Why Smartmatic got deal for PCOS repairs

MANILA, Philippines – Before the Christmas break, the Commission on Elections (Comelec) ruled that Smartmatic-Total Information Management (TIM) Corp would conduct the first stage of refurbishment of the precinct count optical scan (PCOS) machines for the 2016 elections.

Only the P300-million "Program 1" section under Smartmatic-TIM's extended warranty proposal, estimated to cost at least P1.2 billion, was approved by the Comelec en banc on December 23, 2014, via Comelec Resolution No. 9922.

The poll body chose to deal directly with Smartmatic instead of holding a public bidding for the PCOS repairs, as recommended by the Comelec law department.

Smartmatic, the supplier of PCOS machines for the 2010 and 2013 automated polls, has been hounded by criticism of its performance in past elections, like the appearance of "digital lines" on scanned ballot images and the alleged "60-30-10" cheating pattern in the 2013 polls.

The "Program 1" part of the warranty covers only the "examination, diagnostics, and some minor repairs" of some 82,000 PCOS units in Comelec's inventory, clarified Comelec Chairman Sixto Brillantes Jr on Monday, January 5.

Brillantes and 4 commissioners voted in favor of Program 1 of Smartmatic's proposal, while 2 commissioners dissented (Tito Luie Guia and Arthur Lim, in a separate opinion, voted for a public bidding if the timeline allows it).

The reasons for the poll body's approval of the P300-million deal boiled down to 4:

Lack of time for public bidding

Proceeding with a public bidding for PCOS maintenance would entail "unnecessary delay" in the preparations for the 2016 polls, said the Comelec in the resolution.

In its timeline, Comelec plans to conduct the actual refurbishment from March to November 2015. According to the Comelec bids and awards committee (BAC), a public bidding for it would take 55 calendar days (for a one-stage bid) or 88 calendar days (for a two-stage bid) to complete, excluding additional time in case of a failed bidding.

The poll body claimed that the remaining period of about 60 days before the March target date "is terribly insufficient" to conduct a public bidding.

The Comelec also argued that the BAC already has its hands full in tackling all election-related procurement, including the lease of more 2016 voting machines and election paraphernalia for the February 2015 SK polls.

But why didn't the Comelec act earlier? The poll body explained that the recommendation of the Comelec Advisory Council (CAC) favoring the reuse of PCOS machines came only in August.

Meanwhile, the approval of the Comelec's budget in Congress, which took into consideration the reuse of existing units versus the purchase of all-new machines, was finalized only in December.

'Greater risk' with third-party providers

The Comelec argued that bidding out the refurbishment to a third-party provider "will be too great a risk, considering the highly-technical nature of the refurbishment and/or repairs to be conducted on the machines."

A third-party provider may find it necessary to reverse-engineer the PCOS machines produced by Smartmatic to study its inner workings. But even then, said the Comelec, "there is no guarantee if [the third-party provider] can actually reverse-engineer the machines and the technology behind it."

Plus, the software might also need to be reverse-engineered as a consequence. It would then be required to undergo a new certification which would take time "and would result in a serious delay" in the 2016 polls timeline.

"We cannot take the very arduous repercussion of jeopardizing the 2016 national elections due to this non-assurance," the Comelec said.

If ever the reverse-engineered PCOS machines do malfunction on election day, Comelec argued that "blame games" would occur next. "In the end, it is the Comelec that will ultimately suffer the ramifications of the risk involved."

Warranty deal 

The Comelec law department, in its legal opinion in November, said the extended warranty still falls within the purview of Republic Act 9184 as a "direct contracting" or "single source procurement" transaction.

In direct contracting, there is no need for a bidding because the supplier would simply be asked to submit a quotation or pro forma invoice, together with the conditions of sale.

The extended warranty deal must pass 3 requirements for it to be deemed valid under direct contracting. In its decision, the Comelec said that it met all the conditions:

Warranty still valid

The Comelec leased the PCOS machines from Smartmatic in 2009, then purchased it from them in 2012, with an additional condition to keep the warranties in the 2009 contract in full force and effect.

The extension of the warranty, therefore, "is but a performance of an already existing obligation with Smartmatic-TIM to Comelec covering the maintenance and repairs of the very same machines," said the Comelec. – Rappler.com

Michael Bueza

Michael Bueza is a researcher and data curator under Rappler's Research 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.

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