BISHOP BRODERICK S. PABILLO, DD, PABLO R. MANALAST AS, JR.

, PhD, [Smartmatic-TIM], for a minimum period of three (3) months, in the case of supplies,
MARIA CORAZON AKOL, CONCEPCION B. REGALADO, HECTOR A. BARRIOS, and one (1) year, in the case of equipment, after performance of this Contract"; and
LEO Y. QUERUBIN, AUGUSTO C. LAGMAN, FELIX P. MUGA, II, PhD, ATTY. as for the "PCOS, Smartmatic-TIM shall warrant the availability of parts, labor and
GREGORIO T. FABROS, EVITA L. JIMENEZ, and JAIME DL CARO, PhD, technical support and maintenance to the COMELEC for ten (10) years, if purchased,
Petitioners, vs. COMELEC EN BANC, represented by Acting Chairperson beginning May 10, 2010.
CHRISTIAN ROBERT S. LIM, and SMARTMATIC-TIM CORPORATION,
represented by Smartmatic Asia-Pacific President CESAR FLORES, COMELEC was able to implement for the first time the AES on a nationwide scale
Respondents. during the May 10, 2010 Synchronized National and Local Elections.

G.R. No. 216098 April 21, 2015 COMELEC partially exercised the OTP when it purchased 920 units of PCOS
machines with the corresponding canvassing/consolidation system (CCS) for the
x-----------------------x special elections in certain areas in Basilan, Lanao del Sur, and Bulacan. The option
period was thereafter extended several times and on March 21, 2012, the COMELEC
INTEGRATED BAR OF THE PHILIPPINES, Petitioner, vs. COMELEC, En Banc issued Resolution No. 9376 approving the full exercise of the OTP. Thus, on
represented by its Acting Chairperson ROBERT S. LIM, and SMARTMATIC-TIM March 30, 2012, the COMELEC and Smartmatic-TIM executed a Deed of Sale (2012
CORPORATION, Respondents. Deed of Sale) for the remaining PCOS and CCS machines, which the COMELEC
used during the May 13, 2013 Synchronized National and Local Elections. The 2012
G.R. No. 216562
Deed of Sale states that the warranties under the 2009 AES Contract are
PERLAS-BERNABE, J. incorporated and that the PCOS machines will be covered by a one (1) year warranty
commencing from the acceptance by the COMELEC during the Hardware
Facts: Acceptance Test (HAT); Provided, that no warranty period will expire earlier than 31
May 2013.
In 1997, Congress enacted RA 8436, which authorized the COMELEC "to use an
automated election system (AES) for the process of voting, counting of votes and Petitioners in the consolidated cases of Capalla v. COMELEC challenged the validity
canvassing/consolidation of results for the May 11, 1998 national and local elections. and constitutionality of Resolution No. 9376 and prayed for the issuance of a TRO
RA 9369, was enacted on January 23, 2007, amending RA 8436 "to encourage enjoining the implementation of the 2012 Deed of Sale. Nevertheless, the Court, in a
transparency, credibility, fairness, and accuracy of elections." Decision dated June 13, 2012, ruled in favor of the COMELEC, finding that the latter
properly exercised its OTP, despite the extended period therefor, and, accordingly,
COMELEC published a Request for Proposal (RFP) for the public bidding of the lease
declared the 2012 Deed of Sale legal and valid.
with option to purchase of an AES to be used in the May 10, 2010 Automated
Synchronized National and Local Elections. The 2009 RFP states that "[t]he winning COMELEC Advisory Council (CAC) recommended, among others, the reuse of the
bidder shall assure the availability of parts, labor, and technical support and existing technology for the upcoming 2016 Elections.
