DECISION NO.

2019-263
June 25, 2019

Subject: Automatic Review of Commission on Audit National Government Sector–Cluster 4

Decision No. 2014-006 dated November 24, 2014, on the appeal of Col. Jessie Mario
B. Dosado, former Commanding Officer of the Philippine Army Procurement Center,
Armed Forces of the Philippines Procurement Service, from Notice of Disallowance
No. 2012-101-01(11) dated March 28, 2012, on the imposition of liquidated damages
for the delay in the deliveries of ammunition, in the amount of P7,102,314.67

DECISION

FACTS OF THE CASE

For automatic review1 is Commission on Audit (COA) National Government Sector (NGS)–Cluster 4 Decision No. 2014-
006 dated November 24, 2014, on the appeal of Col. Jessie Mario B. Dosado, former Commanding Officer (CO) of the Philippine
Army Procurement Center (PAPC), Armed Forces of the Philippines Procurement Service (AFPPS), from Notice of Disallowance
(ND) No. 2012-101-01(11) dated March 28, 2012, on the imposition of liquidated damages for the delay in the deliveries of
ammunition, in the amount of P7,102,314.67. The decision reduced the amount of the disallowance from P7,102,314.67 to
P640,467.43, and included several officials as additional persons liable for the disallowance.

The Philippine Army (PA) procured ammunition (7.62 mm ball rounds) from Companhia Brasileira De Cartuchos (CBC),
through its local representative, Firepower and Defense Contractors, Inc. (FDC), covered by three contracts, as follows:

Contract No. Particulars Amount Delivery Period

103-12-09 804,613 rounds cartridge P33,471,900.00 120 calendar days from
(ctg.) opening of irrevocable
0-84-12-09 974,955 rounds ctg. 29,112,156.30 Letter of Credit or on
March 19, 2011
104-12-09 600,000 rounds ctg. 22,986,000.00
Total P85,570,056.30

On post-audit, the Supervising Auditor (SA), PA, issued ND No. 2012-101-01(11) dated March 28, 2012, disallowing the
amount of P7,102,314.67, representing liquidated damages for late delivery of ammunition, pursuant to Section 10(m) of the
Special Conditions of the Contract with CBC, represented by the FDC. The following persons were held liable for the
disallowance:

Name Position/Designation Nature of Participation in the

Transaction
CBC/FDC Supplier For failure to deliver within the
prescribed delivery period, despite
an allowance of at least 80 days to
open the Letter of Credit
Col. Jessie Mario B. CO, PAPC For failure to impose liquidated
Dosado damages for the late delivery of
ammunition

On December 4, 2013, Col. Dosado filed an appeal from the ND invoking the following grounds:

1. The SA erred in the computation of liquidated damages. She failed to consider the extension of the delivery
period approved by the head of the procuring entity (HOPE). On the basis of such approval, the revised
schedule of delivery for Contract Nos. 103-12-09 and 104-12-09 was on May 19, 2011 and for Contract No.
0-84-12-09 was on June 10, 2011. The delay should only be 22 days for Contract Nos. 103-12-09 and 104-
12-09 and no delay for Contract No. 0-84-12-09. Thus, the liquidated damages should only be
P1,242,073.80;

2. Being a public officer, he enjoys the presumption of regularity in the computation of the correct amount of
liquidated damages. He should not also be held liable for the liquidated damages because he was not the one
who incurred the delay;

3. The issue on his failure to assess the appropriate liquidated damages is already rendered moot and academic
by the payment of liquidated damages in the amount of P1,242,073.80 by CBC/FDC; and

4. The SA gravely abused her discretion when she ordered him to personally pay the liquidated damages.
 In her Answer, the SA averred that:

1. With the approved extension of 60 days, the delivery date was accordingly rescheduled to May 19, 2011 for
all the contracts. The claim of Col. Dosado that there was no delay in the delivery of ammunition for
Contract No. 0-84-12-09 has no basis, as there was no further amendment, except for the extension until
May 19, 2011. Thus, the liquidated damages in the amount of P1,882,541.23 should be imposed;

2. The settlement/payment by CBC/FDC extinguishes the liability of Col. Dosado, only to the amount paid of
P1,242,073.80. Thus, he remains liable for the P640,467.43;

