SEVERAL lawmakers have urged the Land Transportation Office (LTO) anew to rescind its contract with foreign information technology (IT) provider — Dermalog Joint Venture (JV), which developed the P3.14 billion Land Transportation Management System (LTMS) project, due to contract breaches and violations.
House Committee on Transportation chairman and Antipolo City 2nd District Rep. Romeo Acop, during the continuation of the LTMS hearing, stressed that Dermalog violated two provisions of the Government Procurement Manual when it failed to submit the required deliverables on time despite being granted 13 deadline extensions.
Acop added that these violations already amount to P1.119 billion in liquidated damages, which “merits the filing of termination or rescission of the contract.”
“Pursuant to the Revised Implementing Rules and Regulations of the Government Procurement Reform Act (R.A. 9184), once the cumulative amount of liquidated damages reaches 10 percent of the amount of the contract, the procuring entity may rescind or terminate the contract without prejudice to other causes of action and remedies available under the circumstance,” Acop explained.
In response, LTO chief Asec. Vigor Mendoza II said the agency is finalizing its legal steps to proceed with the contract termination with the help of the Office of the Solicitor General (OSG).
Mendoza said the agency is also coordinating with the Department of Information and Communications Technology (DICT) to ensure that public service, including motor vehicle registration and driver’s license application, will not suffer amidst any legal actions that the LTO will undertake.
“The Department of Transportation (DOTr) agrees as far as the grounds for rescission of contract is concerned. They have reviewed and we have already provided them with the COA report as early as last year,” Mendoza said.
Mendoza committed to finalizing the contract termination process this week after he discussed the matter with DOTr Sec. Jaime Bautista.
SAGIP Party-list Rep. Rodante Marcoleta told Mendoza to immediately start the process as the contract is already “ripe for termination.”
Marcoleta added that the termination could ensure LTO’s complete control over the LTMS to implement changes since Dermalog repeatedly refused to turn over the source code to LTO until its contract ends next year.
It can be recalled that in the February 20 transportation committee hearing, Marcoleta also questioned the legality of the P8.2 billion Road IT Infrastructure Project, in which the LTMS was Component A, since there were no documents showing that the project splitting was approved by the National Economic and Development Authority — Investment Coordination Committee (NEDA-ICC).
Acop questioned the LTO on why it allowed a sole payment channel platform to connect to the LTMS. Paynamics charges convenience fees amounting from P60 to P80 for every successful transaction with the LTMS, including online motor vehicle registration, among others.
Acop stressed this amount is relatively higher compared to the average convenience fees of other providers, which only range from P12 to P15 as confirmed by the DICT.
Mendoza said that the Paynamics contract was signed during the previous LTO administration in October 2020. He also explained the LTO is open to adding more online payment gateways into the LTMS to prevent monopolistic businesses and lower the transaction fees but the agency is unable to do so as it has no complete control over the system due to the failure of its foreign IT contractor to submit the source and access codes of the LTMS.
It was also revealed during the hearing that Paynamics has a Joint Venture Agreement (JVA) with technology firm, Gold Gate Technology Solutions for IT transaction and financial reconciliation support.
Gold Gate president Nick Torres denied that the firm’s operation is connected with Dermalog and further admitted that its stockholder and former chairman Voltaire Encarnado was the former representative of the Dermalog JV for the LTMS project.
Dermalog’s legal counsel and resident agent in the Philippines, Atty. Anthony Peralta, confirmed Torres’s statement but clarified that Encarnado had no employer-employee relationship with the company.
