Republic of the Philippines

COMMISSION ON AUDIT
Cordillera Administrative Region
La Trinidad, Benguet

COA Appeal Case No.__________________

IN RE: APPEAL TO THEIR SPECIFIC

PARTICIPATION IN THE
NOTICE OF DISALLOWANCE
(ND).

Notice of Disallowance No. 2017-

RUBEN E. PAOAD
Municipal Mayor

MARCELA M. TINOYAN , and

Municipal Health Officer

CLARITA B. MACAY,
Municipal Accountant

X---------------------------------------------------X

NOTICE OF APPEAL

WITH ALL DUE RESPECT TO THE HONORABLE

COMMISSION ON AUDIT

Appeal Memorandum
Notice of Disallowance
 APPELLANTS, unto the Honorable Commission on Audit most respectfully appeal the
charge against them for their participation in the purchase of Sports Utility Vehicle (SUV)
costing P1,207,800.00 charged from the Philippine Health Insurance Corporation (Philhealth)
Capitation Fund (PCF) which is allegedly contrary to Philhealth Circular 10 s. 2012, resulting in
an irregular disbursement of funds and deprivation of other health services to entitled indigents
in the community.

A copy of the Notice of Disallowance dated August , 2017 is hereto attached and made
integral part hereof as Annex “1”.

JURISDICTIONAL FACTS TO PROVE

TIMELINESS OF APPEAL

Appellants received a copy of the Notice of Disallowance dated August 7, 2017 on

September 9, 2017.

Pursuant to Section 17, chapter IV, of the 2009 Rules and Regulation on the Settlement
of Accounts (RRSA), the Appellants have until February 9, 2018 within which to appeal the said
Notice before Director of the Cluster/office that conducted the post audit and issued the Notice
of Disallowance.

Hence , this appeal to the Regional Director of the Commission on Audit (COA)
Cordillera Administrative Region.

APPEAL MEMORANDUM

BRIEF STATEMENT OF
THE FACTS OF THE CASE
1. That the appellants received an Audit Observation memorandum AOM No.
(Tublay)2016 -6 dated February 14, 2016 from the Commission on Audit
Team which states :

Sports Utility Vehicle (SUV) purchased costing P1,207,800.00 was

charged from the Philippine Health Insurance Corporation
(Philhealth)
Capitation Fund (PCF) contrary to Philhealth Circular 10 s. 2012,
resulting in an irregular disbursement of funds and deprivation
of other health services to entitled indigents in the community.

2. The Audit Team recommended to management that the amount utilized for the
procurement of the vehicle be reimbursed to the PCF by all the persons
responsible for the irregular disbursement.

3. Prior to the scheduled Exit Conference between COA Audit Team and LGU
Management on April 9, 2017, management submitted its comments on the
AOM as prepared by appellant Dr. Marcela Tinoyan and duly noted by the
Municipal Accountant and the incumbent Municipal Armando I. Lauro. During
the Exit conference, management reiterated its comments and explained that the
purchase proceeded only after being verbally informed by the PHILHEALTH
Field Office head, Janet Palaez that the Capitation fund could be used for the
purchase of the vehicle.

The Audit team understood but required that the appellant submit a
certification from PHILHEALTH to that effect. The appellants agreed outright
to get the certification since they have allowed it earlier albeit verbal. On May
18, 2017, LGU Tublay received a letter from the Philhealth Regional Director in
response to the LGUs request for a written certification to the effect that they
allow the purchase of a utility vehicle out of the capitation fund denying the
request contrary to what Mrs. Janet Palaez have said earlier.

4. The Municipal Mayor, Armando I. Lauro reiterated thru an appeal letter dated
July 7, 2017 Copies of the management letter addressed to the Audit team.

5. That it is respectfully reiterated that the Appellants who are members of the BAC
are ordinary employees of Baguio Teachers Camp who had no previous training
and experience in conducting public bidding. This also explains the reason why
Consultants were hired to assist them during the bidding. In fact, there were two
(2) consultants who were hired in the persons of Mr. Ricardo Aquino and Mr.
Felitio Lara to guide them as they go through these processes. The presence of
these consultants only shows that the Appellants observed fair, neutral, and
unbiased evaluation of the bids. There was no offense or gross negligence that
the Appellants committed to include them as persons liable in the disallowance.
6. Foremost, based on the advice given by their Consultant, Mr. Aquino, the
Appellants members of the BAC conducted a meeting to determine the
acceptability of personal checks as a form of bid security to be given by the
winning bidder. The BAC members then heavily then heavily relied on the
advice given by their consultant that if they accept personal checks as a form of
bid security, this will ensure increased competition for the projects and will
eventually give the government wider options in deciding which bid is the most
advantageous offer. Their participation therefore does not constitute breach of
sworn duty nor does it constitute ill will on their part as they honestly believed
that they can consider the acceptance of a personal check as bid security as per
the advice of their consultant.