3. Records show that there was delay in the delivery of goods. Hence, the imposition of liquidated damages is
proper;

4. Col. Dosado was determined to be liable for his participation in the transaction, such as issuing the Order of
Payment, negotiating the Deposit on the Letter of Credit (DLC), and releasing the retention money to the
supplier. Since the DLC was negotiated without deducting the amount of liquidated damages, he should be
held responsible for failure to enforce the payment of the same; and

5. The following officials should be held jointly and severally liable with Col. Dosado and CBC/FDC:

Name Position/Designation Nature of Participation in the

Transaction
1. Col. Aurelio T. Head, Philippine Army For failure to note the delay and
Badajos Technical Inspection and recommend for the imposition of
Acceptance Committee liquidated damages
(PATIAC)
2. Major Eugene F. PATIAC Member Same as above
Lague

3. Major Noli L. PATIAC Member Same as above

Baguitan, Jr.

4. Msg. Allan B. PATIAC Member Same as above

Dagatan
5. Lt. Col. Pedro C. Chief, Pre-Audit, Management Same as above
Balisi, Jr. Fiscal Office (MFO)

6. Guillerma R. Mapalla Inspector, Pre-Audit, MFO Same as above

7. Leah A. Pongyan Chief Accountant For approving the Journal Entry
Voucher (JEV) without noting the
imposition of liquidated damages

The Cluster Director (CD), Cluster 4–Defense and Security, NGS, this Commission, in COA Decision No. 2014-006 dated
November 24, 2014, affirmed with modifications the disallowance, ruling as follows:

1. The imposition of liquidated damages is proper as it is supported by the provisions of the contract,
particularly Section 10(m)2 and Clause 19.1 3 of the Special Conditions of the Contract;

2. The HOPE approved the 60-day extension requested by CBC/ FDC; hence, the revised delivery schedule
should be on or before May 19, 2011. There are no documents found to support Col. Dosado’s averment that
the expected delivery under Contract No. 0-84-12-09 was on June 18, 2011. Thus, the total liquidated
damages should be P1,882,541.23, not P1,242,073.80, as claimed by him;

3. Considering the settlement of CBC/FDC in the amount of P1,242,073.80, the amount of the disallowance is
reduced to P640,467.43;

4. Col. Dosado and the other officials4 having participation in the transactions, are jointly and severally liable
with the supplier; and

5. Considering that the participation of Ms. Leah A. Pongyan, 5 Chief Accountant, PA, was in approving the
JEV for the recording of the transactions after the payment of the delivered ammunition, she cannot be held
liable for the disallowance.

Hence, this automatic review in view of the reduction of the amount of the disallowance from P7,102,314.67 to
P640,467.43, and the exclusion from liability of Ms. Pongyan.

ISSUE
ISSUE

The issue to be resolved is whether or not COA NGS-Cluster 4 Decision No. 2014-006 is proper.

DISCUSSION

This Commission finds the decision in order.

It must be noted that the appeal before the CD was already filed out of time. The ND was received on March 29, 2012,6 and
the appeal was filed on December 4, 2013,7 or after 615 days from receipt of the ND. In fact, there was already a Notice of Finality
of Decision dated October 18, 2013, which was attached by Col. Dosado as Annex “B” to his appeal, for the amount of
P5,860,240.87 (P7,102,314.67 originally disallowed less P1,242,073.80 settled). However, the CD resolved the appeal on the
merits and found that the liquidated damages should only be P1,882,541.23, and given the partial settlement of P1,242,073.80, the
remaining unsettled liability is P640,467.43.

As a rule, petitions filed beyond the reglementary period are dismissed outright by this Commission. This is true even if the
CD resolved the same on the merits and thereafter forwarded the decision to the Commission Proper (CP) for automatic review. To
hold otherwise would result in an absurd situation whereby appeals already filed out of time even at the Director’s level will be
put in a better position than petitions that were only belatedly filed at the CP level. In other words, appeals belatedly filed before
the Director, even if entertained on the merits, can still be declared by the CP in an automatic review to have been filed out of
time.

