Privatization and Management Office

Overview
Basically, Privatization and Management Office (PMO) is the privatization arm of the
government. PMO is an attached agency under the Department of Finance.

What is Privatization?
Privatization describes the process by which a piece of property or business goes from being
government owned to being privately owned. The government or public sector gets paid for selling
its assets.

When a publicly-owned asset or facility is privatized, the ownership is permanently

transferred to the private sector together with the concomitant attributes thereof like operation and
control. This asset or facility is viewed as better managed or owned by the private sector.

The Philippine Privatization Program is governed by Proclamation No. 50 (Proclaiming and

Launching a Program for the Expeditious Disposition and Privatization of Certain Government
Corporations and/or the Assets Thereof, and Creating the Committee on Privatization and the Asset
Privatization Trust), as amended, and Executive Order No. 323, series of 2000, (Constituting an Inter-
Agency Privatization Council and Creating a Privatization and Management Office Under the
Department of Finance for the Continuing Privatization of Government Assets and Corporations).

The Privatization Council (PrC) serves as the central agency of the government responsible
for oversight of its privatization program, with Privatization and Management Office (PMO) as the
one in charge for the implementation of actual marketing or disposition program of government
corporations, assets and idle properties of the government.
History of the PMO
In 1986, right after the martial law regime of the Marcos Administration, then President
Corazon C. Aquino, government divested itself from non-essential business-related assets acquired
during the Marcos era. It enacted Presidential Proclamation No. 50 in December 1986, which
created the Asset Privatization Trust (APT) and the Committee on Privatization (COP) to handle this
move.

Under Proclamation No. 50, the State declared it a policy to promote privatization through
an orderly, coordinated and efficient program for the prompt disposition of the large number of

Privatization and Management Office 1|Page

non-performing assets of the government financial institutions, and certain government-owned or
controlled corporations which have been found unnecessary or inappropriate for the government
sector to maintain.

The creation of APT was seen by the state as necessary, expedient and advantageous to
centralize the disposition and privatization process in a public trust entity which shall on its own and,
where necessary, by engaging the services of qualified professionals, institutions, syndicates, and
consortia of institutions in the private sector, whether domestic or foreign, undertake the
disposition.

Initially, from the date of Proclamation No. 50, APT and COP shall exist for a period of five
years. In January 17, 1992, Republic Act No. 7181 prolonged the term of APT and COP from
December 8, 1991 to August 31, 1992. The same law granted an option to the President of the
Philippines to extend for not more than sixteen (16) months the life of APT and COP.

Republic Act No. 7181 dated December 23, 1993 extended the life of APT and COP from
December 31, 1993 to June 30, 1995. Congress made further extension to APT and COP from July 1,
1995 to December 31, 1999 by passing Republic Act No. 7886 in February 20, 1995.

The final holdover was Republic Act No. 8758 dated December 28, 1999, from
January 01, 2000 to December 31, 2000. The same law also mandated that upon the expiration of
APT’s corporate life, all its powers, functions, duties and responsibilities, all properties, real or
personal assets, equipment and records, as well as its obligations and liabilities shall devolve upon
the National Government.

The PMO is the successor agency of the APT. Upon the expiration of APT’s term on
December 31, 2000, Executive Order No. 323 was issued by then President Joseph Ejercito Estrada
wherein the government restated its privatization policy to promote an orderly, coordinated and
efficient privatization of remaining government corporations, assets, activities and idle properties
which have been identified as unnecessary and inappropriate for the government sector to
maintain.

Through Executive Order 471 dated November 17, 2005, then President Gloria Macapagal
Arroyo has ordered the merger of the Board of Liquidators (BOL) and the PMO to expedite the

Privatization and Management Office 2|Page

liquidation of assets and properties of abolished agencies. The merger was intended to improve the
efficiency of the privatization program by removing duplicative functions in asset disposition. The
PMO is the surviving entity in the merger. As such, the administrative policies and operational
guidelines of the PMO shall govern all transactions and dispositions of the assets of the BOL.

Under Memorandum Order No. 29 signed on September 25, 2018, President Rodrigo R.
Duterte has abolished the Partido Development Administration (PDA), which was established in
1994 to accelerate the development of 10 municipalities, comprising the 4th District of the Province
of Camarines Sur. The PMO is tasked to dispose of the assets of the PDA to settle its outstanding
liabilities in accordance with applicable laws, rules, and regulation.

Privatization and Management Office 3|Page

Organizational Structure

The Privatization Council (PrC), referred to as the “Council”, oversees the privatization
program of the Government. As such, it approves all proposed privatization plans prepared by PMO,
and provides the final approval for the proposed price and buyer for the assets.

