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Republic of the Philippines

Office of the Regional Director
COMMISSION ON AUDIT
Regional Office No. IX, Cabatangan, Zamboanga City

ENGR. JAIME P. ALVAREZ,

Appell
ant,
NOTICE OF DISALLOWANCE
-versus- NO. 2016-001(13) Dated November
10, 2016

EVERLYN T. SANICO, in her

capacity as State Auditor IV, Audit
Team Leader and ANNABELLA
C. UY, in her capacity as State
Auditor IV , OIC-Supervising
Auditor of Commission on Audit,
Regional Office No. IX,
Cabatangan, Zamboanga City
Appelle
es,
X-----------------------------------------X

APPEAL MEMORANDUM FOR APPELLANT

COMES NOW, Appellant JAIME P. ALVAREZ and unto this Honorable

Regional Director most respectfully submits this Appeal Memorandum and
alleges that:

STATEMENT OF THE CASE

This is an Appeal to the Notice of Disallowance numbered 2016-

001(13) dated November 10, 2016 issued by Appellees, EVERLYN T.
SANICO, in her capacity as State Auditor IV, Audit Team Leader and
ANNABELLA C. UY, in her capacity as State Auditor IV, OIC-Supervising
Auditor against Appellant, ENGR. JAIME P. ALVAREZ in his capacity as
Officer-in-Charge, Production Operations & Maintenance Division (OIC-
POMD) of Zamboanga City Water District (ZCWD) for having made as
signatory to the Prime Power Diesel Generating Set procurement process.
The total amount disallowed is P8, 032, 355.35. The assailed Notice of
Disallowance is hereto attached as Annex A.
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TIMELINES OF THE APPEAL

The Notice of Disallowance (ND) was received by herein Appellant on

11 January 2017. Thus, pursuant to Section 17 of Commission on Audits
Implementing Rules and Regulations of Circular No. 2009-006 dated 15
September 2009, the Appellant has six (6) months within which to file this
instant Appeal. Hence, it is manifested that this Appeal is timely filed.

STATEMENT OF THE FACTS

1. Appellant Engr. JAIME P. ALVAREZ is the Principal Engineer A and

the Officer-in-Charge for Production Operations & Maintenance
Division of ZCWD.

2. It is stated in the above-mentioned ND that the Appellant was

made a signatory to the Prime Power Diesel Generating Set
Specifications as preparer that requires only bidders whose
Genset products supplied in the market for the last 25 years are
qualified to participate in the procurement process and for which
reason the Appellant was allegedly found liable under the said ND.

3. Based on the aforesaid ND, it was stated that to impose what is

not required by the IRR such as the prospective bidder companys
existence of 25 years which is equivalent to of the life of a
corporation under the Corporation Code is not only limiting but
also unnecessary imposition. Accordingly, the same defeats the
policy on competitiveness in public procurement and runs counter
to the mandate of the law to extend equal opportunity to all eligible
bidders. It is also stated that adding a very restrictive requirement
resulted in disqualification of a bidder which tendered the lower
bid, but whose companys existence is only more than seven (7)
years, that could have generated a saving of P1, 112, 500.00 for
ZCWD.

4. The Department Manager for Accounting & Treasury Department,

LUIS A. WEE issued a memorandum no. GAD -2012-09-002 dated
26 September 2012 requesting TEOTIMO C. REYES to provide
rationale for the 25-years-existence of the Bidder as company as a
requirement for Purchase Requisition No. 12-0233 now PO No.
11690. A copy of the said memorandum dated 26 September 2012
is hereto attached as Annex B and forming an integral part
hereof.

5. TEOTIMO C. REYES issued a memorandum dated 01 October

2012 in relation and/or in reply to the above-mentioned
Memorandum issued by LUIS A. WEE wherein he was able to
provide justifications on the above-mentioned requirement
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provided under PR No. 12-0233. Said Memorandum dated 01

October 2012 is hereto attached as Annex C and forming an
integral part hereof.

