06 January 2021

MEMORANDUM

FOR : Lucille Karen E. Malilong-Isberto

Executive Director

FROM : Angeline B. Salazar

Legal Officer

SUBJECT : Claim of J.D. Venzon Construction

A. FACTS

Supplier J.D. Venzon Construction installed five (5) pieces 7ft x 22ft Panaflex lighted wall
signages for the promotion of the Nayong Pilipino Foundation (NPF) Clark Park. This
project cost Php 518,000.00 (110,000.00 per piece of Panaflex signage). The Panaflex
signages were delivered and installed sometime in August 2019 per the Acceptance and
Inspection Report dated 08 August 2019. However, NPF has not settled their obligation
with the supplier.

Considering that J.D. Venzon has been following-up on this collectible, the matter was
brought to the attention of then Deputy Executive Director for Administration and
Finance, Atty. Vhincent G. Canares who then instructed Ms. Serrano to demand from the
former Procurement Officer of NPF, Ms. Amir Cerone M. Velasco the copies of the
Department of Tourism Bids and Awards Committee (DOT – BAC) Resolution evidencing
the same. This led to an exchange of Memoranda between Ms. Serrano and Ms. Velasco
dated 14 January 2020 and 29 January 2020, respectively. The first memorandum
demanded from Ms. Velasco the BAC documents representing the transaction with J.D.
Venzon. The second deals with the reply of Ms. Velasco, to wit:

“xxx

Regarding your Memorandum on J.D. Venzon Construction

a) You yourself know that it is not possible to for a BAC for NPF because of
the lack of regular employees. Nagkaroon pa kami ng meeting with Director
Mary Angelene A. Tolentino of the Department of Tourism at humingi kami
ng tulong sa kanila. Sabi naman nila, tutulungan nila tayo kapag may
purchases na kailangan ng bidding. Ang purchase with JD Venzon ay
P518,000.00 lamang. Ang importante lang ay HOPE si ED Mich.
b) In this connection, please check Board Resolution No. 2019-003 where the
Board of Trustees of Nayong Pilipino authorized former Executive Director
 Michelle Aguilar Ong to act as Head of the Procuring Entity for Procurement
with approved budget for contracts amounting to less than one million
pesos. Paki-hingi na lang po ang kopya sa Corporate Secretary na nagtatago
ng mga Board Resolutions ng BOT. All the documents COA requires to be
attached for this purchase are complete. Ano, in particular ba ang kailangan
ninyo from me? Yung paghingi niyo ng BAC Resolution ay imposible dahil
walang BAC. Kaya hindi ko maintindihan bakit mo ako hinihingan nito
samantalang ikaw mismo alam mo na walang BAC?”

The NPF, since it has no Bids and Awards Committee (BAC) of its own, requests from the
Department of Tourism (DOT) the creation of a Special Bids and Awards Committee
(Special BAC) for the purposes of procurement. However, Ms. Velasco failed to furnish
the Management with the documents evidencing that this transaction underwent the DOT
Special BAC even after her resignation.

In an email dated 11 November 2020, J.D. Venzon Construction asked for the payment
of the amount of Four Hundred Ninety Thousand and Two Hundred Fifty Pesos
(Php490,250.00) net of tax, or the gross amount of Five Hundred Eighteen Thousand
Pesos (Php518,000.00), for the installation of the wall signages in the NPF Clark Park. It
claimed that the installation of the Panaflex signages was made by virtue of Purchase
Order No. 019-192 dated 08 August 2019 signed by former NPF Executive Director
Michelle Aguilar-Ong. In the said Purchase Order, it was indicated that the procurement
was conducted through Negotiated Procurement – Small Value Procurement.

In her letter-explanation dated 25 November 2020, Ms. Joni Maria C. Serrano stated that
the documents attached to the Purchase Order were patently defective in nature upon
initial review.