The Council is composed of the Secretary of Finance as Chairman, with the Secretaries of
Budget and Management, Trade and Industry, National Economic and Development Authority and
Justice as members. The National Treasurer and the Chairman of the Presidential Commission on
Good Government shall be non-voting members of the Council.

The Technical Committee, which endorses privatization plan and price for approval by the
Council, is composed of the representative of the Department of Finance as Chairman, and
representatives of the Department of Justice, Department of Budget and Management, Department
of Trade and Industry, National Economic Development Authority, Bureau of the Treasury and the
Presidential Commission on Good Government, as members.

The PMO is headed by a Chief Privatization Officer (CPO) who is appointed by the President
of the Philippines upon recommendation of the Secretary of Finance.

Privatization and Management Office 4|Page

 The Chief Privatization Officer is assisted by four (4) Deputy Privatization Officers who shall
be in charge of specific operations and undertakings as directed by the CPO. These Deputy
Privatization Officers shall be appointed by the Secretary of Finance upon recommendation by the
Chief Privatization Officer.

Privatization and Management Office 5|Page

Mandate, Powers and Functions

Privatization Council

Under Section 3, Article II of Executive Order 323, series of 2000, the PrC shall direct,
supervise and coordinate all privatization and similar disposition efforts undertaken by the
Government in order to promote private sector participation in developing the Philippine economy
and to generate maximum cash recovery for the National Government.

In the pursuit of these objectives, the Council shall assume all the powers, functions, duties
and responsibilities, all properties, real or personal assets, equipment and records, as well as the
obligations and liabilities previously held or exercised by the COP under Proclamation No. 50, as
amended, which have been devolved to the National Government pursuant to Republic Act No.
8758.

Under Section 5, Article II of Proclamation 50, as amended, the following are the powers and
functions previously held by COP and now assumed by PrC:

(1) To identify to the President of the Philippines, and arrange for transfer to the National
Government and/or to the Trust and the subsequent divestment to the private sector of (a)
such non-performing assets as may be identified by the Committee, and approved by the
President, for transfer from the government banks for disposal by the Trust or the
government banks, and (b) such government corporations, whether parent or subsidiary,
and/or such of their assets, as may have been recommended by the Committee for
disposition, and approved by the President; Provided, that no such identification,
recommendation, or approval shall be necessary where a parent corporation decides on its
own to divest of, in whole or in part, or liquidate a subsidiary corporation organized under
the Corporation Code; Provided, further, that any such independent disposition shall be
undertaken with the prior approval of the Committee and in accordance with the general
disposition guidelines as the Committee may provide; Provided, finally, that in every case
the sale or disposition shall be approved by the Committee with respect to the buyer and
price only;

Privatization and Management Office 6|Page

(2) To determine which of such assets shall be transferred to the Trust or referred to other
government institutions, whether financial or otherwise, for disposition and, pending
disposition, for conservation and management;

(3) To establish mandatory as well as indicative guidelines for the conservation, rehabilitation
and disposition of such assets, whether by the Trust or any other government institution;

(4) To approve or disapprove, on behalf of the National Government and without need of any
further approval or other action from any other government institution or agency, the sale
or disposition of such assets, in each case on terms and to purchasers recommended by the
Trust or the government institution, as the case may be, to whom the disposition of such
assets may have been delegated; Provided that, the Committee shall not itself undertake the
marketing of any such assets, or participate in the negotiation of their sale;

(5) In its discretion, to approve or disapprove, subject to the availability of funds for such
purpose, the rehabilitation of assets pending disposition by the Trust or any other
government agency authorized by the Committee, or the Trust with the approval of the
Committee; Provided that, the budget for each rehabilitation project shall be likewise
subject to prior approval by the Committee;

(6) To exercise on behalf of the National Government rights of ownership with respect to such
assets, including the right to vote, whether directly or through duly authorized nominees,
shares of stock held in the name of the National Government, and which have not been
transferred to the Trust;

(7) To issue necessary guidelines to all government agencies to govern ongoing negotiations on
the disposal of government corporate assets;

(8) To approve the organization and financial requirements of the Trust, including its annual
budgets for operations, conservation, and administration of assets entrusted under its care;

(9) To monitor and review as necessary from time to time the entire privatization and
divestment program, including those which are being undertaken by parent government
corporations, and the status of its implementation; and

Privatization and Management Office 7|Page

 (10) To appoint, transfer, remove, and fix the remuneration of personnel of the Committee;
provided that the Committee shall hire its own personnel only if deemed absolutely
necessary for the discharge of its responsibilities and, as far as practicable, it shall avail itself
of the services of the personnel seconded or detailed from other government offices.

