THE Supreme Court (SC) has affirmed with finality its ruling directing the Bases Conversion and Development Authority (BCDA) to subject to a competitive challenge, or to a so-called Swiss challenge, the unsolicited proposal of SM Land Inc. (SMLI) for the acquisition and development of a 33.1-hectare property in Bonifacio South in Taguig City in exchange for P25.9 billion for the government.
In a 13-page resolution penned by Associate Justice Presbitero J. Velasco Jr., the Court’s Special Third Division denied the motion for reconsideration filed by the BCDA president seeking the reversal of its ruling issued on August 13, 2014.
The High Tribunal, in that decision, granted the SMLI petition seeking the nullification of the notice issued by BCDA President and CEO Arnel Paciano D. Casanova terminating the Swiss challenge.
The Court rejected Casanova’s argument that the BCDA and SMLI do not have a contract, giving the latter the right to demand that its unsolicited proposal be subject to a competitive challenge.
Casanova pointed out even if such an agreement exist, such may still be terminated if public interest so requires.
However, the Court ruled that a valid agreement between SMLI and the BCDA existed, such that its breaching resulted in the filing of a complaint against the erring party.
The SC noted that consent, the first requisite of a perfected contract, “is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.”
In the case of SMLI, the Court noted that when it submitted the unsolicited proposal to the BCDA on December 14, 2009, such submission constituted an offer to undertake the development of the subject property.
The BCDA then entered into negotiations with SMLI until it finally accepted the terms of the final unsolicited proposal.
This 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 the BCDA and SMLI, represented by Gen. Narciso L. Abaya and 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 the 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 said.
“This agreement is the law between the contracting parties with which they are required to comply in good faith. Verily, it is the 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 SC said the BCDA could not abandon its obligation to subject the unsolicited proposal to a competitive challenge having signed a perfected contract with SMLI.
It also said the BCDA gave assurance that it would respect the rights of SMLI under the agreement. The SC, however, clarified that its ruling did not award 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 SC stressed.
“Consequently, any alleged disadvantage the government would suffer is speculative at most, as there is no final award for the project as of yet,” it added.
The Court explained that the project’s perceived low floor price, 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 entitiess] 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 SC said the government previously accepted offers from private entities and subjected them to a Swiss challenge like the proposal of Metro Pacific Investment Corp. for the expansion of the North Luzon Expressway, as well as its integration with the Subic-Clark-Tarlac Expressway.
Prior to the controversy, the BCDA opened for disposition the subject property which prompted SMLI to submit an unsolicited proposal for its development through a public-private joint-venture agreement.
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 near the posh Forbes Park.
Six real-estate developers have expressed interest in the property. These are Ayala Land Inc., 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 P25.9 billion.
Afterward, a certification of successful negotiations was issued by the BCDA, wherein the latter agreed to undertake a Swiss challenge of the SMLI proposal.
However, instead of subjecting SMLI’s offer to a Swiss challenge, the BCDA decided to dispose of the property through open competitive bidding.
The BCDA said it set aside the unsolicited proposal of SM Land pursuant to the Office of the President’s directive.
It argued that it will be more advantageous to the government to conduct open competitive bidding for its land assets, since it will not only result in getting the best price but the best development for the property.
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.