file:information technology foundation of the phil vs comelec (3).htm

EN BANC

[G.R. No. 159139.  January 13, 2004]

INFORMATION TECHNOLOGY FOUNDATION
OF THE PHILIPPINES, MA. CORAZON
M.  AKOL, MIGUEL UY, EDUARDO H. LOPEZ, AUGUSTO C. LAGMAN, REX
C. DRILON, MIGUEL HILADO, LEY SALCEDO, and MANUEL ALCUAZ JR., petitioners,
vs. COMMISSION ON ELECTIONS; COMELEC CHAIRMAN BENJAMIN ABALOS SR.;
COMELEC BIDDING and AWARD COMMITTEE CHAIRMAN
EDUARDO D. MEJOS and MEMBERS GIDEON DE GUZMAN, JOSE F. BALBUENA, LAMBERTO P.
LLAMAS, and BARTOLOME SINOCRUZ JR.; MEGA PACIFIC eSOLUTIONS, INC.; and MEGA
PACIFIC CONSORTIUM, respondents.

D E C I S I O N

PANGANIBAN, J.:

There is grave abuse of discretion (1) when an act is done
contrary to the Constitution, the law or jurisprudence;[1]
or (2) when it is executed whimsically, capriciously or arbitrarily out of
malice, ill will or personal bias.[2]  In the present case, the Commission on
Elections approved the assailed Resolution and awarded the subject Contract not
only in clear violation of law and jurisprudence, but also in reckless
disregard of its own bidding rules and procedure.  For the automation of the counting and
canvassing of the ballots in the 2004 elections, Comelec awarded the Contract
to “Mega Pacific Consortium” an entity that had not participated in the bidding.  Despite this grant, the poll body signed the
actual automation Contract with “Mega Pacific eSolutions, Inc.,” a company that
joined the bidding but had not met the eligibility requirements.

Comelec awarded this billion-peso undertaking with inexplicable
haste, without adequately checking and observing mandatory financial, technical
and legal requirements.  It also accepted
the proferred computer hardware and software even if, at the time of the award,
they had undeniably failed to pass eight critical requirements designed to
safeguard the integrity of elections, especially the following three items:

1.     
They failed to achieve the
accuracy rating criteria of 99.9995 percent set-up by the Comelec itself

2.     
They were not able to detect
previously downloaded results at various canvassing or consolidation levels and
to prevent these from being inputted again

3.     
They were unable to print the
statutorily required audit trails of the count/canvass at different levels
without any loss of data

Because of the foregoing violations of law and the glaring grave
abuse of discretion committed by Comelec, the Court has no choice but to
exercise its solemn “constitutional duty”[3]
to void the assailed Resolution and the subject Contract.  The illegal, imprudent and hasty actions of
the Commission have not only desecrated legal and jurisprudential norms, but
have also cast serious doubts upon the poll body’s ability and capacity to
conduct automated elections.   Truly, the
pith and soul of democracy — credible, orderly, and peaceful elections — has
been put in jeopardy by the illegal and gravely abusive acts of Comelec.

The Case

Before us is a Petition[4]
under Rule 65 of the Rules of Court, seeking (1) to declare null and void
Resolution No. 6074 of the Commission on Elections (Comelec), which awarded
“Phase II of the Modernization Project of the Commission to Mega Pacific
Consortium (MPC);” (2) to enjoin the implementation of any further contract
that may have been entered into by Comelec “either with Mega Pacific Consortium
and/or Mega Pacific eSolutions, Inc. (MPEI);” and (3) to compel Comelec to
conduct a re-bidding of the project.

The Facts

The following facts are not disputed.  They were culled from official documents, the
parties’ pleadings, as well as from admissions during the Oral Argument on
October 7, 2003.

On June 7, 1995, Congress passed Republic Act 8046,[5]
which authorized Comelec to conduct a nationwide demonstration of a
computerized election system and allowed the poll body to pilot-test the system
in the March 1996 elections in the Autonomous Region in Muslim Mindanao (ARMM).

On December 22, 1997, Congress enacted Republic Act 8436[6]
authorizing Comelec to use an automated election system (AES) for the process
of voting, counting votes and canvassing/consolidating the results of the
national and local elections.  It also
mandated the poll body to acquire automated counting machines (ACMs), computer
equipment, devices and materials; and to adopt new electoral forms and printing
materials.

Initially intending to implement the automation during the May
11, 1998 presidential elections, Comelec — in its Resolution No. 2985 dated
February 9, 1998[7]
— eventually decided against full national implementation and limited the
automation to the Autonomous Region in Muslim Mindanao (ARMM).  However, due to the failure of the machines
to read correctly some automated ballots in one town, the poll body later
ordered their manual count for the entire Province of Sulu.[8]

In the May 2001 elections, the counting and canvassing of votes
for both national and local positions were also done manually, as no additional
ACMs had been acquired for that electoral exercise allegedly because of time
constraints.

On October 29, 2002, Comelec adopted in its Resolution 02-0170 a
modernization program for the 2004 elections. It resolved to conduct biddings
for the three (3) phases of its Automated Election System; namely, Phase I –
Voter Registration and Validation System; Phase II – Automated Counting and
Canvassing System; and Phase III – Electronic Transmission.

On January 24, 2003, President Gloria Macapagal-Arroyo issued
Executive Order No. 172, which allocated the sum of P2.5 billion to fund
the AES for the May 10, 2004 elections. Upon the request of Comelec, she
authorized the release of an additional P500 million.

On January 28, 2003, the Commission issued an “Invitation to
Apply for Eligibility and to Bid,” which we quote as follows:

“INVITATION TO APPLY FOR ELIGIBILITY
AND TO BID

The Commission on Elections (COMELEC), pursuant to the mandate of
Republic Act Nos. 8189 and 8436, invites interested offerors, vendors,
suppliers or lessors to apply for eligibility and to bid for the procurement by
purchase, lease, lease with option to purchase, or otherwise, supplies,
equipment, materials and services needed for a comprehensive Automated Election
System, consisting of three (3) phases: (a) registration/verification of
voters, (b) automated counting and consolidation of votes, and (c)  electronic transmission of election results,
with an approved budget of TWO BILLION FIVE HUNDRED MILLION (Php2,500,000,000)
Pesos.

Only bids from the following entities shall be entertained:

a.       Duly licensed Filipino
citizens/proprietorships;

b.       Partnerships duly organized under the laws
of the Philippines and of which at least sixty percent (60%) of the interest
belongs to citizens of the Philippines;

c.       Corporations duly organized under the
laws of the Philippines, and of which at least sixty percent (60%) of the
outstanding capital stock belongs to citizens of the Philippines;

d.       Manufacturers, suppliers and/or
distributors forming themselves into a joint venture, i.e., a group of two (2)
or more manufacturers, suppliers and/or distributors that intend to be jointly
and severally responsible or liable for a particular contract, provided that
Filipino ownership thereof shall be at least sixty percent (60%); and

e.       Cooperatives duly registered with the
Cooperatives Development Authority.

Bid documents for the three (3) phases may be obtained starting 10
February 2003, during office hours from the Bids and Awards Committee (BAC)
Secretariat/Office of Commissioner Resurreccion Z. Borra, 7^th Floor,
Palacio del Governador, Intramuros, Manila, upon payment at the Cash Division,
Commission on Elections, in cash or cashier’s check, payable to the Commission
on Elections, of a non-refundable amount of FIFTEEN THOUSAND PESOS
(Php15,000.00) for each phase.  For this
purpose, interested offerors, vendors, suppliers or lessors have the option to
participate in any or all of the three (3) phases of the comprehensive
Automated Election System.

A Pre-Bid Conference is scheduled on 13 February 2003, at 9:00 a.m.
at the Session Hall, Commission on Elections, Postigo Street, Intramuros,
Manila.  Should there be questions on the
bid documents, bidders are required to submit their queries in writing to the
BAC Secretariat prior to the scheduled Pre-Bid Conference.

Deadline for submission to the BAC of applications for eligibility
and bid envelopes for the supply of the comprehensive Automated Election System
shall be at the Session Hall, Commission on Elections, Postigo Street,
Intramuros, Manila on 28 February 2003 at 9:00 a.m.

The COMELEC reserves the right to review the qualifications of the
bidders after the bidding and before the contract is executed.  Should such review uncover any
misrepresentation made in the eligibility statements, or any changes in the
situation of the bidder to materially downgrade the substance of such
statements, the COMELEC shall disqualify the bidder upon due notice without any
obligation whatsoever for any expenses or losses that may be incurred by it in
the preparation of its bid.”[9]

On February 11, 2003, Comelec issued Resolution No. 5929
clarifying certain eligibility criteria for bidders and the schedule of
activities for the project bidding, as follows:

“1.)    Open to Filipino and foreign corporation
duly registered and licensed to do business and is actually doing business in
the Philippines, subject to Sec. 43 of RA 9184 (An Act providing In the
Modernization Standardization and Regulation of the Procurement Activities of
the Government and for other purposes etc.)

2.)     Track Record:

a)     For counting machines – should have been
used in at least one (1) political exercise with no less than Twenty Million
Voters;

b)     For verification of voters – the reference
site of an existing data base installation using Automated Fingerprint
Identification System (AFIS) with at least Twenty Million.

3.)     Ten percent (10%) equity requirement shall be
based on the total project cost; and

4.)     Performance bond shall be twenty percent
(20%) of the bid offer.

RESOLVED moreover, that:

1)  A. Due
to the decision that the eligibility requirements and the rest of the Bid
documents shall be released at the same time, and the memorandum of Comm.
Resurreccion Z. Borra dated February 7, 2003, the documents to be released on
Friday, February 14, 2003 at 2:00 o’clock p.m. shall be the eligibility
criteria, Terms of Reference (TOR) and other pertinent documents;

B.  Pre-Bid conference shall be on February 18,
2003; and

C.  Deadline for the submission and receipt of
the Bids shall be on March 5, 2003.

2) The aforementioned documents will be available at the following
offices:

a)
Voters Validation: Office of Comm. Javier

b) Automated
Counting Machines: Office of Comm. Borra

c) Electronic
Transmission: Office of Comm. Tancangco”[10]

On February 17, 2003, the poll body released the Request for
Proposal (RFP) to procure the election automation machines.  The Bids and Awards Committee (BAC) of
Comelec convened a pre-bid conference on February 18, 2003 and gave prospective
bidders until March 10, 2003 to submit their respective bids.

Among others, the RFP provided that bids from manufacturers,
suppliers and/or distributors forming themselves into a joint venture may be
entertained, provided that the Philippine ownership thereof shall be at least
60 percent.  Joint venture is defined in the RFP as “a group of two or more
manufacturers, suppliers and/or distributors that intend to be jointly and
severally responsible or liable for a particular contract.”[11]

Basically, the public bidding was to be conducted under a two-envelope/two stage system.  The bidder’s first envelope or the
Eligibility Envelope should establish the bidder’s eligibility to bid and its
qualifications to perform the acts if accepted. 
On the other hand, the second envelope would be the Bid Envelope
itself.  The RFP outlines the bidding
procedures as follows:

“25.   Determination of Eligibility of Prospective
Bidders

“25.1 The eligibility envelopes of prospective
Bidders shall be opened first to determine their eligibility. In case any of
the requirements specified in Clause 20 is missing from the first bid envelope,
the BAC shall declare said prospective Bidder as ineligible to bid.  Bid envelopes of ineligible Bidders shall be
immediately returned unopened.

“25.2 The eligibility of prospective Bidders shall be
determined using simple ‘pass/fail’ criteria and shall be determined as either
eligible or ineligible.  If the
prospective Bidder is rated ‘passed’ for all the legal, technical and financial
requirements, he shall be considered eligible. 
If the prospective Bidder is rated ‘failed’ in any of the requirements,
he shall be considered ineligible.