Privatization and Management Office

The PMO is mandated as:

(a) the marketing arm of the Government with respect to transferred-assets, government
corporations and other properties assigned to it by the Privatization Council (PrC) for
disposition, pursuant to Executive Order (EO) No. 323 (200); and

(b) the disposition entity of properties transferred to the Republic under the Philippine Property
Act of 1946, Republic Act No. 8, and EO 99 (1947), pursuant to EO 471 (2005)

Under Section 2, Article III of Executive Order 323, series of 2000, in addition to the powers,
duties and functions under Proclamation No. 50, as amended, the Office shall be empowered:

(1) To implement the actual marketing/disposition program for government corporations, assets
and idle properties after securing prior approval of the Council;

(2) To execute and deliver, on behalf of the National Government, the deeds of sale, contracts
and other instruments as may be necessary or appropriate to convey title to such assets;

(3) To take title to and possession and conserve assets transferred to it;

(4) To engage external expertise as necessary in the fulfillment of its tasks;

(5) To adopt internal rules and regulations; and

(6) To submit periodic reports to the Council on the status of the disposition program.

Privatization and Management Office 8|Page

 Under Section 12, Article III of Proclamation 50, as amended, the following are the powers
and functions previously held by ATP and now assumed by PMO:

(1) To formulate and, after approval by the Committee, implement a program for the disposition
of assets transferred to it under this Proclamation, such program to be completed within a
period of five years from the date of the issuance of this Proclamation;

(2) Subject to its having received the prior written approval of the Committee to sell such asset
at a price and on terms of payment and to a party disclosed to the Committee, to sell each
asset referred to it by the Committee to such party and on such terms as in its discretion are
in the best interest of the National Government, and for such purpose to execute and
deliver, on behalf and in the name of the National Government, such deeds of sale,
contracts and other instruments as may be necessary or appropriate to convey title to such
assets;

(3) To take title to and possession of and to take such steps as may be necessary to conserve
assets transferred to it by the Committee, including, without limitation, to oversee the
management and operation of corporations or other businesses constituting such assets,
and to file suits and institute proceedings on behalf of and in the name of National
Government for the recovery and protection of such assets;

(4) Subject to the prior approval of the Committee, to undertake the rehabilitation of such assets
in instances where such rehabilitation is necessary to conserve the value of such assets or
permit their sale.

(5) To engage such external expertise as may be necessary for it to fulfill its task;

(6) To lease or own real and personal property to the extent required or entailed by its
functions; to borrow money and incur such liabilities as may be reasonably necessary to
permit it to carry out the responsibilities imposed upon it under this Proclamation; to
receive and collect interest, rent and other income from the corporations and assets held by
it and to exercise in behalf of the National Government and to the extent authorized by the
Committee, in respect of such corporations and assets, all rights, powers and privileges of

Privatization and Management Office 9|Page

 ownership including the ability to compromise and release claims or settle liabilities, and
otherwise to do and perform any and all acts that may be necessary proper to carry out the
purposes of this Proclamation: Provided, however, that any borrowing by the Trust shall be
subject to the prior approval by the majority vote of the members of the Committee;

(7) To adopt its internal rules and regulations, to adopt, alter and use a seal which shall be
judicially noticed; to enter into contracts; to sue and be sued; and

(8) To submit periodic reports to the Committee on the status of the disposition program under
its responsibility, and such other reports as may be required by the Committee.

EO 323 provides that all receipts from the sale of assets of PMO, except portions thereof for
reimbursable custodianship and/or operational expenses, are remitted to the National Treasury then
apportions the remittances made by PMO wherein sixty percent (60%) goes to the special account of
the Agrarian Reform Fund and forty percent (40%) goes to the General Fund.

 Chief Privatization Officer

Under Section 3, Article III of Executive Order 323, series of 2000, the CPO shall have the
following powers and functions:

1. To enter into management and other contracts as may be appropriate; and

2. To develop the staffing requirements of the Office, and for this purpose, appoint,
remove and fix the remuneration of the personnel of the Office: Provided, That as far
as practicable, the CPO should rely on secondment from government entities undertaking
related functions, and or qualified external expertise in an advisory capacity and on a
contractual basis.

 Office of the Chief Privatization Officer (OCPO)

The Office of the Chief Privatization Officer is responsible for leading the organization in the
performance of its mandate. The OCPO exercises planning, monitoring, and controlling the

Privatization and Management Office 10 | P a g e

operations of PMO. Corollary support functions such as information technology is provided by the
office as part of its overall management function.

 Office of the Deputy Privatization Officer (ODPO) for Marketing

The Marketing Group handles the frontline group which initiates, plan and implement the
disposition of the assets. The operational strategy is the adoption of an account management
concept in managing the disposition process. The Marketing Group is manned by Account Officers
who are assigned a group of assets to dispose. The Account Officer is responsible for coordinating
and orchestrating the activities leading to the disposal of the assets to the best interest and terms of
conditions advantageous to the government. The Account Officer should be on top of all stages of
the disposal process.

