The Department of the Interior and Local Government (DILG)’s proposal to relocate its central office through a lease-purchase agreement with the Government Service Insurance System (GSIS), citing legal viability under existing procurement and property valuation laws, was given a greenlight by the Department of Justice (DOJ).
This is based on a legal opinion dated 15 May and addressed to DILG Secretary Juanito Victor Remulla. The DOJ pointed out that the Multi-Year Contractual Authority (MYCA) issued by the Department of Budget and Management (DBM) constitutes a binding commitment for the DILG’s procurement process.
The DOJ said this authority must be obtained prior to initiating any procurement activities and requires a detailed annual breakdown of project costs as mandated by DBM Circular No. 2023-7.
It further clarifies that the total and annual costs specified in the MYCA will serve as the basis for both the Approved Budget for the Contract and the yearly Certificates of Availability of Funds, ensuring the project’s financial viability throughout its implementation period.
Regarding property valuation, the DOJ emphasized that acquisitions by national government agencies must strictly adhere to the market value standard as defined under Republic Act No. 12001, the Real Property Valuation and Assessment Reform Act. The law defines market value as the estimated amount that would be agreed upon by knowledgeable and willing parties in an arm’s length transaction after proper marketing. This provision directly applies to the proposed arrangement where GSIS would first acquire the property before leasing it to the DILG.
The opinion strongly recommends consultation with the Commission on Audit (COA) given the substantial government expenditure involved in the transaction. This precautionary measure aligns with COA’s constitutional mandate to examine, audit, and settle all accounts pertaining to government funds and property. Such oversight would help ensure that the lease-purchase agreement meets the highest standards of fiscal responsibility and legal compliance.
The relocation initiative stems from persistent operational challenges at the DILG’s current Quezon City office. Under the proposed scheme, GSIS would acquire an appropriate office property at market value and lease it to the DILG over a specified period, with ownership transferring to the department upon lease completion. The arrangement would be secured by the MYCA issued by DBM, creating a structured pathway for the property’s eventual transfer to government ownership.
Undersecretary Raul Vasquez, the DOJ Officer-in-Charge, emphasized the importance of strict adherence to established procedures, noting that following the guidelines under DBM Circular No. 2023-7 would prevent potential irregularities.
The opinion also stresses the necessity for the DILG and GSIS to jointly determine the market value of the prospective office building before finalizing any agreement.
With the legal clearance from the DOJ, the DILG can now proceed with greater confidence in its relocation plans as the next steps involve finalizing negotiations with GSIS regarding property valuation, securing the necessary MYCA from DBM with complete funding details, and engaging COA for pre-transaction review to ensure full compliance with auditing requirements.
With DOJ’s comprehensive opinion, it not only approved of office relocation but also establishes important precedents for similar government transactions.
With clear parameters for multi-year contractual authorities and property valuations in government acquisitions, it contributed to greater transparency and accountability in major public sector projects.