SM Land vs. BCDA, G.R. No. 203655, 13 August 2014.

THIRD DIVISION

G.R. No. 203655 August 13, 2014

SM LAND, INC., Petitioner,

vs.
BASES CONVERSION AND DEVELOPMENT AUTHORITY and ARNEL PACIANO D.
CASANOVA, ESQ., in his official capacity as President and CEO of BCDA, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Before Us is a Petition for Certiorari, Prohibition and Mandamus under Rule 65 of the Rules of
Court, with prayer for injunctive relief, seeking to nullify and set aside the Bases Conversion and
Development Authority (BCDA) Supplemental Notice No. 5 as well as all other acts1 pursued in
furtherance thereof, and to order respondents to immelliately conduct and complete the
Competitive Selection Process on petitioner's duly accepted unsolicited proposal.

The Facts

As culled from the records, the facts are simple and undisputed.

Pursuant to Republic Act No. (RA) 7227 or the "Bases Conversion and Development Act of
1992," the BCDA opened for disposition and development its Bonifacio South Property, a 33.1-
hectare expanse located at Taguig City that was once used as the command center for the
country's military forces. Jumping on the opportunity, petitioner SM Land, Inc. (SMLI), on
December 14, 2009, submitted to the BCDA an unsolicited proposal for the development of the
lot through a public-private joint venture agreement. The proposal guaranteed the BCDA
secured payments amounting to PhP 15,985/sqm or a total of PhP 8.1 billion.

Barely three months later, the initial proposal was followed by a second one with guaranteed
secured payments of PhP 31,139/sqm, totaling PhP 20 billion. On May 4, 2010, however, SMLI
submitted its third unsolicited proposal with guaranteed secured payments amounting to PhP
32,501/sqm for a total of PhP 22.6 billion.

Thereafter, the BCDA created a Joint Venture Selection Committee (JV-SC) following the
procedures prescribed under Annex "C" of the Detailed Guidelines for Competitive Challenge
Procedure for PublicPrivate Joint Ventures (NEDA JV Guidelines) promulgated by the National
Economic Development Authority(NEDA). The said committee recommended the acceptance of
the unsolicited proposal, which recommendation was favorablyacted upon by the BCDA.
Through a letter dated May 12, 2010, the BCDA communicated to petitioner its acceptance of
the unsolicited proposal. Despite its acceptance, however, the BCDA clarified that its act should
not be construed to bind the agency to enter into a joint venture agreement with the petitioner
but only constitutes an authorization granted to the JV-SC to conduct detailed negotiations with
petitioner SMLI and iron out the terms and conditions of the agreement.
Pursuant to this authorization, the JV-SC and SMLI embarked on a series of detailed
negotiations, and on July 23, 2010, SMLI submitted its final revised proposal with guaranteed
secured payments amounting to a total of PhP 25.9 billion. Afterwards, upon arriving at mutually
acceptable terms and conditions, a Certification of Successful Negotiations (Certification) was
issued by the BCDA and signed by both parties on August 6, 2010. Through the said
Certification, the BCDA undertook to "subject SMLI’s Original Proposal to Competitive Challenge
pursuant to Annex C" and committed itself to "commence the activities for the solicitation for
comparative proposals."1

In an attempt to comply with its obligations, the BCDA prepared for the conduct of a Competitive
Challenge to determine whether or not there are other Private Sector Entities (PSEs)that can
match the proposal of SMLI, and concurrently ensure that the joint venture contract will be
awarded to the party that can offer the most advantageous terms in favor of the government. In
furtherance thereof, the agency issued Terms of Reference (TOR),2 which mapped out the
procedure to be followed in connection with the Competitive Challenge. Consequently, SMLI was
required, as it did, to post a proposalsecurity in the amount of PhP 187 million, following the
prescribed procedure outlined in the TOR and the NEDA JV Guidelines.

Afterwards, the BCDA set the Pre-eligibility Conference on September 3, 2010. Invitations to
apply for eligibility and to submit comparative proposals were then duly published on August 12,
16 and 20, 2010. Hence, the pre-eligibility conference was conducted as scheduled. The
companies that participated in the conference included SMLI, as the Original Proponent, and
three (3) PSEs, namely Ayala Land, Inc., Rockwell Land Corp., and Filinvest Land, Inc.

On Ayala Land, Inc.’s request, the deadline for submission of Eligibility Documents was
scheduled on October 20, 2010 through Supplemental Notice No. 1. However, the deadline was
again moved to November 19, 2010 to allow the BCDA, in conjunction with other national
agencies, to resolve issues concerning the relocation and replication of facilities located in the
subject property.For this purpose, the BCDA issued Supplemental Notice No. 2.

Following a conference, the BCDA, on November 18, 2010, issued Supplemental Notice No. 3,
again rescheduling the submission deadline this time to an unspecified future date "pending final
results of the policy review by the Office of the President on the lease versus joint venture/sale
mode and other issues."3 Henceforth, the BCDA repeatedly postponed the deadline of eligibility
requirements untiltwo (2) years have already elapsed from the signing of the Certification without
the Competitive Challenge being completed.

Then, instead of proceeding withthe Competitive Challenge, the BCDA addressed a letter4 to
Jose T. Gabionza, Vice President of SMLI, stating that it will welcome any "voluntary and
unconditional proposal" to improve the original offer, with the assurance that the BCDA will
nonetheless respect any right which may have accrued in favor of SMLI. SMLI, through a letter
dated December 22, 2011, replied by increasing the total secured payments to PhP 22.436
billion in over fifteen (15) years with an upfront payment of PhP 3 billion. SMLI likewise proposed
to increase the net present value of the property to PhP 38,500.00/sqm. With this accelerated
terms of payment, the total inflow to be received by the BCDA from the project after five (5) years
would amount to PhP 9.289 billion. In the same letter, SMLI clarified that itsimproved offer is
tendered on reliance of the BCDA’s previous commitment torespect SMLI’s status as the Original
Proponent.