“26.   Bid Examination/Evaluation

“26.1 The
BAC will examine the Bids to determine whether they are complete, whether any
computational errors have been made, whether required securities have been
furnished, whether the documents have been properly signed, and whether the
Bids are generally in order.

“26.2 The BAC shall check the submitted documents of
each Bidder against the required documents enumerated under Clause 20, to
ascertain if they are all present in the Second bid envelope (Technical
Envelope).  In case one (1) or more of
the required documents is missing, the BAC shall rate the Bid concerned as
‘failed’ and immediately return to the Bidder its Third bid envelope (Financial
Envelope) unopened.   Otherwise, the BAC
shall rate the first bid envelope as ‘passed’.

“26.3 The BAC shall immediately open the Financial
Envelopes of the Bidders whose Technical Envelopes were passed or rated on or
above the passing score.  Only Bids that
are determined to contain all the bid requirements for both components shall be
rated ‘passed’ and shall immediately be considered for evaluation and
comparison.

“26.4 In the opening and examination of the Financial
Envelope, the BAC shall announce and tabulate the Total Bid Price as
calculated.  Arithmetical errors will be
rectified on the following basis: If there is a discrepancy between words and
figures, the amount in words will prevail. 
If there is a discrepancy between the unit price and the total price
that is obtained by multiplying the unit price and the quantity, the unit price
shall prevail and the total price shall be corrected accordingly.  If there is a discrepancy between the Total
Bid Price and the sum of the total prices, the sum of the total prices prevail
and the Total Bid Price shall be corrected accordingly.

“26.5 Financial Proposals which do not clearly state
the Total Bid Price shall be rejected. 
Also, Total Bid Price as calculated that exceeds the approved budget for
the contract shall also be rejected.

27.     Comparison
of Bids

27.1   The bid price shall be deemed to embrace all
costs, charges and fees associated with carrying out all the elements of the
proposed Contract, including but not limited to, license fees, freight charges
and taxes.

27.2   The BAC shall establish the calculated prices
of all Bids rated ‘passed’ and rank the same in ascending order.

x x x                                         x
x x                                  x x x

“29.   Postqualification

“29.1 The BAC will determine to its satisfaction
whether the Bidder selected as having submitted the lowest calculated bid is
qualified to satisfactorily perform the Contract.

“29.2 The determination will take into account the
Bidder’s financial, technical and production capabilities/resources.  It will be based upon an examination of the
documentary evidence of the Bidder’s qualification submitted by the Bidder as well
as such other information as the BAC deems necessary and appropriate.

“29.3 A bid determined as not substantially
responsive will be rejected by the BAC and may not subsequently be made
responsive by the Bidder by correction of the non-conformity.

“29.4 The BAC may waive any informality or
non-conformity or irregularity in a bid which does not constitute a material
deviation, provided such waiver does not prejudice or affect the relative
ranking of any Bidder.

“29.5 Should the BAC find that the Bidder complies
with the legal, financial and technical requirements, it shall make an
affirmative determination which shall be a prerequisite for award of the
Contract to the Bidder.  Otherwise, it
will make a negative determination which will result in rejection of the
Bidder’s bid, in which event the BAC will proceed to the next lowest calculated
bid to make a similar determination of that Bidder’s capabilities to perform satisfactorily.”[12]

Out of the 57 bidders,[13]
the BAC found MPC and the Total Information Management Corporation (TIMC)
eligible.  For technical evaluation, they
were referred to the BAC’s Technical Working Group (TWG) and the Department of
Science and Technology (DOST).

In its Report on the Evaluation of the Technical Proposals on
Phase II, DOST said that both MPC and TIMC had obtained a number of failed
marks in the technical evaluation. 
Notwithstanding these failures, Comelec en banc, on April 15, 2003,
promulgated Resolution No. 6074 awarding the project to MPC. The Commission
publicized this Resolution and the award of the project to MPC on May 16,
2003. 

On May 29, 2003, five individuals and entities (including the
herein Petitioners Information Technology Foundation of the Philippines, represented by its president, Alfredo
M. Torres; and Ma. Corazon Akol) wrote a letter[14]
to Comelec Chairman Benjamin Abalos Sr. 
They protested the award of the Contract to Respondent MPC “due to
glaring irregularities in the manner in which the bidding process had been
conducted.”  Citing therein the
noncompliance with eligibility as well as technical and procedural requirements
(many of which have been discussed at length in the Petition), they sought a
re-bidding. 

In a letter-reply dated June 6, 2003,[15]
the Comelec chairman — speaking through
Atty. Jaime Paz, his head executive assistant — rejected the protest and
declared that the award “would stand up to the strictest scrutiny.”

Hence, the present Petition.[16]

The Issues

In their Memorandum, petitioners raise the following issues for our
consideration:

“1.     The COMELEC awarded and contracted with a
non-eligible entity; x x x

“2.     Private respondents failed to pass the
Technical Test as required in the RFP. Notwithstanding, such failure was
ignored. In effect, the COMELEC changed the rules after the bidding in effect
changing the nature of the contract bidded upon.

“3.     Petitioners have locus standi.

“4.     Instant Petition is not premature. Direct
resort to the Supreme Court is justified.”[17]

In the main, the substantive
issue is whether the Commission on Elections, the agency vested with the
exclusive constitutional mandate to oversee elections, gravely abused its
discretion when, in the exercise of its administrative functions, it awarded to
MPC the contract for the second phase of the comprehensive Automated Election
System.

Before discussing the validity of the award to MPC, however, we
deem it proper to first pass upon the procedural
issues: the legal standing of petitioners and the alleged prematurity of the
Petition.

This Court’s Ruling

The Petition is meritorious.

First Procedural Issue:

Locus Standi of Petitioners

Respondents chorus that petitioners do not possess locus standi, inasmuch as they are not
challenging the validity or constitutionality of RA 8436.  Moreover, petitioners supposedly admitted
during the Oral Argument that no law had been violated by the award of the
Contract.  Furthermore, they allegedly
have no actual and material interest in the Contract and, hence, do not stand
to be injured or prejudiced on account of the award.

On the other hand, petitioners — suing in their capacities as
taxpayers, registered voters and concerned citizens — respond that the issues
central to this case are “of transcendental importance and of national
interest.” Allegedly, Comelec’s flawed bidding and questionable award of the
Contract to an unqualified entity would impact directly on the success or the
failure of the electoral process.  Thus,
any taint on the sanctity of the ballot as the expression of the will of the
people would inevitably affect their faith in the democratic system of
government.  Petitioners further argue
that the award of any contract for automation involves disbursement of public
funds in gargantuan amounts; therefore, public interest requires that the laws
governing the transaction must be followed strictly. 

We agree with petitioners. 
Our nation’s political and economic future virtually hangs in the
balance, pending the outcome of the 2004 elections. Hence, there can be no
serious doubt that the subject matter of this case is “a matter of public
concern and imbued with public interest”;[18]
in other words, it is of “paramount public interest”[19]
and “transcendental importance.”[20]  This fact alone would justify relaxing the
rule on legal standing, following the liberal policy of this Court whenever a
case involves “an issue of overarching significance to our society.”[21]  Petitioners’ legal standing should therefore
be recognized and upheld.

Moreover, this Court has held that taxpayers are allowed to sue
when there is a claim of “illegal disbursement of public funds,”[22]
or if public money is being “deflected to any improper purpose”;[23]
or when petitioners seek to restrain respondent from “wasting public funds
through the enforcement of an invalid or unconstitutional law.”[24]  In the instant case, individual petitioners,
suing as taxpayers, assert a material interest in seeing to it that public
funds are properly and lawfully used.  In
the Petition, they claim that the bidding was defective, the winning bidder not
a qualified entity, and the award of the Contract contrary to law and
regulation.  Accordingly, they seek to
restrain respondents from implementing the Contract and, necessarily, from making any unwarranted expenditure of public funds
pursuant thereto.  Thus, we hold that
petitioners possess locus standi.

Second Procedural Issue:

Alleged Prematurity Due to Non-Exhaustion

of Administrative Remedies

Respondents claim that petitioners acted prematurely, since they
had not first utilized the protest mechanism available to them under RA 9184,
the Government Procurement Reform Act, for the settlement of disputes
pertaining to procurement contracts.

Section 55 of RA 9184 states that protests against decisions of
the Bidding and Awards Committee in all stages of procurement may be lodged
with the head of the procuring entity by filing a verified position paper and
paying a protest fee.  Section 57 of the
same law mandates that in no case shall any such protest stay or delay the
bidding process, but it must first be resolved before any award is made.

On the other hand, Section 58 provides that court action may be
resorted to only after the protests contemplated by the statute shall have been
completed.  Cases filed in violation of
this process are to be dismissed for lack of jurisdiction.  Regional trial courts shall have jurisdiction
over final decisions of the head of the procuring entity, and court actions
shall be instituted pursuant to Rule 65 of the 1997 Rules of Civil Procedure.

Respondents assert that throughout the bidding process,
petitioners never questioned the BAC Report finding MPC eligible to bid and
recommending the award of the Contract to it (MPC).  According to respondents, the Report should
have been appealed to the Comelec en banc, pursuant to the aforementioned
sections of RA 9184.  In the absence of
such appeal, the determination and recommendation of the BAC had become final.

The Court is not persuaded.

Respondent Comelec came out with its en banc Resolution No. 6074 dated
April 15, 2003, awarding the project to Respondent MPC even before the BAC
managed to issue its written report and recommendation on April 21, 2003.  Thus, how could petitioners have appealed the
BAC’s recommendation or report to the head of the procuring entity (the
chairman of Comelec), when the Comelec en banc had already approved the award of the contract to MPC even before
petitioners learned of the BAC recommendation? 

It is claimed[25]
by Comelec that during its April 15, 2003 session, it received and approved the
verbal report and recommendation of
the BAC for the award of the Contract to MPC, and that the BAC subsequently
re-affirmed its verbal report and recommendation by submitting it in writing on
April 21, 2003.  Respondents insist that
the law does not require that the BAC Report be in writing before Comelec can
act thereon; therefore, there is allegedly nothing irregular about the Report
as well as the en banc Resolution.

However, it is obvious that petitioners could have appealed the
BAC’s report and recommendation to the head of the procuring entity (the
Comelec chair) only upon their discovery thereof, which at the very
earliest would have been on April 21, 2003, when the BAC actually put its
report in writing and finally released it. 
Even then, what would have been the use of protesting/appealing the
report to the Comelec chair, when by that time the Commission en banc (including the chairman himself) had
already approved the BAC Report and awarded the Contract to MPC? 

And even assuming arguendo
that petitioners had somehow gotten wind of the verbal BAC report on April 15,
2003 (immediately after the en banc session), at that point the Commission en
banc had already given its approval to the BAC Report along with the award to
MPC.  To
put it bluntly, the Comelec en banc
itself made it legally impossible for petitioners to avail themselves of the
administrative remedy that the Commission is so impiously harping on.  There is no doubt that they had not been
accorded the opportunity to avail themselves of the process provided under
Section 55 of RA 9184, according to which a protest against a decision of the
BAC may be filed with the head of the
procuring entity.  Nemo tenetur ad impossible,[26]
to borrow private respondents’ favorite Latin excuse.[27]

Some
Observations on the

BAC Report to the
Comelec

We shall return to this issue of alleged prematurity shortly, but
at this interstice, we would just want to put forward a few observations
regarding the BAC Report and the Comelec en banc’s approval thereof.

First, Comelec contends
that there was nothing unusual about the fact that the Report submitted by the
BAC came only after the former had already awarded the Contract, because the
latter had been asked to render its report and recommendation orally during the
Commission’s en banc session on April 15, 2003. Accordingly, Comelec supposedly
acted upon such oral recommendation and approved the award to MPC on the same
day, following which the recommendation was subsequently reduced into writing
on April 21, 2003. While not entirely outside the realm of the possible, this
interesting and unique spiel does not speak well of the process that Comelec
supposedly went through in making a critical decision with respect to a
multi-billion-peso contract.