The Marketing Group consists of three (3) divisions, namely: (1) Marketing Division
IInstitutional, (2) Marketing Division II-Mining, Equity and Special Assets, and (3)Marketing Division
III–Retail. The Marketing Divisions are differentiated by the nature of the market for asset disposal.
All assets that would cater to institutional and high value individuals are handled by Marketing
Division I. Marketing Division II handles financial form assets or financial claims and equity or shares
of stock as well as special assets. Assets catering to individuals involving small lots and value are
handled by Marketing Division III.

 Office of the Deputy Privatization Officer (ODPO) for Asset Management

The Asset Management Group is tasked with supporting the Marketing Group by providing
complete and accurate information and custodianship services of all assets to preserve and/or
enhance the value of the assets until the assets are finally disposed. The Asset Management Group
consists of two (2) divisions, namely: (1) Custodianship Division, and (2) Disposition Support Services
Division.

The Custodianship Division is responsible for asset inventory, security, maintenance and
enhancement of the assets. The custodianship functions start with the proper and orderly receipt of
an asset assigned by PrC to the PMO, on to a detailed inventory of the assets contained therein and
locating and evaluating its status by way of regular and continuing property inspections. Also within
its scope of responsibility is making provisions to secure assets to avoid losses and/or damage while

Privatization and Management Office 11 | P a g e

in PMO custody and maintaining the central records of asset folders and database and safekeeping
of original documents.
The Disposition Support Division is responsible for ensuring property appraisals are
current to ascertain viability for disposition.

 Office of the Deputy Privatization Officer (ODPO) for Legal Services

Legal Services has a major function in the disposal process considering that many assets have
legal issues. It is tasked to pursue resolution of legal issues brought by contending parties to the
PMO or to the courts and other quasi-judicial agencies by monitoring the handling of cases by the
Office of the Solicitor General (OSG), or direct handling/management of issues. ODPO also provides
internal legal services to the rest of the organization which may involve due diligence on legal issues
of asset/s, legal opinions on matters referred, administrative investigations, and review or advice on
other legal matters.

 Office of the Deputy Privatization Officer (ODPO) for Administrative, Financial and
Management Services

The Financial Management Division (FMD) takes care of preparation of financial reports,
preparation of the budget and monitoring of expenses against budget, maintaining as well as
updating collections and remittances of sales and other proceeds of disposition to the National
Treasury. FMD also provides extensive support for the submission of required reports and
documentation to the various government agencies, primarily the Department of Finance, the
Senate, and the House of Representatives, requiring information from PMO.

Administrative Division under AFMS is responsible for ensuring the implementation of

human resource processes including timely payroll disbursements, administration of other employee
benefits and personnel policies and development of employees through performance evaluation and
training. The General Office Services under AFMS takes care of the availability of office supplies,
office equipment and the like, as well as coordination and supervision of other support services that
are engaged through outsourcing (i.e. janitors, messengers, drivers, skilled workers, etc.) to ensure
smooth operations of the different divisions and units of the organization.

Privatization and Management Office 12 | P a g e

Privatization Process Flow*

Privatization and Management Office 13 | P a g e

Privatization Flow

Part I. Determination and Selection of Asset for Privatization

a. Review and evaluation of legal issues that may affect the disposition of asset;

b. Procurement of appraisal services for the valuation of asset; and

The Marketing Department requests for an appraisal of the asset to be conducted by an

independent third party appraiser duly commissioned through a bidding process administered
by the Asset Management, Appraisal and Insurance Department. The appraisal company to
which the appraisal project is awarded is provided by the Marketing Department with a detailed
listing of the properties to be appraised, based on the latest inventory of the asset conducted by
the Property Maintenance and Security Department (PMSD).

Privatization and Management Office 14 | P a g e

c. Consultation with other agencies of the plan to dispose particular asset to clear up other issues
(e.g. DOF, DAR, DENR, MGB, PMDC, BIR, PDIC, NDC, MMDA, DPWH, GCG, GOCC, OP).

Illustrative Case: Republic v. Sunvar Realty Development Corporation

Facts:

Petitioners Republic of the Philippines (Republic) and National Power Corporation (NPC) are
registered co-owners of several parcels of land located along Pasong Tamo Extension and Vito
Cruz in Makati City, and covered by four Transfer Certificates of Title (TCTs). The main subject
matter of the instant Petition is one of these four parcels of land covered by TCT No. 458365,
with an area of approximately 22,294 square meters (hereinafter, the subject property). Eighty
percent (80%) of the subject property is owned by petitioner Republic, while the remaining
twenty percent (20%) belongs to petitioner NPC. Petitioners are being represented in this case
by the Privatization Management Office (PMO), which is the agency tasked with the
administration and disposal of government assets. Meanwhile, respondent Sunvar Realty
Development Corporation (Sunvar) occupied the subject property by virtue of sublease
agreements, which had in the meantime expired.

