G.R. No. 90261 , July 23, 1990
BEN A. SANTANDER, doing business under the name and style of BEN A. SANTANDER CONSTRUCTION, petitioner, vs. THE COURT OF APPEALS, NINTH DIVISION AND GOVERNMENT SERVICE INSURANCE SYSTEM, respondents.

FACTS

The Government Service Insurance System (GSIS) advertised for public bidding for the construction of its Central Luzon Regional Office building. Petitioner Ben A. Santander participated, paid the pre-qualification fee, secured the required credit line and cash deposit, and submitted his bid. His bid of P2,398,636.00 was the lowest. The GSIS Board of Trustees passed a resolution approving the award to Santander and authorizing an additional appropriation, as his bid exceeded the original project budget. However, this required approval from the Office of the Economic Coordinator (OEC).
The OEC disapproved the proposal and directed GSIS to review the plans and conduct a re-bidding. GSIS informed Santander of this directive, returned his cash bond, and proceeded with a re-bidding, ultimately awarding the project to another contractor. Santander filed an action for execution of contract and damages. The trial court ruled in his favor, awarding various damages. The Court of Appeals reversed this decision, prompting Santander’s petition to the Supreme Court.

ISSUE

Whether a contract for the government construction project was perfected upon Santander being declared the lowest bidder and upon the GSIS Board’s resolution to award him the project.

RULING

No, there was no perfected contract. The Supreme Court affirmed the Court of Appeals’ decision. The legal logic hinges on the specific rules governing public bidding and the nature of contract perfection. A contract is perfected only upon a meeting of minds between the parties. In public bidding, the advertisement and invitation to bid are mere solicitations of offers; the bid submitted is the offer. Acceptance of that offer is governed by the bidding rules.
The proposal form and bidding rules explicitly reserved GSIS’s right to reject any and all bids and stated that the contract would be deemed perfected only upon the bidder’s receipt of a formal notice of acceptance and the execution of a written contract. Here, while Santander was the lowest bidder and the GSIS Board passed a resolution, this internal act did not constitute a final, communicated acceptance. The resolution was conditional, as it required OEC approval for the necessary additional appropriation. The OEC’s disapproval and directive for a re-bidding meant the condition was not fulfilled. Consequently, no notice of acceptance was ever issued to Santander, and no formal contract was executed. Therefore, the essential element of consent—a meeting of the minds—was absent. The expenses incurred by Santander were considered part of the ordinary risks assumed by a bidder in a public bidding process where the government agency reserves the right to reject all bids.