The documents Ms. Serrano appended to her letter-explanation are the following:
1. Acceptance and Inspection Report, signed by Mr. Michael Jay S. Canlas (for
Acceptance) and Kevin Nico P. Madlambayan (for Inspection) on 16
September 2019;
2. Purchase order for the supplier Innosigns Advertising Solution dated 18
June 2019 and signed by Executive Director Michelle A. Ong;
3. Unsigned Disbursement Voucher to Payee J.D. Venzon Construction dated
06 January 2020;
4. Notice for Negotiated Procurement from the Procuring Entity Nayong
Pilipino Foundation dated 17 July 2019;

However, after clarification with the Records Officer of the NPF, Ms. Eliza Dizon, the
following documents were sent to the Finance Unit sometime in 2020 for the processing
of the payment to the supplier:
 1. Unsigned Disbursement Voucher to Payee J.D. Venzon Construction dated
06 January 2020;
2. Unsigned Budget Utilization Status Form with Payee J.D. Venzon
Construction, undated;
3. A letter addressed to Ms. Joni Maria Serrano from Procurement Officer Ms.
Cerone Amir Velasco dated 12 December 2019 endorsing the Disbursement
Vouchers;
4. A photocopied Official Receipt from J.D. Venzon for the amount of Four-
Hundred Ninety Thousand and Two Hundred Fifty Pesos, undated;
5. Purchase order for the supplier Innosigns Advertising Solution dated 18
June 2019 and signed by Executive Director Michelle A. Ong;
6. A scanned ID of the Raquel River of Innosigns;
7. Statement of Account form J.D. Venzon Construction billed to Nayong
Pilipino dated 03 September 2019;
8. Photos of the signs installed outside the Nayong Pilipino Clark Park;
9. Acceptance and Inspection Report, signed by Mr. Michael Jay S. Canlas (for
Acceptance) and Kevin Nico P. Madlambayan (for Inspection) on 16
September 2019;
10. Purchase Order for the Supplier J.D. Venzon Construction dated 08 August
2019 signed by ED Ong;
11. Abstract of Canvass dated 07 August 2019 signed by Ms. Velasco and ED
Ong;
12. Request for Quotation from Pryntcom Copy Center Co. from Ms. Velasco
dated 17 July 2019;
13. Request for Quotation from Ads Infinity from Ms. Velasco dated 17 July
2019;
14. Request for Quotation from J.D. Venzon Construction from Ms. Velasco
dated 17 July 2019;
15. Photos of J.D. Venzon’s samples; and
16. Certificate of PhilGEPS Registration (Platinum Membership) of J.D. Venzon
Construction

To date, the payment has not been processed and has been on hold pending the
completion of the documents.

B. APPLICABLE LAWS and RATIONALE

The mode of procurement reflected in the Purchase Order is Negotiated Procurement -

Small Value Procurement, defined under Section 53.9 of the 2016 Revised Implementing
Rules and Regulations of R.A. 9184 as “Procurement of Goods, Infrastructure Projects
and Consulting Services, where the amount involved does not exceed the threshold
prescribed in Annex “H” of this IRR: Provided, That in case of Goods, the procurement
does not fall under shopping in Section 52 of this IRR.”
Under Annex “H: of the IRR of RA 9184, the amount involved shall not exceed One Million
Pesos (PhP 1,000,000.00) for NGs, GOCCs, GFIs, SUCs and Autonomous Regional
Government.

The procedure under Annex “H” for Small Value Procurement is as follows:

