G.R. No. 203655, August 13, 2014.
SM Land, Inc. v. Bases Conversion Development Authority and Arnel Paciano D. Casanova, Esq.

FACTS

Petitioner SM Land, Inc. (SMLI) submitted an unsolicited proposal to respondent Bases Conversion and Development Authority (BCDA) for a joint venture to develop a 33.1-hectare property in Bonifacio South. BCDA accepted the proposal and, following NEDA JV Guidelines, created a Joint Venture Selection Committee (JV-SC) to conduct detailed negotiations. On August 6, 2010, the parties signed a “Certification of Successful Negotiations,” wherein BCDA undertook to subject SMLI’s proposal to a Competitive Challenge. BCDA issued Terms of Reference (TOR) and SMLI posted the required proposal security. The Competitive Challenge was initiated with published invitations and a pre-eligibility conference. However, BCDA repeatedly postponed the process. Eventually, without completing the challenge, BCDA issued Supplemental Notice No. 5 terminating it, invoking a reservation clause in the TOR that allowed BCDA to call off the disposition. BCDA then decided to subject the property development to public bidding and returned SMLI’s proposal security with interest. SMLI filed the petition seeking to nullify Supplemental Notice No. 5 and to compel BCDA to complete the Competitive Challenge.

ISSUE

Whether the BCDA gravely abused its discretion in unilaterally terminating the Competitive Challenge through Supplemental Notice No. 5 and in deciding to subject the project to public bidding instead.

RULING

Yes, the BCDA committed grave abuse of discretion. The Court ruled that the “Certification of Successful Negotiations” constituted a binding contract that obligated BCDA to conduct and complete the Competitive Challenge as prescribed under the NEDA JV Guidelines. The reservation clause in the TOR, relied upon by BCDA to terminate the process, cannot be invoked to negate this contractual obligation, as the TOR was issued pursuant to and as an implementation of the earlier Certification. The Competitive Challenge is a mandatory stage in the negotiated joint venture mode under the NEDA JV Guidelines, designed to ensure the most advantageous terms for the government. By arbitrarily abandoning the process after SMLI had complied with all requirements and incurred expenses, BCDA violated its contractual commitment, the principles of fair dealing, and the public policy on competitive bidding. The Court granted the petition, nullified Supplemental Notice No. 5, and ordered BCDA to proceed with and complete the Competitive Challenge on SMLI’s unsolicited proposal.