On 26 December 1977, petitioners leased the four parcels of land, including the subject
property, to the Technology Resource Center Foundation, Inc., (TRCFI) for a period of 25 years
beginning 01 January 1978 and ending on 31 December 2002. Under the Contract of Lease,
petitioners granted TRCFI the right to sublease any portion of the four parcels of land.

Exercising its right, TRCFI consequently subleased a majority of the subject property to
respondent Sunvar through several sublease agreements. Although these agreements
commenced on different dates, all of them contained common provisions on the terms of the
sublease and were altogether set to expire on 31 December 2002.

In 1987, following a reorganization of the government, TRCFI was dissolved. In its stead, the
Philippine Development Alternatives Foundation (PDAF) was created, assuming the functions
previously performed by TRCFI.

Privatization and Management Office 15 | P a g e

On 31 December 2002, the main lease contract with PDAF, as well as its sublease agreements
with respondent Sunvar, all expired. Hence, petitioners recovered from PDAF all the rights over
the subject property and the three other parcels of land. Thereafter, petitioner Republic
transferred the subject property to the PMO for disposition. Nevertheless, respondent Sunvar
continued to occupy the property.

On 22 February 2008, or six years after the main lease contract expired, petitioner Republic,
through the Office of the Solicitor General (OSG), advised respondent Sunvar to completely
vacate the subject property within thirty (30) days. The latter duly received the Notice from the
OSG through registered mail, but failed to vacate and remained on the property.

On 03 February 2009, respondent Sunvar received from respondent OSG a final notice to vacate
within 15 days. When the period lapsed, respondent Sunvar again refused to vacate the property
and continued to occupy it.

On 02 April 2009, the PMO issued an Inspection and Appraisal Report to determine the fair
rental value of the subject property and petitioners’ lost income – a loss arising from the refusal
of respondent Sunvar to vacate the property after the expiration of the main lease contract and
sublease agreements. Using the market comparison approach, the PMO determined that the fair
rental value of the subject property was ₱ 10,364,000 per month, and that respondent Sunvar
owed petitioners a total of ₱ 630,123,700 from 01 January 2002 to 31 March 2009.

On 23 July 2009, petitioners filed the Complaint dated 26 May 2009 for unlawful detainer with
the Metropolitan Trial Court (MeTC) of Makati City. Petitioners prayed that respondent Sunvar
be ordered to vacate the subject property and to pay damages for the illegal use and lost income
owing to them.

Respondent Sunvar moved to dismiss the Complaint and argued that the allegations of
petitioners in the Complaint did not constitute an action for unlawful detainer, since no privity of
contract existed between them. In the alternative, it also argued that petitioners’ cause of action
was more properly an accion publiciana, which fell within the jurisdiction of the RTC, and not the
MeTC, considering that the petitioners’ supposed dispossession of the subject property by
respondent had already lasted for more than one year.

Privatization and Management Office 16 | P a g e

 The RTC directed the MeTC to dismiss the complaint for unlawful detainer for lack of jurisdiction.
The RTC reasoned that the one-year period for the filing of an unlawful detainer case was
reckoned from the expiration of the main lease contract and the sublease agreements on 31
December 2002. Petitioners should have then filed an accion publiciana with the RTC in 2009,
instead of an unlawful detainer suit.

Issue:

Whether or not the RTC is correct in dismissing the complaint for unlawful detainer

Ruling:

No, the RTC erred in dismissing the complaint. The one-year period should be counted from the
final demand made on 03 February 2009. The last demand for petitioners to vacate is the
reckoning period for determining the one-year period in an action for unlawful detainer. Such
one year period should be counted from the date of plaintiff’s last demand on defendant to
vacate the real property, because only upon the lapse of that period does the possession
become unlawful.

Update on the case:

Privatization and Management Office 17 | P a g e

Part II. Privatization Plan

a. Preparation and submission of privatization plan to the Chief Privatization Officer (CPO);

The Marketing Department prepares a Proposal (“Privatization Plan”) for disposition, which
contains a brief background on the asset to be disposed, previous and latest appraisal values,
the recommended mode of disposition, pricing and other information. Draft copies of the Asset
Specific Bidding Rules (ASBR), Asset Specific Bidding Form (ASBF), or Specific Rule on Negotiated
Sale (SRNS) and Negotiated Sale Offer Form (NSOF) and ad placement are annexed to the
Proposal. The Proposal is signed by the Deputy Privatization Officer (DPO) for Marketing, or in
his/her absence, the Department Manager (DM) for Marketing. The Proposal is then submitted
to the Chief Privatization Officer (CPO), for consideration and approval.

