FROM news reports, we learn that the Department of Information and Communications Technology (DICT) is implementing a blockchain-based system meant to track the 2026 national budget. This is being funded through a private sector grant from a private company — Polygon.
Because the service is provided as a grant from a private entity, it is not undergoing the standard public bidding process, which has raised questions regarding compliance with procurement rules.
Can a government agency validly enter into a service contract without public bidding?
In the realm of government procurement, the principle of transparency, competitiveness and accountability serves as the cornerstone of public service delivery. The prevailing question arises: Can a government agency rightfully enter into a service contract with a private entity without undergoing the public bidding process simply because there is “no cost to the government”? The short answer to this is “no.”
Legal framework
Republic Act (RA) 12009, or the New Government Procurement Act, signed on July 20, 2024, modernizes the old law (RA 9184) to enhance efficiency, sustainability and transparency in Philippine public procurement. It introduces new, fit-for-purpose modalities, mandates market scoping, utilizes technology and promotes green, gender-responsive and sustainable practices. This new law outlines the necessity of conducting public bidding for all types of procurement, encompassing contracts for goods, infrastructure projects and consulting services. The implementing rules and regulations emphasize that transparency and fairness are paramount in the procurement process.
Section 3(e) of Republic Act 3019, known as the Anti-Graft and Corrupt Practices Act, further underscores the prohibition against causing undue injury to any party, including the government, or granting unwarranted benefits to any private entity. Entering into a service contract without public bidding could constitute a violation of this law if it results in manifest partiality, leading to the selection of a private provider based on nontransparent criteria, rather than through a competitive process.
The principle of public bidding
Public bidding is the primary mode of procurement as stated in the law. The procurement process is designed to foster fair competition among potential service providers, ensuring that the government receives the best quality of service at the most reasonable price. The notion of “no cost to the government” does not exempt a service contract from the requirements set forth by the procurement law.
Even in cases where services appear to be provided free of charge, the government is still engaging in the procurement of services. The very act of contracting with a private entity constitutes a procurement process that must uphold the tenets of public bidding. The goal is to avoid favoritism and ensure equal opportunity for all qualified service providers.
Even if an agreement is touted as “cost-free” to the government, it must still comply with public bidding regulations because it may still involve significant liabilities to the government. The DICT cannot circumvent these regulations under the guise of administrative discretion or convenience.
Conclusion
If the “free” service requires the DICT to enter into a contract, memorandum of understanding or memorandum of agreement that involves a cost (even hidden costs), or if it constitutes a “service delivery” to the government, it may require competitive bidding to ensure transparency and prevent corruption.
The DICT is mandated to maintain transparency in its procurement. Any partnership, including those offering free technology, must comply with government, regulatory and public accountability standards.
If the “free” offer is used to circumvent, or gives an unfair advantage, in a future procurement process, it clearly violates competitive bidding principles.
While a truly “free” gift with no strings attached might sound “too good to be true,” the more prudent course of action for the DICT is to seek legal opinion from the Government Procurement Policy Board to determine whether such “free service” arrangement does not require public bidding. Any agreement with a private technology provider like Polygon that affects government systems, public data or future procurement must be handled through proper, transparent procurement processes or, if appropriate, a public-private partnership framework authorized by law.
Enrique “Buko” dela Cruz Jr. is the current dean of the College of Law of Baliuag University. He is a senior partner at DivinaLaw and the corporate secretary of Qadena Foundation, an independent nonprofit stewarding the blockchain’s growth, governance and ecosystem development in the Philippines. He earned his Juris Doctor with honors from UST Manila and his LLM with distinction (London, UK) in 2005 as a Chevening scholar of the British Council. He completed an executive program on leadership at the KSG, Harvard University in 2002.
