Questions for Comelec

Here we are, in the third week of May in the year of our Lord 2009, and still no vendor has been selected for the automation of the May 2010 elections. From what I have learned, there are only two bidders that may qualify. Smartmatic has been announced as qualified, and another bidder, ES&S/AMA, has a motion for reconsideration pending as of May 23. ES&S prospects appear dim.

From a project management standpoint, the window of 11 months before the elections is a recipe for disaster, especially because the COMELEC Special Bids and Awards Committee (SBAC) has yet to test the technical qualifications of the bidders. They are only at the eligibility stage. I find it worrisome that the COMELEC has come out with 25 clarificatory bulletins since the pre-bid conference. That can only mean that SBAC did not do its complete staff work before the pre-bid conference. The question also arises whether the technical advisory board gave the proper guidance.

And we are not even talking yet about the logistical challenge of providing and distributing some 82,000 election machines to some 250,000 precincts all over the archipelago!

Problematic bidding process

All the conundrum appears to stem from COMELEC’s bidding process, which has been hobbled both by difficulties laid down by the election automation law, General Procurement Reform Act and by the apparent confused and confusing decisions of the election body. 

In what follows, I ask readers to excuse the boring legalese. It is necessary to bring the crucial legal questions across and to avoid possible complaints from parties involved.

The key complaint of the disqualified bidders is that the COMELEC has been disqualifying bidders for less than substantive reasons. It disqualified many reputable suppliers without evaluating their technical proposals or product offerings. ES&S was disqualified for not having a valid “customer acceptance” for two of their largest projects (although they could prove that the projects had been completed and that the customers had paid in full). USSC/Sequoia was disqualified because their bidding consortium included a third party, newly incorporated, that was jointly owned by Sequoia and USSC. Nothing in this structure would in any way diminish the qualifications and experience of Sequoia, or limit their joint-and-several liability in the project.

Many are asking: Isn’t payment by the customer a better expression of acceptance by the customer than the written “customer acceptance”? Isn’t the formation of a new entity SOP for international corporations coming together for a specific project? Can ownership of the 60 percent of the equity really eclipse the obvious dominance of the 40 percent holder who is obviously going to provide more than what the 60 percent holder will?

Then in contrast, with respect to the Smartmatic/TIM consortium, COMELEC deferred from examining many issues until the “post qualification” session. While these post-qualification sessions are conducted in public view, the actual deliberations are not public. There has been no ability yet to post “manifestations.” It is unknown if there will be any public visibility to the resolution of the pending issues.

In view of this, I believe it is important for the public and the media to keep watch on what will happen. Certain important questions must be satisfactorily answered and these must be made public. Among these are:

1. Has the 60/40 requirement been met? ? It seems that all of the money is coming from the Smartmatic side of the consortium, so how can there truly be 60 percent Filipino equity?

2. Has Smartmatic documented who really owns the company? Their structure involves a confusing mixture of shell companies and tax havens.

3. Did Smartmatic misrepresent its prior contracts? The bidder was “Smartmatic International Corporation” (SIC) of Barbados, which is just one of many Smartmatic subsidiaries. But when they displayed a summary of the “contracts of the prior year” they were showing the contracts of other, related companies. There is nothing wrong with providing supplemental information that goes beyond the SIC contracts, but this is not what they did. The misrepresentation will be obvious if the SBAC either (a) reviews the contracts which Smartmatic was required to provide, or (b) reviews the audited financial statements of SIC, which will show revenues much too small to contain the contracts identified as belonging to them.

4. Did Smartmatic misrepresent its “largest single contract” and blacked out portions of the document to hide the misrepresentation? While the bidder is Smartmatic International Corporation, the copy of the large contract that they provided showed the supplier as being “Smartmatic [blacked out text], a subsidiary of Smartmatic International Holding B.V.” The translation of the contract says that the supplier itself is Smartmatic International Holding B.V. The customer “acceptance” says that the agreement is with “the Smartmatic Group”.

While the name of the vendor is partially blacked out (Smartmatic XXXXX), the contract identifies this vendor as having been incorporated on April 22, 2008. How could this possibly be Smartmatic International Corporation? They showed audited financial statements for 2007.Clearly incorporation was not in 2008.

It should be noted that the chairman of SBAC said: “We will require during post qualification the submission of the whole contract without any erasures; we expect to see in that contract the full name of the contracting parties.” 

The SBAC may be in for a surprise if they see the unedited contract.

Latest news

My sources in Barbados just informed me that there are seven Smartmatic-related companies in Barbados, but only one that was incorporated on April 22, 2008. Smartmatic Deployment Corporation, incorporated in April 2008, must be the corporation responsible for the largest contract. While it is unclear whether or not this contract for a related party should count for Smartmatic International Corporation, it is clear that they presented the contract as something that it is not. And the blacked-out portions were designed to support this deception. I find it extremely difficult to trust such representations which clearly manifest a deliberately confusing set of Barbados corporations.

Another Bidder Questions Smartmatic

According to NEWSBREAK, “One of the losing bidders seeking to automate next year’s national polls has cautioned the Commission on Elections against bending the bid rules to accommodate a particular vendor. In a letter to COMELEC officials, Avante International Technology Inc. president Kevin Chung scored Smartmatic International and Total Information Management Inc. (TIM) for violating the law and possibly compromising the integrity of the entire election process. Chung said there are irregularities in the counting machines’ hardware and software that the Smartmatic/TIM consortium has proposed in its bid.”

Given the above description of Smartmatic’s representations, I hope that the COMELEC SBAC will do further “due diligence” before making a final selection of the vendor.

Whither Election Automation?

All these troubling information bring us to the sad but unavoidable concern: the nation may have cause to worry whether the automation of the 2010 will really happen – or happen in the salutary way that the law envisions.

At this stage, the tell-tale signs are not good. The clock is ticking. Reputable bidders have been disqualified for dubious reasons. The COMELEC is not moving fast enough. There are more questions than answers at hand. And we haven’t even come to the really hard part yet: the testing and installation of the automation machines at precinct and nationwide level.

As a citizen long distressed by our outdated election system, I ache and pray for automated elections to finally happen in our country come May 2010. But as a former IBM executive of 25 years, I also know that an automated election system done poorly could be worse than the disease.