580 Phil. 301
REYES, R.T., J.:
The Office of the Solicitor General (OSG) respectfully avers that in an Indorsement dated October 24, 2007, the Legal Service of the Department of Transportation and Communications (DOTC) has informed it of the Philippine Government's decision not to continue with the ZTE National Broadband Network Project (see attachment[2]). That said, there is no more justiciable controversy for this Honorable Court to resolve. WHEREFORE, public respondents respectfully pray that the present petitions be DISMISSED.On November 13, 2007, the Court noted the OSG's manifestation and motion and required petitioners in G.R. Nos. 178830, 179317, and 179613 to comment.
Petitioner Suplico further argues that:
- Aside from the fact that the Notes of the Meeting Between President Gloria Macapagal-Arroyo and Chinese President Hu Jintao held 2 October 2007 were not attached to the 26 October 2007 Manifestation and Motion - thus depriving petitioners of the opportunity to comment thereon - a mere verbally requested 1st Indorsement is not sufficient basis for the conclusion that the ZTE-DOTC NBN deal has been permanently scrapped.
- Suffice to state, said 1st Indorsement is glaringly self-serving, especially without the Notes of the Meeting Between President Gloria Macapagal-Arroyo and Chinese President Hu Jintao to support its allegations or other proof of the supposed decision to cancel the ZTE-DOTC NBN deal. Public respondents can certainly do better than that.[4]
Petitioner Suplico cites this Court's rulings in Gonzales v. Chavez,[6] Rufino v. Endriga,[7] and Alunan III v. Mirasol[8] that despite their mootness, the Court nevertheless took cognizance of these cases and ruled on the merits due to the Court's symbolic function of educating the bench and the bar by formulating guiding and controlling principles, precepts, doctrines, and rules.
- Assuming arguendo that some aspects of the present Petition have been rendered moot (which is vehemently denied), this Honorable Court, consistent with well-entrenched jurisprudence, may still take cognizance thereof.[5]
Petitioners AHI and Sauz further contend that because of the transcendental importance of the issues raised in the petition, which among others, included the President's use of the power to borrow, i.e., to enter into foreign loan agreements, this Court should take cognizance of this case despite its apparent mootness.
- First of all, the present administration has never been known for candor. The present administration has a very nasty habit of not keeping its word. It says one thing, but does another.
- This being the case, herein petitioners are unable to bring themselves to feel even a bit reassured that the government, in the event that the above-captioned cases are dismissed, will not backtrack, re-transact, or even resurrect the now infamous NBN-ZTE transaction. This is especially relevant since what was attached to the OSG's Manifestation and Motion was a mere one (1) page written communication sent by the Department of Transportation and Communications (DOTC) to the OSG, allegedly relaying that the Philippine Government has decided not to continue with the NBN project "x x x due to several reasons and constraints."
On September 11, 2007, the Court issued a TRO[14] in G.R. No. 178830, enjoining the parties from "pursuing, entering into indebtedness, disbursing funds, and implementing the ZTE-DOTC Broadband Deal and Project" as prayed for. Pertinent parts of the said Order read:G.R. No. 178830WHEREFORE, it is respectfully prayed of this Honorable Court:
- Upon the filing of this Petition, pursuant to the second paragraph of Rule 58, Section 5 of the Rules of Court, issue forthwith an ex parte temporary restraining order enjoining respondents, their subordinates, agents, representatives and any and all persons acting on their behalf from pursuing, entering into indebtedness, disbursing funds, and implementing the ZTE-DOTC Broadband Deal;
- Compel respondents, upon Writ of Mandamus, to forthwith produce and furnish petitioner or his undersigned counsel a certified true copy of the contract or agreement covering the NBN project as agreed upon with ZTE Corporation;
- Schedule Oral Arguments in the present case pursuant to Rule 49 in relation to Section 2, Rule 56 of the revised Rules of Court; and,
- Annul and set aside the award of the ZTE-DOTC Broadband Deal, and compel public respondents to forthwith comply with pertinent provisions of law regarding procurement of government ICT contracts and public bidding for the NBN contract.[11] (Emphasis supplied)
G.R. No. 179317WHEREFORE, petitioners Amsterdam Holdings, Inc., and Nathaniel Sauz respectfully pray as follows:
