Pabillo v. Comelec

G.R. No. 216098. April 21, 2015.
*

BISHOP BRODERICK S. PABILLO, DD, PABLO R.
MANALASTAS, JR., PhD, MARIA CORAZON AKOL,
CONCEPCION B. REGALADO, HECTOR A. BARRIOS,
LEO Y. QUERUBIN, AUGUSTO C. LAGMAN, FELIX P.
MUGA II, PhD, ATTY. GREGORIO T. FABROS, EVITA L.
JIMENEZ, and JAIME DL CARO, PhD, petitioners, vs.
COMMISSION ON ELECTIONS EN BANC, represented
by Acting Chairperson CHRISTIAN ROBERT S. LIM, and
SMARTMATIC-TIM CORPORATION, represented by
Smartmatic Asia-Pacific President CESAR FLORES,
respondents.
G.R. No. 216562. April 21, 2015.*

INTEGRATED BAR OF THE PHILIPPINES, petitioner,
vs. COMMISSION ON ELECTIONS, represented by its
Acting Chairperson ROBERT S. LIM, and SMARTMATIC-
TIM CORPORATION, respondents.
Election Law; Automated Election System: Precinct Count

Optical Scan Machines; Words and Phrases; Precinct Count
Optical Scan (PCOS) means “a technology wherein an optical
ballot scanner, into which optical scan paper ballots marked by
hand by the voter are inserted to be counted, is located in every
precinct.”—Indeed, the
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* EN BANC.
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Pabillo vs. Commission on Elections En Banc
conduct of the upcoming 2016 Elections is dependent on the

functional state of the existing PCOS machines purchased by the
COMELEC. PCOS means “a technology wherein an optical ballot
scanner, into which optical scan paper ballots marked by hand by
the voter are inserted to be counted, is located in every precinct.”
As the AES’s groundwork mechanism, it is imperative that the
PCOS machines, come election day, are of optimal utility.
Following the CAC’s recommendation to reuse the existing
technology for the said elections, the COMELEC proceeded to
procure services for the repair and refurbishment of the PCOS
machines. The COMELEC, however, through its Resolution No.
9922, decided to pursue a direct contracting arrangement with
Smartmatic-TIM, which has now resulted in the execution of the
Extended Warranty Contract (Program 1). Petitioners assail the
validity of the foregoing courses of action mainly for violating the
GPRA. Thus, if only to ensure that the upcoming elections is not
mired with illegality at this basic, initial front, this Court,
pursuant to its unyielding duty as final arbiter of the laws, deems
it proper to thresh out the above stated substantive issues,
reasonably unfettered by the rigors of procedure.
Bids and Bidding; Government Contracts; In this jurisdiction,
public bidding is the established procedure in the grant of
government contracts.—In this jurisdiction, public bidding is the
established procedure in the grant of government contracts.
Section 3, Article I of the GPRA — the standing procurement law
approved on January 10, 2003 — states that “[a]ll procurement of
the national government, its departments, bureaus, offices and
agencies, including state universities and colleges, government-
owned and/or -controlled corporations, government financial
institutions and local government units, shall, in all cases, be
governed by these principles: (a) Transparency in the
procurement process and in the implementation of procurement
contracts. (b) Competitiveness by extending equal opportunity to
enable private contracting parties who are eligible and qualified
to participate in public bidding. (c) Streamlined procurement
process that will uniformly apply to all government procurement.
The procurement process shall be simple and made adaptable to
advances in modern technology in order to ensure an effective and
efficient method. (d) System of accountability where both the
public officials directly or indirectly involved in the procurement
process as well as in the implementation of procurement contracts
and the private parties that deal with government are,
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608 SUPREME COURT REPORTS ANNOTATED

when warranted by circumstances, investigated and held

liable for their actions relative thereto. (e) Public monitoring of
the procurement process and the implementation of awarded
contracts with the end in view of guaranteeing that these
contracts are awarded pursuant to the provisions of this Act and
its implementing rules and regulations, and that all these
contracts are performed strictly according to specifications.”
Same; By its very nature, public bidding aims to protect
public interest by giving the public the best possible advantages
through open competition.—By its very nature, public bidding
aims to protect public interest by giving the public the best
possible advantages through open competition. Under Section
5(e), Article I of the GPRA, public bidding is referred to as
“Competitive Bidding,” which is defined as “a method of
procurement which is open to participation by any interested
party and which consists of the following processes:
advertisement, pre-bid conference, eligibility screening of
prospective bidders, receipt and opening of bids, evaluations of
bids, post-qualification, and award of contract, the specific
requirements and mechanics of which shall be defined in the
[GPRA’s Implementing Rules and Regulations (IRR)].” Case law
states that competition requires not only bidding upon a common
standard, a common basis, upon the same thing, the same subject
matter, and the same undertaking, but also that it be legitimate,
fair and honest and not designed to injure or defraud the
government. The essence of competition in public bidding is that
the bidders are placed on equal footing which means that all
qualified bidders have an equal chance of winning the auction
through their bids. Another self-evident purpose of competitive
bidding is to avoid or preclude suspicion of favoritism and
anomalies in the execution of public contracts.
Same; Government Procurement; It is an established public
policy, as well as a statutory mandate that all government
procurement shall be done through competitive public bidding.—It
is an established public policy, as well as a statutory mandate
that all government procurement shall be done through
competitive public bidding. However, as an exception, Article XVI
of the GPRA sanctions a resort to alternative methods of
procurement, among others, via direct contracting.
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Same; Direct Contracting; Words and Phrases; Direct

contracting, otherwise known as “Single Source Procurement,”
refers to “a method of Procurement that does not require elaborate
Bidding Documents because the supplier is simply asked to submit
a price quotation or a pro forma invoice together with the
conditions of sale, which offer may be accepted immediately or
after some negotiations.”—Direct contracting, otherwise known as
“Single Source Procurement,” refers to “a method of Procurement
that does not require elaborate Bidding Documents because the
supplier is simply asked to submit a price quotation or a pro
forma invoice together with the conditions of sale, which offer
may be accepted immediately or after some negotiations.”
Same; Same; Government Procurement Reform Act; Under
Section 50(a), Article XVI of the Government Procurement Reform
Act (GPRA), direct contracting may be allowed when the
procurement involves goods of proprietary nature, which can be
obtained only from the proprietary source — that is, when patents,
trade secrets, and copyrights prohibit others from manufacturing
the same item.—Under Section 50(a), Article XVI of the GPRA,
direct contracting may be allowed when the procurement involves
goods of proprietary nature, which can be obtained only
from the proprietary source — that is, when patents, trade
secrets, and copyrights prohibit others from manufacturing the
same item. The applicability of said condition was explicated in
the GPPB Manual as follows: This is applicable when the goods or
services being procured are covered by a patent, trade secret or
copyright duly acquired under the law. Under the Intellectual
Property Code of the Philippines (R.A. No. 8293), the registered
owner of a patent, a copyright or any other form of intellectual
property has exclusive rights over the product, design or process
covered by such patent, copyright or registration. Such exclusive
right includes the right to use, manufacture, sell, or otherwise to
derive economic benefit from the item, design or process.
Same; Same; Same; Automated Election System; Even if it is
assumed that Smartmatic-TIM is the proprietary source of the
services or that the intended repair and refurbishment would
necessarily entail a modification of the Precinct Count Optical
Scan (PCOS) hardware and software of which its existing
intellectual property rights cover, the Commission on Elections
(COMELEC) is still not
610

bound to engage Smartmatic-TIM on an exclusive basis.—A

perusal of the aforementioned patent and copyright documents
reveals that Smartmatic-TIM’s existing intellectual property
rights do not cover the services subject of these cases. No evidence
has been presented to show that it possessed intellectual property
rights over the method, process, system, program, or work of
servicing the said PCOS machines for their repair and
refurbishment. Accordingly, Smartmatic-TIM cannot be said to be
the services’ proprietary source, thus, negating its purported
exclusivity as the COMELEC claims. At any rate, even if it is
assumed that Smartmatic-TIM is the proprietary source of the
services or that the intended repair and refurbishment would
necessarily entail a modification of the PCOS hardware and
software of which its existing intellectual property rights cover,
the COMELEC is still not bound to engage Smartmatic-TIM on
an exclusive basis. Based on the 2009 AES Contract, Smartmatic-
TIM would grant the COMELEC a perpetual, but nonexclusive
license to use, modify, and customize the PCOS systems
and software, including the right to alter and modify the
source code itself, for all future elections, when the latter
exercises its option to purchase (which it eventually did), with
certain limitations.
Civil Law; Sales; Warranties; Albeit undefined in our local
statutes, a warranty has been ordinarily considered as an
agreement to be responsible for all damages that arise from the
falsity of a statement or assurance of fact.—Albeit undefined in
our local statutes, a warranty has been ordinarily considered as
an agreement to be responsible for all damages that arise from
the falsity of a statement or assurance of fact. In other words, a
warranty promises indemnity against defects in an article sold. In
Ang v. CA, 567 SCRA 54 (2008), a warranty was defined as “a
statement or representation made by the seller of goods,
contemporaneously and as part of the contract of sale, having
reference to the character, quality or title of the goods, and by
which he promises or undertakes to insure that certain facts are
or shall be as he then represents them.”
Same; Same; Same; Automated Election System; With the
warranty on manufacturing defects having lost its effect, there is
no way that the Commission on Elections’ (COMELEC’s)
engagement of another service contractor would constitute a breach
of that warranty.—With the warranty on manufacturing defects
having lost its
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effect, there is no way that the COMELEC’s engagement of

another service contractor would constitute a breach of that
warranty.
Same; Same; Same; Same; While Smartmatic-TIM may be the
exclusive manufacturer and distributor of the Precinct Count
Optical Scan (PCOS) machines and software in the Philippines,
there is no evidence to show that it is the sole entity capable of
repairing and/or refurbishing the same. Smartmatic-TIM’s
certification — aside from being self-serving and, thus, of doubtful
probative value — is not evidence of the company’s exclusive
capability.—While Smartmatic-TIM may be the exclusive
manufacturer and distributor of the PCOS machines and software
in the Philippines, there is no evidence to show that it is the sole
entity capable of repairing and/or refurbishing the same.
Smartmatic-TIM’s certification — aside from being self-serving
and, thus, of doubtful probative value — is not evidence of the
company’s exclusive capability. A business dictionary defines
“certification” as a “formal procedure by which an accredited or
authorized person or agency assesses and verifies (and attests in
writing by issuing a certificate) the attributes, characteristics,
quality, qualification, or status of individuals or organizations,
goods or services, procedures or processes, or events or situations,
in accordance with established requirements or standards.”
Paralleled against this definition, the certification thus operates
only as a formal assurance that any work performed by the
issuer’s employees would conform to its own established
requirements and standards, for which the client, based on the
issuer’s goodwill and reputation, is led to expect a certain quality
of work. With the COMELEC appearing to rely solely on
Smartmatic-TIM’s certification, and more importantly, absent the
conduct of an initial industry survey (which again may, in itself,
be considered as a ground to invalidate the resultant contract as
above explained), it remains uncertain if the repair and
refurbishment of the PCOS machines can be accomplished by
other equally capable service providers at more advantageous
terms to the government. With this, the Court concludes that the
third condition — similar to the previous two conditions — which
would justify a resort to direct contracting under Section 50,
Article XVI of the GPRA had not been complied with.
Bids and Bidding; Direct Contracting; Section 52(h) of Batas
Pambansa (BP) Blg. 881 basically allows the Commission on
Elections (COMELEC) to engage in negotiations or sealed bids if it
finds
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the requirements of public bidding impractical to observe.—
Section 52(h) of BP 881 basically allows the COMELEC to engage
in negotiations or sealed bids if it finds the requirements of public
bidding impractical to observe. BP 881 was passed way back in
1985, before the advent of both the GPRA (signed into law on
January 10, 2003) and the automated election law (RA 8436, as
amended by RA 9369, signed into law on December 22, 1997). BP
881’s datedness notwithstanding, the Court deems that said
provision remains valid and effective, absent its express repeal.
Indeed, “[b]asic is the principle in statutory construction that
interpreting and harmonizing laws is the best method of
interpretation in order to form a uniform, complete, coherent, and
intelligible system of jurisprudence, in accordance with the legal
maxim interpretare et concordare leges legibus est optimus
interpretandi modus. Simply because a later statute relates
to a similar subject matter as that of an earlier statute
does not result in an implied repeal of the latter.”
Same; Same; It has already been resolved that the
Commission on Elections (COMELEC) failed to comply with any
of the conditions by which its selected mode of procurement, i.e.,
direct contracting, would have been allowed.—It has already been
resolved that the COMELEC failed to comply with any of the
conditions by which its selected mode of procurement, i.e., direct
contracting, would have been allowed. Meanwhile, it has not
argued that any other alternative method of procurement can be
applied. This notwithstanding, the COMELEC attempts to go
beyond the scope of the GPRA and extend Section 52(h)’s
application based on two (2) practical considerations, namely: (a)
the alleged tight schedule of conducting a public bidding and
having the PCOS machines repaired/refurbished in time for the
2016 elections; and (b) the great risk of having the PCOS
machines repaired/refurbished by any third party provider in
view of the highly technical nature of the goods.
Same; Same; Automated Election System; The Commission on
Elections (COMELEC) could have already had the Precinct Count
Optical Scan (PCOS) machines inspected and diagnosed by its
own in-house personnel as early as the time it had resolved to
reuse the same.—At the outset, it should be underscored that the
COMELEC could have already had the PCOS machines inspected
and diagnosed by its own in-house personnel as early as the time
it had resolved to reuse the same. The COMELEC’s ITD could
have even proceeded to
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conduct preventive maintenance procedures, which it admits

it is capable of under its memorandum dated May 14, 2014.
Same; Same; Same; It appears that the Commission on
Elections (COMELEC) could have just procured the “the tools for
repair and parts for replacement,” and have the repair and
refurbishment done by its own in-house personnel.—In fact, as
may be above gleaned, it appears that the COMELEC could have
just procured the “the tools for repair and parts for replacement,”
and have the repair and refurbishment done by its own in-house
personnel. Note that a sufficient number of ITD personnel could
have well been trained by Smartmatic-TIM itself on matters
related to the repair, refurbishment, tuning up and maintenance
of the PCOS machines, as well as the electronic transmission
facility, pursuant to Item No. 8.2.4, Part V of the 2009 RFP.
Same; Same; Same; Smartmatic-TIM’s training obligation —
an obligation that was incipiently required in the Request for
Proposal (RFP) to which all bidders at that time were subjected to
and, in fact, included in the 2009 Automated Election System
(AES) Contract’s project scope — spans both aspects of preventive
maintenance and repair. With this, the Supreme Court (SC) is in a
quandary as to why the services subject of these cases would still
have to be procured by the Commission on Elections (COMELEC)
from an outside service provider, let alone under an exclusive
direct contracting arrangement with Smartmatic-TIM.—Clearly,
Smartmatic-TIM’s training obligation — an obligation that was
incipiently required in the RFP to which all bidders at that time
were subjected to and, in fact, included in the 2009 AES
Contract’s project scope — spans both aspects of preventive
maintenance and repair. With this, the Court is in a quandary as
to why the services subject of these cases would still have to be
procured by the COMELEC from an outside service provider, let
alone under an exclusive direct contracting arrangement with
Smartmatic-TIM. Curiously, Smartmatic-TIM has been
communicating with the COMELEC about its proposed extended
warranty as early as 2013. Hence, unless the COMELEC was
already bent on pursuing its current deal with Smartmatic-TIM,
then the latter’s training obligation should have been enforced. To
the Court’s mind, this would have been the more prudent course
of action: ideally, this would not only narrow down the
COMELEC’s task to the procurement of the necessary tools and
replacement parts, but
614

also provide it with a considerable degree of sustainability by

minimizing — if not eliminating — its reliance on Smartmatic-
TIM with respect to the upkeep of the PCOS machines.
Same; Same; Same; Nothing on record convinces the Supreme
Court (SC) that there is no other service provider which is capable
of servicing the Precinct Count Optical Scan (PCOS) machines
without the need to reverse engineer the same.—Nothing on record
convinces this Court that there is no other service provider which
is capable of servicing the PCOS machines without the need to
reverse engineer the same. Neither is this Court convinced that
reverse engineering, if done properly, would impair the machines’
integrity or put “back to zero” the know-how already accumulated.
The bid guidelines may very well qualify the COMELEC’s desired
body of work, and the bidding process itself screens the capability
of potential bidders to comply with the same. As it was in its
earlier asseveration, the COMELEC is quick to assume the worst
but its assumptions remain unsubstantiated. Accordingly, the
COMELEC’s arguments at this juncture are denied altogether.
Same; Same; Same; Warranty; The services of repair and
refurbishment cannot be procured from Smartmatic-TIM through
an “extended warranty” mode, unless the Supreme Court (SC)
assents to a blatant circumvention of the procurement law.—The
Extended Warranty Contract (Program 1) cannot be validated by
the mere expedient of characterizing the same as a part of the
2009 AES Contract. The services of repair and refurbishment
cannot be procured from Smartmatic-TIM through an “extended
warranty” mode, unless this Court assents to a blatant
circumvention of the procurement law.
Same; Same; Same; Same; An extended warranty gives a
prolonged warranty to consumers to provide the additional service
of replacing or repairing goods, the defects of which are directly
related to how the item was manufactured.—An extended
warranty gives a prolonged warranty to consumers to provide the
additional service of replacing or repairing goods, the defects of
which are directly related to how the item was
manufactured. As an “extension,” the defect to be repaired
should occur within the extended period covered in the
agreement. In these cases, the warranty period for
manufacturing defects had, as above discussed,
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lapsed a long time ago, or last March 30, 2013, which follows
the one (1) year warranty period for the PCOS machines,
reckoned from March 30, 2012 when the 2012 Deed of Sale was
executed.
Same; Same; Same; Same; The Commission on Elections
(COMELEC) has failed to justify its reasons for directly
contracting with Smartmatic-TIM: it had not shown that any of
the conditions under Section 50, Article XVI of the Government
Procurement Reform Act (GPRA) exists; its claims of
impracticality were not supported by independently verified and
competent data; and lastly, its perceived “warranty extension” is,
in reality, just a circumvention of the procurement law.—There
are no qualms about the task of having the PCOS machines
repaired and refurbished. However, there are serious and
unignorable legal flaws about how the COMELEC intends to
pursue this undertaking. Bluntly, the COMELEC has failed to
justify its reasons for directly contracting with Smartmatic-TIM:
it had not shown that any of the conditions under Section 50,
Article XVI of the GPRA exists; its claims of impracticality were
not supported by independently verified and competent data; and
lastly, its perceived “warranty extension” is, in reality, just a
circumvention of the procurement law. For all these counts, the
conclusion thus reached is that the COMELEC had committed
grave abuse of discretion amounting to lack or excess of
jurisdiction. As a result, its Resolution No. 9922 and the Extended
Warranty Contract (Program 1) should be stricken down, and
necessarily, all amounts paid to Smartmatic-TIM pursuant to the
said contract, if any, being public funds sourced from taxpayers’
money, should be returned to the government in accordance with
the procedures contained in existing rules and regulations. Note
that the disposition of these cases does not prohibit the
COMELEC from resorting to direct contracting anew or other
alternative method of procurement with any service contractor,
subject to compliance with the conditions provided in the GPRA
and all the pertinent rules and procedures.
Velasco, J., Concurring and Dissenting Opinion:
Bids and Bidding; Direct Contracting; Warranty; Automated

Election System; View that failure to comply with the set
preconditions for direct contracting, specifically the conduct of an
initial industry survey and pre-procurement conference, is a
ground to nullify the Extended Warranty Contract subject of these
consolidated
616

cases, and that the disposition of these cases ought not

prohibit the Commission on Elections (COMELEC) from resorting
to direct contracting anew or resorting to other alternative modes
of procurement with any service provider.—I concur with the
majority that failure to comply with the set preconditions for
direct contracting, specifically the conduct of an initial industry
survey and pre-procurement conference, is a ground to nullify the
Extended Warranty Contract subject of these consolidated cases,
and that the disposition of these cases ought not prohibit the
Commission on Elections (COMELEC) from resorting to direct
contracting anew or resorting to other alternative modes of
procurement with any service provider.
Same; Same; Same; Same; View that the parties herein agree
that the subject “goods” of the Extended Warranty Contract neither
pertain to the Precinct Count Optical Scan (PCOS) machines nor
the software program, but to the services, particularly diagnostics,
preventive maintenance, repair, and replacement of the PCOS
machines previously bought from Smartmatic-TIM.—To put
things into perspective, however, the parties herein agree that the
subject “goods” of the Extended Warranty Contract neither
pertain to the PCOS machines nor the software program, but to
the services, particularly diagnostics, preventive maintenance,
repair, and replacement of the PCOS machines previously bought
from Smartmatic-TIM. Here, it has been duly proved that
Smartmatic-TIM has proprietary rights over the PCOS machines’
hardware and software, but whether these proprietary rights
extend to the services contracted remains to be seen. It is likewise
premature at this point to draw a conclusion on whether or not
Smartmatic-TIM is the sole distributor of the services to be
rendered. This is in view of the fact that the COMELEC, as
correctly pointed out by the ponencia, failed to comply with two
key requirements prior to directly contracting with Smartmatic-
TIM, namely: the conduct of (a) an initial industry survey, and (b)
a pre-procurement conference. On this point alone, the Extended
Warranty Contract ought to be nullified.
Same; Same; Same; Same; View that it is undisputed that the
Commission on Elections (COMELEC) has the right to reverse
engineer, disassemble, decompile, alter, modify, or transmit the
technology it purchased in any form or by any means, but, as can
be gleaned, these rights to alter and/or modify the Precinct Count
Optical Scan (PCOS) machine hardware, and the software
embedded thereon,
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pertain exclusively to COMELEC.—It is undisputed that the

COMELEC has the right to reverse engineer, disassemble,
decompile, alter, modify, or transmit the technology it purchased
in any form or by any means, but, as can be gleaned, these rights
to alter and/or modify the PCOS machine hardware, and the
software embedded thereon, pertain exclusively to COMELEC.
In the same vein, the exception under Article 10 indeed allows for
the exploitation and reproduction of the technology transferred
but only if it is performed by COMELEC itself. To be sure, the
provisions, as couched, do not evince that the said rights
mentioned thereon are actually transferrable. On the
contrary, the language of the 2009 AES Contract prohibits the
same.
Same; Same; Same; Same; View that it is still premature at
this point to rule that performing the auxiliary services will
necessarily affect the source code.—While I maintain my position
that the hardware and software of the PCOS machines are closely
intertwined — the software being embedded on the hardware, I
echo the concern that it is still premature at this point to rule
that performing the auxiliary services will necessarily
affect the source code. The initial industry survey, after all,
may reveal that these services may actually be rendered without
altering the software’s algorithms, proving the COMELEC’s fears
to be unfounded. Thus, should the COMELEC opt to conduct an
initial industry survey, I implore the Commission to include a
technical study to ascertain the veracity of its claim. If it were to
be discovered that the said auxiliary services cannot be
performed by entities other than by COMELEC and
Smartmatic-TIM without necessarily altering the source
code, the Commission cannot then contract out the said
services except to Smartmatic-TIM. This is so because the
rights granted to COMELEC to alter and/or modify the Source
Code under Article 9 of the 2009 AES Contract, to reiterate, is
nontransferable and cannot be performed by any other entity in
its stead, lest the Commission contravene Articles 9 and 10 of the
2009 AES Contract, and violate Smartmatic-TIM’s intellectual
property rights.
SPECIAL CIVIL ACTIONS in the Supreme Court.