If the proposal is not approved, the CPO advises the Marketing Department on the
recommended course of action and/or modifications to the Proposal.

b. Endorsement of privatization plan to Privatization Council (PrC);

If the privatization plan is approved by the CPO, it is endorsed to the PrC for approval.

Forms of disposition involve public bidding, government to government, lease, offer for sale,
compromise settlement and other modes of privatization or disposition as may be approved by
the PrC.

Under Executive Order 298 dated January 30, 1996, the APT is authorized to enter into the
following alternative and/or intermediate modes of privatization:

a. Joint Venture – the APT arranges for the APT-held asset to carry on a specific business
enterprise with another person/entity for their mutual benefit, using their combined funds,
land resources, facilities and services, either through a joint venture corporation or as
separate personalities. Thereafter, the joint venture project is privatized or referred to the
proper government agency for implementation in accordance with Section 23, paragraph 2
of Proclamation No. 50 (s. 1986)

Privatization and Management Office 18 | P a g e

 b. B-O-T Schemes – the APT finds proponents who will undertake infrastructure and/or
development projects using the APT-held asset, under any of the arrangements provided for
under Republic Act No. 6957, as amended, which project is then referred to the proper
government agency for implementation in accordance with Section 23, paragraph 2 of
Proclamation No. 50 (s. 1986)

c. Management Contract – a corporation undertakes to manage or operate all or substantially

all of the business of an APT-held asset. This contract may also be designated as a service
contract or operating agreement;

d. Lease-Purchase – the lessee of an APT-held asset would have the right to purchase the same.
The price and terms of the purchase must be set forth for the option to be valid, which
option may run the length of the lease period; and

e. Securitization – the form of the APT-held asset is changed or modified, such as from physical
form to equities or certificate of participation, subject to Section 2 of Republic Act No. 7886.

c. Approval of privatization plan and proposed minimum price.

Any such disposition shall be undertaken with the prior approval of the PrC and in accordance
with the general disposition guidelines as the PrC may provide.

Illustrative Case: Jose R. Moreno v. Privatization Management Office

Facts:

Plaintiff is the owner of the Ground Floor, the 7th Floor and the Penthouse of the J. Moreno
Building and the lot on which it stands. Defendant is the owner of the 2nd, 3rd, 4th, 5th and 6th
floors of the building, the subject-matter of this suit.

On February 13, 1993, the defendant called for a conference for the purpose of discussing
plaintiff’s right of first refusal over the floors of the building owned by defendant. At said

Privatization and Management Office 19 | P a g e

 meeting, defendant informed plaintiff that the proposed purchase price for said floors was
Twenty One Million Pesos (₱21,000,000.00).

On February 22, 1993, defendant, in a letter signed by its Trustee, Juan W. Moran, informed
plaintiff thru Atty. Jose Feria, Jr., that the Board of Trustees (BOT) of Asset Privation Trust (APT)
"is in agreement that Mr. Jose Moreno, Jr. has the right of first refusal" and requested plaintiff to
deposit 10% of the "suggested indicative price" of ₱21.0 million on or before February 26, 1993.

Plaintiff paid the ₱2.1 million on February 26, 1993. Then on March 12, 1993, defendant wrote
plaintiff that its Legal Department has questioned the basis for the computation of the indicative
price for the said floors.

On April 2, 1993, defendant wrote plaintiff that the APT BOT has "tentatively agreed on a
settlement price of ₱42,274,702.17" for the said floors.

Issue:

Whether or not there was a perfected contract of sale over the subject floors at the price of
₱21,000,000.00

Ruling:

No, the letter of February 22, 1993 and the surrounding circumstances clearly show that the
parties are not past the stage of negotiation, hence there could not have been a perfected
contract of sale.

A contract of sale is perfected at the moment there is a meeting of minds upon the thing which
is the object of the contract and upon the price. Consent is manifested by the meeting of the
offer and the acceptance upon the thing and the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute.

The letter clearly states that ₱21,000,000.00 is merely a "suggested indicative price" of the
subject floors as it was yet to be approved by the Board of Trustees. Before the Board could
confirm the suggested indicative price, the Committee on Privatization must first approve the

Privatization and Management Office 20 | P a g e

 terms of the sale or disposition. The imposition of this suspensive condition finds basis under
Proclamation No. 50, which vests in the Committee the power to approve the sale of
government assets, including the price of the asset to be sold.