- upon the filing of this Petition for Mandamus and conditioned upon the posting of a bond in such amount as the Honorable Court may fix, a temporary restraining order and/or writ of preliminary injunction be issued directing the Department of Transportation and Communication, the Commission on Information and Communications Technology, all other government agencies and instrumentalities, their officers, employees, and/or other persons acting for and on their behalf to desist during the pendency of the instant Petition for Mandamus from entering into any other agreements and from commencing with any kind, sort, or specie of activity in connection with the National Broadband Network Project;
- the instant Petition for Mandamus be given due course; and,
- after due consideration of all relevant issues, judgment be rendered directing respondents to allow herein petitioners access to all agreements entered into with the Government of China, the ZTE Corporation, and/or other entities, government instrumentalities, and/or individuals with regard to the National Broadband Network Project.[12] (Emphasis supplied)
G.R. No. 179613WHEREFORE, it is respectfully prayed of this Honorable Court to:
- Compel respondents, upon Writ of Mandamus, to forthwith produce and furnish petitioner or his undersigned counsel a certified true copy of the contract or agreement covering the NBN project as agreed upon with ZTE Corporation;
- Schedule Oral Arguments in the present case pursuant to Rule 49 in relation to Section 2, Rule 56 of the Revised Rules of Court;
- Annul and set aside the award of the contract for the national broadband network to respondent ZTE Corporation, upon the ground that said contract, as well as the procedures resorted to preparatory to the execution thereof, is contrary to the Constitution, to law and to public policy;
- Compel public respondent to forthwith comply with pertinent provisions of law regarding procurement of government infrastructure projects, including public bidding for said contract to undertake the construction of the national broadband network.[13] (Emphasis supplied)
WHEREAS, the Supreme Court, on 11 September 2007, adopted a resolution in the above-entitled case, to wit:Petitioners in G.R. Nos. 178830 and 179613 pray that they be furnished certified true copies of the "contract or agreement covering the NBN project as agreed upon with ZTE Corporation." It appears that during one of the Senate hearings on the NBN project, copies of the supply contract[16] were readily made available to petitioners.[17] Evidently, the said prayer has been complied with and is, thus, mooted."G.R. No. 178830 (Rolex Suplico vs. National Economic and Development Authority, represented by NEDA Secretary Romulo L. Neri, and the NEDA Investment Coordination Committee, Department of Transportation and Communications (DOTC), represented by DOTC Secretary Leandro Mendoza, including the Commission on Information and Communications Technology, headed by its Chairman, Ramon P. Sales, The Telecommunications Office, Bids and Awards for Information and Communications Technology Committee (ICT), headed by DOTC Assistant Secretary Elmer A. Soneja as Chairman, and The Technical Working Group for ICT, and DOTC Assistant Secretary Lorenzo Formoso, and All Other Operating Units of the DOTC for Information and Communications Technology, and ZTE Corporation, Amsterdam Holdings, Inc., and ARESCOM, Inc.--Acting on the instant petition with prayer for temporary restraining order and/or writ of preliminary injunction, the Court Resolved, without giving due course to the petition, toNOW THEREFORE, effective immediately and continuing until further orders from this Court, You, Respondents (i) National Economic and Development Authority, (ii) NEDA-Investment Coordination Committee, (iii) Department of Transportation and Communications, Commission on Information and Communications Technology, (iv) Telecommunications Office, Bids and Awards for Information and Communications Technology Committee (ICT), (v) Technical Working Group for ICT, and all other Operating Units of the DOTC for Information and Communications Technology, (vi) ZTE Corporation; (vii) Amsterdam Holdings, Inc., and (viii) ARESCOM, Inc., and any and all persons acting on their behalf are hereby ENJOINED from "pursuing, entering into indebtedness, disbursing funds, and implementing the ZTE-DOTC Broadband Deal and Project" as prayed for.[15] (Emphasis supplied.)x x x x
(d) Issue a TEMPORARY RESTRAINING ORDER, effective immediately and continuing until further orders from this Court, enjoining the (i) National Economic and Development Authority, (ii) NEDA-Investment Coordination Committee, (iii) Department of Transportation and Communications, Commission on Information and Communications Technology, (iv) Telecommunications Office, Bids and Awards for Information and Communications Technology Committee (ICT), (v) Technical Working Group for ICT, and all other Operating Units of the DOTC for Information and Communications Technology, (vi) ZTE Corporation; (vii) Amsterdam Holdings, Inc., and (viii) ARESCOM, Inc., and any and all persons acting on their behalf from `pursuing, entering into indebtedness, disbursing funds, and implementing the ZTE-DOTC Broadband Deal and Project' as prayed for."