We can imagine that anyone else standing in the shoes of the
Honorable Commissioners would have been extremely conscious of the overarching
need for utter transparency.  They would
have scrupulously avoided the slightest hint of impropriety, preferring to
maintain an exacting regularity in the performance of their duties, instead of
trying to break a speed record in the award of multi-billion-peso
contracts.  After all, between April 15
and April 21 were a mere six (6) days. 
Could Comelec not have waited out six more days for the written report
of the BAC, instead of rushing pell-mell into the arms of MPC?  Certainly, respondents never cared to explain
the nature of the Commission’s dire need to act immediately without awaiting
the formal, written BAC Report.

In short, the Court finds it difficult to reconcile the uncommon
dispatch  with which Comelec acted to
approve the multi-billion-peso deal, with its claim of having been impelled by
only the purest and most noble of motives. 

At any rate, as will be discussed later on, several other factors
combine to lend negative credence to
Comelec’s tale.

Second, without
necessarily ascribing any premature malice or premeditation on the part of the
Comelec officials involved, it should nevertheless be conceded that this cart-before-the-horse
maneuver (awarding of the Contract ahead of the BAC’s written report) would
definitely serve as a clever and effective way of averting and frustrating any
impending protest under Section 55.

Having made the foregoing observations, we now go back to the
question of exhausting administrative remedies. 
Respondents may not have realized it, but the letter addressed to
Chairman Benjamin Abalos Sr. dated May 29, 2003[28]
serves to eliminate the prematurity issue as it was an actual written protest
against the decision of the poll body to award the Contract.  The letter was signed by/for, inter alia, two of herein petitioners:
the Information Technology Foundation of the Philippines, represented by its
president, Alfredo M. Torres; and Ma. Corazon Akol.

Such letter-protest is sufficient
compliance with the requirement to exhaust administrative remedies
particularly because it hews closely to the procedure outlined in Section 55 of
RA 9184.

And even without that May 29, 2003 letter-protest, the Court
still holds that petitioners need not exhaust administrative remedies in the
light of Paat v. Court of Appeals.[29]  Paat
enumerates the instances when the rule on exhaustion of administrative remedies
may be disregarded, as follows: 

“(1)    when there is a violation of due process,

(2)     when the issue involved is purely a legal
question,

(3)     when the administrative action is patently
illegal amounting to lack or excess of jurisdiction,

(4)     when there is estoppel on the part of the
administrative agency concerned,

(5)     when there is irreparable injury,

(6)     when the respondent is a department
secretary whose acts as an alter ego of
the President bears the implied and assumed approval of the latter,

(7)     when to require exhaustion of administrative
remedies would be unreasonable,

(8)     when it would amount to a nullification of
a claim,

(9)     when the subject matter is a private land
in land case proceedings,

(10)   when the rule does not provide a plain,
speedy and adequate remedy, and

(11)   when there are circumstances indicating the
urgency of judicial intervention.”[30]

The present controversy precisely falls within the
exceptions listed as Nos. 7, 10 and 11: “(7) when to require exhaustion of administrative
remedies would be unreasonable; (10) when the rule does not provide a plain,
speedy and adequate remedy, and (11) when there are circumstances indicating
the urgency of judicial intervention.” As already stated, Comelec itself
made the exhaustion of administrative remedies legally impossible or, at the
very least, “unreasonable.” 

In any event, the peculiar circumstances surrounding the
unconventional rendition of the BAC Report and the precipitate awarding of the
Contract by the Comelec en banc — plus the fact that it was racing to have its
Contract with MPC implemented in time for the elections in May 2004 (barely
four months away) — have combined to bring about the urgent need for judicial
intervention, thus prompting this Court to dispense with the procedural
exhaustion of administrative remedies in this case.

Main Substantive Issue:

Validity of the Award to MPC

We come now to the meat of the controversy.  Petitioners contend that the award is invalid, since Comelec gravely abused
its discretion when it did the following:

1.  Awarded the Contract to
MPC though it did not even participate in the bidding

2.  Allowed MPEI to
participate in the bidding despite its failure to meet the mandatory
eligibility requirements

3.  Issued its Resolution of
April 15, 2003 awarding the Contract to MPC despite the issuance by the BAC of
its Report, which formed the basis of the assailed Resolution, only on April
21, 2003[31]

4.  Awarded the Contract,
notwithstanding the fact that during the bidding process, there were violations
of the mandatory requirements of RA 8436 as well as those set forth in
Comelec’s own Request for Proposal  on
the automated election system

5.  Refused to declare a
failed bidding and to conduct a re-bidding despite the failure of the bidders
to pass the technical tests conducted by the Department of Science and
Technology

6.  Failed to follow
strictly the provisions of RA 8436 in the conduct of the bidding for the
automated counting machines

After reviewing the slew of pleadings as well as the matters
raised during the Oral Argument, the Court deems it sufficient to focus
discussion on the following major areas
of concern that impinge on the issue of grave abuse of discretion:

A.      Matters pertaining to
the identity, existence and eligibility of MPC as a bidder

B.      Failure of the
automated counting machines (ACMs) to pass the DOST technical tests

C.      Remedial measures and
re-testings undertaken by Comelec and DOST after the award, and their effect on
the present controversy

A.

Failure to Establish the Identity,

Existence and Eligibility of the

Alleged Consortium as a Bidder

On the question of the identity and the existence of the real
bidder, respondents insist that, contrary to petitioners’ allegations, the
bidder was not Mega Pacific eSolutions, Inc. (MPEI), which was incorporated
only on February 27, 2003, or 11 days prior to the bidding itself.  Rather, the bidder was Mega Pacific
Consortium (MPC), of which MPEI was but a part. 
As proof thereof, they point to the March 7, 2003 letter of intent to
bid, signed by the president of MPEI allegedly for and on behalf of MPC.  They also call attention to the official
receipt issued to MPC, acknowledging payment for the bidding documents, as
proof that it was the “consortium” that participated in the bidding process.

We do not agree.  The March
7, 2003 letter, signed by only one signatory — “Willy U. Yu, President, Mega
Pacific eSolutions, Inc., (Lead Company/ Proponent) For: Mega Pacific
Consortium” — and without any further proof, does not by itself prove the
existence of the consortium.  It does not
show that MPEI or its president have been duly pre-authorized by the other
members of the putative consortium to represent them, to bid on their
collective behalf and, more important, to commit them jointly and severally to
the bid undertakings.  The letter is
purely self-serving and uncorroborated.

Neither does an official receipt issued to MPC, acknowledging
payment for the bidding documents, constitute proof that it was the purported
consortium that participated in the bidding. 
Such receipts are issued by cashiers without any legally sufficient
inquiry as to the real identity or existence of the supposed payor.

To assure itself properly of the due existence (as well as
eligibility and qualification) of the putative consortium, Comelec’s BAC should
have examined the bidding documents submitted on behalf of MPC.  They would have easily discovered the
following fatal flaws.

Two-Envelope,

Two-Stage System

As stated earlier in our factual presentation, the public bidding
system designed by Comelec under its RFP (Request for Proposal for the
Automation of the 2004 Election) mandated the use of a two-envelope, two-stage
system.  A bidder’s first envelope (Eligibility Envelope) was meant to establish its
eligibility to bid and its qualifications and capacity to perform the contract
if its bid was accepted, while the second
envelope would be the Bid Envelope itself.

The Eligibility Envelope was to contain legal documents such as articles of incorporation, business
registrations, licenses and permits, mayor’s permit, VAT certification, and so
forth; technical documents containing
documentary evidence to establish the track record of the bidder and its
technical and production capabilities to perform the contract; and financial documents, including audited
financial statements for the last three years, to establish the bidder’s
financial capacity.

In the case of a consortium or joint venture desirous of
participating in the bidding, it goes without saying that the Eligibility
Envelope would necessarily have to include a copy of the joint venture
agreement, the consortium agreement or memorandum of agreement — or a business
plan or some other instrument of similar import — establishing the due
existence, composition and scope of such aggrupation.  Otherwise,
how would Comelec know who it was dealing with, and whether these parties are
qualified and capable of delivering the products and services being offered for
bidding?[32]

In the instant case, no such instrument was submitted to Comelec
during the bidding process.  This fact
can be conclusively ascertained by scrutinizing the two-inch thick “Eligibility
Requirements” file submitted by Comelec last October 9, 2003, in partial
compliance with this Court’s instructions given during the Oral Argument.  This file purports to replicate the
eligibility documents originally submitted to Comelec by MPEI allegedly on
behalf of MPC, in connection with the bidding conducted in March 2003.  Included in the file are the incorporation
papers and financial statements of the members of the supposed consortium and
certain certificates, licenses and permits issued to them.

However, there is no sign whatsoever of any joint venture agreement, consortium agreement, memorandum of
agreement, or business plan executed
among the members of the purported consortium.

The only logical conclusion is that no such agreement was ever
submitted to the Comelec for its consideration, as part of the bidding process.

It thus follows that, prior the award of the Contract, there was
no documentary or other basis for Comelec to conclude that a consortium had
actually been formed amongst MPEI, SK C&C and WeSolv, along with
Election.com and ePLDT.[33]  Neither was there anything to indicate the
exact relationships between and among these firms; their diverse roles,
undertakings and prestations, if any, relative to the prosecution of the
project, the extent of their respective investments (if any) in the supposed
consortium or in the project; and the precise nature and extent of their
respective liabilities with respect to the contract being offered for
bidding.  And apart from the self-serving
letter of March 7, 2003, there was not even any indication that MPEI was the lead
company duly authorized to act on behalf of the others.

So, it necessarily follows that, during the bidding process,
Comelec had no basis at all for determining that the alleged consortium really
existed and was eligible and qualified; and that the arrangements among the
members were satisfactory and sufficient to ensure delivery on the Contract and
to protect the government’s interest.

Notwithstanding such deficiencies, Comelec still deemed the
“consortium” eligible to participate in the bidding, proceeded to open its
Second Envelope, and eventually awarded the bid to it, even though — per the
Comelec’s own RFP — the BAC should have declared the MPC ineligible to bid and
returned the Second (Bid) Envelope unopened. 

Inasmuch as Comelec should not have considered MPEI et al. as
comprising a consortium or joint venture, it should not have allowed them to
avail themselves of the provision in Section 5.4 (b) (i) of the IRR for RA 6957
(the Build-Operate-Transfer Law), as amended by RA 7718.  This provision states in part that a joint
venture/consortium proponent shall be evaluated based on the individual or collective experience of the member-firms of
the joint venture or consortium and of the contractor(s) that it has engaged
for the project.  Parenthetically,
respondents have uniformly argued that the said IRR of RA 6957, as amended,
have suppletory application to the instant case.

Hence, had the proponent MPEI been evaluated based solely on its
own experience, financial and operational track record or lack thereof, it
would surely not have qualified and would have been immediately considered
ineligible to bid, as respondents readily admit.

At any rate, it is clear that Comelec
gravely abused its discretion in arbitrarily failing to observe its own
rules, policies and guidelines with respect to the bidding process, thereby
negating a fair, honest and competitive bidding.

