Repliblie of the Philippines, DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT DILG-NAPOLCOM Buildin SA comer Quezon Avenue, Quezon City, fred gov ph OFFICE OF THE UNDERSECRETARY FOR LOCAL GOVERNMENT | | HON. ARNEL D.C. GOMEZ Vice-Mayor City of Santa Rosa, Laguna | | Dear Vice-Mayor Gomez: | DILG Legal Opinion No. 34S. 2015 25 AUG 2015 ‘This refers to your request for this Department's opinion on the following: “1. Whether or not the City Mayor, on behalf of the City of Santa Rosa, can validly enter into th infrastructure contract with the contractor Izumo without prior authority rom the sanggunian; 2 Whether or not the City Mayor can grant an extension to, or enter into an agreement for lension with, the contractor Izumo for the completion of the City’s Sport's Complex even without authority from the sanggunian; 3. Corollary theretd, whether or not the sanggunian can validly enjoin the City Mayor from grating ‘sic) extension to, or enter into an agreement for the extension with, the contractor Izumo for the completion of the City's Sports Complex; and 4, Whether or not| the sanggunian can invalidate, rescind or terminate any previous cont Rosa and Izumo which were authority from the sanggunian. and/or agreement between the City of Santa Hered into bythe City Mayor without prior Based on your letter, on 22 March 2015, the Gity of Santa Rosa entered into an Infrastructure Contract (hereinaftery|the “Contract”) for the construction of the City’s Sports Complex with the winning-bidder Izumo Contractors, Inc. (hereinafter " ‘The said Contract was entered into fot and on behalf of the City of Santa Rosa thru Mayor Arlene, Aris allegedly without ahy authority from the SanggunianSUICUMIEU JUL QUIIPIEUUE 1a>t 27 SePYEMIUEL 2UOR LiUWEvEL, UL ZY ugUBL vier iZUlU requested for an extension of time (fr 233 days, or until 15 May 2015) to complete the Sports Complex, which was allegedly granted by the City Mayor upon recommendation of the City Engineer absent the Sanggunian’s authorization. Allegedly, upon the Sanggunian's 15 May 2015 ocular inspecticin of the Sports Complex, it ‘was found that the construction works is incomplete (about 60-70%) and would require an additional period (four (4) months) for its completion as earlier disclosed by the City Engineer and Izumo’s representative. ‘Thus, it was recommended by the Sang 1's Committee on Infrastructure, in its 18 May 2015 Report, that the City Mayor be enjoined from granting any extension to Izumo or to enter into any contract relative thereto until the Sanggunian has properly evaluated the matter. . Hence, this request. Please be advised that this Department shall defer from squarely answering the queries proffered as they are justiciable in nature and would require a determination of the legality or validity of actions of both’the Local Chief Executive and the Sangguniang Panlungsodot Sta. Rosa, Laguna based on the facts alleged in the letter and the applicable law thereto. As such, to avoid encroaching upon the prerogatives and jurisdiction of the courts this Department's discussion shall focus on generalities. ‘Section 22. Corporate Powers. xxx (c) Untess otherwise provided in this Code, no contract may be entered into by the local chief executive in behalf of the local government unit without prior ee by the sanggunian concerned. xxx Page 2 of 10 DILG Opinionfmt gay excun Gabe Ut LeeuakAet ou an NL ty MLE YUE Fn Sec. 306 of RLA. No. 7160 merely contains a definition of terms. Read in conjunction with Sec. 346, Sec. 306 authorizes the local chief executive to make disbursements of funds ini accordance with the ordinance authorizing the annual or supplemental appropriations. The “ordinance” referred to in Sec. 346 pertains to that which enacts the local government unit's budget; for which reason no further authorization from the local council is required, the ordinance functioning, as it does, as the legislative authorization of the budget. + ak To construe Sections 306 and 346 of R.A. No. 7160 as exceptions to Sec. 22(c) would render the regirement of prior sanggunian authorization superfluous, useless and irreleoant, ‘Thére would be no instance when such prior authorization would be required, as in contracts involving the disbursement of appropriated funds. Yet, this is obviously not the effect {{G.R.Na_ 175527, December 08, 2008, | Ree ae “anol Budo rferst a nani plan embodyingthe estimates of ncame and expenses For one 