G.R. No. 201112

G.R. No. 201112 - ARCHBISHOP FERNANDO R. CAPALLA, OMAR SOLITARIO ALI and MARY ANNE L. SUSANO,petitioners,versusCOMMISSION ON ELECTIONS, respondent.

G.R. No. 201121 - SOLIDARITY FOR SOVEREIGNTY (S4S) represented by Ma. Linda Olaguer; RAMON PEDROSA, BENJAMIN PAULINO, SR., EVELYN CORONEL, MA. LINDA OLAGUER MONTAYRE and NELSON T. MONTAYRE,petitioners,versus COMMISSION ON ELECTIONS, respondent.

G.R. No. 201127 - TEOFISTO T. GUINGONA, BISHOP BRODERICK S. PABILLO, SOLITA COLLAS MONSOD, MARIA CORAZON MENDOZA ACOL, FR. JOSE DIZON, NELSON JAVA CELIS, PABLO R. MANALASTAS, GEORGINA R. ENCANTO and ANNA LEAH E. COLINA, petitioners, versusCOMMISSION ON ELECTIONS and SMARTMATIC TIM CORPORATION, respondents.

G.R. No. 201413 - TANGGULANG DEMOKRASYA (TAN DEM), INC., EVELYN L. KILAYKO, TERESITA D. BALTAZAR, PILAR L. CALDERON and ELITA T. MONTILLA, petitioners, versusCOMMISSION ON ELECTIONS and SMARTMATIC TIM CORPORATION,respondents.

Promulgated:

June 13, 2012

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DISSENTING OPINION

VILLARAMA, JR., J.:

Existing laws are read into and form part of every government contract. The terms of such contract may not contravene mandatory provisions of general or special laws, or public policy. An option to purchase provided in a contract of lease of equipment cannot be enforced if it is used to circumvent the law on procurement requiring a competitive bidding, or where the equipment and services failed to comply with the essential conditions or standards set by the law or regulation authorizing the original bidded contract.

Factual Antecedents

On July 10, 2009, respondents Commission on Elections (COMELEC) and the joint venture of Smartmatic International Corporation and Total Information Management Corporation (Smartmatic-TIM) entered into a contract for the provision of an automated election system (2009 AES Contract) for the May 10, 2010 synchronized national and local elections. The contract was awarded to the winning bidder Smartmatic-TIM after it passed the eligibility requirements, evaluation of financial and technical proposals, and demonstration tests conducted by the COMELEC pursuant to the provisions of Republic Act (R.A.) No. 9369.[1]

The 2009 AES Contract contained an option to purchase Smartmatic-TIMs Precinct Count Optical Scan (PCOS) machines being leased to COMELEC, under the following terms:

ARTICLE 4

CONTRACT FEE AND PAYMENT

x x x x

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 [Smartmatic-TIM] 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.

The retention money will be returned within five (5) working days after the expiration of the above warranty, provided, however, that the goods supplied are in good operating condition free from patent and latent defects, all the conditions imposed under the purchase contract have been fully met, and any defective machines, except to those attributable to COMELEC, have been either repaired at no additional charge or replaced or deducted from the price under the Option to Purchase.

x x x x

ARTICLE 6

COMELECS RESPONSIBILITIES

x x x x

6.6 COMELEC shall notify the PROVIDER on or before 31 December 2010 of its option to purchase the Goods as listed in Annex L.

x x x x[2]

The above stipulation was based on Section 28, Part V of the Other Specifications of the Request for Proposal (RFP) or the Terms of Reference (TOR), which states:

28. The offer shall be for a one-time lease basis for Component 1-A, 1-B and 1-C.

28.1 An offer for an option to purchase by component to be decided by COMELEC before December 31, 2010 shall be included by the bidder in its proposal.

28.2 The price of the option-to-purchase shall not exceed 50% of the lease price of the equipment.[3]

Smartmatic-TIMs PCOS machines were used in the first fully-automated national and local elections held on May 10, 2010.

In June 2010, the COMELEC Advisory Council (CAC) submitted its Post- Election Report on the Use of the Automated Election System (AES) in the 2010 National and Local Elections[4] to the Joint Congressional Oversight Committee on Automated Election System. The CAC concluded that despite the time constraints, several questionable decisions made by COMELEC that placed the integrity of the AES in jeopardy and the mistakes committed by Smartmatic-TIM, the AES ultimately did work. While it noted the numerous claims of electronic fraud, none have been substantiated and while the new system did not eradicate all forms of electoral fraud, it was able to remove the most damaging type the dagdag-bawas. For the May 2013 elections, the CAC opined that COMELEC need not use the same PCOS machines, but the basic technology appears to be a good fit for the Philippines. It further recommended that the COMELEC would be better off not exercising the option to purchase the PCOS machines so it can look for an even better solution for the May 2013 elections. On the whole, the CAC found the May 2010 automated elections as a success despite criticisms and its shortcomings which should never be used to justify a return to manual election or even hybrid manual/automated elections.[5]

On July 20, 2010, the Technical Working Group submitted its Report[6] on the Random Manual Audit of the AES in the May 2010 elections, which highlighted the difficulties encountered by the TWG-RMA and gave recommendations to improve and standardize the conduct of Random Manual Audit in future elections using the AES system.

On September 23, 2010, COMELEC partially exercised the option to purchase when it entered into a Contract of Sale with Smartmatic-TIM for the acquisition of 920 units of PCOS machines with the corresponding Consolidated Canvassing System (CCS), which were used during the special elections held on November 13, 2010 in certain areas in the provinces of Basilan, Lanao del Sur and Bulacan.

On December 20, 2010, COMELEC received a letter from Smartmatic-TIM reminding it of the imminent expiration of the option to purchase the remaining 81,280 PCOS units and extending the period of the option to purchase until March 31, 2011. As no response was received from COMELEC, Smartmatic-TIM sent another letter dated March 23, 2011 addressed to the new Chairman, Hon. Sixto S. Brillantes, Jr., offering a Revised Extended Option to Purchase, in consideration of the forthcoming ARMM elections, until September 30, 2011.[7]

In a letter dated March 30, 2011, Commissioner Rene V. Sarmiento sought clarification on the terms of Smartmatic-TIMs revised extended offer. In its letter-reply dated April 1, 2011, Smartmatic-TIM answered the queries and detailed the conditions for its revised extended option to purchase effective until December 31, 2011.[8]

On September 23, 2011, Smartmatic-TIM again sent a communication to COMELEC following-up on the extended option to purchase and stating new conditions for its availment. This was followed by the letter dated December 28, 2011 reiterating the benefits of the PCOS technology offered to COMELEC under the revised option to purchase.[9]

On January 12, 2012, the CAC issued Resolution No. 2012-001[10] recommending the use of the Optical Mark Reader (OMR) technology for the 2013 national and local elections, and that in any purchase COMELEC consider the cost of storage, facility for storage, reliability of hardware over time and cost of money.

On February 8, 2012, the CAC issued Resolution No. 2012-003[11] with the following recommendations:

1. that for the sake of transparency and for the COMELEC to have the best option possible, COMELEC should exert all efforts to procure the necessary AES only through a competitive public bidding process;

2. that the option to purchase under the 2010 national and local elections contract should not be exercised, if as a consequence, the rest of the system must come from the same vendor, as this:

a. may not afford the COMELEC the best possible total solution, as the hardware is just one component of the entire automated election system;

b. prevents the COMELEC from taking advantage of the best possible technology currently available considering technological advances and/or obsolescence;

c. will prevent other prospective vendors from competitively participating in the bidding process; and

d. may severely erode the public trust and confidence in the electoral process;

x x x x[12] (Emphasis supplied.)