maintenance to the COMELEC for the duration of this project and for the next ten (10)
years should the COMELEC opt to purchase the system after the lease period." COMELEC Law Department issued a memorandum, with subject heading "Review of
the Draft Contract for the 2014 Extension to the Warranty (Program 1); Repair and
COMELEC En Banc, resolved to approve the report/recommendation of the Maintenance of the Precinct Count Optical Scan (PCOS) Machines." In the said
COMELEC Special Bids and Awards Committee (SBAC) dated June 3, 2009, memorandum, the COMELEC's Law Department stated that it was not provided with
confirming Smartmatic-TIM - a joint venture company formed by Smartmatic the copies of the annexes of the draft contract and, thus, was constrained to limit its
International Corporation (Smartmatic) and Total Information Management review only on the general provisions and structure thereof, excluding the activities
Corporation (TIM) - as "the bidder with the 'Lowest Calculated Responsive Bid' and negotiations conducted in the acquisition of the subject services. Furthermore, it
[LCRB] and to award the contract for the automation of the elections on May 10, 2010 mentioned that prior to its review of the Final Extended Warranty Proposal, a similar
to the said joint venture." proposal for the "refurbishment/preventive maintenance/ extended warranty /program
updates of the PCOS machines," also from Smartmatic-TIM, was submitted for its
COMELEC and Smartmatic-TIM executed the Contract for the Provision of an
review on June 13, 2014 specifically on the aspect of procuring the same services
Automated Election System for the May 10, 2010 Synchronized National and Local
through direct contracting under RA 9184, otherwise known as the Government
Elections (2009 AES Contract). The 2009 AES Contract pertinently provides that "in
Procurement Reform Act (GPRA). Therein, it stressed that the procedure for direct
the event that COMELEC exercises its option to purchase (OTP) the Goods until
contracting shall only be applied if the conditions to resort to the method are present
December 31, 2010, the COMELEC shall pay Smartmatic-TIM an additional amount
or complied with, and that the Bids and Awards Committee (BAC) and the
of ₱2,130,635,048.15. A warranty shall also be required in order to assure that: [a]
COMELEC's Information Technology Department (ITD) should first determine and
manufacturing defects shall be corrected; and/or [b] replacements shall be made by
confirm if indeed Smartmatic-TIM is the sole provider of the services to be procured or 1. Its resort to direct contracting was legal under Section 52 (h) BP 881, or the
otherwise the only entity capable of executing such project, to the exclusion of others. Omnibus Election Code, which authorizes the COMELEC to enter into negotiations
COMELEC's Law Department also stated that since the AES procurement project and sealed bids if it finds the requirements of public bidding impractical to observe;
must necessarily form part of the 2009 AES Contract, Smartmatic-TIM must train the and
COMELEC's technical personnel.
2. the instances under the GPRA when resort to direct contracting may be made are
These notwithstanding, the COMELEC En Banc, in its Resolution No. 9922, attendant in the case.
approved Program 1 of Smartmatic-TIM's PCOS Extended Warranty Proposal
amounting to ₱300,000,000.00, exclusive of VAT, through direct contracting, in view Smartmatic-TIM arguments
of the following reasons:
1. the elements to justify the resort to alternative modes of procurement stated in
First, time is of the essence in the preparation for the May 9, 2016 National and Local Justice Presbitero J. Velasco, Jr.'s Concurring Opinion in Capalla are present,
Elections such that the Commission and the Bids and Awards Committee are emphasizing that both the hardware and software of the PCOS machines are
constrained by the tight time schedule if public bidding are to be conducted in the protected under RA 8293, or the Intellectual Property Code of the Philippines;
refurbishment and/or repair of the machines considering all the procurement activities
2. Under the 2009 AES Contract and the 2012 Deed of Sale, the warranty shall
lined up.
continue for ten (10) years if the COMELEC exercises the OTP and pays for the
Second, to give the refurbishment and/or the repair of the PCOS Machines to any machines' maintenance and technical support subject to prevailing prices; and
third-party provider other than SMARTMATIC, the original manufacturer will be too
3. there is no direct substitute for the PCOS machines and that it is the only entity
great a risk considering the highly technical nature of the refurbishment and/or the
authorized to provide the licensed technology in the Philippines.
repair to be conducted on the machines.
In G.R. No. 216562, another petition assailing the validity of Resolution No. 9922 was
Third, given that no public bidding will be conducted, it is still legal under RA 9184 for
filed, this time by petitioner the IBP. The IBP also assails the validity of the Extended
the COMELEC to resort to direct contracting in the present case.