Without responding to SMLI’s new proposal, the BCDA sent a memorandum to the Office of the
President (OP) dated February 13, 2012, categorically recommending the termination of the
Competitive Challenge. The memorandum, in part, reads:
In view of the foregoing, may we respectfully recommend the President’s approval for BCDA to
terminate the proceedings for the privatization and development of the BNS/PMC/ASCOM/SSU
Properties in Bonifacio South through Competitive Challenge and proceed with the bidding of the
property.5

Alarmed by this development, SMLI, in a letter dated August 10, 2012, urged the BCDA to
proceed with the Competitive Challenge as agreed upon. However, the BCDA, via the assailed
Supplemental Notice No. 5, terminated the Competitive Challenge altogether. Said
Supplemental Notice pertinently reads:

This Supplemental Notice No. 05 is issued to inform the [PSEs] that the Competitive Challenge
for the Selection of BCDA’s Private Sector Partner for the Privatization and Development of the
approximately 33.1-hectare BNS/PMC/ASCOM/SSU Properties in Bonifacio South is hereby
terminated. BCDA shall not dispose the property through Competitive Challenge.6

To support its position, the BCDA invoked Article VIII of the TOR on the subject "Qualifications
and Waivers," to wit:

The BCDA reserves the right to call off [the] disposition prior to acceptance of the proposal(s)
and call for a new disposition process under amended rules and without any liability whatsoever
to any or all the PSEs, except the obligation to return the Proposal Security.

Thereafter, the BCDA informed SMLI of the OP’s decision to subject the development of the
subject propertyto public bidding. When asked by SMLI, the JV-SC manifested its conformity
with the actions thus taken by the BCDA and OP.

The JV-SC’s declaration proved to be the last straw that fractured SMLI’s patience as it lost no
time in interposing the instant recourse.

In the meantime, the BCDA issuedin favor of SMLI Philippine National Bank Check No. 11-634-
610001-0 in the amount of PhP 188,508,466.67 dated September 28, 2012. The check was sent
through registered mail with no explanation whatsoever accompanying the same, although the
BCDA admitted that its value corresponds to the proposal security posted by SMLI, plus interest
in an unspecified rate. SMLI attempted to return the check but to no avail.

The BCDA likewise caused the publication of an "Invitation to Bid" for the development of the
subject property in the December 21, 2012 issue of the Philippine Star.7 This impelled SMLI to
file an Urgent Manifestation with Reiterative Motion to Resolve SMLI’s Application for Temporary
Restraining Order (TRO) and Preliminary Injunctionon the same day. By Resolution8 of January
9, 2013, the Court issued the TRO prayed for by petitioner and enjoined respondent BCDA from
proceeding with the new selection process for the development of the property.

The Issue

Without a doubt, the issue in this case boils down to whether or not the BCDA gravely abused its
discretion in issuing Supplemental Notice No. 5, in unilaterally aborting the Competitive
Challenge, and in subjecting the development of the project to public bidding.

For its part, SMLI alleged in its petition that the Certification issued by the BCDA and signed by
the parties constituted a contract and that under the said contract, BCDA cannot renege on its
obligation to conduct and complete the Competitive Challenge. The BCDA, on the other hand,
relies chiefly on the reservation clause in the TOR, which allegedly authorized the agency to
unilaterally cancel the Competitive Challenge. Respondents add that the terms and conditions
agreedupon are disadvantageous to the government, and that it cannot legally be barred by
estoppel in correcting a mistake committed by its agents.

The Court’s Ruling

The petition is impressed with merit. SMLI has the right to a completed competitive challenge
pursuant to the NEDA JV Guidelines and the Certification issued by the BCDA. The reservation
clause adverted to by the respondent cannot, in any way, prejudice said right.

The Procurement Process under the NEDA JV Guidelines

In resolving the case, discussing the procedure outlined under the NEDA JV Guidelines and a
brief backgrounder thereof is apropos.

To streamline the procurement process and expedite the acquisition of goods and services,
Executive Order No. (EO) 423 was issued on April 30, 2005, which prescribed the rules and
procedures on the review and approval of government contracts. The EO, in part, provides:
Section 8. Joint Venture Agreements. The NEDA, in consultation with the GPPB, shall issue
guidelines regarding joint venture agreements with private entities with the objective of
promoting transparency, competitiveness, and accountability in government transactions, and,
where applicable, complying with the requirements of an open and competitive public bidding.

Taking its cue from the above-quoted provision, the NEDA promulgated the NEDA JV
Guidelines, which detailed two (2) modes of selecting a private sector JV partner: by competitive
selectionor through negotiated agreements.

Competitive selection involves a selection process based on transparent criteria, which should
not constrain or limit competition, and is open to participation byany interested and qualified
private entity.9 Selection by negotiated agreements10 or negotiated projects,11 on the other hand,
comes about as an end result of an unsolicited proposal12from a private sector proponent, or if
the government has failed to identify an eligible private sector partner for a desired activity after
subjecting the same to a competitive selection.

Relevant to the case at bar is the selection modality by negotiated agreement arising from the
submission and acceptance of an unsolicited proposal, known as the Swiss Challenge
method,13 in essea hybrid mechanism between the direct negotiation approach and the
competitive bidding route.14 With the availability of the Swiss Challenge method for utilization by
those in the private sector, PSEs have studied, formulated, and submitted numerous suo motoor
unsolicited proposals with the ultimate goal of assisting the public sector in elevating the
country’s place in the global economy, as in the case herein.

