Authority to enter into a contract

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Authority to enter into a contract

Post by Berna on Thu Sep 09, 2010 11:54 am

The lgu had a moa with the doh re: health facilities enhancement program. the bac had bid for the project and in the process of evaluation.

do the mayor have to ask from the sb authority to enter into a contract (bet LGU and winning contractor)?
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Re: Authority to enter into a contract

Post by engrjhez® on Thu Sep 09, 2010 1:59 pm

Bernadette G. Driza wrote:The lgu had a moa with the doh re: health facilities enhancement program. the bac had bid for the project and in the process of evaluation.

do the mayor have to ask from the sb authority to enter into a contract (bet LGU and winning contractor)?

Provided that all necessary documentations and undertakings in the amendment/update of the Budget (approved by the Sanggunian) if necessary and the Annual Procurement Plan is made prior to the bidding, then there should be no more prior approval from the sanggunian required. Once the procurement process begins, the HOPE shall be in full responsibility of its approval or disapproval - and that includes signing for the contract. Smile
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Re: Authority to enter into a contract

Post by RDV @ GP3i on Thu Sep 09, 2010 4:12 pm

Bernadette G. Driza wrote:The lgu had a moa with the doh re: health facilities enhancement program. the bac had bid for the project and in the process of evaluation.

do the mayor have to ask from the sb authority to enter into a contract (bet LGU and winning contractor)?

To answer your question, it would be better to cite (I think the latest) jurisprudence on a similar case.

The jurisprudence I am referring to is the case of Quisumbing vs. Garcia, G.R. 175527, promulgated by the Supreme Court En Bank only on December 8, 2008.

The fact of the case is that the Province of Cebu was operating under a reenacted budget in 2004. Sec. 323 of R.A. No. 7160 provides that in case of a reenacted budget, “only the annual appropriations for salaries and wages of existing positions, statutory and contractual obligations, and essential operating expenses authorized in the annual and supplemental budgets for the preceding year shall be deemed reenacted and disbursement of funds shall be in accordance therewith.” However, despite the province operating under a reenacted budget, a new contract was entered into by the Provincial Governor without prior sanggunian authorization in accordance with Sec. 22(c) of R.A. No. 7160.

Aside from Sec. 22(c), there are other provisions in the LGC on the authority of the Sanggunian. The Supreme Court thus mentioned that:

Elsewhere in R.A. No. 7160 are found provisions which buttress the stand taken by petitioners against Gov. Garcia’s seemingly heedless actions. Sec. 465, Art. 1, Chapter 3 of R.A. No. 7160 states that the provincial governor shall “[r]epresent the province in all its business transactions and sign in its behalf all bonds, contracts, and obligations, and such other documents upon authority of the sangguniang panlalawigan or pursuant to law or ordinances.” Sec. 468, Art. 3 of the same chapter also establishes the sanggunian’s power, as the province’s legislative body, to authorize the provincial governor to negotiate and contract loans, lease public buildings held in a proprietary capacity to private parties, among other things.

“The foregoing inexorably confirms the indispensability of the sanggunian’s authorization in the execution of contracts which bind the local government unit to new obligations. Note should be taken of the fact that R.A. No. 7160 does not expressly state the form that the authorization by the sanggunian has to take. Such authorization may be done by resolution enacted in the same manner prescribed by ordinances, except that the resolution need not go through a third reading for final consideration unless the majority of all the members of the sanggunian decides otherwise."

The SC also added that:

As regards the trial court’s pronouncement that R.A. No. 9184 does not require the head of the procuring entity to secure a resolution from the sanggunian concerned before entering into a contract, attention should be drawn to the very same provision upon which the trial court based its conclusion. Sec. 37 provides: “The Procuring Entity shall issue the Notice to Proceed to the winning bidder not later than seven (7) calendar days from the date of approval of the contract by the appropriate authority x x x.

R.A. No. 9184 establishes the law and procedure for public procurement. Sec. 37 thereof explicitly makes the approval of the appropriate authority which, in the case of local government units, is the sanggunian, the point of reference for the notice to proceed to be issued to the winning bidder. This provision, rather than being in conflict with or providing an exception to Sec. 22(c) of R.A. No. 7160, blends seamlessly with the latter and even acknowledges that in the exercise of the local government unit’s corporate powers, the chief executive acts merely as an instrumentality of the local council. Read together, the cited provisions mandate the local chief executive to secure the sanggunian’s approval before entering into procurement contracts and to transmit the notice to proceed to the winning bidder not later than seven (7) calendar days therefrom.”


The SC, therefore, posited that:

As things stand, the declaration of the trial court to the effect that no prior authorization is required when there is a prior appropriation ordinance enacted does not put the controversy to rest. The question which should have been answered by the trial court, and which it failed to do was whether, during the period in question, there did exist ordinances (authorizing Gov. Garcia to enter into the questioned contracts) which rendered the obtention of another authorization from the Sangguniang Panlalawigan superfluous. It should also have determined the character of the questioned contracts, i.e., whether they were, as Gov. Garcia claims, mere disbursements pursuant to the ordinances supposedly passed by the sanggunian or, as petitioners claim, new contracts which obligate the province without the provincial board’s authority.