Subsequently, the CAC having been apprised that COMELEC was seriously considering to exercise the option to purchase, issued Resolution No. 2012-005[13] dated March 7, 2012 setting forth its recommendations to ensure that COMELEC will have full control of the election process. Among these recommendations were: that the AES hardware be compliant to the technical specifications recommended in the 2012 CAC resolutions, delivered with appurtenances such as system specifications and user/training manuals, and be certified that they have all been upgraded and checked to comply with the established requirements and are in good working condition; that there be ample time for COMELEC to test the equipment; provisions for a minimum one year warranty and replacement/repair of malfunctioning units, and spare parts; and separate biddings for transmission and ballot printing services, as well as for the services of a Systems Integrator to take advantage of the best possible technology currently available considering advances and/or obsolescence.

Meanwhile, Congress approved the amount of P7,000,000,000.00 for the procurement of AES for the 2013 elections, which was way below the proposed budget for lease of AES submitted by COMELEC in the amount of P10,436,300,399.00. Per COMELECs computation based on the lowest calculated responsive bid obtained during the bidding for the May 10, 2010 elections, P12,854,731,547 would be needed for the lease of 125,000 PCOS machines to achieve the target of 600 voters per precinct. On the other hand, only P4,728,912,086.00 is necessary should COMELEC exercise the option to purchase, and the over-all cost of technology and all services and deployment would only amount to P6,757,382,285.00, which is well within the budget allocated by Congress.[14]

Faced with budgetary and time limitations, COMELEC issued Resolution No. 9373[15] dated March 6, 2012, seriously considering the exercise of its option to purchase under the 2009 AES Contract, subject to compliance with the following conditions:

1) Smartmatic-TIM shall submit to the Commission not later than noon of March 12, 2012 a formal written proposal indicating the total cost of the technology (PCOS and CCS hardware and software) which amount, as reflected in Annex L of the 2010 AES Contract, shall not be increased. Such proposal may also include its offer for technology related services mentioned above which it may provide for the 2013 automated elections, preferably at the same price as in the 2010 AES contract;

2) Smartmatic-TIM shall undertake that the PCOS and CCS hardware to be procured are properly stored and in good working condition until their turn-over to the Commission, subject to inspection by the Commission. To determine whether the PCOS and CCS hardware are properly stored, the Project Management Office shall create an Inspection Team who will submit a report thereon to the Commission not later than March 12, 2012;

3) The warranties agreed upon under Articles 4 and 8 of the 2010 AES Contract shall be in full force and effect; and

4) Fixes and enhancements on the AES as requested by the Commission must be addressed by Smartmatic-TIM. For this purpose, the Project Management shall submit a report to the Commission on the final Scope of Work and timelines to address said fixes and enhancements not later than March 12, 2012.[16] (Italics supplied.)

In his Dissenting Opinion,[17] Commissioner Augusto C. Lagman pointed out that: (1) even Smartmatic-TIM acknowledged the fact that the option to purchase period had already expired and hence any offer to extend it communicated to COMELEC was unilateral; (2) the extension of the option period was a substantial amendment and had the other bidders known that the option period could be extended beyond the time provided, they could have varied the amount of their respective bids; (3) COMELECs acceptance of Smartmatic-TIMs unilateral offer may be deemed a manifest partiality to Smartmatic-TIM to the detriment of other bidders; (4) the exercise by COMELEC of the option to purchase in this case may not be justified under the alternative modes of procurement allowed by R.A. No. 9184, i.e., direct contracting, because Smartmatic-TIM is not the only supplier of OMR machines, the technology recommended by the CAC; and (5) on the technical aspect, the requirements of functional capability under R.A. No. 9369 were not met by Smartmatic-TIM as shown by the deficiencies uncovered in the AES used in the 2010 elections.

On March 21, 2012, COMELEC issued Resolution No. 9376[18] stating that the COMELEC decided to exercise the option to purchase the PCOS machines for the 2013 elections. The COMELEC deemed it most advantageous for the government to exercise the option citing primarily the time and budgetary constraints, and the fact that Smartmatic-TIM has extended the option to purchase until March 31, 2012 without COMELEC rejecting the same. The resolution reads in part:

x x x x

WHEREAS, although Systest Labs, Inc. (now SLI Global Solutions), the established International Certification Entity that reviewed the AES for the 2010 elections, has determined that the critical and major issues on the Voluntary Voting System Guidelines (VVSG) of the 2010 AES have already been resolved, there are fixes and enhancements being requested by the Commission on the AES to be used in the 2013 elections;

WHEREAS, the final Scope of Work for the enhancements being requested by the Commission to the AES to be used in the 2013 elections has already been completed;

WHEREAS, the Commissions Project Management Office for the May 13, 2013 National and Local Elections has submitted an Inspection Report showing that the PCOS used in the May 10, 2010 elections are properly stored at the Cabuyao Warehouse where said PCOS are currently stocked;

WHEREAS, the Commission previously purchased from Smartmatic-TIM nine hundred twenty (920) units of PCOS and related peripherals for use in the special elections in 2010;

NOW, THEREFORE, the Commission on Elections, by virtue of the powers vested in it by the Constitution, the Omnibus Election Code, Republic Act No. 9369 and other election laws, and after finding the exercise of the Option to Purchase most advantageous to the government, RESOLVED, as it hereby RESOLVES, to exercise its Option to Purchase the PCOS and CCS hardware and software in accordance with Section 4.3, Article 4 of the AES contract between the Commission and SMARTMATIC-TIM in connection with the May 10, 2010 National and Local Elections, subject to the conditions that:

1. The warranties agreed upon under Articles 4 and 8 of the 2010 AES Contract shall be in full force and effect;

2. The original price for the hardware and software covered by the Option to Purchase as specified under Annex L of the 2010 AES contract shall be maintained, excluding the cost of the nine hundred twenty (920) units of PCOS and related peripherals previously purchased for use in the 2010 special elections; and

3. All other services related to the 2013 Automated Election System shall be subject to public bidding.

SO ORDERED.[19]

On March 30, 2012, COMELEC and Smartmatic-TIM entered into an Agreement on the Extension of the Option to Purchase Under the Contract for the Provision of an Automated Election System for the May 10, 2010 Synchronized National and Local Elections,[20] citing as basis Article 19 of the 2009 AES Contract which allows amendments to its provisions upon mutual agreement. It was thus agreed that the last date of the exercise of the option to purchase is extended to March 31, 2012.

On March 30, 2012, COMELEC and Smartmatic-TIM executed the Deed of Sale[21] covering the PCOS and CCS hardware and software pursuant to the option to purchase in the 2009 AES Contract, for the total consideration of P1,833,274,457.09 subject to the conduct of the Hardware Acceptance Test (HAT) and compliance with the Final Scope of Work for additional system modifications or the fixes and enhancements earlier requested by the COMELEC.

On the same date, COMELEC issued Resolution No. 9378[22] approving the aforesaid Deed of Sale between COMELEC and Smartmatic-TIM.