The development and adoption by several countries of the Swiss Challenge scheme15 is
attributed to the recognition that the private sector can be an important source of technical and
managerial expertise, as well as financing, as evidenced by private companies’ practice of
directly approaching governments with new and innovative project ideas through unsolicited
proposals.16 Some states, however, frown on the practice since transparency is allegedly
compromised when the government directly negotiates with a proponent. In this method, the
Original Proponent, who first submitted and secured acceptance ofthe unsolicited proposal, is
given the right to match the successful bid received in the competitive bid process for the said
project.17
Item III, Annex "C" of the NEDA JV Guidelines, where the Swiss Challenge format is tucked in,
maps out a three-stage framework, to which Negotiated JV Agreements are to be mandatorily
subjected, as summarized below:

Stage One

Submission and the Acceptance

or Rejection of the Unsolicited Proposal

Stage One18 of the process involves the submission, evaluation, and the acceptance of
unsolicited proposals from private entities. The steps involved are:

1. A PSE submits an unsolicited proposalto the government entity (GE) or the GE seeks out a JV
partner after a failed competition (open bidding) for a JV activity or project.

2. The GE, through its JV-SC, undertakes the initial evaluation of the proposal.

3. The head of the GE shall then either issue an acceptance or nonacceptance notice of the
proposal.

a. An acceptance shall not bind the GE to enter into the JV activity, but shall mean that
authorization is given to proceed with detailed negotiations on the terms and conditions of the JV
activity.

b. In case of non-acceptance, the private sector entity shall be informed of the reasons/grounds
for such action.

Stage Two

Detailed Negotiations

Stage Two19 entails negotiation on the terms and conditions of the JV activity. Below is a
summary of the parameters adhered to in detailed negotiations, and the preparation of the
proposal documents in case of successful negotiations:

1. The parties shall negotiate on, among other things, the scope as well as all legal, technical,
and financial aspects of the JV activity.

2. The JV-SC shall determine the eligibility of the PSE to enter into the JV activity in accordance
with pre-set rules.

3. Negotiations shall comply with the process, requirements and conditions as stipulated under
Sections 6 (General Guidelines) and 7 (Process for Entering into JV Agreements) of the JV
Guidelines.

a. If successful, the GE head and the representative of the PSE shall issue a signed certification
of successful negotiation to the effect that:

a) an agreement has been reached;

b) the PSE is eligible to enter into the proposed JV activity; and

c) the GE shall commence the activities for the solicitation for comparative proposals.

b. If an acceptable agreement isnot reached, the GE may:

a) reject the proposal and thereafter accept a new one from private sector participants; or

b) pursue the proposed activity through alternative routes other than a joint venture.

4. After an agreement is reached, the contract documents, including the selection documents for
the competitive challenge, are prepared.

Stage Three

Competitive Challenge

In Stage Three,20 upon the successful completion of the detailed negotiation phase, the JV
activity shall be subjected to a competitive challenge,21 which includes the observance of the
following procedure:

1. Preparation and approval of all tender documents including the draft contract before the
invitation for comparative proposals is published.

2. Publication of the invitation for comparative proposals followed by the posting by the PSE of
the proposal security.

3. Determination of the eligibility of comparative proponents/PSEs, issuance of supplemental

competitive selection bulletins and pre-selection conferences, submission, opening and
evaluation of comparative proposals.

4. In the evaluation of the comparative proposals as a prelude to determine the best offer, the
original proposal of the original proponent shall be considered.

a. If the GE determines that an offer made by a comparative private sector participant is more
advantageous to the government than the original proposal, the original proponent shall be given
the right to match such superior or more advantageous offer.

b. Should no matching offer be received, the JV activity shall be awarded to the comparative
private sector participant submitting the most advantageous proposal.

c. If a matching offer is received, or if there is no comparative proposal, the JV activity shall be

awarded to the original proponent.

5. After the completion of the competitive challenge, the JV-SC shall submit the recommendation
of award to the head of the GE.22

6. Embarking on activities leading to the execution of the Final Agreement.23

Deviation from the procedure outlined cannot be countenanced. Wellestablished is the rule that
administrative issuances––such as the NEDA JV Guidelines, duly promulgated pursuant to the
rule-making power granted by statute––have the force and effect of law.24 Being an issuance in
compliance with an executive edict, the NEDA JV Guidelines, therefore, has the same binding
effect as if it were issued by the President himself.25 As such, no agency or instrumentality
covered by the JV Guidelines26 can validly stray from the mandatory procedures set forth therein,
even if the other party acquiesced therewith27 or not.

SMLI’s rights as an Original Proponent and BCDA’s correlative duty under the NEDA JV
Guidelinesand the parties’ agreement

It is well to point out that after BCDA accepted the unsolicited proposal of SMLI and after both
parties herein successfully concluded the detailed negotiations on the terms and conditions of
the project, SMLI acquired the status of an Original Proponent. An Original Proponent, per the
TOR, pertains to the party whose unsolicited proposal for the development and privatization of
the subject property though JV with BCDA has been accepted by the latter, subject to certain
conditions, and is now being subjected to a competitive challenge.28

In this regard, SMLI insists that asan Original Proponent, it obtained the right to a completed
competitive challenge. On the other hand, the BCDA argues that it can, at any time, withdraw
from the disposition process as it is not bound to enter into the proposed JV activity with SMLI.
Petitioner’s argument holds water.

A scrutiny of the NEDA JV Guidelinesreveals that certain rights are conferred to an Original
Proponent. Ascorrectly pointed out by SMLI, these rights include:

1. The right to the conduct and completion of a competitive challenge;

2. The right to match the superior or more advantageous offer, if any;

3. The right to be awarded the JV activity in the event that a matching offer is submitted within
the prescribed period; and

4. The right to be immediately awarded the JV activity should there be no comparative

proposals.29 (emphasis added)

Material to the present case is the right to the conduct and completion of a Competitive
Challenge. Based onthe NEDA JV Guidelines, it is necessary that Stages One and Two of the
Swiss Challenge shall have been fruitful for this right to arise.

To recall, Stages One and Two ofthe framework deal with the submission and evaluation of the
unsolicited proposal and the conduct of the detailed negotiations. Should the parties productively
conclude the in-depth negotiations, the guidelines require the preparation of the contract and
selection documents for the competitive challenge.30 Following this, Stage Three of the same
rules provides that the GE shall subject the terms agreed upon to a Competitive Challenge.
Thus:

Stage Three – Once the negotiations have been successfully completed, the JV activity shallbe
subjected to a competitive challenge, as follows:
1. The [GE] shallprepare the tender documents pursuant to Section II (Selection/Tender
Documents) of Annex A hereof. The eligibility criteria used in determining the eligibility of the
[PSE] shall be the same as those stated in the tender documents. x x x The Head of the [GE]
shall approve all tender documents including the draft contract before the publication of the
invitation for comparative proposals.