“It cannot be overemphasized that the paramount consideration in the present controversy is the fact that the Province of Cebu was operating under a re-enacted budget in 2004, resulting in an altogether different set of rules as directed by Sec. 323 of R.A. 7160. This Decision, however, should not be so construed as to proscribe any and all contracts entered into by the local chief executive without formal sanggunian authorization. In cases, for instance, where the local government unit operates under an annual as opposed to a re-enacted budget, it should be acknowledged that the appropriation passed by the sanggunian may validly serve as the authorization required under Sec. 22(c) of R.A. No. 7160. After all, an appropriation is an authorization made by ordinance, directing the payment of goods and services from local government funds under specified conditions or for specific purposes. The appropriation covers the expenditures which are to be made by the local government unit, such as current operating expenditures and capital outlays
."

Thus, the Supreme Court ruled that:

The question of whether a sanggunian authorization separate from the appropriation ordinance is required should be resolved depending on the particular circumstances of the case. Resort to the appropriation ordinance is necessary in order to determine if there is a provision therein which specifically covers the expense to be incurred or the contract to be entered into. Should the appropriation ordinance, for instance, already contain in sufficient detail the project and cost of a capital outlay such that all that the local chief executive needs to do after undergoing the requisite public bidding is to execute the contract, no further authorization is required, the appropriation ordinance already being sufficient.

“On the other hand, should the appropriation ordinance describe the projects in generic terms such as “infrastructure projects,” “inter-municipal waterworks, drainage and sewerage, flood control, and irrigation systems projects,” “reclamation projects” or “roads and bridges,” there is an obvious need for a covering contract for every specific project that in turn requires approval by the sanggunian. Specific sanggunian approval may also be required for the purchase of goods and services which are neither specified in the appropriation ordinance nor encompassed within the regular personal services and maintenance operating expenses
.”

Of course the jurisprudence I just quoted is a case on a reenacted budget. But even then, you can infer from the case even in situations where the budget is not reenacted (Annual Budget and Supplemental Budget) and when there is no appropriation ordinance to speak of (as in the moa between the DOH and the LGU).
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Re: Authority to enter into a contract

Post by jcolas on Mon Sep 13, 2010 1:55 pm

Sec. 468, Art. 3 of RA 7160 of the same chapter also establishes the sanggunian’s power, as the province’s legislative body, to authorize the provincial governor to negotiate and contract loans, lease public buildings held in a proprietary capacity to private parties, among other things.

I can safely infer from the above-cited provision, that the Sanguniang Panlalawigan or any sangunian for that matter, has the "power of the purse" and as the Legislative Body in the local government, it is the only appropriate authority that authorizes the HOPE to contract business with other parties. If I may go further, this is the reason why the head prefers that his party has a clear majority in the membership of the legislative body so that his appropriation bill and other bills will pass through that body without a hitch.
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Re: Authority to enter into a contract

Post by RDV @ GP3i on Mon Sep 13, 2010 9:54 pm

jcolas wrote: Sec. 468, Art. 3 of RA 7160 of the same chapter also establishes the sanggunian’s power, as the province’s legislative body, to authorize the provincial governor to negotiate and contract loans, lease public buildings held in a proprietary capacity to private parties, among other things.

I can safely infer from the above-cited provision, that the Sanguniang Panlalawigan or any sangunian for that matter, has the "power of the purse" and as the Legislative Body in the local government, it is the only appropriate authority that authorizes the HOPE to contract business with other parties. If I may go further, this is the reason why the head prefers that his party has a clear majority in the membership of the legislative body so that his appropriation bill and other bills will pass through that body without a hitch.

Although there is that provision in the LGC on the power of the sanggunian and also a provision under Sec. 22(c) that a prior sanggunian authorization is required before the local chief executive could enter into contract, the Supreme Court in Garcia vs. Quisumbing ruled that "the question of whether a sanggunian authorization separate from the appropriation ordinance is required should be resolved depending on the particular circumstances of the case."

The Supreme Court said that if the appropriation ordinance already contains sufficient details as to the project and the cost and what the LCE has to do after the requisite public bidding is only to execute the contract, a prior authorization by the sanggunian is no longer required. It said that the appropriation ordinance is already enough. On the other hand if the project is described only in generic terms, such as "infrastructure projects" or various infra projects or roads and bridges, where the contract needs to be more specific then there is a need still for a prior sanggunian authorization.

Because of that ruling, LGUs which do not specifically identify the projects in their appropriation ordinance, but instead they are in lump-sum amounts, have to secure first the necessary sanggunian authorization before the LCE could enter into a contract under any of those projects.
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