Warranty Contract (Program 1) entered into between the COMELEC and Smartmatic-
The COMELEC further pointed that it was constrained to pursue a direct contracting TIM, alleging that the COMELEC erroneously and invalidly resorted to direct
arrangement with Smartmatic-TIM for the re-use of the existing technology since its contracting as an alternative method of procurement, thereby violating the
proposed budget for the purchase of all new technology was rejected. requirements of public and competitive bidding under the GPRA, and that the
supposed "tight time schedule" in the preparation for the May 9, 2016 National and
On January 30, 2015, COMELEC and Smartmatic-TIM entered into the Extended Local Elections is not a ground to dispense with the conduct of public bidding under
Warranty Contract (Program 1), whereby Smartmatic-TIM undertook the following the law.
during a five (5)-month period:
On March 24, 2015, the Court issued a TRO enjoining the implementation of the
(a) accomplish a physical inventory count of PCOS machines; (b) complete a full Extended Warranty Contract (Program 1 ), pending resolution of the cases at hand.
diagnostic of every PCOS machine in accordance with the Diagnostic Program; (c)
determine the required refurbishment to bring PCOS machines back to working Issues:
condition; (d) perform a full Preventive Maintenance Program of every PCOS
Main Issue: Whether or not the COMELEC gravely abused its discretion in issuing
machine; (e) perform all repairs and replacements of the defective components; and
Resolution No. 9922 and in subsequently entering into the Extended Warranty
(j) provide replacement units for those PCOS machines that are irreparable.
Contract.
The present cases before the SC:
Sub-issues to be resolved to decide over the main issue:
In G.R. No. 216098, petitioners Pabillo et. al. filed a petition for certiorari and
1. Whether or not the petitions should be dismissed outright due to procedural
prohibition with prayer for the issuance of a writ of preliminary injunction, as registered
grounds.
voters and taxpayers, alleging that the COMELEC committed grave abuse of
discretion in adopting Resolution No. 9922 as it violates the GPRA, which requires 2. Whether or not the conditions for direct contracting stated under Section 50, Article
competitive bidding for government procurement contracts as a general rule. They XVI of the GPRA were complied with;
point out that lack of material time is not one of the instances that would warrant the
resort to direct contracting. 3. whether or not direct contracting may be resorted to under Section 52 (h) of the
Omnibus Election Code; and
COMELEC’s arguments
4. Whether or not the Extended Warranty Contract (Program 1), being a part of the a) Procurement of Goods of proprietary nature, which can be obtained only from the
2009 AES Contract, even required public bidding. proprietary source, i.e. when patents, trade secrets and copyrights prohibit others
from manufacturing the same item;
Ruling:
b) When the Procurement of critical components from a specific manufacturer,
1. No, the petition should not be dismissed outright. supplier or distributor is a condition precedent to hold a contractor to guarantee its
project performance, in accordance with the provisions of this contract; or,
Respondents invoke various procedural grounds, which would supposedly warrant
the consolidated petitions' outright dismissal. They claim that petitioners88 did not c) Those sold by an exclusive dealer or manufacturer, which does not have sub-
have the legal standing to institute their corresponding petitions;89 that certiorari and dealers selling at lower prices and for which no suitable substitute can be obtained at
prohibition are not the proper remedies to assail the validity of Resolution No. 9922 more advantageous terms to the Government. (Emphasis supplied)
and the Extended Warranty Contract (Program 1);90 that direct resort to the Court
violated the doctrine of hierarchy of courts;91 and that nonetheless the petitions were The second scenario, under Section 50 (b), Article XVI of the GPRA, which would
filed out of time. justify a resort to direct contracting is when the procurement of critical components
from a specific manufacturer, supplier or distributor is a condition precedent to hold a
The propositions are rejected. contractor to guarantee its project performance, in accordance with the provisions of
the contract.
The Court, taking cue from its ruling in Capalla, which, as mentioned, involved the
legality of the COMELEC's exercise of its OTP under the 2009 AES Contract, despite Respondents are of the view that the direct contracting arrangement falls under this
the extended period therefor, brushes aside any of the foregoing procedural barriers second condition. In this regard, the COMELEC claims that Smartmatic-TIM will not
in view of the compelling significance and transcendental public importance of the take responsibility for malfunctioning machines if they are tampered with by other
matter at hand. entities as per the warranty provisions of the 2009 AES Contract, which were
incorporated in the 2012 Deed of Sale. Thus, the engagement of Smartmatic-TIM
2. No, the conditions for direct contracting stated under Section 50, Article XVI
constitutes a critical component or a condition precedent if the COMELEC were to
of the GPRA were not complied with.
hold it for its existing warranties.
