House pushes LTO to end problematic LTMS deal anew, probes online payment platform

Several lawmakers urged the Land Transportation Office anew to rescind its contract with foreign information technology provider Dermalog Joint Venture, which developed the P3.14-billion Land Transportation Management System (LTMS) project due to contract breaches and violations.
House Committee on Transportation chairman and Antipolo City 2nd District Rep. Romeo Acop stressed that Dermalog violated two provisions of the Government Procurement Manual when it failed to submit the required deliverables on time despite being granted 13 deadline extensions.
During the continuation of the LTMS hearing on March 7, Acop added that these violations already amount to P1.119 billion in liquidated damages, which “merits the filing of termination or rescission of the contract.”
“Pursuant to the Revised Implementing Rules and Regulations of the Government Procurement Reform Act (RA 9184), once the cumulative amount of liquidated damages reaches 10 percent of the amount of the contract, the procuring entity may rescind or terminate the contract without prejudice to other causes of action and remedies available under the circumstance,” Acop explained.
In response, LTO chief Asec. Vigor Mendoza II said the agency is already finalizing its legal steps to proceed with the contract termination with the help of the Office of the Solicitor General (OSG).
Mendoza added that the agency is also coordinating with the Department of Information and Communications Technology to ensure that public service, including motor vehicle registration and driver’s license application, will not suffer amidst any legal actions the LTO will undertake.
“The Department of Transportation agrees as far as the grounds for rescission of contract is concerned. They have reviewed and we have already provided them with the COA report as early as last year,” Mendoza added.
Mendoza committed to finalizing the contract termination process this week after he discussed the matter with Transportation Secretary Jaime Bautista.
However, SAGIP Party-list Rep. Rodante Marcoleta ordered Mendoza to immediately start the process as the contract is already “ripe for termination.”
Marcoleta added that the termination could ensure LTO’s complete control over the LTMS to implement changes, since Dermalog repeatedly refused to turn over the source code to LTO until its contract ends next year.
Officials of Dermalog have yet to comment on the development as of posting time.
Last year, the German firm said that the LTMS was “on time” as it “passed user acceptance” in August 2019 and is “feature complete.”
“We built a system that is 100 percent working. If LTO would use it and stop making excuses not to use it… The system was feature complete as per contract in August 2019,” Till Dunkel, LTMS project director for the Dermalog joint venture group, said in an interview.
In the Feb. 20 transportation committee hearing, Marcoleta also questioned the legality of the P8.2 billion Road IT Infrastructure Project, in which the LTMS was Component A, since there were no documents showing that the project splitting was approved by the National Economic and Development Authority – Investment Coordination Committee (NEDA-ICC).
Meanwhile, the House transportation committee also examined the questionable online payment platform connected to the LTMS, Paynamics, and its possible link with Dermalog.
Acop asked the LTO why it allowed a sole payment channel platform to connect to the LTMS.
Paynamics charges convenience fees amounting from P60 to P80 for every successful transaction with the LTMS, including online motor vehicle registration, among others, the lawmaker said.
Acop stressed this amount is relatively higher compared to the average convenience fees of other providers, which only range from P12 to P15 as confirmed by the DICT.
Mendoza said the Paynamics contract was signed during the previous LTO administration in October 2020.
He also explained that the LTO is open to adding more online payment gateways into the LTMS to prevent monopolistic businesses and lower the transaction fees. However, the agency is unable to do so as it has no complete control over the system due to the failure of its foreign IT contractor to submit the source and access codes of the LTMS.
The hearing also revealed that Paynamics has a Joint Venture Agreement with technology firm Gold Gate Technology Solutions for IT transaction and financial reconciliation support.
Gold Gate president Nick Torres denied that the firm’s operation is connected with Dermalog and admitted that its stockholder and former chairman Voltaire Encarnado was the former representative of the Dermalog JV for the LTMS project.
Dermalog’s legal counsel and resident agent in the Philippines, lawyer Anthony Peralta, confirmed Torres’s statement but clarified that Encarnado had no employer-employee relationship with the company.
With these confirmations, Acop argued that there is a possible connection among the said companies.
He also divulged that Encarnado is the signatory of a document dated Dec. 12, 2021, which pertains to the amendment of the delivery and payment schedule of Dermalog’s deliverables in the LTMS project.
The hearing also uncovered that the former consultant of then-LTO chief Edgar Galvante, Bernard Yu, has been a consultant of Dermalog since November 2020.
The transportation committee will resume its inquiry into the Paynamics contract and is inviting Encarnado to the next hearing.
Acop also ordered the Securities and Exchange Commission to submit the financial statements of Paynamics and Gold Gate to the committee.