Commissioners
Not

Aware of
Consortium

In this regard, the Court is beguiled by the statements of
Commissioner Florentino Tuason Jr., given in open court during the Oral
Argument last October 7, 2003.  The good
commissioner affirmed that he was aware, of
his own personal knowledge, that there had indeed been a written agreement
among the “consortium” members,[34]
although it was an internal matter among them,[35]
and of the fact that it would be presented by counsel for private respondent.[36]

However, under questioning by Chief Justice Hilario G.
Davide  Jr. and Justice Jose C. Vitug,
Commissioner Tuason in effect admitted that, while he was the commissioner-in-charge
of Comelec’s Legal Department, he had
never seen, even up to that late date, the agreement he spoke of.[37]  Under further questioning, he was likewise
unable to provide any information regarding the amounts invested into the
project by several members of the claimed consortium.[38]  A short while later, he admitted that the Commission had not taken a look at the
agreement (if any).[39]

He tried to justify his position by claiming that he was not a
member of the BAC.  Neither was he the
commissioner-in-charge of the Phase II Modernization project (the automated
election system); but that, in any case, the BAC and the Phase II Modernization
Project Team did look into the aspect of the composition of the consortium.

It seems to the Court, though, that even if the BAC or the Phase
II Team had taken charge of evaluating the eligibility, qualifications and
credentials of the consortium-bidder, still, in all probability, the former
would have referred the task to Commissioner Tuason, head of Comelec’s Legal
Department.  That task was the
appreciation and evaluation of the legal effects and consequences of the terms,
conditions, stipulations and covenants contained in any joint venture
agreement, consortium agreement or a similar document — assuming of course
that any of these was available at the time. 
The fact that Commissioner Tuason was barely aware of the situation
bespeaks the complete absence of such document, or the utter failure or neglect
of the Comelec to examine it — assuming it was available at all — at the time
the award was made on April 15, 2003.

In any event, the Court notes for the record that Commissioner
Tuason basically contradicted his statements in open court about there being
one written agreement among all the consortium members, when he subsequently referred[40]
to the four (4) Memoranda of Agreement (MOAs) executed by them.[41]

At this juncture, one might ask: What, then, if there are four
MOAs instead of one or none at all? 
Isn’t it enough that there are these corporations coming together to
carry out the automation project?  Isn’t
it true, as respondent aver, that nowhere in the RFP issued by Comelec is it
required that the members of the joint venture execute a single written
agreement to prove the existence of a joint venture.  Indeed, the intention to be jointly and
severally liable may be evidenced not only by a single joint venture agreement,
but also by supplementary documents executed by the parties signifying such
intention.  What then is the big deal?

The problem is not that there are four agreements instead of only
one.  The problem is that Comelec never bothered to check.  It never based its decision on documents or
other proof that would concretely establish the existence of the claimed
consortium or joint venture or agglomeration. 
It relied merely on the self-serving representation in an uncorroborated
letter signed by only one individual, claiming that his company represented a
“consortium” of several different corporations. It concluded forthwith that a
consortium indeed existed, composed of such and such members, and thereafter
declared that the entity was eligible to bid.

True, copies of financial statements and incorporation papers of
the alleged “consortium” members were submitted.  But these papers did not establish the
existence of a consortium, as they could have been provided by the companies
concerned for purposes other than to prove that they were part of a consortium
or joint venture.  For instance, the
papers may have been intended to show that those companies were each qualified
to be a sub-contractor (and nothing more) in a major project.  Those documents did not by themselves support
the assumption that a consortium or joint venture existed among the companies.

In brief, despite the absence
of competent proof as to the existence and eligibility of the alleged
consortium (MPC), its capacity to deliver on the Contract, and the members’
joint and several liability therefor, Comelec nevertheless assumed that such consortium existed and was eligible.  It then went ahead and considered the bid of
MPC, to which the Contract was eventually awarded, in gross violation of the
former’s own bidding rules and procedures contained in its RFP.  Therein lies Comelec’s grave abuse of discretion.

Sufficiency
of the

Four Agreements

Instead of one multilateral agreement executed by, and effective
and binding on, all the five “consortium members” — as earlier claimed by
Commissioner Tuason in open court — it turns out that what was actually
executed were four (4) separate and distinct
bilateral Agreements.[42]  Obviously, Comelec was furnished copies of
these Agreements only after the
bidding process had been terminated, as these were not included in the
Eligibility Documents.  These Agreements
are as follows:

1.     
A Memorandum of Agreement between
MPEI and SK C&C

2.     
A Memorandum of Agreement between
MPEI and WeSolv

3.     
A “Teaming Agreement” between MPEI
and Election.com Ltd.

4.     
A “Teaming Agreement” between MPEI
and ePLDT.

In sum, each of the four different and separate bilateral Agreements
is valid and binding only between MPEI and the other contracting party, leaving
the other “consortium” members total strangers thereto.  Under this setup, MPEI dealt separately with each of the “members,”
and the latter (WeSolv, SK C&C, Election.com, and ePLDT) in turn had
nothing to do with one another, each dealing only with MPEI.

Respondents assert that these four Agreements were sufficient for
the purpose of enabling the corporations to still qualify (even at that late
stage) as a consortium or joint venture, since the first two Agreements had
allegedly set forth the joint and several
undertakings among the parties, whereas the latter two clarified the parties’ respective roles with regard to the Project,
with MPEI being the independent contractor and Election.com and ePLDT the
subcontractors.

Additionally, the use of the phrase “particular contract” in the
Comelec’s Request for Proposal (RFP), in connection with the joint and several
liabilities of companies in a joint venture, is taken by them to mean that all
the members of the joint venture need not be solidarily liable for the entire
project or joint venture, because it is sufficient that the lead company and
the member in charge of a particular contract or aspect of the joint venture
agree to be solidarily liable.

At this point, it must be stressed most vigorously that the
submission of the four bilateral Agreements to Comelec after the end of the bidding process did nothing to eliminate the
grave abuse of discretion it had already
committed on April 15, 2003.

Deficiencies
Have

Not Been “Cured”

In any event, it is also claimed that the automation Contract
awarded by Comelec incorporates all documents executed by the “consortium”
members, even if these documents are not referred to therein.  The basis of this assertion appears to be the
passages from Section 1.4 of the Contract, which is reproduced as follows:

“All Contract Documents shall form part of the Contract even if
they or any one of them is not referred to or mentioned in the Contract as
forming a part thereof.  Each of the
Contract Documents shall be mutually complementary and explanatory of each
other such that what is noted in one although not shown in the other shall be
considered contained in all, and what is required by any one shall be as
binding as if required by all, unless one item is a correction of the other.

“The intent of the Contract Documents is the proper, satisfactory
and timely execution and completion of the Project, in accordance with the
Contract Documents.  Consequently, all
items necessary for the proper and timely execution and completion of the
Project shall be deemed included in the Contract.”

Thus, it is argued that whatever perceived deficiencies there
were in the supplementary contracts — those entered into by MPEI and the other
members of the “consortium” as regards their joint and several undertakings —
have been cured.  Better still, such
deficiencies have supposedly been prevented from arising as a result of the
above-quoted provisions, from which it can be immediately established that each
of the members of MPC assumes the same joint and several liability as the other
members.

The foregoing argument is unpersuasive.  First,
the contract being referred to, entitled “The Automated Counting and Canvassing
Project Contract,” is between Comelec and MPEI,
not the alleged consortium, MPC.  To
repeat, it is MPEI — not MPC — that is a party to the Contract.  Nowhere
in that Contract is there any mention of a consortium or joint venture, of
members thereof, much less of joint and several liability.  Supposedly executed sometime in May 2003,[43]
the Contract bears a notarization date of June 30, 2003, and contains  the signature of Willy U. Yu signing as
president of MPEI (not for and on behalf of MPC), along with that of the
Comelec chair.  It provides in Section
3.2 that MPEI (not MPC) is to supply the Equipment and perform the Services
under the Contract, in accordance with the appendices thereof; nothing
whatsoever is said about any consortium or joint venture or partnership.

Second, the portions of
Section 1.4 of the Contract reproduced above do not have the effect of curing (much less preventing) deficiencies
in the bilateral agreements entered into by MPEI with the other members of the
“consortium,” with respect to their joint and several liabilities.  The term “Contract Documents,” as used in the
quoted passages of Section 1.4, has a well-defined meaning and actually refers
only to the following documents:

1.     
The Contract itself along with its
appendices

2.     
The Request for Proposal (also
known as “Terms of Reference”) issued by the Comelec, including the Tender
Inquiries and Bid Bulletins

3.     
The Tender Proposal submitted by
MPEI

In other words, the term “Contract Documents” cannot be
understood as referring to or including the MOAs and the Teaming Agreements
entered into by MPEI with SK C&C, WeSolv, Election.com and ePLDT.  This much is very clear and admits of no
debate.  The attempt to use the
provisions of Section 1.4 to shore up the MOAs and the Teaming Agreements is
simply unwarranted.

Third and last, we fail
to see how respondents can arrive at the conclusion that, from the above-quoted
provisions, it can be immediately established that each of the members of MPC
assumes the same joint and several liability as the other members.  Earlier, respondents claimed exactly the
opposite — that the two MOAs (between MPEI and SK C&C, and between MPEI
and WeSolv) had set forth the joint and
several undertakings among the parties; whereas the two Teaming Agreements clarified the parties’ respective roles with
regard to the Project, with MPEI being the independent contractor and
Election.com and ePLDT the subcontractors.

Obviously, given the differences in their relationships, their
respective liabilities cannot be the same. 
Precisely, the very clear terms and stipulations contained in the MOAs
and the Teaming Agreements — entered into by MPEI with SK C&C, WeSolv,
Election.com and ePLDT — negate the idea that these “members” are on a par
with one another and are, as such, assuming the same joint and several
liability. 

Moreover, respondents have earlier seized upon the use of the
term “particular contract” in the Comelec’s Request for Proposal (RFP), in
order to argue that all the members of the joint venture did not need to be solidarily liable for the entire
project or joint venture.  It was
sufficient that the lead company and the member in charge of a particular
contract or aspect of the joint venture would agree to be solidarily
liable.  The glaring lack of consistency
leaves us at a loss.  Are respondents
trying to establish the same joint and solidary liability among all the
“members” or not? 

Enforcement
of

Liabilities
Problematic

Next, it is also maintained that the automation Contract between
Comelec and the MPEI confirms the
solidary undertaking of the lead company and the consortium member concerned
for each particular Contract, inasmuch as the position of MPEI and anyone else
performing the services contemplated under the Contract is described therein as
that of an independent contractor.

The Court does not see, however, how this conclusion was arrived
at.  In the first place, the contractual
provision being relied upon by respondents is Article 14, “Independent
Contractors,” which states: “Nothing
contained herein shall be construed as establishing or creating between the
COMELEC and MEGA the relationship of employee and employer or principal and
agent, it being understood that the position of MEGA and of anyone performing
the Services contemplated under this Contract, is that of an independent
contractor.”

Obviously, the intent behind the provision was simply to avoid
the creation of an employer-employee or a principal-agent relationship and the
complications that it would produce. 
Hence, the Article states that the role or position of MPEI, or anyone
else performing on its behalf, is that of an independent contractor.  It is obvious to the Court that respondents
are stretching matters too far when
they claim that, because of this provision, the Contract in effect confirms the
solidary undertaking of the lead
company and the consortium member concerned for the particular phase of the
project.  This assertion is an absolute non sequitur.

Enforcement
of Liabilities

Under the Civil
Code Not Possible

In any event, it is claimed that Comelec may still enforce the
liability of the “consortium” members under the Civil Code provisions on partnership, reasoning that MPEI et al. represented themselves as partners and
members of MPC for purposes of bidding for the Project.  They are, therefore, liable to the Comelec to
the extent that the latter relied upon such representation.  Their liability as partners is solidary with
respect to everything chargeable to the partnership under certain conditions. 

The Court has two points to make with respect to this
argument.  First, it must be recalled that SK C&C, WeSolv, Election.com
and ePLDT never represented
themselves as partners and members of MPC, whether for purposes of bidding or
for something else.  It was MPEI alone that represented them to be
members of a “consortium” it supposedly headed. 
Thus, its acts may not necessarily be held against the other
“members.” 

