P3B PHIL. ID PROJECT IN PERIL OVER BSP QUESTIONABLE DEAL

THE country’s effort to create a national identification system’ (PhilSys) envisioned by its proponents under RA11055 as a platform for the “seamless” delivery of services as well as a “social and economic platform through which all transactions including public and private services can be availed of” by everyone, is at risk of going down the drain over the questionable deal entered into by the Bangko Sentral ng Pilipinas (BSP) for its implementation thru one of its service providers.

At a press conference on Tuesday, September 24, 2024, in Quezon City, the Crime and Corruption Watch International (CCWI), gave an update on the petition it filed before the Court of Appeals (CA), to stop the BSP from further honoring its contract with ALLCARD, INC. (ACI), in October 2020 for the rollout of the national ID program.

Impleaded in the petition filed before the CA Third Division last January 29, 2024, are incumbent BSP governor, Eli Remolona, former BSP governor Benjamin Diokno and ACI.

Diokno was the BSP head when the contract was awarded to ACI for the supply of 116 million pieces of national ID cards, more than enough for all Filipinos, including registered aliens.

The ACI was deemed as the “lone qualified bidder” for the project with an approved budget (ABC) of P3,062,400,000.00, broken down into:

Lot 1: Lease of card production equipment for 3 years, P2,563,875,000.00

Lot 2: Lease of card personalization equipment for 4 years, P498,525,000.00

ACI bagged the contract after it submitted a bid of P2,614,640,000.00, broken down into: P2,119,320,000.00, or P444,555,000.00 lower than the approved budget for Lot 1 and, P495,320,000.00, which is just P3.205 million below the approved budget for Lot 2.

CCWI lawyers Eugene Alfaras and Frumencio ‘Sonny’ Pulgar, on behalf of CCWI president, Carlo Magno Batalla, said they were constrained to seek the CA’s intervention after Remolona failed to respond to the letter they sent to the BSP last January 11, 2024, questioning the deal with ACI.

The CCWI said they were “alarmed” to learn that despite clear failure of ACI to fulfill its contractual obligations, the BSP entertained the proposal of the company for a “compromise” in the settlement of its ‘liquidated damages’ (LD) to the government. The schedule penalties due on ACI are stipulated in the project’s ‘TOR’ (Terms of Reference).

ACI was supposed to print and deliver 116 million pieces of Phil. ID by the end of 2023. However, the CCWI noted that by end 2023, the company has only delivered some 50 million cards– “of very poor quality,” according to its recipients. The delivery constitutes a mere 43.2 percent of the total 116 million cards for delivery, the CCWI said.

A document cited by CCWI noted that on July 5, 2023, two days after Remolona took over the helms of the BSP from Felipe Medalla (who replaced Diokno after his transfer to the Department of Finance on June 30, 2022; Medalla’s term ended on July 3, 2023), he received a report stating that ACI already incurred liquidated damages due to the government amounting to P258,754,031.91 or more than 12 percent for the card production contract (Lot 1).

However, the BSP only penalized ACI with P96.634 million in LD while the balance of P162,120,356.84 was never deducted from the subsequent payments to ACI, the anti-corruption watchdog noted.

On July 12, 2023, just over a week after Remolona received the report on ACI’s poor performance, the CCWI said they were alarmed to learn the firm was offering a compromise of just P1.505 million, instead of paying the overdue penalty of P162,120,356.84.

“(E)ntertaining the idea of entering into a compromise agreement with ACI…violates the applicable TOR, anomalous, and reeks of graft and corruption,” CCWI told the court.

“Illegal subcontracting”—Sen. Poe

Maverick lawyer and newspaper columnist Al Vitangcol, who has shown an earlier interest in the national ID controversy and who is assisting CCWI, also questioned the participation of the BSP in the National ID/PhilSys project and the BSP’s subsequent decision to ‘subcontract’ the same to one of its service providers, ACI.

Section 15 of RA 11055 is clear in mandating the Philippine Statistics Authority (PSA) in the implementation of the national ID project with “technical assistance” from the Department of Information and Communication Technology (DICT) in the area of data security and integrity.