2. Within seven (7) calendar days from the issuance of the Certification of a successful
negotiation referred toin Stage Two above, the JV-SC shall publish the invitation for comparative
proposals in accordance with Section III.2. (Publication of Invitation to Apply for Eligibility and to
Submit Proposal) under Annex A hereof.

3. The [PSE] shallpost the proposal security at the date of the first day of the publication of the
invitation for comparative proposals in the amount and form stated in the tender documents.

4. The procedure for the determination of eligibility of comparative proponents/private sector

participants, issuance of supplemental competitive selection bulletins and pre-selection
conferences, submission and receipt of proposals, opening and evaluation of proposals shall
follow the procedure stipulated under Annex A hereof. In the evaluation of proposals, the best
offer shall be determined to include the original proposal of the [PSE]. If the [GE] determines that
an offer made by a comparative private sector participant other than the original proponent is
superior or more advantageous to the government than the original proposal, the [PSE] who
submitted the original proposal shall be given the right to match such superior or more
advantageous offerx x x. Should no matching offer be received within the stated period, the JV
activity shallbe awarded to the comparative private sector participant submitting the most
advantageous proposal. If a matching offer is received within the prescribed period, the JV
activity shallbe awarded to the original proponent. If no comparative proposal isreceived by the
[GE], the JV activity shallbe immediately awarded to the original private sector proponent.

5. Within seven (7) calendar days from the date of completion of the Competitive Challenge, the
JV-SC shallsubmit the recommendation of award to the Head of the [GE]. Succeeding activities
shall be in accordance with Sections VIII. (Awardand Approval of Contract) and X (Final
Approval) of Annex A hereof.31(emphasis added)

Anent the above-quoted directives, emphasis must be given to the repeated use of the word
"shall." It is elementary that the word "shall" underscores the mandatory character of the rule. Itis
a word of command, one which always has or must be given a compulsory meaning, and is
generally imperative or mandatory.32 Considering the compulsory tenor of the order, the rule
could not be any clearer––that once the negotiations at Stage Two shall have been successfully
completed, it becomes mandatory for the GE to subject theJV activity to a competitive challenge.
By the Guidelines’ explicit order, proceeding to Stage Three of the process is compulsory,
conditioned only on the successful conclusion of Stage Two. The GE is not given any discretion
to decide whether it will proceed with the competitive challenge or not. Furthermore, there is no
question in the case at hand that the unsolicited proposal for the development of the subject
property passed through scrutiny under the first two stages, resulting inthe issuance and signing
of the Certification. As a matter of fact, this is clearly evinced in the whereas clauses of the
Certification, to wit:

WHEREAS, on 04 May 2010, BCDA received from [SMLI] an unsolicited proposalfor the
development of [the subject property]. x x x

WHEREAS, after evaluation of the unsolicited proposalsubmitted by SMLI in accordance with the
provisions of Annex "C" of the JV Guidelines, the [JV-SC] created byBCDA x x x recommended
to the BCDA Board, and the BCDA Board approved, per Board Resolution No. 2010-05-100, the
acceptance ofthe unsolicited proposal, subject to the condition that such acceptance shall not
bind BCDA to enter into a JV activity, but shall mean that authorization is given to proceed with
detailed negotiationson the terms and conditions of the JV activity;

WHEREAS, pursuant to the authorization granted by the Board and issued pursuant to Annex
"C", Part III, Stage One of the JV Guidelines, BCDA went into detailed negotiations with SMLI.
The JV-SC simultaneously ascertained the eligibility of SMLI inaccordance with Annex "C", Part
III, Stage 2 (2) of the JV Guidelines;

WHEREAS, this Certificationisissuedpursuant to Annex "C" Part III, Stage 2 (2) of the JV
Guidelines;

NOW, THEREFORE, for and in consideration of the foregoing, BCDA and SMLI, after successful
negotiationspursuant to Stage II of Annex C x x x reached an agreement on the purpose, terms
and conditions of the JV development of the subjectproperty, which shall become the terms for
the Competitive Challenge pursuant to Annex C of the JV Guidelinesx x x.33 (emphasis added)

Moreover, the Certification further discloses that the BCDA has the obligation to subject SMLI’s
unsolicited proposal to a Competitive Challenge, to which SMLI assented. As provided:

BCDA and SMLI have agreed to subject SMLI’s Original Proposal to Competitive Challenge
pursuant to Annex C – Detailed Guidelines for Competitive Challenge Procedure for Public-
Private Joint Ventures of the NEDA JV Guidelines, which competitive challenge process shall be
immediately implemented following the Terms of Reference (TOR) Volumes 1 and 2. BCDA
shall, thus, commence the activities for the solicitation for comparative proposals with the
publication of the Invitation to Apply for Eligibility and to Submit Comparative Proposals
(IAESCP) thrice for two (2) consecutive weeks in three (3) major newspapers starting on 10
August 2010, on which date SMLI shall post the required Proposal Security as statedabove.
Pursuant to Annex C of the NEDA JV Guidelines, if, after solicitation of comparative proposals,
BCDA determines that an offer by a comparative PSE is found to be superior to SMLI’s Original
Proposal,SMLI shall be given the right to match such superior offer within the period prescribed
in the attached TOR Volumes 1 and 2. If SMLI is ableto match such superior offer, SMLI shall be
issued the Notice of Award, subject to Item No. 19 above. In the event, however, that SMLI is
unable to match the superior offer, the comparative PSE which submitted such superior offer
shall be awarded the contract, subject to Item No. 19 above.34(emphasis added)

By their mutual consent and in signing the Certification, both parties, in effect, entered into a
binding agreement to subject the unsolicited proposal to the Competitive Challenge. Evidently,
the certification partakes of a contractwherein BCDA committed itself to proceed with the Third
Stage of the process and simultaneously grants SMLI the right to expect that the BCDA will fulfill
its obligations under the same. The preconditions to the conduct of the Competitive Challenge
having been met, what is left, therefore, is tosubject the terms agreed upon to a Competitive
Challenge pursuant to Stage Three, Annex "C" of the NEDA JV Guidelines.