SECTION 1. Judicial Notice, when mandatory. - A court shall take judicial notice, without introduction of evidence, of the existence and territorial extent of states, their political history, forms of government and symbols of nationality, the law of nations, the admiralty and maritime courts of the world and their seals, the political constitution and history of the Philippines, the official acts of the legislative, executive and judicial departments of the Philippines, the laws of nature, the measure of time, and the geographical divisions. (Emphasis supplied)Under the rules, it is mandatory and the Court has no alternative but to take judicial notice of the official acts of the President of the Philippines, who heads the executive branch of our government. It is further provided in the above-quoted rule that the court shall take judicial notice of the foregoing facts without introduction of evidence. Since we consider the act of cancellation by President Macapagal-Arroyo of the proposed ZTE-NBN Project during the meeting of October 2, 2007 with the Chinese President in China as an official act of the executive department, the Court must take judicial notice of such official act without need of evidence.
Indeed, the instant petition, insofar as it assails the Court of Appeals' Decision nullifying the orders of the SEC en banc and the SICD, has been rendered moot and academic. To rule, one way or the other, on the correctness of the questioned orders of the SEC en banc and the SICD will be indulging in a theoretical exercise that has no practical worth in view of the supervening event.Secondly, even assuming that the Court will choose to disregard the foregoing considerations and brush aside mootness, the Court cannot completely rule on the merits of the case because the resolution of the three petitions involves settling factual issues which definitely requires reception of evidence. There is not an iota of doubt that this may not be done by this Court in the first instance because, as has been stated often enough, this Court is not a trier of facts.
The rule is well-settled that for a court to exercise its power of adjudication, there must be an actual case or controversy - one which involves a conflict of legal rights, an assertion of opposite legal claims susceptible of judicial resolution; the case must not be moot or academic or based on extra-legal or other similar considerations not cognizable by a court of justice. Where the issue has become moot and academic, there is no justiciable controversy, and an adjudication thereon would be of no practical use or value as courts do not sit to adjudicate mere academic questions to satisfy scholarly interest, however intellectually challenging.
In the ultimate analysis, petitioners are seeking the reinstatement of the writ of injunction to prevent the concerned parties from pushing through with transactions with Qualcomm, Inc. Given that Qualcomm, Inc. is no longer interested in pursuing the contracts, there is no actual substantial relief to which petitioners would be entitled and which would be negated by the dismissal of the petition.
The Court likewise finds it unnecessary to rule whether the assailed Court of Appeals' Decision had the effect of overruling the Court's Resolution dated 29 January 1999, which set aside the TRO issued by the appellate court.
A ruling on the matter practically partakes of a mere advisory opinion, which falls beyond the realm of judicial review. The exercise of the power of judicial review is limited to actual cases and controversies. Courts have no authority to pass upon issues through advisory opinions or to resolve hypothetical or feigned problems.
While there were occasions when the Court passed upon issues although supervening events had rendered those petitions moot and academic, the instant case does not fall under the exceptional cases. In those cases, the Court was persuaded to resolve moot and academic issues to formulate guiding and controlling constitutional principles, precepts, doctrines or rules for future guidance of both bench and bar.
In the case at bar, the resolution of whether a writ of preliminary injunction may be issued to prevent the implementation of the assailed contracts calls for an appraisal of factual considerations which are peculiar only to the transactions and parties involved in this controversy. Except for the determination of whether petitioners are entitled to a writ of preliminary injunction which is now moot, the issues raised in this petition do not call for a clarification of any constitutional principle or the interpretation of any statutory provision.[22]
Definitely, some very specific reliefs prayed for in both G.R. Nos. 178830 and 179613 require prior determination of facts before pertinent legal issues could be resolved and specific reliefs granted.
