DBM v. Kolonwel Trading; Vibal v.
Awards Committee (IABAC), such that
Kolonwel; DEPED v. Kolonwel, June 8, 2007
DOCTRINE: Pacta Sunt Servanda regarding
Foreign loan agreements:
Under the fundamental international
principle of pacta sunt servanda, the RP, as
borrower bound itself to perform in good faith
the duties and obligations under Loan No.
7118-PH. Applying this postulate, the DBM
IABAC, was legally obliged to comply with, or
accord primacy to the WB guidelines on the
conduct and implementation of the
bidding/procurement process in question.
Foreign loan agreements with international
financial institutions, such as Loan No. 7118-
PH, partake of an executive or international
agreement within the purview of Sec. 4 of
RA9184. Significantly, whatever was stipulated
in the loan agreement, shall primarily govern
the procurement of goods necessary to
implement the main project.
Facts:
Facts:
The department of education requested the
services of DBM-PS to undertake the
procurement project geared for the acquisition,
supply and delivery of some 17.5 million copies
of social studies textbooks and teacher’s
manuals. the fund thereof was sourced from
World Bank therefore it shall be governed
by the applicable procurement guidelines of
the foreign lending institution (under Loan
No. 7118-PH). The textbooks and the manuals
shall be acquired in view of the guidelines set
forth by the World Bank.
Such project was put up for bid, and the
participating bidders were Watana Phanit
Printing and Publishing Co., Ltd., Vibal
Publishing House, Inc., Daewoo International
Corporation, and Kolonwel.
The contracts were awarded to Watana and
Vibal by DBM-PS Inter-Agency Bids and
Kolonwel after the denial of its motion for
reconsideration, filed a special civil action for
certiorari and prohibition to restrain the
implementation of the allegedly void supply
contracts, which were rushed to beat the loan
closing-date. In the meantime, Vibal filed an
urgent motion to dismiss the petition of
Kolonwel, alleging among others that the
respondent has failed to comply with the
requisite of exhaustion of all administrative
measures as provided for in RA 9184. The
respondent argues that it has twice been
denied of its motion for reconsideration, and
that it was prevented from filing a protest due
to the fact of the government’s failure to issue
the necessary implementing rules and
regulations for RA 9184 to apply to foreign-
funded projects.
The RTC of manila, finding for kolonwel, issued
the order granting the final injunction against
DepEd and Vibal, proscribing them to proceed
with the contract and transactions related to
the grant or award of the bid.
Issue:
Whether or not, RA 9184 is applicable to
foreign-funded projects?
Ruling:
The Court does not concur with the findings of
the trial court. Inasmuch as the respondent had
been denied twice of its motion for
reconsideration as regard the bid it made to the
project, it cannot be said that the respondent
indeed availed of the protest procedure set
forth in RA 9184. In fact, it has violated the
statutory mandate of completing the protest
process before going to court. Its averment that
the aforementioned statute does not have any
IRR for foreign-funded projects is
unmeritorious. It is to be stressed that the
protest mechanism is a built-in administrative
remedy embodied in the law itself, such that
the to defy this requirement would tantamount
to defying the law itself. The want of
implementing rules and regulations for foreign
funded projects, as so pointed out by the
respondent, is not an excuse for its failure to
comply with the protest since it is very clear for
1
sec. 55 of the IRR of the said law, that with
regards to protests for foreign-funded projects,
the specific office assigned to such is limited to
the fixing of the protest fee and the period
within which to file the protest. Surely, this
matter is not a condition sine qua non, as to
prevent the respondent from filing the required
protest.

Under the fundamental international

principle of pacta sunt servanda, the RP, as
borrower bound itself to perform in good
faith the duties and obligations under Loan
No. 7118-PH. Applying this postulate, the
DBM IABAC, was legally obliged to comply
with, or accord primacy to the WB
guidelines on the conduct and
implementation of the bidding/procurement
process in question.

Foreign loan agreements with international

financial institutions, such as Loan No.
7118-PH, partake of an executive or
international agreement within the purview
of Sec. 4 of RA9184. Significantly, whatever
was stipulated in the loan agreement, shall
primarily govern the procurement of goods
necessary to implement the main project.

In the light of the RTC’s holding that the World

Bank’s guidelines are in no way superior to our
local laws on the matter of loans, the Supreme
court disagrees. It is to be recalled that prior to
the bid, the procurement guidelines of the
world bank has been made known to the
bidders, and to impugn that matter would
be futile. Moreover, the Philippines, as
borrower, has to perform in good faith its
duties and obligations, by virtue of the
internationally accepted principle of pacta
sunt servanda, under the said loan. The
ruling of the trial court is thereby set aside
and nullified.