Third Submission – The Construction Contract is Null and Void

1. The loan agreement between Weximbank and the PH’s DOF is not an executive agreement.

Art. 2 sec. 1 of the Vienna Convention on the Law of Treaties defines a Treaty as “An international
agreement concluded between States in written form and governed by international law, whatever
its particular designation”.

Sec. 2 of E.O. 459 defines International Agreement as “a contract or understanding, regardless of

nomenclature, entered into between the Philippines and another government in written form and
governed by international law. It takes the form of either a treaty or an executive agreement.

In case law (such as CNMEG v. Sta Maria), for an agreement to be considered an executive agreement,
the following three requisites provided under the Vienna Convention must concur:
o the agreement must be between states;
o it must be written; and
o it must be governed by international law.

Applying the above definitions and requisites to the loan agreement between Weximbank and DOF:
o In the absence of proof of Westphalia law, we apply processual presumption and deem
that Weximbank is equivalent to the PH Export and Import Agency which is a GOCC as
defined by E.O. 292 sec. 2(13)1 and that it was not acting as an agent of Westphalia in its
sovereign capacity but was instead acting in its proprietary capacity in entering into the
loan agreement with DOF.
o The DOF is a department as defined by E.O. 292 sec. 2(7)2.

1E.O. 292 (Revised Administrative Code) sec. 2(13). Government-owned or controlled corporation refers to any agency
organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where
applicable as in the case of stock corporations, to the extent of at least fifty-one 51%: Provided, That government-owned or
controlled corporations may be further categorized by the Department of the Budget, the Civil Service Commission, and the
Commission on Audit for purposes of the exercise and discharge of their respective powers, functions and responsibilities with
respect to such corporations.

2 E.O. 292 (Revised Administrative Code) sec. 2(7). Department refers to an executive department created by law. For purposes
of Book IV, this shall include any instrumentality, as herein defined, having or assigned the rank of a department, regardless of
its name or designation.
 o DOF is neither clothed with full powers3 to negotiate international agreements nor has
been able to show the requisite authorization required by Sec. 3 of E.O. 4594 in order to
bind the state to an agreement.
o The loan agreement, being between a government-owned and controlled bank of
Westphalia and the Department of Finance, the first requisite for executive agreements is
thus not met.
o The loan agreement also stipulated that the laws of Westphalia will govern. The requisite
that executive agreements are governed by international law is also not met.
o Lastly, there is nothing in the facts that tells us that the loan has even been guaranteed by
the borrowing state.

2. The procuring agency is obligated to comply with PH procurement laws.

Sec. 4 of R.A. 91845 states that the Government Procurement Reform Act applies to the procurement
of infrastructure projects, goods, and consulting services, regardless of source of funds, whether local
or foreign, by all branches and instrumentalities of government, its departments, offices and
agencies, including GOCCs and local government units.

Sec. 4.1 of the IRR of R.A. 9184 likewise states that the IRR applies to all procurement of any branch,
agency, department, bureau, office, or instrumentality of the government.

DOF, the loan contracting agency, and DND, the procuring agency, are obligated to comply with the
requirements of R.A. 9184 for the selection of a contractor to build the military base.

3. The exception from coverage of R.A. 9184 does not apply.

While Sec. 4 of R.A. 9184 provides an exception to the compulsory competitive bidding under R.A.
9184, which states that Any treaty or international or executive agreement affecting the subject

3 E.O. 459 (Guidelines in the Negotiation of International Agreements) sec. 4. Full Powers. -The issuance of Full Powers shall be
made by the President of the Philippines who may delegate this function to the Secretary of Foreign Affairs.
The following persons, however, shall not require Full Powers prior to negotiating or signing a treaty or an executive
agreement, or any amendment thereto, by virtue of the nature of their functions:
a. Secretary of Foreign Affairs;
b. Heads of Philippine diplomatic missions, for the purpose of adopting the text of a treaty or an agreement between the
Philippines and the State to which they are accredited;
c. Representatives accredited by the Philippines to an international conference or to an international organization or one of
its organs, for the purpose of adopting the text of a treaty in that conference, organization or organ.