Second, this argument
of the OSG in its Memorandum[44]
might possibly apply in the absence of a
joint venture agreement or some other writing that discloses the
relationship of the “members” with one another. 
But precisely, this case does not deal with a situation in which there
is nothing in writing to serve as reference, leaving Comelec to rely on mere representations
and therefore justifying a falling back on the rules on partnership.  For, again, the terms and stipulations of the
MOAs entered into by MPEI with SK C&C and WeSolv, as well as the Teaming
Agreements of MPEI with Election.com and ePLDT (copies of which have been
furnished the Comelec) are very clear with respect to the extent and the
limitations of the firms’ respective liabilities.

In the case of WeSolv and SK C&C, their MOAs state that their
liabilities, while joint and several with MPEI, are limited only to the particular areas of work wherein their services are
engaged or their products utilized. 
As for Election.com and ePLDT, their separate “Teaming Agreements”
specifically ascribe to them the role of subcontractor vis-à-vis MPEI as
contractor and, based on the terms of their particular agreements, neither Election.com nor ePLDT is, with
MPEI, jointly and severally liable to Comelec.[45]
It follows then that in the instant case, there is no justification for anyone,
much less Comelec, to resort to the rules on partnership and partners’
liabilities.

Eligibility
of a Consortium

Based
on the Collective

Qualifications of
Its Members

Respondents declare that, for purposes of assessing the
eligibility of the bidder, the members of MPC should be evaluated on a collective
basis.  Therefore, they contend, the
failure of MPEI to submit financial statements (on account of its recent
incorporation) should not by itself disqualify MPC, since the other members of
the “consortium” could meet the criteria set out in the RFP.

Thus, according to respondents,
the collective nature of the undertaking of the members of MPC, their
contribution of assets and sharing of risks, and the community of their
interest in the performance of the Contract lead to these reasonable conclusions:
(1) that their collective qualifications should
be the basis for evaluating their eligibility; (2) that the sheer enormity of
the project renders it improbable to expect any single entity to be able to
comply with all the eligibility requirements and undertake the project by
itself; and (3) that, as argued by the OSG, the RFP allows bids from
manufacturers, suppliers and/or distributors that have formed themselves into a
joint venture, in recognition of the virtual impossibility of a single entity’s
ability to respond to the Invitation to Bid. 

Additionally, argues the Comelec, the Implementing Rules and
Regulations of RA 6957 (the Build-Operate-Transfer Law) as amended by RA 7718
would be applicable, as proponents of BOT projects usually form joint ventures
or consortiums.  Under the IRR, a joint
venture/consortium proponent shall be evaluated based on the individual or the
collective experience of the member-firms of the joint venture/consortium and
of the contractors the proponent has engaged for the project.

Unfortunately, this argument seems to assume that the
“collective” nature of the undertaking of the members of MPC, their
contribution of assets and sharing of risks, and the “community” of their
interest in the performance of the Contract entitle MPC to be treated as a
joint venture or consortium; and to be evaluated accordingly on the basis of
the members’ collective qualifications when, in fact, the evidence before the
Court suggest otherwise.

This Court in Kilosbayan v.
Guingona[46]
defined joint venture as “an
association of persons or companies jointly undertaking some commercial
enterprise; generally, all contribute assets and share risks.  It requires a community of interest in the
performance of the subject matter, a right to direct and govern the policy in
connection therewith, and [a] duty, which may be altered by agreement to share
both in profit and losses.”

Going back to the instant case, it should be recalled that the
automation Contract with Comelec was not executed by the “consortium” MPC — or
by MPEI for and on behalf of MPC — but by MPEI, period.  The said Contract
contains no mention whatsoever of any
consortium or members thereof.  This fact
alone seems to contradict all the suppositions about a joint undertaking that
would normally apply to a joint venture or consortium: that it is a commercial
enterprise involving a community of interest, a sharing of risks, profits and
losses, and so on.

Now let us consider the four bilateral Agreements, starting with
the Memorandum of Agreement between MPEI and WeSolv Open Computing, Inc., dated
March 5, 2003.  The body of the MOA
consists of just seven (7) short paragraphs that would easily fit in one
page.  It reads as follows:

“1.     The parties agree to
cooperate in successfully implementing the Project in the substance and form as
may be most beneficial to both parties and other subcontractors involved in the
Project.

“2.     Mega Pacific shall be
responsible for any contract negotiations and signing with the COMELEC and,
subject to the latter’s approval, agrees to give WeSolv an opportunity to be
present at meetings with the COMELEC concerning WeSolv’s portion of the
Project.

“3.     WeSolv shall be
jointly and severally liable with Mega Pacific only for the particular products
and/or services supplied by the former for the Project.

“4.     Each party shall
bear its own costs and expenses relative to this agreement unless otherwise
agreed upon by the parties.

“5.     The parties undertake to
do all acts and such other things incidental to, necessary or desirable or the
attainment of the objectives and purposes of this Agreement.

“6.     In the event that the
parties fail to agree on the terms and conditions of the supply of the products
and services including but not limited to the scope of the products and
services to be supplied and payment terms, WeSolv shall cease to be bound by
its obligations stated in the aforementioned paragraphs.

“7.     Any dispute arising
from this Agreement shall be settled amicably by the parties whenever
possible.  Should the parties be unable
to do so, the parties hereby agree to settle their dispute through arbitration
in accordance with the existing laws of the Republic of the Philippines.”
(Underscoring supplied.)

Even shorter is the Memorandum of Agreement between MPEI and SK
C&C Co. Ltd., dated March 9, 2003, the body of which consists of only six
(6) paragraphs, which we quote:

“1.     All parties agree to
cooperate in achieving the Consortium’s objective of successfully implementing
the Project in the substance and form as may be most beneficial to the
Consortium members and in accordance w/ the demand of the RFP.

“2.     Mega Pacific shall
have full powers and authority to represent the Consortium with the Comelec,
and to enter and sign, for and in behalf of its members any and all agreement/s
which maybe required in the implementation of the Project.

“3.     Each of the individual
members of the Consortium shall be jointly and severally liable with the
Lead Firm for the particular products and/or services supplied by such
individual member for the project, in accordance with their respective
undertaking or sphere of responsibility.

“4.     Each party shall
bear its own costs and expenses relative to this agreement unless otherwise
agreed upon by the parties.

“5.     The parties undertake
to do all acts and such other things incidental to, necessary or desirable for
the attainment of the objectives and purposes of this Agreement.

“6.     Any dispute arising
from this Agreement shall be settled amicably by the parties whenever
possible.  Should the parties be unable
to do so, the parties hereby agree to settle their dispute through arbitration
in accordance with the existing laws of the Republic of the Philippines.”
(Underscoring supplied.)

It will be noted that the two Agreements quoted above are very
similar in wording.  Neither of them
contains any specifics or details as to the exact nature and scope of the
parties’ respective undertakings, performances and deliverables under the
Agreement with respect to the automation project.  Likewise, the two Agreements are quite bereft
of pesos-and-centavos data as to the amount of investments each party
contributes, its respective share in the revenues and/or profit from the
Contract with Comelec, and so forth — all of which are normal for agreements
of this nature.  Yet, according to public
and private respondents, the participation of MPEI, WeSolv and SK C&C
comprises fully 90 percent of the entire undertaking with respect to the
election automation project, which is worth about P1.3 billion. 

As for Election.com and ePLDT, the separate “Teaming Agreements”
they entered into with MPEI for the remaining 10 percent of the entire project
undertaking are ironically much longer and more detailed than the MOAs
discussed earlier.  Although specifically
ascribing to them the role of subcontractor
vis-à-vis MPEI as contractor, these Agreements are, however, completely
devoid of any pricing data or payment terms. 
Even the appended Schedules supposedly containing prices of goods and
services are shorn of any price data. 
Again, as mentioned earlier, based on the terms of their particular
Agreements, neither Election.com nor ePLDT — with MPEI — is jointly and severally liable to Comelec.

It is difficult to imagine how these bare Agreements —
especially the first two — could be implemented in practice; and how a dispute
between the parties or a claim by Comelec against them, for instance, could be
resolved without lengthy and debilitating litigations.  Absent any clear-cut statement as to the
exact nature and scope of the parties’ respective undertakings, commitments,
deliverables and covenants, one party or another can easily dodge its
obligation and deny or contest its liability under the Agreement; or claim that
it is the other party that should have delivered but failed to.

Likewise, in the absence of definite indicators as to the amount
of investments to be contributed by each party, disbursements for expenses, the
parties’ respective shares in the profits and the like, it seems to the Court
that this situation could readily give rise to all kinds of misunderstandings
and disagreements over money matters.

Under such a scenario, it will be extremely difficult for Comelec
to enforce the supposed joint and several liabilities of the members of the
“consortium.”  The Court is not even
mentioning the possibility of a situation arising from a failure of WeSolv and
MPEI to agree on the scope, the terms and the conditions for the supply of the
products and services under the Agreement. 
In that situation, by virtue of paragraph 6 of its MOA, WeSolv would
perforce cease to be bound by its obligations — including its joint and
solidary liability with MPEI under the MOA — and could forthwith disengage
from the project.  Effectively, WeSolv
could at any time unilaterally exit from its MOA with MPEI by simply failing to
agree.  Where would that outcome leave
MPEI and Comelec?

To the Court, this strange and beguiling arrangement of MPEI with
the other companies does not qualify them to be treated as a consortium or
joint venture, at least of the type that government agencies like the Comelec
should be dealing with.  With more reason
is it unable to agree to the proposal to evaluate the members of MPC on a
collective basis.

In any event, the MPC members claim to be a joint
venture/consortium; and respondents have consistently been arguing that the IRR
for RA 6957, as amended, should be applied to the instant case in order to
allow a collective evaluation of consortium members.  Surprisingly, considering these facts,
respondents have not deemed it necessary for MPC members to comply with Section
5.4 (a) (iii) of the IRR for RA 6957 as amended.

According to the aforementioned provision, if the project
proponent is a joint venture or consortium, the members or participants
thereof are required to submit a sworn statement that, if awarded the contract,
they shall bind themselves to be jointly, severally and solidarily liable for
the project proponent’s obligations thereunder.  This provision was supposed to mirror Section
5 of RA 6957, as amended, which states: “In all cases, a consortium that
participates in a bid must present proof that the members of the consortium
have bound themselves jointly and severally to assume responsibility for any
project.  The withdrawal of any member of
the consortium prior to the implementation of the project could be a ground for
the cancellation of the contract.” 

The Court has certainly not seen any joint and several
undertaking by the MPC members that even approximates the tenor of that which
is described above.  We fail to see why
respondents should invoke the IRR if it is for their benefit, but refuse to
comply with it otherwise.

B.

DOST Technical Tests Flunked by the

Automated Counting Machines

Let us now move to the second subtopic, which deals with the
substantive issue:  the ACM’s failure to
pass the tests of the Department of Science and Technology (DOST).