Part III. Public Bidding

a. Notification to Commission on Audit (COA) of the sale/ disposition (if necessary, a Special Audit by
the COA of asset for disposition is conducted);

The Marketing Department formally notifies the Commission on Audit (COA) of the schedule of
bidding and furnishes the latter copies of the relevant bidding documents at least ten (10) days
before the bidding date.

The PMO Internal Audit Service (IAS) is likewise formally notified of the scheduled bidding and
furnished copies of the bidding documents.

b. Publication of Invitation to Bid/Offer for Sale;

The Marketing Department proceeds with the implementation of the approved Proposal by
publishing an Invitation to Bid in national newspapers of general circulation for three (3)
consecutive days. However, as the Marketing Department deems necessary, the Invitation to Bid
may also be published in a foreign publication, in a local periodical (e.g., regional, provincial
newspaper) or on the Internet.

The minimum bid price for the properties are prescribed in the notice.

The prices are payable in cash or in the form of a bank manager’s check, and exclusive of any
and all taxes. All taxes, fees and expenses pursuant to or in relation to the sale of the properties
shall be borne by the buyer.

A copy of the Invitation to Bid is also posted in the PMO’s website.

Privatization and Management Office 21 | P a g e

c. Issuance/Releases of Bid Documents;

The Marketing Department makes available the offer documents (ASBR & ASBF) or (SRNS &
NSOF) and the Asset Specific Catalogue (ASC) or Information Memorandum to interested parties
for a nominal fee.

The ASBR sets forth the terms and conditions under which an award will be given. A bidder wins
only after satisfying and complying with all the terms and conditions of the ASBR, including
matching the indicative price.

d. Due diligence period;

Prospective bidders are allowed to undertake a due diligence study or conduct ocular
inspections of the asset for sale.

Whether or not the bidder conducts due diligence is its business decision.

e. Pre-bid Conference;

The objective of pre-bid conference is to explain the details of the bidding documents to
interested bidders. Prospective bidders are permitted to request clarifications on the invitation
for bids or request for proposals by a stipulated date, and the pre-bid meeting is held within that
period.

The details of pre-bid conference are included in the notice of Invitation to Bid.

f. Request for Clarification/Supplemental Bid Bulletin;

Requests for clarification(s) on any part of the bidding documents or for an interpretation may
be made by eligible bidders provided that these are in writing and are submitted to the
Marketing Department before the deadline for the submission and receipt of bids. In this case,
the Marketing Department shall issue its response by issuing a supplemental/bid bulletin, to be

Privatization and Management Office 22 | P a g e

 made available to all those who have properly secured the bidding documents before the
deadline for the submission and receipt of bids.

The Marketing Department may, at its own initiative, also issue supplemental/bid bulletins for
purposes of clarifying or modifying any provision of the bidding documents.

A supplemental/bid bulletin must contain a brief but comprehensive and accurate summary of
the issue or issues that it wishes to address. If it was an eligible bidder that raised the issue
addressed by the bulletin, then it ought to contain a summary of that bidder’s request for
clarification and/or interpretation, without identifying the eligible bidder.

Bidders who have submitted bids before a supplemental/bid bulletin is issued have to be
informed in writing and allowed to modify or withdraw their respective bids.

g. Public Bidding/Offer for Sale (Eligibility Check, Submission and Opening of Bids);

The Marketing Department conducts the public bidding at least ten (10) days from the first day
of publication.

The bidding is declared successful if at least two (2) qualified bidders submit offers at the
specified date and time. Bidders must comply with the requirements provided in the ASBR, and
shall be required to submit a bid deposit, which is usually equivalent to at least 10 percent of the
bid price indicated in the ASBR.

For Offers for Negotiated Sale, one offeror is acceptable. After one failed bid, a negotiated sale
may be pursued.

Immediately after the bidding, the Marketing Department will evaluate the highest qualified
financial bid and prepares a recommendation to the CPO.

In the event of a failed bidding, the Marketing Department prepares a report to the CPO and
recommends a re-bidding of the property, or a negotiated sale offering where applicable.

h. Evaluation of Bids/Post Qualification;

Privatization and Management Office 23 | P a g e

The CPO acts on the Marketing Department’s recommendation for acceptance of the highest
qualified financial bid received.

If approved, the Marketing Department formally endorses the proposed sale to the Privatization
Council (PrC) for confirmation. The endorsement is signed by the CPO, or in his absence, the DPO
for Marketing.

If disapproved, the concerned bidder is immediately notified of the PMO’s decision and the bid
deposit is returned.

PMO reserves the right to reject any or all bids, or to waive any defect or required formality
therein, and to accept the bids considered most advantageous to the national government.

Privatization and Management Office 24 | P a g e

i. Endorsement of Winning Bid to PrC; and

The Technical Committee (TechCom) of the PrC and subsequently, the PrC itself deliberates on
the proposed sale endorsed by the PMO. The PrC then formally notifies the PMO of its decision.