(1) Whether an executive agreement has been reached between the Philippine and Chinese governments over the NBN Project; (2) Whether the ZTE Supply Contract was entered into by the Republic of the Philippines, through the DOTC, and ZTE International pursuant to, and as an integral part of, the executive agreement; (3) Whether a loan agreement for the NBN Project has actually been executed; (4) Whether the Philippine government required that the NBN Project be completed under a Build-Operate-and-Transfer Scheme; (5) Whether the AHI proposal complied with the requirements for an unsolicited proposal under the BOT Law; (6) Whether the Philippine government has actually earmarked public finds for disbursement under the ZTE Supply Contract; and (7) Whether the coverage of the NBN Project to be supplied under the ZTE Supply Contract is more extensive than that under the AHI proposal or such other proposal submitted therefor.[24]
Respectfully indorsed to SOLICITOR GENERAL AGNES VST DEVANADERA (Attention: ASSISTANT SOLICITOR GENERAL AMPARO M. CABOTAJE-TANG), herein copy of the Highlights From the Notes of the Meeting Between President Gloria Macapagal-Arroyo and Chinese President Hu Jintao which was held in Xi Jiao Guesthouse, Shanghai, The People's Republic of China on 02 October 2007 as transmitted from the Office of the President as provided by the Department of Foreign Affairs (DFA).[3] Rollo (G.R. No. 178830), p. 1124.
As per verbal request from your honorable office we are furnishing you a copy of the record of the said meeting which states in sum the Philippine Government's decision not to continue with the ZTE National Broadband Network Project due to several reasons and constraints. It is the understanding of the DOTC that this document will form part of the evidence that will be submitted to the Honorable Supreme Court in connection with the cases filed against the DOTC in relation to the NBN Project.
Kindly refer to the attached document and respectfully request appropriate action on the same. Thank you very much for your continued support and assistance to the Department of Transportation and Communications.
No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.[13]The power of the purse - or the power of Congress to authorize payment from funds in the National Treasury - is lodged exclusively in Congress. One of the fundamental checks and balances finely crafted in the Constitution is that Congress authorizes the amount to be spent, while the Executive spends the amount so authorized. The Executive cannot authorize its own spending, and neither can Congress spend what it has authorized. The rationale of this basic check and balance is to prevent abuse of discretion in the expenditure of public funds.
SECTION 46. Appropriation Before Entering into Contract. — (1) No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure; andSections 85, 86 and 87 of the Government Auditing Code of the Philippines,[14] an earlier law, contain the same provisions.
(2) Notwithstanding this provision, contracts for the procurement of supplies and materials to be carried in stock may be entered into under regulations of the Commission provided that when issued, the supplies and materials shall be charged to the proper appropriations account.
SECTION 47. Certificate Showing Appropriation to Meet Contract. — Except in the case of a contract for personal service, for supplies for current consumption or to be carried in stock not exceeding the estimated consumption for three (3) months, or banking transactions of government-owned or controlled banks, no contract involving the expenditure of public funds by any government agency shall be entered into or authorized unless the proper accounting official of the agency concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the current calendar year is available for expenditure on account thereof, subject to verification by the auditor concerned. The certificate signed by the proper accounting official and the auditor who verified it, shall be attached to and become an integral part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purpose until the obligation of the government agency concerned under the contract is fully extinguished.
SECTION 48. Void Contract and Liability of Officer. — Any contract entered into contrary to the requirements of the two (2) immediately preceding sections shall be void, and the officer or officers entering into the contract shall be liable to the Government or other contracting party for any consequent damage to the same extent as if the transaction had been wholly between private parties. (Emphasis supplied)
It is quite evident from the tenor of the language of the law that the existence of appropriations and the availability of funds are indispensable pre-requisites to or conditions sine qua non for the execution of government contracts. The obvious intent is to impose such conditions as a priori requisites to the validity of the proposed contract. Using this as our premise, we cannot accede to PHOTOKINA's contention that there is already a perfected contract. x x xThe law expressly declares void a procurement contract that fails to comply with the two requirements, namely, an appropriation law funding the contract and a certification of appropriation and fund availability. The clear purpose of these requirements is to insure that government contracts are never signed unless supported by the corresponding appropriation law and fund availability.[18] The ZTE Supply Contract does not comply with any of these two requirements. Thus, the ZTE Supply Contract is void for violation of Sections 46, 47 and 48, Chapter 8, Subtitle B, Title I, Book V of the Administrative Code of 1987, as well as Sections 85, 86 and 87 of the Government Auditing Code of the Philippines. These provisions of both Codes implement Section 29(2), Article VI of the Constitution.