Certiorari and Prohibition.
The facts are stated in the opinion of the Court.
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Manuelito R. Luna for petitioners in G.R. No. 216098.

Pacifico A. Agabin for petitioner in G.R. No. 216562.
Angara, Abello, Concepcion, Regala & Cruz for
Smartmatic-TIM Corporation.
PERLAS-BERNABE, J.:

“Procurement of electoral services and goods constitutes a major

part of the organisation of elections in terms of planning, costs and
implementation (purchasing and distribution). Integrity and
transparency is thus essential; lack of integrity in the purchasing
system may put the legitimacy of the whole electoral exercise at
risk.”1

Before this Court are consolidated petitions for certiorari
and prohibition2 assailing respondent the Commission on
Elections’ (COMELEC) Resolution No. 99223 dated
December 23, 2014, which approved4 a direct contracting
arrangement with respondent Smartmatic-TIM
Corporation (Smartmatic-
_______________
1 “Procurement Aspects of Introducing ICT Solutions in Electoral

Processes: The Specific Case of Voter Registration.” Published by the Joint
European Commission-United Nations Development Programme task
Force on Electoral Assistance (2010). <http://www.
ec-undp-electoralassistance.org/images/operational%20paper.pdt> (visited
March 30, 2015).
2 Both with prayers for the issuance of a writ of preliminary
injunction. Rollo (G.R. No. 216098), Vol. I, pp. 3-46; and Rollo (G.R. No.
216562), Vol. I, pp. 3-29.
3 Rollo (G.R. No. 216098), Vol. I, pp. 729-738; and Rollo (G.R. No.
216562), Vol. I, pp. 33-42.
4 In the Summary of Votes five out of the seven COMELEC
Commissioners, i.e., Chairman Sixto B. Brillantes, Jr., and
Commissioners Lucenito N. Tagle, Elias R. Yusoph, Christian Robert S.
Lim, and Al A. Parreño (with Separate Opinion), voted for the approval of
Smartmatic’s PCOS Extended Warranty Contract (Program 1).
Commissioners Arthur D. Lim and Luie Tito F. Guia dissented. See Rollo
(G.R. No. 216098), Vol. I, p. 739; and Rollo (G.R. No. 216562), Vol. I, p. 43.
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TIM) for the diagnostics, maintenance, repair, and

replacement of the COMELEC’s Precinct Count Optical
Scan (PCOS) machines, as well as the resulting contract
thereof, the Extended Warranty Contract (Program 1)5
dated January 30, 2015.

The Facts

In 1997, Congress enacted Republic Act No. (RA) 8436,6
which authorized the COMELEC “to use an automated
election system [(AES)] x x x for the process of voting,
counting of votes and canvassing/consolidation of results
[for the May 11, 1998] national and local elections,”7 as well
as for subsequent national and local electoral exercises. To
achieve this purpose, the COMELEC was “to procure by
purchase, lease or otherwise any supplies, equipment,
materials[,] and services needed for the holding of the
elections by an expedited process of public bidding of
vendors, suppliers or lessors.”8 RA 8436 further provided
that the AES “shall be under the exclusive supervision and
control of the [COMELEC].”9
_______________
216562), Vol. I, pp. 57-68.
6 Entitled “An Act Authorizing the Commission on Elections to Use an
Automated Election System in the May 11, 1998 National or Local
Elections and in Subsequent National and Local Electoral Exercises,
Providing Funds Therefor and for Other Purposes” (December 22, 1997).
7 RA 8436, Section 6.
8 Id.
9 RA 8436, Section 26.
620

RA 9369,10 signed into law on January 23, 2007, later

amended RA 8436 and was passed “to encourage
transparency, credibility, fairness, and accuracy of
elections.” Thereunder, “the mandate and authority of the
[COMELEC] to prescribe the adoption and use of the most
suitable technology of demonstrated capability taking into
account the situation prevailing in the area and the funds
available for the purpose”11 were explicitly recognized. RA
9369 authorized the COMELEC “to use an [AES] or
systems in the same election in different provinces,
whether paper-based or a direct recording electronic
election system as it may deem appropriate and practical
for the process of voting, counting of votes[,] and
canvassing/consolidation and transmittal of results of
electoral exercises,”12 and for such purpose, “to procure, in
accordance with existing laws, by purchase, lease, rent or
other forms of acquisition, supplies, equipment, materials,
software, facilities[,] and other services, from local or
foreign sources free from taxes and import duties, subject
to accounting and auditing rules and regulations.”13
On March 18, 2009, the COMELEC published a Request
for Proposal (RFP)14 for the public bidding of the lease with
option to purchase of an AES to be used in the May 10,
2010
_______________
10 Entitled “An Act Amending Republic Act No. 8436, Entitled ‘An Act
Authorizing the Commission on Elections to Use an Automated Election
System in the May 11, 1998 National or Local Elections and in
Subsequent National and Local Electoral Exercises, to Encourage
Transparency, Credibility, Fairness and Accuracy of Elections, Amending
for the Purpose’ Batas Pambansa Blg. 881, as Amended, Republic Act No.
7166 and Other Related Elections Laws, Providing Funds Therefor and for
Other Purposes” (January 23, 2007).
11 RA 8436, as amended by RA 9369, Section 1.
14 Rollo (G.R. No. 216098), Vol. II, pp. 848-905; and Rollo (G.R. No.
216562), Vol. II, pp. 512-569.
621
VOL. 756, APRIL 21, 2015 621

Automated Synchronized National and Local

Elections.15 Item No. 18, Part V16 of the 2009 RFP states
that “[t]he winning bidder shall assure the availability of
parts, labor, and technical support and maintenance to the
COMELEC for the duration of this [p]roject and for the
next ten (10) years should the COMELEC opt to purchase
the system after the lease period.”17
On June 9, 2009, the COMELEC En Banc, in Resolution
No. 8608,18 resolved to approve the report/recommendation
of the COMELEC Special Bids and Awards Committee
(SBAC) dated June 3, 2009, confirming Smartmatic-TIM —
a joint venture company formed by Smartmatic
International Corporation (Smartmatic) and Total
Information Management Corporation (TIM) — as “the
bidder with the ‘Lowest Calculated Responsive Bid’ [LCRB]
and to award the contract for the automation of the
elections on May 10, 2010 to the said joint venture.”19
On July 10, 2009, COMELEC and Smartmatic-TIM
executed the Contract for the Provision of an Automated
Election System for the May 10, 2010 Synchronized
National and Local Elections20 (2009 AES Contract). The
2009 AES Contract pertinently provides that “in the event
that [the] COMELEC
_______________
15 Rollo (G.R. No. 216098), Vol. II, p. 773; and Rollo (G.R. No. 216562),
Vol. II, p. 461.
Vol. II, p. 545.
Vol. II, p. 461.
18 Rollo (G.R. No. 216098), Vol. II, pp. 906-907; and Rollo (G.R. No.
216562), Vol. II, pp. 570-571. Signed by Chairman Jose A.R. Melo, and
Commissioners Rene V. Sarmiento, Nicodemo T. Ferrer, Lucenito N.
Tagle, and Armando C. Velasco.
Vol. II, p. 571.
216562), Vol. II, pp. 572-596.
622

exercises its option to purchase [(OTP)] the Goods

x x x,”21 until December 31, 2010:22 (1) the COMELEC
“shall pay [Smartmatic-TIM] an additional amount of
[P2,130,635,048.15]”;23 (2) “a warranty shall be required in
order to assure that: [a] manufacturing defects shall be
corrected; and/or [b] replacements shall be made by
[Smartmatic-TIM], for a minimum period of three (3)
months, in the case of supplies, and one (1) year, in the
case of equipment, after performance of this Contract”;24
and (3) for the “PCOS, [Smartmatic-TIM] shall warrant the
availability of parts, labor and technical support and
maintenance to [the] COMELEC for ten (10) years, if
purchased, x x x beginning May 10, 2010.”25
The COMELEC was able to implement for the first time
the AES on a nationwide scale during the May 10, 2010
Synchronized National and Local Elections.26
On September 23, 2010, the COMELEC partially
exercised the OTP when it purchased 920 units of PCOS
machines with the corresponding canvassing/consolidation
system (CCS) for the special elections in certain areas in
Basilan, Lanao del Sur, and Bulacan.27 The option period
was thereafter extended several times28 and on March 21,
2012, the COMELEC En
_______________
21 Rollo (G.R. No. 216098), Vol. I, p. 673; and Rollo (G.R. No. 216562),
Vol. II, p. 579.
Vol. II, p. 583.
Vol. II, p. 579.
24 Id.
Vol. II, p. 586.
26 See Rollo (G.R. No. 216098), Vol. I, p. 774; and Rollo (G.R. No.
216562), Vol. II, p. 462.
27 See Whereas clause of the 2012 Deed of Sale; Rollo (G.R. No.
216098), Vol. I, p. 705. See also Rollo (G.R. No. 216562), Vol. I, p. 83.
28 See Capalla v. COMELEC, G.R. Nos. 201112, 201121, 201127, and
201413, June 13, 2012, 673 SCRA 1, 39.
623
VOL. 756, APRIL 21, 2015 623

Banc issued Resolution No. 937629 approving the full

exercise of the OTP.30 Thus, on March 30, 2012, the
COMELEC and Smartmatic-TIM executed a Deed of Sale31
(2012 Deed of Sale) for the remaining PCOS and CCS
machines, which the COMELEC used during the May 13,
2013 Synchronized National and Local Elections.32 Item 9
of the 2012 Deed of Sale states that the warranties under
Articles 4 and 8 of the 2009 AES Contract are incorporated
and that “pursuant to Article 4.3 of the [2009] AES
Contract, the PCOS machines will be covered by a one (1)
year warranty commencing from the acceptance by the
[COMELEC] during the [Hardware Acceptance Test
(HAT)] for every batch of 20,000 units as evidenced by the
date of the Delivery Receipt; Provided, that no warranty
period will expire earlier than 31 May 2013.”33
Prior to the scheduled May 13, 2013 Synchronized
National and Local Elections, petitioners in the
consolidated cases of Capalla v. COMELEC34 (Capalla)
challenged the validity and constitutionality of Resolution
No. 9376. They further prayed for the issuance of a
temporary restraining order (TRO) enjoining the
implementation of the 2012 Deed of Sale, which the Court
granted in a Resolution dated April 24, 2012. Nevertheless,
the Court, in a Decision dated June 13, 2012, ruled in favor
of the COMELEC, finding that the latter properly exercised
its OTP, despite the extended period therefor, and,
accordingly, declared the 2012 Deed of Sale legal and
valid.35
_______________
29 Not attached to the records.

Vol. I, p. 83.
31 Rollo (G.R. No. 216098), Vol. I, pp. 704-709 and Vol. II,
pp. 933-938; and Rollo (G.R. No. 216562), Vol. I, pp. 396-401.
32 Rollo (G.R. No. 216098), Vol. I, pp. 343-344; and Rollo, (G.R. No.
216562), Vol. I, pp. 83-84 and Vol. II, p. 462.
33 Rollo (G.R. No. 216098), Vol. I, p. 707 and Vol. II, p. 936; and Rollo
(G.R. No. 216562), Vol. I, p. 399.
34 Supra note 28.
35 Id.
624

On November 11, 2013, the COMELEC received from

Smartmatic-TIM a proposal letter36 to “extend the
warranty” of the PCOS machines for three (3) years.37 The
proposal covered labor, preventive maintenance,
diagnostics, repair and/or replacement of parts from 2014
to 2016.38 A more detailed version of the said proposal was
sent by Smartmatic-TIM to the COMELEC on November
19, 2013.39
In its Resolution No. 2014-00240 dated August 13, 2014,
the COMELEC Advisory Council (CAC)41 recommended,
among others, the reuse of the existing technology for the
upcoming 2016 Elections.42 The CAC also recommended
that the COMELEC seriously consider the use of multiple
or mixed technologies to promote interoperability and
encourage innovative solutions, as well as engaging one or
more secondary
_______________
36 See Proposal for Extended Warranty of PCOS Machines, Central

Servers and Network Equipment dated November 8, 2013. Rollo (G.R. No.
216098), Vol. I, pp. 535-537; and Rollo (G.R. No. 216562), Vol. I, pp. 200-
202.
(G.R. No. 216562), Vol. I, p. 84 and Vol. II, p. 463.
38 Id.
39 See Proposal for Extended Warranty of PCOS Machines, Central
Servers and Network Equipment dated November 19, 2013. Rollo (G.R.
No. 216098), Vol. I, pp. 538-542; and Rollo (G.R. No. 216562), Vol. I, pp.
204-208.
216562), Vol. II, pp. 604-607.
41 Under Section 9 of RA 8436, as amended by RA 9369, the CAC is
tasked to provide “advice and assistance in the identification, assessment
and resolution of systems problems or inadequacies as may surface or
resurface in the course of the bidding, acquisition, testing,
operationalization, reuse, storage or disposition of the AES equipment
and/or resources as the case may be.”
Vol. II, p. 463.
625
VOL. 756, APRIL 21, 2015 625

technologies, which shall be likewise selected through

open public bidding.43
The CAC’s technology recommendations were adopted
“in general” by the COMELEC in its Minute Resolution No.
14-062844 dated August 29, 2014.45 Negotiations between
the COMELEC and Smartmatic-TIM thereafter ensued46
and on October 30, 2014, Commissioner Christian Robert
S. Lim (Commissioner Christian Lim), who was the
authorized negotiator for the COMELEC and the
Chairperson of the Steering Committee,47 submitted to the
COMELEC’s Law Department the Final Extended
Warranty Proposal48 of Smartmatic-TIM for review.49
On November 4, 2014, the COMELEC’s Law
Department issued a memorandum,50 with subject heading
“Review of the Draft Contract for the 2014 Extension to the
Warranty (Program 1); Repair and Maintenance of the
Precinct Count Optical Scan (PCOS) Machines.” In the said
memorandum, the COMELEC’s Law Department stated
that it was not provided with the copies of the annexes of
the draft contract and, thus, was constrained to limit its
review only on the general provi-
_______________
216562), Vol. II, p. 605.
216562), Vol. II, pp. 608-611.
Vol. II, p. 464.
46 Id.
216562), Vol. I, p. 33.
48 See Rollo (G.R. No. 216098), Vol. II, pp. 948-959; and Rollo (G.R.
No. 216562), Vol. II, pp. 612-623.
(G.R. No. 216562), Vol. I, p. 87 and Vol. II, p. 464.
216562), Vol. I, pp. 227-235. Issued by Director IV Atty. Esmeralda Amora
Ladra, CEO VI, CESO IV.
626

sions and structure thereof, excluding the activities and

negotiations conducted in the acquisition of the subject
services.51 Furthermore, it mentioned that prior to its
review of the Final Extended Warranty Proposal, a similar
proposal for the “refurbishment/preventive
maintenance/extended warranty/program updates of the
PCOS machines,” also from Smartmatic-TIM, was
submitted for its review on June 13, 2014 specifically on
the aspect of procuring the same services through direct
contracting under RA 9184,52 otherwise known as the
Government Procurement Reform Act (GPRA).53 Therein, it
stressed that the procedure for direct contracting shall only
be applied if the conditions to resort to the method are
present or complied with, and that the Bids and Awards
Committee (BAC) and the COMELEC’s Information
Technology Department (ITD) should first determine and
confirm if indeed Smartmatic-TIM is the sole provider of
the services to be procured or otherwise the only entity
capable of executing such project, to the exclusion of others,
as well as if the ITD itself, given sufficient manpower,
budget, and resources, will be able to conduct the same.54
In this relation, it noted that the previous Smartmatic-TIM
proposal was similar to the current one55 and, thus, gave
the same recommendation to the subject contract under
review. Based on its understanding, it remarked that the
ITD personnel were in the process of conducting routine
and preventive maintenance of the PCOS machines (which
were stored at the Cabuyao warehouse) in
_______________
Vol. I, p. 227.
52 Entitled “An Act Providing for the Modernization, Standardization
and Regulation of the Procurement Activities of the Government and for
Other Purposes” (RA 9184 was approved on January 10, 2003 and took
effect on January 26, 2003).
Vol. I, p. 227.
Vol. I, p. 228.
55 Id.
627
VOL. 756, APRIL 21, 2015 627

order to maintain satisfactory operating condition by

providing for systematic inspection, detection, and
correction of incipient failures either before they occur or
before they develop into major defects, as well as to prevent
faults from occurring by conducting a battery of
maintenance tests, measurements, adjustments, and parts
replacement, if necessary.56 As such, it opined that the
conduct of repair was premature, considering that the units
requiring repair, if any, was yet to be determined.57 The
same was said of the replacement servers and network
equipment, as well as of the need to update the MTD58
modem firmware, which were yet to be evaluated.59
Finally, the COMELEC’s Law Department drew attention
to Item No. 8, Part V of the 2009 RFP, which provides that
all proposals for the AES procurement project require an
extensive training and education program on the
preparation of election systems, counting and canvassing
systems and transmission systems for technical personnel,
as well as for repair, troubleshooting, tuning up and
maintenance of machines and electronic transmission
facility.60 In this regard, the COMELEC’s Law Department
stated that since the AES procurement project must
necessarily form part of the 2009 AES Contract,
Smartmatic-TIM must train the COMELEC’s technical
personnel specifically on the foregoing respects.61
_______________
56 Id.
57 Id.
58 Not defined in the records.
Vol. I, p. 228.
216562), Vol. I, pp. 230-231.
Vol. I, p. 231.
628

These notwithstanding, the COMELEC En Banc, in its

Resolution No. 992262 dated December 23, 2014
(Resolution No. 9922), approved Program 1 of
Smartmatic-TIM’s PCOS Extended Warranty Proposal
amounting to P300,000,000.00, exclusive of Value-Added
Tax (VAT), through direct contracting, in view of the
following reasons:
First, time is of the essence in the preparation for the May 9,

2016 National and Local Elections such that the Commission and
the Bids and Awards Committee are constrained by the tight time
schedule if public bidding are to be conducted in the
refurbishment and/or repair of the machines considering all the
procurement activities lined up.63
Second, to give the refurbishment and/or the repair of the
PCOS Machines to any third party provider other than
SMARTMATIC, the original manufacturer will be too great a risk
considering the highly technical nature of the refurbishment
and/or the repair to be conducted on the machines.64
Third, given that no public bidding will be conducted, it is still
legal under RA 9184 for the COMELEC to resort to direct
contracting in the present case.65
The Extended Warranty Contract meets the requirements of
the procurement law on direct contracting, particularly,
a) The goods procured are of propriety nature, which can be
obtained only from the proprietary source of the PCOS licensed
technologies
_______________
216562), Vol. I, pp. 33-42.
63 Rollo (G.R. No. 216098), Vol. I, p. 731. See also Rollo (G.R. No.
216562), Vol. I, p. 35.
216562), Vol. I, p. 37.
216562), Vol. I, p. 38.
629
VOL. 756, APRIL 21, 2015 629

and from the exclusive manufacturer, which in the case of the

PCOS is SMARTMATIC.
b) The procurement of critical component of the AES solution
from SMARTMATIC-TIM is a condition precedent to hold it to
guarantee the project performance in accordance with the
provisions of the contract.
c) The PCOS is exclusively manufactured in the Philippines by
SMARTMATIC, which does not have sub-dealers and there is no
direct substitute for the product.66
Last, the proposed extended warranty that is a part of the 2009
AES Contract — which was a product of a validly conducted
public bidding — is still valid and enforceable.67

