Posted on Wednesday, November 03, 2004

Identity of real bidder
in Comelec deal unclear

By Lakambini A. Sitoy, Reporter

Second of four parts

One of the major issues arising from the award of the Phase 2 Co­­melec moder­niza­tion contract was the identity of the bidder, and how this differed from the entity that received the award.

The bidder was supposed to be Mega Pacific Consortium. This was a group comprising Mega Pacific eSolutions Inc. (MPEI), the Korean firm SK C&C, WeSolv Open Computing Inc., Elec­tion.com Ltd and ePLDT. 

SK C&C was the manufacturer and supplier of the automatic counting machines. It is of South Korean origin and was incorporated in 1991.

In a memorandum submitted to the Supreme Court, Mega Pacific Consortium claimed SK C&C’s automatic counting machines had been used in two Korean national elections with more than 20 million voters.

WeSolv Open Computing Inc. was to be responsible for the rollout, training and maintenance functions of the consortium. Incorporated in 1994, WeSolv is the networking and communications subsidiary of Fujitsu Philippines Inc. On the Fujitsu website, WeSolv is said to specialize in wireless LAN and virtual private network security and has a partnership with Cisco Systems Inc., a leading Internet networking company.

Two companies had a subcontractor relationship with Mega Pacific eSolutions Inc.  (MPEI). These were Election.Com Ltd and ePLDT.

Election.Com is an American company, incorporated in Delaware in 1991. It has had experience with more than 400 automated elections in the USA and Europe, and was to be responsible for system integration.

ePLDT, the provider of computer security and encryption, is the Internet arm, and a wholly owned subsidiary, of Philippine Long Distance Telephone Co.

Except for MPEI, the companies in the consortium were well known in their countries and fields, and had been doing business for more than a decade.

On the other hand, MPEI, with which the Comelec finally signed the contract, was incorporated on February 27, 2003, six days before the March 5 bidding. 

In its Articles of Incorporation filed with the Securities and Exchange Commission, the company incorporators were identified as Willy U. Yu, Bonnie S. Yu, Enrique T. Tansipek, Pedro O. Tan, Johnson W. Fong, Bernard L. Fong and Lauriano A. Barrios, all Filipinos and residents of Metro Manila.

The directors were the Yus, Enrique Tansipek, Tan and Johnson W. Fong. Tan was, in addition, the treasurer.

The total amount of capital stock subscribed was P300 million, with Tan holding the most shares: 749,999 at P100 per share. 

The Yus and the Tansipeks had 375,000 shares apiece; Johnson Fong 510,000; Bernard Fong 240,000; and Barrios one share.

MPEI had been incorporated primarily to supply and sell information technology systems, equipment and services, though its articles of incorporation contained provisions securing its identity as a general merchant and importer/exporter.

The date of incorporation, less than a week before the bidding and just 10 days after the request for proposal was issued, indicates that MPEI may have been formed in response to the P1.3-billion Phase 2 project. 

“Now, what would prevent an enterprising individual from obtaining copies of the Articles of Incorporation and financial statements of, let us say, San Miguel Corp. and Ayala Corp. from the SEC, and using these to support one’s claim that these two giant conglomerates have formed a consortium with one’s own penny-ante company [to bid] for a multibillion-peso contract? As far as the Comelec is concerned, the answer seems to be: Nothing,” noted Justice Artemio Pangani­ban, who wrote the main opinion of G.R. 159139. 

Documents missing

The exact identity of a bidder was to have been ascertained by documents submitted to the Comelec as part of the bidding.

The bidding was to be conducted according to a “two-envelope/two-stage system.”

The first, or Eligibility Envelope, was to contain documents establishing the bidder’s eligibility to bid and its qualifications to perform the contract if accepted. The second envelope would be the bid itself.

The eligibility envelopes of prospective bidders were to be opened first. These envelopes were expected to contain legal documents, such as articles of incorporation, business registrations, licenses and permits, mayor’s permits, VAT certification, affirming the fact that the bidder was in business and had permission to do so.

Documents proving the record of the bidder and its technical and production capabilities, as well as financial documents including audited financial statements, were also expected to be in the eligibility envelope.

“In the case of a consortium,” the Supreme Court said, “… the Eligibility Envelope would … have to include a copy of the joint-venture agreement … or a business plan … establishing the due existence, composition and scope of such aggrupation.”

Documents such as these would but naturally inform the Comelec of the kind of entity it was dealing with, and whether it was competent.

But no such agreement was contained in the first envelope, the Court found, after scrutinizing a thick file of “eligibility requirements” submitted by the Comelec. This file replicated the documents originally submitted to the Comelec by the MPEI, on behalf of Mega Pacific Consortium. 

The Court concluded that this crucial document had been missing in the first stage of the bidding.

Instead, financial statements and incorporation papers of the individual members were submitted. These were insufficient proof.

Since the first stage of the bidding, “the Comelec had no basis at all for determining that the alleged consortium really existed, and was eligible and qualified,” said the Court.

At this point, under the provisions of the request for proposal, the Comelec’s Bids and Awards Committee ought to have declared the bidder ineligible, and immediately returned the bid envelope unopened.

It didn’t.

This was a clear instance of grave abuse of discretion, “thereby negating a fair honest and competitive bidding.”

However, the Comelec was given four bilateral agreements. These were between MPEI and the four other members of the consortium—SK C&C, WeSolv, Elec­tion.com Ltd and ePLDT—and established the relationship of each of the four parties to MPEI.

There was an issue whether these agreements had been among the eligibility documents in the first envelope. In its main opinion, the Supreme Court ruled that they hadn’t—that in fact they had been submitted late and thus did nothing to correct a bidding process already blighted.

The lone dissenter, Justice Dante Tinga, argued that in fact these four agreements had been in the eligibility envelope all along and were sufficient to prove the existence of a consortium.

What was the value of these four agreements, assuming that they were submitted to the Comelec according to the schedule? The High Court, in its main opinion, adjudged them to be so sketchy in their provisions that they were virtually unenforceable.

“Absent any clear-cut statement as to the exact nature … of the parties’ … undertakings,” and “in the absence of definite indicators as the amount of investments to be contributed by each party, disbursements for expenses, … respective shares in the profits,” the parties could easily dodge their obligations, the Court said. Disagreements over money matters would surely arise.

The agreements were so cursory that they could not be the definitive documents establishing the presence of a consortium, in other words. A Comelec that knew its business, and that knew the bidder only through the paperwork it had received, would not take the agreements seriously.

(To be continued)

Part 1 |Part 3 |Part 4 |