6. According to the Recommendation Letter prepared by Gulliermo

A. Rojas in his capacity as State Auditor V, Supervising Auditor, it
is stated that TEOTIMO C. REYES who is the Chairman of Bids
and Awards Committee (BAC) was able to make justifications to
the above-mentioned additional requirement issue through reply
letter dated November 26, 2015 which stated as follows:

a. That he being the BAC Chairman and as part of the End-

User Unit for the above procurement, did not in any manner
intend to add a very restrictive requirement on the above-
procurement;

b. That he knows fully well the principle of competitiveness in

government procurement, whereby the procuring entity
should extend equal opportunity to enable private
contracting parties who are eligible and qualified to
participate in public bidding;

c. That only those eligible and qualified parties may participate

in public bidding;

d. That there was already a previous instance of a similar

procurement of a fleet of generator sets wherein a certain
supplier was able to secure the award for the contract.
However, ZCWD had a very bad experience with said
company, particularly insofar as the quality of the products
which they have offered. There were findings of malfunction,
overheating, and extreme noise during the testing and initial
operation of the generator sets. In addition, the after-sales
services provided by said supplier were very unsatisfactory;

e. That as a result, ZCWD had to suffer the inconvenience of

having to conduct a re-inspection of the fleet of generator
sets offered, having them rejected, and conduct a re-bidding.
The rebidding happens to be the procurement subject of this
justification, where the 25-year company existence
requirement was put in place as suggested by the End-User
Unit;

f. That inasmuch as the specifications for the generator sets

were already generic and were open to all who would wish to
participate, the procuring entity deemed it best to add an
additional technical requirement relevant to the companies
who would wish to participate, hence the 25 year company
existence requirement;
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g. That the Office merely learned from its lessons in the

previous procurement of generator sets where the brands
offered by the supplier Huang Feng and Hua Yan were
represented as brand new but were actually refurbished,
apart from the poor performance of these generator sets and
the poor after-sales provided by the supplier; and

h. ZCWD only intended to procure the best equipment

considering the amount involved and to do away the
scenario which we had with supplier which offered said
Huang Feng and Hua Yan as this will no doubt result to
more expenses and will negatively affect our water
distribution services since these generator sets are used to
generate back-up power for various wells.

7. Pursuant to GPPB Non Policy Opinion NPM 014-2015 dated 05-

25-2015 as requested by ZCWD it is provided as follows:

The procuring entity may stipulate its actual requirements in its

Technical Specifications/Scope of Work/Terms of Reference,
which must be reasonable and competitive. The Single Largest
Completed Contract (SLCC) criterion is required in order to
ensure that the Government is contracting with an entity that
has accomplished at least one project with a value equivalent to
no less than 50% and which is also similar to the contract to be
bid. It must be noted that no additional technical eligibility
requirement is necessary to ensure that ZCWD and the
government as a whole, is entering into contract with the best
qualified and capable contractor, as this may already be
covered by the bidders SLCC.

8. In relation to the recommendation letter dated 23 August 2016, a

Special Audit Team was constituted and its findings or Notice of
Disallowance is now the subject of this Appeal.

9. The Appellant was allegedly found to be liable in the Notice of

Disallowance considering that he was able to sign and participate
in the procurement process in his capacity as OIC of Production
Operations & Maintenance Division and he was allegedly made to
sign the document related thereto.

ISSUE

WHETHER OR NOT THE APPELEES ERRED IN HOLDING

APPELLANT LIABLE IN THE TRANSACTION SUBJECT OF THE
NOTICE OF DISALLOWANCE?
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DISCUSSION

THE APPELEES ERRED IN

HOLDING APPELLANT LIABLE
IN THE TRANSACTION
SUBJECT OF THE NOTICE OF
DISALLOWANCE

1. It is submitted that the Appellees erred in holding Appellant liable

in the transaction subject of the Notice of Disallowance
considering that the Appellant was able to sign and participate in
the procurement process in his capacity as OIC of Production
Operations & Maintenance Division and he was made to sign the
document related thereto based on the foregoing justification of
the Chairman of Bids and Awards Committee and he merely relied
thereon considering that it appeared to be reasonable considering
that the requirement imposed on the bidding process would inure
to the benefit of the ZCWD as it would no longer be vulnerable to
commit the same mistake in procuring low quality and defective
Generator Set and the same would not undermine the policy of
competitiveness and reasonableness in the procurement process.

2. The participation of the Appellant is only to the extent of the

preparation of the specification for the Generator Set ought to be
procured and not to the imposition of the additional requirement for
the prospective bidders. Thus, it is submitted that the Appellant
has no authority to decide whether or not to impose additional
requirement on the procurement process considering that his
capacity being the OIC of Production Operations & Maintenance
Division is only limited to the specification of the product to be
procured.