The COMELEC further pointed that it was constrained
to pursue a direct contracting arrangement with
Smartmatic-TIM for the reuse of the existing technology
since its proposed budget for the purchase of all new
technology was rejected.68
After negotiations by the parties, the contract amount
was reduced to P240,000,000.00, exclusive of VAT, and the
scope of work expanded to include all major repairs and
replacement of irreparable units, up to four percent (4%) of
all inventoried PCOS machines.69
On January 30, 2015, the COMELEC and Smartmatic-
TIM entered into the Extended Warranty Contract
(Program 1),70 whereby Smartmatic-TIM undertook the
following during
_______________
66 Rollo (G.R. No. 216098), Vol. I, pp. 734-735. See also Rollo (G.R. No.
216562), Vol. I, pp. 38-39.
216562), Vol. I, p. 40 and Vol. II, pp. 465-466.
68 Rollo (G.R. No. 216562), Vol. II, p. 495. The proposed budget for the
new technology at P18,436,416,378.00 was reduced to P16,814,910,000.00.
69 Rollo (G.R. No. 216562), Vol. II, p. 466.
70 Rollo (G.R. No. 216098), Vol. I, pp. 593-603.
630

a five (5)-month period: (a) accomplish a physical

inventory count of all the 81,896 PCOS machines with the
authorized COMELEC representatives ensuring, among
others, that the serial numbers are properly recorded and
annotated in the Inventory List of the COMELEC; (b)
complete a full diagnostic of every PCOS machine in
accordance with the Diagnostic Program; (c) examine each
PCOS machine to determine the required refurbishment to
bring them back to working condition; (d) perform a full
Preventive Maintenance Program71 of every PCOS
machine; (e) perform all repairs and replacements of the
defective components; and (f) provide replacement units for
those PCOS machines that are irreparable, up to a
maximum of four percent (4%) of the total number of PCOS
machines after the inventory count by both parties. The
following were, however, excluded from the scope of work:
(a) those PCOS machines that are unavailable during the
five (5)-month period of the Program or those units beyond
the four percent (4%) cap; (b) those cosmetic changes or
refinishing of the machines or furnishing of the machines
or furnishing supplies for such purposes, or making
specification changes; and (c) those PCOS machines, where
persons or entities other than Smartmatic-TIM authorized
representative, performed maintenance or repair services,
as a result of which, further repair or maintenance is
required to be done by a Smartmatic-TIM authorized
representative to restore the machines to good working
condition.72
_______________
71 Preventive Maintenance procedures include: (1) checking of the

completeness of the peripherals of the PCOS; (2) running the diagnostic
program of the PCOS to verify if there are functionalities in the system
that will fail; (3) opening of the PCOS cover and cleaning of the dust of the
inside parts of the unit; and (4) closing of the PCOS cover and re-executing
the diagnostic program of the PCOS. See Rollo (G.R. No. 216562), Vol. II,
p. 483.
631
VOL. 756, APRIL 21, 2015 631

The Cases

A. G.R. No. 216098

On February 2, 2015, a petition for certiorari and
prohibition73 with prayer for the issuance of a writ of
preliminary injunction was filed by petitioners Bishop
Broderick S. Pabillo, DD, Pablo R. Manalastas, Jr., PhD,
Maria Corazon Akol, Concepcion B. Regalado, Hector A.
Barrios, Leo Y. Querubin, Augusto C. Lagman, Felix P.
Muga II, PhD, Atty. Gregorio T. Fabros, Evita L. Jimenez,
and Jaime DL Caro, PhD (Pabillo, et al.), as registered
voters and taxpayers, alleging that the COMELEC
committed grave abuse of discretion in adopting Resolution
No. 9922 as it violates the GPRA, which requires
competitive bidding for government procurement contracts
as a general rule. In this relation, Pabillo, et al. point out
that lack of material time is not one of the instances that
would warrant the resort to direct contracting.74
In response, the COMELEC maintains75 that its resort
to direct contracting was legal under Section 52(h) of Batas
Pambansa Bilang (BP) 881, or the Omnibus Election Code,
which authorizes the COMELEC to enter into negotiations
and sealed bids if it finds the requirements of public
bidding impractical to observe.76 It further argues that the
instances under the GPRA when resort to direct
contracting may be made are attendant in the case.77
For its part, Smartmatic-TIM claims78 that the elements
to justify the resort to alternative modes of procurement
stated
_______________

74 Id., at pp. 26-27.
75 See Consolidated Comment of the COMELEC; Rollo (G.R. No.
216098), Vol. II, pp. 764-847.
76 Id., at p. 766.
77 Id., at pp. 766-767.
78 See Consolidated Comment of Smartmatic-TIM; Rollo (G.R. No.
216098), Vol. I, pp. 327-429.
632

in Justice Presbitero J. Velasco, Jr.’s Concurring
Opinion in Capalla79 are present, emphasizing that both
the hardware and software of the PCOS machines are
protected under RA 8293,80 or the Intellectual Property
Code of the Philippines.81 It also posits that under the 2009
AES Contract and the 2012 Deed of Sale, the warranty
shall continue for ten (10) years if the COMELEC exercises
the OTP and pays for the machines’ maintenance and
technical support subject to prevailing prices.82 It further
asseverates that there is no direct substitute for the PCOS
machines and that it is the only entity authorized to
provide the licensed technology in the Philippines.83

B. G.R. No. 216562

On February 18, 2015, another petition84 assailing the
validity of Resolution No. 9922 was filed, this time by
petitioner the Integrated Bar of the Philippines (IBP). The
IBP also assails the validity of the Extended Warranty
Contract (Program 1) entered into between the COMELEC
and Smart-
_______________
79 Supra note 28 at pp. 96-97.

“1. There is prior approval of the Head of the Procuring Entity on the
use of alternative methods of procurement, as recommended by the BAC;
2. The conditions required by law for the use of alternative methods
are present; and
3. The method chosen promotes economy and efficiency, and that the
most advantageous price for the government is obtained.”
80 Entitled “An Act Prescribing the Intellectual Property Code and
Establishing the Intellectual Property Office, Providing for its Powers and
Functions, and for Other Purposes” (June 6, 1997).
82 Id., at pp. 414-419.
83 Id.
633
VOL. 756, APRIL 21, 2015 633

matic-TIM, alleging that the COMELEC erroneously

and invalidly resorted to direct contracting as an
alternative method of procurement, thereby violating the
requirements of public and competitive bidding under the
GPRA, and that the supposed “tight time schedule” in the
preparation for the May 9, 2016 National and Local
Elections is not a ground to dispense with the conduct of
public bidding under the law.85
On March 24, 2015, the Court issued a TRO enjoining
the implementation of the Extended Warranty Contract
(Program 1), pending resolution of the cases at hand.86

The Issues Before the Court

The decisive issue in these cases is whether or not the
COMELEC gravely abused its discretion in issuing
Resolution No. 9922 and in subsequently entering into the
Extended Warranty Contract (Program 1) with
Smartmatic-TIM. To determine the existence of grave
abuse of discretion, the following sub-issues are to be
resolved: (a) whether or not the conditions for direct
contracting stated under Section 50, Article XVI of the
GPRA were complied with; (b) whether or not direct
contracting may be resorted to under Section 52(h) of the
Omnibus Election Code; and (c) whether or not the
Extended Warranty Contract (Program 1), being a part of
the 2009 AES Contract, even required public bidding.87

The Court’s Ruling

The petitions are meritorious.
_______________
85 Id., at pp. 9-10.

86 See TRO Order and Resolution of the Court dated March 24, 2015.
87 The Court does not find any need to address Pabillo, et al.’s
arguments regarding Commonwealth Act No. 138, or the Flag Law, due to
lack of substantial merit.
634

I.

At the outset, respondents invoke various procedural
grounds, which would supposedly warrant the consolidated
petitions’ outright dismissal. They claim that petitioners88
did not have the legal standing to institute their
corresponding petitions;89 that certiorari and prohibition
are not the proper remedies to assail the validity of
Resolution No. 9922 and the Extended Warranty Contract
(Program 1);90 that direct resort to the Court violated the
doctrine of hierarchy of courts;91 and that nonetheless the
petitions were filed out of time.92
The propositions are rejected.
The Court, taking cue from its ruling in Capalla, which,
as mentioned, involved the legality of the COMELEC’s
exercise of its OTP under the 2009 AES Contract, despite
the extended period therefor, brushes aside any of the
foregoing procedural barriers in view of the compelling
significance and transcendental public importance of the
matter at hand. In Capalla, the Court ruled:
At the outset, we brush aside the procedural barriers (i.e., locus

standi of petitioners and the nonobservance of the hierarchy of
courts) that supposedly prevent the Court from entertaining the
consolidated petitions. As we held in Guingona, Jr. v.
[COMELEC, 634 Phil. 516, 529 (2010)]:
There can be no doubt that the coming 10 May 2010 [in this
case, May 2016] elections is a matter of great public concern. On
_______________
88 May interchangeably refer to either Pabillo, et al. and/or the IBP for
facility of discussion.
89 See Rollo (G.R. No. 216098), Vol. II, pp. 791-793 and 795-798; and
Rollo (G.R. No. 216562), Vol. I, pp. 95-102 and Vol. II, pp. 470-471.
90 See Rollo (G.R. No. 216098), Vol. II, pp. 785-788.
91 Id., at pp. 788-791 and 793-795.
92 Rollo (G.R. No. 216562), pp. 105-107.
635
VOL. 756, APRIL 21, 2015 635

election day, the country’s registered voters will come out to

exercise the sacred right of suffrage. Not only is it an exercise that
ensures the preservation of our democracy, the coming elections
also embodies our people’s last ounce of hope for a better future. It
is the final opportunity, patiently awaited by our people, for the
peaceful transition of power to the next chosen leaders of our
country. If there is anything capable of directly affecting the lives
of ordinary Filipinos so as to come within the ambit of a public
concern, it is the coming elections, more so with the alarming turn
of events that continue to unfold. The wanton wastage of public
funds brought about by one bungled contract after another, in
staggering amounts, is in itself a matter of grave public concern.
Thus, in view of the compelling significance and transcending
public importance of the issues raised by petitioners, the
technicalities raised by respondents should not be allowed to
stand in the way, if the ends of justice would not be subserved by
a rigid adherence to the rules of procedure.93

Corollarily, in Roque, Jr. v. COMELEC,94 it was held that:

[The] bottom line is that the Court may except a particular

case from the operations of its rules when the demands of justice
so require. Put a bit differently, rules of procedure are merely
tools designed to facilitate the attainment of justice. Accordingly,
technicalities and procedural barriers should not be allowed to
stand in the way, if the ends of justice would not be subserved by
a rigid adherence to the rules of procedure.95
_______________

94 615 Phil. 149; 599 SCRA 69 (2009).
95 Id., at p. 200; p. 112.
636

Indeed, the conduct of the upcoming 2016 Elections is

dependent on the functional state of the existing PCOS
machines purchased by the COMELEC. PCOS means “a
technology wherein an optical ballot scanner, into which
optical scan paper ballots marked by hand by the voter are
inserted to be counted, is located in every precinct.”96 As
the AES’s groundwork mechanism, it is imperative that the
PCOS machines, come election day, are of optimal utility.
Following the CAC’s recommendation to reuse the existing
technology for the said elections,97 the COMELEC
proceeded to procure services for the repair and
refurbishment of the PCOS machines. The COMELEC,
however, through its Resolution No. 9922, decided to
pursue a direct contracting arrangement with Smartmatic-
TIM, which has now resulted in the execution of the
Extended Warranty Contract (Program 1). Petitioners
assail the validity of the foregoing courses of action mainly
for violating the GPRA. Thus, if only to ensure that the
upcoming elections is not mired with illegality at this basic,
initial front, this Court, pursuant to its unyielding duty as
final arbiter of the laws, deems it proper to thresh out the
above stated substantive issues, reasonably unfettered by
the rigors of procedure.

II.

The resolution of the substantive aspect of this case is
predicated first on a basic understanding of the
fundamentals of public bidding.
In this jurisdiction, public bidding is the established
procedure in the grant of government contracts.98 Section
3, Article
_______________
96 See Section 1(c), Rule 2, Part I, COMELEC Resolution No. 8804 (In
Re: COMELEC Rules of Procedure on Disputes in an Automated Election
System in Connection with the May 10, 2010 Elections) dated March 22,
2010.
97 See Rollo (G.R. No. 216098), Vol. I, pp. 711-714.
98 Supra note 28 at p. 52.
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VOL. 756, APRIL 21, 2015 637

I of the GPRA — the standing procurement law

approved on January 10, 2003 — states that “[a]ll
procurement of the national government, its departments,
bureaus, offices and agencies, including state universities
and colleges, government-owned and/or -controlled
corporations, government financial institutions and local
government units, shall, in all cases, be governed by these
principles:

(a) Transparency in the procurement process and in
the implementation of procurement contracts.
(b) Competitiveness by extending equal opportunity to
enable private contracting parties who are eligible and
qualified to participate in public bidding.
(c) Streamlined procurement process that will
uniformly apply to all government procurement. The
procurement process shall be simple and made adaptable to
advances in modern technology in order to ensure an
effective and efficient method.
(d) System of accountability where both the public
officials directly or indirectly involved in the procurement
process as well as in the implementation of procurement
contracts and the private parties that deal with
government are, when warranted by circumstances,
investigated and held liable for their actions relative
thereto.
(e) Public monitoring of the procurement process and
the implementation of awarded contracts with the end in
view of guaranteeing that these contracts are awarded
pursuant to the provisions of this Act and its implementing
rules and regulations, and that all these contracts are
performed strictly according to specifications.”
Commission on Audit v. Link Worth International, Inc.99
synthesizes these principles as such:
_______________
99 600 Phil. 547; 581 SCRA 501 (2009).
638

Public bidding as a method of government procurement is

governed by the principles of transparency, competitiveness,
simplicity and accountability. These principles permeate the
provisions of [the GPRA] from the procurement process to the
implementation of awarded contracts. x x x100

By its very nature, public bidding aims to protect public
interest by giving the public the best possible advantages
through open competition.101 Under Section 5(e), Article I
of the GPRA, public bidding is referred to as “Competitive
Bidding,” which is defined as “a method of procurement
which is open to participation by any interested party and
which consists of the following processes: advertisement,
pre-bid conference, eligibility screening of prospective
bidders, receipt and opening of bids, evaluations of bids,
post-qualification, and award of contract, the specific
requirements and mechanics of which shall be defined in
the [GPRA’s Implementing Rules and Regulations
(IRR)].”102
Case law states that competition requires not only
bidding upon a common standard, a common basis, upon
the same thing, the same subject matter, and the same
undertaking, but also that it be legitimate, fair and honest
and not designed to injure or defraud the government.103
The essence of competition in public bidding is that the
bidders are placed on equal footing which means that all
qualified bidders have an equal chance of winning the
auction through their bids.104
_______________
100 Id., at p. 555; p. 508.

102 Entitled “Implementing Rules and Regulations of Republic Act No.
9184 Otherwise Known as the Government Procurement Reform Act.”
(The Revised IRR was approved by the Government Procurement Policy
Board (GPPB) through its Resolution 03-2009 dated July 22, 2009 and
published in the Official Gazette on August 3, 2009. It took effect on
September 2, 2009)
104 Id., at p. 53.
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VOL. 756, APRIL 21, 2015 639

Another self-evident purpose of competitive bidding is to

avoid or preclude suspicion of favoritism and anomalies in
the execution of public contracts.105

III.

It is an established public policy,106 as well as a
statutory mandate107 that all government procurement108
shall be done through competitive public bidding. However,
as an exception, Article XVI of the GPRA sanctions a resort
to alternative methods of procurement, among others, via
direct contracting:

ARTICLE XVI
ALTERNATIVE METHODS OF PROCUREMENT

Section 48. Alternative Methods.—Subject to the prior
approval of the Head of the Procuring Entity or his duly
authorized representative, and whenever justified by the
conditions provided in this Act, the Procuring Entity may, in
order to promote economy and efficiency, resort to any of
the following alternative methods of Procurement:
a. Limited Source Bidding, otherwise known as Selective
Bidding – a method of Procurement that involves direct invitation
to bid by the Procuring Entity from a set of preselected suppliers
or consultants with
_______________
105 Id.
106 See Power Sector Assets and Liabilities Management Corporation
v. Pozzolanic Philippines, Inc., G.R. No. 183789, August 24, 2011, 656
SCRA 214, 241.
107 Section 10, Article IV of the GPRA provides that “[a]ll
Procurement shall be done through Competitive Bidding, except as
provided for in Article XVI of this Act.”
108 Section 5(n), Article I of the GPRA states that “[p]rocurement –
refers to the acquisition of Goods, Consulting Services, and the contracting
for Infrastructure Projects by the Procuring Entity. Procurement shall
also include the lease of goods and real estate. x x x.”
640

known experience and proven capability relative to the
requirements of a particular contract;
b. Direct Contracting, otherwise known as Single
Source Procurement – a method of Procurement that does
not require elaborate Bidding Documents because the
supplier is simply asked to submit a price quotation or a
pro forma invoice together with the conditions of sale,
which offer may be accepted immediately or after some
negotiations;
c. Repeat Order – a method of Procurement that involves a
direct Procurement of Goods from the previous winning bidder,
whenever there is a need to replenish Goods procured under a
contract previously awarded through Competitive Bidding;
d. Shopping – a method of Procurement whereby the
Procuring Entity simply requests for the submission of price
quotations for readily available off-the-shelf Goods or
ordinary/regular equipment to be procured directly from suppliers
of known qualification; or
e. Negotiated Procurement – a method of Procurement that
may be resorted under the extraordinary circumstances provided
for in Section 53 of this Act and other instances that shall be
specified in the IRR, whereby the Procuring Entity directly
negotiates a contract with a technically, legally and financially
capable supplier, contractor or consultant.
In all instances, the Procuring Entity shall ensure that
the most advantageous price for the government is
obtained. (Emphases supplied)

Section 48.2 of the GPRA IRR provides that alternative
methods of procurement are only allowed in highly
exceptional cases:
48.2. In accordance with Section 10 of this IRR, as a general

rule, the Procuring Entities shall adopt public bidding as the
general mode of procurement and shall see to it that the
procurement program allows sufficient lead
641
VOL. 756, APRIL 21, 2015 641

time for such public bidding. Alternative methods shall be

resorted to only in the highly exceptional cases provided
for in this Rule. (emphasis supplied)

Meanwhile, the Manual of Procedures for the
Procurement of Goods and Services of the Government
Procurement Policy Board (GPPB Manual) explains that
the GPRA allows the use of alternative methods of
procurement in some exceptional instances, provided: (a)
there is prior approval of the Head of the Procuring Entity
on the use of alternative methods of procurement, as
recommended by the BAC; and (b) the conditions
required by law for the use of alternative methods
are present. As additional requisites, (c) the Procuring
Entity must ensure that the method chosen promotes
economy and efficiency, and (d) that the most
advantageous price for the government is obtained.109

IV.

The compliance of the COMELEC with the second
requisite as above stated is one of the primary issues in
these cases. It is undisputed that the COMELEC had not
conducted a public bidding and, instead, resorted to direct
contracting when it procured from Smartmatic-TIM the
services for the repair and refurbishment of the existing
PCOS machines through the Extended Warranty Contract
(Program 1), as authorized under Resolution No. 9922.
Direct contracting, otherwise known as “Single Source
Procurement,” refers to “a method of Procurement that
does not require elaborate Bidding Documents because the
supplier is simply asked to submit a price quotation or a
pro forma invoice together with the conditions of sale,
which offer may be accepted immediately or after some
negotiations.”110
_______________
109 See GPPB Manual, Vol. 2, p. 81 found at http://www.gppb.gov.

ph/downloadables/forms/GPM%20-%20Vol.2.pdf (visited March 27, 2015).
110 See Setion 48(b), Article XVI of the GPRA.
642

The parameters for valid direct contracting are found in

Section 50, Article XVI of the GPRA:
SEC. 50. Direct Contracting.—Direct Contracting may be

resorted to only in any of the following conditions:
a) Procurement of Goods of proprietary nature, which can be
obtained only from the proprietary source, i.e., when patents,
trade secrets and copyrights prohibit others from manufacturing
the same item;
b) When the Procurement of critical components from a
specific manufacturer, supplier or distributor is a condition
precedent to hold a contractor to guarantee its project
performance, in accordance with the provisions of this contract; or
c) Those sold by an exclusive dealer or manufacturer, which
does not have sub-dealers selling at lower prices and for which no
suitable substitute can be obtained at more advantageous terms
to the Government. (Emphasis supplied)

While compliance with only one condition is enough to
justify the COMELEC’s resort to direct contracting (as
evinced by the disjunctive “or,” but provided that the other
requisites of approval of the Head of the Procuring Entity,
promotion of economy and efficiency, and most
advantageous price to the government are equally complied
with), respondents are insistent that all of the foregoing
conditions attend in these cases. The Court, thus, examines
these claims, determinative as they are of the validity of
Resolution No. 9922 and the Extended Warranty Contract
(Program 1).

V.

