G.R. No. 94476 September 26, 1991
MICAELA C. ANDRES and ARNULFO M. PURISIMA, petitioners, vs. THE HONORABLE COMMISSION ON AUDIT, respondents.

FACTS

The case arose from the disallowance by the Commission on Audit (COA) of payments for 1,838 school desks manufactured and delivered by three state vocational institutions to public schools in La Union. The project was part of the President’s Community Employment and Development Program (CEDP) under DECS Regional Office No. 1. Implementing Guidelines prescribed two procurement modes: negotiated contracts with vocational institutions and local competitive bidding, with a stated preference for the former due to educational and social benefits. Pursuant to a conference agreement and these guidelines, DECS Division Superintendent Micaela Andres entered into negotiated contracts with three state schools at a unit price of P414.88. The contracts were approved by the DECS Secretary. The COA Regional Auditor, however, disallowed the payments, citing overpricing based on a later Metro Manila price finding of P300.00 and alleged irregularity for non-compliance with public bidding requirements under COA circulars.

ISSUE

The primary issue is whether the COA correctly disallowed the payments for the school desks procured through negotiated contracts with state vocational institutions.

RULING

The Supreme Court granted the petition and nullified the COA decision. The legal logic centered on the validity of the negotiated procurement and the reasonableness of the price. First, the negotiated contracts were expressly authorized by the DECS Implementing Guidelines, which gave preference to this mode when dealing with capable vocational institutions for its educational and social benefits. This preference was reinforced by Executive Order No. 301, which allows negotiated procurement when made from a government agency or when deemed most advantageous by the Department Head, as was the case here with the Secretary’s approval. Second, on the issue of overpricing, the Court found the COA’s price comparison flawed. The P300.00 “Metro Manila Price Finding” was not a proper benchmark, as it was dated months after the contracts were executed and pertained to a different geographical area with potentially different cost structures. The contract price of P414.88 was the approved agency estimate for La Union, determined before procurement, and was within the range of estimates for other provinces in the region, some of which were higher. The Court also noted the COA’s discriminatory application, as it allowed payments in other divisions within the same region at similar or higher prices. While there were minor technical lapses, such as delayed submission of contracts to the COA, these were deemed insufficient to invalidate otherwise justifiable contracts undertaken in good faith with government institutions.