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“MAPping The Future” Column in the INQUIRER – 20 July 2009
IS THE SMARTMATIC - TIM COMELEC CONTRACT FRONT LOADED?
By Manuel A. Alcuaz, Jr.
One of my concerns with the COMELEC Request for Proposal was that payment terms were not stipulated.
What was to prevent the COMELEC from awarding the contract to a favored bidder who may insist on a large up
front payment?
The payment could be made with no tangible delivery. What if the Supreme Court subsequently nullified the
contract.
The COMELEC may again have paid for something that it cannot use.
At least in the 2004 Mega Pacific deals the machines had actually been delivered.
Unfortunately, the COMELEC has signed a contract that is obviously disadvantageous to the country and its
citizens.
This COMELEC contract raises some doubts about the COMELEC, its bids and awards committee, and the
advisory council.
Some people would wonder if they are naïve or biased for Smartmatic.
Let me start by showing that the payment terms are front loaded.
The contract payment terms are as follows:
Project Initialization, Set up Project Management Team (PMT) and
Project Systems including all SW licenses and firmware
Delivery of Development Set (20 units)
Report on Transmission and Logistics
Delivery of Functional System and Software Agreement
Delivery of EMS and CCS (HW, SW and Website)
Complete System Including Customization and
Voter Education Materials/Website
Field Testing, Mock Election, TEC Systems Certification,
Training of Trainors
Delivery of PCOS Machines (Nov-12K; Dec-30K)
Second Delivery of PCOS Machines (Jan – 30K; Feb 10.2K)
Commencement of Ballot Production
Delivery of Ballots
Configuration of Machines, Final Checking of systems,
Including transmission and Sealing
Subtotal
Election Day Services & Completion Report and
Final Acceptance in lieu of retention of Warranty Security,
Within thirty (30) days from receipt of Final Report
10%
5%
5%
5%
5%
5%
5%
17.5%
17.5%
2.5%
7.5%
5%
90%
10%
When viewed as % they look fairly standard but when one puts a value on the percentages and analyzes what is
being delivered, the unfairness of the payment terms become obvious.
The first payment for Project Initialization Set Up Management Team and Project Systems including SW
Licenses and Firmware 10% or P719 million!
It is common in large construction projects to have a mobilization fee but this usually involves moving in a lot of
manpower and equipment.
Smartmatic does not need to mobilize a lot of manpower till November thru February when the machines will
arrive.
How much of the P719 million is software we do not know but why should COMELEC pay for the Software up
front, when the machines that will use the software will arrive between November and February?
The next payment is 5% for development set (20 units). This will be P359 million. Nearly P18 million per
machine. Are we back to the mainframe days when computers cost millions!
One does not need an MBA degree to realize that this is clearly ridiculous and unfair to the country. A smart
grade six student would tell you so.
The next 5% or P359 million is for A report on Transmission and Logistics. Is this report written on pages made
of gold? P359 million would pay for the actual transmission and a substantial amount of logistics!
This is clearly an attempt to sip on money from the project without substantial delivery.
The next 5% or P359 million is for the delivery of the functional system and software agreement!
What are these? Must again be written in gold. Or they must have the world’s most expensive system designer
crafting the agreement.
The above total 25% of the project a total of P1.795 billion, significantly more than the P 359 million
performance bond..
The vendor obviously does not need P1.795 billion for the activities and deliveries described above.
Some people may wonder if this is intended to be able to pay certain parties who maneuvered the contract to
Smartmatic.
It is interesting that the delivery of the 80,200 machines will only require payment of 35% of the budget when in
the original COMELEC budget the rental of equipment was 72.5% of the total budget.
This is an obvious proof that the payment terms are front loaded.
A number of the payments in the contract specifically violate the provisions of COMELEC’s Bid Terms.
Application Development
Section 7.3 of the RFP states that the ownership of the analysis, design, and executable programs of all the
applications developed should be given to COMELEC at no additional cost.
Another discrepancy is between Section 1.10 of the terms and conditions.
Terms and Conditions
Section 1.10 the Commission on Election will not assume responsibility for securing exemptions from taxes, or
import duties and/or import license.
Whereas Article 12 on Taxes and Duties states
12.1 To achieve the purpose of Republic Act 9369, COMELEC is authorized to procure, in accordance with
existing laws, by purchase, lease, rent or other forms of acquisition, supplies, equipment, materials, software,
facilities, and other services, from local or foreign sources free from taxes and import duties.
12.2 These Goods shall include those to be brought in for replacement and/or repair of defective parts covering
the entire Term of this Contract, including the warranty period.
12.3 Hence, there will be no retention of any corresponding amounts for said taxes by COMELEC.
12.4 For these tax and duty exemptions, COMELEC shall seek a certification from the Department of Finance,
Bureau of Customs, and Bureau of Internal Revenue.
Was the COMELEC unaware of these when it made the RFP? Or is this information available only to preferred
bidders?
The other bidders could have provided for duties and taxes in their proposals.
Many people will be led to worry. How can a COMELEC that can agree to such obviously, unfavorable payment
terms be expected to conduct clean and honest automated elections?
(The article reflects the personal opinion of the author and does not reflect the official stand of the Management
Association of the Philippines. The author is President of Systems Sciences Consult, Inc. Feedback at
[email protected]. For previous articles, please visit <map.org.ph>.)
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