COA affirms PA’s payment of P64.9-M refund to supplier for ‘excessive’ liquidated damages

The Commission on Audit (COA) has affirmed with finality the P64.9 million refund to be paid by the Philippine Army (PA) to JROG Marketing for the excessive charge of liquidated damages imposed on the delay in the delivery of equipment.

It denied the motion for reconsideration filed by the PA which contested the grant of money claim by Ronie S. Osman, owner of JROG Marketing, for the refund of liquidated damages amounting to P64,923,417.21.

The money claim was granted on the ground that the imposition of liquidated damages was not in accordance with the contract of the parties.

The COA cited Section 3.2 of Annex D of the 2016 Revised Implementing Rules and Regulations of Republic Act No. 9184 (Government Procurement Reform Act), which states that in no case shall the total sum of liquidated damages exceed 10 percent of the total contract price.

The PA claimed that the law allows continued imposition of liquidated damages over the 10 percent cap as “the appropriate sanction for the delay in the delivery of goods constituting a breach of contract.”

In denying the PA’s motion, the COA said: “The movant (PA) failed to convince this Commission that the evidence is insufficient to justify the decision, or that the assailed decision is contrary to law.”

“In this case, there is no substantial difference between a penalty and liquidated damages insofar as legal results are concerned since there has been partial or irregular compliance,” it also said.

Despite the delay in the delivery of equipment, the COA said that the PA opted not to rescind the contract but accepted the equipment. At the same time, the COA said that the reasons for the delay were not solely due to the fault of JROG Marketing.

“Although the government may have suffered damages because of the delay, to charge liquidated damages more than what the law requires against Mr. Osman is contrary to law. Hence, there is no substantial ground for this Commission to deviate from its decision,” it pointed out.