x x x
Petitioners are justified in refusing to formalize the contract with PHOTOKINA. Prudence dictated them not to enter into a contract not backed up by sufficient appropriation and available funds. Definitely, to act otherwise would be a futile exercise for the contract would inevitably suffer the vice of nullity. In Osmeña vs. Commission on Audit, this Court held:The Auditing Code of the Philippines (P.D. 1445) further provides that no contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor and the proper accounting official of the agency concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and the amount necessary to cover the proposed contract for the current fiscal year is available for expenditure on account thereof. Any contract entered into contrary to the foregoing requirements shall be VOID.Verily, the contract, as expressly declared by law, is inexistent and void ab initio. This is to say that the proposed contract is without force and effect from the very beginning or from its incipiency, as if it had never been entered into, and hence, cannot be validated either by lapse of time or ratification. (Emphasis supplied)
Clearly then, the contract entered into by the former Mayor Duterte was void from the very beginning since the agreed cost for the project (P8,368,920.00) was way beyond the appropriated amount (P5,419,180.00) as certified by the City Treasurer. Hence, the contract was properly declared void and unenforceable in COA's 2nd Indorsement, dated September 4, 1986. The COA declared and we agree, that:The prohibition contained in Sec. 85 of PD 1445 (Government Auditing Code) is explicit and mandatory. Fund availability is, as it has always been, an indispensable prerequisite to the execution of any government contract involving the expenditure of public funds by all government agencies at all levels. Such contracts are not to be considered as final or binding unless such a certification as to fund availability is issued (Letter of Instruction No. 767, s. 1978). Antecedent of advance appropriation is thus essential to government liability on contracts (Zobel vs. City of Manila, 47 Phil. 169). This contract being violative of the legal requirements aforequoted, the same contravenes Sec. 85 of PD 1445 and is null and void by virtue of Sec. 87.
Section 5.1. General Principles on Budget - All expenditures, inclusive of counterpart and proceeds of loans and loans and grant funds, must be included in the annual national expenditure program to be submitted to Congress for approval. (Emphasis supplied)There can be no dispute that the proceeds of foreign loans, whether concluded or not, cannot be obligated in a procurement contract without a prior appropriation from Congress.
At the outset, there is no need yet for a budget allocation as the loan agreement has yet to be concluded. Assuming arguendo that one has already been executed, the appropriation therefor is covered by the Executive branch's power of automatic appropriation for payment of foreign loans contracted. x x x[20]The OSG's first argument is an admission that when the ZTE Supply Contract was signed, there was no loan agreement, no loan proceeds, and no appropriation from Congress for the contract. This only drives the last nail deeper into the coffin of the ZTE Supply Contract because the absence of an appropriation from Congress makes the signing of the ZTE Supply Contract an unconstitutional and unlawful act.
Section 10. Competitive Bidding - All procurement shall be done through Competitive Bidding, except as provided for in Article XVI of this Act. (Emphasis supplied)In addition, Section 4 of the Government Procurement Reform Act provides that the Act applies to government procurement "regardless of source of funds, whether local or foreign." Hence, the requirement of public bidding applies to foreign-funded contracts like the ZTE Supply Contract.
x x x Section 4 of RA 9184 itself expressly provides that executive agreements that deal on subject matters covered by said law shall be observed. Hence, the requirement of competitive bidding under section 10 of the law is not applicable. Section 4 of RA 9184 provides:Private respondent ZTE Corporation's argument will hold water if an executive agreement can amend the mandatory statutory requirement of public bidding in the Government Procurement Reform Act. In short, the issue turns on the novel question of whether an executive agreement can amend or repeal a prior law. The obvious answer is that an executive agreement cannot amend or repeal a prior law.Section 4. Scope and Application. - This Act shall apply to the procurement of Infrastructure Projects, Goods and Consulting Services, regardless of source of funds, whether local or foreign, by all branches and instrumentalities of government, its departments, offices and agencies, including government-owned and/or controlled corporations and local government units, subject to the provisions of Commonwealth Act No. 138. Any treaty or international or executive agreement affecting the subject matter of this Act to which the Philippine government is a signatory shall be observed.x x x
There is no provision in the Executive Agreement that requires the conduct of competitive public bidding before the award of the NBN Project, or any project envisioned in the RP-China MNOU for that matter. The subsequent exchange of notes between China and the Philippines clearly shows that ZTE was chosen as the contractor for the NBN Project. This was formalized through the DTI-ZTE MOU and the ZTE Supply Contract. (Boldfacing and underlining in the original)
International agreements involving political issues or changes of national policy and those involving international arrangements of a permanent character usually take the form of treaties. But international agreements embodying adjustments of detail carrying out well-established national policies and traditions and those involving arrangements of a more or less temporary nature usually take the form of executive agreements.[25] (Emphasis supplied)Executive agreements are intended to carry out well-established national policies, and these are found in statutes.