The Reservation Clause only covers the Third Stage and cannot prejudice SMLI’s rights
stemming from the first two stages

In an attempt to advance its claim, BCDA invokes the reservation clause in Article VIII of the
TOR on "Qualifications and Waivers." To reiterate, said provision reads:
3. BCDA further reserves the right to call off this disposition prior to acceptance of the
proposal(s) and call for a new disposition process under amended rules, and without any liability
whatsoever to any or all of the PSEs, except the obligation to return the Proposal
Security.35 (emphasis ours)

The BCDA insists that the "disposition process" to which the reservation clause refers is the
entire Swiss Challenge, and not merely Stage Three thereof regarding the Competitive
Challenge. This interpretation does not come as a surprise considering the term’s technical
meaning, that is, alienation of property;36 the transfer of the property and possession of lands,
tenements, or other things from one person to another; or the voluntary resignation of title to real
estate by one person to another and accepted by the latter, in the forms prescribed by law.37 On
the basis of said definition, indeed, the reservation clause seemingly refers to the Swiss
Challenge itself since in the case at bar, it is the Swiss Challenge, not the competitive challenge,
that is the avenue for the disposition.

To anchor the real import of the clause on the basis only of a single word may, however, result in
a deviation from its true meaning by rendering all the other terms unnecessaryor insignificant.
Suchan interpretation would run afoul Article 1373 of the Civil Code, which states that "[i]f some
stipulation of any contract should admit of several meanings, it shall be understood as bearing
that import which is most adequate to render it effectual." It is a cardinal rule in statutory
construction that no word, clause, sentence, provision or part of a statute shall be considered
surplusage or superfluous, meaningless, void and insignificant.38 For this purpose, an
interpretation which renders every word operative is preferred over that which makes some
words idle and nugatory.

We find that the reservation clausecannot justify the cancellation of the entire procurement
process. Respondent cannot merely harp on the lone provision adverted to without first
explaining the context surrounding the reservation clause. The said provision cannot be
interpreted in a vacuum and should instead be read in congruence with the other provisions in
the TOR for Us to fully appreciate its import.

At this juncture, it is worthy to point out that the TOR containing the reservation clause details the
requirements for eligibility to qualify as a PSE that may submit its proposal for the JV,39 as well as
the procedure to be followed in the assessment of the eligibility requirements submitted and in
the conduct of the Competitive Challenge. It basically governs only part and parcel of Stage
Three of the Swiss Challenge Process, that is, the requirements for and the determination of an
interested PSE’s eligibility to participate inthe Competitive Challenge. This conclusion is deduced
from the very provisions of the TOR, viz:

These [TOR] describe the procedures that shall be followed in connection with the disposition of
the approximately Three Hundred Thirty-one Thousand Three Hundred Twenty-seven square
meters (331,327 sq.m.) or 33.1-hectare Bonifacio Naval Station (BNS)/Philippine Marine Corps
(PMC)/Army Support Command (ASCOM)/Service Support Unit (SSU) Properties in Bonifacio
South (the "Property"), located along Lawton Avenue, Fort Bonifacio, Taguig City, Metro Manila,
Philippines.

These TOR are issued in two (2) volumes: Volume 1 – Eligibility Documents; and Volume 2 –
Tender Documents. This first volume details the requirements for eligibility to qualify as a Private
Sector Entity (PSE) that may submit Technical and Financial Proposals for the Joint Venture (JV)
Privatization and Development of [the] subject Property, and the procedures involved in the
entire Competitive Challenge procedure. [PSEs] which shall be declared eligible shall be issued
the second volume of the TOR which details the requirements and procedures for the
submission of Technical and Financial Proposals, with the end-view of determining a Winning
PSE for subject JV development.

xxxx

I. GENERAL INFORMATION

xxxx

2. Publication of Invitation for Comparative Proposals. BCDA shall publish x x x the "Invitation to
Apply for Eligibility and to Submit a Comparative Proposal" (IAESCP). This shall serve to inform
and to invite the prospective PSEs to the Competitive Challenge procedure at hand. x x x

3. Joint Venture Agreement.x x x the ultimate objective of BCDA in qualifying prospective

PSEsto be eligible to submit Technical and Financial Proposals is to select a partner in the
unincorporated/contractual [JV]for the privatization and development of the subject Property. x x
x

xxxx

4. Amendment of these TOR. x x x Should any of the information and/or procedurescontained in

these TOR be amended or replaced, the JV-SC shall inform and send Supplemental Notices to
all PSEs. To ensure all PSEs are informed of any amendments, all PSEs are requested to inform
BCDA of their contact [details].In addition, receipt of all Supplemental Notices shall beduly
acknowledged by each PSEprior to the submission of eligibility documents and/or proposals and
shall be soindicated therein.

5. Pre-Eligibility Conference. Interested parties are invited to attend a Pre-Eligibility Conference

for prospective PSEs x x x.

