SC orders BCDA to subject SMLI’s proposal to ‘Swiss challenge’
The Supreme Court upheld with finality its decision on August 13, 2014, ordering the Bases Conversion and Development Authority (BCDA) to subject to competitive challenge or “Swiss challenge” the unsolicited proposal of SM Land Inc. (SMLI) to acquire and develop a 33.1-hectare property in Bonifacio South in Taguig City in exchange of more than P25.9 billion for the government.
In a Swiss challenge, a form of public procurement, a government agency that has received an unsolicited bid for a public project or services may publish the bid and invite third parties to match or exceed the unsolicited proposal.
In a 13-page resolution written by Associate Justice Presbitero Velasco, the high court’s Special Third Division dismissed the appeal filed by BCDA.
In dismissing the appeal, the high court in effect granted the petition filed by SMLI seeking the nullification of the notice issued by respondent BCDA president and chief executive officer Arnel Paciano Casanova terminating the Swiss challenge.
The high court dismissed the argument raised by Casanova that BCDA and SMLI do not have a contract that would bestow upon the latter the right to demand that its unsolicited proposal be subjected to a competitive challenge.
Casanova argued that even if such agreement between the two parties exists, the same may be terminated by reasons of public interest.
But the high court maintained the agreement between SMLI and BCDA is valid causing an action against the erring party in case of breach.
One of the requisites for a perfected contract, according to the high court “is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.”
The high court said the unsolicited proposal of SMLI, which is considered an offer has been accepted by BCDA when it entered into negotiations with the company.
Their agreement was later put into writing through the issuance of the certification of successful negotiations where the meeting of the parties’ minds was reflected therein.
Subsequently, both BCDA and SMLI, represented by Gen. Narciso L. Abaya and Ms. Ana Bess Pingol, respectively––affixed their signatures on the Certification of Successful Negotiations and had it notarized on August 6, 2010″”
“The elements of a valid contract being present, there thus exists between SMLI and BCDA a perfected contract, embodied in the Certification of Successful Negotiations, upon which certain rights and obligations spring forth, including the commencement of activities for the solicitation for comparative proposals,” the Court pointed out
“This agreement is the law between the contracting parties with which they are required to comply in good faith. Verily, it is BCDA’s subsequent unilateral cancellation of this perfected contract which this Court deemed to have been tainted with grave abuse of discretion,” it added.
The high court said with a perfected contract, the two parties-SMLI and BCDA can no longer abandon its obligation to subject the unsolicited proposal to a competitive challenge.
But the high court clarified that its decision does not mean awarding the project to SMLI but merely directed the BCDA to subject its proposal to a competitive challenge.
“The alleged adverse economic impact on the government, in finding for SMLI, does not constitute, under the premises, a valid cause for the reversal of the assailed decision,” the high court stressed.
It explained that the perceived low floor price for the project, based on SMLI’s proposal, remains a floor price and that there is still an opportunity to increase the price and the government share through a competitive challenge.
“Such offers can even surpass the property’s current market value and, in which case, constitute sufficient consideration for the project. Without first subjecting SMLI’s proposal to a competitive challenge, no bid can yet be obtained from PSEs (private sector entities) and, corollarily, no determination can be made at present as to whether or not the final bid price for the project is, indeed, below the property’s fair market value,” the Court said.
The high court said the government had previously accepted proposals from private entities and subjected them to a Swiss challenge like the proposal of Metro Pacific Investment Corporation’s (MPIC’s) for the expansion of the North Luzon Expressway as well as its integration with the Subic-Clark-Tarlac Expressway.
The property is composed of lands occupied by the Army Support Command and Special Services Unit of the Army, the Bonifacio Naval Station and the Marine Corps of the Navy. It is between Newport City and McKinley West and near posh Forbes Park.
Six real-estate developers have expressed interest in the property. These are ALI, Filinvest Land Inc., Jones Lang La Salle-Leechiu, Megaworld Corp., Robinsons Land Corp. and Rockwell Land Corp.
Following a series of negotiations, SM Land submitted its final revised proposal with guaranteed secure payments amounting to a total of P25.9 billion. Then, a certification of successful negotiation was issued which includes an agreement to undertake a Swiss challenge.
But instead of subjecting SMLI’s offer, BCDA has decided to conduct an open competitive bidding.
The BCDA said it set aside the unsolicited proposal of SM Land pursuant to the Office of the President’s directive.
Concurring with the ruling were Associate Justices Diosdado Peralta and Jose Catral Mendoza.
Associate Justices Marvic Mario Victor Leonen and Martin Villarama dissented from the majority ruling. TVJ
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