TATAD v.

GARCIA
06 April 1995
Topic: Presumption of Regularity of Performance; Strong Evidence

G.R. No. 114222

Quiason, J.

SUMMARY :

Out of the groups interested in building the EDSA LRT III, only one (a corporation organized under HK
laws) satisfied the prequalification requirements. As such, DOTC awarded the contract to it by negotiation and
not by public bidding. The parties entered into agreements initially without congressional or presidential approval.
Petitioners questioned the validity of the proceedings conducted. SC dismissed the petition.
NATURE: Petition under Rule 65 to prohibit respondents (DOTC Sec. Garcia, Jr., and EDSA LRT Consortium) from
further implementing the agreement to build an LRT system in EDSA
N.B. Several DOTC Secretaries and Executive Secretaries were involved in this case. It's best not to focus on their names.

FACTS:
1989 - DOTC planned to construct an LRT line along EDSA (EDSA LRT III).
1990 - RA 6957, the "Build-Operate-Transfer (BOT) Law" was passed. It recognized 2 schemes for the
financing, construction, and operation of gov't projects: BOT and BT (Build-Transfer).
1991 - The Prequalification Bids and Awards Committee (PBAC) issued guidelines for the prequalification of
contractors. These were published in 3 newspapers of general circulation weekly for 3 consecutive weeks.
Of the 5 groups that submitted prequalification bids, only EDSA LRT Consortium, organized under HK laws,
met the requirement of 21 points per criterion (except Legal Aspects), garnering a total of 82/100.
DOTC Sec. Prado sent Pres. Cory 2 letters recommending the award of the project to the Consortium and
requesting authority to negotiate with it. Exec. Sec. Orbos directed DOTC to proceed.
Consortium submitted its bid proposal which DOTC found satisfactory. DOTC and EDSA LRT Corporation (in
substitution of Consortium; hereinafter "Corp") entered into an "Agreement to Build, Lease and Transfer a Light
Rail Transit System for EDSA".
1992 - DOTC Sec. Prado requested presidential approval of the contract, but Exec. Sec. Drilon said the
President could not grant the approval for the ff. reasons:
(1) DOTC failed to conduct actual public bidding in compliance with the BOT Law 5;
(2) The prequalification proceedings was not the public bidding contemplated under the law;
(3) Item 14 of the IRR of the BOT Law which authorized negotiated award of contract in addition to public
bidding was of doubtful legality;
(4) Congressional approval of the list of priority projects under the BOT/BT Scheme provided in the law had
not yet been granted at the time the contract was awarded
DOTC and Corp entered into a Revised Agreement, claiming that the DOTC has full authority to sign the
Agreement without need of approval by the President. They also entered into a Supplemental Agreement to
clarify their respective rights and responsibilities. DOTC Sec. Garcia submitted both to Pres. FVR for approval.
FVR approved them. Under the agreements, this is how the BOT scheme will work:
o Corp shall undertake and finance the project. Upon viability thereof, Corp shall deliver the use and
possession to DOTC which shall operate the same. DOTC shall pay monthly rentals. After 25 years and
DOTC has completed the payments, ownership shall be transferred for $1.
1994 - RA 7718 amending the BOT Law was passed. It expressly recognizes the Build-Lease-Transfer (BLT)
scheme and allows direct negotiation of BLT contracts.
PETITIONERS ARGUE: The Revised and Supplemental Agreements are unconstitutional/ invalid because:
(1) EDSA LRT III is a public utility, and the ownership and operation thereof is limited by the Constitution to Filipino
citizens and domestic corporations, not foreign corporations like private respondent;
(2) The BLT scheme provided in the agreements is not the BOT or BT scheme under the law;
(3) The contract was awarded to private respondent not through public bidding which is the only mode of
awarding infrastructure projects under the BOT law; and
(4) The agreements are grossly disadvantageous to the government.
VILLARAMA, BIANCA DANICA S.