x x x it may be desirable to point out here the well-recognized distinction between an executive agreement and a treaty. In brief, it is that the former cannot alter the existing law and must conform to all statutory enactments, whereas a treaty, if ratified by and with the advice and consent of two-thirds of the Senate, as required by the Constitution, itself becomes the supreme law of the land and takes precedence over any prior statutory enactments.[27] (Emphasis supplied)As Professor Erwin Chemerinsksy states, "So long as the (U.S.) president is not violating another constitutional provision or a federal statute, there seems little basis for challenging the constitutionality of an executive agreement."[28] In the United States, while an executive agreement cannot alter a federal law, an executive agreement prevails over state law.[29]
x x x Although it seems clear that an unratified executive agreement, unlike a treaty, cannot override a prior act of Congress, executive agreements, even without Senate ratification, have the same weight as formal treaties in their effect upon conflicting state laws.[30]Professor Tribe cited United States v. Gary W. Capps, Inc.,[31] where the Court of Appeals (4th Circuit) ruled that an unratified executive agreement could not prevail over a conflicting federal law. The U.S. Supreme Court affirmed the appellate court's decision but on non-constitutional grounds.
Section 4. Scope and Application - This Act shall apply to the Procurement of Infrastructure Projects, Goods and Consulting Services, regardless of the source of funds, whether local or foreign, by all branches of the government, its departments, offices and agencies, including government-owned and/or-controlled corporations and local government units, subject to the provisions of Commonwealth Act No. 138. Any treaty or international or executive agreement affecting the subject matter of this Act to which the Philippine government is a signatory shall be observed. (Emphasis supplied)Respondents argue that the second sentence of Section 4 allows an executive agreement to override the mandatory public bidding in Section 10 of the Government Procurement Reform Act.
Section 4. In the contracting of any loan, credit or indebtedness under this Act, the President of the Philippines may, when necessary, agree to waive or modify the application of any law granting preferences or imposing restrictions on international competitive bidding, including among others, Act Numbered Four Thousand Two Hundred Thirty-Nine, Commonwealth Act Numbered One Hundred Thirty-Eight, the provisions of Commonwealth Act Numbered Five Hundred Forty-One, insofar as such provisions do not pertain to constructions primarily for national defense or security purposes, Republic Act Numbered Five Thousand One Hundred Eighty-Three: Provided, however, That as far as practicable, utilization of the services of qualified domestic firms in the prosecution of projects financed under this Act shall be encouraged: Provided, further, That in case where international competitive bidding shall be conducted preference of at least fifteen per centum shall be granted in favor of articles, materials, or supplies of the growth, production or manufacture of the Philippines: Provided, finally, That the method and procedure in the comparison of bids shall be the subject of agreement between the Philippine Government and the lending institution. (Emphasis supplied)Likewise, Section 4 of the Government Procurement Reform Act should be read in conjunction with Section 11-A of the Official Development Assistance Act of 1996:[38]
Section 11-A. In the contracting of any loan, credit or indebtedness under this Act or any law, the President of the Philippines may, when necessary, agree to waive or modify the application of any provision of law granting preferences in connection with, or imposing restrictions on, the procurement of goods or services: Provided, however, That as far as practicable, utilization of the services of qualified Filipino citizens or corporations or associations owned by such citizens in the prosecution of projects financed under this Act shall be prepared on the basis of the standards set for a particular project: Provided, further, That the matter of preference in favor of articles, materials, or supplies of the growth, production or manufacture of the Philippines, including the method or procedure in the comparison of bids for purposes therefor, shall be the subject of agreement between the Philippine Government and the lending institution. (Emphasis supplied)Consequently, as construed together, the executive agreements mentioned in the second sentence of Section 4 of the Government Procurement Reform Act should refer to executive agreements on (1) the waiver or modification of preferences to local goods or domestic suppliers;[39] (2) the waiver or modification of restrictions on international competitive bidding; and (3) the method or procedure in the comparison of bids.