After respondent “consortium” and the other bidder, TIM, had
submitted their respective bids on March 10, 2003, the Comelec’s BAC — through
its Technical Working Group (TWG) and the DOST — evaluated their technical
proposals.  Requirements that were highly
technical in nature and that required the use of certain equipment in the evaluation
process were referred to the DOST for testing. 
The Department reported thus:

TEST RESULTS MATRIX[47]

[Technical Evaluation of Automated Counting
Machine]

KEY REQUIREMENTS [QUESTIONS]	MEGA-PACIFIC CONSORTIUM		TOTAL INFORMATION MANAGEMENT
	YES	NO	YES	NO
1.      Does the machine have an accuracy rating of at least 99.995 percent At COLD      environmental condition At NORMAL environmental    conditions At HARSH environmental conditions	√	√   √	√       √	√
2.      Accurately records and reports the date and time of the start and end of counting of ballots per precinct?	√		√
3.      Prints election returns without any loss of date during generation of such reports?	√		√
4.      Uninterruptible back-up power system, that will engage immediately to allow operation of at least 10 minutes after outage, power surge or abnormal electrical occurrences?	√			√
5.      Machine reads two-sided ballots in one pass?	√			√ Note: This particular requirement needs further verification
6.      Machine can detect previously counted ballots and prevent previously counted ballots from being counted more than once?	√			√
7.      Stores results of counted votes by precinct in external (removable) storage device?	√			√ Note: This particular requirement needs further verification
8.      Data stored in external media is encrypted?	√			√ Note: This particular requirement needs further verification
9.      Physical key or similar device allows, limits, or restricts operation of the machine?	√		√
10.  CPU speed is at least 400mHz?	√			√ Note: This particular requirement needs further verification
11.  Port to allow use of dot-matrix printers?	√		√
12.  Generates printouts of the election returns in a format specified by the COMELEC? Generates printouts In format specified by COMELEC	√	√	√	√
13.  Prints election returns without any loss of data during generation of such report?	√		√
14.  Generates an audit trail of the counting machine, both hard copy and soft copy?   Hard copy   Soft copy	√   √		√	√ Note: This particular requirement needs further verification
15.  Does the City/Municipal Canvassing System consolidate results from all precincts within it using the encrypted soft copy of the data generated by the counting machine and stored on the removable data storage device?	√			√ Note: This particular requirement needs further verification
16.  Does the City/Municipal Canvassing System consolidate results from all precincts within it using the encrypted soft copy of the data generated by the counting machine and transmitted through an electronic transmission media?		√ Note: This particular requirement needs further verification		√ Note: This particular requirement needs further verification
17.  Does the system output a Zero City/Municipal Canvass Report, which is printed on election day prior to the conduct of the actual canvass operation, that shows that all totals for all the votes for all the candidates and other information, are indeed zero or null?	√			√ Note: This particular requirement needs further verification
18.  Does the system consolidate results from all precincts in the city/municipality using the data storage device coming from the counting machine?	√			√ Note: This particular requirement needs further verification
19.  Is the machine 100% accurate?	√			√ Note: This particular requirement needs further verification
20.  Is the Program able to detect previously downloaded precinct results and prevent these from being inputted again into the System?		√		√ Note: This particular requirement needs further verification
21.  The System is able to print the specified reports and the audit trail without any loss of data during generation of the above-mentioned reports? Prints specified reports Audit Trail	√	√		√   √ Note: This particular requirement needs further verification
22.  Can the result of the city/municipal consolidation be stored in a data storage device?	√			√ Note: This particular requirement needs further verification
23.  Does the system consolidate results from all precincts in the provincial/district/ national using the data storage device from different levels of consolidation?	√			√ Note: This particular requirement needs further verification
24.  Is the system 100% accurate?	√			√ Note: This particular requirement needs further verification
25.  Is the Program able to detect previously downloaded precinct results and prevent these from being inputted again into the System?		√		√ Note: This particular requirement needs further verification
26.  The System is able to print the specified reports and the audit trail without any loss of data during generation of the abovementioned reports? Prints specified reports Audit Trail	√	√		√ √ Note: This particular requirement needs further verification
27.  Can the results of the provincial/district/national consolidation be stored in a data storage device?	√			√ Note: This particular requirement needs further verification

According to respondents, it was only after the TWG and the DOST
had conducted their separate tests and submitted their respective reports that
the BAC, on the basis of these reports formulated its comments/recommendations
on the bids of the consortium and TIM.

The BAC, in its Report dated April 21, 2003, recommended that the
Phase II project involving the acquisition of automated counting machines be
awarded to MPEI.  It said:

“After incisive analysis of the technical
reports of the DOST and the Technical Working Group for Phase II – Automated
Counting Machine, the BAC considers adaptability to advances in modern
technology to ensure an effective and efficient method, as well as the security
and integrity of the system.

“The results of the evaluation conducted by
the TWG and that of the DOST (14 April 2003 report), would show the apparent
advantage of Mega-Pacific over the other competitor, TIM.

“The BAC further noted that both
Mega-Pacific and TIM obtained some ‘failed marks’ in the technical
evaluation.  In general, the ‘failed
marks’ of Total Information Management as enumerated above affect the counting
machine itself which are material in nature, constituting non-compliance to the
RFP.  On the other hand, the ‘failed
marks’ of Mega-Pacific are mere formalities on certain documentary requirements
which the BAC may waive as clearly indicated in the Invitation to Bid.

“In the DOST test, TIM obtained 12 failed
marks and mostly attributed to the counting machine itself as stated earlier.  These are requirements of the RFP and
therefore the BAC cannot disregard the same.

“Mega-Pacific failed in 8 items however
these are mostly on the software which can be corrected by reprogramming the
software and therefore can be readily corrected.

“The BAC verbally inquired from DOST on the
status of the retest of the counting machines of the TIM and was informed that
the report will be forthcoming after the holy week.  The BAC was informed that the retest is on a
different parameters they’re being two different machines being tested.  One purposely to test if previously read
ballots will be read again and the other for the other features such as two
sided ballots.

“The said machine and the software
therefore may not be considered the same machine and program as submitted in
the Technical proposal and therefore may be considered an enhancement of the
original proposal.

“Advance information relayed to the BAC as
of 1:40 PM of 15 April 2003 by Executive Director Ronaldo T. Viloria of DOST is
that the result of the test in the two counting machines of TIM contains
substantial errors that may lead to the failure of these machines based on the
specific items of the RFP that DOST has to certify.

OPENING OF FINANCIAL
BIDS

“The BAC on 15 April 2003, after notifying the concerned bidders
opened the financial bids in their presence and the results were as follows:

Mega-Pacific:

Option 1 – Outright purchase: Bid Price of Php1,248,949,088.00

Option 2 – Lease option:

          70% Down payment of cost of hardware or
Php642,755,757.07

          Remainder
payable over 50 months or a total of Php642,755,757.07

          Discount
rate of 15% p.a. or 1.2532% per month.

Total Number of Automated
Counting Machine – 1,769 ACMs (Nationwide)

TIM:

        Total Bid Price –
Php1,297,860,560.00

          Total Number of Automated Counting Machine – 2,272 ACMs
(Mindanao and NCR only)

“Premises
considered, it appears that the bid of Mega Pacific is the lowest calculated
responsive bid, and therefore, the Bids and Awards Committee (BAC) recommends
that the Phase II project re Automated Counting Machine be awarded to Mega
Pacific eSolutions, Inc.”[48]

The BAC, however, also stated on page 4 of its Report: “Based
on the 14 April 2003 report (Table 6) of the DOST, it appears that both
Mega-Pacific and TIM (Total Information Management Corporation) failed to meet
some of the requirements.  Below is a
comparative presentation of the requirements wherein Mega-Pacific or TIM or
both of them failed: x x x.”  What
followed was a list of “key requirements,” referring to technical requirements,
and an indication of which of the two bidders had failed to meet them. 

Failure
to Meet the

Required Accuracy
Rating

The first of the key requirements was that the counting machines
were to have an accuracy rating of at
least 99.9995 percent.  The BAC
Report indicates that both Mega Pacific and TIM failed to meet this standard.

The key requirement of accuracy rating happens to be part and
parcel of the Comelec’s Request for Proposal (RFP).  The RFP, on page 26, even states that the
ballot counting machines and ballot counting software “must have an accuracy rating of 99.9995% (not merely 99.995%) or better as certified by a reliable
independent testing agency.”

When questioned on this matter during the Oral Argument,
Commissioner Borra tried to wash his hands by claiming that the required
accuracy rating of 99.9995 percent had been set by a private sector group in
tandem with Comelec.  He added that the
Commission had merely adopted the accuracy rating as part of the group’s
recommended bid requirements, which it had not bothered to amend even after
being advised by DOST that such standard was unachievable.  This excuse, however, does not in any way
lessen Comelec’s responsibility to adhere to its own published bidding rules,
as well as to see to it that the consortium indeed meets the accuracy
standard.  Whichever accuracy rating is the right standard — whether 99.995 or
99.9995 percent — the fact remains that the machines of the so-called
“consortium” failed to even reach the lesser of the two.  On this basis alone, it ought to have been
disqualified and its bid rejected outright.

At this point, the Court stresses that the essence of public
bidding is violated by the practice of requiring very high standards or
unrealistic specifications that cannot be met — like the 99.9995 percent
accuracy rating in this case — only to water them down after the bid has been award. 
Such scheme, which discourages the entry of prospective bona fide bidders, is in fact a sure
indication of fraud in the bidding, designed to eliminate fair
competition.  Certainly, if no bidder
meets the mandatory requirements, standards or specifications, then no award
should be made and a failed bidding declared.

Failure
of Software to Detect

Previously
Downloaded Data

Furthermore, on page 6 of the BAC Report, it appears that the
“consortium” as well as TIM failed to meet another key requirement — for the
counting machine’s software program to be able
to detect previously downloaded precinct results and to prevent these from
being entered again into the counting machine.  This same deficiency on the part of both
bidders reappears on page 7 of the BAC Report, as a result of the recurrence of
their failure to meet the said key requirement.

That the ability to detect previously downloaded data at
different canvassing or consolidation levels is deemed of utmost importance can
be seen from the fact that it is repeated three times in the RFP.  On page 30 thereof, we find the requirement
that the city/municipal canvassing
system software must be able to detect previously downloaded precinct results
and prevent these from being “inputted” again into the system.  Again, on page 32 of the RFP, we read that
the provincial/district canvassing
system software must be able to detect previously downloaded city/municipal
results and prevent these from being “inputted” again into the system.  And once more, on page 35 of the RFP, we find
the requirement that the national canvassing
system software must be able to detect previously downloaded provincial/district
results and prevent these from being “inputted” again into the system.

Once again, though, Comelec chose to ignore this crucial
deficiency, which should have been a cause for the gravest concern. Come May
2004, unscrupulous persons may take advantage of and exploit such deficiency by
repeatedly downloading and feeding into the computers results favorable to a
particular candidate or candidates.  We
are thus confronted with the grim prospect of election fraud on a massive scale
by means of just a few key strokes.  The
marvels and woes of the electronic age!

Inability
to Print

the Audit Trail

But that grim prospect is not all.  The BAC Report, on pages 6 and 7, indicate
that the ACMs of both bidders were unable
to print the audit trail without any loss of data.  In the case of MPC, the audit trail system
was “not yet incorporated” into its ACMs.

This particular deficiency is significant, not only to this
bidding but to the cause of free and credible elections.  The purpose of requiring audit trails is to
enable Comelec to trace and verify the identities of the ACM operators
responsible for data entry and downloading, as well as the times when the
various data were downloaded into the canvassing system, in order to forestall
fraud and to identify the perpetrators.

Thus, the RFP on page 27 states that the ballot counting machines and ballot counting software must print an
audit trail of all machine operations for documentation and verification
purposes. Furthermore, the audit trail must be stored on the internal storage
device and be available on demand for future printing and verifying.  On pages 30-31, the RFP also requires that
the city/municipal canvassing system software be able to print an audit trail
of the canvassing operations, including therein such data as the date and time
the canvassing program was started, the log-in of the authorized users (the
identity of the machine operators), the date and time the canvass data were
downloaded into the canvassing system, and so on and so forth.  On page 33 of the RFP, we find the same audit
trail requirement with respect to the provincial/district
canvassing system software; and
again on pages 35-36 thereof, the same audit trail requirement with respect to
the national canvassing system software.

That this requirement for printing audit trails is not to be
lightly brushed aside by the BAC or Comelec itself as a mere formality or
technicality can be readily gleaned from the provisions of Section 7 of RA
8436, which authorizes the Commission to use an automated system for elections.