In this case, the CD must have found the appeal highly meritorious and has taken the opportunity to correct a glaring error
in the computation of the liquidated damages under the ND. Hence, this Commission decides to set aside technicalities for the
higher interest of justice.

There is no dispute that all Letters of Credit for the contracts were opened on November 19, 2010. Thus, the deadline for
the delivery of the ammunition was on March 19, 2011, it being the 120 th calendar day from the opening of the Letters of Credit.
In its letter dated January 31, 2011, CBC requested for an extension of 60 days to deliver the ammunition. The request was
approved by the HOPE on March 2, 2011, making May 19, 2011 as the new deadline for the delivery. Considering that the
ammunition were all delivered on June 10, 2011, there was a 22-day delay for the deliveries of goods for all contracts.

It is the contention of Col. Dosado that the revised schedule of delivery of ammunition under Contract No. 0-84-12-09 was
on June 18, 2011. Since the ammunition were delivered before such date, there was no delay incurred under Contract No. 0-84-12-
09. Thus, the total amount of liquidated damages should be reduced to P1,242,073.80 and not P1,882,541.23.

As a rule, it is incumbent upon the party who alleges the existence of facts to support the allegation with
sufficient evidence. However, as correctly pointed out by the SA, PA, in the Answer, there is nothing in the records that would
support Col. Dosado’s allegation that the revised deadline for delivery under Contract No. 0-84-12-09 was on June 18, 2011.
Thus, this Commission finds that there was a 22-day delay in the delivery of ammunition under all the contracts, including
Contract No. 0-84-12-09. The total amount of liquidated damages should be P1,882,541.23, computed as follows:

Contract Amount Period of Computation Liquidated

No. Delay Damages
103-12-09 P33,471,900.00 22 days P33,471,900 x 0.001 P 736,381.80
x 22 days
0-84-12-09 29,112,156.30 22 days P29,112,156.30 x 640,467.43
0.001 x 22 days
104-12-09 22,986,000.00 22 days P22,986,000 x 0.001 505,692.00
x 22 days
Total P85,570,056.30 P1,882,541.23

As to the persons liable, Section 16.1 of the Rules and Regulations on the Settlement of Accounts provides:

The liability of public officers and other persons for audit disallowances/charges shall be determined on the
basis of (a) the nature of the disallowance/charge; (b) the duties and responsibilities or obligations of
officers/employees concerned; (c) the extent of their participation in the disallowed/charged transaction; and
(d) the amount of damage or loss to the government, xxx. (Underscoring supplied)

The members of the PATIAC, the Pre-audit Inspector, and the Chief of the MFO should also be held liable in view of their
failure to note the delay and to recommend the imposition of liquidated damages. It was their duty to verify the date of delivery
and determine if there was delay in the delivery since liquidated damages are imposed in case of delay. The Manual of Procedures
for the Procurement of Goods and Services8 provides:

Methodology: How are Liquidated Damages imposed?

The following steps need to be followed in the imposition of liquidated damages:

xxx

5 If the supplier/manufacturer/distributor incurs delay and it does not request for an extension
 a. The PMO or end-user unit informs, within a reasonable time from the first day of delay, the
supplier/manufacturer/distributor that the Procuring Entity shall impose the liquidated damages
agreed upon by the parties.

b. Upon delivery, the PMO or end-user unit and the Technical Inspection and Acceptance Committee
records the delay in the inspection documents, noting therein the amount of the liquidated damages
imposable on the supplier. xxx (Underscoring supplied)

9
As to the liability of Ms. Pongyan, the Chief Accountant, PA, COA Circular No. 2006-003 dated January 31, 2006 provides
the functions of the Accounting Unit, to wit:

The responsibilities of the Heads of the Requesting Unit, the Budget Unit and the Accounting Unit are hereby
set forth as follows:

xxx

2.4 For contract or purchase order, the Head of the Accounting Unit shall certify the availability of funds
based on the ObR [Obligation Request] or BUR [Budget Utilization Request] duly certified by the
Budget Officer.

2.5 The Head of the Accounting Unit shall certify the availability of cash and completeness of supporting
documents in the DV.

2.6 The Head of the Accounting Unit shall also prepare the Daily Cash Position to be submitted to the
Head of the Agency.