On April 10, 2012, the first two petitions -- for certiorari, prohibition and mandamus with prayer for temporary restraining order (TRO) and writ of preliminary injunction -- were filed before this Court by Archbishop Fernando R. Capalla, Omar Solitario Ali and Mary Anne L. Susano (G.R. No. 201112), and former Vice-President Teofisto T. Guingona joined by Bishop Broderick S. Pabillo, Solita Collas Monsod, Maria Corazon Mendoza Acol, Fr. Jose Dizon, Nelson Java Celis, Pablo R. Manalastas, Georgina R. Encanto and Anna Leah E. Colina (G.R. No. 201127). On the same day, another petition for certiorari and prohibition with similar prayer for injunctive relief was filed by the Solidarity for Sovereignty (S4S) represented by Ma. Linda Olaguer, and Ramon Pedrosa, Benjamin Paulino, Sr., Evelyn Coronel, Ma. Linda Olaguer Montayre and Nelson T. Montayre (G.R. No. 201121).

On April 24, 2012, this Court issued a TRO enjoining the implementation of the assailed contract of sale. The three petitions were consolidated and the respondents were directed to file their comment.[23]

A fourth petition for certiorari, prohibition and mandamus filed by Tanggulang Demokrasya (Tan Dem), Inc., Evelyn L. Kilayko, Teresita D. Baltazar, Pilar L. Calderon and Elita T. Montilla (G.R. No. 201413) was likewise consolidated with the first three cases, and the respondents required to file their comment to the said petition.

Arguments of the Parties

Petitioners seek the nullification of the deed of sale entered into by COMELEC with Smartmatic-TIM for the acquisition of the subject PCOS and CCS hardware and software used in the May 10, 2010 national and local elections, pursuant to an option to purchase in the 2009 AES Contract. Their common stand proceeds from the theory that since the deadline set under the 2009 contract had lapsed without COMELEC exercising the option to buy the leased units, Smartmatic-TIM cannot extend the period of the option beyond the term of the contract which has long expired. They stress that purchase of the PCOS machines is altogether a different procurement than a lease envisioned in the original AES Contract. A new bidding for the sale of the AES equipment was therefore necessary to comply with the provisions of R.A. No. 9184. The unilateral extension of the option to purchase by Smartmatic-TIM being illegal and in contravention of the law on procurement, its acceptance by the COMELEC constitutes grave abuse of discretion amounting to lack or in excess of jurisdiction.

Petitioners cite the deficiencies, vulnerabilities and glitches that surfaced when the AES was used during the May 10, 2010 elections, as verified by government authorities, private observers, local IT experts and citizens groups. Among these significant findings were: (1) the disabling of security features like the ultra-violet mark sensors; (2) absence or lack of digital signatures; (3) faulty compact flashcards (CF) which had to be recalled and reconfigured close to election day; (4) lack of or ineffective source code review; (5) absence of paper audit trail or audit logs; (6) insufficient or unreliable random manual audit; and (7) discovery of console port which allows unsecured access to the operating system of the PCOS machines. Because these issues have not been properly addressed by Smartmatic-TIM and completely disregarded by COMELEC when it insisted on the purchase of the defective PCOS machines, petitioners contend that COMELEC gravely abused its discretion and committed dereliction of its constitutionally mandated function of safeguarding the election process.

Petitioners assert that before the country can hope to have a speedy and credible automated elections, it must first be able to procure the proper computerized hardware and software legally, based on a transparent and valid system of public bidding. The business of automating the coming midterm elections in 2013 (and beyond) is too critical to the survival of our democratic institutions to be entrusted to a provider whose wares have performed poorly and below par in the last general elections and failed to meet the automated election laws minimum requirement as to functional capabilities. Further on the practical side, petitioners point out that even assuming that the PCOS units leased during the 2010 election were then all brand-new, all these would at least be three years old by the time the 2013 elections are held would these be too old by then? Prudence dictates that COMELEC should heed the prodding of its own Advisory Council and put through the grinder of a public, competitive bidding Smartmatic-TIM and every other prospective provider of AES in the next and other succeeding elections.

Finally, petitioners lament the fact that when COMELEC allowed the period of the option to purchase to expire in December 31, 2010, it should have already looked into other possible providers as recommended by the CAC, by conducting a public bidding. Why then, they ask, is COMELEC now using lack of time to conduct a public bidding to justify its dealing anew with Smartmatic-TIM for the purchase and use of its PCOS machines and related paraphernalia for the 2013 elections? It may be recalled that for the 2010 elections, COMELEC conducted the bidding some ten months before election date. Moreover, under the Multi-Year Budget Allotment System of the Department of Budget and Management (DBM), additional funding may be obtained for a more reliable and better 2013 AES through competitive public bidding.

On their part, respondents assail the petitions on both procedural and substantive grounds. They contend that petitioners availed of the wrong remedy as the proper action is a suit for annulment of contract before the Regional Trial Court; did not observe the hierarchy of courts; failed to raise a genuine constitutional issue requiring this Courts intervention; and lacked legal standing to question the Deed of Sale between COMELEC and Smartmatic-TIM.

Even assuming that this Court allows a certiorari petition questioning the Deed of Sale between COMELEC and Smartmatic-TIM, respondents argue that no grave abuse of discretion was committed by the COMELEC after considering the circumstances proving that the exercise of the option to purchase was most advantageous to the government given the budgetary and time constraints, the familiarity of the voters and Board of Election Inspectors (BEI) with the use of the PCOS machines, the general success demonstrated by the said technology during the 2010 elections, and the legality of the extended option period which did not have the effect of altering the technical and/or financial proposals of the previous bidders and there being no indication in the bidding documents that the period of the option to purchase may no longer be extended (i.e., no restrictive words used such as non-extendible to qualify the period fixed). It was pointed out that even if the other bidders were aware that the option period could be extended fifteen (15) months, it would have been commercially impossible for any other bidder to outbid Smartmatic-TIM.

Respondents also assert that there was no violation of R.A. No. 9184 because under Section 10 of R.A. No. 9369, COMELEC was authorized to procure supplies and equipment for the AES by other forms of acquisition under which the exercise of the option to purchase may be categorized. And in the determination of the mode of procurement, COMELEC has the discretion, which may not be intruded upon for as long as it is exercised within the limits of existing laws. Section 1 of R.A. No. 9369 recognizes such authority of the COMELEC to prescribe x x x and x x x use the most suitable technology of demonstrated capability taking into account the situation prevailing in the area and the funds available for the purpose. For the coming 2013 elections, COMELEC needs more or less 125,000 PCOS machines which would entail a total cost of approximately P12,854,731,547.00 to achieve a 600:1 voter-to-precinct ratio. Hence, it proposed the said amount with P10,436,300,399.00 allotted for the lease of the PCOS machines in the 2013 elections. Unfortunately, the DBM allotted COMELEC an overall budget of only P7,962,220,229.00. Despite COMELEC lobbying for more funds from Congress, the General Appropriations Act of 2012 adopted the DBMs allotment in its National Expenditures Program (NEP) for the Year 2012. COMELEC tried other possible sources and applied for a multi-year obligational authority (MYOA) with the DBM; however, upon learning that the additional funding would be sourced from the Office of the President, COMELEC turned down the supplementary budget as it did not want its independence be put in question. Under this scenario, COMELEC found the exercise of the option to purchase as feasible, explaining in its Consolidated Comment that

139. The COMELEC has the option to purchase 80,916 PCOS machines for the price of P1,833,274,457.09. Together with the 980 PCOS machines it previously acquired from Smartmatic-TIM, the COMELEC will have at its disposal a total of 81,896 PCOS machines for the upcoming elections. With these, the COMELEC still hopes to at least maintain the 1,000:1 voter-to-precinct ratio.