The said provision which respondents have quoted several times,
provides that ACMs are to possess certain features divided into two classes:
those that the statute itself considers mandatory
and other features or capabilities that the law deems optional.  Among those considered mandatory are
“provisions for audit trails”!  Section 7
reads as follows: “The System shall contain the following features:
(a) use of appropriate ballots; (b) stand-alone machine which can count votes
and an automated system which can consolidate the results immediately; (c) with provisions for audit trails; (d)
minimum human intervention; and (e) adequate safeguard/security measures.”  (Italics and emphases supplied.)

In brief, respondents cannot deny that the provision requiring
audit trails is indeed mandatory, considering the wording of Section 7 of RA
8436.  Neither can Respondent Comelec
deny that it has relied on the BAC Report, which indicates that the machines or
the software was deficient in that respect. 
And yet, the Commission simply disregarded this shortcoming and awarded
the Contract to private respondent, thereby violating the very law it was
supposed to implement.

C.

Inadequacy of Post Facto

Remedial Measures

Respondents argue that the deficiencies relating to the detection
of previously downloaded data, as well as provisions for audit trails, are mere
shortcomings or minor deficiencies in software or programming, which can be
rectified.  Perhaps Comelec simply relied
upon the BAC Report, which states on page 8 thereof that “Mega Pacific failed in 8 items[;] however these are mostly on the
software which can be corrected by re-programming x x x and therefore can be
readily corrected.”

The undersigned ponente’s
questions, some of which were addressed to Commissioner Borra during the Oral
Argument, remain unanswered to this day. 
First of all, who made the determination that the eight “fail” marks of
Mega Pacific were on account of the software — was it DOST or TWG?  How can we be sure these failures were not
the results of machine defects?  How was
it determined that the software could actually be re-programmed and thereby
rectified?  Did a qualified technical expert read and analyze the source code[49] for the programs and conclude that these
could be saved and remedied?  (Such
determination cannot be done by any other means save by the examination and
analysis of the source code.) 

Who was this qualified technical expert?  When did he carry out the study?  Did he prepare a written report on his
findings? Or did the Comelec just make a wild guess?  It does not follow that all defects in
software programs can be rectified, and the programs saved.  In the information technology sector, it is
common knowledge that there are many badly written programs, with significant
programming errors written into them; hence it does not make economic sense to
try to correct the programs; instead, programmers simply abandon them and just
start from scratch.  There’s no telling
if any of these programs is unrectifiable, unless a qualified programmer reads
the source code. 

And if indeed a qualified expert reviewed the source code, did he
also determine how much work would be needed to rectify the programs?  And how much time and money would be spent
for that effort?  Who would carry out the
work?  After the rectification process,
who would ascertain and how would it be ascertained that the programs have
indeed been properly rectified, and that they would work properly thereafter?  And of course, the most important question to
ask: could the rectification be done in time for the elections in 2004?

Clearly, none of the respondents bothered to think the matter
through.  Comelec simply took the word of
the BAC as gospel truth, without even bothering to inquire from DOST whether it
was true that the deficiencies noted could possibly be remedied by
re-programming the software.  Apparently,
Comelec did not care about the software, but focused only on purchasing the
machines.

What really adds to the Court’s dismay is the admission made by
Commissioner Borra during the Oral Argument that the software currently being
used by Comelec was merely the “demo” version, inasmuch as the final version
that would actually be used in the elections was still being developed and had
not yet been finalized.

It is not clear when the final version of the software would be
ready for testing and deployment.  It
seems to the Court  that Comelec is just
keeping its fingers crossed and hoping the final product would work.  Is there a “Plan B” in case it does not?  Who knows? 
But all these software programs are part and parcel of the bidding and
the Contract awarded to the Consortium.  Why is it that the machines are already
being brought in and paid for, when there is as yet no way of knowing if the
final version of the software would be able to run them properly, as well as
canvass and consolidate the results in the manner required?

The counting machines, as well as the canvassing system, will
never work properly without the correct
software programs.  There is an old
adage that is still valid to this day: “Garbage in, garbage out.”  No matter how powerful, advanced and
sophisticated the computers and the servers are, if the software being utilized
is defective or has been compromised, the results will be no better than
garbage.  And to think that what is at
stake here is the 2004 national elections — the very basis of our democratic
life.

Correction
of Defects?

To their Memorandum, public respondents proudly appended 19
Certifications issued by DOST declaring that some 285 counting machines had
been tested and had passed the acceptance testing conducted by the Department
on October 8-18, 2003.  Among those
tested were some machines that had failed previous tests, but had undergone
adjustments and thus passed re-testing.

Unfortunately, the Certifications from DOST fail to divulge in
what manner and by what standards or criteria the condition, performance and/or
readiness of the machines were re-evaluated and re-appraised and thereafter
given the passing mark.  Apart from that
fact, the remedial efforts of respondents were, not surprisingly, apparently
focused again on the machines — the hardware. 
Nothing was said or done about the software
— the deficiencies as to detection and prevention of downloading and entering
previously downloaded data, as well as the capability to print an audit
trail.  No matter how many times the machines were tested and re-tested, if nothing
was done about the programming defects and deficiencies, the same danger of
massive electoral fraud remains.  As
anyone who has a modicum of knowledge of computers would say, “That’s
elementary!”

And only last December 5, 2003, an Inq7.net news report quoted
the Comelec chair as saying that the new automated poll system would be used
nationwide in May 2004, even as the
software for the system remained unfinished.  It also reported that a certain Titus Manuel
of the Philippine Computer Society, which was helping Comelec test the hardware
and software, said that the software for
the counting still had to be submitted on December 15, while the software for
the canvassing was due in early January. 

Even as Comelec continues making payments for the ACMs, we keep
asking ourselves: who is going to ensure that the software would be tested and
would work properly?

At any rate, the re-testing of the machines and/or the 100
percent testing of all machines (testing of every single unit) would not serve
to eradicate the grave abuse of discretion already committed by Comelec when it
awarded the Contract on April 15, 2003, despite the obvious and admitted flaws
in the bidding process, the failure of the “winning bidder” to qualify, and the
inability of the ACMs and the intended software to meet the bid requirements
and rules.

Comelec’s
Latest

“Assurances”
Are

Unpersuasive

Even the latest pleadings filed by Comelec do not serve to allay
our apprehensions.  They merely affirm
and compound the serious violations of law and gravely abusive acts it has
committed.  Let us examine them.

The Resolution issued by this Court on December 9, 2003 required
respondents to inform it as to the number of ACMs delivered and paid for, as
well as the total payment made to date for the purchase thereof.  They were likewise instructed to submit a
certification from the DOST attesting to the number of ACMs tested, the number
found to be defective; and “whether the
reprogrammed software has been tested and found to have complied with the
requirements under Republic Act No. 8436.”[50]

In its “Partial Compliance and Manifestation” dated December 29,
2003, Comelec informed the Court that 1,991 ACMs had already been delivered to
the Commission as of that date.  It
further certified that it had already paid the supplier the sum of P849,167,697.41,
which corresponded to 1,973 ACM units that had passed the acceptance testing
procedures conducted by the MIRDC-DOST[51]
and which had therefore been accepted by the poll body.

In the same submission, for
the very first time, Comelec also disclosed to the Court the following:

“The Automated Counting and Canvassing Project involves not only
the manufacturing of the ACM hardware but also the development of three (3)
types of software, which are intended for use in the following:

1.       Evaluation of
Technical Bids

2.       Testing and
Acceptance Procedures

3.       Election Day Use.”

Purchase
of the First Type of

Software Without
Evaluation

In other words, the first type of software was to be developed
solely for the purpose of enabling the evaluation of the bidder’s technical
bid.  Comelec explained thus: “In addition to the presentation of the ACM
hardware, the bidders were required to develop a ‘base’ software program that
will enable the ACM to function properly. 
Since the software program utilized during the evaluation of bids is not
the actual software program to be employed on election day, there being two (2)
other types of software program that will still have to be developed and
thoroughly tested prior to actual election day use, defects in the ‘base’
software that can be readily corrected by reprogramming are considered minor in
nature, and may therefore be waived.”

In short, Comelec claims that it evaluated the bids and made the
decision to award the Contract to the “winning” bidder partly on the basis of
the operation of the ACMs running a “base” software. That software was
therefore nothing but a sample or “demo” software, which would not be the
actual one that would be used on election day. 
Keeping in mind that the Contract involves the acquisition of not just
the ACMs or the hardware, but also the software that would run them, it is now
even clearer that the Contract was awarded without Comelec having seen, much
less evaluated, the final product —
the software that would finally be utilized come election day.  (Not even the “near-final” product, for that
matter).

What then was the point of conducting the bidding, when the
software that was the subject of the Contract was still to be created and could conceivably undergo innumerable
changes before being considered as being in final form?  And that is not all!

No
Explanation for Lapses

in the Second Type of Software

The second phase, allegedly involving the second type of
software, is simply denominated “Testing and Acceptance Procedures.”  As best as we can construe, Comelec is
claiming that this second type of software is also to be developed and delivered by the supplier in connection with
the “testing and acceptance” phase of the acquisition process.  The previous pleadings, though — including
the DOST reports submitted to this Court — have not heretofore mentioned any
statement, allegation or representation to the effect that a particular set of
software was to be developed and/or delivered by the supplier in connection
with the testing and acceptance of delivered ACMs. 

What the records do show is that the imported ACMs were subjected
to the testing and acceptance process conducted by the DOST.  Since the initial batch delivered included a
high percentage of machines that had failed the tests, Comelec asked the DOST
to conduct a 100 percent testing; that is, to test every single one of the ACMs
delivered.  Among the machines tested on
October 8 to 18, 2003, were some units that had failed previous tests but had
subsequently been re-tested and had passed. 
To repeat, however, until now, there has never been any mention of a
second set or type of software pertaining to the testing and acceptance
process.

In any event, apart from making that misplaced and uncorroborated
claim, Comelec in the same submission also professes (in response to the
concerns expressed by this Court) that the
reprogrammed software has been tested and found to have complied with the
requirements of RA 8436.  It reasoned
thus: “Since the software program is an
inherent element in the automated counting system, the certification issued by
the MIRDC-DOST that one thousand nine hundred seventy-three (1,973) units
passed the acceptance test procedures is an official recognition by the
MIRDC-DOST that the software component of the automated election system, which
has been reprogrammed to comply with the provisions of Republic Act No. 8436 as
prescribed in the Ad Hoc Technical Evaluation Committee’s ACM Testing and Acceptance
Manual, has passed the MIRDC-DOST tests.”

The facts do not support this sweeping statement of Comelec.  A scrutiny of the MIRDC-DOST letter dated
December 15, 2003,[52]
which it relied upon, does not justify its grand conclusion.  For clarity’s sake, we quote in full the
letter-certification, as follows:

“15 December 2003

“HON. RESURRECCION Z. BORRA

Commissioner-in-Charge

Phase II, Modernization Project

Commission on Elections

Intramuros, Manila

Attention:  Atty. Jose M. Tolentino, Jr.

               Project Director

“Dear Commissioner Borra:

“We are pleased to submit 11 DOST Test
Certifications representing 11 lots and covering 158 units of automated
counting machines (ACMs) that we have tested from 02-12 December 2003.

“To date, we have tested all the 1,991
units of ACMs, broken down as follow: (sic)

1^st batch   –   30 units     4^th
batch  –  
438 units

2^nd batch  – 288
units     5^th batch  –   438
units

3^rd batch  – 414
units     6^th batch  –   383
units

“It should be noted that a total of 18
units have failed the test.  Out of these
18 units, only one (1) unit has failed the retest.

“Thank you and we hope you will find
everything in order.

“Very truly yours,

“ROLANDO T. VILORIA, CESO III

Executive Director cum

Chairman, DOST-Technical Evaluation Committee”

Even a cursory glance at the foregoing letter shows that it is
completely bereft of anything that would remotely support Comelec’s contention
that the “software component of the automated election system x x x has been
reprogrammed to comply with” RA 8436, and “has passed the MIRDC-DOST
tests.”  There is no mention at all of
any software reprogramming.  If the
MIRDC-DOST had indeed undertaken the supposed reprogramming and the process
turned out to be successful, that agency would have proudly trumpeted its
singular achievement.