Under Section 50(a), Article XVI of the GPRA, direct
contracting may be allowed when the procurement involves
goods of proprietary nature, which can be obtained
only from the proprietary source — that is, when
patents, trade secrets, and copyrights prohibit others from
manufac-
643
VOL. 756, APRIL 21, 2015 643

turing the same item. The applicability of said condition

was explicated in the GPPB Manual as follows:
This is applicable when the goods or services being procured

are covered by a patent, trade secret or copyright duly acquired
under the law. Under the Intellectual Property Code of the
Philippines (R.A. No. 8293), the registered owner of a patent, a
copyright or any other form of intellectual property has exclusive
rights over the product, design or process covered by such patent,
copyright or registration. Such exclusive right includes the right
to use, manufacture, sell, or otherwise to derive economic benefit
from the item, design or process.111

Petitioners contend that the “goods” sought to be
procured in these cases refer to the refurbishment,
maintenance, diagnostics, and repair of the PCOS
machines, which are not protected by patents, trade
secrets, and copyrights owned by Smartmatic-TIM. Thus,
they may be contracted out from other service providers.112
On the other hand, respondents maintain that the goods
sought to be procured by the COMELEC are of proprietary
nature which may only be obtained from the proprietary
source, in this case Smartmatic-TIM, which owns the
intellectual property rights over such goods.113
The Court agrees with petitioners.
Goods are considered to be of “proprietary nature” when
they are owned by a person who has a protectable interest
in them or an interest protected by intellectual property
laws.114
_______________

113 See Comment of the COMELEC, Rollo (G.R. No. 216562), Vol. II,
p. 486; and Comment of Smartmatic-TIM, Rollo (G.R. No. 216562), Vol. I,
p. 111.
114 See Separate Concurring Opinion of Associate Justice Presbitero J.
Velasco, Jr. in Capalla, citing Black’s Law Dictionary,
644


Here, it has not been seriously disputed that
Smartmatic-TIM has intellectual property rights over the
SAES 1800 AES, comprised of the PCOS machines, as well
as the software program used to run the technology. In
support thereof, Smartmatic-TIM has drawn attention to
United States (US) Patent Application Publication No. US
2012/0259681 A1115 dated October 11, 2012 for the
invention called “Appending Audit Mark Image” (US
Patent App. No. US 2012/0259681 A1)116 and US Copyright
Registration No. TX 7-921-024 dated October 16, 2014117
for the work entitled “Democracy Suite Election
Management System Software version 4.14” (US Copyright
Reg. No. TX 7-921-024),118 both in the name of Dominion
Voting Systems, Inc., which — as Smartmatic-TIM alleges
in a letter119 dated November 25, 2014 to the COMELEC —
has already granted to it the Perpetual License to use the
Dominion “licensed technology” embodied in the existing
machines, the transfer of PCOS and Election Management
System (EMS) Intellectual Property Rights, and the
exclusive rights to manufacture and sell the PCOS and
EMS in the Philippines.
_______________
9th ed., p. 1339, for the iPhone/iPad/iPod touch, Version 2.1.0

(B112136), supra note 28 at p. 99.
115 Rollo (G.R. No. 216098), Vol. I, p. 534; and Rollo (G.R. No.
216562), Vol. I, p. 281.
116 <http://appft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&
Sect2=HITOFF&d=PG01&p=1&u=%2Fnetahtml%2FPTO%2Fsrchnum.html&r=1&f=G&1=50&s1=%2220120259681%22.PGNR.&OS=DN/20120259681&RS=DN/201202
(visited March 25, 2015).
216562), Vol. I, p. 263.
118 <http://cocatalog.loc.gov/cgi-bin/Pwebrecon.cgi> (visited March 25,
2015). However, it must be noted that the copyright is under the name of
Dominion Voting Systems, Inc. and not Smartmatic-TIM. See also Rollo
(G.R. No. 216562), Vol. I, p. 242.
216562), Vol. I, p. 254.
645
VOL. 756, APRIL 21, 2015 645

However, it is at once apparent that the “goods” subject

of these cases neither pertain to the PCOS machines nor
the software program aforementioned, but rather to the
services for the machines’ repair and refurbishment, which
in itself constitutes a distinct contract object that is
susceptible to government procurement through
competitive public bidding. As defined in Section 5(h),
Article I of the GPRA, “services such as the repair and
maintenance of equipment” are included within the ambit
of the term “goods” as applied within the context of the
procurement law:
Section 5. Definition of Terms.—For purposes of this Act, the

following terms or words and phrases shall mean or be
understood as follows:
(h) Goods – refer to all items, supplies, materials and general
support services, except consulting services and infrastructure
projects, which may be needed in the transaction of the public
businesses or in the pursuit of any government undertaking,
project or activity, whether in the nature of equipment, furniture,
stationery, materials for construction, or personal property of any
kind, including nonpersonal or contractual services such
as the repair and maintenance of equipment and
furniture, as well as trucking, hauling, janitorial, security,
and related or analogous services, as well as procurement
of materials and supplies provided by the [P]rocuring
[E]ntity or such services. (Emphasis supplied)
646

A perusal of the aforementioned patent120 and copy-
_______________
120 US Patent App. No. US 2012/0259681 A1 contains the following

Abstract and Claims:
Abstract
A system, method and computer program for tabulating votes and
creating an audit trail is provided. A ballot processing device may include
a paper feed mechanism, a computer, a ballot processing application
loaded on the computer, and a digital scanning device linked to the
computer. The ballot processing application may process the digital image
to establish a series of processing results defining one or more voting
results for the paper ballot, and also an audit trail. The ballot processing
application may process the digital image to define the voting results
based on criteria established by election officials, including ambiguous
mark criteria. The audit trail enables election officials to verify that
particular paper ballots have been processed correctly in accordance with
these criteria.
Claims
1.-26. (canceled)
27. A method for recording votes for voter-marked paper ballots,
comprising: receiving optical image data comprising an optical image of a
voter-marked paper ballot; identifying one or more votes recorded on the
voter-marked paper ballot; generating vote stamp image data comprising
the one or more identified votes; and appending the vote stamp image
data to the optical image data.
x x x x
41. A system for recording votes for voter-marked paper ballots,
comprising: a processor; and a memory in electronic communication with
the processor, wherein the memory stores executable instructions that
when executed by the processor cause the processor to perform operations
comprising: receiving optical image data comprising an optical image of a
voter-marked paper ballot; identifying one or more votes recorded on the
voter-marked paper ballot; generating vote stamp image data comprising
the one or more identified votes; and appending the vote stamp image
data to the optical image data.
647
VOL. 756, APRIL 21, 2015 647

right121 documents reveals that Smartmatic-TIM’s

existing intellectual property rights do not cover the
services subject of these cases. No evidence has been
presented to show that it possessed intellectual property
rights over the method, process, system, program, or work
of servicing the said PCOS machines for their repair and
refurbishment. Accordingly, Smartmatic-TIM cannot be
said to be the services’ proprietary source, thus, negating
its purported exclusivity as the COMELEC claims.
_______________
x x x x
(See Rollo [G.R. No. 216098], Vol. I, p. 534; and Rollo [G.R. No.
216562], Vol. I, p. 281. See also <http://appft.uspto.gov/netacgi/
nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PG01&p=1&u=%
2Fnetahtml%2FPTO%2Fsrchnum.html&r=1&f=G&1=50&s1=%2220120259681%22.PGNR.&OS=DN/20120259681&RS=DN/20120259681>
[visited March 25, 2015]).
121 US Copyright Reg. No. TX 7-921-024 lists, inter alia, the following
information regarding the work covered by copyright protection:
x x x x(See Rollo [G.R. No. 216098], Vol. I, p. 587; and Rollo [G.R. No.
216562], Vol. I, p. 263. See also <http://cocatalog.loc.gov/cgi-bin/
Pwebrecon.cgi> (visited March 25, 2015).
648

At any rate, even if it is assumed that Smartmatic-TIM

is the proprietary source of the services or that the
intended repair and refurbishment would necessarily entail
a modification of the PCOS hardware and software of
which its existing intellectual property rights cover, the
COMELEC is still not bound to engage Smartmatic-TIM on
an exclusive basis. Based on the 2009 AES Contract,
Smartmatic-TIM would grant the COMELEC a perpetual,
but nonexclusive license to use, modify, and customize
the PCOS systems and software, including the right
to alter and modify the source code itself, for all
future elections, when the latter exercises its option to
purchase (which it eventually did), with certain limitations
as hereunder stated:
ARTICLE 9
SOFTWARE AND LICENSE SUPPORT

9.1 The PROVIDER shall furnish all systems and software
provided in Components 1, 2 and 3, and their accompanying
licenses and grant to COMELEC a one-time nontransferable right
or license to use the software, system and other goods at the
voting centers, canvassing/ consolidation centers, central servers,
backup/redundancy servers, and in such other locations as
COMELEC may choose.
9.2 Should COMELEC exercise its option to purchase,
it shall have perpetual, but nonexclusive license to use
said systems and software and may have them modified at
COMELEC’s expense or customized122 by the licensor for
all future elections as hereby warranted by the
PROVIDER, as per the li-
_______________
122 Article 1.4 of the 2009 AES Contract states that “[c]ustomization
means modification, conversion or adaptation of the software to suit the
requirements of Philippine laws and general instructions of COMELEC on
the conduct of the elections.” (Rollo [G.R. No. 216098], Vol. I, p. 668; and
Rollo [G.R. No. 216562], Vol. I, p. 360 and Vol. II, p. 574)
649
VOL. 756, APRIL 21, 2015 649

cense agreement. Accordingly, the PROVIDER shall furnish

COMELEC the software in such format as will allow COMELEC
to pursue the same.
9.3. COMELEC agrees that it shall not:
(a) transfer the software and related materials to any
third party;
(b) reverse engineer, disassemble, decompile, modify
or transmit the software in any form or by any means for
any purpose other than for this Project, unless COMELEC
has purchased it for Philippine elections; or
(c) use any software acquired hereunder for any
purpose other than the operation of voting, counting, and
canvassing/ consolidation of votes.
x x x x
9.5. x x x.
x x x x
After purchase, COMELEC shall be authorized to use
the software system and make such alterations and
modifications on the source code that are necessary or
desirable for the proper use of the software system as
provided in Article 9.2 above. COMELEC shall not sell,
lease, transfer or otherwise convey the software to any
other individual, company or entity. The PROVIDER
undertakes and guarantees to keep such information and
documentation up-to-date. Escrow charges or expenses shall be
for the account of the PROVIDER.123 (Emphases and
underscoring supplied)

Indeed, the license granted is but a natural incident of
the COMELEC’s exercise of the OTP, by which it had
acquired
_______________
123 Rollo (G.R. No. 216098), Vol. II, pp. 922-923.
650

ownership over the PCOS machines;124 hence, the

COMELEC should already be able to freely exploit them
for the purpose that they were purchased. The only
limitations, as may be above gleaned, are on their
commercialization as such would be clearly foreign to the
contract’s objective. It would be both absurd and unfair if
the COMELEC’s ability to effectively operate the machines
would remain solely dependent on Smartmatic-TIM
notwithstanding its acquired ownership over the same.
While the intellectual property rights of Smartmatic-TIM
were acknowledged by the COMELEC, by no means was it
precluded — as it should not be precluded — from the
complete utilization of the machines as long as it advances
election-related purposes:

ARTICLE 10
INTELLECTUAL PROPERTY

10.1 The PROVIDER warrants that all intellectual property
rights in or related to the Goods and/or Services, including but not
limited to patents and other know-how and copyright, both
registered and unregistered, owned and/or otherwise used by the
PROVIDER, and all goodwill related thereto are, and shall
remain at all times, the exclusive property of SMARTMATIC; and
COMELEC acknowledges the same, and shall not exploit,
reproduce or use the same except as expressly
_______________
124 Article 1.14 of the 2009 AES Contract defines “goods” as “the
[PCOS] machines and their peripherals, personal computers, servers,
electronic transmission, devices, printers, integrated software and other
related equipment, both hardware and software, including all deliverable
supplies, ballots and materials, except ballot boxes, as presented by TIM
and [Smartmatic] in their Technical and Financial Proposals, and all
other materials necessary to carry out the Project.” See Rollo (G.R. No.
216098), Vol. I, p. 669; and Rollo (G.R. No. 216562), Vol. II, p. 575.
651
VOL. 756, APRIL 21, 2015 651

provided in this Contract.125 (Emphasis and underscoring

supplied)

For these reasons, the COMELEC cannot insist that the
PCOS machines should be repaired and/or refurbished
solely by Smartmatic-TIM. Therefore, the first condition for
direct contracting under Section 50(a), Article XVI of the
GPRA does not exist.
The second scenario, under Section 50(b), Article XVI of
the GPRA, which would justify a resort to direct
contracting is when the procurement of critical
components from a specific manufacturer, supplier or
distributor is a condition precedent to hold a
contractor to guarantee its project performance, in
accordance with the provisions of the contract. The GPPB
Manual explains that:
This is applicable when there is a contract for an infrastructure

project consisting of the construction/repair/renovation of a plant,
and critical components of such plant are prescribed by the
contractor for it to guarantee its contract performance. For
example, in the construction of a power generation plant, the
contractor may require the use of certain components
manufactured by a specific manufacturer, whose products have
been found to meet certain standards and are compatible with the
technology used by the contractor. In this instance, Direct
Contracting may be resorted to in the procurement of such critical
plant components. However, the BAC must require technical
proof that such critical plant components are the ONLY products
compatible with the plant.126
_______________
125 Rollo (G.R. No. 216098), Vol. II, p. 923; and Rollo (G.R. No.
216562), Vol. II, p. 587.
126 See GPPB Manual, Vol. II, p. 84 found at <http://www.gppb.
gov.ph/downloadables/forms/GPM%20-%20Vol.2.pdf> (visited March 31,
2015).
652

Respondents are of the view that the direct contracting

arrangement falls under this second condition. In this
regard, the COMELEC claims that Smartmatic-TIM will
not take responsibility for malfunctioning machines if they
are tampered with by other entities as per the warranty
provisions of the 2009 AES Contract, which were
incorporated in the 2012 Deed of Sale. Thus, the
engagement of Smartmatic-TIM constitutes a critical
component or a condition precedent if the COMELEC were
to hold it for its existing warranties.127
Petitioners counter that the COMELEC failed to show
that Smartmatic-TIM is the sole entity which can provide
the subject services. As such, it cannot be inferred that the
latter is the only entity that has the technical expertise in
refurbishment, maintenance, diagnostics, and repair of the
PCOS machines.128
Petitioners’ argument is tenable. Further reasons
equally shore up their cause.
First, the subject “goods” to be procured, i.e., repair and
refurbishment services, are not critical components of any
infrastructure project,129 whose manufacture and/or supply
may be solely availed of from Smartmatic-TIM. A
component is defined as “a part or element of a larger
whole.”130 It is critical when it has a decisive or crucial
importance in the success,
_______________
128 Id., at p. 16.
129 Section 5(k), Article I of the GPRA states that “[i]nfrastructure
Projects – include the construction, improvement, rehabilitation,
demolition, repair, restoration or maintenance of roads and bridges,
railways, airports, seaports, communication facilities, civil works
components of information technology projects, irrigation, flood control
and drainage, water supply, sanitation, sewerage and solid waste
management systems, shore protection, energy/power and electrification
facilities, national buildings, school buildings and other related
construction projects of the government.”
130 <http://www.oxforddictionaries.com/us/definition/american_
english/ component> (visited March 27, 2015).
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VOL. 756, APRIL 21, 2015 653

failure, or existence131 of the project. While it may be

argued that repair and refurbishment are critical to the
functionality of the existing PCOS machines, they cannot
be considered as “components” thereof as they are not
elemental parts that make up the machine but are
auxiliary services that pertain to an output that has
already been completed.
Second, while the procurement of the parts for the
repair and refurbishment of the PCOS machines may
necessitate the procurement of critical components, it has
not been settled that Smartmatic-TIM, who claims to be
the exclusive manufacturer of the SAES 1800 PCOS
machines in the Philippines, is the only entity capable of
supplying parts for the machines’ repair and
refurbishment. Neither has it been convincingly shown
that the PCOS machines could not be repaired or
refurbished if the parts used are those manufactured by
another company, nor would the functionality of the
machines be compromised if parts of equivalent quality,
although not of the exact make than that manufactured by
Smartmatic-TIM, are to be used for repair and
refurbishment. To recount, not only was the bidding of the
2009 AES Contract participated in by Smartmatic-TIM,
but also by other technology companies, such as the
consortiums of Indra Sistemas, S.A., Hart Intercivic, and
SAHI; AMA Group Holdings Corp. and Election Systems
and Software International, Inc.; and Gilat Satellite
Network Ltd., F.F. Cruz & Co., Inc., and Filipinas Systems,
Inc., among others,132 who may as well be capable of
servicing the PCOS machines and/or providing the parts
therefor. A preliminary determination could have been
made if only an initial industry survey had been duly
conducted by the COMELEC’s BAC. The GPPB Manual
relevantly provides:
_______________
131 <http://www.oxforddictionaries.com/us/definition/american_
english/critical?q=critical+> (visited March 27, 2015).
132 See Omnibus SBAC Resolution No. 09-001 dated May 13, 2009;
Rollo (G.R. No. 216098), Vol. I, pp. 297-311.
654

How can Direct Contracting be justified?

To justify the need to procure through the Direct
Contracting method, the BAC should conduct a survey of
the industry and determine the supply source. This survey
should confirm the exclusivity of the source of goods or
services to be procured. In all cases where Direct Contracting
is contemplated, the survey must be conducted prior to the
commencement of the procurement process. Moreover, the
Procuring Entity must justify the necessity for an item
that may only be procured through Direct Contracting,
and it must be able to prove that there is no suitable
substitute in the market that can be obtained at more
advantageous terms.
Who are involved in procurement through Direct
Contracting?
The following are involved in the conduct of direct contracting:
1. The Head of the Procuring Entity;
2. The BAC;
3. The TWG;
4. The BAC Secretariat/Procurement Unit; and
5. The supplier/manufacturer.
Methodology: How is Direct Contracting conducted?
The following steps are undertaken in conducting Direct
Contracting:
1. The method of procurement to be used shall be as indicated
in the approved APP. If the original mode of procurement
recommended in the APP was Public Bidding but cannot be
ultimately pursued, the BAC, through a resolution shall justify
and recommend the change in the mode of procurement to be
approved by the Head of the Procuring Entity.
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VOL. 756, APRIL 21, 2015 655

2. For information purposes, the BAC, through the BAC
Secretariat shall post the notice direct contracting in the
following:
a. The PhilGEPS;
b. The website of the Procuring Entity and its electronic
procurement service provider, if any; and
c. Any conspicuous place in the premises of the Procuring
Entity.
3. The BAC, through the TWG and the BAC Secretariat,
prepares the Request for Quotation, technical specifications and
draft contract in accordance with the procedures laid down in this
Manual, in the IRR-A and in the PBDs.
4. The BAC, through the Secretariat, identifies the supplier
from whom the goods will be procured.
5. If a pre-procurement conference is required or
deemed necessary, as previously discussed in this Manual, the
BAC holds such a conference. If a pre-procurement
conference is held, the participants should confirm the
existence of the conditions required by law for
procurement through Direct Contracting.
x x x x 133 (Emphases and underscoring supplied)

Unfortunately, it was not shown that the said
procedures, i.e., that of (a) an initial industry survey
(during which the BAC “should confirm the exclusivity of
the source of goods or services to be procured,” and “must
justify the necessity for an item that may only be procured
through Direct Contracting” and “be able to prove that
there is no suitable substitute in the market that can be
obtained at more advantageous
133 See GPPB Manual, Vol. II, p. 85 found at <http://www.gppb.