6. One-on-One Meetings. Prospective PSEs may request for one-on-one meetings with the JV-
SC or its duly authorized representatives. x x x

xxxx

9. Due Diligence. x x x

The PSE shall investigate x x x [and] carefully examine [the] conditions of and at the Property
and its surrounding vicinities affecting the actual execution and such other information as to
allow the PSE to make a competitive estimate. The PSE, by the act of submitting its proposal,
acknowledges that it has inspected the Property and accepted all the terms and conditions for
this competitive challenge as set in TOR Volumes 1 and 2.

xxxx

V. APPLICATION FOR ELIGIBILITY

1. Eligibility Requirements. Only eligible PSEs shall be allowed to submit comparative Technical
and Financial Proposals, or collectively, the Tender Documents x x x. Hence, interested PSEs
are invited to apply for eligibility and to participate in the Competitive Challenge procedure. Aside
from being required to purchase the [TOR] – Volume1, for a non-refundable fee x x x, a PSE
shall be considered eligible if it satisfies all of the following requirements:

1.1. Legal Requirements. The PSE must be a duly registered and existing corporation authorized
by Philippine Laws to own, hold or develop lands in the Philippines. x x

1.2. Technical Requirements.

1.2.1. Firm Experience. The PSEx x x shall have completed within a period of ten (10) years
from the date of submission and receipt of Proposals, a similar or related development project x
x x.

1.2.2. Key Personnel. x x x

1.3. Financial Capability. The PSEx x x must have adequate capability to sustain the financing
requirements for the proposed development ofthe Property. This shall be measured in terms of:

1.3.1. Net Worth. x x x

1.3.2. Good financial standing. x x x

1.3.3. No Arrears. x x x

1.3.4. Timely and complete Payment of Taxes. x x x

1.3.5. Financial Capacity to Undertake the

Project.

xxxx

2. Required Eligibility Documents. The PSEs x x x that wish to be considered for eligibility are
required to submit x x x the following documents:

xxxx

VI. EVALUATION OF ELIGIBILITY

1. Opening of Eligibility Documents. x x x

2. Evaluation Process. Eligibility Documents submitted by the PSEshall be evaluated on a pass

or fail basis to determine if the PSEx x x complies with or satisfies all of the requirements
specified in Article V hereof. x x x

3. Motion for Reconsideration/Appeal on Eligibility. A prospective PSE determined as "Ineligible"

has seven (7) calendar days upon written notice within which to file a motion for reconsideration
tothe JV-SC. x x x
4. No Eligible [PSEs]. In the event that no PSE be found eligible or no PSE submitted itself to
eligibility check for the Competitive Challenge procedure, BCDA shall proceed to the issuance of
Notice of Award to SMLI, as the original proponent for the subject JV project.

xxxx

VII. CHANGE IN MEMBERSHIP OF AN ELIGIBLE PSE.

xxxx

VIII. QUALIFICATIONS AND WAIVERS

1. BCDA reserves the right to reject any or all Eligibility Documents, to waive any defect or
informality thereon or minor deviations, which do notaffect the substance and validity of the
proposal.

2. BCDA reserves the right to review other relevant information affecting the PSE or its Eligibility
Documents before its declaration as eligible to participate further in the selection process, and
be allowed to submit a Final Proposal. Should such review uncover any misrepresentations
made in the eligibility documents, or any change in the situation of the PSE, which affects its
eligibility, BCDA may disqualify the PSE from obtaining any award/contract.

3. BCDA further reserves the right tocall of this disposition prior to acceptance of the proposal(s)
and call for a new disposition process under amended rules,and without any liability whatsoever
to any or all the PSEs, except the obligation to return the Proposal Security x x x.40 (emphasis
ours; citation omitted)

A cursory reading of the TOR, ascouched, readily shows that it focuses only on the eligibility
requirements for PSEs who wish to challenge SMLI’s proposal as well as the procedure to be
followed by the BCDA JVSC in the evaluation of the PSEs’ submittals. We thus find merit in
SMLI’s thrust that since the TOR governs the eligibility requirements for PSE’s, the "disposition
process" referred to inthe reservation clause could only refer to the eligibility process in Stage
Three of the Swiss Challenge and not the entire Swiss Challenge process itself. We are
convinced that the said provision does not authorize BCDA to abort the entire procurement
process and cannot impair any of SMLI’s statutorily and contractuallyconferred rights stemming
from the first two stages’ conclusion. To rule otherwise would grant the GE unbridled authority to
thrust aside the agreement between the parties after successful detailed negotiations. It would
disregard the fact that through the said covenant,the GE bound itself to conduct and complete
the Competitive Challenge pertaining to SMLI’s proposal.

Provisions of the TOR cannot prevail over the NEDA JV Guidelines

In the same vein, We cannot also agree with respondents’ contention that the term "disposition"
in the assailed reservation clause refers to the entire Swiss Challenge itself and authorizes the
BCDA to abandon the negotiations even at Stage Three of the process for this would result in an
interpretation that is antagonisticwith the NEDA JV Guidelines.

A review of the outlined three-stage framework reveals that there are only two occasions where
pre-termination of the Swiss Challenge process is allowed: at Stage One, prior to acceptance of
the unsolicited proposal; and at Stage Two, should the detailed negotiationsprove unsuccessful.
In the Third Stage, the BCDA can no longer withdraw with impunity from conducting the
Competitive Challenge as it became ministerial for the agency to commence and complete the
same. Thus, acceding to the interpretation of the TOR offered byBCDA will, in effect, result not
only in the alteration of the agreement between the parties but also of the NEDA JV Guidelines
itself, both of which has the force and effect of law.

The interpretation offered by BCDA is, therefore, unacceptable. Between procedural guidelines
promulgated by an agency pursuant to its rule-making power and a condition unilaterally
designed and imposed for the implementation of the same, the former must prevail. BCDA does
not wield any rule-making power such that it can validly alter or abandon a clear and definite
provision in the NEDA JV Guidelines under the guise of a condition under the TOR. AsWe have
time and again harped, the ones dutybound to ensure observance with laws and rules should not
be the ones to depart therefrom.41 A contrary rule would open the floodgates to abuses and
anomalies more detrimental to public interest.42 For how can others be expected to respect the
rule of law if the very persons or entities tasked to administer laws and their implementing rules
and regulations are the first to violate them, blatantly or surreptitiously?