It is an established public policy, as well as a statutory mandate that all government
Petitioners counter that the COMELEC failed to show that Smartmatic-TIM is the sole
procurement shall be done through competitive public bidding. However, as an
entity which can provide the subject services. As such, it cannot be inferred that the
exception, Article XVI of the GPRA sanctions a resort to alternative methods of
latter is the only entity that has the technical expertise in refurbishment, maintenance,
procurement, among others, via direct contracting:
diagnostics, and repair of the PCOS machines.
Section 48. Alternative Methods. -Subject to the prior approval of the Head of the
Petitioners' argument is tenable. Further reasons equally shore up their cause.
Procuring Entity or his duly authorized representative, and whenever justified by the
conditions provided in this Act, the Procuring Entity may, in order to promote First, the subject "goods" to be procured, i.e., repair and refurbishment services, are
economy and efficiency, resort to any of the following alternative methods of not critical components of any infrastructure project,129 whose manufacture and/or
Procurement: supply may be solely availed of from Smartmatic-TIM. A component is defined as "a
part or element of a larger whole." It is critical when it has a decisive or crucial
b. Direct Contracting, otherwise known as Single Source Procurement - a
importance in the success, failure, or existence of the project. While it may be argued
method of Procurement that does not require elaborate Bidding Documents because
that repair and refurbishment are critical to the functionality of the existing PCOS
the supplier is simply asked to submit a price quotation or a pro-forma invoice
machines, they cannot be considered as "components" thereof as they are not
together with the conditions of sale, which offer may be accepted immediately or after
elemental parts that make up the machine but are auxiliary services that pertain to an
some negotiations;
output that has already been completed.

Second, while the procurement of the parts for the repair and refurbishment of the
The parameters for valid direct contracting are found in Section 50, Article XVI of the PCOS machines may necessitate the procurement of critical components, it has not
GPRA: been settled that Smartmatic-TIM, who claims to be the exclusive manufacturer of the
SAES 1800 PCOS machines in the Philippines, is the only entity capable of supplying
SEC. 50. Direct Contracting. -Direct Contracting may be resorted to only in any parts for the machines' repair and refurbishment. Neither has it been convincingly
of the following conditions: shown that the PCOS machines could not be repaired or refurbished if the parts used
are those manufactured by another company, nor would the functionality of the
machines be compromised if parts of equivalent quality, although not of the exact xxxx
make than that manufactured by Smartmatic-TIM, are to be used for repair and
refurbishment. To recount, not only was the bidding of the 2009 AES Contract (h) Procure any supplies, equipment, materials or services needed for the holding of
participated in by Smartmatic-TIM, but also by other technology companies, such as the election by public bidding: Provided, That, if it finds the requirements of public
the consortiums of Indra Sistemas, S.A., Hart Intercivic, and SAHI; AMA Group bidding impractical to observe, then by negotiations or sealed bids, and in both cases,
Holdings Corp. and Election Systems and Software International Inc.; and Gilat the accredited parties shall be duly notified.
Satellite Network Ltd., F.F. Cruz & Co., Inc., and Filipinas Systems, Inc., among
In order to harmonize the provisions of the pertinent laws, the COMELEC's exercise
others, who may as well be capable of servicing the PCOS machines and/or providing
of its power to conduct negotiations and sealed bids based on the standard of
the parts therefor. A preliminary determination could have been made if only an initial
"impracticality" under Section 52 (h) of BP 881 should be read in conjunction with the
industry survey had been duly conducted by the COMELEC's BAC. The GPPB
GPRA, the latter being the special law currently governing all matters of government
Manual relevantly provides:
procurement. Notably, the approach is called for by Section 76, Article XXV of the
How can Direct Contracting be justified? GPRA, which provides that "[a]ny other law, presidential decree or issuance,
executive order, letter of instruction, administrative order, proclamation, charter, rule
To justify the need to procure through the Direct Contracting method, the BAC should or regulation and/or parts thereof contrary to or inconsistent with the provisions of this
conduct a survey of the industry and determine the supply source. This survey should Act, are hereby repealed, modified or amended accordingly." It is further consistent
confirm the exclusivity of the source of goods or services to be procured. In all cases with Sections 12 and 36 of the automated elections law, i.e., RA 8436, as amended
where Direct Contracting is contemplated, the survey must be conducted prior to the by RA 9369, which respectively state that in order "[t]o achieve the purpose of this
commencement of the procurement process. Moreover, the Procuring Entity must Act, the Commission is authorized to procure, in accordance with existing laws, by
justify the necessity for an item that may only be procured through Direct Contracting, purchase, lease, rent or other forms of acquisition, supplies, equipment, materials,
and it must be able to prove that there is no suitable substitute in the market that can software, facilities, and other services, from local or foreign sources free from taxes
be obtained at more advantageous terms. and import duties, subject to accounting and auditing rules and regulation x x x," and
that "[t]he provision of Batas Pambansa Big. 881, as amended, otherwise known as
Unfortunately, it was not shown that the said procedures, i.e., that of (a) an initial the 'Omnibus Election Code of the Philippines,' and other election laws not
industry survey (during which the BAC "should confirm the exclusivity of the source of inconsistent with this Act shall apply."