4 E.O. 459 (Guidelines in the Negotiation of International Agreements) sec. 3. Authority to Negotiate. Prior to any international
meeting or negotiation of a treaty or executive agreement, authorization must be secured by the lead agency from the
President through the Secretary of Foreign Affairs. The request for authorization shall be in writing, proposing the composition
of the Philippine delegation and recommending the range of positions to be taken by that delegation. In case of negotiations of
agreements, changes of national policy or those involving international arrangements of a permanent character entered into in
the name of the Government of the Republic of the Philippines, the authorization shall be in the form of Full Powers and formal
instructions. In cases of other agreements, a written authorization from the President shall be sufficient.

5 R.A. 9184 (Government Procurement Reform Act) sec. 4. Scope and Application. – This Act shall apply to the Procurement of
Infrastructure Projects, Goods, and Consulting Services, regardless of source of funds, whether local or foreign, by all branches
and instrumentalities of government, its departments, offices and agencies, including government-owned and/or -controlled
corporations and local government units, subject to the provisions of CA No. 138. Any treaty or international or executive
agreement affecting the subject matter of this Act to which the Philippine government is a signatory shall be observed.
 matter of this Act to which the Philippine government is a signatory shall be observed, such exception
does not apply to DOF and DND because the loan agreement is not an executive agreement.

4. In light of the total absence of procurement guidelines in VIFEDCA, the VIFEDCA itself, as well as its
accessory contract (the loan agreement), will necessarily refer to R.A. 9184 in the implementation of
any needed procurements.

The total absence of procurement guidelines in VIFEDCA can only, and necessarily, mean that R.A.
9184 must apply to all procurements needed in order to attain the objectives of VIFEDCA and the
objectives of all accessory agreements that would arise in support of VIFEDCA.

Why do I say that that procurement guidelines are totally wanting in VIFEDCA? The second sentence of
Art. VIII-A VIFEDCA provides that the two governments shall “agree to use the most efficient
procurement methods for the construction of the military bases”. This merely sets a standard and is
not self-executing. Nothing in the VIFEDCA provides any implementation guidance at all. If it is handed
to the implementing agencies the way that it is, incomplete, it would call for subordinate legislation
which we seek to avoid.

Neither does the VIFEDCA preclude competitive bidding as a mode of procurement, which, in certain
cases, such as large infrastructure projects, may prove to be the most efficient method of all.
Competitive bidding allows governments to obtain and evaluate proposals that provide the highest
value overall.

5. For being non-compliant with the PH Constitution and with R.A. 9184, the Construction Contract
between DND and ZTZ must be declared void ab initio.

Sec. 24 of Art. VI of the Constitution provides that all appropriation bills and bills authorizing increase
of the public debt shall originate exclusively in the House of Representatives. In this case, no bill has
been passed to authorize the increase of the public debt through the loan incurred from Weximbank.
Neither has the servicing of this loan been provided an allocation in the General Appropriations Act, in
derogation of the Constitutional requirement.

Meanwhile, Sec. 10 of R.A. 9184 requires that all procurement shall be done through Competitive
Bidding, except as provided for in Art. XVI.

Sec. 50 of Art. XVI of R.A. 9184 enumerates the very limited circumstances in which Direct Contracting
may be employed. It may be resorted to only in any of the following conditions:
a. Procurement of goods of proprietary nature, which can be obtained only from the proprietary
source, i.e. when patents, trade secrets and copyrights prohibit others from manufacturing the
same item;
b. When the Procurement of critical components from a specific manufacturer, supplier or
distributor is a condition precedent to hold a contractor to guarantee its project performance, in
accordance with the provisions of his contract; or,
c. Those sold by an exclusive dealer or manufacturer, which does not have sub-dealers selling at
lower prices and for which no suitable substitute can be obtained at more advantageous terms to
the Government.
 The construction of a military base, an infrastructure project, is not among the conditions for which
direct contracting may be validly used. The selection of a contractor for such a project may only be
made through Competitive Bidding. The Direct Contracting method employed by Westphalia, to which
DOF and DND acquiesced, is a patent violation of our government procurement law.

DND, given that ZTZ was nominated by Westphalia under a void direct contracting method, is thus not
authorized to enter into any agreement with ZTZ. The Construction Contract must be declared null and
void.

6. Prayer. For the actions of the PH Government in procuring and entering into the Construction Contract
to be declared void ab initio.