140. Given its limited budget, the COMELECs exercise of the OTP was a sound decision.

141. What is more, acquiring the PCOS and CCS hardware and software pursuant to the OTP reaps the following benefits:

1) The COMELEC will be purchasing the subject PCOS hardware and software at 33% of its actual cost;

2) Since the COMELEC will own the subject PCOS machines, it will no longer have to lease AES during subsequent elections;

3) Training costs will be reduced because COMELEC personnel, the Board of Election Inspectors (BEI) and other responsible individuals are already familiar with the handling and operation of the PCOS machines;

4) Voters will feel more secure and comfortable using technology which they are familiar with;

5) It will promote uniformity and standardization considering that the government had previously acquired 980 units of the same PCOS and CCS hardware and software;

6) The subject PCOS machines are now proven technology and any bugs and glitches it encountered during the past elections have been properly addressed;

7) Time, effort and money will be saved from having to conduct competitive public bidding.

142. It must always be borne in mind that the essence of procurement laws is to ensure that the people get maximum benefits and quality services from government contracts.[24](Italics supplied.)

Procedural Issues

Legal Standing

and Hierarchy of Courts

Petitioners in their capacity as citizens instituted these cases on a matter of paramount public interest and transcendental importance to the nation involving the right of suffrage, i.e., to ensure the integrity, efficiency and transparency of the automated election system, specifically the technology to be used in the next national and local elections. The suit is one for the enforcement of a public duty the protection of the exercise of such right in the implementation of election laws, which duty the Constitution has vested on the COMELEC.

This Court has previously overruled, in the exercise of sound discretion, procedural questions on the standing of petitioners who raise issues of paramount public interest.[25] In the case of Chavez v. PCGG,[26] we upheld the right of a citizen to bring a suit on matters of transcendental importance to the public,[27] thus:

In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners legal standing, the Court declared that the right they sought to be enforced is a public right recognized by no less than the fundamental law of the land.

Legaspi v. Civil Service Commission, while reiterating Taada, further declared that when a mandamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general public which possesses the right.

Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the development, management and [the] operation of the Manila International Container Terminal, public interest [was] definitely involved considering the important role [of the subject contract] . . . in the economic development of the country and the magnitude of the financial consideration involved. We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioners standing.[28]

In Roque, Jr. v. Commission on Elections,[29] we brushed aside the procedural barriers of locus standi and hierarchy of courts when the implementation of the 2009 AES Contract was challenged before this Court, thus:

There is no doubt in our mind, however, about the compelling significance and the transcending public importance of the one issue underpinning this petition: the successand the far-reaching grim implications of the failureof the nationwide automation project that will be implemented via the challenged automation contract.

The doctrinal formulation may vary, but 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. This postulate on procedural technicalities applies to matters of locus standi and the presently invoked principle of hierarchy of courts, which discourages direct resort to the Court if the desired redress is within the competence of lower courts to grant. The policy on the hierarchy of courts, which petitioners indeed failed to observe, is not an iron-clad rule. For indeed the Court has full discretionary power to take cognizance and assume jurisdiction of special civil actions for certiorari and mandamus filed directly with it for exceptionally compelling reasons or if warranted by the nature of the issues clearly and specifically raised in the petition.

The exceptions that justify a deviation from the policy on hierarchy appear to obtain under the premises. The Court will for the nonce thus turn a blind eye to the judicial structure intended, first and foremost, to provide an orderly dispensation of justice.[30] (Emphasis supplied.)

SUBSTANTIVE ISSUES

Grounds for Nullity

of Deed of Sale

The COMELEC is an independent constitutional body tasked to enforce and administer all laws and regulations relative to the conduct of elections. As such, it enjoys a considerable latitude in devising means and methods to carry out its mandate of ensuring free, orderly and honest elections.[31] Absent a clear breach of the Constitution or laws, or grave abuse of discretion, this Court will not substitute its own judgment and nullify COMELECs acts or decisions.

Under Section 5 of R.A. No. 8436, as amended, the COMELEC is authorized to use an automated election system 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. Sec. 12 of R.A. No. 8436, as amended, further provides:

SEC. 12. Procurement of Equipment and Materials. - To 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 regulations. With respect to the May 10, 2010 elections and succeeding electoral exercises, the system procured must have demonstrated capability and been successfully used in a prior electoral exercise here or abroad. Participation in the 2007 pilot exercise shall not be conclusive of the systems fitness.

In determining the amount of any bid from a technology, software or equipment supplier, the cost to the government of its deployment and implementation shall be added to the bid price as integral thereto. The value of any alternative use to which such technology, software or equipment can be put for public use shall not be deducted from the original face value of the said bid. (Emphasis supplied.)

In Roque, Jr. v. Commission on Elections,[32] one of the grounds raised for the nullification of the AES contract award to Smartmatic-TIM was that the PCOS machines do not satisfy the minimum system capabilities prescribed by R.A. No. 8436, as amended. It was suggested that the PCOS system offered by Smartmatic-TIM lacked the security features that would assure accuracy in the recording and reading of votes, as well as in the tabulation, consolidation/canvassing, electronic transmission, storage results and accurate ballot counting. This Court, however, overruled these objections, fairly satisfied with the fact that COMELEC has adopted a rigid technical evaluation mechanism, to ensure compliance with the aforesaid minimum system capabilities. As to the matter of auditability of the election results, we pointed out that PCOS, being a paper-based technology, affords audit since the voter would be able, if need be, to verify if the machine had scanned, recorded and counted his vote properly; and additionally, the PCOS machine contains an LCD screen, one that can be programmed or configured to display to the voter his votes as read by the machine. Even the possibility of the AES being hacked was considered by the Court which pointed out that unlike the voting system used in certain precincts in Florida, U.S.A. during the Gore-Bush presidential contests, the Source Code[33] for the 2010 AES shall be available and opened for review by political parties, candidates and the citizens arms or their representatives, and the very same PCOS machines found in the precincts will also be the same device that would tabulate and canvass the votes. Besides, it was noted that the possibility of system hacking is very slim since the PCOS machines are only online when they transmit the results, would only take around one to two minutes. All in all, the Court was prepared in 2009 to give a chance for the AES be finally adopted even though it has its flaws upon the assurance that COMELEC and Smartmatic-TIM have seen to it that the system is well-protected with sufficient security measures in order to ensure honest elections.

Now, just two years after the conduct of the first automated election system in the country, COMELECs recent decision to buy the same PCOS machines used in the 2010 elections from the same provider is being opposed by herein petitioners who prefer the conduct of a new bidding for such acquisition for the purpose of the 2013 elections in view of questions regarding the legality of COMELECs exercise of the option to purchase, as well as the deficiencies and glitches experienced in the actual deployment and operation of the PCOS machines during the 2010 elections. Petitioners posit that such shortcomings and irregularities which COMELEC dismissed as minor problems that have already been corrected, glaringly reveal Smartmatic-TIMs failure to comply with the minimum functional capabilities of an AES under R.A. No. 8436, as amended. Petitioners thus ascribe grave abuse of discretion in COMELECs decision to buy the PCOS machines in violation of the laws on procurement and automated election system.

Extension of the Period of Option to Purchase

An option to purchase is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions; or which gives to the owner of the property the right to sell or demand a sale. It binds the party who has given the option, not to enter into the principal contract with any other person during the period designated, and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option.[34]

As earlier stated, the option to purchase was incorporated in the 2009 AES Contract for the lease of the PCOS machines as required in the bidding documents. The period within which COMELEC was to exercise the option was fixed. The use of the word shall in Article 6.6 of the AES Contract conveys a mandatory undertaking by COMELEC to exercise the option to purchase on or before December 31, 2010. The fixed date of the exercise of the option is likewise reflected in the bidding documents.