goods or services to be procured," and "must justify the necessity for an item that may
only be procured through Direct Contracting" and "be able to prove that there is no Adopting the foregoing, the Court finds that the most reconciliatory method of
suitable substitute in the market that can be obtained at more advantageous terms") construction, to the extent that fairness and reason would allow, is to consider the
and even (b) a pre-procurement conference (which is required since the "goods" to be situations stated under the GPRA which would justify a resort to alternative methods
procured amount to more than ₱2,000,000.00, and during which the participants, led of procurement as instances that particularize Section 52 (h)'s broad gauge of
by the BAC, "ensures that the procurement will proceed in accordance with the PPMP "impracticality."
[(Project Procurement Management Plan, whereby the schedule of milestone
activities is identified and the method of procurement determined)]" had been It has already been resolved that the COMELEC failed to comply with any of the
observed by the COMELEC in these cases. Note that the foregoing were prescribed conditions by which its selected mode of procurement, i.e., direct contracting, would
itself by the GPPB in its issued Manual of Procedures for the Procurement of Goods have been allowed. Meanwhile, it has not argued that any other alternative method of
and Services, which is currently posted at its own website. procurement can be applied. This notwithstanding, the COMELEC attempts to go
beyond the scope of the GPRA and extend Section 52 (h)'s application based on two
3.No. (2) practical considerations, namely: (a) the alleged tight schedule of conducting a
public bidding and having the PCOS machines repaired/refurbished in time for the
Non-compliance with the foregoing GPRA requisites notwithstanding, the COMELEC, 2016 elections; and (b) the great risk of having the PCOS machines
nevertheless, justifies its exclusive engagement of Smartmatic-TIM on account of repaired/refurbished by any third party provider in view of the highly technical nature
Section 52 (h) of BP 881, or the Omnibus Election Code, which, in its view, has not of the goods:
been repealed by the GPRA.
First, time is of the essence in the preparation for the May 9, 2016 National and Local
Sec. 52. Powers and functions of the Commission on Elections. -In addition to the Elections such that the Commission and the Bids and Awards Committee are
powers and functions conferred upon it by the Constitution, the Commission shall constrained by the tight time schedule if public bidding are to be conducted in the
have exclusive charge of the enforcement and administration of all laws relative to the refurbishment and/or repair of the machines considering all the procurement activities
conduct of elections for the purpose of ensuring free, orderly and honest elections, lined up.
and shall:
Second, to give the refurbishment and/or the repair of the PCOS Machines to any capability of potential bidders to comply with the same. As it was in its earlier
third-party provider other than SMARTMATIC, the original manufacturer will be too asseveration, the COMELEC is quick to assume the worst but its assumptions remain
great a risk considering the highly technical nature of the refurbishment and/or the unsubstantiated. Accordingly, the COMELEC's arguments at this juncture are denied
repair to be conducted on the machines. altogether.