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ISSUES, HOLDING, RATIO: (SC dismissed the petition.)

(1) W/N respondent EDSA LRT Corp, Ltd., a foreign corporation, can own EDSA LRT III, a public utility
Loaded question. EDSA LRT Corp only owns the facilities used by the public utility, not the utility itself.
The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof.
One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility
without owning the facilities used to serve the public.
While Corp owns the facilities necessary to operate the EDSA LRT III (tracks, carriages, terminals, etc.), it admits that
it does not have the franchise required by the Constitution to be able to operate a public utility. This is why the parties
agreed that upon completion, the project will immediately be delivered by way of lease to DOTC, which shall operate
the LRT as a common carrier.
In sum, Corp will not run the LRT and collect fees from the riding public. It will have no dealings with the public and
the public will have no right to demand any services from it. Its role is only that of a lessor.
o Distinguished from Kilosbayan v. Guingona: In that case, the Court found that PGMC's participation was not
confined to the construction and setting up of the online lottery system. It spilled over to the actual operation
thereof. Here, Corp does not participate in the operation.
(2) W/N the BLT scheme in the Agreements is recognized under the BOT Law and its IRR
YES. The BLT scheme is but a variation of the BT scheme under the law. There is no mention in the BOT Law that
the BOT and BT schemes bar any other arrangement for the payment by the government of the project cost. The law
must not be read in such a way as to rule out or unduly restrict any variation within the context of the two schemes.
No statute can be enacted to anticipate and provide all the fine points and details for the multifarious and complex
situations that may be encountered in enforcing the law.
The burden on the government in raising funds to pay for the project is made lighter by allowing it to amortize
payments from the LRT's income.
It is of no significance that the rents shall be paid in USD. It is a high-priority project certified by Congress and NEDA,
hence outside the operation of the Uniform Currency Act.
(3) W/N the award through negotiation and before Congressional approval invalidates the award
NO. This does not suffice to invalidate the award. Subsequent Congressional approval amounts to a ratification of the
prior award of the EDSA LRT IIII contract. The agreements have also been approved by Pres. FVR.
Since only 1 applicant passed the prequalification process, to conduct a public bidding for that lone participant would
be an absurd and pointless exercise.
PD 1594, "Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts," allows
the negotiated award of government projects in exceptional cases such as when there is a lack of qualified bidders or
contractors, the award of government infrastructure contracts may be made by negotiation. PD 1594 is the general
law on government infrastructure contracts while the BOT Law governs particular arrangements or schemes aimed at
encouraging private sector participation. The 2 laws are not inconsistent with each other but are in pari materia and
should be read together accordingly.
Petitioners' claim that the BLT scheme and direct negotiation of contracts are not contemplated by the BOT Law has
now been rendered moot and academic by RA 7718. It is a curative statute, which makes valid that which before
enactment of the statute was invalid.
If the prequalification process was actually tainted by foul play, why didn't any of the competing firms bring the matter
before the PBAC or intervene in this petition?
(4) W/N the Agreements are grossly disadvantageous to government
NO. Government officials are presumed to perform their functions with regularity and strong evidence is
necessary to rebut this presumption. Petitioners have not presented evidence on the reasonable rentals to be paid
by the parties to each other. The matter of valuation is an esoteric field which is better left to the experts and which
this Court is not eager to undertake.
The terms of the agreements were arrived at after a painstaking study by DOTC. The determination by the proper
administrative agencies and officials who have acquired expertise, specialized skills and knowledge in the
performance of their functions should be accorded respect, absent any showing of grave abuse of discretion. The
discretion to award a contract is vested in the agencies entrusted with that function.
That the grantee of a government contract will profit therefrom and to that extent the government is deprived of the
profits if it engages in the business itself, is not worthy of being raised as an issue. In all cases where a party enters
into a contract with the government, he does so not out of charity and not to lose money, but to gain pecuniarily.
VILLARAMA, BIANCA DANICA S.

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