Honoraria for Government Procurement: DBM Guidelines Are Mandatory

The Supreme Court has settled a recurring question for government employees involved in procurement: can a government agency pay honoraria to members of its Bids and Awards Committee (BAC) and Technical Working Group (TWG) before the Department of Budget and Management (DBM) issues its guidelines? In Sison v. Commission on Audit (G.R. No. 177011, June 5, 2009), the Court answered no. The decision underscores that the statutory authority to grant honoraria is not self-executing and that agencies must wait for the DBM's implementing rules.

Facts of the Case

The National Housing Authority (NHA) paid honoraria totaling P364,299.31 to its BAC and TWG members, including petitioners, for procurement work done from March 2003 to June 2004. The payments were based on a straight 25% of each member's basic monthly salary, which the NHA believed was allowed under Section 15 of Republic Act No. 9184, the Government Procurement Reform Act.

The Commission on Audit (COA) disallowed the payments. Some were disallowed for lack of legal basis because no DBM guidelines yet existed; others were disallowed because they exceeded the rates later set by DBM Budget Circular No. 2004-5. The COA's Legal Adjudication and Settlement Board affirmed the disallowances. The employees then went directly to the Supreme Court.

Procedural Issue: Exhaustion of Administrative Remedies

Before reaching the merits, the Court noted a fatal procedural flaw. The employees appealed the Board's decision to the Supreme Court without first appealing to the COA Proper. Under COA Resolution No. 2003-001 and the 1997 Revised Rules of Procedure of the COA, appeals from the Board must be brought to the Commission Proper before any petition for certiorari may be filed with the Court.

The Court held that the failure to exhaust administrative remedies deprived the petition of a cause of action. Because the employees skipped this mandatory step, the disallowance became final and executory. The Court found no exception to the exhaustion rule applied to the case.

The Main Issue: Are DBM Guidelines Mandatory?

Even if the procedural defect were ignored, the Court found the disallowances substantively correct. Section 15 of RA 9184 states that a procuring entity "may grant payment of honoraria to the BAC members in an amount not to exceed twenty five percent (25%) of their respective basic monthly salary subject to availability of funds." Critically, it adds: "For this purpose, the DBM shall promulgate the necessary guidelines."

The Court ruled that this provision is not self-executing. The word "shall" in the second sentence is mandatory, not directory. Until the DBM issued its guidelines, agencies had no legal basis to pay honoraria. The employees argued it would be unjust to deny payment for work already performed, but the Court rejected this. An honorarium is a voluntary donation in appreciation of services, not a matter of obligation. The use of "may" in the law confirms that honoraria cannot be demanded as a matter of right.

The DBM Guidelines

DBM Budget Circular No. 2004-5, issued March 23, 2004, eventually set the rules. It provided that BAC and TWG members may be paid honoraria only for successfully completed procurement projects, at fixed rates per project (P3,000 for the BAC Chair, P2,500 for BAC members, and P2,000 for TWG members), with a monthly cap of 25% of basic salary. A subsequent circular clarified that a project is "successfully completed" once the contract has been awarded to the winning bidder.

Because the NHA paid a flat 25% of monthly salary regardless of completed projects and before the guidelines existed, the payments violated both the law and the DBM rules.

Practical Takeaways

• Wait for the DBM rules. Statutory authority to grant honoraria is not enough; agencies must wait for the DBM's implementing guidelines before making payments.
• Honoraria are not a right. The word "may" in the law means employees cannot demand honoraria as a matter of entitlement.
• Pay only for completed projects. Honoraria are allowed only for successfully completed procurement projects, meaning after the contract award, not merely upon recommendation.
• Observe the rate caps. Payments must follow the per-project rates and the 25% monthly salary cap set by the DBM circulars.
• Exhaust administrative remedies. Decisions of the COA's Adjudication and Settlement Board must first be appealed to the COA Proper before going to the Supreme Court; skipping this step makes the disallowance final.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.