Breaches in Procurement Processes Can Lead to Personal Liability for Government Officials

G.R. No. 254337, June 18, 2024

Imagine planning a town fiesta, ordering supplies, and later finding out you’re personally liable for the expenses because of procurement irregularities. This is the harsh reality faced by local government officials when procurement processes aren’t meticulously followed. The Supreme Court case of Avanceña vs. Commission on Audit highlights the critical importance of adhering to government procurement regulations and the potential personal financial consequences of failing to do so. This case serves as a stark reminder that good intentions are not enough; strict compliance with the law is paramount.

Understanding the Legal Framework of Government Procurement

The Philippine government procurement process is governed primarily by Republic Act No. 9184, also known as the Government Procurement Reform Act. This law aims to promote transparency, competitiveness, and accountability in government transactions. The Implementing Rules and Regulations (IRR) further detail the procedures and guidelines for various procurement methods.

One key aspect is the Annual Procurement Plan (APP), which outlines all planned procurement activities for the fiscal year. This plan ensures that procurement is aligned with the agency’s strategic goals and budget. When procuring entities use methods other than public bidding, the BAC needs to justify it.

The law also defines different modes of procurement, each with its own set of requirements. Competitive bidding is the default method, but alternative methods like Shopping and Small Value Procurement (SVP) are allowed under specific circumstances. SVP, as mentioned in the decision, is often misused or misunderstood. Here is the exact text of the SVP provision from the IRR:

Section 53.9 of the IRR of RA 9184 states: “Small Value Procurement may be used when the procurement does not fall under shopping…” This clarifies that SVP is only appropriate when Shopping is not feasible. The procuring entity also has to follow GPPB guidelines.

Deviation from these regulations can lead to disallowances by the Commission on Audit (COA), holding officials personally liable for the misused funds. COA is constitutionally mandated to audit government funds and is authorized to disallow irregular or illegal expenses.

The Case: Festivities and Financial Fallout

In 2014, the Municipality of Dr. Jose P. Rizal, Palawan, made several procurements for various events, including Women’s Day, a local festival (Biri-Birian Program), the Municipality’s Founding Anniversary, and the Baragatan Festival. The procurements, totaling PHP 8,191,695.83, were made through Small Value Procurement (SVP) based on resolutions passed by the Bids and Awards Committee (BAC).

However, the COA found several irregularities, including:

• Non-submission of required documents
• Violation of RA 9184 and its IRR
• Purchase requests containing brand names
• Splitting of contracts to avoid public bidding
• Inappropriate resort to SVP for readily available goods
• Lack of certification from the Department of Budget and Management-Procurement Service

The COA issued Notices of Disallowance (NDs), holding the BAC members and other officials liable for the disallowed amounts. The officials appealed, arguing that the procurements were justified due to time constraints and that they acted in good faith.

Here’s a breakdown of the procedural journey:

1. COA Regional Office affirmed the NDs.
2. COA Commission Proper denied the Petition for Review, excluding one official.
3. The case was elevated to the Supreme Court via a Petition for Certiorari.

Despite procedural issues (failure to file a motion for reconsideration), the Supreme Court decided to address the issues due to their public interest implications. One central quote from the Supreme Court highlights the core issue:

“The BAC was responsible for ensuring that the procuring entity abided by the standards in Republic Act No. 9184 and its IRR. Here, however, it was the BAC that violated the law when it recommended Small Value Procurement as an alternative mode of procurement to the Municipality when there was no basis to do so.“

The Supreme Court absolved the BAC Secretariat, recognizing their purely administrative role. However, the other BAC members were held liable for failing to justify the resort to SVP and for the splitting of contracts. The Court found that their actions lacked good faith and diligence.

The Supreme Court reiterated that public officials are presumed to have performed their duties regularly and in good faith, but negligence, bad faith, or malice would negate this presumption, per the ruling of Madera et al. v. COA. It was further ruled that since the concerned parties were proven to have performed their functions negligently and not in good faith, they are solidarily liable for the amount that was disallowed.

What Does This Mean for Future Procurement Activities?

This case reinforces the importance of strict adherence to procurement laws and regulations. It serves as a warning to government officials that they can be held personally liable for financial losses resulting from irregular procurement practices. Ignorance of the law or reliance on subordinates is not a valid defense.

Key Lessons:

• Thoroughly understand RA 9184 and its IRR.
• Ensure proper planning and budgeting to avoid last-minute procurements.
• Justify the use of alternative procurement methods with clear and documented reasons.
• Avoid splitting contracts to circumvent public bidding requirements.
• Implement robust internal controls to prevent irregularities.

Hypothetical Scenario: Imagine a municipality planning a sports event. Instead of planning ahead and conducting competitive bidding, the BAC waits until the last minute and procures sports equipment through multiple SVP transactions, each below the threshold. Based on this case, the BAC members could be held personally liable for these expenses.

Frequently Asked Questions

Q: What is Small Value Procurement (SVP)?
A: SVP is an alternative method of procurement allowed for small-value purchases that do not exceed specified thresholds. It’s intended for efficiency but requires strict adherence to guidelines.

Q: What is splitting of contracts and why is it illegal?
A: Splitting of contracts involves dividing a procurement into smaller parts to avoid the requirements of public bidding. It’s illegal because it undermines transparency and competitiveness.

Q: What is the role of the Bids and Awards Committee (BAC)?
A: The BAC is responsible for ensuring that the procuring entity complies with procurement laws and regulations. They must carefully evaluate and justify the choice of procurement method.

Q: What are the potential consequences of procurement irregularities?
A: Procurement irregularities can lead to disallowances by the COA, holding officials personally liable for the misused funds, and potentially leading to criminal charges.

Q: How can government officials protect themselves from liability?
A: By thoroughly understanding and following procurement laws, implementing robust internal controls, and documenting all procurement decisions.

ASG Law specializes in government procurement and administrative law. Contact us or email hello@asglawpartners.com to schedule a consultation.