1} ea yea; “Apoccpriation” refers to an authorization made by brdnance, ecting the payment of goods and service rom local government funds under specied conditions ofr spec proses; fo ‘Rofo acumen ees othe uments bythe local et enews 1 eset a comprtenive ancl pa to the sanggunian concerned, “capital Outs” refers to appropriations forthe purse of foods and serces, the henits of whch extend beyond the fiscal year ‘and which add othe assets ofthe lel governmest nit concerned, including investments n pub lies such a public markets Sr sloughtechowses ‘a "Continuing Appropriation” refers to an appropriation avaible to support eigations fra spaced purpose or projets, such s those oc the construction of physical structures or for he equbsition of real propery or equipment even when these cbigatins are Incurted beyand the budget yea (0) “Current Operating Ependtures” refers to appropriations for the chase a gods and sence forthe conduct of norm government ‘operations within the fal year, induding goods ahd serdces hat wil be Used or consumed during the budget yeu, (a) “Eipected Results” refers to te senvices, product ‘or benefits that wil acrue tothe publ, measures o° physi targets, “ timated in trms of performance (0) “Fund” refers toa sum of money, o other ase epnvertie toca st aside forthe purpose of carrying ut spe atts or be accountng ety, ()“rcome” refers tol revenues an recep callecte or received forming the goss accretions of funds ofthe local government nt (]_ “Obteatonsrtersto an amount committed oe pd by the loca goverment unit for any lalact made by an accountable oficer| {oc ann hal of the loeal government unit conctined; 8 “rena eo sion pe of sls, an ee onpton pam, ns, conn Sd coalesce (W) “Receipts” refers to income realized from ome and activities of the local government or are received by it in the exercise of its corre nto ustnge ger ttn sneiecs seo pss comnedy ase ism ono ors tn chr ann cp pret comcast omey epee nd (9) “Revere” refers to income dive rm the regu system of tation enforced under author of aw or ordinance and, a5 sch * Sc. 346, Disbursements of Local Funds ond Statement of Aezounts.—Disbursements shall be made in accordance with the ordinance ‘authoring the anal or supplemental appropriations without the pric approval a he sangunianconcemed Within thy (2) doy ter ‘the cise of each mont the local acountant shal furs the sanggunian with uch franca statements a may be prescribe bythe COA Inthe cae ofthe year-end statement of acount, the peed shale ity (0) day ater he thirty fst (3s) of December ye Page 3 of 10 DILG Opiniontransactions, the prior authorization of the sanggunian concerned. The requirement was deliberately addled as.a measure of check and balance, to temper the authority of the local chief executive, and in recognition of the fact that the corporate powers of the local government unit are wielded as much by its chief executive as by its council. Horhever, as will be discussed later, the sanggunian authorization may be in the form of an appropriation ordinance passed for the year which specifically covers the projects cost or contract to he entered into by the local government unit. | 5 ‘The fact that the Province of Cebu operated under a reenacted budget in 2004 lent a complexion.to this atse which the trial court did not apprehend. Sec. 323 of R.A. No. 7160 provides that in case of a reenacted budget, “only the annual appropriations for salaiies and wages-of existing positions, statutory and contractual obligations, and essential operating expenses authorized in the answel_and supplemental budgets for the preceding year shall be deemed reenucted and disbursement of funds shall be in accordance therewith.” | It should be observed tht, as indicated by the word “only” preceding the above enumeration in Sec. 323, the items for which disbursements may be mace under a reenacted budget are exclusive. Clearly, contractual obligations which were not included in the previous year’s annual and supplemental budgets cannot be disbursed by the local government unit. It follows, too, that new contracts entered into by the local chief executive require the prior approval of the sanggunian, axx ‘This Decision, however, phould net be so construed as to proscrie 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 toa re-enacted budget, it should _be_acknotwledged that the appropriation passed by the sanggunian may validly she as the authorization required