Capalla vs.

Comelec,
GR No. 201112, June 13, 2012
Facts:
On July 10, 2009, the Comelec and Smartmatic-TIM entered into a Contract for
the Provision of an Automated Election System for the May 10, 2010
Synchronized National and Local Elections,(AES Contract). The contract between
the Comelec and Smartmatic-TIM was one of “lease of the AES with option to
purchase (OTP) the goods listed in the contract.” In said contract, the Comelec
was given until December 31, 2010 within which to exercise the option. In
September 2010, the Comelec partially exercised its OTP 920 units of PCOS
machines with corresponding canvassing/consolidation system (CCS) for the
special elections in certain areas in the provinces of Basilan, Lanao del Sur and
Bulacan. In a letter dated December 18, 2010, Smartmatic-TIM, through its
Chairman Flores, proposed a temporary extension of the option period on the
remaining PCOS machines until March 31, 2011, waiving the storage costs and
covering the maintenance costs. The Comelec did not exercise the option within
the extended period. Several extensions were given for the Comelec to exercise
the OTP until its final extension on March 31, 2012.

On March 29, 2012, the Comelec issued a Resolution resolving to accept

Smartmatic-TIM’s offer to extend the period to exercise the OTP until March 31,
2012 and to authorize Chairman Brillantes to sign for and on behalf of the
Comelec the Agreement on the Extension of the OTP Under the AES Contract
(Extension Agreement). Comelec again issued a Resolution resolving to approve
the Deed of Sale between the Comelec and Smartmatic-TIM to purchase the
latter’s PCOS machines to be used in the upcoming May 2013 elections and to
authorize Chairman Brillantes to sign the Deed of Sale for and on behalf of the
Comelec. The Deed of Sale was forthwith executed.

Petitioners assail the constitutionality of the Comelec Resolutions on the grounds

that the option period provided for in the AES contract had already lapsed; that
the extension of the option period and the exercise of the option without
competitive public bidding contravene the provisions of RA 9184; and that the
Comelec purchased the machines in contravention of the standards laid down in
RA 9369. On the other hand, respondents argue on the validity of the subject
transaction based on the grounds that there is no prohibition either in the
contract or provision of law for it to extend the option period; that the OTP is not
an independent contract in itself, but is a provision contained in the valid and
existing AES contract that had already satisfied the public bidding requirements of
RA 9184; and that exercising the option was the most advantageous option of the
Comelec.

Issue:
Whether or not there was grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of the Comelec in issuing the assailed Resolutions and in
executing the assailed Extension Agreement and Deed.

Held:
No. A reading of the other provisions of the AES contract would show that the
parties are given the right to amend the contract which may include the period
within which to exercise the option. There is, likewise, no prohibition on the
extension of the period, provided that the contract is still effective. The Comelec
still retains P50M of the amount due Smartmatic-TIM as performance security,
which indicates that the AES contract is still effective and not yet terminated.
Consequently, pursuant to Article 19 of the contract, the provisions thereof may
still be amended by mutual agreement of the parties provided said amendment is
in writing and signed by the parties. Considering, however, that the AES contract
is not an ordinary contract as it involves procurement by a government agency,
the rights and obligations of the parties are governed not only by the Civil Code
but also by RA 9184. A winning bidder is not precluded from modifying or
amending certain provisions of the contract bidded upon. However, such changes
must not constitute substantial or material amendments that would alter the
basic parameters of the contract and would constitute a denial to the other
bidders of the opportunity to bid on the same terms.
The conclusions held by the Court in Power Sector Assets and Liabilities
Management Corporation (PSALM) v. Pozzolanic Philippines Incorporated and
Agan, Jr. v. Philippine International Air Terminals Co., Inc., (PIATCO) cannot be
applied in the present case. First, Smartmatic-TIM was not granted additional
right that was not previously available to the other bidders. The bidders were
apprised that aside from the lease of goods and purchase of services, their
proposals should include an OTP the subject goods. Second, the amendment of
the AES contract is not substantial. The approved budget for the contract was
P11,223,618,400.00 charged against the supplemental appropriations for election
modernization. Bids were, therefore, accepted provided that they did not exceed
said amount. The competitive public bidding conducted for the AES contract was
sufficient. A new public bidding would be a superfluity. Lastly, the amendment of
the AES contract is more advantageous to the Comelec and the public because
the P7,191,484,739.48 rentals paid for the lease of goods and purchase of
services under the AES contract was considered part of the purchase price. For
the Comelec to own the subject goods, it was required to pay only
P2,130,635,048.15. If the Comelec did not exercise the option, the rentals already
paid would just be one of the government expenses for the past election and
would be of no use to future elections.