Section 1. The President of the Philippines is hereby authorized, in behalf of the Republic of the Philippines, to contract such loans, credits, including supplier's credit, deferred payment arrangements, or indebtedness as may be necessary and upon terms and conditions as may be agreed upon, not inconsistent with this Act, with Governments of foreign countries with whom the Philippines has diplomatic or trade relations or which are members of the United Nations, their agencies, instrumentalities or financial institutions or with reputable international organizations or non-governmental national or international lending institutions or firms extending supplier's credit deferred payment arrangements x x x . (Emphasis supplied)A solitary Department of Justice opinion[40] has ventured that the phrase "as may be necessary and upon terms and conditions as may be agreed upon" serves as statutory basis for the President to exempt foreign-funded government procurement contracts from public bidding. This is a mistake. This phrase means that the President has discretion to decide the terms and conditions of the loan, such as the rate of interest, the maturity period, amortization amounts, and similar matters. This phrase does not delegate to the President the legislative power to amend or repeal mandatory provisions of law like compulsory public bidding of government procurement contracts. Otherwise, this phrase would constitute undue delegation of legislative power since there are no standards that would guide the President in exercising this alleged delegated legislative power.
Section 3. Governing Principles on Government Procurement. - All procurement of the national government, its departments, bureaus, offices and agencies, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units shall, in all cases, be governed by these principles:The only exceptions to mandatory public bidding are procurements falling under any of the narrowly defined situations in Article XVI of the Act, which respondents do not invoke.
(a) Transparency in the procurement process x x x.
(b) Competitiveness by extending equal opportunity to enable private contracting parties who are eligible and qualified to participate in public bidding.
x x x.
Section 4. Scope and Application. - This Act shall apply to the Procurement of Infrastructure Projects, Goods and Consulting Services, regardless of source of funds, whether local or foreign, by all branches and instrumentalities of government, its departments, offices and agencies, including government-owned and/or controlled corporations and local government units, x x x.
Section 10. Competitive Bidding. - All procurement shall be done through Competitive Bidding, except as provided for in Article XVI of this Act. (Emphasis supplied)
x x x it is hereby clarified that foreign-assisted infrastructure projects may be exempted from the application of the pertinent provisions of the Implementing Rules and Regulations (IRR) of Presidential Decree (P.D.) No. 1594 relative to the method and procedure in the comparison of bids, which may be the subject of agreement between the infrastructure agency concerned and the lending institution. It should be made clear however that public bidding is still required and can only be waived pursuant to existing laws. (Italicization in the original of the Memorandum Circular; boldfacing supplied)Executive agreements with lending institutions have never been understood to allow exemptions from public bidding. What the executive agreements can modify are the methods or procedures in the comparison of bids, such as the adoption of the competitive bidding procedures or guidelines of the Japan Bank for International Cooperation[43] or the World Bank[44] on the method or procedure in the evaluation or comparison of bids. It is self-evident that these procedures or guidelines require public bidding.
The conditions imposed by the donor on the recipient with respect to ODA utilization provide another basis for differentiating ODA. In particular, restriction of the geographic areas where procurement of goods and services are eligible for ODA funding make ODA loan/grant tied or untied with respect to source of procurement. Usually, bilateral ODA is tied to the donor country in terms of procurement. While competitive bidding is still practiced, qualified bidders for the supply of goods and services are confined to those firms which are owned or controlled by nationals of the donor country. x x x[45] (Emphasis supplied)Even for tied loans, the international practice still requires public bidding although the public bidding is restricted only among suppliers that are nationals of the creditor country. In the present case, there was no such public bidding because the Export-Import Bank of China simply handpicked ZTE Corporation as the supplier of the goods and services to the Philippine Government.
Section 27. The State shall maintain honesty and integrity in the public service and take positive and effective measures against graft and corruption.ZTE Supply Contract is Void from the Beginning
Section 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest.
Article 1409. The following contracts are inexistent and void from the beginning:Sections 46 and 47, Chapter 8, Subtitle B, Title I, Book V of the Administrative Code of 1987 expressly prohibit the entering into procurement contracts that are not funded by an appropriation law and which do not have certificates of appropriation and fund availability. Section 48 of the same law expressly declares such contracts void. To repeat, Section 48 provides:x x x
(7) Those expressly prohibited or declared void by law.