under Sec. 22(0 of RA. No. 7160. Afier all, dn appropriation is an authorization made by ordinance, directing the payntent 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. ‘The question of whether\a sarggunian authorization separate from the appropriation ordinance is required should be resolved depending on the particular circumstances of the base. Resort to the appropriation ordinance is je if there is a provision therein which ise to be incurred or the contract to be entered into. Should the appropriation ordinance, for instance, alread contain in sufficient detail the project and cost of a capital outlay such that all that the local chief executive netds to do after undergoing the requisite public bidding sto execute the conta no further authorization is require, the appropriation ordinance already being sufficient. Page 4 of 10 : DILG Opinionrojects,” “reclamation SPS Pe pn need for a covering contra wroval by requires aj the ma projects in generic terms such waterworks, drainage and set ‘as “infrastructure projects,” “inter-municipal vers control, and irrigation systems /" or.*roads and bridges;" there is an obvious t for eve specific project that in turn nian. Specific sanggunian approval riation ordinance nor encompassed 1 services and_maintenance_operatin, expenses,” [Emphasis and undersorng supplied) Clearly, the Supreme Court in the reenacted budget (as in the case of included in its discussion regularly e approval or authorization by the sanj | bove entitled case did not limit its discussion on the 2004 budget of the Province of Gebu), but also -facted budget in relation to the instances when prior is necessary and not necessary in incurring expense or entering into a contract by'the local chief executive officer in behalf of the local government unit, as in the case herein. | Applying the foregoing herein, the City Mayor is required by law to seek further approval or authorization of the Sanggunian hand, sanggunian authorization may if the same provides in sufficient detail no further authorization is required of the Code, Note that following the Supreme Co vs. Hon. Gwendolyn F. Garcia, et a No. 2010-014, dated 22 April 2010, projects described in generic terms. On the other ready be contained in the appropriations ordinance the project and the cost of the capital outlay. Hence, is the same sufficiently complies with Section 22 (c) I. Decision in Hon. Gabriel Luis Quisumbing, et al. the Commission on Audit (COA) in its Memorandum leclared that the incurrence of expenses or entering into contract by the local chief executive on behalf of the local government unit, which are not in accordance with the framework laid out in the ruling of the Supreme Court in said case, shall be disallowed in audit, as follows: “The decision of the Supreme, Court in the above case clearly indicated the instances when prior approval or authorization by the sanggunian is necessary and not necessary in incurring expense or entering into a contract by the local chief executive officer in behalf of the local government unit. This may be summarized as follows: In the case of « reenacted budget: The disbursement of funds the items enumerated under Section 323 of Republic Act (R.A.) No. 7160 (Local Government Code of 1991) does not require approval or authorization by the sanggunian. However, such list of items being exclusive, as evidenced by the use of the word “only” tinder the said provision, contractual obligations Page 5 of 10 DILG Opinionunit. SE eer tape emote dae: tig) ib “Even if the transaction is covered by the enumeration of items under Section 323 of R.A. No. 7160, new tontracts thereon to be entered into by the local chief executive require the prior approval or ‘authorization of the anggunian. 1. If the project and cos of a capital outlay is specifically described and the details thereof arf sufficiently provided, or the purchase of goods and services and mainteniince operating expense, such that all that the local chief executive needs to do is to execute the contract, no further approval or authorization by the sanggunian is required. 2. If the project is described in generic terms, such as infrastructure projects, inter-municipal waterworks, drainage anud sewerage, flood control, aud irrigatidn system project, reclamation project, or roads and bridges, « contract for every such specific project with the prior ‘approval or authorization of the sanggunian is required. 