The Commission on Audit (COA) commits grave abuse of discretion when it inordinately delays action on a government agency's request for concurrence to engage private legal counsel and subsequently denies the request solely on the ground of lack of such prior concurrence, especially when the delay hampers the agency's fulfillment of its mandate. Furthermore, while COA has the discretion to require pre-audit, its unreasonable delay in exercising this function can excuse non-compliance by the requesting agency.

The case arose from PSALM's need to engage international and Philippine legal advisors for the privatization of generation assets and Independent Power Producer (IPP) contracts of the National Power Corporation (NPC), a mandate under the Electric Power Industry Reform Act (EPIRA) of 2001. PSALM sought the concurrence of both the Office of the Government Corporate Counsel (OGCC) and the COA for these engagements due to the highly technical expertise required, particularly in international public bidding and IPP contracts, which was crucial for bolstering investor confidence and meeting EPIRA's privatization timelines.

• On May 9, 2011, PSALM requested concurrences from COA and OGCC to engage Mr. John T. K. Yeap as an international legal advisor and Atty. Michael B. Tantoco as a Philippine legal advisor for its privatization projects under EPIRA, with a requested action date of on or before May 30, 2011, due to urgency.
• The engagement was for six months, with specified professional fees and scopes of services, explicitly stating that services would not involve court representation.
• OGCC granted its concurrence on May 31, 2011, finding the contracts generally in order.
• COA did not respond by PSALM's requested date. PSALM waited an additional 91 days (total 110 days from May 13, 2011) before proceeding with the engagement of the advisors effective August 29, 2011.
• Over three years later, on November 6, 2014, the COA Legal Services Sector-Office of the General Counsel issued LRR No. 2014-174, denying PSALM's request because PSALM engaged the consultants without COA's prior approval, citing COA Circulars and a previous denial for similar engagement in 2010.
• PSALM's motion for reconsideration was denied by COA Decision No. 2017-215 dated July 6, 2017, which held that prior COA concurrence was indispensable even for advisory services and denied payment on quantum meruit, making the approving officers personally liable.
• A subsequent motion for reconsideration by PSALM was denied by COA Resolution-Decision No. 2019-004 dated January 30, 2019.
• The legal advisors had satisfactorily completed their services, contributing to the privatization of around 70% of generation assets.

• PSALM argued that the hiring of legal advisors was exempt from COA Circular Nos. 86-255 and 95-011 because their services were purely advisory and did not involve court appearances.
• The highly technical expertise of the advisors was essential for PSALM's privatization mandate under EPIRA, and delaying their engagement due to lack of COA's concurrence would have hampered these projects.
• The PSALM officers who authorized the payment acted in good faith, pursued PSALM's legitimate mandate, derived no personal benefit, and the payment was for public benefit.
• The consultants should not be required to return payments received for services already rendered, based on the principle of quantum meruit.
• COA committed grave abuse of discretion by acting on the request only after three years.

• COA, through the OSG, contended that the concurrences of both OGCC and COA are mandatory for hiring private lawyers by GOCCs like PSALM, regardless of whether the services involve actual legal controversy.
• PSALM was estopped from denying its awareness of the need for COA's concurrence, as evidenced by a previous LRR in 2010.
• The claim that awaiting COA's concurrence would delay privatization projects was belied by PSALM's prior knowledge of the requirement.
• The approving PSALM officers did not act in good faith due to their blatant disregard of the concurrence requirement and notice of the previous LRR, making them personally liable.
• Invocation of quantum meruit is unavailing, citing Polloso v. Gangan.
• COA's prior written concurrence is not pre-audit but a mandated requirement for exceptional hiring, sought primarily to determine rate reasonableness, and may be denied if fait accompli.
• COA acts on requests within a reasonable time, but delays may be justified by the volume of requests and other audit transactions.

• Whether the required prior concurrence of COA for the engagement of a private lawyer is a species of pre-audit and if imposing it as a prerequisite to validity is ultra vires.
• Whether the contracts of engagement are subject to the concurrence requirement under COA Circular Nos. 86-255 and 95-011.
• Whether COA committed grave abuse of discretion when it acted on PSALM's request for engagement of legal advisors only after three (3) years following its receipt.
• Whether the approving PSALM officers are liable for the payment of the advisors' fees.