If the PrC does not approve the sale, the Marketing Department immediately notifies the
concerned bidder and the bid deposit is returned.

Under certain circumstances, the PrC may defer approval of a proposed sale and/or impose
conditions prior to approval. The Marketing Department promptly informs the concerned bidder
of such deferment and/or conditions.

j. Approval/Acceptance of Offer.

In every case of sale or disposition shall be approved by the PrC with respect to the buyer and
price prior to any awarding.

Illustrative Case: Privatization Management Office v. Strategic Alliance Development Corp.

Facts:

PMO, then operating as the Asset Privatization Trust (APT), held a public bidding on 30 October
2000 to sell the Philippine National Construction Corporation (PNCC) properties in order to
generate maximum cash recovery for the government. The Asset Specific Bidding Rules (ASBR)
governed the bidding process, which had the following pertinent rules: (1) the indicative price of
the PNCC properties shall be announced on the day of the bidding; (2) the winning bidder is the
one that submits the highest total bid and that complies with all the terms of the ASBR; (3) PMO
reserves the right to reject any or all bids, including the highest bid; and (4) the delivery of
financial information regarding the PNCC properties shall not give rise to a warranty with respect
to the said data or information. Strategic Alliance Development Corporation (SADC), as a
participant in the bidding process, signified its acceptance under these terms.

Privatization and Management Office 25 | P a g e

 On the day of the bidding, the indicative price was announced at ₱7,000,000,000. None of the
bidders met the threshold. SADC, despite giving the highest offer, only gave ₱1,228,888,800 as
its bid offer. Consequently, PMO rejected all the bids.

As a result, SADC protested the rejection of its bid and insisted that a notice of award of the
PNCC properties be issued in its favor. PMO refused. Subsequently, the former filed a Complaint
for Declaration of Right to a Notice of Award and/or Damages before the RTC. Ruling in the
bidder’s favor, the trial court held that the failure to explain the basis of the indicative price of
₱7 billion constituted a grave abuse of discretion and a violation of the public’s right to
information, warranting the issuance of a notice of award of the PNCC properties to SADC.

On appeal, the CA affirmed the ruling of the RTC in its Decision dated 27 January 2012. PMO
questioned the aforesaid ruling before this Court via a Petition for Review on Certiorari dated 16
March 2012. Meanwhile, PMO’s co-petitioner, PNCC, moved for reconsideration.

Issue:

Whether or not PMO can be compelled to award Dong-A Consortium the PNCC assets that it
values at ₱7,000,000,000.00 for only ₱1,228,888,800.00

Ruling:

No, the Court maintains that it is unjust to force the government to award the PNCC shares to a
bidder at a drastically lower value. APT and PMO are mandated to determine the most
advantageous prices that will improve the financial situation of the government. Given that
discretion, they cannot be directed by the courts to do a particular act or be enjoined from doing
an act within their prerogatives.

Since Dong-A Consortium failed to match the indicative price, it could not have been considered
a winner, and, is not entitled to a Notice of Award.

Part IV. Closing of Transaction

a. Issuance of Notice of Award;

Privatization and Management Office 26 | P a g e

 Upon being formally notified of PrC’s approval of the proposed sale, the Marketing Department
issues a Notice of Award to the winning bidder. The Notice of Award a) informs the bidder of
PrC’s approval of the sale and b) reiterates the provision in the ASBR or SRNS requiring the
winning bidder to pay the balance of the purchase price within a reasonable period from receipt
of the Notice of Award, otherwise, the bid deposit will be forfeited in favor of the PMO.

The PMO Legal Department is requested to prepare the Closing Documents (e.g., Deed of
Absolute Sale).

b. Acceptance of Payment of Bid Price;

Full payment of the purchase price should be made within the specific periods from receipt of
the award notice.
The Legal Department finalizes the Closing Documents.

c. Execution/Signing of Sale/Transaction documents; and

The Legal Department, in coordination with the Marketing Department, shall execute and
schedule the signing of the Closing Documents (deeds of sale, contracts and other instruments
as may be necessary or appropriate to convey title to such assets).

After all documents have been signed, the Asset Management Department, the PMSD and the
IAS are notified of the completion of the sale and requested to schedule the turn-over of the
properties to the buyer, in coordination with the Marketing Department. The COA is likewise
notified of the completion of the sale.

d. Turnover of asset to buyer/winning bidder.

The properties are formally turned over to the buyer by the PMSD, in the presence of
representatives from the IAS and COA.

After the successful privatization of state assets, the PMO is required to remit all receipts from
the sale of the properties to the Bureau of the Treasury, expect portions for reimbursable
custodianship or operational expenses.

Privatization and Management Office 27 | P a g e