3. If the purchase of goods and services are neither specified nor encompassed within the regulgr personal services and maintenance operating expense, a specific contract for every such purchase with thie prior approval or authorization of the sanggunian is required. Accordingly, and pursuant to this Commission's exclusioe authority to promulgate accounting and auditing rules and regulations, including for the prevention and disallowance of irregular, unneeessary, excessive, extravagant, and/or unconscionable expenditure or uses of public funds and property (Section 2 [2], Article IX-D, 1987 Constitution), the incurrence of expenses or entering into contract by the|local chief executive on behalf of the local government unit, which are nol in accordance with the framework laid out in the ruling of the Supreme Court in the above case, shall be disallowed in audit.” Time Extension to. Implem: ht : Time extension to implement infraftructure contracts of LGUs is governed by the provisions of the Infrastructure Contratt itself and the pertinent provisions of Republic Act, No. 9184 and its Implementing Rules find Regulations as well as other pertinent issuances of the Government Procurement Polidy Board (crPs). Under the GPPB's Manual of Procedtire for the Procurement of Infrastructure Projects for Local Government Units (hereinafter, the “Manual”), the conditions for contract extension are as follows Page 6 of 10 DILG Opiniontouttedeny facgss es) 1. There are additional works or pther special circumstances? that would entitle the contractor to an extension of its contract; ‘The affected activities fall within the critical path of the Project Evaluation Review ‘Technique (PERT)/Critical Path Method (CPM) network; The contractor shall have notifjed the LGU that the amount of additional work or the occurrence of the special cifeumstances merits the extension of its contract, and that it had done so before the efpiration of the contract within thirty (30) calendar days after the start of the additional work or of the special circumstance that has arisen; . ‘The LGU, after due investigition, finds the request justified, determines the appropriate extension period, and approves the request of the contractor for a contract extension. ‘The Manual also provides that no cont fact extension must be given toa contractor due to: L. Ordinary unfavourable weather conditions, in that stich weather conditions had already been taken into consideration and anticipated in the computation of the unworkable days; and Inexcusable failure or negligence of contractor to provide the required equipment, supplies or materials. Pursuant to the Manual, the request fr extension is handled by the LGU’s Engineering Office/Project Management Office (PMO) or end-user who shall either approve or disapprove the same following the progedure outlined below: 7 1 ‘The contractor must submit a Written request to the Engineering Office/PMO or end-user unit for an extension of the completion or construction period, citing the reason/s for such delay. 5 Special circumstances to be considered for eonfract tine ektenston: 1 3 Bera ‘Major ealamitiessuch as exceptionally {lestructive typhoons, floods and earthquakes, and epidemics; 'Non-delivery on time of materials, working drawings, or written information to be furnished by the LGU: Non-acquisition of permit to enter private properties within the right-of-way resulting in complete ride or nstonide shortage of fonsrution materials as certified by the DT Serer, Region-wide or nationwide general abr kes, a certiied by the DOLE Secretary: and Sri pce und order problems as cerifed by the DILGe or AFP Provincial Commande ral approved by the DND Secretary. (Mama! of Progedures fr the Procurement of Infasretare Project for Local Government Uns) ° Page 7 of 10 DILG Opinionthe request for extension. If the extension is granted, contractor will be so informe If, however, the request for or end-user unit shall, inform that the said notice or commu time from receipt of the reque: damages in accordance with outlined in the Manual. Clearly, requests for extension of time not require the prior auithorizati implementation of a prior obligation the Sanggunian on LGU Contracts Anent the applicable method for ass Code of the Philippines does not pro an unenforceable contract is capable If the LCE entered into a contract wi the expense to be incurred or contrac in the appropriations