• The Supreme Court granted PSALM's petition and nullified COA Decision No. 2017-215 and Resolution-Decision No. 2019-004. COA was directed to allow payment to the legal advisors.
• The requirement for COA's prior written concurrence to engage private counsel is an instance of pre-audit. COA has the exclusive jurisdiction to decide when to require pre-audit. The Court found no reason to overturn COA's discretion to require pre-audit in the form of written concurrence for outside legal services.
• The contracts of engagement were subject to the concurrence requirement under COA Circulars Nos. 86-255 and 95-011, which cover all types of legal services, not just court litigation.
• COA committed grave abuse of discretion by inordinately delaying its action on PSALM's request for over three years. COA's denial, based on PSALM not obtaining prior concurrence, was unjustified as this was a result of COA's own inaction and delay. This violated PSALM's right to a speedy disposition of its case.
• The PSALM officers who approved the contracts should not be held personally liable. They acted in good faith to fulfill PSALM's EPIRA mandate, especially given COA's delay and the urgency of the privatization projects. The legal advisors satisfactorily rendered their services for the benefit of the government.
• The Court laid down remedial measures: government agencies must submit requests for COA concurrence at least 60 calendar days prior to engagement, with OGCC/OSG conformity. COA has 60 calendar days to act; inaction deems the request approved.

• Pre-audit — An examination of financial transactions before their consumption or payment to determine compliance with appropriation laws, availability of funds, reasonableness of expenditure, and proper approval. The Court held that COA's requirement for prior written concurrence for engaging private counsel is essentially a pre-audit, aimed at preventing wastage of public funds. COA has the constitutional mandate and discretion to require pre-audit.
• COA's Exclusive Authority to Define Scope of Audit — The Constitution grants COA exclusive authority to define the scope of its audit and examination. The Court affirmed COA's discretion to require pre-audit (in the form of written concurrence) for engaging outside legal services, despite general lifting of pre-audit in other areas, by invoking saving clauses in its circulars.
• Prohibition on Hiring Private Lawyers by Government Agencies (Exception) — Government agencies, including GOCCs, are generally prohibited from hiring private lawyers unless exceptional circumstances warrant and prior written conformity of the OGCC/OSG and COA is secured. This rule applies to all forms of legal services, not just litigation. Applied here, PSALM's engagement was subject to this rule.
• Grave Abuse of Discretion — An evasion of a positive duty, virtual refusal to discharge a duty enjoined by law, or performing an act tainted with caprice or despotism, amounting to excess or lack of jurisdiction. COA's inordinate delay of over three years in acting on PSALM's request and then denying it based on the lack of prior concurrence (caused by COA's own delay) constituted grave abuse of discretion.
• Right to Speedy Disposition of Cases (Art. III, Sec. 16, Constitution) — All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial, or administrative bodies. COA's inordinate delay violated PSALM's right to a speedy disposition of its request for concurrence.
• Good Faith of Public Officials — Public officials are presumed to have acted in good faith in the performance of their duties. Personal liability does not attach unless there is a clear showing of bad faith, malice, or gross negligence. The PSALM officers were found to have acted in good faith in proceeding with the engagement due to COA's inaction and the urgency of their mandate.
• Quantum Meruit — Payment for services rendered to the extent of their reasonable value. While not explicitly granted on this basis, the Court directed payment for services satisfactorily completed by the legal advisors, emphasizing their entitlement to compensation under their contracts and the benefit to the government.
• Doctrine of Primary Jurisdiction — Courts will hold off from determining a controversy involving a question within the jurisdiction of an administrative agency, particularly when its resolution demands special knowledge. The Court recognized that the OSG/OGCC are the primary agencies to determine the necessity/expediency of hiring private legal services, and their determination is entitled to great respect by COA.

• "COA denied written concurrence because PSALM had not obtained such concurrence. This reasoning begs the issue. This is precisely why we cannot adhere to COA's denial of PSALM's request."
• "COA's unjustified refusal and delay to perform its obligation to review, evaluate, and render its concurrence prevented PSALM from securing the required concurrence. Thus, there was no fault on the part of PSALM as the fault lies with COA."
• "For if we simply accept this reasoning [sheer volume of requests] and justify any other delays in past and future cases, either pending or soon to be initiated with this Court, nothing will prevent this faux pas from occurring over and over again."
• "Should the period of sixty (60) calendar days expire, sans any action from COA, the request is deemed approved."
• "The approving and implementing PSALM officers should not be held personally liable for payment of the professional fees owing to the legal advisors. The latter's expertise and services substantially contributed to boosting the government's privatization of 70% of our generation assets with the end in view of improving the quality of power supply in the entire country."