Perusing the exchange of communication between respondents, it is undeniable that COMELEC was apprised by Smartmatic-TIM that the December 31, 2010 had already expired. COMELEC was then banking solely on the successive unilateral extensions offered by Smartmatic-TIM. When COMELEC finally resolved to exercise the option to purchase, it cited as legal basis Article 19 of the AES Contract which states:

This Contract and its Annexes may be amended by mutual agreement of the parties. All such amendments shall be in writing and signed by the duly authorized representatives of both parties.

Since the option to purchase expired on December 31, 2010 without COMELEC exercising the same, said contract clause ceased to exist. The revised option to purchase offered by Smartmatic-TIM did not have the effect of extending the option period which had lapsed. Even assuming that the option clause may be amended by extending its period in the AES Contract on or before December 31, 2010, such extension must be done by mutual agreement because a unilateral amendment is not allowed under the AES Contract. While COMELEC and Smartmatic-TIM indeed executed a written mutual agreement for such extension, this was done only on March 30, 2012, or one year and three months after the deadline fixed in the AES Contract.

COMELEC argues that the exercise of the option to purchase was merely an implementation of a provision in the 2009 AES Contract which subsists in view of the retention by COMELEC of P50 million of the Performance Security for the remaining unfulfilled obligations of Smartmatic-TIM (Resolution No. 9293 dated October 6, 2011), and the Precautionary Protection Order (PPO) issued on August 31, 2010[35] by the Presidential Electoral Tribunal in PET Case No. 004 involving the election protest filed by vice-presidential candidate Manuel A. Roxas against the proclaimed winner Vice-President Jejomar C. Binay directing the COMELEC to PRESERVE and SAFEGUARD the integrity of the ballot boxes, their contents and keys, lists of voters with voting records, books of voters and other documents and paraphernalia used in the May 2010 elections for the position of Vice-President of the Republic of the Philippines, as well as the data storage devices containing the electronic data evidencing the results of elections in the contested 76,340 clustered precincts subject of the Protest and Counter-Protest, effective immediately and continuing until further orders from this Tribunal.[36]

COMELEC then cites Article 5.11 of the 2009 AES Contract which provides:

5.11 All Goods or Equipment in the possession of COMELECbecause of any election contest or audit requirement after December 31, 2010 shall be considered sold to COMELEC pursuant to its purchase option under this Contract, and COMELEC shall pay the corresponding price within the first five (5) business days of January 2011. In case the election protest was due to any defect in the machines or the system or that the audit will show the same, COMELEC shall return the machines to the PROVIDER for full refund.[37]

On its part, Smartmatic-TIM asserts that even if the period of the option to purchase had lapsed, there is no prohibition, legal or otherwise, to revive a lapsed period by mutual agreement of the parties. Such extension of the option did not constitute a substantial amendment that would alter the parameters of the 2009 AES Contract. Stressing that no bidder was prejudiced by the extension of the option period, Smartmatic-TIM recalls that from the date of the May 2010 elections until the execution of the Extension Agreement on March 31, 2012, there were continuing negotiations between COMELEC and Smartmatic-TIM which clearly showed the intent to keep the option to purchase alive. Since the benefit of the option period pertained to COMELEC, it was therefore at liberty to demand performance from Smartmatic-TIM for the exercise of its option. Additionally, Smartmatic-TIM posits that the deadline specified in the 2009 AES Contract for the exercise of the option had no special significance or urgency to COMELEC; such date was arbitrarily chosen by the parties though in actuality the exercise of the option was at the pleasure of COMELEC for whose benefit the period was provided.[38]

We are not persuaded by respondents submissions.

There can be no debate that the contracting parties are free to waive by mutual agreement the option period in their contract. Such is a valid argument if both are private individuals or juridical persons. Where, as in this case, one of the contracting parties is a government entity, the exercise of an option to buy should not contravene the laws on procurement.

Thus, despite the expiration of the option to purchase, COMELEC may still enter into a contract of sale with Smartmatic-TIM. However, such acquisition of the PCOS hardware and software for the purpose of the 2013 elections is deemed as a new procurement which is distinct and separate from the 2009 AES lease with option to buy. Procurement in its dictionary meaning refers to the act of obtaining, attainment, acquisition, bringing about, effecting.[39] A procurement contract is a government contract with a manufacturer or supplier of goods or machinery or services under the terms of which a sale is made to the government; such contracts are governed by government regulations, standard forms, etc.[40] R.A. No. 9184 defines procurement as the acquisition of goods, consulting services, and the contracting for Infrastructure Projects by the Procuring Entity which refers to any branch, department, office, agency, or instrumentality of the government, including state universities and colleges,government-owned and/or -controlled corporations, government financialinstitutions, and local government units. The term procurement includes the lease of goods and real estate.[41]

R.A. No. 9184 established the basic policy that all government procurement shall be done through competitive bidding, except for certain specified alternative modes of procurement.[42] Competitive public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. It is a mechanism that enables the government agency to avoid or preclude anomalies in the execution of public contracts.[43]

Respondents have not shown any right to enter into the subject contract of sale of the PCOS machines without going through the process of bidding other than the expired option clause in the 2009 AES Contract. COMELECs argument that it was authorized under Sec. 12 of R.A. No. 9369 to procure goods or equipment not only by purchase, lease, rent but also by other forms of acquisition under which the exercise of the option to purchase may be categorized, is misplaced. As already established, the option to purchase provided in the original lease contract had already expired. Moreover, the phrase other forms of acquisition can only be interpreted as referring to those alternative modes of procurement as provided in R.A. No. 9184, considering that the authority to procure granted to COMELEC under the aforesaid provision is qualified by the words in accordance with existing laws. Respondents are therefore burdened to prove that their contract of sale falls under those alternative modes of procurement provided in R.A. No. 9184, which are exempt from the public bidding requirement.

COMELEC posits that the exercise of the option to purchase is analogous to direct contracting and negotiated procurement, which are among the alternative modes provided in R.A. No. 9184. The reasons given are: (1) the PCOS, CCS and Election Management System (EMS) have already been customized, modified and configured for Philippine elections and certified to be operating properly, securely and accurately, and with enough machines to automate the 2013 elections given COMELECs budgetary constraints; (2) no other manufacturer or producer has such goods; (3) the acquisition of a new AES for the 2013 elections is not only a near commercial impossibility because of the limited budget but also a near logistical impossibility; (4) based on the 2010 elections timeline, COMELEC is deeply concerned if it will have to bid out the supply of the AES for use in the 2013 elections; and (5) the policy considerations that prompted the issuance of Resolution No. 06-2005 (Guidelines on the Use of an Ordering Agreement under the Government Procurement Reform Act) find relevance in the astute appreciation of COMELECs decision to exercise the option to purchase considering that the EMS, PCOS and CCS machines are non-routinary or non-recurring items that were not ordinarily kept in stock by COMELEC but admittedly necessary after it failed to secure the budget needed to conduct the 2013 elections, the quantity required was not accurately pre-determined.[44]

We disagree.

