The Supreme Court (SC) has been asked to nullify the contract for the Land Transportation Management System (LTMS) signed by the Land Transportation Office (LTO) and DERMALOG Joint Venture, a German firm, on May 28, 2018 for P3.19 billion.

Among other functions, the LTMS was designed to integrate all LTO services – like issuance of driver’s license, registration of motor vehicles, and issuance of transport permits – into a single database and digital platform.

Thus, the LTMS would be a web-based core system that would replace the old system of LTO, including the establishment and operation of an exclusive on-premises private cloud, network operations center, technical support, and helpdesk centers.

In a petition, the SC was told that after years of waiting, the LTMS “remains incomplete and not fully utilized due to inherent defects in its design, illegal amendments to the contract, and flawed acceptance.”

The petitioners, Gerald Domingo and Atty. Jose Carlito M. Montenegro, asked the SC to issue a temporary restraining order (TRO) or injunction that would stop the LTO from further paying DERMALOG Joint Venture for maintenance fees, change orders, and other fees, and from further using LTMS.

“Unless enjoined by the SC, both the government and the public will be constrained to continue using the wholly substandard, inefficient, defective, ill-conceived and incomplete LTMS,” Domingo and Montenegro said in their petition.

“Paying DERMALOG JV, keeping LTO technologically captured, continually exposing unauthorized access to LTO’s data in foreign countries… undermine public welfare, threaten national security, and breach informational privacy of LTO data subjects, like herein petitioners who are taxpayers, drivers, motorists and motor vehicle owners,” they said.

It was not known immediately if the SC has acted on the petition.  A check with the SC’s website showed there has been no resolution issued yet on the petition denominated as GR No. 270550.

DERMALOG JV is composed of DERMALOG Identification Systems gmBH, Holy Family Printing Corporation, Microgenesis Software Corporation, and Verzontal Builders, Inc.

The petitioners said that as envisioned in the contract, the LTMS would be a full digitalization and modernization of all LTO systems into an online portal for seamless processing and exchange of data.

However, they said, the Commission on Audit (COA) found that the LTMS project was “flawed from inception and was put up for bidding despite lack of requirements and specifications to address the needs of LTO.”

They said the contract “contained unduly difficult conditions that were later relaxed and/or removed by LTO during contract implementation after the project had been awarded to DERMALOG JV.”

“The LTMS delivered to the LTO by DERMALOG JV was incomplete as the design of the core systems did not include all the functionalities and connectivity needed by LTO to address fully the needs of the agency as raised later in the report by COA and the Department of Information and Communications Technology (DICT),” they also said.

“Instead of penalizing DERMALOG JV,” the petitioners said “the LTO further contracted amendments and granted extensions to DERMALOG JV to the prejudice of the government and the public.”

The petitioners pointed out that under the Terms of Reference of the project and the schedule requirements, majority of DERMALOG’s  deliverables for the LTMS, including the “Go Live” for 24 pilot sites, must be completed within 26 weeks or by December 2018.

However, they told the SC that less than a month after the signing of the LTO-Component A contract, the agency issued several orders which allowed 13 extensions to DERMALOG’s deliverables from 2018 to 2021, prolonging the project delivery schedule by almost three years.

They pointed out that despite the delays, the LTO did not impose liquidated damages to DERMALOG as required under the contract and Republic Act No. 9184, the Government Procurement Reform Act (GPRA), or pre-terminate the contract despite existing grounds to do so.

In their petition, the SC was also asked to order the LTO to file appropriate administrative and criminal cases against the transport agency’s officials and employees involved in the anomalous implementation of the project.

“Here, the facts are abundant and daylight clear, that despite the numerous delays… and still undelivered aspects of the LTO IT Project Component A, the responsible officers of respondent LTO have repeatedly turned a blind eye to the patent repeated breaches of DERMALOG Joint Venture,” they said.  

Instead of penalizing DERMALOG JV, the petitioner said the responsible LTO officers “have given great favor to the latter, both to the prejudice of the government and the public in general.” They also said: “And yet, the said responsible officers have not been held accountable, and have enjoyed impunity until this point.”

The petitioners asked the SC to order LTO to blacklist DERMALOG JV from participating in any bidding process involving government projects.

They also asked the SC to issue an order directing DERMALOG to turnover to LTO the database containing all data owned by LTO, particularly data of motor vehicles and driver’s license.

At the same time, the petitioners asked the SC to order DERMALOG JV to return the amount paid by the government for the “null and void” contract and to declare the company liable to pay damages amounting to not less than P319 million.

DERMALOG’s contract with LTO had been subject of an inquiry conducted by the Senate Blue Ribbon Committee in 2023.