National Power Corporation vs. Pinatubo Commercial

An administrative circular limiting public bidding participants to direct manufacturers is a valid exercise of government discretion and does not violate the equal protection clause, provided the classification is reasonable and substantially related to the objective of preventing the fencing of stolen government property.

NPC issued Circular No. 99-75 to govern the disposal of scrap aluminum conductor steel-reinforced (ACSR) wires, limiting qualified bidders to partnerships or corporations that directly use aluminum as raw material. Pinatubo Commercial, a scrap trader, applied for pre-qualification to bid on NPC's scrap ACSR cables but was denied solely on the basis of the circular's restrictions.

• The Circular: NPC Circular No. 99-75 established guidelines for the disposal of scrap ACSR wires to decongest NPC installations and generate income. Items 3 and 3.1 restricted qualified bidders to partnerships or corporations that directly use aluminum as raw material in producing finished products, or their duly appointed representatives.
• Denial of Pre-qualification: In April 2003, NPC published an invitation for the pre-qualification of bidders for the public sale of its scrap ACSR cables. Respondent Pinatubo Commercial, a trader of scrap materials, submitted a pre-qualification form but was denied in a letter dated April 29, 2003. Pinatubo's motion for reconsideration was likewise denied by NPC.

• Publication: NPC Circular No. 99-75 need not be published because it is not of general application but merely an internal directive addressed to NPC disposal committees and personnel.
• Reasonable Classification: A substantial distinction exists between manufacturers and traders of aluminum scrap, particularly in light of Republic Act No. 7832. Limiting bidders to manufacturers allows NPC to easily monitor the market for its scrap ACSRs and prevent the fencing of stolen wires.
• Trader Participation: Traders are not absolutely prohibited from participating in the bidding; they may do so provided they have a tie-up with a manufacturer.

• Due Process: The circular violates substantive due process because it creates rights in favor of third parties but was not published.
• Equal Protection: The circular violates the equal protection clause by favoring aluminum manufacturers and processors over dealers and traders in the purchase of aluminum ACSR cables.
• Free Trade and Competition: The circular denies traders the right to exercise their business, restrains free competition, and violates the competitiveness policy of Republic Act No. 9184 by allowing only a certain sector to participate in the bidding.

• Publication of Administrative Rules: Whether NPC Circular No. 99-75 must be published to have binding force and effect.
• Equal Protection: Whether items 3 and 3.1 of NPC Circular No. 99-75 violate the equal protection clause of the Constitution.
• Free Trade and Competition: Whether items 3 and 3.1 of NPC Circular No. 99-75 restrain free trade and competition.

• Publication of Administrative Rules: Publication was not required because the circular was merely an internal rule or regulation. It did not purport to enforce or implement existing law but directed NPC subordinates on the proper disposal of scrap ACSRs. The guidelines addressed solely NPC personnel involved in the bidding and award of scrap ACSRs and did not affect the rights of the general public, affecting individual rights only remotely, indirectly, and incidentally.
• Equal Protection: The equal protection clause was not violated. The classification between direct manufacturers and traders was reasonable and based on substantial distinctions. The limitation was intended to support Republic Act No. 7832 by ensuring scrap ACSRs end with manufacturers who process them into finished products, rather than passing through multiple traders where they might co-mingle with illegally sourced materials. Participation in bidding is a privilege, not a demandable right, and the government has wide discretion to determine who can participate, provided it is not done arbitrarily or fraudulently.
• Free Trade and Competition: Free trade and competition were not restrained. The competitiveness policy under Republic Act No. 9184 presupposes the eligibility and qualification of bidders; it does not mandate a "free-for-all." The free enterprise system does not preclude government intervention to promote general welfare, such as preventing the trafficking of stolen government property, and granting privileges to certain enterprises to the exclusion of others does not automatically render an issuance unconstitutional for espousing unfair competition.

• Publication of Administrative Rules — Interpretative regulations and those merely internal in nature, regulating only the personnel of the administrative agency and not the public, need not be published. Applied to exempt NPC Circular No. 99-75 from the publication requirement, as it was a directive to subordinates regarding the disposal of scrap ACSRs.
• Reasonable Classification under Equal Protection — The equal protection clause does not preclude classification of individuals who may be accorded different treatment under the law as long as the classification is reasonable and not arbitrary. Applied to uphold the distinction between manufacturers and traders, which was substantially related to the objective of monitoring scrap materials and preventing the fencing of stolen government property.
• Bidding as a Privilege — Participation in a government bidding process is a privilege, not a demandable right. The government agency has the power to determine who shall be its recipient and under what terms the award may be made. Courts will not interfere with this discretion unless exercised arbitrarily or fraudulently.

• "Since a bid partakes of the nature of an offer to contract with the government, the government agency involved may or may not accept it. Moreover, being the owner of the property subject of the bid, the government has the power to determine who shall be its recipient, as well as under what terms it may be awarded."
• "Our free enterprise system is not based on a market of pure and unadulterated competition where the State pursues a strict hands-off policy and follows the let-the-devil-devour-the-hindmost rule."

• Tañada v. Tuvera, G.R. No. L-63915 — Controlling precedent on the requirement of publication for statutes and administrative rules. Followed to establish the exception that internal regulations need not be published.
• J.G. Summit Holdings, Inc. v. Court of Appeals, G.R. No. 124293 — Cited for the definition of bidding and the authority to impose conditions or reservations in the bidding process.
• Desierto v. Ocampo, G.R. No. 155419 — Cited for the principle that a bid is an offer to contract with the government.
• Terminal Facilities and Services Corporation v. Philippine Ports Authority, G.R. No. 135639 — Cited for the principle that recipients of privileges or largesse from the government possess no traditionally recognized proprietary interest therein.
• Albay Accredited Constructors Association, Inc. v. Desierto, G.R. No. 133517 — Cited for the wide latitude of discretion in accepting or rejecting bids, and the policy against judicial interference in such discretion absent arbitrariness or fraud.
• Tatad v. Secretary of the Department of Energy, G.R. No. 124360 — Cited for the principle that the free enterprise system is not based on pure and unadulterated competition.
• Pest Management Association of the Philippines (PMAP) v. Fertilizer and Pesticide Authority (FPA), G.R. No. 156041 — Cited for the principle that granting incentives or privileges to certain enterprises to the exclusion of others does not render the issuance unconstitutional for espousing unfair competition, and the State's reserved power to intervene to promote general welfare.

• Section 3, Republic Act No. 7832 (Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994) — Penalizes the theft of ACSR in excess of 100 MCM. The circular's classification was intended to support this law by preventing stolen wires from co-mingling with legally purchased scrap.
• Section 3(b), Republic Act No. 9184 (Government Procurement Reform Act) — Governing principle of competitiveness, extending equal opportunity to eligible and qualified parties. Cited to demonstrate that competitiveness presupposes eligibility and qualification, not a "free-for-all."
• Section 5(e), Republic Act No. 9184 — Defines competitive bidding as a method open to any interested party but mandates eligibility screening of prospective bidders.

Presbitero J. Velasco, Jr., Diosdado M. Peralta, Lucas P. Bersamin, Jose Catral Mendoza