Smartmatic, Indra contest each other’s eligibility in PCOS bidding

Michael Bueza

This is AI generated summarization, which may have errors. For context, always refer to the full article.

Smartmatic, Indra contest each other’s eligibility in PCOS bidding
(UPDATED) An item in Smartmatic-TIM's articles of incorporation and Indra's local branch office are put into question

MANILA, Philippines (UPDATED) – The two companies vying for the contract to lease additional 2016 voting machines questioned each other’s eligibility to participate in the bidding being conducted by the Commission on Elections (Comelec).

Smartmatic-Total Information Management (TIM) Corporation and Indra Sistemas SA recently submitted their manifestations to the Comelec Bids and Awards Committee (BAC) regarding issues found in each other’s eligibility documents.

The Comelec BAC on December 4 opened the bids of the two firms for the lease of 23,000 precinct count optical scan (PCOS) machines, which use optical mark reader (OMR) technology.

These units will augment the existing 82,000 PCOS machines in Comelec’s inventory. The approved budget for the contract is P2.5 billion.

Smartmatic’s articles of incorporation

Smartmatic's PCOS machines, as presented to Comelec on Wednesday, December 10. Michael Bueza/Rappler

Indra claimed that the Smartmatic-TIM-led joint venture “has no legal personality or capacity” to join the current bidding, as its Articles of Incorporation (AOI) limit the company to providing services related only to the 2010 elections.

Indra’s lead counsel, Archivald de Mata, argued that Smartmatic-TIM’s primary purpose, as stated in its AOI, is “to do, perform, and comply with all obligations and responsibilities… arising under the request for proposal and notice of award issued by the Comelec in connection with the automation of the 2010 national and local elections.”

Smartmatic is, therefore, committing an ultra vires act, or something that is beyond its powers, added De Mata.

The joint venture also failed to translate many contracts of its ongoing projects to English, as instructed by the Comelec BAC, he said.

“Our contention is that the Smartmatic-TIM joint venture must be disqualified,” said De Mata in a press conference on Wednesday, December 10. “Their continued participation in the bidding does not only go against their AOI, but also against the law.”

The Smartmatic joint venture is composed of Smartmatic-TIM Corp, Jarltech International, TIM Corp, and Smartmatic International Holdings BV.

Smartmatic replies

In response, Smartmatic Asia Pacific president Cesar Flores said that Indra was “grasping at straws, looking for trivial technicalities to try to disqualify Smartmatic-TIM.”

In Smartmatic-TIM’s official statement on Thursday, December 11, Flores said that the company’s AOI also authorizes them to “enter into contracts and arrangements of every kind and description for any lawful purpose.”

He added, “There is a wealth of jurisprudence in the Philippines confirming that the secondary purposes of a corporation are more than enough to allow them to enter into contracts such as the current bidding with the Comelec.”

As for the translation issue, Flores said that the submission of one member, in case of a joint venture, is considered the submission of all.

“Smartmatic TIM submitted its Statement of all Ongoing and Completed Contracts, which happen to be all in English, therefore making the bidding joint venture fully compliant,” said Flores, adding that it was the contracts of Smartmatic International Holdings BV that were submitted in a foreign language.

“These are our answers to the non-issues that Indra is trying to foist on the public together with other groups engaged in a smear campaign against Smartmatic,” Flores added.

Various groups and poll watchdogs have also called for the blacklisting of Venezuela-based Smartmatic in providing services for the 2016 polls. However, the Comelec BAC junked their petition on December 4.

Indra’s local branch office

Indra's PCOS machines, as presented to Comelec on December 5. Joel Leporada/Rappler

Meanwhile, Smartmatic questioned the legal basis surrounding the Philippine branch of Indra Sistemas, which joined the bidding as a foreign bidder. Indra is a Spain-based technology and consultancy company.

Smartmatic claimed that Indra “is estopped from claiming that it is one and the same entity with its branch in the Philippines.”

Estoppel precludes an entity from asserting something that contradicts what is implied by his previous action or statement or by a previous court decision.

“Even though foreign bidders are allowed to bid, they must designate a local representative,” said Smartmatic-TIM public relations officer Franklin dela Cruz in a text message to Rappler. “As such, the local representative needs to comply with all the requirements of the bid.”

According to Smartmatic, Indra failed to comply with two items of the Bid Data Sheet:

  1. Indra allegedly did not submit a board resolution designating a branch office as its local representative. Instead, “it submitted a board resolution dated as far back as 2008 proving the authority to establish a branch office in the Philippines. There is no indication that that authority pertains to the bidding for the 2016 elections,” Ruby Yusi, the lead counsel of Smartmatic, told the Comelec bids committee.
  2. The Indra head office “has no tax clearance certificate from the Bureau of Internal Revenue.” Instead, Indra only had the tax clearance for its Philippine branch, “which unfortunately is only its local [representative] based on their application,” Yusi said.

Added Yusi, “It appears that it is the head office, not the Philippine branch, that is actually filing its application or is the bidder for this project” based on the documents that Smartmatic has seen.

“In view of its submission and subsequent public declarations, Indra cannot conveniently argue that the head office and the Philippine branch are one and the same entity,” said Smartmatic-TIM in its reply to Indra’s manifestation, a copy of which was obtained by Rappler. 

Smartmatic also alleged that the Secretary’s Certificate submitted by one of Indra’s subcontractors was not notarized. There were also 30 boxes or spaces omitted in Indra’s sworn statement of all ongoing and completed projects, Smartmatic said.

Indra replies

During the opening of bids, Indra countered that its parent company has issued a Power of Attorney in favor of its Philippine branch, which has been operating in the country for the past 18 years, based on its website.

“The branch office of Indra Sistemas SA in the Philippines has been appointed as its legal representative. The branch office cannot issue a separate board resolution… because it has no separate personality from Indra Sistemas SA,” Indra’s lead counsel Archivald de Mata argued.

He cited a previous Supreme Court decision, which said that a branch has no separate legal personality. “So a branch is merely an extension of the personality of Indra Sistemas, meaning Indra Sistemas and the Philippine branch are one and the same entity.”

Rappler has yet to obtain Indra’s response to the issues regarding the aforementioned Secretary’s Certificate and sworn statement.

The Comelec BAC is set to decide on both companies’ manifestations next week, said chairperson Helen Aguila-Flores. – Rappler.com

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Michael Bueza

Michael is a data curator under Rappler's Tech Team. He works on data about elections, governance, and the budget. He also follows the Philippine pro wrestling scene and the WWE. Michael is also part of the Laffler Talk podcast trio.