Direct Contracting, otherwise known as Single Source Procurement is defined as 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.[45] On the other hand, Negotiated Procurement refers to a method of Procurement that may be resorted under the extraordinary circumstances provided for in Section 53 of R.A. No. 9184 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.[46]

COMELEC would justify resort to direct contracting under Sec. 50 (a) on 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. However, while it is true that the license for the software of Smartmatic-TIMs PCOS machines is exclusively owned by Dominion with which it has a licensing agreement, Smartmatic-TIM is not the sole manufacturer of PCOS-type machines, a mere component of the paper-based AES offered by said provider. Precinct Count Optical Scan or PCOS refers to a technology wherein an optical ballot scanner, into which optical scan paper ballots marked by hand by the voter are inserted to be counted.[47] PCOS is thus merely one of several automated voting, counting or canvassing technologies coming within the term AES. It is simply a variation of an optical scan system where the scanner is in the precinct (precinct optical scanning), the other one refers to scanning performed at the election office (central optical scanning).[48] There is likewise no showing that no suitable substitute to PCOS is available or can be obtained at more advantageous terms to the government.

Neither can we consider the acquisition of Smartmatic-TIMs PCOS machines as a negotiated procurement. Section 53 of the Implementing Rules and Regulations of R.A. No. 9184 provides:

Section 53. Negotiated Procurement

Negotiated Procurement is a method of procurement of goods, infrastructure projects and consulting services, whereby the procuring entity directly negotiates a contract with a technically, legally and financially capable supplier, contractor or consultant only in the following cases:

a) Where there has been failure of public bidding for the second time as provided in Section 35 of the Act and this IRR-A;

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. In the case of infrastructure projects, the procuring entity has the option to undertake the project through negotiated procurement or by administration or, in high security risk areas, through the AFP;

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;

d) Where the subject contract is adjacent or contiguous to an on-going infrastructure project: x x x

e) Purchases of goods from another agency of the Government, such as the PS-DBM x x x;

f) In the case of individual consultants hired to do work that is (i) highly technical or proprietary; or (ii) primarily confidential or policy determining, where trust and confidence are the primary consideration for the hiring of the consultant: x x x (Emphasis and italics supplied.)

It is clear from the foregoing that the claimed budgetary and time constraints in the procurement of AES for the 2013 elections do not even come close to any of the extraordinary circumstances above-enumerated in order to consider the sale transaction of PCOS machines between COMELEC and Smartmatic-TIM as a negotiated procurement exempt from the bidding requirement. To stress, the IRR has declared that alternative methods of procurement shall be resorted to only in highly exceptional cases,[49] which is not the situation here. COMELEC faced the same obstacles and pressures in 2009 when the use of Smartmatic-TIMs PCOS machines for the first time was met with great scepticism. But the bidded AES contract was implemented as scheduled after a similar petition against it was filed and decided by this Court.

In fine, while R.A. No. 9184 allows procurement without competitive bidding under certain conditions, or extraordinary circumstances, respondents failed to demonstrate that the questioned purchase of the PCOS machines falls under any of these recognized exceptions.

Competitive public bidding may not be dispensed with nor circumvented, and alternative modes of procurement for public service contracts and for supplies, materials, and equipment may only be resorted to in the instances provided for by law.[50]A contract granted without the competitive bidding required by law is void, and the party to whom it is awarded cannot benefit from it.[51]

Because the option to purchase had long expired and the lease contract itself had been terminated save for the warranties and unfulfilled obligations of Smartmatic-TIM, it is clear that respondents insistence on reviving the option period has no other purpose but to avoid compliance with R.A. No. 9184 which requires the conduct of a new bidding for the purchase of the same PCOS machines leased under the 2009 AES Contract.

Compliance with the Minimum Functional

Capabilities Under R.A. No. 9369

But the more compelling reason advanced by petitioners to nullify the Deed of Sale over the remaining PCOS machines, is Smartmatic-TIMs failure to comply with the minimum technical requirements of an automated election system. Petitioners enumerated the serious deficiencies observed during the actual operation of these machines in the 2010 elections but the COMELEC insists these have already been resolved.

COMELECs posture that even assuming those perceived defects of the PCOS machines were confirmed, it does not warrant rejection of the units because they did not materially affect the results of the 2010 elections, is not well-taken. Compliance by the AES provider with the minimum functional capabilities laid down by R.A. No. 9369 is mandatory for an AES to be acceptable. Besides, sticking to the same AES lacking in critical security features simply because many of the election protests filed in connection with the 2010 elections have been dismissed by COMELECdoes not augur well for the future of automated elections in our country. COMELECs constitutional duty is to ensure free, orderly and honest elections, and not to gamble on the peoples vote by buying defective voting machines hoping that they will work all the time, completely relying on the providers willingness to just undertake the needed fixes and enhancements on the technology already chosen and used.

Indeed, R.A. No. 9369 vested COMELEC with the authority to determine the most suitable technology, but such must be one of demonstrated capability. COMELEC is set to spend anew huge public funds on technology with serious security issues, from a provider who never publicly admitted responsibility for the deficiencies in their AES. The Court finds that COMELECs utter disregard of such deficiencies and resort to stop-gap solutions like ordering fixes and enhancements on the PCOS machines instead of conducting a new bidding to secure the most advantageous terms for the government, constitutes grave abuse of discretion.

Questions and Issues on

the Integrity and Reliability

of the PCOS Machines

During the oral argument, former COMELEC Commissioner Augusto C. Lagman, who had opposed the Commission En Bancs decision to purchase the remaining PCOS machines, was asked to explain his position and his opinion as an IT expert. He confirmed the lack of critical safeguards and the real possibility of tampering due to the open port found in the PCOS machines which allowed unsecured access to its operating system. He likewise affirmed that despite the fixes supposedly done, the actual demonstration showed that up to that time Smartmatic-TIM was not really able to resolve deficiencies and other issues, such as the re-zero functionality and hardware problem. Thus, Commissioner Lagmans concern is the lack of assurance on the part of Smartmatic-TIM that they will be able to correct all operational problems and issues with the PCOS machines.[52]

As earlier mentioned, in Roque, Jr. v. Commission on Elections,[53]one of the grounds raised for the nullification of the AES contract awarded to Smartmatic-TIM was that the PCOS machines do not satisfy the minimum system capabilities prescribed by Sec. 7 of R.A. No. 8436, as amended, which provides:

SEC. 6. Minimum System Capabilities. - The automated election system must at least have the following functional capabilities:

(a) Adequate security against unauthorized access;

(b) Accuracy in recording and reading of votes as well as in the tabulation, consolidation/canvassing, electronic transmission, and storage of results;

(d) System integrity which ensures physical stability and functioning of the vote recording and counting process;

(e) Provision for voter verified paper audit trail;

(f) System auditability which provides supporting documentation for verifying the correctness of reported election results;

(g) An election management system for preparing ballots and programs for use in the casting and counting of votes and to consolidate, report and display election results in the shortest time possible;

(h) Accessibility to illiterates and disabled voters;

(i) Vote tabulating program for election, referendum or plebiscite;

(j) Accurate ballot counters;

(k) Data retention provision;

(l) Provide for the safekeeping, storing and archiving of physical or paper resource used in the election process;

(m) Utilize or generate official ballots as herein defined;

(n) Provide the voter a system of verification to find out whether or not the machine has registered his choice; and

(o) Configure access control for sensitive system data and functions.

In the procurement of this system, the Commission shall develop and adopt an evaluation system to ascertain that the above minimum system capabilities are met. This evaluation system shall be developed with the assistance of an advisory council.

Since the PCOS has passed the technical evaluation conducted by COMELEC using a 26-item/check list criteria, and with the Courts finding that COMELEC and Smartmatic-TIM have seen to it that the system is well-protected with sufficient security measures in order to ensure honest elections, we declared that the project award complied with legal prescriptions, and the terms and conditions of the AES Contract valid. At the time, the PCOS machines still had to undergo acceptance tests as specified in the RFP prior to actual deployment in the 2010 elections.