x x x. (Emphasis supplied)
SECTION 48. Void Contract and Liability of Officer. — Any contract entered into contrary to the requirements of the two (2) immediately preceding sections shall be void, x x x. (Emphasis supplied)The ZTE Supply Contract, which is not funded by an appropriation law and does not have a certificate of appropriation and fund availability, is not only void, but also void from the beginning under Article 1409 of the Civil Code. As the Court held in COMELEC v. Quijano-Padilla,[47] which involved a procurement contract without the requisite appropriation law and certificate of appropriation and fund availability:
Verily, the contract, as expressly declared by law, is inexistent and void ab initio. This is to say that the proposed contract is without force and effect from the very beginning or from its incipiency, as if it had never been entered into, and hence, cannot be validated either by lapse of time or ratification. (Emphasis supplied)A contract void from the beginning is legally non-existent. As such, it cannot be annulled because to annul a contract assumes a voidable contract.[48] A cancellation of a contract void from the beginning has no legal effect because the contract is legally non-existent. Any cancellation may simply be construed as an acknowledgment or admission that the contract is void from the beginning. A contract void from the beginning can only be declared as such, that is, void from the beginning.
SECTION 85. Appropriation Before Entering into Contract. —(1) No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure.[15] Rollo, pp. 572-573. The ZTE Supply Contract (Annex "LL" of public respondents' Consolidated Comment), on the paragraph Conditions for the Effectivity of the Contract, provides:
(2) Notwithstanding this provision, contracts for the procurement of supplies and materials to be carried in stock may be entered into under regulations of the Commission provided that when issued, the supplies and materials shall be charged to the proper appropriation account.
SECTION 86. Certificate Showing Appropriation to Meet Contract. —Except in the case of a contract for personal service, for supplies for current consumption or to be carried in stock not exceeding the estimated consumption for three months, or banking transactions of government-owned or controlled banks no contract involving the expenditure of public funds by any government agency shall be entered into or authorized unless the proper accounting official of the agency concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the current fiscal year is available for expenditure on account thereof, subject to verification by the auditor concerned. The certificate signed by the proper accounting official and the auditor who verified it, shall be attached to and become an integral part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purpose until the obligation of the government agency concerned under the contract is fully extinguished.
SECTION 87. Void Contract and Liability of Officer. —Any contract entered into contrary to the requirements of the two immediately preceding sections shall be void, and the officer or officers entering into the contract shall be liable to the government or other contracting party for any consequent damage to the same extent as if the transaction had been wholly between private parties.
The Effectivity of this Contract shall be subject to the fulfillment of the following conditions precedent:[16] Article 1318 of the Civil Code provides: "There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject of the contract; (3) Cause of the obligation which is established." Hence, once the three requisites concur, a contract arises, regardless of any stipulation on conditional obligations.Issuance of a Forward Obligation Authority (FOA) by the Department of Budget and Management (DBM) of the Government of the Philippines;
Conclusion of the Loan Agreement between Export-Import Bank of China and the Department of Finance (DOF) of the Government of the Republic of the Philippines;
Legal opinion on the procurement process by the Department of Justice of the Government of the Republic of the Philippines.
The ratification by the Government of the Republic of the Philippines and the People's Republic of China of the Executive Agreement evidenced by the letter dated 02 December 2006 of Chinese Ambassador Li Jinjun to Presidential Chief of Staff Michael T. Defensor relating to the NBN Project and the letter of NEDA Secretary dated 20 April 2007 addressed to Honorable Minister Bo XllI, Ministry of Commerce and Honorable Li Ruogu, Chairman and President, of the Export-Import Bank of China, People's Republic of China nominating the NBN Project.
SECTION 31. Automatic Appropriations. — All expenditures for (a) personnel retirement premiums, government service insurance, and other similar fixed expenditures, (b) principal and interest on public debt, (c) national government guarantees of obligations which are drawn upon, are automatically appropriated: provided, that no obligations shall be incurred or payments made from funds thus automatically appropriated except as issued in the form of regular budgetary allotments. (Emphasis supplied)[20] Rollo, p. 431. Consolidated Comment of public respondents.
The moot and academic principle is not a magical formula that can automatically dissuade the courts in resolving a case. Courts will decide cases, otherwise moot and academic, if: first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount public interest is involved; third, when the constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public; and fourth, the case is capable of repetition yet evading review. (Underscoring supplied)The reasons underlined above in David are just as applicable in the present case as they were, not only in David, but also in Province of Batangas v. Romulo[2] and Manalo v. Calderon,[3] where the Court similarly decided the case on the merits, supervening events that would have ordinarily rendered the same moot notwithstanding.