7. That, aside from that, the Appellants were never motivated by personal motives
nor does their decision in allowing personal check as bid security tainted with
bad faith since the advice given to the by their Consultant was to deliberate on
the matter and not totally reject such form of bid.

8. It is worth reiterating that the offer of the Nicholas Jift Construction to secure
their obligation through a personal check was initially denied by the BAC.
However, when Nicholas Jift Construction asked for reconsideration, the
members of BAC were advised by their consultant that they can deliberate on the
substance of allowing such form of security. It can be inferred from the sequence
of events that the members of BAC were not motivated by ill motives for they
deliberated and found it more substantial to allow such form of security for it will
be advantageous on the part of the government as per the Consultant’s advice.

9. The appellants and the other members of the BAC heavily relied on the advice
given by their Consultants considering that they never had any training or
experience in public bidding when they were assigned to become members of the
BAC. Their decision was made in good faith and if ever it turns out to be an error
of judgment, still, it did not come from any wrongful intent.

10. Furthermore, it is also worthy to note that even through the BAC allowed
personal checks as a bid security, it was, still, under the strict scrutiny of the
Technical Working Group (TWG) in determining the bidder’s capacity in
accomplishing the said project. In fact, it is also a Standard Operating Procedure
(SOP) that the Head of Procurement will also evaluate and approve the
recommended bids before any award is to be granted.

11. In this particular cases, the post-qualification conducted by the members of the
TWG and the Consultants found that the eligibility, technical and financial
documents submitted by Nicholas Jift Construction were sufficient and
responsive to the requirements of the procuring entity. In this case, it cannot be
argued that Nicholas Jift Construction was heavily favored nor was it chosen
because it has moral influence over the members of the BAC.
12. Furthermore, aside from the Technical Working Group (TWG), the Appellants
also know that the Head of the Procuring Entity has the discretion to approve or
disapprove the BAC’s recommendation. In fact their head has the right to reject
any and all bids, declare a failure of bidding or not to award the contract.

13. From these alone, the Appellants just conducted their duties rightfully under the
circumstances and that they had merely followed the instructions given by their
superiors. Their motive is unquestionable as they relied on the advice of their
Consultants and good faith in exercising their functions as members of the BAC.

WITH ALL DUE RESPECT, THE

FUNCTIONS OF THE APPELLANTS ARE
MERELY RECOMMENDATORY IN
CHARACTER AND THEIR POWER IS
NOT EXCLUSIVE. HENCE, THEY
SHOULD NOT BE INCLUDED AS
PERSONS LIABLE IN THE AUDITED
TRANSACTIONS.

14. The Appellants here are members of the Bids and Awards Committee (BAC) of
Teache’s Camp, Baguio City. Being members of BAC, they are not really
engaged in the grant of concessions. The functions of the BAC are merely
recommendations in character. This particularly described in Section 12 of RA
9184 that specifically states that:

15. In the case of Sison vs. People, the Honorable Supreme Court has defined
“partiality,” “bad faith” and “gross negligence” as follows:

“Partiality” is synonymous with “bias”

which “excites a disposition to see and report matters
as they are wished for rather than as they are”

“Bad faith does no simply connote bad

judgment or negligence; it imputes a dishonest
purpose or some moral obliquity and conscious
doing of a wrong; a breach of sworn duty through
some motive or intent or ill will; it partakes of the
nature of fraud.”

“Gross negligence has been so defined as

negligence characterized by the want of even slight
care, acting or omitting to act in a situation where
there is a duty to act, not inadvertently but willfully
and intentionally with a conscious indifference to
consequences in so far as other persons may be
affected. It is the omission of that care which even
inattentive and thoughtless men never fail to take on
their own property.”xxx
16. That it is respectfully alleged that there was no manifest partiality that was
committed by the BAc when they awarded the project to Nicholas Jift
Corporation;

17. It is worth reiterating that when the issue of the acceptability of personal check
arose, the Appellants and the other BAC members sought the assistance of their
consultant, Ricardo Aquino, who advised them to deliberate the matter and
decide as a collegial body. They were not advised to reject it right away. Hence,
guided by said evidence, the Appellants as members of BAC deliberated on the
matter and decided to accept the personal check as bid security.

18. The appellants were never moved by a dishonest purpose as they accepted the
personal check based primarily on the advice given to them and with the intent to
ensure increased competition for the projects and give the government wider
options in deciding which bid is the most advantageous offer. There is no breach
of sworn duty here or even ill will on their part as they honestly believed that
they can consider the acceptance of a personal check as bid security.

