The Commission on Audit (COA) has ordered the Procurement Service-Department of Budget and Management (PS-DBM) to pay P2.185 billion to Crayon Software Experts Philippines, Inc. (CSEPI) for all its Microsoft software licenses and subscription services from 2021 to 2022.

The PS-DBM and Microsoft Philippines, Inc. (MPI) entered into a memorandum of agreement (MOA) on June 25, 2020 to continue the provision of Microsoft software licenses and subscription services.

Under their agreement, the PS-DBM should issue the purchase order (PO) to a designated fulfiller, which should be entitled to payment.

MPI will incur no actual obligation to supply and deliver the Microsoft licenses and services because these will be undertaken by the fulfiller.

CSEPI submitted the lowest mark-up percentage out of all fulfillers, so it entered into a fulfiller's agreement with PS-DBM on Nov. 24, 2020.

However, there was an issue on the standard input value-added tax (VAT) for each sale of licenses to PS-DBM as this was reportedly impacted by the TRAIN Law, the Tax Reform for Acceleration and Inclusion Act.

This prompted CSEPI to change its reseller mark-up to 0.50 percent with the total mark-up now escalating to 7.5 percent.

Even without the ruling of the Bureau of Internal Revenue (BIR) regarding the issue, PS-DBM and CSEPI executed an addendum to the fulfiller's agreement to be deemed effective beginning Jan. 1, 2021.

On June 23, 2021, the BIR issued a ruling and stressed that the TRAIN Law does not result in any significant change in CSEPI's VAT liability. Because of this, PS-DBM suspended payments at the escalated mark-up percentage rate.

The fulfiller's agreement with CSEPI expired on Nov. 24, 2022, and CSEPI sent a demand letter to PS-DBM on May 7, 2024 asking for the initial bid amount outstanding at the original mark-up percentage as of December 2023.

For its part, PS-DBM said it could not make the payment given the negative findings made by the COA audit team.

This prompted CSEPI to file a money claim before the COA on Feb. 26, 2025, arguing that it is entitled to payment as well as the increased mark-up percentage.

The COA found the petition slightly meritorious. While it granted the payment for the amount of P2,185,804,399.70, it denied for lack of merit the demand for the mark-up difference in the amount of P219,850,230.76.

"In various communications between PS-DBM and CSEPI, there was no instance where PS-DBM refuted the claim of CSEPI that Microsoft licenses and services were delivered. Thus, this Commission grants the payment for the Microsoft licenses and services covered by the Fulfiller's Agreement based on the principle of quantum meruit, but in the amount not exceeding the original bid offer or reseller mark-up of-7.5 percent. To rule otherwise would be tantamount to unjust enrichment by the government at the CSEPI's expense," the COA ruled.

The 20-page decision was signed by Chairperson Gamaliel A. Cordoba and Commissioner Douglas M.N. Mallillin.