The only mention of the BSP in RA 11055  was under Section 16, as a member of the PhilSys Policy and Coordination Council (PSPCC), which is chaired by the chair of the NEDA (National Economic Development Authority). Even here, the BSP is represented by an undersecretary of the monetary body and not by the BSP governor.

“…(F)or reasons known only to respondents, respondent BSP assumed the public bidding for the PhilSys project,” CCWI noted.

During the Senate hearing for the PSA budget last September 11 chaired by Sen. Grace Poe, PSA National Statistician and Civil Registrar General Claire Dennis Mapa, said they were also “surprised” to learn that ALLCARDS would be printing the national ID, instead of the BSP.

Mapa said their contract with the BSP is for the latter to print the IDs of which, they already paid P1.4 billion covering 90 percent of the 55 million IDs thus far printed by ALLCARDS.

Poe noted that the BSP subcontracting the project to a private company is not allowed under the law, an observation seconded by the representative from the Commission on Audit (COA) present during the hearing.

COA auditor Anicleto Boleche Jr. added that subcontracting was specifically disallowed in the MOA (memorandum of agreement) between the PSA and the BSP.

Poe raised the issue after learning that last August 15, the BSP decided to terminate its contract with ALLCARDS.

Among others, the BSP justified its decision by pointing out the failure of ALLCARDS “to deliver any or all of the goods specified in the contract, amounting to more than 10 percent of the contract price.”

A violation of RA 9184—Vitangcol; ‘No subcontracting’– BSP

In a separate statement a day after the hearing, on September 12, the BSP maintained it did not ‘subcontract’ the printing of the national ID to ALLCARD. Rather, the BSP claimed the contract was for ACI to provide “equipment, raw materials, and technical support under a lease and supply contract.”

“The Commission on Audit (COA) team assigned to BSP flagged no issues related to subcontracting in its review of BSP’s transactions,” the statement added.

The statement, however, did not addressed the case and the issues raised by the CCWI before the CA.

While Vitangcol would not comment on suspicion that the deal between the BSP under Diokno and ACI reeks of a ‘rigged contract,’ he did note that part of the TOR that ACI agreed to comply with is to purchase “all raw materials inclusive of the Diffractive Optically Variable Image Device (DOVID)…from Kinegram…”

OVD Kinegram is a company based in Switzerland and part of the KURZ Group of Germany. Its website claimed it to be as “a globally leading supplier of security features for identity documents and banknotes.”

Vitangcol, who is also a known IT expert and an engineer, said the DOVID forms part of the security features of the national ID—but which appears not present in the IDs already released by the PSA.

He added that specifying a particular supplier in any government contract is also against the law as it violates RA 9184 or the Government Procurement Reform Act as it reeks of ‘favoritism.’

ACI resorting to forum shopping?

In its September 12 statement, the BSP also revealed that it agreed to an “arbitration” with ACI.

“This independent proceeding serves as the proper venue to resolve all issues raised by ACI, and the BSP shall abide by the decision of the arbitration committee,” reads the statement. It failed to mention which arbitration body is currently handling the matter.

Vitangcol said they would not be surprised if the CCWI is not also invited to the arbitration proceedings.

Complicating the situation is the decision by the ACI to go to court after the contract termination and where it managed to secure a temporary restraining order (TRO) last September 9, from Hon. Judge Renato Pambid of Branch 76, Quezon City Regional Trial Court. The ruling in the main mandated the BSP to honor the contract with the company.

In its decision, the court said the BSP contract termination last August 15, came just a day after the summary hearing it conducted. The court also criticized the BSP over its “alarming lack of transparency” in its decision to rescind the contract with ACI.

With arbitration already in motion, Vitangcol warned that this legal maneuver by ACI before the sala of Judge Pambid already constitutes ‘forum shopping’ as he also questioned the propriety of the TRO considering that the CA Third Division, a higher court than the RTC, has already acquired jurisdiction over the case.