The Supreme Court ruled that a bidder in a government project, even if submitting the lowest bid, has no automatic right to be awarded the contract without undergoing the mandatory post-qualification process. This means government agencies have the discretion to reject bids if the bidder doesn’t meet all requirements, safeguarding public interests. This decision clarifies the rights of bidders and the obligations of government agencies in procurement processes, emphasizing adherence to procedural requirements to ensure transparency and accountability.

When is a Bid Not a Guarantee? Examining Rights in Government Procurement

This case revolves around Maria Elena L. Malaga, owner of B.E. Construction, who submitted the lowest bid for two DPWH concreting projects. However, due to urgent circumstances, the DPWH decided to undertake one project by administration, prompting Malaga to file a suit for damages, claiming she was wrongly denied the award despite being the lowest bidder. The central legal question is whether a low bidder has an automatic right to a government contract before completing the post-qualification requirements.

The Regional Trial Court (RTC) initially dismissed Malaga’s case, deeming it an unauthorized suit against the State. The RTC emphasized that Malaga, as the lowest bidder, did not automatically have the right to be awarded the project, as post-qualification was still necessary. Moreover, the government retained the right to reject any or all bids to best serve the citizenry. The Court of Appeals (CA) reversed the RTC’s decision, stating that the suit was against individual petitioners in their personal capacities for acts of bad faith. The CA ordered the case to be remanded to the trial court to determine if there was capricious exercise of governmental discretion.

The Supreme Court disagreed with the Court of Appeals. According to the Supreme Court, the procurement process has several steps, and it is only after going through all these that a project is awarded. Those steps include: (1) pre-procurement conference; (2) advertisement of the invitation to bid; (3) pre-bid conference; (4) eligibility check of prospective bidders; (5) submission and receipt of bids; (6) modification and withdrawal of bids; (7) bid opening and examination; (8) bid evaluation; (9) post qualification; and (10) award of contract and notice to proceed. The Court emphasized the importance of post-qualification, which involves the procuring entity verifying and validating all statements made by the lowest bidder. This process uses a non-discretionary criteria as stated in the bidding documents to ensure compliance with requirements.

Building on this principle, the Supreme Court highlighted the principles governing public bidding which are transparency, competitiveness, simplicity and accountability. The Court quoted the case of Commission on Audit v. Link Worth International, Inc., 600 Phil. 547, 555-556, 559 (2009), stating that:

After the preliminary examination stage, the BAC opens, examines, evaluates and ranks all bids and prepares the Abstract of Bids which contains, among others, the names of the bidders and their corresponding calculated bid prices arranged from lowest to highest. The objective of the bid evaluation is to identify the bid with the lowest calculated price or the Lowest Calculated Bid. The Lowest Calculated Bid shall then be subject to post-qualification to determine its responsiveness to the eligibility and bid requirements. If, after post-qualification, the Lowest Calculated Bid is determined to be post-qualified, it shall be considered the Lowest Calculated Responsive Bid and the contract shall be awarded to the bidder.

The Supreme Court also referenced another case, WT Construction, Inc. v. Department of Public Works and Highways, 555 Phil. 642, 649-650 (2007), reinforcing that mere submission of the lowest bid does not automatically entitle a bidder to the award of the contract. The bid must still undergo evaluation and post-qualification to be declared the lowest responsive bid and receive the contract. The government also reserves the right to reject any and all bids if it deems necessary.

The Court noted that since Malaga’s bid did not undergo the required post-qualification process, she could not claim that the project was awarded to her. Without a formal award, she had no right to undertake the project and therefore, no right to demand indemnity for lost profits. In short, the Court held that because there was no award, Malaga had no right of action against the petitioners, and thus, no cause of action in Civil Case No. 27059. Moreover, a premature invocation of the court’s intervention renders the complaint without a cause of action and dismissible on such ground.

Malaga’s claim for damages was also premised on Article 27 of the Civil Code, which provides that:

Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and other relief against the latter, without prejudice to any disciplinary administrative action that may be taken.

However, the Supreme Court stated that individual petitioners could not have awarded the project to her precisely because her bid still had to undergo a post-qualification procedure required under the law. But such post-qualification was overtaken by events, particularly the DPWH Secretary’s Memorandum, which ordered that the project be undertaken by administration. The proper remedy for Malaga should have been to seek reconsideration or the setting aside of the Memorandum and then a reinstatement of the bidding or post-qualification process with a view to securing an award of the contract and notice to proceed therewith.

In conclusion, the Supreme Court reversed the Court of Appeals’ decision, dismissing Malaga’s case. The High Court emphasized the government’s discretion in awarding contracts and the necessity of adhering to procurement rules.

FAQs

What was the key issue in this case?	The central issue was whether a bidder with the lowest bid in a government project has an automatic right to the contract award before completing the post-qualification process.
What is the post-qualification process?	Post-qualification is a mandatory procedure where the government verifies and validates the statements and documents submitted by the lowest bidder to ensure compliance with requirements.
Why was the project not awarded to Malaga?	The project was not awarded to Malaga because the DPWH decided to undertake the project by administration due to urgent circumstances, and the post-qualification process was not completed.
What does it mean to undertake a project by administration?	Undertaking a project by administration means the government directly undertakes the project instead of awarding it to a private contractor through bidding.
Did Malaga have a valid claim for damages?	The Supreme Court ruled that Malaga did not have a valid claim for damages because she was not formally awarded the project, and her bid did not undergo post-qualification.
What was the basis of Malaga’s claim for damages?	Malaga claimed damages under Article 27 of the Civil Code, alleging that the public officials refused or neglected to perform their official duty without just cause.
What should Malaga have done instead of filing a lawsuit?	Malaga should have sought reconsideration or the setting aside of the DPWH Secretary’s Memorandum and requested the reinstatement of the bidding or post-qualification process.
What is the significance of the government’s right to reject bids?	The government’s right to reject any or all bids ensures flexibility in procurement processes and allows it to prioritize the best interests of the public.

This case underscores the importance of adhering to procurement laws and regulations. While submitting the lowest bid is a significant step, it does not guarantee an award. Bidders must successfully navigate the post-qualification process, and government agencies retain the discretion to reject bids in accordance with legal provisions and public interest.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: DPWH vs. Malaga, G.R. No. 204906, June 05, 2017