gov.ph/downloadables/forms/GPM%20-%20Vol.2.pdf> (visited March 31,
2015).
656

terms”) and even (b) a pre-procurement

conference134
_______________
134 The GPPB Manual explains that “[t]he pre-procurement

conference is the forum where all officials involved in the procurement
meet and discuss all aspects of a specific procurement activity, which
includes the technical specifications, the ABC [(Approved Budget for the
Contract)], the applicability and appropriateness of the recommended
method of procurement and the related milestones, the bidding
documents, and availability of the pertinent budget release for the
project.” (See GPPB Manual, Vol. II, p. 20 found at <http://
www.gppb.gov.ph/downloadables/forms/GPM%20-%20Vol.2.pdf> [visited
March 31, 2015])
Meanwhile, Section 20.1 of the GPRA IRR states that during the pre-
procurement conference, the BAC shall, among others, review and adopt
the procurement schedule, including deadlines and timeframes, for the
different activities:
20.1. x x x During this conference, the participants, led by the BAC,
shall:
a) Confirm the description and scope of the contract, the ABC, and
contract duration;
b) Ensure that the procurement is in accordance with the project and
annual procurement plans;
c) Determine the readiness of the procurement at hand, including,
among other aspects, the following:
i) availability of appropriations and programmed budget for contract;
ii) completeness of the Bidding Documents and their adherence to
relevant general procurement guidelines;
iii) completion of the detailed engineering according to the prescribed
standards in the case of infrastructure projects; and
iv) confirmation of the availability of ROW and the ownership of
affected properties.
d) Review, modify and agree on the criteria for eligibility screening,
evaluation, and post-qualification;
e) Review and adopt the procurement schedule, including
deadlines and timeframes, for the different activities; and
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VOL. 756, APRIL 21, 2015 657

which is required since the “goods” to be procured

amount to more than P2,000,000.00, and during which the
participants, led by the BAC, “ensures that the
procurement will proceed in accordance with the PPMP135
[(Project Procurement Man-
_______________
f) Reiterate and emphasize the importance of confidentiality, in

accordance with Section 19 of this IRR, and the applicable sanctions and
penalties, as well as agree on measures to ensure compliance with the
foregoing. (Emphasis and underscoring supplied)
135 Under Section 20.2 of the GPRA IRR, only small procurements are
not required to undergo pre-procurement conference:
20.2. The holding of a pre-procurement conference may not be required
for small procurements, i.e., procurement of goods costing two million
pesos (P2,000,000.00) and below, procurement of infrastructure projects
costing five million pesos (P5,000,000.00) and below, and procurement of
consulting services costing one million pesos (P1,000,000.00) and below.
The GPPB Manual mirrors this and further explains:
Why is a Pre-procurement Conference necessary?
For projects involving an ABC amounting to more than Two
Million Pesos (P2 Million), a pre-procurement conference is
conducted to determine the readiness of the Procuring Entity to
procure goods and services in terms of the legal, technical and
financial requirements of the project. More specifically, it ensures
that the procurement will proceed in accordance with the PPMP
[(Project Procurement Management Plan)] and APP [(Annual
Procurement Plan)], confirms the availability of appropriations
and programmed budget for the contract, and reviews all relevant
documents in relation to their adherence to the law.
Even when the ABC amounts to P 2 Million and below, the BAC is
encouraged to conduct a pre-procurement conference if the circumstances,
like the complexity of the technical specifications, warrant the holding of
such conference before the Pro-
658

agement Plan, wherebythe schedule of milestone

activities is identified and the method of procurement
determined)]”136 had been observed by the COMELEC in
these cases.137 Note that the foregoing were prescribed
itself by the GPPB in its
_______________
curing Entity proceeds with the procurement. (See GPPB Manual, Vol.
II, p. 20 found at <http://www.gppb.gov.ph/ down
loadables/forms/GPM%20-%20Vol.2.pdf> [last visited March 31, 2015];
emphases and underscoring supplied)
136 Under the GPPB Manual, “[f]ormulating the PPMP involves
identifying the procurement project requirements, writing the technical
specifications, determining the ABC, identifying the schedule of
milestone activities, and determining the method of procurement.”
(GPPB Manual, Vol. II, p. 7 found at <http://www.
gppb.gov.ph/downloadables/forms/GPM%20-%20Vol.2.pdf> (visited March
31, 2015); emphases and underscoring supplied.
On the other hand, Section 7.3.2 of the GPRA IRR provides:
7.3.2. The end-user units of the procuring entity shall prepare their
respective Project Procurement Management Plan (PPMP) for their
different programs, activities, and projects (PAPs). The PPMP shall
include:
x x x x
d) the procurement methods to be adopted, and indicating if the
procurement tasks are to be outsourced as provided in Section 53.6 of this
IRR;
e) the time schedule for each procurement activity and for the
contract implementation.
x x x x
137 The Court observes that the COMELEC attached BAC-issued
documents providing detailed timelines requiring a minimum of 31 days
and a maximum of 88 days for a two-stage procurement process; and a
minimum of 28 days and a maximum of 55 days for a single-stage
procurement process (see Rollo [G.R. No. 216562], Vol. II, pp. 781-782).
However, in no way can these be considered as part of the required PPMP
since the foregoing timelines are but general estimations of how long it
would take to complete an entire bidding cycle within the COMELEC.
More significantly, nothing in the foregoing documents would show that it
specifically pertains to the procurement of the services sought for in the
instant cases.
659
VOL. 756, APRIL 21, 2015 659

issued Manual of Procedures for the Procurement of

Goods and Services, which is currently posted at its own
website.138 Under Section 63, Article XX of the GPRA, the
GPPB was “established to: (a) protect national interest in
all matters affecting public Procurement, having due
regard to the country’s regional and international
obligations; (b) formulate and amend, whenever necessary,
the IRR and the corresponding standard forms for
Procurement; (c) ensure that Procuring Entities regularly
conduct Procurement training programs and prepare a
Procurement operations manual for all offices and agencies
of government; and (d) conduct an annual review of the
effectiveness of [the GPRA] and recommend any
amendments thereto, as may be necessary. x x x.” Thus,
owing to the GPPB’s statutory mandate, its issuances,
insofar as matters of government procurement are
concerned, should be accorded with authoritative value. In
fine, the COMELEC’s noncompliance with the GPPB’s set
procedures — formative as they are of the bidding rules
which have been crafted precisely to realize the objectives
of the procurement law and give life to the State’s policy on
public bidding — may, in itself, be considered as a ground
to invalidate the resultant contract.139
_______________
138
<http://www.gppb.gov.ph/downloadables/ProcurementManuals.html>
(visited March 30, 2013).
139 See Power Sector Assets and Liabilities Management Corporation
v. Pozzolanic Philippines, Inc. (supra note 106 at p. 241) where the Court
held that “public bidding is the established procedure in the grant of
government contracts [and that] [t]he award of public contracts through
public bidding is a matter of public policy.”
“Public policy has been defined as that principle under which freedom
of contract or private dealing is restricted for the good of the community.
Under the principles relating to the doctrine of public policy, as applied to
the law of contracts, courts of justice will not recognize or uphold a
transaction when its object, operation, or tendency is calculated to be
prejudicial to the public welfare, to sound morality or to civic honesty.”
(See also Agan, Jr. v. Phil. International Air Terminals Co., Inc., 450 Phil.
744; 402 SCRA 612 [2003])
660

Besides, it is even speculative, at this point, to say that

the procurement of the subject services is necessary since it
appears that an initial diagnostics of the PCOS machines
had yet to be conducted by the COMELEC’s in-house
personnel. The COMELEC’s Law Department, in its
November 4, 2014 memorandum,140 in fact, conceded that
the conduct of repair was premature:
Also, while under storage at the Cabuyao warehouse, it was

our understanding that the ITD personnel are in the process of
conducting routine and periodic preventive maintenance on the
PCOS machines in order to maintain satisfactory operating
condition by providing for systematic inspection, detection, and
correction of incipient failures either before they occur or before
they develop into major defects as well as to prevent faults from
occurring by conducting a battery of maintenance tests,
measurements, adjustments, and parts replacement, if necessary.
As such, the conduct of repair is premature considering
that the units requiring repair, if any, is yet to be determined.
The same can be said for the replacement of servers and network
equipment which has yet to be evaluated.
Most noteworthy of all is that as of the time of such proposal,
even to this writing, the ITD has yet to determine if MTD
modem firmware upgrades are essential and necessary
considering that under the current setup, the PCOS machines, as
well as the whole Automated Elections System were able to
successfully function for the May 10, 2010 Automated
Synchronized National and Local Elections as well as in the May
13, 2013 Automated Synchronized National, Local and ARMM
Elections.141 (Emphases and underscoring supplied)
_______________

141 Id., at p. 549.
661
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And lastly, even if the foregoing were to be discounted,

Smartmatic-TIM’s exclusive engagement cannot be
considered as a condition precedent to guarantee the
performance of its warranties under the 2009 AES
Contract or the 2012 Deed of Sale.
Albeit undefined in our local statutes, a warranty has
been ordinarily considered as an agreement to be
responsible for all damages that arise from the falsity of a
statement or assurance of fact. In other words, a warranty
promises indemnity against defects in an article sold.142 In
Ang v. CA,143 a warranty was defined as “a statement or
representation made by the seller of goods,
contemporaneously and as part of the contract of sale,
having reference to the character, quality or title of the
goods, and by which he promises or undertakes to insure
that certain facts are or shall be as he then represents
them.”144
There are two warranties under the 2009 AES Contract,
which were all explicitly incorporated and made part of the
2012 Deed of Sale.145
_______________
142 67 Am. Jur. 2d, §425, p. 586.
143 588 Phil. 366; 567 SCRA 54 (2008).
144 Id., at p. 373; p. 61.
145 “9. The warranties agreed upon by the parties under Articles 4
and 8 of the AES Contract, including the limitations on warranties under
Article 8.5, shall continue to remain in full force and effect. Articles 4 and
8 of the AES Contract are incorporated herein by way of reference.
Pursuant to Article 4.3 of the AES Contract, the PCOS machines will be
covered by a one (1) year warranty commencing from the acceptance by
the BUYER during the HAT for every batch of 20,000 units as evidenced
by the date of the Delivery Receipt; Provided, that no warranty period will
expire earlier than 31 May 2013. The procedure in enforcing the warranty
shall be in accordance with the Warranty Procedure attached as Annex ‘G’
hereof.” See Rollo (G.R. No. 216098), Vol. I, p. 707; and Rollo (G.R. No.
216562), Vol. II, p. 600.
662

The first is found in Articles 4.3146 and 8.4147 of the

2009 AES Contract, both of which pertain to a warranty
on manufacturing defects of supplies and equipment.
Article 4.3 of the 2009 AES Contract states that once the
COMELEC exercises the OTP, it is required that
Smartmatic-TIM warrants that manufacturing defects
shall be corrected, and/or replacements shall be made by it,
for a minimum period of three (3) months, in the case of
supplies, and one (1) year, in the case of equipment (such
as the PCOS machines), after performance of the contract:
4.3 OPTION TO PURCHASE

In the event COMELEC exercises its option to purchase the
Goods as listed in Annex “L,” COMELEC shall pay the
PROVIDER an additional amount of Two Billion One Hundred
Thirty Million Six Hundred Thirty-Five Thousand Forty-Eight
Pesos and Fifteen Centavos (Php2,130,635,048.15) as contained in
the Financial Proposal of the joint venture partners —
SMARTMATIC and TIM.
In case COMELEC should exercise its option to purchase, a
warranty shall be required in order to assure that: (a)
manufacturing defects shall be corrected; and/or (b)
replacements shall be made by the PROVIDER, for a
minimum period of three (3) months, in the case of supplies, and
one (1) year, in the case of equipment, after performance
of this Contract. The obligation for the warranty shall be
covered by retention money of ten percent (10%) of every option to
purchase payment made.
x x x x 148 (Emphases and underscoring supplied)
_______________
146 See Rollo (G.R. No. 216098), Vol. II, p. 915.

147 Id., at p. 921.
148 Id., at p. 915.
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In similar light, Article 8.4 of the 2009 AES Contract

reads:
8.4 The PROVIDER shall, at its sole expense, repair or

replace any Equipment found to contain manufacturing
defects and it shall be returned to the PROVIDER’s
premises at its sole expense. All costs of handling,
transportation and labor relative to the return of the repaired or
replaced Equipment to COMELEC’s designated Sites shall also be
at the PROVIDER’s expense.149 (Emphasis and underscoring
supplied)

The limitations to the warranty on manufacturing
defects, which was also carried over in the 2012 Deed of
Sale, are stated in Article 8.5 of the 2009 AES Contract:
8.5 Limitations of Warranties.—The warranty obligation of

the PROVIDER shall not extend to:
(a) Equipment the serial number, model number or any other
identification, marking, and security seal of which has been
removed or rendered illegible by COMELEC personnel, without
any authority from the PROVIDER or its technical personnel.
(b) Equipment that has been damaged by malicious misuse,
accident or force majeure.
(c) Equipment the selected component of which has been
opened without the PROVIDER’s prior written approval; or
(d) Equipment wherein COMELEC or its agents have made
changes to its physical, mechanical, electrical, software or
interconnection components without written authorization of the
PROVIDER.150

To put it simply, these provisions state that Smartmatic-
TIM had warranted that the PCOS machines purchased by
the COMELEC are free from manufacturing defects; other-
_______________
149 Id., at p. 921.

150 Id.
664

wise, it will repair or replace, if irreparable, any

defective machines at its own expense for as long as: (a) the
defect occurs within the warranty period, i.e., three (3)
months, in the case of supplies, and one (1) year, in the
case of equipment, reckoned from March 30, 2012, i.e., the
date on which the OTP was exercised and the
corresponding 2012 Deed of Sale was executed; and (b)
none of the warranty limitations are breached.
The foregoing warranty on manufacturing defects is
separate and distinct from the second warranty found in
Article 8.8 of the 2009 AES Contract, to wit:
8.8 If COMELEC opts to purchase the PCOS and

Consolidation and Canvassing System (CCS), the following
warranty provisions indicated in the RFP shall form part of the
purchase contract:
1) For PCOS, SMARTMATIC shall warrant the availability
of parts, labor and technical support and maintenance to
COMELEC for ten (10) years, if purchased (Item 18, Part V of
the RFP), beginning May 10, 2010. Any purchase of parts, labor
and technical support and maintenance not covered under Article
4.3 above shall be subject to the prevailing market prices at the
time and at such terms and conditions as may be agreed upon.151
x x x x (Emphases supplied)

Under Article 8.8, Smartmatic-TIM warrants that its
parts, labor and technical support and maintenance will be
available to the COMELEC, if it so decides to purchase
such parts, labor and technical support and maintenance
services, within the warranty period stated, i.e., ten (10)
years for the PCOS, reckoned from May 10, 2010, or until
May 10, 2020. Article 8.8 skews from the ordinary concept
of warranty since it is a mere warranty on availability,
which entails a subsequent
_______________
151 Id., at p. 922.
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VOL. 756, APRIL 21, 2015 665

purchase contract,152 founded upon a new consideration,

the costs of which (unlike in the first warranty) are still to
be paid. With Article 8.8 in place, the COMELEC is
assured that it would always have access to a capable
parts/service provider in Smartmatic-TIM, during the 10-
year warranty period therefor, on account of the peculiar
nature of the purchased goods.
However, in no way does Article 8.8 precondition the
warranty on availability on Smartmatic-TIM’s exclusive
engagement. There are two reasons for this:
First, it cannot be deduced from the deliberate
arrangement of the provisions that the warranty
limitations under Article 8.5 (which, in essence, prohibits
unauthorized tampering by the COMELEC and/or by a
third party) apply to the subsequently situated Article 8.8
(i.e., warranty on availability of parts, labor and technical
support and maintenance). On the other hand, Article 8.5
logically follows Article 8.4 (i.e., warranty on
manufacturing defects), evincing that it (Article 8.5)
constitutes a limitation to the provision preceding it
(Article 8.4).
Second, and more substantially, the Court finds no
discernible reason to void a warranty on availability on
account of previous tampering. As mentioned, under Article
8.8, the COMELEC would still have to engage Smartmatic-
TIM in a subsequent purchase contract, founded upon a
new consideration altogether, and, thus, pay the costs of
the parts and services procured. The fact that the goods
had been previously tampered with is immaterial to
Smartmatic-TIM’s future engagement as the warranty
would not be voided if a different service contractor has
been engaged by the COMELEC to conduct repair and
refurbishment works. On other hand, it is reasonable — as
it is usually the case — that a warranty on manufacturing
defects would be voided if the goods had already been
tampered with; in such an instance, it is difficult,
_______________
152 Hence, the phrase “if purchased” in the provision.
666

if not, improbable, to ascertain the cause of the

malfunction, and, hence, determine if the manufacturing
defects were attributable to the seller’s fault. Accordingly,
the seller (Smartmatic-TIM) should not repair or replace
the defective goods without the buyer (the COMELEC)
shouldering the costs.
Simply put, the variance is that Article 8.8 only
warrants access to the purchase of parts and services,
whereas Article 8.4 (in relation to Article 4.3) warrants the
functionality of the machines themselves. In fact, the direct
contracting arrangement subject of these cases is the very
manifestation of Article 8.8’s enforcement: the COMELEC
engaged Smartmatic-TIM for the repair and refurbishment
of the PCOS machines and, now, has to pay a distinct
purchase price therefor. In so doing, the records are bereft
of any showing that the limitations under Article 8.5 were
relevant in enforcing the warranty found in Article 8.8. The
COMELEC could very well enforce — as it did enforce —
the warranty on availability notwithstanding a breach of
Article 8.5 as the latter limits only the enforcement of the
warranty on manufacturing defects found in Article 8.4 in
relation to Article 4.3, which, however, was stipulated to
last only for three (3) months, in the case of supplies, and
one (1) year, in the case of equipment, reckoned from
March 30, 2012 (i.e., March 30, 2013) and as such, had
already lapsed way before Resolution No. 9922 was passed
on December 23, 2014. Smartmatic-TIM, in fact, admits
this in its Comment to the Pabillo Petition:
3.170 The original responsibility of [Smartmatic-TIM] on the

warranty of the PCOS machines was only until 2014.153
[Smartmatic-TIM] was not obligated to diagnose, repair, and
refurbish the PCOS machines that
_______________
153 This is inaccurate. The warranty on manufacturing defects in the

case of equipment lapsed last March 30, 2013.
667
VOL. 756, APRIL 21, 2015 667

would be used for the 2016 Elections. There is no obligation

on the part of [Smartmatic-TIM] to fulfill the warranty
provision of the Deed of Sale when the same has already
expired. In fact, the Warranty Procedure of the 2012 Deed of
Sale states that if the equipment is no longer in warranty, then
the client [(the COMELEC)] will be charged for the diagnostic and
repair of the machine. Without the Extended Warranty
Agreement, the COMELEC would have to incur additional
expenses to pay [Smartmatic-TIM], or any other entity, for the
repair and refurbishment of the same.154 (Emphasis supplied)

Hence, with the warranty on manufacturing defects
having lost its effect, there is no way that the COMELEC’s
engagement of another service contractor would constitute
a breach of that warranty.
That the Extended Warranty Contract (Program 1)
excludes from the scope of work those PCOS machines,
where persons or entities other than Smartmatic-TIM
authorized representative, performed maintenance or
repair services, as a result of which, further repair or
maintenance is required to be done by a Smartmatic-TIM
authorized representative to restore the machines to good
working condition155 does not call for a different conclusion.
Said exclusion was inserted as part of the Extended
Warranty Contract (Program 1) that was agreed upon
only after the expiration of the original warranty on
manufacturing defects. In other words, the exclusion
was only part of Smartmatic-TIM’s offer for a new contract,
which the COMELEC accepted only after the warranty on
manufacturing defects had lapsed.
In fine, the procurement of the repair and refurbishment
services from Smartmatic-TIM cannot be deemed as a
condi-
_______________
154 Rollo (G.R. No. 216098), Vol. I, pp. 411-412. Id., at p. 419.
155 Id., at pp. 596-597.
668

tion precedent to hold it to any of its existing
warranties as prescribed by Section 50(b) of the GPRA.
As a last instance, direct contracting may be legally
rationalized under Section 50(c), Article XVI of the GPRA
when what is involved is the procurement of goods sold by
an exclusive dealer or manufacturer, which does not have
sub-dealers selling at lower prices and for which no
suitable substitute can be obtained at more advantageous
terms to the Government. The GPPB Manual, once more,
illustrates:
This condition anticipates a situation where the goods are sold

by an exclusive dealer or distributor, or directly sold by the
manufacturer. In this instance, it is highly unlikely that sub-
dealers can sell the same at lower prices. Further, the Procuring
Entity has not identified a suitable substitute for the product that
can be procured at terms more advantageous to the
government.156

Petitioners argue that the COMELEC failed to establish
that the repair and refurbishment of the PCOS machines
may be done exclusively by Smartmatic-TIM. Thus, it
cannot be said that no suitable substitute can be obtained
at more advantageous terms to the government.157
On the other hand, respondents insist that since
Smartmatic-TIM is the exclusive manufacturer and
distributor of the SAES 1800 PCOS machines in the
Philippines, it is the only certified entity to perform repair
and refurbishment works on the same.158 To support their
claim, they presented a document entitled “Certificates of
Intellectual Property
_______________
156 See GPPB Manual, Vol. II, p. 84 found at <http://www.

gppb.gov.ph/downloadables/forms/GPM%20-%20Vol.2.pdf> (visited March
27, 2015).
157 Rollo (G.R. No. 216562), Vol. I, p. 16.
158 See Rollo (G.R. No. 216098), Vol. I, pp. 405-408.
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VOL. 756, APRIL 21, 2015 669

Rights Ownership and Distributorship”159 dated

November 25, 2014 signed by Filipinas Ordoño for
Smartmatic International Corporation and Alastair Wells
for Smartmatic-TIM Corporation, which reads:
We hereby certify that the undersigned Smartmatic

International Corporation is the exclusive intellectual property
rights owner of the SAES 1800 Automated Election System
(AES), comprising amongst other items, the Precinct Count
Optical Scan (PCOS) machines acquired by COMELEC in March
2012, including its spare parts and critical accessories such as
Transmission Modem, Secured Memory Cartridges/Devices, etc.
In addition, Smartmatic International Corporation and its
Affiliate, Smartmatic Tim Corporation are the only entities
authorized to access, modify and upgrade the software and
firmware contained within the said AES in accordance with the
Deed of Sale and Extended Warranty arrangements agreed
between Smartmatic-TIM Corporation and the COMELEC.
We further certify that Smartmatic International Corporation
is the exclusive distributor of SAES 1800 PCOS machines in the
Philippines and that its affiliate Smartmatic TIM Corporation is
the sole entity authorized by Smartmatic International
Corporation to distribute the SAES 1800 PCOS machines in the
territory of the Republic of the Philippines.
We affirm and certify that Smartmatic International
Corporation is the only competent entity with the knowledge,
tools, expertise, and capability to upgrade the Hardware,
Firmware and Software as well as maintain the functionalities
required by the customer to assure the integrity of the machines
and ultimately, the electoral processes and data.
Petitioners are correct.
_______________
159 Id., at pp. 589-590.
670

While Smartmatic-TIM may be the exclusive

manufacturer and distributor of the PCOS machines and
software in the Philippines, there is no evidence to show
that it is the sole entity capable of repairing and/or
refurbishing the same. Smartmatic-TIM’s certification —
aside from being self-serving and, thus, of doubtful
probative value — is not evidence of the company’s
exclusive capability. A business dictionary defines
“certification” as a “formal procedure by which an
accredited or authorized person or agency assesses and
verifies (and attests in writing by issuing a certificate) the
attributes, characteristics, quality, qualification, or status
of individuals or organizations, goods or services,
procedures or processes, or events or situations, in
accordance with established requirements or standards.”160
Paralleled against this definition, the certification thus
operates only as a formal assurance that any work
performed by the issuer’s employees would conform to its
own established requirements and standards, for which the
client, based on the issuer’s goodwill and reputation, is led
to expect a certain quality of work. With the COMELEC
appearing to rely solely on Smartmatic-TIM’s certification,
and more importantly, absent the conduct of an initial
industry survey (which again may, in itself, be considered
as a ground to invalidate the resultant contract as above
explained), it remains uncertain if the repair and
refurbishment of the PCOS machines can be accomplished
by other equally capable service providers at more
advantageous terms to the government. With this, the
Court concludes that the third condition — similar to the
previous two conditions — which would justify a resort to
direct contracting under Section 50, Article XVI of the
GPRA had not been complied with.
_______________
160 <http://www.businessdictionary.com/definition/certification.
html> (visited March 27, 2015).
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VI.