ordinance, th itfect of the Absence of Authority es Te HUZINECLNY UuNLErL MU) OF CHUTUSEL MHL 9taHE EXEL appLUE UF UidapptUve je liquidated damages shall not be imposed and the inwriting, | 1¢ extension is denied, the Engineering Office/PMO e contractor in writing of such denial, and ensure ‘ication is received by the latter within a reasonable for extension. The LGU then imposes the liquidated {the provisions of the contract and the procedures to implement infrastructure projects, in general, does in of the sanggunian as it merely extends the nntered into by the LGU. 4 44 ‘iling an unenforceable contract, note that the Civil jde a method for assailing the same, but provides that f ratification as discussed below: ithout.the prior authorization of the senggunian and to be entered into is only described in generic terms same is considered unenforceable unless ratified expressly or impliedly by the Pea Section 1403 in relation to Section 1317, both of the Civil Code of the PI “Section 1403, The foll ati (1) Those entered into been given no auth “Section 1317. No one| being authorized by the latter, ippines, viz: wing contracts are unenforceable, unless they Vag in the name of another person by one who has rity or legal representation, or who has acted Ny eee net a] ie rermetey erarrere ter Iruatless he has by law or tight to represent him Page 8 of 10 ILG Opinionunenforceable, unless it is ra on on whose behalf it has been executed, before itis reooked by the other contracting party.” [Underscoring ours] The ratification of contracts is expldined in Yasuma vs. Heirs of Cecilio S. de Villa, et al (G.R. No. 150350, 22 August 2006), as follows:. “Ratification means that the principal voluntarily adopts, confirms and gives sanction to some unauthorized act of its agent on its behalf. It is this voluntary choice, knowingly nade, which amounts to a ratification of what was theretofore unauthorized and Becomes the authorized act of the party so making the ratification. ‘The substance of the doctrine is confirmation after conduct, amounting to a substitute for d prior authority. Ratification can be made either expressly or impliedly. Implied ratification may take various forms — like silence or acquiescente, acts showing, approval or adoption. of the act, or acceptance and retention of benefits flowing therefro In Gity of Quezon vs. Lexber Incorporated (G.R. No. 141616, 15 March 2001), the Supreme Court recognized the LGU’s constructive ratification of contracts through subsequent acts showing approval or adoption of the contract and aéceptance of benefits therefrom, viz: “We are not dissuaded by petitioner's arguments that there can be no ratification due to the absence of an explicit or tacit approval of the second negotiated contract. At the oulset, the issue raised by petitioner that the subject contract is null and void ab initio, and therefore not capable of ratification, has been laid to rest by the inevitable conclusion that the said contract is valid and binding. Consequently, ratification of the subject contract is not necessary. Be that as it may, it gannot be denied that there was constructive ratification on the part of petitioner. The records show that upon completion of the infrastructure and other facilities, petitioner, albeit still under the alministration of Mayor Brigido Simon, Jr., started to dump garbage in the premises. In fact, ou December 11, 1991, & Notice to Commence Work, implementing the contract for the maintenance of the sanitary latdfill starting December 15, 1991 to Decertber 31, 1995, was issued by said Mayor, as recommended by Project Manager Rene R. Lazaro and City Engineer Alfredo Macapugay. The records also reveal that petitioner issued Dishursement Vouchers of various amounts covering the period between-March 1, 1992 to April 30, 1992 for the seroices rendered by the|Mud Regal Group, Incorporated to haul garbage to the sanitary landfill. The shid disbursement vouchers were passed in audit and duly approved and paid by petitioner. These are facts and circumstances on record which led the trial court, the apipellate court, and this Court to affirm the conclusion that petitioner had actually ratified the subject contract.” | 8 Page 9 of 10 DILG OpinionWe nupe W Mave eHuyuteHeN you Un) due KLegoMIE. AUSTERE A. PANADERO Undersecretary ve [Baeee| co: RD RENATO L. BRION ui DILG Region IV-A 4 ‘Barangay Mapagong, Calamba City, Laguna Page 10 of 10 DILG Opinion