Harbour Centre wins court decision on SBMA contract

The Supreme Court has reinstated the order  issued by the Regional Trial Court of Olongapo City  in 2012 which compelled  the Subic Bay Metropolitan Authority (SBMA) to award the P5.5-billion contract to Harbour Centre Port Terminal, Inc. (HCPTI) for the development, operation and management of several ports inside the Subic Special Economic and Freeport Zone., according to a report by BusinessMirror.

In a 28-page decision, the Court’s Third Division reversed and set aside the August 8, 2013 decision issued by the Court of Appeals (CA).

The CA’s decision overturned the  Olongapo RTC’s 2012 order granting HCPTI’s petition for the issuance of mandamus directing the SBMA to issue a notice of award (NOA)  and notice to proceed (NTP) for its  joint-venture project covering the Naval Supply Deport, Boton, Alava, Rivera and Bravo Wharfs/Point. 

It also reminded government entities to observe laws and rules it set governing its projects being undertaken with private entities.

“The one duty-bound to ensure observance with laws and rules should not be the ones to depart therefrom. The violation by the government of the rules itself would stain the credibility of the investment environment,” the Court stressed.

The SBMA received an unsolicited proposal from HCPTI on November 16, 2009, to enter into an unincorporated joint venture (JV) for the development, operation and management of the said ports. 

The proposed JV sought to consolidate break-bulk, bulk and other essential port services to achieve efficiency of port resources.

The unsolicited proposal was made pursuant to the 2008 Guidelines and Procedures for entering into JVAs between government and private entities issued by the National Economic and Development Authority (Neda).

“In this case, all the requisites for the issuance of the NOA had already been complied with. The existence of these requisites gave rise to a clear legal right in favor of petitioner and correlative ministerial duty upon SBMA,” the Court said. 

“It appears that there is no legal right or contractual obstacle to the issuance of the NTP. Hence, the same must also be issued to petitioner in preparation for the implementation of the joint venture agreement, and so that the parties may start complying with other conditions precedent stipulated therein,” it added.

The SC said there is no law justifying the non-issuance of the NOA due to the withdrawal of the NEDA endorsement, considering that HCPT has complied with all the legal requisites for the issuance of such.

“As such, a writ of mandamus may issue to compel SBMA to perform its legal duty,” the SC stressed. 

The Neda, on July 5, 2021, withdrew its endorsement of the project based on alleged violation of the 2008 JV guidelines, such as the execution of the agreement as early as stage two of the process, and a supposed material change in the project cost from approximately P763 million to P5.37 billion after the competition challenge. 

The SBMA sought a reconsideration; however, its board issued a resolution deferring action on the award of the project to HCPTI pending Neda’s response. 

Due to SBMA’s failure and refusal to issue the NOA and NTP, petitioner filed a petition for mandamus before the Olongapo RTC. 

During the pendency of the RTC proceedings, Neda denied SBMA’s request for reconsideration and reiterated its withdrawal on September 30, 2011. 

After a month, the Office of the Government Corporate Counsel (OGCC), which initially found the agreement valid, recommended that the issuance of  the NOA be suspended in light of Neda’s withdrawal of its endorsement and pending further study of the JVA. 

In granting HCPTI’s petition, the Court noted that under the 2008 JV guidelines, a JV partner may be picked through selection or negotiated agreement, which a government entity may enter into when it receives an unsolicited proposal from the private sector. 

It added that in all cases where the government entity directly negotiates with a private sector participant for a proposed JV undertaking, the negotiated terms shall be subjected to a competition challenge. 

A competitive challenge is an alternative selection process where third parties are invited to submit comparative proposals to an unsolicited proposal. 

Negotiated agreements are subjected to a three-stage process – the submission of an unsolicited proposal to the government entity, the negotiations on the terms and conditions of the JV activity and the conduct of a competitive challenge. 

“In this case, petitioner had already undergone all three stages and complied with all the requisites for the immediate award of the JV activity. Petitioner submitted an unsolicited proposal, underwent negotiations, arrived at an agreement with SBMA, and completed the competition challenge without contest,” the SC noted. 

“Thus, the CA erred in ruling that petitioner has no right to the issuance of the NOA because the parties had yet to conduct a Swiss challenge. The competitive challenge under Annex C of the 2008 JV Guidelines is what was referred to as the Swiss Challenge, having been patterned after the Swiss challenge method,” it added. 

The SC also gave weight to the favorable opinion issued by the OGCC affirming the JVA’s legality. 

“The OGCC’s subsequent recommendation to suspend the issuance of the NOA does not erase the fact of prior compliance. The favorable OGCC opinion was not ‘revoked’ or ‘amended’…” the SC stressed.

The SC added that the favorable OGCC opinion is not even a condition for issuing the NOA. 

Likewise, the SC noted that the 2008 JV guidelines does not require a new endorsement and approval of the JVA. 

“There is no legal basis for the suspension of the issuance of the NOA due to Neda’s withdrawal of its endorsement. The 2008 JV Guidelines does not require Neda’s endorsement or approval,” the Court stressed. 

The SC also said there is no basis to Neda’s claim that  the project cost was initially fixed at P763 million. 

Contrary to Neda’s claim, the SC said records show that the project cost, revenue shares and other material financial components of the JV were included in the tender documents, which were then used as basis for the competitive challenge. The tender documents show that the estimated direct project cost was pegged at approximately P5.524 billion.