Noncompliance with the foregoing GPRA requisites
notwithstanding, the COMELEC, nevertheless, justifies its
exclusive engagement of Smartmatic-TIM on account of
Section 52(h) of BP 881, or the Omnibus Election Code,
which, in its view, has not been repealed by the GPRA:161

ARTICLE VII
THE COMMISSION ON ELECTIONS

Sec. 52. Powers and functions of the Commission on
Elections.—In addition to the powers and functions conferred
upon it by the Constitution, the Commission shall have exclusive
charge of the enforcement and administration of all laws relative
to the conduct of elections for the purpose of ensuring free, orderly
and honest elections, and shall:
x x x x
(h) Procure any supplies, equipment, materials or services
needed for the holding of the election by public bidding: Provided,
That, if it finds the requirements of public bidding impractical to
observe, then by negotiations or sealed bids, and in both cases, the
accredited parties shall be duly notified.

Invoking this provision, the COMELEC asserts that it
took into account various advantages of directly contracting
with Smartmatic-TIM, such as the price thereof. It claims
that statutory, as well as daily operational constraints and
budgetary limitations, preclude it from bidding the subject
services.162 It further points out that its ITD personnel are
not capable of performing the required services.163
_______________
216562), Vol. II, p. 492.
162 Rollo (G.R. No. 216098), Vol. I, p. 492.
163 Id., at p. 497.
672

For their part, petitioners submit that the bidding

process can be shortened depending on the COMELEC’s
efficiency, and that the period for refurbishment is merely
an approximation, which means that public bidding is very
much feasible.164 They also propound that since two (2)
automated elections have been held, the COMELEC’s ITD
should have acquired the necessary knowledge and
expertise in performing basic maintenance and repair on
the PCOS machines.165
First, on the law’s applicability, Section 52(h) of BP 881
basically allows the COMELEC to engage in negotiations
or sealed bids if it finds the requirements of public bidding
impractical to observe. BP 881 was passed way back in
1985, before the advent of both the GPRA (signed into law
on January 10, 2003) and the automated election law (RA
8436, as amended by RA 9369, signed into law on
December 22, 1997). BP 881’s datedness notwithstanding,
the Court deems that said provision remains valid and
effective, absent its express repeal. Indeed, “[b]asic is the
principle in statutory construction that interpreting and
harmonizing laws is the best method of interpretation in
order to form a uniform, complete, coherent, and
intelligible system of jurisprudence, in accordance with the
legal maxim interpretare et concordare leges legibus est
optimus interpretandi modus.166 Simply because a later
statute relates to a similar subject matter as that of
an earlier statute does not result in an implied
repeal of the latter.”167
In order to harmonize the provisions of the pertinent
laws, the COMELEC’s exercise of its power to conduct
negotiations
_______________
164 Rollo (G.R. No. 216562), Vol. I, p. 18.

165 Id., at p. 17.
166 Meaning, “[t]o interpret and reconcile laws so they harmonize is
the best mode of construction,” Black’s Law Dictionary (8th edition), p.
1726.
167 Civil Service Commission v. Court of Appeals, G.R. Nos. 176162
and 178845, October 9, 2012, 682 SCRA 353, 377-378; emphasis supplied.
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VOL. 756, APRIL 21, 2015 673

and sealed bids based on the standard of “impracticality”

under Section 52(h) of BP 881 should be read in
conjunction with the GPRA, the latter being the special law
currently governing all matters of government
procurement. Notably, the approach is called for by Section
76, Article XXV of the GPRA, which provides that “[a]ny
other law, presidential decree or issuance, executive order,
letter of instruction, administrative order, proclamation,
charter, rule or regulation and/or parts thereof contrary to
or inconsistent with the provisions of this Act, are hereby
repealed, modified or amended accordingly.” It is further
consistent with Sections 12 and 36 of the automated
elections law, i.e., RA 8436, as amended by RA 9369, which
respectively state that in order “[t]o achieve the purpose of
this Act, the Commission is authorized to procure, in
accordance with existing laws, by purchase, lease, rent
or other forms of acquisition, supplies, equipment,
materials, software, facilities, and other services, from local
or foreign sources free from taxes and import duties,
subject to accounting and auditing rules and regulation
x x x,”168 and that “[t]he provision of Batas Pambansa Blg.
881, as amended, otherwise known as the ‘Omnibus
Election Code of the Philippines,’ and other election laws
not inconsistent with this Act shall apply.”169
Adopting the foregoing, the Court finds that the most
reconciliatory method of construction, to the extent that
fairness and reason would allow, is to consider the
situations stated under the GPRA which would justify a
resort to alternative methods of procurement as instances
that particularize Section 52(h)’s broad gauge of
“impracticality.”
As an example, Section 50(b), Article XVI of the GPRA
allows direct contracting when the procurement of critical
com-
_______________
168 RA 8436, as amended by RA 9369, Section 12; emphasis supplied.

169 RA 8436, as amended by RA 9369, Section 36 (emphasis supplied).
674

ponents from a specific manufacturer, supplier or

distributor is a condition precedent to hold a contractor to
guarantee its project performance, in accordance with the
provisions of his contract. Surely, it is an impractical
course of action for a Procuring Entity to allow an existing
warranty to be voided by procuring the subject goods from
another contractor. On the other hand, direct contracting
under Section 50(a), Article XVI, i.e., procurement of goods
of proprietary nature, which can be obtained only from the
proprietary source, and Section 50(c), Article XVI, i.e., the
procurement of goods sold by an exclusive dealer or
manufacturer, which does not have sub-dealers selling at
lower prices and for which no suitable substitute can be
obtained at more advantageous terms to the government,
both of the GPRA, are allowed since it is utterly impractical
and in fact, almost impossible to do otherwise.
Considerations of impracticality are also written all over
Section 53, Article XVI of the GPRA which governs
Negotiated Procurement:
Sec. 53. Negotiated Procurement.—Negotiated

Procurement shall be allowed only in the following instances:
a. In case of two (2) failed biddings as provided in Section 35
hereof;
b. In case of imminent danger to life or property during a
state of calamity, or when time is of the essence arising from
natural or man-made calamities or other causes where immediate
action is necessary to prevent damage to or loss of life or property,
or to restore vital public services, infrastructure facilities and
other public utilities;
c. Take-over of contracts, which have been rescinded or
terminated for causes provided for in the contract and existing
laws, where immediate action is necessary to prevent damage to
or loss of life or property, or to restore vital public services,
infrastructure facilities and other public utilities;
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VOL. 756, APRIL 21, 2015 675

d. Where the subject contract is adjacent or contiguous to an

ongoing infrastructure project, as defined in the IRR: Provided,
however, That the original contract is the result of a Competitive
Bidding; the subject contract to be negotiated has similar or
related scopes of work; it is within the contracting capacity of the
contractor; the contractor uses the same prices or lower unit
prices as in the original contract less mobilization cost; the
amount involved does not exceed the amount of the ongoing
project; and, the contractor has no negative slippage: Provided,
further, That negotiations for the procurement are commenced
before the expiry of the original contract. Wherever applicable,
the principle shall also govern consultancy contract, where the
consultants have unique experience and expertise to deliver the
required service; or
e. Subject to the guidelines specified in the IRR, purchases of
Goods from another agency of the government, such as the
Procurement Service of the DBM, which is tasked with a
centralized procurement of commonly used Goods for the
government in accordance with Letters of Instruction No. 755 and
Executive Order No. 359, Series of 1989.

The same goes for the alternative procurement methods
of Limited Source Bidding, Repeat Order, and Shopping
respectively governed by Sections 49, 51, and 52, Article
XVI of the GPRA:
Sec. 49. Limited Source Bidding.—Limited Source

Bidding may be resorted to only in any of the following conditions:
a. Procurement of highly specialized types of Goods and
Consulting Services which are known to be obtainable only from a
limited number of sources; or
b. Procurement of major plant components where it is deemed
advantageous to limit the bidding to known eligible bidders in
order to maintain an optimum and uniform level of quality and
performance of the plant as a whole.
676

x x x x
Sec. 51. Repeat Order.—When provided for in the Annual
Procurement Plan, Repeat Order may be allowed wherein the
Procuring Entity directly procures Goods from the previous
winning bidder whenever there arises a need to replenish goods
procured under a contract previously awarded through
Competitive Bidding, subject to post-qualification process
prescribed in the Bidding Documents and provided all the
following conditions are present:
a. The unit price must be equal to or lower than that provided
in the original contract;
b. The repeat order does not result in splitting of requisitions
or purchase orders;
c. Except in special circumstances defined in the IRR the
repeat order shall be availed of only within six (6) months from
the date of the Notice to Proceed arising from the original
contract; and
d. The repeat order shall not exceed twenty-five percent (25%)
of the quantity of each item of the original contract.
Sec. 52. Shopping.—Shopping may be resorted to under
any of the following instances:
a. When there is an unforeseen contingency requiring
immediate purchase: Provided, however, That the amount shall
not exceed Fifty thousand pesos (P50,000); or
b. Procurement of ordinary or regular office supplies and
equipment not available in the Procurement Service involving an
amount not exceeding Two hundred fifty thousand pesos
(P250,000): Provided, however, That the Procurement does not
result in Splitting of Contracts: Provided, further, That at least
three (3) price quotations from bona fide suppliers shall be
obtained.
The above amounts shall be subject to a period review by the
GPPB. For this purpose, the GPPB shall be authorized to increase
or decrease the said amount in order to
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VOL. 756, APRIL 21, 2015 677

reflect changes in economic conditions and for other justifiable

reasons.

When dissected to their core, these conditions are, in
truth, specific manifestations of impracticality, for
which a deviation from the general rule on public bidding
may be extraordinarily permitted. Thus, it may be
reasonably inferred that the parameters of impracticality
are, if at all, already fleshed out in the current
procurement law.
It has already been resolved that the COMELEC failed
to comply with any of the conditions by which its selected
mode of procurement, i.e., direct contracting, would have
been allowed. Meanwhile, it has not argued that any other
alternative method of procurement can be applied. This
notwithstanding, the COMELEC attempts to go beyond the
scope of the GPRA and extend Section 52(h)’s application
based on two (2) practical considerations, namely: (a) the
alleged tight schedule of conducting a public bidding and
having the PCOS machines repaired/refurbished in time
for the 2016 elections; and (b) the great risk of having the
PCOS machines repaired/refurbished by any third party
provider in view of the highly technical nature of the goods:
First, time is of the essence in the preparation for the May 9,

2016 National and Local Elections such that the Commission and
the Bids and Awards Committee are constrained by the tight time
schedule if public bidding are to be conducted in the
refurbishment and/or repair of the machines considering all the
procurement activities lined up.170
Second, to give the refurbishment and/or the repair of the
PCOS Machines to any third party provider other than
SMARTMATIC, the original manufacturer will be too great a risk
considering the highly technical nature of
_______________
216562), Vol. I, p. 35.
678

the refurbishment and/or the repair to be conducted on the

machines.171

Practicality is a relative term which, to stand the mettle
of law, must be supported by independently verified and
competent data. As an exception to the public policy and
statutory command requiring all government procurement
to be conducted through competitive public bidding, a claim
of impracticality should only be based on substantiated
projections, else it would be easy to contrive, and the rule
on public bidding easily circumvented.
As above intimated, the COMELEC decries that there
will not be enough time to complete the intended repair
and refurbishment works on the PCOS machines by the
2016 National and Local Elections, if it were not to directly
procure the same from Smartmatic-TIM.172 In this relation,
it purports in Resolution No. 9922 that:
In a Memorandum of the BAC to the Commission En Banc

dated December 9, 2014, it submitted a timeline stating that a
two-stage bidding needs eighty-eight (88) calendar days to
complete the process. If there is a failure of bidding, the BAC
needs to repeat the whole process doubling the time needed.
After two instances of failed biddings, only then is the
Commission allowed to proceed to negotiated procurement.
The refurbishment of the machines is already slated to start by
March 2015. The Steering Committee in its Implementation
Calendar requires at least eight months for the refurbishment of
existing machines, and intends to start by March 2, 2015 and to
end by November 30, 2015. The COMELEC Information
Technology (ITD) has declared that it requires forty (40) days to
inspect and diagnose the PCOS, and an additional two
hundred (200) days to refurbish them.
_______________
171 Rollo (G.R. No. 216098), Vol. I, p. 733.

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Note that it is already December and the BAC has a little more
than sixty (60) days to conduct the bidding for the refurbishment
and/or repair of the machines so the two-stage procurement is not
within the timeline and even assuming that the BAC will adopt a
single stage procurement, the time needed, which is fifty-five (55)
calendar days, is only sufficient to cover one cycle of the
process — meaning, there is no room for failure which is
very likely to happen.
It is glaringly evident that the remaining period of about sixty
days before the March target date is terribly insufficient for the
conduct of the two-stage bidding for the refurbishment and/or
repair of the machines. Failed biddings must also be considered in
calculating the time required, and would only further delay the
schedule.
Moreover, there is only one BAC tasked to handle all
procurement activities related to the election. These include the
Sangguniang Kabataan procurement scheduled for February
2015 and the regular procurement aside from and the
procurement of the DRE, the additional OMR and all other
election propaganda for 2016. The bidding for the refurbishment
and/or repair of the machines, which is no longer necessary given
the exemptions under Rep. Act No. 9184, will only impede other
procurement activities and impair the efficiency of the BAC.173
(Emphases supplied)

The conclusion is not well-taken.
While the COMELEC’s 88-calendar-day estimation
(double if the first bidding fails) to conduct a two-stage
bidding process is correct, the rest of its projection, i.e., the
forty (40)-day inspection and diagnosis period, and the two
hundred (200)-day-refurbishment period, lacks material
basis. The Court expounds.
Section 38, Article XI of the GPRA provides a three (3)-
month cap for the conduct of each procurement process:
_______________
173 See Rollo (G.R. No. 216562), Vol. I, p. 36.
680

Sec. 38. Period of Action on Procurement Activities.—The

procurement process from the opening of bids up to the award of
contract shall not exceed three (3) months, or a shorter period
to be determined by the procuring entity concerned. Without
prejudice to the provisions of the preceding section, the different
procurement activities shall be completed within reasonable
periods to be specified in the IRR.
If no action on the contract is taken by the head of the
procuring entity or by his duly authorized representative, or by
the concerned board, in the case of government-owned and/or -
controlled corporations, within the periods specified in the
preceding paragraph, the contract concerned shall be deemed
approved. (Emphasis supplied)

Based on the IRR, it is approximated that it will take a
little less than 83 calendar days, more or less, to complete
the procurement process, broken down as follows: (a) 7
days for the advertisement/posting of the invitation to
bid;174 (b) a maximum of 45 days for the submission of bids
within which the pre-bid conference is likewise
conducted;175 (c) a maximum of 7 days for the bid
evaluation wherein bids are opened and examined as well
as the determination of the lowest calculated bid or the
highest rated bid is made;176 (d) a maximum of 7 days for
the post-qualification process wherein the BAC makes its
recommendation/s to the head of the procuring entity; (e) a
maximum of 7 days for the approval of award; and (f) a
maximum of 10 days for the contract signing between the
procuring entity and the winning bidder.
This period would be doubled when a first bidding fails,
and resort to negotiated procurement, upon a second failed
_______________
174 See Section 21.2.1, Revised IRR of the GPRA.

175 See Section 25.4(a) and Section 22.2, Revised IRR of the GPRA.
176 See Section 32.4, Section 29, and Section 30, Revised IRR of the
GPRA.
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VOL. 756, APRIL 21, 2015 681

bidding, would be allowed. Section 35, Article X of the

GPRA reads:
Sec. 35. Failure of Bidding.—there shall be a failure of
bidding if:
a. No bids are received;
b. No bid qualifies as the Lowest Calculated Responsive Bid;
or
c. Whenever the bidder with the highest rated/lowest
calculated responsive bid refuses, without justifiable cause to
accept the award of contract, as the case may be.
Under any of the above instances, the contract shall be re-
advertised and rebid. The BAC shall observe the same process
and set the new periods according to the same rules followed
during the first bidding. After the second failed bidding, however,
the BAC may resort to negotiated procurement as provided for in
Section 53 of this Act.

Thus, the COMELEC’s projection that it will take 88
calendar days, as maximum,177 to complete a two-stage
bidding process (double, if the first bidding fails) is
theoretically correct. Applying the same, this means that
the COMELEC from the time this Decision is promulgated
(i.e., May 2015) will be able to bid out the same in three (3)
months (i.e., by August 2015), which gives it, more or less,
nine (9) months until the May 2016 National and Local
Elections to have the machines repaired and/or
refurbished. Assuming that a first bidding fails, the second
bidding process should be completed in six (6) months (i.e.,
by November 2015); as such, it will still have, more or less,
another six (6) months until the May 2016
_______________
177 The COMELEC admits in its Comment that a two-stage bidding

process may be done in at least 31 calendar days. (See Rollo [G.R. No.
216562], Vol. II, p. 493)
682

National and Local Elections to have the machines

repaired and/or refurbished.178
Note, however, that the COMELEC itself concedes in
Resolution No. 9922 that it can shorten the bidding process
to 55 calendar days, as maximum,179 if only to expedite
the procurement of refurbishment/repair services of the
PCOS Machines via a single-stage procurement. Hence, a
substantial reduction of the foregoing periods is altogether
possible. In such instance, the bidding process should be
finished in two months (i.e., by July 2015), leaving it with
ten (10) months until the May 2016 National and Local
Elections to have the machines repaired and/or
refurbished.
Note further that the periods would be greatly reduced if
the minimum periods of 31 calendar days (for two-stage
procurement) and 28 calendar days (for single-stage
procurement), as the COMELEC itself projected, are
successfully followed.180
While the Court finds the COMELEC’s conservative
bidding timeframe tenable, it cannot do the same with
respect to its projections covering the inspection and
diagnosis (i.e., 40 days), and the repair and/or
refurbishment (i.e., 200 days) of the PCOS machines.
At the outset, it should be underscored that the
COMELEC could have already had the PCOS machines
inspected and diagnosed by its own inhouse personnel as
early as the time it had resolved to reuse the same. The
COMELEC’s ITD could
_______________
178 The filing of a motion for reconsideration would not alter the
periods left for the COMELEC to act, should it decide to continue with the
procurement of the subject services, since, as stated in the dispositive
portion, this Decision is immediately executory in view of the time
considerations attendant herein.
179 The COMELEC admits that a single-stage bidding process
may be done in at least 28 calendar days. (See Rollo [G.R. No.
216562], Vol. II, p. 493)
180 Id.
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VOL. 756, APRIL 21, 2015 683

have even proceeded to conduct preventive maintenance

procedures, which it admits it is capable of under its
memorandum181 dated May 14, 2014:
This refers to your memorandum dated 13 May 2014 re Query

whether the ITD is capable of providing the Preventive
Maintenance and Repair of PCOS as proposed by the (sic)
Smartmatic.
Preventive maintenance procedures include (1) checking of the
completeness of peripherals of the PCOS, (2) running the
diagnostic program of the PCOS to verify if there are
functionalities in the system that will fail, (3) opening of the
PCOS cover and cleaning of dust of the inside parts of the unit,
and (4) closing of the PCOS cover and re-executing the diagnostic
program of the PCOS.
Repair includes evaluating the problem of the PCOS
functionalities that failed, identifying the parts that need to be
replaced and replacing the parts that failed.
Please be informed that the ITD can only do the
preventive maintenance procedures. We can identify the
reason for PCOS failure by running the diagnostic
program but we do not have the tools for repair and parts
for replacement.
For your information. (Emphases and underscoring supplied)

In fact, as may be above gleaned, it appears that the
COMELEC could have just procured the “the tools for
repair and parts for replacement,” and have the repair and
refurbishment done by its own in-house personnel. Note
that a sufficient number of ITD personnel could have well
been trained by Smartmatic-TIM itself on matters related
to the repair, refurbishment, tuning up and maintenance of
the PCOS machines, as well as the electronic transmission
facil-
_______________
181 Rollo (G.R. No. 216098), Vol. II, p. 972. Signed by COMELEC ITD
Acting Director IV Jeannie V. Flororita.
684

ity, pursuant to Item No. 8.2.4, Part V182 of the 2009

RFP. As correctly observed by the COMELEC’s Law
Department in its November 4, 2014 Memorandum:183
Part V – OTHER SPECIFICATIONS provides:

