184 — Allows Negotiated Procurement only in specified instances, including two failed biddings and take-over of contracts rescinded or terminated for causes provided in the contract and existing laws where immediate action is necessary. The Court found that none of the conditions justified the NPO-BAC’s negotiated procurement with RFI.
• Section 13, Article V, Republic Act No. 9184 and Section 13, Rule V, IRR-A — Require the BAC to invite, in all stages of the procurement process, a COA representative and at least two observers, one from a duly recognized private group and one from an NGO. The Court held that the NPO-BAC failed to prove it sent these written invitations.
• Section 20, Article VII, Republic Act No. 9184 — Mandates a pre-procurement conference on each and every procurement, except those below a certain level or amount specified in the IRR. The Court found the NPO-BAC failed to show compliance.
• Section 22, Article VII, Republic Act No. 9184 — Requires at least one pre-bid conference for each procurement, unless otherwise provided in the IRR. The Court held this requirement applied to the June 2006 biddings despite De Guzman’s claim that they were merely a re-bid.
• Section 21.2.4, IRR-A — Provides that for alternative methods of procurement, advertisement in a newspaper may be dispensed with, but posting shall be made in the procuring entity’s website, the G-EPS, and a conspicuous place in the procuring entity’s premises. The Court found no proof of posting.
• Section 54.2(e), IRR-A — Sets the procedure for negotiated procurement based on take-over of contract: negotiation starts with the second lowest calculated bidder at the original bid price, then the third lowest, and if both fail, a short list of at least three eligible contractors is invited. The Court found no evidence of compliance and held that a direct award to RFI was not allowed.
• Section 5, Rule 133, Rules of Court — Defines substantial evidence in cases before administrative or quasi-judicial bodies as such relevant evidence as a reasonable mind might accept as adequate to justify a conclusion. The Court used this standard to sustain the Ombudsman’s findings.
• Section 46, Rule 10, Revised Rules on Administrative Cases in the Civil Service — Classifies grave misconduct as a grave offense punishable by dismissal from the service. The Court affirmed the penalty of dismissal.

Bersamin, Leonen, Jardeleza, and Martires, JJ., concur. Jardeleza, J., was designated as an additional member per Raffle dated November 20, 2017.