1. The End-User shall submit a request for SVP to the BAC, which indicates
the technical specifications, scope of work, terms of reference, ABC and
other terms and conditions.
2. The BAC shall prepare and send the RFQs/RFPs to at least three (3)
suppliers, contractors or consultants of known qualifications. This,
notwithstanding, those who responded through any of the required
postings shall be allowed to participate. Receipt of at least one (1)
quotation is sufficient to proceed with the evaluation thereof.
3. Except for those with ABCs equal to Fifty Thousand Pesos (Php
50,000.00) and below, RFQs shall be posted for a period of three (3)
calendar days in the PhilGEPS website, website of the Procuring Entity,
if available, and at any conspicuous place reserved for this purpose in
the premises of the Procuring Entity.
4. Pre-bid conference may be conducted at the discretion of the BAC, in
order to clarify and/or explain any of the requirements, terms,
conditions, and specifications stipulated in the RFQ/RFP.
5. After the deadline of the submission of the quotations/proposals, an
Abstract of Quotations/Ratings shall be prepared setting forth the names
of those who responded to the RFQ/RFP, their corresponding price
quotations/ratings.
6. The BAC shall recommend to the HOPE the award of contract in favor
of the supplier or contractor with the Single or Lowest Calculated and
Responsive Quotation (for goods or infrastructure projects), or
consultant with the Single of Highest Rated and Responsive Proposal
(for consulting services). In case of approval, the HOPE shall
immediately enter into contract with the said supplier, contractor or
consultant.

Based on the foregoing facts and laws, it appears that the supplier J.D. Venzon did not
undergo this process. In consonance with R.A. 9184 and its 2016 IRR, NPF submits a
request for Small Value Procurement to the DOT Special BAC if the amount of the items
to be procured is more than Fifty Thousand Pesos (PhP 50,000.00). The request indicates
the technical specifications, scope of work, terms of reference, ABC and other terms and
conditions. However, based from the foregoing facts, it appears that this step was omitted
as asserted by Ms. Velasco in her Memorandum dated 29 January 2020. In doing so,
there is a clear violation of the required procedure for procurement under R.A. 9184.
Though the Purchase Order reflects the mode of procurement as “NP – Small Value
Procurement”, no documents to back up this claim can be availed of. Specifically, there
were no approved Technical Specifications, Annual Procurement Plan, Project
Procurement Management Plan, AdHoc Nomination, minutes of Opening of Bids, Bid
Evaluation Report, Technical Requirements, Eligibility, Technical, and Financial Evaluation
Report, Resolution Recommending Award, Notice of Award (NOA) and Notice to Proceed
(NTP) to the suppliers, and posting of NOA and NTP at PhilGEPS to support the validity
of the transaction. Likewise, the supplier submitted incomplete eligibility requirements
such as the Mayor’s Permit, Business Permit and Income Tax Return.

It is important to note that Ms. Velasco’s assertion in her 29 January 2020 Memorandum
that she cannot produce the BAC Resolution is an admission that no BAC to issue the
same was constituted for this transaction, thus:

“Yung paghingi niyo ng BAC Resolution ay imposible dahil walang BAC.

Kaya hindi ko maintindihan bakit mo ako hinihingan nito samantalang ikaw
mismo alam mo na walang BAC?”

This is a clear violation of R.A. 9184 insofar as the requirement in Small Value
Procurement that the BAC, through a resolution shall recommend to the HOPE the award
of contract in favor of the supplier or contractor with the Single or Lowest Calculated and
Responsive Quotation (for goods or infrastructure projects).

It was also observed that based on the PhilGEPS description, the NPF Clark Park through
the 2019 General Appropriations Act, will be requiring the installation and mounting of
these Panaflex Signages for the promotion of the Park. However, no GAA funding
supports this project at all. Moreover, the NPF Clark Park has been closed to the public
since 01 April 2019 and the Panaflex signages were delivered and installed sometime in
August 2019 per the Acceptance and Inspection Report dated 08 August 2019.