“8. Training Plans
All proposals shall include the following training requirements:
8.1 A training program for COMELEC Executives;
8.2 An extensive training and education program on the
preparation of elections systems, counting and canvassing
systems and transmission systems for technical personnel. Such
training shall be sufficient to the point that the COMELEC
technical personnel shall be able to operate the systems with their
own. The training shall address, but shall not be limited to, the
following topics:
8.2.1. x x x.
x x x x
8.2.4. Repair, troubleshooting, tuning up and
maintenance of machines and electronic transmission
facility x x x”
As such, it is clear that under the AES Procurement
Project which must necessarily form part of the AES
Contract executed between Smartmatic-TIM and the
Commission, the former must train COMELEC Technical
Personnel specifically for the repair, troubleshooting, tuning
up and maintenance of machines and electronic
transmission facility which includes the subject PCOS
machines. (Emphases and underscoring supplied)
_______________
216562), Vol. II, p. 542.
183 Rollo (G.R. No. 216098), Vol. I, p. 548.
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Clearly, Smartmatic-TIM’s training obligation — an

obligation that was incipiently required in the RFP to
which all bidders at that time were subjected to and, in
fact, included in the 2009 AES Contract’s project scope184
— spans both aspects of preventive maintenance and
repair. With this, the Court is in a quandary as to why the
services subject of these cases would still have to be
procured by the COMELEC from an outside service
provider, let alone under an exclusive direct contracting
arrangement with Smartmatic-TIM. Curiously,
Smartmatic-TIM has been communicating with the
COMELEC about its proposed extended warranty as early
as 2013.185 Hence, unless the COMELEC was already bent
on pursuing its current deal with Smartmatic-TIM, then
the latter’s training obligation should have been enforced.
To the Court’s mind, this would have been the more
prudent course of action: ideally, this would not only
narrow down the COMELEC’s task to the procurement of
the necessary tools and replacement parts, but also provide
it with a considerable degree of sustainability by
minimizing — if not eliminating — its reli-
_______________
184 The RFP was categorized as one of the “Bidding Documents” under
the 2009 AES Contract (see Article 1.1 of the 2009 AES Contract; Rollo
[G.R. No. 216562], Vol. II, p. 573). In turn, Article 3.1 of the 2009 AES
Contract states:
3.1 The scope of the Project shall include:
x x x x
(b) The provision of the Services specified in the Bidding Documents,
with Systems Integrations and Project Management; Electoral Advocacy;
Training and Information Campaign Materials; Pre-Election Testing and
Rollout Support; Site Preparation; Ballot Box Design; Deployment,
Installation, Pullout and Warehousing; Election Day Support; Post-
Election Support; Supplies and Others as listed in the Financial Proposal
hereunder appended and made integral parts of this Contract, x x x
x x x x
686

ance on Smartmatic-TIM with respect to the upkeep of

the PCOS machines.
Be that as it may, the Court is unable to determine the
extent of work to be accomplished without the machines
undergoing initial diagnostics. As such, it cannot resolve if
the COMELEC’s 200-day timetable for repair and/or
refurbishment is cogent. In fact, there is no concrete
assurance that the repair and/or refurbishment of the
PCOS machines are even necessary. To reiterate, the
COMELEC’s Law Department even admitted that the
conduct of repair is premature:186
Also, while under storage at the Cabuyao warehouse, it was

our understanding that the ITD personnel are in the process of
conducting routine and periodic preventive maintenance on the
PCOS machines in order to maintain satisfactory operating
condition by providing for systematic inspection, detection, and
correction of incipient failures either before they occur or before
they develop into major defects as well as to prevent faults from
occurring by conducting a battery of maintenance tests,
measurements, adjustments, and parts replacement, if necessary.
As such, the conduct of repair is premature considering
that the units requiring repair, if any, is yet to be determined.
The same can be said for the replacement of servers and network
equipment which has yet to be evaluated.
x x x x 187 (Emphasis and underscoring supplied)

At this point, it should be noted that under the GPRA,
the Procuring Entity is required to prepare bidding
documents which shall include, among others, the delivery
time or completion schedule for the goods/services sought to
be procured.188 Similarly, when the Procuring Entity
advertises/posts the
_______________

187 Id.
188 See Section 17(g) of the GPRA.
687
VOL. 756, APRIL 21, 2015 687

invitation to bid, it should contain the contract duration

for such procurement.189 Thus, had the COMELEC decided
to bid out the project, it would have been able to convey to
all prospective bidders the tight timeline it is supposedly
working with, and may even receive a proposal with a more
efficient timeframe. At the very least, the COMELEC
should have conducted an initial industry survey to
ascertain if other service providers are capable of
accomplishing the works under more favorable terms to it,
as well as the required pre-procurement conference to
ensure that the procurement will proceed in accordance
with the PPMP. Unfortunately, the records do not indicate
that these procedures were followed. The reasons for the
COMELEC’s noncompliance can only be second-guessed
and may even elude these present cases, but the glaring
reality it must face is that projections tracked on
uncertainty cannot be upheld, else it would be easy to
efface the State’s mandate on public bidding. The timeline
which the COMELEC had submitted is therefore
speculative at best.
The same conclusion obtains with respect to the
COMELEC’s risk concern. In Resolution No. 9922, the
COMELEC finds it too great of a risk to have the PCOS
machines serviced by a different contractor other than
Smartmatic-TIM in view of their highly technical nature.
Particularly, it expresses fears over the reverse engineering
of the PCOS machines, a process which would likely be
undertaken if the machines were to be serviced by a
contractor unfamiliar with the system, and if so done, may
end up jeopardizing its integrity.190 However, without the
required industry survey having first been conducted, the
COMELEC’s reservation once again borders on the
speculative. In fact, nothing on record convinces this Court
that there is no other service provider which is capable of
servicing the PCOS machines without the need to reverse
engineer the same. Neither is this Court convinced
_______________
189 See Section 21(g) of the GPRA.

216562), Vol. I, pp. 37-38.
688

that reverse engineering, if done properly, would impair

the machines’ integrity or put “back to zero” the know-how
already accumulated.191 The bid guidelines may very well
qualify the COMELEC’s desired body of work, and the
bidding process itself screens the capability of potential
bidders to comply with the same. As it was in its earlier
asseveration, the COMELEC is quick to assume the worst
but its assumptions remain unsubstantiated. Accordingly,
the COMELEC’s arguments at this juncture are denied
altogether.

VII.

Lastly, the COMELEC argues that the Extended
Warranty Contract (Program 1) is a mere extension of the
2009 AES Contract, and thus need not undergo the
rigorous process of bidding. In this relation, it draws
attention to Article 8.8 of the 2009 AES Contract, which
was incorporated under Item No. 9 of the 2012 Deed of
Sale, and deemed as a surviving provision under Article
2.2192 of the 2009 AES Contract. It also makes mention of
the Court’s ruling in Capalla, wherein it was declared that
a contract is still effective as long as the performance
security has not been released.193
The theory is flawed.
The Extended Warranty Contract (Program 1) cannot be
validated by the mere expedient of characterizing the same
as a part of the 2009 AES Contract. The services of repair
and refurbishment cannot be procured from Smartmatic-
TIM
_______________
216562), Vol. I, p. 37.
192 2.2 The Term of this Contract begins from the date of effectivity
until the release of the Performance Security, without prejudice to the
surviving provisions of this Contract including the warranty provision as
prescribed in Article 8.3 and the period of the option to purchase. (See
Rollo [G.R. No. 216098], Vol. I, p. 670)
689
VOL. 756, APRIL 21, 2015 689

through an “extended warranty” mode, unless this Court
assents to a blatant circumvention of the procurement law.
As earlier discussed, under Article 8.8 of the 2009 AES
Contract, Smartmatic-TIM warrants that its parts, labor
and technical support and maintenance will be available to
the COMELEC, if it so decides to purchase such parts,
labor and technical support and maintenance services,
within the warranty period stated, i.e., ten (10) years for
the PCOS, reckoned from May 10, 2010. Since Article 8.8 is
a mere warranty on availability, it entails a subsequent
purchase contract, founded upon a new consideration, to be
effectively invoked. However, by no means does this
provision dispense with the need to bid out the
ensuing purchase contract. Neither does this
presuppose that the COMELEC is — for the stated
period of ten (10 years) — already beholden to
Smartmatic-TIM. Certainly, the COMELEC’s hands
cannot be hamstrung by a mere warranty on availability,
which is precisely a warranty provision that should operate
in its favor. In any event, the spirit of competition which
primordially animates the procurement law cannot be
undercut absent the law’s own exceptive conditions.
Otherwise, other potential bidders would be deprived of the
opportunity to participate and offer better terms to the
government. That Smartmatic-TIM has already acquired
complete monopoly over any subsequent need the
government would have in relation to the PCOS machines
for a period of ten (10) years is a notion this Court, under
these circumstances, cannot accept.
Besides, there is an inaccurate portrayal of the
Extended Warranty Contract (Program 1) as a mere
“warranty extension.”
An extended warranty gives a prolonged warranty to
consumers to provide the additional service of replacing or
repairing goods, the defects of which are directly
related
690

to how the item was manufactured.194 As an

“extension,” the defect to be repaired should occur
within the extended period covered in the
agreement.195
In these cases, the warranty period for manufacturing
defects had, as above discussed, lapsed a long time ago, or
last March 30, 2013, which follows the one (1) year
warranty period for the PCOS machines, reckoned from
March 30, 2012 when the 2012 Deed of Sale was executed.
Hence, there was nothing more that could be extended. As
Smartmatic-TIM itself admits:
3.170 The original responsibility of [Smartmatic-TIM] on the

warranty of the PCOS machines was only until 2014.196
[Smartmatic-TIM] was not obligated to diagnose, repair, and
refurbish the PCOS machines that would be used for the 2016
Elections. There is no obligation on the part of [Smartmatic-
TIM] to fulfill the warranty provision of the Deed of Sale
when the same has already expired. x x x.197 (Emphasis
supplied)

Based on said admission,198 the expiration of the
aforestated warranty period becomes an established fact
which therefore renders Article 8.1 of the Extended
Warranty Contract (Program 1) false insofar as it states
that “[t]he warranties agreed upon under Articles 4 and 8
of the 2009 AES contract, including the limitations on
warranties under Article 8.5, shall continue to remain in
full force and effect.” Clearly,
_______________
194 “Extended Warranties vs. Extended Service Plans” by Kevin Paul

Hanson, <http://extended-warranty-services-review.toptenreviews.
com/extended-warranties-vs.extended-service-plans.html> (visited March
31, 2015).
195 See “Extended Warranty Law & Legal Definition,” <http://
definitions.uslegal.com/e/extended-warranty/> (visited March 30, 2015).
196 This is inaccurate. The warranty on manufacturing defects in the
case of equipment lapsed last March 30, 2013.
197 Rollo (G.R. No. 216098), Vol. I, p. 411. Id., at p. 419.
198 See Section 4, Rule 129 of the Rules of Court.
691
VOL. 756, APRIL 21, 2015 691

the warranty on manufacturing defects contained under

Articles 4.3 in relation to Articles 8.4 and 8.5 of the 2009
AES Contract is already defunct and thus, cannot
“continue to remain in full force and effect.” For the same
reason, these provisions cannot be “incorporated herein by
way of reference.”199 Meanwhile, the parties could not have
contemplated the extension of Article 8.8 of the 2009 AES
Contract since: (a) the Extended Warranty Contract
(Program 1) already provides for the actual performance of
work, and thus does not extend a warranty on the mere
availability of parts, labor, and technical support and
maintenance; and (b) the warranty on availability still
subsists, i.e., ten (10) years for the PCOS, reckoned from
May 10, 2010, or until May 10, 2020.
At best, one can construe the Extended Warranty
Contract (Program 1) as a revival, rather than an
extension. However, if the Court were to condone this way
of thinking, then the bidding for any service related to the
PCOS, or any government project for that matter, would
never be needed at all. All the Procuring Entity has to do is
simply revive the provisions of a dead contract and
perpetually hold itself to the original contract awardee.
Clearly, this undermines the very core of the procurement
law — it eliminates competition, deprives the government
of the opportunity to receive offers with more advantageous
terms, and, more significantly, erodes the public’s faith by
rousing suspicions of favoritism and anomaly; perforce, the
COMELEC’s “extended warranty mode” cannot — as it
should not — be sanctioned.
On another front, the COMELEC invokes the Court’s
ruling in Capalla to justify its position. However, Capalla
is not on all fours with the present cases; hence, the stare
decisis doctrine (to adhere to precedents and not to unsettle
things which are established) is inapplicable.
Capalla essentially validated the COMELEC’s exercise
of the extended OTP, which characterization as an option
con-
_______________
199 Article 8.1 of the Extended Warranty Contract (Program 1).
692

tract was never in doubt. The option amount was

already part of the original amount bidded upon in
2009 for the AES Contract, thereby negating the need
for another competitive bidding:
One. Smartmatic-TIM was not granted additional right that

was not previously available to the other bidders. x x x. Section
4.3 thereof gives the Comelec the OTP the goods agreed upon. The
same provision states the conditions in exercising the option,
including the additional amount that the Comelec is
required to pay should it exercise such right. It is, therefore,
undisputed that this grant of option is recognized by both parties
and is already a part of the principal contract of lease. Having
been included in the RFP and the bid bulletins, this right given to
the Comelec to exercise the option was known to all the bidders
and was considered in preparing their bids. x x x.
Two. The amendment of the AES contract is not substantial.
The approved budget for the contract was P11,223,618,400.0056
charged against the supplemental appropriations for election
modernization. Bids were, therefore, accepted provided that they
did not exceed said amount. After the competitive public bidding,
Smartmatic-TIM emerged as winner and the AES contract was
thereafter executed. As repeatedly stated above, the AES contract
is a contract of lease with OTP giving the Comelec the right to
purchase the goods agreed upon if it decides to do so. The AES
contract not only indicated the contract price for the lease
of goods and purchase of services which is
P7,191,484,739.48, but also stated the additional amount
that the Comelec has to pay if it decides to exercise the
option which is P2,130,635,048.15. Except for the period within
which the Comelec could exercise the OTP, the terms and
conditions for such exercise are maintained and respected.
Admittedly, the additional amount the Comelec needed to pay
was maintained (less the amount already paid when it purchased
920 units of PCOS machines with corresponding CCS for the
special
693
VOL. 756, APRIL 21, 2015 693

elections in certain areas in the provinces of Basilan, Lanao del

Sur and Bulacan) subject to the warranties originally agreed upon
in the AES contract. The contract amount not only included that
for the contract of lease but also for the OTP. Hence, the
competitive public bidding conducted for the AES contract was
sufficient. A new public bidding would be a superfluity.
The Solicitor General himself clarified during the oral
arguments that the purchase price of the remaining PCOS
machines stated in the assailed Deed of Sale was the price
stated in Article 4.3 of the AES contract. Therefore, the
said amount was already part of the original amount
bidded upon in 2009 for the AES contract which negates
the need for another competitive bidding.200 (Emphases
supplied)

In stark contrast, the Extended Warranty Contract
(Program 1), despite its titular denomination, is actually a
separate service contract for the repair and refurbishment
of the PCOS machines, to be accomplished within a five (5)-
month period. Since it extends no subsisting warranty, it is
really no different from a contract for the servicing of
appliances, automobiles and the like, by which a routine
checkup and repairs, if need be, are made by the service
contractor. In other words, it is a distinct contract,
founded upon a new offer and a new consideration,
and for which a new payment — as evinced by the
P240,000,000.00 purchase price under Article 2 thereof —
is needed. This much is clear from one of the contract’s
“whereas clauses”201 which states that the contract amount
was a product of subsequent negotiations by the parties:
_______________

216562), Vol. I, p. 60.
694

WHEREAS, after negotiations by the parties, the Contract

Amount was reduced to Philippine Pesos Two Hundred Forty
Million (Php240,000,000.00), exclusive of VAT.202

In fact, if only to highlight its individuality, Smartmatic-
TIM’s October 24, 2014 proposal reveals that the Extended
Warranty Contract (Program 1) was formulated as part of a
full service program package, i.e., from bringing back the
PCOS machines to its working condition to the upgrading
of the different hardware and software components, that
subsists on its own:203

V. Proposal Elements
The proposal consists of three major programs, which cover the
various elements which Smartmatic suggest are required to
ensure the PCOS are in peak condition for 2016.
The first program covers the extension of the warranty to bring
the PCOS back to working condition following a prolonged storage
and lack of preventive maintenance for over two years.
The second program covers the refurbishment of the machines
to change physical components at the end of life and as
precautionary measures to eliminate potential risk. It also
includes the repair of machines through 2015, 2016 preelection
preparation and 2016 post-election repair, firmware upgrades to
the MTD Moderns and return to storage preparation.
For the third program, Smartmatic has reviewed the
requirements of the current installed platform and identified a
range of improvements to the different hardware and software
components of the solution to make it
_______________
202 Id.
203 See Smartmatic-TIM PCOS Extended Warranty Proposal
Summary; Rollo (G.R. No. 216562), pp. 614-615.
695
VOL. 756, APRIL 21, 2015 695

equivalent of any technology available in the market today.

Hence, different from the character of the OTP, it would
be absurd to conclude that the Extended Warranty
Contract (Program 1) was a mere “warranty extension”
that could masquerade as an adjunct of the 2009 AES
Contract if only to evade the procurement law. For the
same reasons, it cannot even pass as a mere amendment.
Needless to state, the true nature of every contract is
ascertained through judicial determination, undergirded by
principles of law. It is never what the parties deem it to
be.204
To stretch the argument further, neither should the
principle of autonomy of contracts preclude the Extended
Warranty Contract’s (Program 1) scrutiny. The principle is
not a safe haven to just leave the parties to their
agreement — it bears a sharp limitation that although
parties may agree to stipulations, clauses, terms and
conditions as they may deem appropriate, they should not
be contrary to law, morals, good customs, public order or
public policy;205 hence, the Court, after ascertaining the
contract’s true nature, should proceed to assess if it
transgresses this limitation. Ironically, Capalla itself
exhorts that “[g]overnment contracts shall be void, as
against the law and public policy, where a statutory
requirement of open competitive bidding has been ignored.
As a corollary, agreements directly tending to prevent
bidding for
_______________
204 “It is true that contracts are not what the parties may see fit to
call them, but what they really are as determined by the principles of
law.” (Borromeo v. Court of Appeals, 150-B Phil. 770, 778-779; 47 SCRA
65, 74 [1972]; citation omitted)
205 “The autonomy of contracts allows the parties to establish such
stipulations, clauses, terms and conditions as they may deem appropriate
provided only that they are not contrary to law, morals, good customs,
public order or public policy.” (Bricktown Dev’t Corp. v. Amor Tierra Dev’t
Corp., G.R. No. 112182, December 12, 1994, 239 SCRA 126, 128)
696

covered government contracts may violate public

policy.”206 The exhortation holds true with respect to the
Extended Warranty Contract (Program 1), which is
unquestionably a government contract imbued with public
interest.
As a final point, it is noteworthy that Capalla upheld
the amendment of the 2009 AES Contract (i.e., the OTP’s
extension) since the OTP’s exercise was, in the Court’s
appreciation, more advantageous to the COMELEC and
the public. It was observed that the P7,191,484,739.48
rentals paid for the lease of goods and purchase of services
under the 2009 AES Contract was already considered as
part of the purchase price, and that for the COMELEC to
own the subject goods, it was required to pay only an
additional P2,130,635,048.15. On the other hand, if the
COMELEC did not exercise the option, the rentals already
paid would just be one of the government expenses for the
past election and, in effect, would be of no use to future
elections:
Third. More importantly, the amendment of the AES contract

is more advantageous to the Comelec and the public.
x x x x
We agree with respondents that the exercise of the
option is more advantageous to the Comelec, because the
P7,191,484,739.48 rentals paid for the lease of goods and
purchase of services under the AES contract was
considered part of the purchase price. For the Comelec to
own the subject goods, it was required to pay only
P2,130,635,048.15. If the Comelec did not exercise the
option, the rentals already paid would just be one of the
government expenses for the past election and would be of
no use to future elections. Assuming that the exercise of the
option is nullified, the Comelec would again con-
_______________
206 See Separate Concurring Opinion of Justice Presbitero J. Velasco,

Jr. in Capalla v. COMELEC, supra note 28 at p. 91.
697
VOL. 756, APRIL 21, 2015 697

duct another public bidding for the AES for the 2013 elections
with its available budget of P7 billion. Considering that the said
amount is the available fund for the whole election process, the
amount for the purchase or lease of new AES will definitely be
less than P7 billion. Moreover, it is possible that Smartmatic-TIM
would again participate in the public bidding and could win at a
possibly higher price. The Comelec might end up acquiring the
same PCOS machines but now at a higher price.207 (Emphases
and underscoring supplied)

The same cannot be said of the Extended Warranty
Contract (Program 1) whereby the COMELEC had agreed
to pay a distinct purchase price of P240,000,000.00 in order
to procure Smartmatic-TIM’s services. In fact, it appears
that it would be more advantageous for the government if
the COMELEC’s own in-house personnel had undertaken
the diagnostics, preventive maintenance, and even the
actual repair and refurbishment of the machines. It could
have held Smartmatic-TIM to its training obligation under
Item No. 8.2.4, Part V of the RFP, as incorporated in the
2009 AES Contract, as above mentioned. If such were the
case, then only the necessary tools and replacement parts,
after the COMELEC’s own examination of the actual
number of defective machines and the extent of the defects,
would be needed to be procured. This course of action
would seem to be cheaper than the wholesale engagement
of Smartmatic-TIM under the Extended Warranty Contract
(Program 1). But then again, the COMELEC’s reasons as to
why it did not proceed as such can only be second-guessed.
At any rate, it is plainly unclear to this Court that the
P240,000,000.00 purchase price gives the best price
advantage to the government. The COMELEC mentions in
its Comment that the said price, coupled with the 4%
maximum replacement threshold, translates into the cost
of P131.26 per
_______________
207 Id., at pp. 58-60.
698

PCOS machine for their inspection, diagnosis, and

repair, including the cost for the parts and components.208
However, as already pointed out, the Court has not been
assured that no other service contractor is capable of
providing more suitable terms to the government. And
more so, the COMELEC’s perceived price advantage under
the Smartmatic-TIM deal assumes that all PCOS machines
have to be repaired. This assumption may very well end up
to be false after the initial diagnostics of the PCOS
machines, again a course of action that the COMELEC
should have preliminarily taken. Therefore, as a worst
case, the government may end up shelling out
P240,000,000.00 for the mere diagnostics and/or preventive
maintenance of the machines, if it turns out that no PCOS
machine needs to be repaired. The contingency of
determining the extent of work to be accomplished simply
precludes an objective assessment of whatever price
advantage may be gained. That being said, the
COMELEC’s invocation of Capalla is misplaced.