It is clear that it is the responsibility of the Chief Accountant to certify the completeness of the supporting documents in the
DV. As Chief Accountant, Ms. Pongyang’s participation was limited to the checking of the completeness of supporting
documents. It is beyond her responsibility to determine or validate the contents of such documents, whether there were delays in
the deliveries of the goods and whether retention money was released without deducting the amount of liquidated damages. As
such, in approving the JEV, she cannot be expected to note any delays in the deliveries and the non-deduction of corresponding
liquidation damages. Thus, she should not be held liable for the disallowance.

However, considering that the amount of P1,242,073.80 was already paid by CBC/FDC under Official Receipt No. 8173796
dated April 4, 2013, and Notice of Settlement of Suspension/Disallowance/Charge No. 2013-4 dated May 24, 2013 was issued for
such amount, the total amount of the disallowance is reduced to P640,467.43.10

RULING

WHEREFORE, premises considered, Commission on Audit National Government Sector–Cluster 4 Decision No. 2014-006
dated November 24, 2014 is hereby APPROVED. Accordingly, Notice of Disallowance (ND) No. 2012-101-01(11) dated March
28, 2012 in the amount of P7,102,314.67, on the imposition of liquidated damages for the delay in deliveries of ammunition, is
reduced to P640,467.43. However, Ms. Leah A. Pongyan, Chief Accountant, Philippine Army, is excluded from liability under the
ND.

The Audit Team Leader and the Supervising Auditor are directed to issue a Supplemental Notice of Disallowance for the
same amount of P640,467.43, against the following persons who were also found liable by the Cluster Director:

Name Position/Designation Nature of Participation in

the Transaction
Col. Aurelio T. Badajos Head, Philippine Army For failure to note the delay
Technical Inspection and and recommend for the
Acceptance Committee imposition of liquidated
(PATIAC) damages
Major Eugene F. Lague PATIAC Member
Major Noli L. Baguitan, Jr. PATIAC Member
Msg. Allan B. Dagatan PATIAC Member
Lt. Col. Pedro C. Balisi, Jr. Chief, Pre-Audit,
Management Fiscal Office
(MFO)
Guillerma R. Mapalla Inspector, Pre-Audit, MFO

(SGD.) MICHAEL G. AGUINALDO

Chairperson
 (SGD.) JOSE A. FABIA (SGD.) ROLAND C. PONDOC
Commissioner Commissioner

Attested by:

(SGD.) NILDA B. PLARAS

Director IV
Commission Secretariat

Copy furnished:

Col. Jessie Mario B. Dosado

Former Commanding Officer
Philippine Army Procurement Center
Armed Forces of the Philippines Procurement Service
Taguig City

The Supervising Auditor

Office of the Auditor
Philippine Army
Taguig City

The Cluster Director

Cluster 4–Defense and Security
National Government Sector

The Director
Information Technology Office
Systems and Technical Services Sector

The Assistant Commissioners

National Government Sector
Commission Proper Adjudication and
Secretariat Support Services Sector

All of this Commission

ESZ/ERD/JHG/LJL/KDG
CPCN 2014-668

1 Pursuant to Section 7, Rule V, 2009 Revised Rules of Procedure of the Commission on Audit (COA).
2 Liquidated damages shall be imposed in accordance with Clause 19 of the contract.
3 The applicable rate is one-tenth (1/10) of one percent of the cost of the unperformed portion for every day of delay. xxx.
4 Col. Aurelio T. Badajos, Major Eugene F. Lague, Major Noli L. Baguitan , Jr., Msg. Allan B. Dagatan, LTC Pedro C. Balisi , Jr., and Guillerma R. Mapalla (Refer to the
table on p. 4).
5 Among the additional persons found jointly and severally liable for the disallowance in the Answer of the State Auditor.
6 Rollo, p. 65.
7 Rollo, p. 19.
8 Government Procurement Policy Board Generic Procurement Manual Volume 2, p. 119.
9 Restatement with Amendments of COA Circular No. 2005-001 on Accounting Policies related to the Budget, Accounting and Disbursement Functions in the National
Government Agencies under the New Government Accounting System.
10 P1,882,541.23 - P1,242,073.80 = P640,467.43, which corresponds to the liquidated damages for Contract No. 0-84-12-09.