10. Without admitting to any irregularity in the above-mentioned

transaction and solely for the purpose of argument, it is
respectfully submitted that based on the premise that to impose
what is not required by the IRR such as the prospective bidder
companys existence of 25 years which is equivalent to of the
life of a corporation under the Corporation Code is not only limiting
but also unnecessary imposition and accordingly, the same
defeats the policy on competitiveness in public procurement and
runs counter to the mandate of the law to extend equal opportunity
to all eligible bidders and adding a very restrictive requirement
resulted in disqualification of a bidder which tendered the lower
bid, but whose companys existence is only more than seven (7)
years, that could have generated a saving of P1, 112, 500.00 for
ZCWD, on the contrary, to impose a restrictive requirement would
not defeat the policy of competitiveness established in
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procurement process considering that there are still several

qualified bidders that would be able to participate in the
procurement process and who have the capacity to provide fine
quality products. The purpose of the additional requirement is
purely anchored on the premise that it would not only allow the
procuring entity to determine who among the bidders that has the
capacity to provide a more trusted and reliable quality Generator
Set but also it will help the procuring entity to save more with
regard to its expenditure considering that the procuring entity will
not have to spend money for the repair and maintenance for the
low quality product. Thus, it negates the assumption that that
ZCWD could have generated a saving of P1, 112, 500.00 if they
will be entering into a contract with low bidders by disregarding the
above-stated restrictive requirement considering that the additional
requirement imposed in the bidding process is more advantageous
to the government.

11. Pursuant to GPPB Non Policy Opinion NPM 014-2015 dated

05-25-2015, the procuring entity is not prohibited from imposing an
additional requirement in the bidding process so long as it is
reasonable. Assuming without admitting that the said GPPB Non
Policy Opinion was only issued after the above-mentioned
transactions had consummated, the same does not contained any
restrictive provision that it should be applied prospectively. Thus,
past transactions may also be covered unless it undermines the
Policy of competitiveness and reasonableness in the procurement
process.

12. Moreover, it is emphasized that the Appellant was made a

signatory to the Prime Power Diesel Generating Set Specification
in his capacity as OIC of Production Operations & Maintenance
Division and he had signed the document in all honesty and good
faith that the same is reasonable as it would inure to the benefit of
the ZCWD and he merely relied on the reasonableness of the
justification of the Bids & Awards Committee Chairman and his
authority and discretion are only limited to the preparation of the
specification of the product to be procured and the imposition of
additional requirement for the prospective bidders in the
procurement process is already beyond the scope of his power
and authority.

13. Thus, in view of the foregoing, it is most respectfully prayed of

this Honorable Office that the Notice of Disallowance No. 2016-
001(13) Dated November 10, 2016 be declared null and void and
the same be set aside.
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PRAYER

WHEREFORE, it is most respectfully prayed of the Honorable Regional

Director that the Notice of Disallowance No. 2016-001(13) Dated
November 10, 2016 be declared null and void and the same be set aside
and that Appellant be relieved from any liability in relation thereto.

Appellant prays for such other reliefs as may be just and equitable in the
premises.
City of Zamboanga, Philippines, ___ May 2017.

ENGR. JAIME P. ALVAREZ

Division Manager A
Zamboanga City Water District
Republic of the Philippines)
City of Zamboanga )s.s.
X---------------------------------X

VERIFICATION/CERTIFICATION

I, ENGR. JAIME P. ALVAREZ, of legal age, married, Filipino citizen and

with office address at Pilar Street, Zamboanga City, Philippines, after
having been duly sworn to in accordance with law, hereby depose and say
that:

1. I am the Appellant in the above-entitled case;

2. I have caused the preparation of the foregoing Appeal

Memorandum;

3. I have read and understood the contents thereof and the same are
true and correct based on personal knowledge and authentic
records;

4. I have not commenced any action or proceeding involving the

same issue in the Supreme Court, Court of Appeals or any division
thereof or any agency or tribunal and that if I should learn that a
similar action or proceeding has been filed or pending before the
Supreme Court, Court of Appeals or any division thereof or any
agency or tribunal, I shall undertake to inform this Honorable Court
within five (5) days from notice.

IN WITNESS WHEREOF, I have hereunto set my hand on this ____

day of May 2017 in the City of Zamboanga, Philippines.
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ENGR. JAIME P. ALVAREZ

Affiant

SUBSCRIBED AND SWORN to before me this ____ day of

December 2010 in the City of Zamboanga, Philippines.

Doc. No. __
Page No. __
Book No. __
Series of 2017

Copy furnished:

EVERLYN T. SANICO
State Auditor IV
Audit Team Leader
COA, Regional Office No. IX
Cabatangan, Zamboanga City

ANNABELLA C. UY
State Auditor IV
OIC-Supervising Auditor
COA, Regional Office No. IX
Cabatangan, Zamboanga City

EXPLANATION

It is respectfully manifested that the foregoing Appeal Memorandum

is being served on Appellees and filed with the Honorable Regional Director
via registered mail with return card, personal service not being practicable
due to distance and lack of manpower.

ENGR. JAIME P. ALVAREZ