BCDA gravely abused its discretion when it issued Supplemental

Notice No. 5 in breach of its contractual obligation to SMLI

"Grave abuse of discretion" implies such capricious and whimsical exercise of judgment as is
equivalent tolack of jurisdiction. It must be so patent and gross as to amount to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of
law.43 While it is the general policy of the Court to sustain the decisions of administrative
authorities, not only on the basis of the doctrine of separation of powers but also for their
presumed expertise in the laws they are entrusted to enforce, when said decisions and orders
are tainted with unfairness or arbitrariness that would amount to grave abuse of discretion, the
Courts are duty-bound to entertain petitions questioning the former’s rulings or actions.44

In the present case, the Court finds that BCDA gravely abused its discretion for having acted
arbitrarily and contrary to its contractual commitment to SMLI, to the damage and prejudice of
the latter. It veritably desecrated the rules the Government itself set in the award of public
contracts.

To review, We have demonstratedthat the BCDA is duty-bound to proceed with and complete
the competitive challenge if the detailed negotiations proved successful. Afterwards, it becomes
mandatory for the competitive challenge to proceed. Whatever rights and obligations that may
have accrued to the parties by that time can no longer be altered by a new disposition process.
At most, the reservation clause in the TOR can only serve to alter the rules of the eligibility
process under the Competitive Challenge.

In the case at bar, however, BCDA, in its mistaken reliance on the reservation clause, aborted
not just the eligibility process of the Competitive Challenge but the entire Swiss Challenge. Even
though the language of Supplemental Notice No. 5 at first blush appears to limit its application to
the Third Stage of the framework, BCDA’s actuations say otherwise. Worthy of reiteration at this
point is the fact that after BCDA issued the assailed notice, the agency also returned through
registeredmail the security posted by SMLI. Coupled with the factthat BCDA subjected the
property instead to straight bidding, it becomes obvious that BCDA no longer intends to comply
with its obligations to SMLI and that it abandoned the Swiss Challenge process altogether, in
contravention of its statutory and contractual obligations.
Moreover, the asseveration of the BCDA in its last ditch effort to salvage its position––that the
withdrawal is justified since it allegedly found that the revised SMLI proposal shall not yield the
best value for the government45 ––deserves scant consideration. On the contrary, the BCDA’s
statements have been inconsistentwhen it comes to identifying the procurement process that
would best serve the interest of the state.

Noticeably, in its November 8, 2010 Memorandum, the BCDA posited that competitive challenge
is more advantageous to the government than straight bidding, to wit:

The price of the Bonifacio South properties has already been set by the winning price in the
bidding for the joint venture development of the JUSMAG property (₱31,111/sq.m.). Thus, BCDA
has established the benchmark for the price of the remaining Bonifacio South properties, of
which the JUSMAG property is the most prime. Logically the minimum bid price under straight
bidding for the BNS/PMC/ASCOM/SSU property, which is a far less inferior property, would be
₱31,111/sq.m. However, with SM’s submission of a revised unsolicited proposal at
₱31,732/sq.m. and later further revised to ₱32,500/sq.m., BCDA saw the opportunity to
negotiate for better terms and eventually arrived at a higher price of ₱36,900/sq.m. In this case,
BCDA deemed that going into Competitive Challenge was more advantageous to the
government than Competitive Selection (straight bidding) because of the opportunity to increase
the price.

Furthermore, subjecting the price tosubsequent price challenge will possibly drive up the price
even higher than ₱38,900/sq.m. These opportunities cannot be taken advantage of under a
straight bidding where failure of bidding would likely ensue if in case BCDA immediately sets the
price of the property too high. The competition in the real estate industry and as experienced by
BCDA issuch that the other developers will usually challenge the original proposal to "up the
ante" as they cannot allow the original proponent to get the property easily.46

Despite this testament, the BCDA, over a year later, made a complete turnaround stating that
straight bidding will be best for the Government.47 As can be gleaned from the BCDA’s
Memorandum to the Presidentdated February 13, 2012, respondents themselves recommended
to the President that the selection proceedings be terminated. To reiterate:

In view of the foregoing, may we respectfully recommend the President’s approval for BCDA to
terminate the proceedings for the privatization and development of the BNS/PMC/ASCOM/SSU
Properties in Bonifacio South through Competitive Challenge and proceed with the bidding of the
property.48

The BCDA offered no explanation to reconcile its opposing positions. It also neglected to inform
SMLI of the provisions in its proposal that it deemed disadvantageous to the government. The
sweeping statement of the BCDA that the terms are disadvantageous cannot be accepted at
face value, bearing in mind that a fruitful in-depthnegotiation necessarily implies that BCDA
found the terms offered by SMLI acceptable. Consider also that should the Competitive
Challenge prove to be unsuccessful, it has no other recourse but to award the project toSMLI,
the Original Proponent. This caveat forces BCDA to ensure that the terms agreed upon during
the detailed negotiations are advantageousto it, lest it run the risk of being bound to a project
that is not beneficial to the government in the first place.

Overall, the foregoing goes to showthat the BCDA failed to establish a justifiable reason for its
refusal to proceed with the Competitive Challenge and for canceling the entire Swiss Challenge.
Because of BCDA’s mistaken reliance on the TOR provision, and by changing its stand on the
conduct of the Competitive Challenge without pointing out with specificity the socalled
unfavorable terms, Weare left to believe that the cancellation of the Swiss Challenge was only
due to BCDA’s whims and caprices.

Acceptance of Unsolicited Proposal vis-à-vis Estoppel

Lastly, respondents argue that the government cannot be estopped by the mistakes or errors of
its agents, implying that when it issued the Certification, it committed a lapse of judgment as it
later discovered that the terms of the proposal allegedly turnedout to be disadvantageous to the
Government. Thus, according to them, it cannot be compelled to proceed with the Competitive
Challenge.