Practicality is a relative term which, to stand the mettle of law, must be supported by 4. No, the Extended Warranty Contract (Program 1) is not a mere extension of
independently verified and competent data. As an exception to the public policy and the 2009 AES Contract
statutory command requiring all government procurement to be conducted through
competitive public bidding, a claim of impracticality should only be based on Lastly, the COMELEC argues that the Extended Warranty Contract (Program 1) is a
substantiated projections, else it would be easy to contrive, and the rule on public mere extension of the 2009 AES Contract, and thus need not undergo the rigorous
bidding easily circumvented. process of bidding. In this relation, it draws attention to Article 8.8 of the 2009 AES
Contract, which was incorporated under Item No. 9 of the 2012 Deed of Sale, and
As above-intimated, the COMELEC decries that there will not be enough time to deemed as a surviving provision under Article 2.2 of the 2009 AES Contract. It also
complete the intended repair and refurbishment works on the PCOS machines by the makes mention of the Court's ruling in Capalla, wherein it was declared that a
2016 National and Local Elections, if it were not to directly procure the same from contract is still effective as long as the performance security has not been released.
Smartmatic-TIM
The theory is flawed.
At this point, it should be noted that under the GPRA, the Procuring Entity is required
to prepare bidding documents which shall include, among others, the delivery time or The Extended Warranty Contract (Program 1) cannot be validated by the mere
completion schedule for the goods/services sought to be procured. Similarly, when expedient of characterizing the same as a part of the 2009 AES Contract. The
the Procuring Entity advertises/posts the invitation to bid, it should contain the services of repair and refurbishment cannot be procured from Smartmatic-TIM
contract duration for such procurement. Thus, had the COMELEC decided to bid out through an "extended warranty" mode, unless this Court assents to a blatant
the project, it would have been able to convey to all prospective bidders the tight circumvention of the procurement law.
timeline it is supposedly working with, and may even receive a proposal with a more
As earlier discussed, under Article 8.8 of the 2009 AES Contract, Smartmatic-TIM
efficient timeframe. At the very least, the COMELEC should have conducted an initial
warrants that its parts, labor and technical support and maintenance will be available
industry survey to ascertain if other service providers are capable of accomplishing
to the COMELEC, if it so decides to purchase such parts, labor and technical support
the works under more favorable terms to it, as well as the required pre-procurement
and maintenance services, within the warranty period stated, i.e., ten (10) years for
conference to ensure that the procurement will proceed in accordance with the
the PCOS, reckoned from May 10, 2010. Since Article 8.8 is a mere warranty on
PPMP. Unfortunately, the records do not indicate that these procedures were
availability, it entails a subsequent purchase contract, founded upon a new
followed. The reasons for the COMELEC's non-compliance can only be second-
consideration, to be effectively invoked. However, by no means does this provision
guessed and may even elude these present cases, but the glaring reality it must face
dispense with the need to bid out the ensuing purchase contract.
is that projections tracked on uncertainty cannot be upheld, else it would be easy to
efface the State's mandate on public bidding. The timeline which the COMELEC had Neither does this presuppose that the COMELEC is - for the stated period of ten (10
submitted is therefore speculative at best. years) - already beholden to Smartmatic-TIM. Certainly, the COMELEC's hands
cannot be hamstrung by a mere warranty on availability, which is precisely a warranty
The same conclusion obtains with respect to the COMELEC's risk concern. In
provision that should operate in its favor. In any event, the spirit of competition which
Resolution No. 9922, the COMELEC finds it too great of a risk to have the PCOS
primordially animates the procurement law cannot be undercut absent the law's own
machines serviced by a different contractor other than Smartmatic-TIM in view of their
exceptive conditions. Otherwise, other potential bidders would be deprived of the
highly technical nature. Particularly, it expresses fears over the reverse engineering of
opportunity to participate and offer better terms to the government. That Smartmatic-
the PCOS machines, a process which would likely be undertaken if the machines
TIM has already acquired complete monopoly over any subsequent need the
were to be serviced by a contractor unfamiliar with the system, and if so done, may
government would have in relation to the PCOS machines for a period of ten (10)
end up jeopardizing its integrity. However, without the required industry survey having
years is a notion this Court, under these circumstances, cannot accept.
first been conducted, the COMELEC's reservation once again borders on the
speculative. In fact, nothing on record convinces this Court that there is no other
service provider which is capable of servicing the PCOS machines without the need
to reverse engineer the same. Neither is this Court convinced that reverse
engineering, if done properly, would impair the machines' integrity or put "back to
zero" the know-how already accumulated. The bid guidelines may very well qualify
the COMELEC's desired body of work, and the bidding process itself screens the