• Dela Llana v. Commission on Audit — Cited for the definition of pre-audit and COA's constitutional mandate to determine whether to require pre-audit or post-audit, and its exclusive authority to define the scope of its audit.
• Polloso v. Gangan — Cited by COA to deny payment on quantum meruit and by the Court to clarify that COA Circular No. 86-255's concurrence requirement applies to all types of legal services, not just court litigation. The Court distinguished the present case by noting COA's inordinate delay here.
• Oñate v. COA — Cited by OSG and the Court to affirm that COA's prior concurrence requirement for hiring private lawyers covers any form of legal service, not just actual legal controversy or court litigation.
• Alejandrino v. COA — Cited to establish the three indispensable conditions for GOCCs to hire external lawyers: exceptional cases, OGCC/OSG conformity, and COA concurrence. Distinguished because PSALM sought COA concurrence unlike in Alejandrino.
• Navarro v. Commission on Audit — Cited as an instance where COA was found guilty of inordinate delay, violating the right to speedy disposition of cases. The Court applied the factors for determining inordinate delay from this case.
• Phividec Industrial Authority v. Capitol Steel Corporation — Cited for the rule that hiring private lawyers without prior OGCC/COA concurrence is unauthorized. Distinguished because PSALM sought concurrence, but COA caused the delay.
• Municipality of Pililla, Rizal vs. Court of Appeals — Referenced as the case leading to COA Circular No. 95-011, reiterating the rules on hiring private counsel by government agencies.
• Gonzales v. Chavez — Cited for the rationale behind requiring OSG/OGCC approval for hiring private counsel, emphasizing consistency in legal policies and the OSG's role as principal law officer.

• COA Circular No. 86-255 — Requires prior written conformity of OSG/OGCC and COA for hiring private lawyers by government agencies; otherwise, payment of retainer fees is disallowed. The Court held it applies to all legal services but COA's delay excused non-compliance.
• COA Circular No. 95-011 — Reiterates the prohibition on utilizing public funds for private legal counsel without OGCC/OSG conformity and COA concurrence under exceptional circumstances. The Court held it applies but COA's delay excused non-compliance.
• COA Circular No. 2011-002 — Lifted pre-audit of government transactions. The Court noted that despite this general lifting, COA could still require pre-audit (like concurrence for legal services) by invoking saving clauses.
• COA Circular No. 2021-003 — Issued during the pendency of the case, exempting certain engagements of lawyers/legal consultants from COA's prior written concurrence, subject to conditions. The Court noted it affirms the general rule of prior concurrence before its issuance and that the contracts in this case did not fall under its exemptions.
• Presidential Decree No. 1445 (Government Auditing Code of the Philippines), Section 49 — Mandates COA to decide any case before it within sixty days from submission for resolution. Relied upon by the Court to establish the timeframe COA should have observed and in formulating remedial measures.
• 2009 COA Revised Rules of Procedure, Rule X, Section 4 — States that any case brought to the Commission Proper shall be decided within sixty days. Relied upon by the Court similarly to PD 1445, Sec. 49.
• Constitution, Article III, Section 16 (Right to Speedy Disposition of Cases) — Guarantees the right to speedy disposition of cases before all judicial, quasi-judicial, or administrative bodies. COA's inordinate delay violated this right.
• Constitution, Article IX-D (Commission on Audit) — Outlines COA's powers and functions, including its exclusive authority to define the scope of its audit and promulgate auditing rules. The Court affirmed COA's power to require pre-audit for legal services.
• Republic Act No. 9136 (EPIRA), Section 31 — Mandated timelines for privatization, which PSALM cited as a reason for the urgency of engaging legal advisors.

• Justice Perlas-Bernabe — Concurred in the result. Expressed reservations against classifying COA's written concurrence requirement as pre-audit, deferring to COA's own characterization. Also disagreed with the ponencia's statement that OGCC/OSG concurrence must be obtained before COA's, as the rules do not prescribe a sequence. Argued that COA's own rules should be respected regarding its audit processes, but agreed COA committed grave abuse of discretion due to inordinate delay.
• Justice Leonen — (Concurring and Dissenting) Agreed COA committed grave abuse of discretion due to delay. Disagreed that COA's written concurrence is a specie of pre-audit, arguing Circular No. 86-255 specifically applies to hiring private lawyers, distinct from general pre-audit circulars. Maintained that prior written concurrences from both OGCC/OSG and COA are absolute requirements.
• Justice Caguioa — (Concurring and Dissenting) Concurred that the petition should be granted. Disagreed that COA can determine whether to require pre-audit despite having lifted it, arguing that COA had already lifted all pre-audit activities via Circular No. 2011-002 and had not issued a new circular reinstating it for legal retainers. Argued the 60-day period from PD 1445 is for deciding "cases," not letter-requests for concurrence. Believed prior COA concurrence was no longer required once OGCC acquiesced, due to the lifting of pre-audit.