We are very much aware of the time-honored rule that "the government cannot be estopped by
the mistakes or errors of its agents."49 Suffice it to state, however, that this precept is not
absolute. As jurisprudence teaches, this rule on estoppel cannot be used to perpetrate an
injustice.50

In the case at bar, it is evident that to allow BCDA to renege on its statutory and contractual
obligationswould cause grave prejudice to petitioner, who already invested time, effort, and
resources in the study and formulation of the proposal, in the adjustment thereof, as well as in
the negotiations. To permit BCDA to suddenly cancel the procurement process and strip SMLI of
its earlier-enumerated rights as an Original Proponent at this point––after the former has already
benefited from SMLI’s proposal through the acquisition of information and ideas for the
development of the subject property––would unjustly enrich the agency through the efforts of
petitioner. What is worse, to do so would be contrary to BCDA’s representations and assurances
that it will respect SMLI’s earlier acquired rights, which statements SMLI reasonably and
innocently believed.

All told, the BCDA’s acceptance ofthe unsolicited proposal and the successful in-depth
negotiation cannot be written off as mere mistake or error that respondents claim to be reversible
and not susceptible to the legal bar of estoppel. The subsequent cancellation of the Competitive
Challenge on grounds that infringe the contractual rights of SMLI and violate the NEDA JV
Guidelines cannot be shrouded with legitimacy by invoking the above-cited rule.

Conclusion

To increase government prospects, participation in joint ventures has been incentivized by

granting rightsand advantages to the Original Proponent in the Competitive Challenge phase of
a Swiss Challenge. Faithful observance of these provisions oflaw that grant the aforesaid rights,
may it be sourced from a bilateral contract or executive edict, aids in improving government
reliability. This, in turn, heavily correlates with greater availability of options when entering into
future joint venture agreements with private sector entities via public-private enterprises as it will
attract investors to contribute in formulating a roadmap towards a nationwide infrastructure
development.

Needless to say, allowing government agencies to retract their commitments to the project
proponents will essentially render inutile the incentives offered to and have accrued in favor of
the private sector entity. Without securing these rights, the business community will be wary
when it comes to forging contracts with the government. Simply put, the failure of the
government to abide by the rules ititself set would have detrimental effects on the private sector’s
confidence that the government will comply with its statutory and contractual obligations to the
letter.
In the case at bench, considering the undisputed facts presented before Us, We cannot sustain
the BCDA’s arguments that its withdrawal from the negotiations is permissible and was not done
with grave abuse of discretion. Being an instrumentality of the government, it is incumbent upon
the BCDA to abide by the laws, rules and regulations, and perform its obligations with utmost
good faith. It cannot, under the guise of protecting the public interest, disregard the clear
mandate of the NEDA JV Guidelines and unceremoniously disregard the very commitments it
made to the prejudice of the SMLI that innocently relied on such promises.51 It is in instances
such as this––where an agency, instrumentality or officer of the government evades the
performance of a positive duty enjoined by law52 ––wherein the exercise of judicial power is
warranted. Consistent with Our solemn obligation to afford protection by ensuring that grave
abuses of discretion on the part of a branch or instrumentality of the government do not go
unchecked, the Petition for Certiorari must be granted and the corresponding injunctive relief be
made permanent.

As a final note, it is worth mentioning that the foreseeable repercussion of a contrary

ponenciaencompasses the reduction of the number of interested private sector entities that
would bewilling to submit suo motoproposals and invest in government projects. After all, what
would be the point of developing ideas and allocating resources in the formulation of PPP
projects when one’s rights asan Original Proponent, under the NEDA JV Guidelines and the
agreement between the parties, can easily be wiped out should the agency decide tolevel the
playing field and conduct straight bidding instead? Evidently, this would not attract but would, in
contrast, repel investors from tendering offers. In addition, even if potential investors do submit
unsolicited or comparative proposals, the terms therein might be driven to become less
competitive due to the adjustment in the balance of risks and returns on investment. Taking into
account the increased possibility of the development project not pushing through, investors
might not be too keen in guaranteeing a high amount of secured payments for the same. These 1âwphi1

considerations further validate the need to secure the private sector’s trust and confidence in the
government.

WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed

Supplemental Notice No. 5 dated August 6, 2012 issued by the BCDA is hereby ANULLED and
SET ASIDE. The Temporary Restraining Order issued bythis Court on January 9, 2013 is hereby
madePERMANENT.

Respondent Bases Conversion and Development Authority and Arnel Paciano D. Casanova, or
whoever assumes the position of president of BCDA, are hereby ORDEREDto conduct and
complete the Competitive Challenge pursuant to the Certification, TOR, and NEDA JV
Guidelines.

Specifically, the BCDA and/or the JV-SC are DIRECTEDto carry out the following:

1. Publish, within seven (7) calendar days from finality of this Decision, the "Invitation to Apply for
Eligibility and to Submit a Comparative Proposal" (IAESCP) in three (3) newspapers of general
nationwide circulation for two (2) consecutive weeks, and in the BCDA website
(www.bcda.gov.ph), in accordance with Section III.2. (Publication of Invitation to Apply for
Eligibility and to Submit Proposal), Section III (Project Rationale), Item 5 of the TOR, and Section
III (General Information), Item 2 (Publication of Invitation for Comparative Proposals) of the TOR;

2. Immediately make the necessary adjustments to the timetable of activities set forth in
Supplemental Notice No. 1, considering that the periods specified therein have already lapsed,
without awaiting the lapse of the period for publication;
3. Strictly adhere to the TOR, Supplemental Notice No. 1, as adjusted, the Certification of
Successful Negotiations, and the NEDA JV Guidelines, in the conduct and completion of the
Swiss Challenge procedure on SM Land Inc.’s unsolicited proposal accepted by the BCDA; and

4. Perform any and all acts necessary to carry out and complete Stage Three of the Swiss
Challenge pursuant to the provisions of the TOR and NEDA JV Guidelines, including, but not
limited to, subjecting petitioner's unsolicited proposal to a competitive challenge.

In the event that SM Land, Inc. already obtained from BCDA the amount representing its
Proposal Security, SM Land, Inc. is hereby DIRECTED to re-post the Proposal Security, in the
same amount as the previous one, on the first day of the publication of the invitation for
comparative proposals, per the NEDA JV Guidelines.

SO ORDERED.