Before us now, the integrity and reliability of the PCOS machines are again being questioned and its purchase by the COMELEC despite their evident flaws and deficiencies is sought to be nullified.

A major deficiency observed in the 2010 elections is the absence of digital signature in the election returns. The requirement of digital signatures as the primary means of ensuring the authenticity of electronically transmitted election results is found in Sec. 25 of R.A. No. 9369, which reads:

SEC. 25. A new Section 30 is hereby provided to read as follows:

Sec. 30. Authentication of Electronically Transmitted Election Results. - The manner of determining the authenticity and due execution of the certificates shall conform with the provisions of Republic Act No. 7166 as may be supplemented or modified by the provisions of this Act, where applicable, by appropriate authentication and certification procedures for electronic data, electronic documents and electronic signatures as provided in Republic Act No. 8792 as well as the rules promulgated by the Supreme Court pursuant thereto.

Electronic signature refers to any distinctive mark, characteristic and/or sound in electronic form, representing the identity of a person and attached to or logically associated with the electronic data message or electronic document or any methodology or procedures employed or adopted by a person and executed or adopted by such person with the intention of authenticating or approving an electronic data message or electronic document.[54]A digital signature is defined as an electronic signature consisting of a transformation of an electronic document or an electronic data message using an asymmetric or public cryptosystem such that a person having the initial untransformed electronic document and the signers public key can accurately determine: (a) whether the transformation was created using the private key that corresponds to the signers public key; and, (b) whether the initial electronic document had been altered after the transformation was made.[55] Digitally signed refers to an electronic document or electronic data message bearing a digital signature verified by the public key listed in a certificate.[56]

Smartmatic-TIM insists that its PCOS machines had digital certificates but COMELEC disabled this feature in the May 2010 elections. COMELEC, on its part, asserts that the machine signature of a PCOS machine is the functional equivalent of a digital signature to assure that the election returns being received by the canvassing boards come from a valid source. COMELEC also pointed out that this is not among the mandated minimum system capabilities. The non-adoption of the digital signature was further justified by security concerns such as the possibility that the BEIs might be coerced or lose their digital keys.

COMELECs interpretation of the requisite digital signature is erroneous and belied by the very terms of reference it had issued to the bidders of the AES in 2009. The RFP expressly required that [t]he system shall transmit digitally signed and encrypted election results and reports enabled by public/private key cryptography to provide authenticity, integrity and non-repudiation utilizing at least 128-bit encryption scheme.[57]It further specified that the Board of Election Inspectors (BEI) shall digitally sign and encrypt the internal copy of the Election Return (ER) and the Board of Canvassers be allowed to digitally sign all electronic results and reports before transmission.[58] It was also clarified in the bidding documents that three (3) digital certificates one for each member shall be issued to all BEIs and BOCs.[59] Clearly, the automatically generated machine digital signature envisioned by the COMELEC is not sufficient for the purpose of authenticating the election returns.

The possibility of coercion of BEI members mentioned by COMELEC, as well as the huge cost of activating the digital signature capability of the PCOS machines, are not valid excuses to disregard the requirement set by law. Violence, intimidation and harassment are constant threats being faced by election officers and workers every election in this country. As for the financial side, it bears to stress that the cost of implementing the digital signature should have already been factored in by Smartmatic-TIM when it bidded for the Automation Project in 2009, as these have been included in the RFP and bid documents.

Another serious cause for concern is the existence of the open port in the PCOS machines which allowed unsecured access to its operating system. Smartmatic-TIM claims that this has been remedied by placing tamper-proof mechanical seals and current version of the PCOS firmware to prevent access through the console port. There is, however, no guarantee that firmware manipulation will not occur. At least one study made by computer technology experts in the US has demonstrated that the firmware component of a proprietary computing system is vulnerable to an attack even by someone who has no extensive resources, an in-depth knowledge of the targeted system, and access to source code and/or hardware specifications. Said study focused on analysing how to gain control over the memory card access and the serial port access.[60]

The Court is mindful that the determination of functional capabilities of the PCOS machines is a question of fact pertaining to technical matters best left to the COMELEC and IT experts. However, there are admissions on record regarding critical security features as mandated by R.A. No. 9369 and RFP for the 2009 Automation Project which were not implemented during the 2010 elections. Notably, COMELEC manifested that the contract of sale over the remaining PCOS machines was subject to the completion of fixes and enhancements to be done by Smartmatic-TIM as directed by COMELEC.

Perusing the records, the fixes and enhancements turn out to be minor program modifications. The serious deficiencies and issues affecting the integrity of the PCOS system appear to have not been fully resolved. Thus, the absence of digital signatures, presence of an open port and lack of a voter verified paper audit trail should have been duly considered by COMELEC in deciding whether to buy the same PCOS machines of Smartmatic-TIM or search for a new technology or system from other suppliers or providers.

The deficiencies noted are critical to the success of the next automated elections because they pertain to those minimum functional capabilities mandated by R.A. No. 9369. For instance, the lack of a voter verified paper audit trail. A voter verified paper audit trail consists of physical paper records of voter ballots as voters have cast them on an electronic voting system. The voter-verified part refers to the fact that the voter is given the opportunity to verify that the choices indicated on the paper record correspond to the choices that the voter has made in casting the ballot. Thus, the result of an election is an electronic tally of the votes cast and a paper record of the individual votes that have been cast.[61]

In Roque, we found no merit in the issue regarding the auditability of the election results explaining that PCOS, being a paper-based technology, affords audit since the voter would be able, if need be, to verify if the machine had scanned, recorded and counted his vote properly. Moreover, we had noted that the PCOS machine contains an LCD screen, one that can be programmed or configured to display to the voter his votes as read by the machine. But even this LCD screen did not function or was disabled. The verified paper audit trail did not materialize and the voters did not have a way of knowing how and if the votes they cast were duly recorded by the PCOS machines. Again, the COMELEC invoked logistical difficulty and insisted that the machines have the capability to print out all these as an audit log. But note that under Sec. 7 of R.A. No. 8436, as amended, the provision for a voter verified paper audit trail is a separate requirement from system auditability and provision for verification by the voter whether the machine has registered his vote. And as can be gleaned from the aforesaid description of a voter verified paper audit trail, there was no compliance with this requirement. Clearly, COMELEC failed in discharging its duty to implement vital safeguards set by law to ensure the accuracy and reliability of election results.

COMELEC emphasizes the positive findings of the international certification entity it had contracted, Systest Labs, Inc., which is accredited by the Election Assistance Commission (EAC) for Voting System Test Laboratory (VSTL) Status, to conduct the certification testing on Smartmatic-TIMs AES. Based on the source code review, documentation review, hardware and functional testing, volume, stress and transmission testing, conducted before the 2010 elections, Systest found that Smartmatic-TIMs system conforms to key requirements and is operationally suitable for use and that [a]ll issues are considered however to be minor in nature or reconcilable using appropriate manual processes and/or compensating controls.[62] After the elections, or on November 7, 2011, Systest, now SLI Global Solutions conducted another system review and issued a Final Certification Test Report stating that it recommends the AES for certification, as it is conformant with operational requirements and is suitable for use in applicable future elections.[63] These results, according to COMELEC, far outweigh petitioners allegation of defects in the PCOS machines.

