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Thursday, September 10, 2009

Roque et al vs COMELEC et al [3]

Antecedents | Procedural Grounds Substantive Issues | Ruling

We now turn to the central issues tendered in the petition which, in terms of subject matter, revolved around two concerns, viz: (1) the Joint Venture Agreement (JVA) of Smartmatic and TIM; and (2) the PCOS machines to be used. Petitioners veritably introduced another issue during the oral arguments, as amplified in their memorandum, i.e. the constitutionality and statutory flaw of the automation contract itself.   The petition-in-intervention confined itself to certain features of the PCOS machines.

The Joint Venture Agreement: Its Existence and Submission

The issue respecting the existence and submission of the TIM-Smartmatic JVA does not require an extended disquisition, as repairing to the records would readily provide a satisfactory answer. We note in fact that the petitioners do not appear to be earnestly pressing the said issue anymore, as demonstrated by their counsel’s practically cavalier discussion thereof during the oral argument.  When reminded, for instance, of private respondents’ insistence on having in fact submitted their JVA dated April 23, 2009, petitioners’ counsel responded as follows: “We knew your honor that there was, in fact, a joint venture agreement filed. However, because of the belated discovery that [there] were irreconcilable differences, we then made a view that this joint venture agreement was a sham, at best pro forma because it did not contain all the required stipulations in order to evidence unity of interest x x x.”[51]

Indeed, the records belie petitioners’ initial posture that TIM and Smartmatic, as joint venture partners, did not include in their submitted eligibility envelope a copy of their JVA.  The SBAC’s Post Qualification Evaluation Report (Eligibility) on TIM-Smartmatic, on page 10, shows the following entry: “Valid Joint Venture Agreement, stating among things, that the members are jointly and severally liable for the whole obligation, in case of joint venture – Documents verified compliance.”[52]

 Contrary to what the petitioners posit, the duly notarized JVA, as couched, explained the nature and the limited purpose[53] of the joint venture and expressly defined, among other things, the composition, scope, and the 60-40 capital structure of the aggroupment.[54]  The JVA also contains provisions on the management[55] and division of profits.[56]  Article 3[57] of the JVA delineates the respective participations and responsibilities of the joint venture partners in the automation project.

Given the foregoing perspective, the Court is at a loss to understand how petitioners can assert that the Smartmatic-TIM consortium has failed to prove its joint venture existence and/or to submit evidence as would enable the Comelec to know such items as who it is dealing with, which between the partners has control over the decision-making process, the amount of investment to be contributed by each partner, the parties’ shares in the profits and like details. Had petitioners only bothered to undertake the usual due diligence that comes with good judgment and examined the eligibility envelope of the Smartmatic-TIM joint venture, they would have discovered that their challenge to and arguments against the joint venture and its JVA have really no factual basis.  

It may be, as petitioners observed, that the TIM-Smartmatic joint venture remained an unincorporated aggroupment during the bid-opening and evaluation stages.  It ought to be stressed, however, that the fact of non-incorporation was without a vitiating effect on the validity of the tender offers. For the bidding ground rules, as spelled out primarily in the RFP and the clarificatory bid bulletins, does not require, for bidding purposes, that there be an incorporation of the bidding joint ventures or consortiums. In fact, Bid Bulletin Nos. 19 and 20 recognize the existence and the acceptability of proposals of unincorporated joint ventures.  In response to a poser, for example, regarding the 60% Filipino ownership requirement in a joint venture arrangement, the SBAC, in its Bid Bulletin No. 22, stated: “In an unincorporated joint venture, determination of the required Filipino participation may be made by examining the terms and conditions of the  [JVA] and other supporting financial documents submitted by the joint venture.” (Emphasis ours.)   Petitioners, to be sure, have not shown that incorporation is part of the pass/fail criteria used in determining eligibility.

Petitioners have made much of the Court’s ruling in Information Technology Foundation of the Philippines [Infotech] v. Comelec,[58] arguing in relation thereto that the partnership of Smartmatic and TIM does not meet the Court’s definition of a joint venture which requires “community of interest in the performance of the subject matter.” 

          Petitioners’ invocation of Infotech is utterly misplaced. Albeit Infotech and this case are both about modernizing the election process and bidding joint ventures, the relevant parallelism ends there. Cast as they are against dissimilar factual milieu, one cannot plausibly set Infotech side with and contextually apply to this case the ratio of Infotech. Suffice it to delve on the most glaring of differences.  In Infotech, the winning bid pertained to the consortium of Mega Pacific, a purported joint venture.  Extant records, however, do not show the formation of such joint venture, let alone its composition.  To borrow from the ponencia of then Justice, later Chief Justice, Artemio Panganiban, “there is no sign whatsoever of any [JVA], consortium agreement [or] memorandum agreement  x x x  executed among the members of the purported consortium.”[59]  There was in fine no evidence to show that the alleged joint venture partners agreed to constitute themselves into a single entity solidarily responsible for the entirety of the automation contract.  Unlike the purported Mega Pacific consortium in Infotech, the existence in this case of the bidding joint venture of Smartmatic and TIM is properly documented and spread all over the bid documents.  And to stress, TIM and Smartmatic, in their JVA, unequivocally agreed between themselves to perform their respective undertakings.  And over and beyond their commitments to each other, they undertook to incorporate, if called for by the bidding results, a JVC that shall be solidarily liable with them for any actionable breach of the automation contract.

