Splitting Contracts: Good Faith Alone Does NOT Excuse Violation of Procurement Laws

In a 2022 decision, the Supreme Court affirmed that a public official's claim of good faith does not excuse violations of procurement laws, particularly the splitting of government contracts to circumvent public bidding requirements. The case of Miñao v. Office of the Ombudsman (G.R. No. 231042) serves as a stern reminder that government officials must strictly comply with Republic Act No. 9184, the Government Procurement Reform Act, regardless of their intentions.

The Facts of the Case

The case arose from a complaint against officials of the Department of Public Works and Highways (DPWH) 1st Engineering District in Dipolog City. The Commission on Audit found that the office had split a P5.5 million project for guardrails and guardrail posts into eleven purchase orders of P500,000.00 each, all awarded to a single supplier, AUF Enterprises, without public bidding.

The officials argued that the Special Allotment Release Order (SARO) from the Department of Budget and Management already divided the project into eleven sub-sections with P500,000.00 allocated per section. They claimed they merely implemented the SARO in good faith and used the simplified bidding process under the old procurement law.

The Issue

The central question was whether the officials could escape administrative liability by claiming good faith and reliance on the SARO's supposed division of the project, despite violating the mandatory requirements of RA 9184 on public bidding.

The Ruling

The Supreme Court denied the petition and affirmed the dismissal of the officials from government service. The Court held that the SARO merely identified locations along national roads where guardrails would be installed, not the number of procurement contracts to be executed.

Splitting of contracts defined. The Court applied the definition of splitting of government contracts under the Implementing Rules and Regulations of RA 9184, which refers to the division or breaking up of government contracts into smaller quantities and amounts, or dividing contract implementation into artificial phases or sub-contracts, for the purpose of evading or circumventing the requirements of law, especially the necessity of competitive bidding. The exact text of this provision is not available in the ASG law library, but the definition as stated in the Supreme Court decision is controlling.

One project, one contract. The Court found that since identical materials of the same specifications were procured for all eleven sub-sections from one supplier, there could only be one procurement contract. The division into eleven contracts was clearly designed to circumvent the requirements of public bidding and the authority limits of district engineers under Department Order No. 319, series of 2002.

Good faith is not a defense. The Court emphasized that a SARO is merely an authority to incur obligations, subject to compliance with applicable laws. Public officials are duty-bound to ensure that government funds are spent in accordance with RA 9184. The Court rejected the argument that the difficulty of complying with the new procurement law justified using the old bidding process.

Acquittal in criminal case is irrelevant. The Court also ruled that the dismissal of the criminal case against the officials had no bearing on the administrative case, since criminal cases require proof beyond reasonable doubt while administrative cases only require substantial evidence.

Practical Takeaways

• Good faith is not a blanket defense. Public officials cannot escape liability by claiming they acted in good faith when they disregard mandatory procurement laws.
• A SARO does not authorize circumvention. A SARO merely releases funds; it does not dictate the manner of procurement or excuse non-compliance with RA 9184.
• Splitting contracts is prohibited. Dividing a single procurement project into smaller contracts to avoid public bidding or approval limits is a violation, regardless of whether the government suffered actual loss.
• Administrative and criminal cases are separate. Acquittal in a criminal case does not automatically absolve a public official from administrative liability.
• Procurement laws apply strictly. Officials must follow RA 9184 and its IRR once these take effect, even if they find the new procedures difficult.

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