Certain government contracts are required by law or regulations to be reviewed, approved or concurred in by higher or superior officers. Where there is such a provision, the contract is not valid until so reviewed, approved or concurred in.
For instance, the review by the Government Corporate Counsel is required of contracts entered into by the National Government with any foreign entity involving P=50 million and above or its equivalent in foreign currency in proper cases or P500 million and above where the contracting party is a government- owned or controlled corporation or a subsidiary thereof.
On the other hand, the approval of the President of the Philippines is required for the validity and enforceability of various government contracts.
Applicable Laws, Rules and Regulations
Section 32, PD 1445 ( as reiterated under COA Circular No. 95- 005 dated April 27, 1995 quoting Sec. 17, Chapter 4, Subtitle B of the Administrative Code of 1987) - Government Contracts for Auditing, Accounting and Related Services
No government agency shall enter into any contract with any private person or firm for services to undertake studies and services relating to government auditing, including services to conduct, for a fee, seminars or workshops for government personnel on these topics, unless the proposed contract is first submitted to the Commission to enable it to determine if it has the resources to undertake such studies or services. The Commission may engage the services of experts from the public or private sector in the conduct of these studies.
Should the Commission decide not to undertake the study or service, it shall nonetheless have the power to review the contract in order to determine the reasonableness of its costs.
LOI 1096 promulgated December 16, 1980 - Contracts Requiring Review of the Government Corporate Counsel
All contracts entered into by any ministry, bureau, office, agency or instrumentality of the national government or any government-owned or controlled corporation including any subsidiary thereof, with any foreign or multi-national corporation, partnership, firm, entity or association, involving P50 million and above, Philippine currency or the equivalent thereof in foreign currency in proper cases, where the contracting party is the Republic of the Philippines thru a ministry, bureau, office, agency or instrumentality of the National Government, or P500 million and above where the contracting party is a government-owned or controlled corporation or a subsidiary thereof, shall be submitted to the Government Corporate Counsel for review, and once reviewed, shall be transmitted to the Office of the President for approval. Any such contract entered into without the required review and approval shall not be valid and binding and the COA and/or Budget Ministry shall disapprove or defer the release or disbursement of the necessary funds unless and until said review and/or approval shall have been secured.
Section 79, PD 1445 - Approval of the Commission on Audit on Private Sale
Destruction or sale of unserviceable property. When government property has become unserviceable for any cause, or is no longer needed, it shall, upon application of the officer accountable therefor, be inspected by the head of the agency or his duly authorized representative in the presence of the auditor concerned and, if found to be valueless or unsalable, it may be destroyed in their presence. If found to be valuable, it may be sold at public auction to the highest bidder under the supervision of the proper committee on award or similar body in the presence of the +auditor concerned or other duly authorized representative of the Commission, after advertising by printed notice in the Official Gazette, or for not less than three consecutive days in any newspaper of general circulation, or where the value of the property does not warrant the expense of publication, by notices posted for a like period in at least three public places in the locality where the property is to be sold. In the event that public auction fails, the property may be sold at a private sale at such price as may be fixed by the same committee or body concerned and approved by the Commission.
Illustrative Decision
COA Decision No. 615 dated September 20, 1988 - Contracts in violation of laws and regulations devoid of legal force and effect
While it is true that the former Corporate Auditor of Philippine Amanah Bank (PAB) deliberately did not undertake the work of reconciling the PAB's due from/to Central Bank, cognizant as he was of the fact that it was a management function and would not like to encroach on their jurisdiction, definitely it was not to be misconstrued as an authority for PAB to contract the services of Sycip, Gorres, Velayo & Co. (SGV) to undertake a job which is inherently theirs as a Banking Institution. Section 1161.7 of the Central Bank Manual of Operations for Banks provides that all banking institutions shall prepare monthly reconciliation statements covering transactions between the Head Office and all its branches within fifteen (15) days after the end of the month.
The contract entered into by and between the Philippine Amanah Bank and the SGV is devoid of legal force and effect for being violative of the mandatory provisions of Section 32, P.D. 1445, and COA Circular No. 86- 254 dated March 24, 1986. It being void from the very beginning, its nullity could not be cured by equitable considerations, hence payment therefor shall be the personal liability of the officer or officers who have entered into the agreement.