            In Infotech, the Court chastised the Comelec for dealing with an entity, the full identity of which the poll body knew nothing about.  Taking a cue from this holding, petitioners tag the TIM-Smartmatic JVA as flawed and as one that would leave the Comelec “hanging” for the non-inclusion, as members of the joint venture, of three IT providers.  The three referred to are Jarltech International, Inc. (Jarltech), a subsidiary of Smartmatic that manufactures the Smartmatic voting machines; Dominion Voting Systems (Domino), the inventor of said PCOS machines; and 2GO Transportation System Corporation (2GO), the subcontractor responsible for the distribution of the PCOS machines throughout the country.
            Petitioners’ beef against the TIM-Smartmatic JVA is untenable.  First off, the Comelec knows the very entities whom they are dealing with, which it can hold solidary liable under the automation contract, should there be contract violation.  Secondly, there is no requirement under either RA 8436, as amended, or the RFP, that all the suppliers, manufacturers or distributors involved in the transaction should be part of the joint venture.  On the contrary, the Instruction to Bidders––as petitioners themselves admit[60]––allows the bidder to subcontract portions of the goods or services under the automation project.[61]

          To digress a bit, petitioners have insisted on the non-existence of a bona fide JVA between TIM and Smartmatic.  Failing to gain traction for their indefensible posture, they would thrust on the Court the notion of an invalid joint venture due to the non-inclusion of more companies in the existing TIM-Smartmatic joint venture.  The irony is not lost on the Court.
This brings us to the twin technical issues tendered herein bearing on the PCOS machines of Smartmatic.

At its most basic, the petition ascribes grave abuse of discretion to the Comelec for, among other things, awarding the automation project in violation of RA 8436, as amended.  Following their line, no pilot test of the PCOS technology Smartmatic-TIM offered has been undertaken; hence, the Comelec cannot conduct a nationwide automation of the 2010 polls using the machines thus offered.  Hence, the contract award to Smartmatic-TIM with their untested PCOS machines violated RA 8436, as amended by RA 9369, which mandates that with respect to the May 2010 elections and onwards, the system procured must have been piloted in at least 12 areas referred to in Sec. 6 of RA 8436, as amended.  What is more, petitioners assert, private respondents’ PCOS machines do not satisfy the minimum system capabilities set by the same law envisaged to ensure transparent and credible voting, counting and canvassing of votes.  And as earlier narrated, petitioners would subsequently add the abdication angle in their bid to nullify the automation contract.

Pilot Testing Not Necessary

Disagreeing, as to be expected, private respondents maintain that there is nothing in the applicable law requiring, as a pre-requisite for the 2010 election automation project award, that the prevailing bidder’s automation system, the PCOS in this case, be subjected to pilot testing.   Comelec echoes its co-respondents’ stance on pilot testing, with the added observation that nowhere in the statutory provision relied upon are the words “pilot testing” used.[62]  The Senate’s position and its supporting arguments match those of private respondents.

The respondents’ thesis on pilot testing and the logic holding it together are well taken.  There can be no argument about the phrase “pilot test” not being found in the law.  But does it necessarily follow that a pilot test is absolutely not contemplated in the law?  We repair to the statutory provision petitioners cited as requiring a pilot run, referring to Sec. 6 of RA 8436, as amended by RA 9369, reading as follows:  

Sec. 5.  Authority to use an Automated Election System.- To carry out the above stated-policy, the [Comelec], x x x is hereby authorized to use an automated election system or systems in the same election in different provinces, whether paper-based or a direct recording electronic election system as it may deem appropriate and practical for the process of voting, counting of votes and canvassing/consolidation and transmittal of results of electoral exercises: Providedthat for the regular national and local elections, which shall be held immediately after the effectivity of this Act, the AES shall be used in at least two highly urbanized cities and two provinces each in Luzon, Visayas, and Mindanao to be chosen by the [Comelec]Providedfurther, That local government units whose officials have been the subject of administrative charges within sixteen (16) month prior to the May 14, 2007 elections shall not be chosen.  Provided, finally, That no area shall be chosen without the consent of the Sanggunian of the local government unit concerned.  The term local government unit as used in this provision shall refer to a highly urbanized city or province.  In succeeding regular national or local elections, the AES shall be implemented. (Emphasis and underscoring added.)

RA 9369, which envisages an AES, be it paper-based or direct-recording electronic, took effect in the second week of February 2007 or thereabout.[63]  The “regular national and local elections” referred to after the “effectivity of this Act” can be no other than the May 2007 regular elections, during which time the AES shall, as the law is worded, be used in at least two highly urbanized cities and provinces in Luzon, Visayas and Mindanao.  The Court takes judicial notice that the May 2007 elections did not deploy AES, evidently due to the mix of time and funding constraints.

To the petitioners, the underscored portion of the aforequoted Sec. 6 of RA 8436 is the pilot-testing provision that Comelec failed to observe.

We are not persuaded.

Antecedents | Procedural Grounds | Substantive Issues | Ruling

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