Further, it was observed that the Purchase Order does not reflect the name or style of
the true owner of the supplier. Upon closer inspection, Purchase Order No. 019-92 dated
18 June 2018 and duly signed by then Executive Director Michelle Aguilar-Ong reflected
the name INNO SIGNS ADVERTISING SOLUTION whereas the Disbursement Voucher
prepared by the Accounting Unit dated 16 January 2020 showed the name J.D. VENZON
CONSTRUCTION. To add to the growing confusion herein, another Purchase Order dated
08 August 2019 was discovered showing the name J.D. VENZON CONSTRUCTION.
Furthermore, an undated Official Receipt was issued by J.D. Venzon to Nayong Pilipino
Foundation for the amount of Four Hundred Ninety Thousand and Two Hundred Fifty
Pesos (PhP490,250.00). Lastly, two (2) of the documents Ms. Velasco was referring to in
her endorsement, the Approved Project/Program Proposal and Approved Purchase
Request could not be found along with the rest of the documents stated above for the
bidding to proceed.
As such, the transaction cannot be said to have been made validly and in good faith due
to the absence of any proof that it underwent the procurement process as required by
law.

For not being in accordance with the correct and complete process, COA Circular 2012 –
003 (Updated Guidelines for the Prevention and Disallowance of Irregular, Unnecessary,
Excessive, Extravagant and Unconscionable Expenditures) provides that this may be
considered as “Illegal” Expenditures or Uses of Government Funds and Property, once
NPF pays J.D. Venzon Construction. Annex “B” of the said circular provides that:

“Cases that are considered “Illegal” Expenditures or Uses of

Government Funds and Property

1. Payment of claims under a contract awarded not strictly in accordance with

the procedures prescribed under Republic Act (R.A.) No. 9184 and its
Revised Implementing Rules and Regulations (IRR):

xxx

1.2 For contracts awarded under an alternative mode of procurement for

items that should have undergone complete bidding process and
eventually resulted in overpricing (Dir. Fredric Villanueva, et al vs. COA,
G.R. No. 151987 dated March 18, 2005 and Venancio R. Nava vs.
Rodolfo G. Palattao, et al., G.R. 160211 dated August 28, 2006)”

This scenario may also fall under “Cases that are considered “Unnecessary” Expenditures
or Uses of Government Funds and Property” under Annex ‘C”, thus:

“Cases that are considered “Unnecessary” Expenditures or Uses of

Government Funds and Property

xxx

8. Construction of buildings and/or procurement of equipment not actually

needed or without any intended purpose, not put to use or use for purposes
other than the intended purpose, not completed and could not be properly
maintained or operations sustained.”

It must be noted that the NPF Clark Park was closed for renovation on 01 April 2019. The
signages were delivered and installed sometime in August 2019. Thus, there is no need
to promote the park as it was still closed to the public and not operational at that point.
Per Commission on Audit (COA) Management Letter for Period ending on December 2019,
it was observed by COA that procurement of goods and services totaling P2.296 million
had incomplete supporting documents, thus:

“Procurement of goods and services totaling P2.296 million with incomplete

supporting documents

23.21 Item 9.2, COA Circular No. 2012-001 and Annex “H” of the 2016 RIRR
of RA 9184 enumerated the documentary requirements for every
type of Alternative Mode of Procurement.

23.22 Presented in Annex B is the checklist of available as well as

unavailable required documents on the various procurements
totaling P2.296 million. In summary, the following documents were
not submitted/complied with.

a. Annual Procurement Plan showing the inclusion of procured items;

b. BAC Resolution recommending to Head of Procuring Entity
(HOPE);
c. Proof of posting with PhilGEPS for procurements with
Approved Budget for the Contracts equal to P50,000;
d. Proof of Posting of Notice of Award (NOA), Purchase Order
(PO), and Notice to Proceed (NTP);
e. Mayor’s/Business Permits;
f. PhilGEPS registration;
g. Income/Business Tax Return; and
h. Omnibus Sworn Statement.

23.23 Also, out of the total procurements of P1.330 million, 57 percent or

P0.761 million were for materials and supplies for the rehabilitation
of fixed assets/infrastructures. However, the Audit Team could not
establish the utilization thereof nor account for the remaining
balance, if any, due to the absence of documents/records and
reports showing the status of application and/or utilization thereof.”