The Court, however, cannot give more weight to the findings and conclusions of the certification firm engaged by COMELEC than the established fact that Smartmatic-TIMs AES did not fully comply with the minimum system requirements set by our election automation law. COMELECs assertion that even Commissioner Lagman concedes that those defects and deficiencies can be solved anyway only raises questions as to the wisdom of buying election hardware and software that still needs repair and fixes. Indeed, COMELEC must now realize that at this point the best way to determine what is most advantageous to the government in the acquisition of an AES for the 2013 elections is still by public competitive bidding. COMELEC should not use as an excuse the insufficient budget allocated by Congress because it should be able to convince Congress to grant its budget proposal for the 2013 automated elections. Given the lessons and experiences from the first automated elections held in the country, it would not be difficult for COMELEC to justify its budgetary requirements for the next automated elections in 2013.

In fine, the Court holds that COMELECs exercise of the option to purchase under the 2009 AES Contract which had long expired was ineffective and invalid. The subsequent contract of sale between COMELEC and Smartmatic-TIM in pursuance of such lapsed option clause and in circumvention of the competitive bidding process under R.A. No. 9184, is consequently illegal and void.

We reiterate that the award of public contracts through public bidding is a matter of public policy. Provisions of applicable laws, especially provisions relating to matters affected with public policy, are deemed written into the contract, more so, to a government contract which is imbued with public interest.[64]

In this case, the exercise of the option to purchase under the 2009 AES Contract, though a contractual privilege on which COMELEC and Smartmatic-TIM may mutually agree upon such terms most advantageous to the government, must not contravene existing laws which form part of their contract. Reasons of budgetary limitations, time constraints and practical convenience in using a familiar technology advanced by COMELEC cannot take precedence over the dictates of public policy. The Court thus cannot uphold the subject contract of sale as to allow circumvention of the policy on competitive public bidding.

I therefore VOTE to GIVE DUE COURSE to the present petitions and to GRANT the writs prayed for therein.Consequently, I also VOTE to declare as NULL and VOIDCOMELEC Resolution Nos. 9373 and 9376 dated March 6, 2012 and March 21, 2012, respectively, theAgreement on the Extensionof the Option to Purchase under the Contract for the Provision of the Automated Election System for the May 10, 2010 Synchronized National and Local Elections dated March 30, 2012 and the Deed of Sale dated March 30, 2012 by and between COMELEC and Smartmatic TIM Corporation.

I further VOTE that the Temporary Restraining Order issued by this Court on April 24, 2012 enjoining respondents COMELEC and Smartmatic TIM Corporation from implementing COMELEC En Banc Resolution No. 9376 be MADEPERMANENT.

MARTIN S. VILLARAMA, JR.

Associate Justice

[1] 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 Election Laws, Providing Funds Therefor and For Other Purposes. Signed into law on January 23, 2007.

[2] Rollo (G.R. No. 201112), pp. 721-722, 725-726.

[7] Id. at 872-874, 881-882. Smartmatic-TIMs letter dated December 28, 2011 (Annex 13) states that from September 30, 2011, the deadline for the revised option to purchase was extended by it to December 31, 2011. [Rollo (G.R. No. 201112), pp. 906-907.]

[25] Kilosbayan, Incorporated v. Guingona, Jr., G.R. No. 113375, May 5, 1994, 232 SCRA 110, 139.

[26] G.R. No. 130716, December 9, 1998, 299 SCRA 744.

[27] As cited in Gamboa v. Teves, G.R. No. 176579, June 28, 2011, 652 SCRA 690, 713.

[29] G.R. No. 188456, September 10, 2009, 599 SCRA 69.

[31] Sumulong v. Commission on Elections, 73 Phil. 288, 294-295 (1941) as cited in Macalintal v. Commission on Elections, G.R. No. 157013, July 10, 2003, 405 SCRA 614, 655.

[33] Under Sec. 2 (12) of R.A. No. 9369, Source Code refers to human readable instructions that define what the computer equipment will do.

[34] Eulogio v. Apeles, G.R. No. 167884, January 20, 2009, 576 SCRA 561, 572 and Carceller v. Court of Appeals, G.R. No. 124791, February 10, 1999, 302 SCRA 718, 724, citing Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines (Vol. IV), 1991 ed., pp. 466-467.

[39] Blacks Law Dictionary, Fifth Ed., p. 1087.

[42] Sec. 10, Art. IV in relation to Art. XVI.

[43] Public Estates Authority v. Bolinao Security and Investigation Service, Inc., G.R. No. 158812, October 5, 2005, 472 SCRA 165, 187, citing National Food Authority v. Court of Appeals, G.R. Nos. 115121-25, February 9, 1996, 253 SCRA 470, 481.

[47] Request for Proposal (RFP) Annex A, Glossary of Terms, as cited in Roque, Jr. v. Commission on Elections, supra note 29, at 124.

[48] Stephen Ansolabehere, The Search For New Voting Technology, originally published in October/November 2001 issue of the Boston Review, accessed at <http://bostonreview.net/BR26.5/ansolabehere.html>.

[49] Sec. 48.2, Implementing Rules and Regulations of R.A. No. 9184.

[50] Manila International Airport Authority v. Olongapo Maintenance Services, Inc., G.R. Nos. 146184-85, 161117 and 167827, January 31, 2008, 543 SCRA 269, 294.

[51] Oani v. People, G.R. No. 139984, March 31, 2005, 454 SCRA 416, 439, citing Malaga v. Penachos, Jr., G.R. No. 86695, September 3, 1992, 213 SCRA 516, 526.

[52] TSN, May 2, 2012, pp. 164-168, 178-184, 187-192, 201-202.

[54] Sec. 6 (g), Implementing Rules and Regulations of the Electronic Commerce Act (R.A. No. 8792).

[55] Sec. 1 (e), Rule 2, Rule on Electronic Evidence.

[57] Request for Proposal for Solutions, Terms and Conditions for the Automation of the May 10, 2010 Synchronized National and Local Elections, p. 17; rollo (G.R. No. 201112), p. 230.

[59] Bid Bulletin No. 13 dated April 17, 2009 issued for the April 27, 2009 Public Bidding of the 2010 Elections Automation Project, id. at 495.

[60] Seda Davtyan, Sotiris Kentros, Aggelos Kiayias, Laurent Michel, Nicolas Nicolaou, Alexander Russell, Andrew See, Narasimha Shashidhar and Alexander A. Shvartsman, Taking Total Control of Voting Systems: Firmware Manipulations on an Optical Scan Voting Terminal, Voting Technology Research Center and Computer Science and Engineering Department, University of Connecticut, Storrs, CT 06269, USA. Accessed at <http://voter.engr.uconn.edu/voter/wp-content/uploads/sac09.pdf>.

[61] The National Academy of Sciences 2005 report Asking the Right Questions About Electronic Voting, cited in What Is A Voter Verified Paper Audit Trail (VVPAT)?, General Reference (not clearly pro or con), accessed at <http://votingmachines.procon.org/view.answers.php?questionID=000291>.

[64] Power Sector Assets and Liabilities Management Corporation v. Pozzolanic Philippines Incorporated, G.R. No. 183789, August 24, 2011, 656 SCRA 214, 240, 243, citing Halaguea v. Philippine Airlines, Inc., G.R. No. 172013, October 2, 2009, 602 SCRA 297, 313 and Sargasso Construction & Development Corporation/Pick & Shovel, Inc/Atlantic Erectors, Inc. (Joint Venture) v. Philippine Ports Authority, G.R. No. 170530, July 5, 2010, 623 SCRA 260, 279-280.