How Comelec came to believe that such reprogramming had been
undertaken is unclear.  In any event, the
Commission is not forthright and candid with the factual details.  If reprogramming has been done, who performed
it and when?  What exactly did the
process involve? How can we be assured that it was properly performed?  Since the facts attendant to the alleged
reprogramming are still shrouded in mystery, the Court cannot give any weight
to Comelec’s bare allegations.

The fact that a total of 1,973 of the machines has ultimately
passed the MIRDC-DOST tests does not by itself serve as an endorsement of the
soundness of the software program, much less as a proof that it has been
reprogrammed.  In the first place,
nothing on record shows that the tests and re-tests conducted on the machines
were intended to address the serious deficiencies noted earlier.  As a matter of fact, the MIRDC-DOST letter
does not even indicate what kinds of tests or re-tests were conducted, their
exact nature and scope, and the specific objectives thereof.[53]  The absence of relevant supporting documents,
combined with the utter vagueness of the letter, certainly fails to inspire
belief or to justify the expansive confidence displayed by Comelec.  In any
event, it goes without saying that remedial measures such as the alleged
reprogramming cannot in any way mitigate the grave abuse of discretion already
committed as early as April 15, 2003.

Rationale
of Public Bidding Negated

by the Third Type of Software

Respondent Comelec tries to assuage this Court’s anxiety in these
words: “The reprogrammed software that has already passed the requirements of
Republic Act No. 8436 during the MIRDC-DOST testing and acceptance procedures
will require further customization since the following additional elements,
among other things, will have to be considered before the final software can be
used on election day:  1. Final
Certified List of Candidates  x x x 2.
Project of Precincts x x x 3. Official Ballot Design and Security
Features x x x 4. Encryption, digital certificates and digital
signatures x x x.  The certified list of candidates for national elective positions will
be finalized on or before 23 January 2004 while the final list of projects of
precincts will be prepared also on the same date.  Once all the above elements are incorporated
in the software program, the Test Certification Group created by the Ad Hoc
Technical Evaluation Committee will conduct meticulous testing of the final
software before the same can be used on election day.  In addition to the testing to be conducted by
said Test Certification Group, the Comelec will conduct mock elections in
selected areas nationwide not only for purposes of public information but also
to further test the final election day program. 
Public respondent Comelec, therefore, requests that it be given up to 16
February 2004 to comply with this requirement.”

The foregoing passage shows the imprudent approach adopted by
Comelec in the bidding and acquisition process. 
The Commission says that before the software can be utilized on election
day, it will require “customization” through addition of data — like the list
of candidates, project of precincts, and so on. 
And inasmuch as such data will become available only in January 2004
anyway, there is therefore no perceived need on Comelec’s part to rush the
supplier into producing the final (or near-final) version of the software
before that time.  In any case, Comelec
argues that the software needed for the electoral exercise can be continuously
developed, tested, adjusted and perfected, practically all the way up to
election day, at the same time that the Commission is undertaking all the other
distinct and diverse activities pertinent to the elections.

Given such a frame of mind, it is no wonder that Comelec paid
little attention to the counting and canvassing software during the entire
bidding process, which took place in February-March 2003.  Granted that the software was defective,
could not detect and prevent the re-use of previously downloaded data or
produce the audit trail — aside from its other shortcomings — nevertheless,
all those deficiencies could still be corrected down the road.  At any rate, the software used for bidding
purposes would not be the same one that will be used on election day, so why
pay any attention to its defects?  Or to
the Comelec’s own bidding rules for that matter? 

Clearly, such jumbled ratiocinations completely negate the
rationale underlying the bidding process mandated by law.

At the very outset, the Court has explained that Comelec
flagrantly violated the public policy on public biddings (1) by allowing
MPC/MPEI to participate in the bidding even though it was not qualified to do
so; and (2) by eventually awarding the Contract to MPC/MPEI.  Now, with the latest explanation given by
Comelec, it is clear that the Commission further desecrated the law on public
bidding by permitting the winning bidder to change and alter the subject of the
Contract (the software), in effect allowing a substantive amendment without
public bidding.

This stance is contrary to settled jurisprudence requiring the
strict application of pertinent rules, regulations and guidelines for public
bidding for the purpose of placing each
bidder, actual or potential, on the same footing.  The essence of public bidding is, after all,
an opportunity for fair competition, and a fair basis for the precise
comparison of bids.  In common parlance,
public bidding aims to “level the playing field.”  That means each bidder must bid under the
same conditions; and be subject to the same guidelines, requirements and
limitations, so that the best offer or lowest bid may be determined, all other things being equal.

Thus, it is contrary to the very concept of public bidding to
permit a variance between the conditions under which bids are invited and those
under which proposals are submitted and approved; or, as in this case, the
conditions under which the bid is won and those under which the awarded
Contract will be complied with.  The
substantive amendment of the contract bidded out, without any public bidding —
after the bidding process had been
concluded — is violative of the public policy on public biddings, as well as
the spirit and intent of RA 8436.  The whole point in going through the public
bidding exercise was completely lost. 
The very rationale of public bidding was totally subverted by the
Commission.

From another perspective, the Comelec approach also fails to make
sense.  Granted that, before election
day, the software would still have to be customized to each precinct,
municipality, city, district, and so on, 
there still was nothing at all to prevent Comelec from requiring
prospective suppliers/bidders to produce, at
the very start of the bidding process, the “next-to-final” versions of the
software (the best software the suppliers had) — pre-tested and ready to be
customized to the final list of candidates and project of precincts, among
others, and ready to be deployed thereafter. 
The satisfaction of such requirement would probably have provided far
better bases for evaluation and selection, as between suppliers, than the
so-called demo software.

Respondents contend that the bidding suppliers’ counting machines
were previously used in at least one political exercise with no less than 20
million voters.  If so, it stands to
reason that the software used in that past electoral exercise would probably
still be available and, in all likelihood, could have been adopted for use in
this instance.  Paying for machines and
software of that category (already tried and proven in actual elections and
ready to be adopted for use) would definitely make more sense than paying the
same hundreds of millions of pesos for demo software and empty promises of usable
programs in the future.

But there is still another gut-level reason why the approach
taken by Comelec is reprehensible.  It
rides on the perilous assumption that nothing would go wrong; and that, come
election day, the Commission and the supplier would have developed, adjusted
and “re-programmed” the software to the point where the automated system could
function as envisioned.  But what if such
optimistic projection does not materialize? 
What if, despite all their herculean efforts, the software now being
hurriedly developed and tested for the automated system performs dismally and
inaccurately or, worse, is hacked and/or manipulated?[54]  What then will we do with all the machines
and defective software already paid for in
the amount of  P849 million of our
tax money?  Even more important, what will happen to our country in case of
failure of the automation?

The Court cannot grant the plea of Comelec that it be given until
February 16, 2004 to be able to submit a “certification relative to the
additional elements of the software that will be customized,” because for us to
do so would unnecessarily delay the resolution of this case and would just give
the poll body an unwarranted excuse to postpone the 2004 elections.  On the other hand, because such certification
will not cure the gravely abusive actions complained of by petitioners, it will
be utterly useless.

Is this Court being overly pessimistic and perhaps even engaging
in speculation?  Hardly.  Rather, the Court holds that Comelec should
not have gambled on the unrealistic optimism that the supplier’s software
development efforts would turn out well. The Commission should have adopted a
much more prudent and judicious approach to ensure the delivery of tried and
tested software, and readied alternative courses of action in case of
failure.  Considering that the nation’s
future is at stake here, it should have done no less.

Epilogue

Once again, the Court finds itself at the crossroads of our
nation’s history.  At stake in this
controversy is not just the business of a computer supplier, or a questionable
proclamation by Comelec of one or more public officials.  Neither is it about whether this country
should switch from the manual to the automated system of counting and
canvassing votes.  At its core is the
ability and capacity of the Commission on Elections to perform properly,
legally and prudently its legal mandate to implement the transition from manual
to automated elections.

Unfortunately, Comelec has failed to measure up to this historic
task.  As stated at the start of this
Decision, Comelec has not merely gravely abused its discretion in awarding the
Contract for the automation of the counting and canvassing of the ballots.  It has also put at grave risk the holding of
credible and peaceful elections by shoddily accepting electronic hardware and
software that admittedly failed to pass legally mandated technical
requirements.  Inadequate as they are,
the remedies it proffers post facto do not cure the grave abuse of discretion
it already committed (1) on April 15, 2003, when it illegally made the award;
and (2) “sometime” in May 2003 when it executed the Contract for the purchase
of defective machines and non-existent software from a non-eligible bidder.

For these reasons, the Court finds it totally unacceptable and
unconscionable to place its imprimatur on this void and illegal transaction
that seriously endangers the breakdown of our electoral system.  For this Court to cop-out and to close its
eyes to these illegal transactions, while convenient, would be to abandon its
constitutional duty of safeguarding public interest.

As a necessary consequence of such nullity and illegality, the
purchase of the machines and all appurtenances thereto including the
still-to-be-produced (or in Comelec’s words, to be “reprogrammed”) software, as
well as all the payments made therefor, have no basis whatsoever in law.  The public funds expended pursuant to the
void Resolution and Contract must therefore be recovered from the payees and/or
from the persons who made possible the illegal disbursements, without prejudice
to possible criminal prosecutions against them.

Furthermore, Comelec and its officials concerned must bear full
responsibility for the failed bidding and award, and held accountable for the electoral
mess wrought by their grave abuse of discretion in the performance of their
functions.  The State, of course, is not
bound by the mistakes and illegalities of its agents and servants.

True, our country needs to transcend our slow, manual and archaic
electoral process.  But before it can do
so, it must first have a diligent and competent electoral agency that can
properly and prudently implement a well-conceived automated election system.

At bottom, before the country can hope to have a speedy and fraud-free
automated election, it must first be able to procure the proper computerized
hardware and software legally, based on a transparent and valid system of
public bidding.  As in any democratic
system, the ultimate goal of
automating elections must be achieved by a legal, valid and above-board process of acquiring the necessary tools
and skills therefor.  Though the
Philippines needs an automated electoral process, it cannot accept just any
system shoved into its bosom through improper and illegal methods.  As the saying goes, the end never justifies
the means.  Penumbral contracting will
not produce enlightened results.

WHEREFORE, the
Petition is GRANTED.  The Court hereby declares NULL and VOID Comelec Resolution No. 6074 awarding the contract for Phase II
of the CAES to Mega Pacific Consortium 
(MPC).  Also declared null and
void is the subject Contract executed between Comelec and Mega Pacific
eSolutions (MPEI).[55]
Comelec is further ORDERED to refrain
from implementing any other contract or agreement entered into with regard to
this project.

Let a copy of this Decision be furnished the Office of the
Ombudsman which shall determine the criminal liability, if any, of the public
officials (and conspiring private individuals, if any) involved in the subject
Resolution and Contract.  Let the Office
of the Solicitor General also take measures to protect the government and
vindicate public interest from the ill effects of the illegal disbursements of
public funds made by reason of the void Resolution and Contract.

SO ORDERED.

Carpio, Austria-Martinez, Carpio-Morales, and Callejo, Sr., JJ., concur.

Davide,
Jr., C.J., Vitug,
and Ynares-Santiago,
JJ., see separate opinion.

Puno, J., concur, and also
joins the opinion of J. Ynares-Santiago.

Quisumbing, J., in the result.

Sandoval-Gutierrez,
J., see concurring opinion.

Corona, and Azcuna, JJ.,
joins the dissent of J. Tinga.

Tinga,
J., pls. see dissenting opinion.