COA then recommended to “Constitute the Bids and Awards Committee (BAC), if not
possible, request guidance from the Government Procurement Policy Board (GPPB) on
how to go over procurements through Special BAC from other government agencies.”
Management replied that a MOA was already entered into with the Department of
Tourism (DOT) where DOT shall be the NPF’s procurement agent to conduct procurement
activities considering the absence of a BAC in NPF.
Based on the above, the COA observation showed that the NPF has had problems
regarding the procurement of goods and services, including this transaction with J.D.
Venzon due to the absence of a Bids and Awards Committee.

Insofar as the propriety of payment to the supplier is concerned, payment cannot be

made without exposing the current management to liability. COA clearly states that
transactions that have not undergone the proper procurement process would be
considered either as “Illegal” or “Unnecessary”.

However, the Supplier is not without redress herein. In the case of Geronimo v. COA
(G.R. No. 224163, 04 December 2018), a COA quantum meruit claim may suffice
considering the absence of the proper bidding undertaken prior to this transaction. The
pronouncement stems from the case of Dr. Eslao v. COA (G.R. No. 108310, 1 September
1994), thus:

"In Dr. Eslao v. The Commission on Audit, the Court ruled that the
contractor should be duly compensated notwithstanding the questions
which hounded the construction project involved due to the failure to
undertake a public bidding. The Court explained that the denial of the
contractor's claim would result in the government unjustly enriching itself.
The Court further reasoned that justice and equity demand compensation
on the basis of quantum meruit."

Insofar as the liability of the signatories to the irregular transaction is concerned, the
Administrative Code of 1987 provides the following:

“Section 46. Appropriation Before Entering into Contract. -

(1) No contract involving the expenditure of public funds shall be entered

into unless there is an appropriation therefor, the unexpended balance of
which, free of other obligations, is sufficient to cover the proposed
expenditure; and

(2) Notwithstanding this provision, contracts for the procurement of

supplies and materials to be carried in stock may be entered into under
regulations of the Commission provided that when issued, the supplies and
materials shall be charged to the proper appropriations account.

Section 47. Certificate Showing Appropriation to Meet Contract. - Except

in the case of a contract for personal service, for supplies for current
consumption or to be carried in stock not exceeding the estimated
consumption for three (3) months, or banking transactions of government-
owned or controlled banks, no contract involving the expenditure of public
funds by any government agency shall be entered into or authorized unless
 the proper accounting official of the agency concerned shall have certified
to the officer entering into the obligation that funds have been duly
appropriated for the purpose and that the amount necessary to cover the
proposed contract for the current calendar year is available for expenditure
on account thereof, subject to verification by the auditor concerned. The
certificate signed by the proper accounting official and auditor who verified
it, shall be attached to and become an integral part of the proposed
contract, and the sum so certified shall not thereafter be available for
expenditure for any other purpose until the obligation of the government
agency concerned under the contract is fully extinguished.

Section 48. Void Contract and Liability of Officer. - Any contract entered
into contrary to the requirements of the two (2) immediately preceding
sections shall be void, and the officer or officers entering into the contract
shall be liable to the Government or other contracting party for any
consequent damage to the same extent as if the transaction had been
wholly between private parties.”

Since the contract appears to be void due to procurement violations, the signatories to
the documents may be sued in their personal capacities.

C. RECOMMENDATION

Based on the foregoing, it is thus highly recommended that the BAC Resolution or any
document representing that the transaction underwent the procurement process, if any,
be demanded from Ms. Amir Cerone M. Velasco and the then Head of the Procuring
Entity, former Executive Director Michelle Aguilar-Ong.

It is also highly recommended that the payment of J.D. Venzon be held in abeyance
subject to the surrender of the missing documents from the abovementioned persons.

In the event that the documents can no longer be produced by the concerned persons,
the supplier J.D. Venzon Consturction may file a Money Claim with the Commission on
Audit pursuant to Rule VIII of the 2009 Revised Rules of Procedure of the Commission
on Audit.