VIII.

In an article published just recently, last March 30,
2015, COMELEC spokesperson James Jimenez stated that
the COMELEC can actually push through with an
automated elections for 2016, even not through the
previous PCOS route. Far from the distraught tenor of the
COMELEC’s submitted pleadings, wherein it flustered over
the catastrophic return to manual elections if Resolution
No. 9922 and the Extended Warranty Contract (Program 1)
would not hold, the spokesperson sensibly explains that it
all boils down to how the COMELEC marshals its own
resources:
The Commission on Elections (COMELEC) is eyeing the use of

other computerized voting machines in the May 2016 elections
should the Supreme Court decide against reusing the precinct
count optical scan (PCOS) machines.
_______________
699
VOL. 756, APRIL 21, 2015 699

Comelec spokesman James Jimenez said the poll body is

considering the use of 23,000 optical mark reader (OMR) units.
“If we push through with the bidding now, we will have
23,000 (OMR) machines. So we can do it. It can be done. It’s
really just a question of how you’re going to marshal your
resources,” Jimenez said.
The Comelec earlier started the bidding for the OMR that will
be used to supplement the existing PCOS machines.
However, the possible reuse of the PCOS machines for the May
2016 elections is being questioned before the Supreme Court (SC).
Though fewer machines can be used if the high court rules
against PCOS, Jimenez said Comelec is still not giving up on
computerized elections in 2016. The poll body had used less units
in past automated elections nationwide.
According to Jimenez, Comelec will adopt the Central Count
Optical Scan (CCOS) system if the OMR machines will be used.
He said the adoption of CCOS is already being discussed,
including the possible number of counting centers.
x x x x209

The Court has not even gone to this extreme and
prohibited the reuse of the PCOS machines. Yet, the
COMELEC’s own spokesperson has conceded that when
push comes to shove, automated elections are still possible.
_______________
209 Jaymalin, Mayen, “Comelec Eyes Alternative Voting Machines,”

The Philippine Star, March 30, 2015 <http://www.philstar.com/
headlines/2015/03/30/1439009/comelec-eyes-alternative-voting-machines>
(visited April 5, 2015).
700

There are no qualms about the task of having the PCOS

machines repaired and refurbished. However, there are
serious and unignorable legal flaws about how the
COMELEC intends to pursue this undertaking. Bluntly,
the COMELEC has failed to justify its reasons for directly
contracting with Smartmatic-TIM: it had not shown that
any of the conditions under Section 50, Article XVI of the
GPRA exists; its claims of impracticality were not
supported by independently verified and competent data;
and lastly, its perceived “warranty extension” is, in reality,
just a circumvention of the procurement law. For all these
counts, the conclusion thus reached is that the COMELEC
had committed grave abuse of discretion amounting to lack
or excess of jurisdiction.210 As a result, its Resolution No.
9922 and the Extended Warranty Contract (Program 1)
should be stricken down, and necessarily, all amounts paid
to Smartmatic-TIM pursuant to the said contract, if any,
being public funds sourced from taxpayers’ money, should
be returned to the government in accordance with the
procedures contained in existing rules and regulations.
Note that the disposition of these cases does not prohibit
the COMELEC from resorting to direct contracting anew or
other alternative method of procurement with any service
contractor, subject to compliance with the conditions
provided in the GPRA and all the pertinent rules and
procedures.
While this Court recognizes that the COMELEC should
be given sufficient leeway in exercising its constitutional
mandate to enforce and administer all election laws, it
demands equal recognition that it is the Court’s
constitutional duty to see to it that all governmental
actions are legally permissible. In so doing, the Court
decides not only with pragmatism in mind, but pragmatism
within the fair bounds of law. Such is
_______________
210 “There is grave abuse of discretion (1) when an act is done

contrary to the Constitution, the law or jurisprudence; (2) when it is
executed whimsically, capriciously or arbitrarily out of malice, ill will or
personal bias.” (Information Technology Foundation of the Phils. v.
COMELEC, 464 Phil. 173, 190; 460 SCRA 291, 298 [2005])
701
VOL. 756, APRIL 21, 2015 701

the case in examining the COMELEC’s apprehensions

under the lens of the procurement law, with heightened
considerations of public accountability and transparency
put to the fore. With due deference to the COMELEC, it
should be made to understand that this Court does not
stand to thwart the conduct of automated elections; but
only steps in to preserve its sanctity. After all, in a
democracy, nothing is more vital than an unimpaired vote.
WHEREFORE, the petitions are GRANTED.
Accordingly, COMELEC Resolution No. 9922 and the
Extended Warranty Contract (Program 1) are hereby
declared NULL and VOID. This Decision is immediately
executory in view of the time considerations attendant
herein.211
SO ORDERED.
Carpio, Leonardo-De Castro, Brion, Peralta, Bersamin,

Del Castillo, Villarama, Jr., Perez, Mendoza, Reyes, Leonen
and Jardeleza, JJ., concur.
Sereno, CJ., I concur; the question & wanted answered
during oral arguments on feasibility of automated elections
despite nullification of questioned contract have been
addressed in this Ponencia.
Velasco, Jr., J., Please see Concurring and Dissenting
Opinion.

CONCURRING AND DISSENTING OPINION

VELASCO, JR., J.:

I concur with the majority that failure to comply with
the set preconditions for direct contracting, specifically the
conduct of an initial industry survey and pre-procurement
con-
_______________
211 See Section 4, Rule 52 in relation to Section 2, Rule 56 of the Rules

of Court.
702

ference, is a ground to nullify the Extended Warranty

Contract subject of these consolidated cases, and that the
disposition of these cases ought not prohibit the
Commission on Elections (COMELEC) from resorting to
direct contracting anew or resorting to other alternative
modes of procurement with any service provider.1
At the core of the controversy is the existence of any of
the three conditions under Sec. 50 of Republic Act No.
9184, otherwise known as the General Procurement
Reform Act (GPRA), to justify resorting to direct
contracting. The provision provides:
SEC. 50. Direct Contracting.—Direct Contracting may be

resorted to only in any of the following conditions:
a) Procurement of Goods of proprietary nature, which
can be obtained only from the proprietary source, i.e.,
when patents, trade secrets and copyrights prohibit others
from manufacturing the same item;
b) When the Procurement of critical components from a
specific manufacturer, supplier or distributor is a condition
precedent to hold a contractor to guarantee its project
performance, in accordance with the provisions of his contract; or
c) Those sold by an exclusive dealer or manufacturer,
which does not have sub-dealers selling at lower prices
and for which no suitable substitute can be obtained at
more advantageous terms to the Government. (emphasis
added)

In the main, COMELEC postulates that conditions (a)
and (c) of Sec. 50 are present in view of Smartmatic-TIM’s
alleged proprietary rights over the PCOS machines.
_______________
1 Decision, p. 700.
703
VOL. 756, APRIL 21, 2015 703

Notably, Smartmatic-TIM’s previous dispute with

Dominion Voting Systems International Corp. over the
intellectual property rights covering the Precinct Count
Optical Scan (PCOS) machines and the software embedded
thereon has already been settled.2 Its exclusive, full, and
unencumbered access to the technology used in the AES, as
certified by Smartmatic-TIM, is now backed up by the
following: US Patent No. US 8,195,505 B2 for “System,
Method and Computer Program for Vote tabulation with an
Electronic Audit Trail”; Certificate of Registration No. TX
7-921-024 “Democracy Suite Election Management System
Software Version 4.14”; and the Certification from the
Intellectual Property Rights Ownership and Distribution
from Smartmatic International for PCOS machines
acquired by COMELEC.3 Smartmatic-TIM’s rights,
therefore, aside from not having been seriously disputed by
the petitioners, have since been confirmed.
To put things into perspective, however, the parties
herein agree that the subject “goods”4 of the Extended
Warranty Contract neither pertain to the PCOS machines
nor the soft-
_______________
2 G.R. No. 216562, Rollo, p. 485.

3 COMELEC En Banc Resolution No. 9922, p. 7.
4 RA 9184, Section 5. Definition of Terms.—For purposes of this
Act, the following terms or words and phrases shall mean or be
understood as follows:
x x x
(h) Goods – refer to all items, supplies, materials and general support
services, except consulting services and infrastructure projects, which may
be needed in the transaction of the public businesses or in the pursuit of
any government undertaking, project or activity, whether in the nature of
equipment, furniture, stationery, materials for construction, or personal
property of any kind, including nonpersonal or contractual services such
as the repair and maintenance of equipment and furniture, as well as
trucking, hauling, janitorial, security, and related or analogous services,
as well as procurement of materials and supplies provided by the
procuring entity or such services.
x x x
704

ware program, but to the services, particularly

diagnostics, preventive maintenance, repair, and
replacement of the PCOS machines previously bought from
Smartmatic-TIM.5
Here, it has been duly proved that Smartmatic-TIM has
proprietary rights over the PCOS machines’ hardware and
software, but whether these proprietary rights extend to
the services contracted remains to be seen. It is likewise
premature at this point to draw a conclusion on whether or
not Smartmatic-TIM is the sole distributor of the services
to be rendered. This is in view of the fact that the
COMELEC, as correctly pointed out by the ponencia,6
failed to comply with two key requirements prior to directly
contracting with Smartmatic-TIM, namely: the conduct of
(a) an initial industry survey,7 and (b) a pre-procurement
conference.8 On this point alone, the Extended Warranty
Contract ought to be nullified.
As provided in Vol. 2 of the General Procurement Policy
Board Manual (GPPB Manual), an initial industry survey
is conducted to determine the supply source. This survey
confirms the exclusivity of the source of goods or services to
be procured, and that there is no suitable substitute in the
market that can be obtained at more advantageous terms.
This survey must therefore be conducted prior to the
commencement of the procurement process where direct
contracting is contemplated.9 Absent this initial
industry survey, there can be no determination that
the subject services of
_______________
5 G.R. No. 216562, Rollo, p. 482.

6 Decision, pp. 655-656.
7 See GPPB Manual, Vol. II, p. 85 found at
http://www.gppb.gov.ph/downloadables/forms/GPM%20-%20Vol.2.pdf (last
accessed April 20, 2015).
8 Section 20, Rule VII, Implementing Rules and Regulations of RA
9184.
9 See GPPB Manual, Vol. II, p. 85 found at
http://www.gppb.gov.ph/downloadables/forms/GPM%20-%20Vol.2.pdf (last
accessed April 20, 2015).
705
VOL. 756, APRIL 21, 2015 705

the Extended Warranty Contract are covered by

Smartmatic-TIM’s intellectual property rights,
warranting the nullification of the agreement.
Concurrently, though, it is also premature, at this
point, to rule out the possibility that Smartmatic-
TIM indeed has proprietary rights over the same.
Regretfully, I take exception to the discussion of the
ponencia regarding Articles 9 and 10 of the 2009
Automated Election Systems Contract (2009 AES
Contract).10 According to the ponencia:11
At any rate, even if it is assumed that Smartmatic-TIM is the

proprietary source of the services or that the intended repair
or refurbishment would necessarily entail a modification
of the PCOS hardware and software of which its existing
intellectual property rights cover, the COMELEC is still not
bound to engage Smartmatic-TIM on an exclusive basis.
Based on the 2009 AES Contract, Smartmatic-TIM would grant
the COMELEC a perpetual, but nonexclusive license to use,
modify, and customize the PCOS systems and software, including
the right to alter and modify the source code itself, for all future
elections, when the latter exercises its option to purchase x x x.
(emphasis added)

My reservation in joining the majority on this point
stems from a reading of the adverted provisions of the 2009
AES Contract, which state:
ARTICLE 9
SOFTWARE AND LICENSE SUPPORT

x x x
9.2 Should the COMELEC exercise its option to purchase, it
shall have perpetual, but nonexclusive license to
_______________
10 Decision, pp. 648-651.

11 Id., at p. 648.
706

use said systems and software and may have them modified at
COMELEC’s expense or customized by the licensor for all future
elections as hereby warranted by the PROVIDER, as per the
license agreement. Accordingly, the PROVIDER shall furnish
COMELEC the software in such format as will allow COMELEC
to pursue the same.
9.3. COMELEC agrees that it shall not:
(a) Transfer the software and relate materials to any
third party;
(b) Reverse engineer, disassemble, decompile, modify,
or transmit the software in any form or by any mean for
any purpose other than for this Project, unless the
COMELEC has purchased it for Philippine elections; or
(c) Use any software acquired hereunder for any
purpose other than the operation of voting, counting, and
canvassing/consolidation of votes.
x x x
9.5. x x x
x x x
After purchase, COMELEC shall be authorized to use the
software system and make such alterations and modifications on
the source code that are necessary or desirable for the proper use
of the software system as provided in Article 9.2 above.
COMELEC shall not sell, lease, transfer, or otherwise
convey the software to any other individual, company or
entity.12 x x x
x x x

ARTICLE 10
INTELLECTUAL PROPERTY

10.1 The PROVIDER warrants that all intellectual property
rights in or related to the Goods and/or Services,
_______________
707
VOL. 756, APRIL 21, 2015 707

including but not limited to patents and other know-how and

copyright, both registered and unregistered, owned and/or
otherwise used by the PROVIDER, and all goodwill related
thereto are, and shall remain at all times, the exclusive property
of SMARTMATIC; and COMELEC acknowledges the same
and shall not exploit, reproduce or use the same except as
expressly provided in this contract.13 (emphasis added)

It is undisputed that the COMELEC has the right to
reverse engineer, disassemble, decompile, alter, modify, or
transmit the technology it purchased in any form or by any
means, but, as can be gleaned, these rights to alter and/or
modify the PCOS machine hardware, and the software
embedded thereon, pertain exclusively to COMELEC. In
the same vein, the exception under Article 10 indeed allows
for the exploitation and reproduction of the technology
transferred but only if it is performed by COMELEC itself.
To be sure, the provisions, as couched, do not evince
that the said rights mentioned thereon are actually
transferrable. On the contrary, the language of the 2009
AES Contract prohibits the same.
Banking on this prohibition, the COMELEC, through
Resolution No. 9922, alleges that:14
x x x PCOS software does not work like a standard computer

where drivers can be installed and downloaded independently
from the applications used. Any change in hardware that does
not come from the appropriate origin will trigger a change
in the different layers of software (drivers, voting
application, transmission applications, security
applications) resulting in a change of the source code.
(emphasis added)
_______________

14 COMELEC En Banc Resolution No. 9922, p. 8.
708

The Commission seems to draw parallelisms to my

treatise in Capalla, viz.:15
In the present case, not only was the object of the contract a
determinate thing, the parties likewise agreed that the subject
Deed of Sale is for the purchase of the entire first component.
While the hardware and software are, by their nature, separable,
the parties, however, intended to treat them as indivisible. Such
being the case, the software cannot then be procured without the
accompanying hardware on which they are embedded. In other
words, what was purchased by the COMELEC was the whole
system, that is, the entire first component of the original AES
Contract, which includes the software needed for the PCOS
machines consisting of the Election Management System (EMS)
and the PCOS firmware applications, protected by our copyright
laws, together with the hardware. Being inseparable by
contractual stipulation, the COMELEC is thus required to
procure the hardware and the proprietary software and firmware
provided by Smartmatic-TIM.
To further show the importance of treating the software and
hardware as indivisible, without Smartmatic-TIM’s EMS which
dictates the functioning of the entire system, by directing the
processes by which the PCOS and the CCS hardware and
software interpret the data scanned from the cast ballots and
later accumulate, tally and consolidate all the votes cast, the
PCOS hardware are lifeless. The EMS is the fundamental
software on which all other applications and machines in the
entire Smartmatic-TIM AES depend. It serves as the brain that
commands all other components in the entire AES.

While I maintain my position that the hardware and
software of the PCOS machines are closely intertwined —
the software being embedded on the hardware, I echo the
concern
_______________
15 Capalla v. COMELEC, G.R. Nos. 201112, 201121, 201127, and

201413, October 23, 2012, 684 SCRA 367, 394-396.
709
VOL. 756, APRIL 21, 2015 709

that it is still premature at this point to rule that

performing the auxiliary services will necessarily
affect the source code. The initial industry survey, after
all, may reveal that these services may actually be
rendered without altering the software’s algorithms,
proving the COMELEC’s fears to be unfounded. Thus,
should the COMELEC opt to conduct an initial industry
survey, I implore the Commission to include a technical
study to ascertain the veracity of its claim. If it were to be
discovered that the said auxiliary services cannot be
performed by entities other than by COMELEC and
Smartmatic-TIM without necessarily altering the
source code, the Commission cannot then contract
out the said services except to Smartmatic-TIM. This
is so because the rights granted to COMELEC to alter
and/or modify the Source Code under Article 9 of the 2009
AES Contract, to reiterate, is nontransferable and cannot
be performed by any other entity in its stead, lest the
Commission contravene Articles 9 and 10 of the 2009 AES
Contract, and violate Smartmatic-TIM’s intellectual
property rights.
In view of the foregoing, I vote to grant the petitions on
the sole ground that COMELEC had failed to comply with
the procedural requirements in directly contracting with
Smartmatic-TIM, particularly the conduct of an initial
industry survey and pre-procurement conference.
Notwithstanding this disposition, the COMELEC is not
precluded from entering into direct negotiations anew with
any service provider, subject to compliance with the
conditions provided in the GPRA and all the pertinent
rules and procedures.
Petitions granted, COMELEC Resolution No. 9922 and

Extended Warranty Contract declared null and void.
Notes.—Price is considered “excessive” if it is more than

the 10% allowable price variance between the price paid for
the item bought and the price of the same item per canvass
of the auditor; Factors to consider in determining whether
or not
710

the price is excessive. (Verzosa, Jr. vs. Carague, 644

SCRA 679 [2011])
The continued serviceability of the purchased computers
is not a factor in the determination of whether the price
paid by the government was unreasonable or excessive.
(Id.)
——o0o——
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G.R. No. 216098. April 21, 2015.

G.R. No. 216562. April 21, 2015.*

Election Law; Automated Election System: Precinct Count

VOL. 756, APRIL 21, 2015 607

conduct of the upcoming 2016 Elections is dependent on the

608 SUPREME COURT REPORTS ANNOTATED

when warranted by circumstances, investigated and held

VOL. 756, APRIL 21, 2015 609

Same; Direct Contracting; Words and Phrases; Direct

610 SUPREME COURT REPORTS ANNOTATED

bound to engage Smartmatic-TIM on an exclusive basis.—A

VOL. 756, APRIL 21, 2015 611

effect, there is no way that the COMELEC’s engagement of

612 SUPREME COURT REPORTS ANNOTATED

VOL. 756, APRIL 21, 2015 613

conduct preventive maintenance procedures, which it admits

614 SUPREME COURT REPORTS ANNOTATED

also provide it with a considerable degree of sustainability by

VOL. 756, APRIL 21, 2015 615

Velasco, J., Concurring and Dissenting Opinion:

Bids and Bidding; Direct Contracting; Warranty; Automated

616 SUPREME COURT REPORTS ANNOTATED

cases, and that the disposition of these cases ought not

VOL. 756, APRIL 21, 2015 617

pertain exclusively to COMELEC.—It is undisputed that the

SPECIAL CIVIL ACTIONS in the Supreme Court.

Manuelito R. Luna for petitioners in G.R. No. 216098.

“Procurement of electoral services and goods constitutes a major

1 “Procurement Aspects of Introducing ICT Solutions in Electoral

VOL. 756, APRIL 21, 2015 619

TIM) for the diagnostics, maintenance, repair, and

620 SUPREME COURT REPORTS ANNOTATED

RA 9369,10 signed into law on January 23, 2007, later

VOL. 756, APRIL 21, 2015 621

Automated Synchronized National and Local

622 SUPREME COURT REPORTS ANNOTATED

exercises its option to purchase [(OTP)] the Goods

VOL. 756, APRIL 21, 2015 623

Banc issued Resolution No. 937629 approving the full

29 Not attached to the records.

624 SUPREME COURT REPORTS ANNOTATED

On November 11, 2013, the COMELEC received from

36 See Proposal for Extended Warranty of PCOS Machines, Central

VOL. 756, APRIL 21, 2015 625

technologies, which shall be likewise selected through

626 SUPREME COURT REPORTS ANNOTATED

sions and structure thereof, excluding the activities and

VOL. 756, APRIL 21, 2015 627

order to maintain satisfactory operating condition by

628 SUPREME COURT REPORTS ANNOTATED

These notwithstanding, the COMELEC En Banc, in its

First, time is of the essence in the preparation for the May 9,

VOL. 756, APRIL 21, 2015 629

and from the exclusive manufacturer, which in the case of the

630 SUPREME COURT REPORTS ANNOTATED

a five (5)-month period: (a) accomplish a physical

71 Preventive Maintenance procedures include: (1) checking of the

VOL. 756, APRIL 21, 2015 631

73 Rollo (G.R. No. 216098), Vol. I, pp. 3-46.