19. Even before deciding, it is a fact that the Appellants referred the matter to their
consultant Mr. Ricardo Aquino. The latter informed them that they can deliberate
on the matter and make a decision. Hence, the guided by this advice, the
appellants decided to accept the personal check as bid security with the sole
desire to ensure increase competition for the projects and give the government an
opportunity to evaluate more prospective contractors that may be awarded the
projects.

20. The only mistake of the Appellants as members of the BAC was to misinterpret
the advice of their consultant that they could decide on the matter. This gave
them the impression that they could choose to accept the personal check as bid
security. This is because they were never advised to just totally reject the
personal check. This will only prove that they never acted with bias and fraud
and they were never motivated by conscious wrongdoing and wrongful intent.

21. In fact, it is also worthy to note that if the Appellants were really motivated by ill
will, they should have simply accepted the personal check right away during the
opening of bid and did not reject it and Nicholas Jift Construction would have
totally won the award at the first instance. However, they referred the matter to
their consultant when Nicholas Jift Construction asked for reconsideration when
the BAC rejected the bid security as it was a personal check. Hence, when their
consultant advised that the personal check for reasons mentioned above.

22. Their decision to accept the personal check of Nicholas JIft Construction was
clearly just bad judgment on the part of the Appellants as they never had any
training or experience in public bidding when they were assigned to become
members of the BAC. This is the reason that they kept on referring the matter to
their consultant. This was highlighted when they changed their decision from
 rejecting the personal check and accepting it after referring the same to their
consultant.

23. However, their change of mind could never indicate a wrongful intent. This only
indicates mental confusion or lack of knowledge and training that was the
situation of the Appellants at the time they were confronted with the problem of
whether or not to accept the personal check. This was the reason they referred the
same to the consultants.

24. As such, the Appellants were all in good faith when they committed bad
judgment. This happened because all of the Appellants have no sufficient
expertise or knowledge about public bidding. This would make their acts without
any wrongful intent. Even if they are bound to know the law, their lack of intent
to commit ill will would only show that there was lack of bad faith on their part.

25. It is also interesting to note that the Office of the Deputy Ombudsman for Luzon
exonerated Mr. Ricardo Aquino, the consultant, ruling that there was nothing
wrong in his involvement of advising the BAC members. This is particularly on
the fact that the Appellants could deliberate on the issue about the acceptability
of the forms of bid securities. According to the Resolution of the Deputy
Ombudsman for Luzon, this is part of the job of Mr. Ricardo Aquino.

26. This would all the more also prove that there was no bad faith on the part of the
Appellants. Even the Deputy Ombudsman for Luzon did not negate the fact that
Mr. Aquino gave his advice on the Appellants as members of the BAC to
deliberate on the matter. This would all the more prove that there is no liability
on the part of the Appellants as they just followed the advice of their consultant
who was found to be just doing his job.

27. The fact was appreciated in the same case filed against the superior of the
Appellants, Mr. Jonathan Malaya, in a similar case filed against him. The Petition
for Review filed by Malaya for the finding against him by the Office of the
Ombudsman was favorably granted by the Fourteenth Division of the Honorable
Court of Appeals.

28. Hence, it was mentioned in said case that while it is submitted that under the
rules on statutory construction that when the law makes an enumeration, those
not included are excluded, a different intention apparently appears when the
enumeration in the IRR-A included the term “any combination of the above” is
involved. It is not too farfetched that based on said enumeration, personal checks
may be acceptable forms of bid security. Hence, the alleged irregularity in the
proceeding where Appellants were made complicit thereby becomes indistinct
and subject to interpretation and discretion.
29. It was also mentioned in said Malaya case that the law does not prescribe what
the head of the procuring entity must do when confronted with the instances
enumerated under Section 41 of RA 9184. What the law provides is discretion to
accept or reject any and all bids, declare a failure of bidding or not award the
contract. From this alone, it would also show the lack of liability of herein
Appellants as their decisions are also hinged upon the approval of their head.

30. The Honorable Court of Appeals also mentioned in the case of Malaya vs. Office
of the Ombudsman that even with the letter dated March 25, 2008 of Richard
Yodong which, from a mere perusal thereof, was not in accord with the form and
content of a protest under the procurement law, the overwhelming documents and
pieces of evidence evaluated by Malaya and upon which he based his decision to
affirm BAC/TWG resolution awarding the civil works packages, they can neither
be faulted in setting aside Yodong’s letter, nor in not taking action thereon. The
procurement law is clear: that decisions of the BAC with respect to the conduct
of bidding may only be protested in a verified writing, coupled with the payment
of a non-refundable protest fee to the head of the procuring entity, provided that a
prior motion for reconsideration should have been duly filed with, and resolved
by the BAC.

31. From here alone, we can see that the Appellants should not also have any
liability. Without compelling evidence of fraud, corruption or negligence, the
Appellants had the right, if not the bounden duty to presume regularity in the
performance of official functions and with the exercise of prudence and due
diligence, the Appellants cannot be said to have abused their discretion.

32. Furthermore, it also respectfully averred that the decision to accept the personal
check by the Appellants was an offshoot of their decision to accept the surety
bond as bid security of another bidder. Here we can see the motive of the
Appellants were not to disqualify a bidder by its bid security but the determine
capacity on the basis of its financial and technical bid. Their decision was made
in good faith and it turns out to be an error of judgment which did not come from
any wrongful intent.

33. Aside from that, the appellants were also of the thought that even if they accept
the personal check, the bid of complying bidder will still go through the process
of evaluation and post qualification. Thus, even if the Appellants awarded the bid
to Nicholas Jift Construction, they know that the contract will not be
automatically awarded to it as it will still be evaluated during the post
qualification. Hence, just in case they committed a mistake, they know that this
will still be further evaluated so they just accepted the personal check first. This
is what their motive is, nothing fraudulent in it.

34. We have respectfully elucidated the fact that the sole desire of the Appellants
was to ensure increased competition for the project and to give the government
an opportunity to evaluate more prospective contractors that may be awarded the
 same. That even if they reversed their earlier decision not to accept the personal
check, there is clearly no gross inexcusable negligence on their part.

35. This is particularly so as the Appellants are also of the belief that the Technical
Working Group (TWG) will still evaluate the recommended bids of the bidders.
In fact they know that the head of the Procurement will also evaluate and approve
the recommended bids before award will be given. Aside from that, they have
constantly sought the advice of their consultants. This is primarily the reason that
there were consultants to guide the BAC in the bidding process. The presence of
these consultants only shows that they want to observe fair, neutral and unbiased
evaluation of the bids. There is no gross offense that the Appellants committed to
be implicated in the Notice of Disallowance.

36. In fact, after the BAC’s recommendation, the TWG members and consultants
would proceed with the post qualification of the declared lowest bidder. In this
case, the post qualification conducted by the TWG members and consultants on
the eligibility, technical and financial documents submitted by Nicholas Jift
Construction were found responsive to requirements of the procuring entity.

37. Furthermore, aside from the Technical Working Group (TWG), the Appellants
also know that the Head of the Procuring Entity has the discretion to approve or
disapprove the BAC’s recommendation. In fact their head has the right to reject
any and all bids, declare a failure of bidding or not to award the contract. In their
belief, if ever there will be errors, this will still be rejected or evaluated after they
make their recommendation.

38. In this case, the discretion to accept or reject a bid and award contracts is vested
in the government agencies entrusted with that function. Such discretion given to
authorities to accept or reject a bid is of such wide latitude that courts will not
interfere with, unless it is apparent that it is exercised arbitrarily or used as a
shield to a fraudulent award. The exercise of that discretion is a policy decision
that necessitates prior inquiry, investigation, comparison, evaluation, and
deliberation. This task can best be discharged by the concerned government
agencies as in the case of the herein Appellants. Hence, they could not be persons
liable to be implicated in the Notice of Disallowance.

39. Furthermore, as regards the use of the personal check it has been decided that
although a personal check may not be tacitly among the required forms of bid
security, the BAC noted the manifestation and offer of Nicholas Jift Construction
to replace the personal check with a manager’s check. With its desire to ensure
increased competition for the projects and provide the government with utmost
advantage, and to prevent the possibility of failure of bidding which would
unduly delay the preparation for BTC’s centennial celebration, the BAC accepted
the personal checks of Nicholas Jift Construction as bid security. A bid security
serves as a guarantee that after receipt of the notice of award, the winning bidder
shall enter into a contract with the procuring entity within the stipulated time and
 furnish the required performance security. It is returned to the winning bidder
after it has signed the contract and furnishes the performance security. It appears
that Nicholas Jift Construction entered into a contract within the given period,
furnished the proper performance security, and it satisfactorily accomplished the
projects awarded to it as shown by the pre-audit and post audit reports of the
Commission on Audit. There is therefore no liability here.

40. The Appellants comprising the BAC and their superior are accorded such wide
discretion to approve or disapprove applications contracts. Significantly observed
is that at the time the Appellants issued their Resolution on March 13, 2008
recommending the issuance of the notice to award to the winning bidders, except
for Package 3 where no bidder passed during post qualification and at the time
their head Jonathan Malaya signed the notice of bidding results on March 17
2208, no protest had been lodged, or evidence of fraud or corruption, relative to
the BAC proceedings.

41. From here alone, we can see that the Appellants should not also have liability.
Without compelling evidence of fraud, corruption or negligence. The Appellants
had the right, if not the bounden duty to presume regularity in the performance of
official functions; and with the exercise of prudence and due diligence, the
Appellants cannot be said to have abused their discretion.

42. As amply demon