SC voids RFID project, orders refund of fees to motorists

Stradcom said the RFID project was an enhancement to the current motor vehicle registration system, thus, there was no need for a public bidding for the project. (Photo: Brian Turner/ Flickr)

MANILA –The Supreme Court has declared null and void due to lack of public bidding the Radio Frequency Identification Project Memorandum of Agreement (RFID-MOA) entered into by the government with Stradcom Corporation (Stradcom) in 2009.

In a 30-page decision penned by Chief Justice Maria Lourdes P. A. Sereno promulgated on Jan. 31, 2017 but was released to media on Wednesday, the High Court also ordered a refund of the RFID fees collected during the RFID Project’s implementation of the RFID Project prior to the Court’s issuance of its Jan. 12, 2010 Status Quo Ante Order.

“The RFID fees collected during the implementation of the RFID Project prior to the issuance of this Court’s Status Quo Ante Order are likewise ordered refunded to the payors thereof,” ruled the Court.

The Court noted that the LTO had already generated PHP 29,894,200 in RFID Fees during its implementation.

Under the RFID project, all vehicles would be required to install stickers containing a microchip that stores vehicle information.

It is an automatic identification technology whereby digital data encoded in an RFID tag or “smart label” are captured by a reader using radio waves.

For a one-time fee of PHP350, the LTO plans to install the RFID tags on some 4,760,593 vehicles which is expected to raise PHP1.6 billion in revenues.

The RFID tag, which is intended to last for 10 years, will be procured from Stradcom Corporation.

Stradcom said the RFID project was an enhancement to the current motor vehicle registration system, thus, there was no need for a public bidding for the project.

The Court ruled that the RFID Project should have undergone public bidding pursuant to Section 5 of the BOT Law which provides that upon the approval of a project, a notice must be made inviting all prospective project proponents to a competitive public bidding.

“In this case, it is patently admitted by DOTC/LTO that no public bidding was conducted on the RFID Project, which was presented by Stradcom as a proposal that would enhance the existing LTO IT Project,” the Court held.

It added that neither does this case fall under the exception to the rule on public bidding per Section 5-A of RA 6957, as amended by RA 7718, which states that “direct negotiation shall be resorted to when there is only one complying bidder left.”

“The RFID MOA must, thus, be struck down by this Court for failure to comply with the rules on public bidding. There is no guarantee that the RFID fee that will be charged to the public is a fair and reasonable price, as it has not undergone public bidding,” the SC said.

Likewise, the Court said there is no guarantee that the public will be receiving maximum benefits and quality services, especially from the additional hardware, such as the RFID tags and readers.

It noted that these are to be procured by Stradcom from its two suppliers, which have not been identified and are not even parties to the RFID MOA.

“On the other hand, Stradcom, which has been awarded the exclusive right to develop and operate the RFID system without having undergone competitive public bidding, stands to earn considerable amounts of revenue from the contract,” the SC added.

Contrary to Stradcom’s claims, the Court held that the RFID MOA is not a mere enhancement but a substantial amendment of the Build-Own-Operate (BOO) Agreement.

The DOTC-LTO awarded to Stradcom in 1997 a contract for the construction and operation of an information technology structure called the LTO IT Project BOO Agreement, making Stradcom the exclusive information technology provider of DOTC-LTO.

The LTO IT Project is a long-term strategic plan to modernize the land transportation systems.

The Court held that under the under the Implementing Rules and Regulations of the BOT Law, the RFID Project does not qualify as an allowable contract variation of the BOO Agreement.

It stressed that the RFID MOA is not an allowable contract variation, involving as it does an increase in the agreed fees, tolls, and charges to be exacted upon the public.

“This charge was not contemplated in the original contract and is not an increase allowed under the formula provided in Article 14 of the BOO Agreement,” the Court pointed out.

The Court granted the petitions filed by Bayan Muna Reps. Satur Ocampo, Teodoro Casiño, Anakpawis Rep. Joel Maglungsod, Gabriela Women’s Party Rep. Liza Maza, Pagkakaisa ng mga Samahan ng Tsuper at Operator Nationwide (Piston) and Automobile Association of the Philippines (AAP) which sought to declare the project unconstitutional.

In its petition, Bayan Muna, et al. sought to annul and set aside the RFID Project as implemented by DOTC Circular No. 2009-06, LTO Memorandum Circular No. ACL-2009-1199, as well as the pertinent 2009 RFID MOA entered into between DOTC, LTO and Stradcom.

However, Bayan Muna, Gabriela, Anakpawis, and Pagkakaisa ng mga Samahan ng Tsuper at Operator Nationwide (PISTON) said the RFID violated the 1987 Constitution for intruding into “people’s protected zone of privacy” as well as Republic Act 9184 or the Government Procurement Reform Act..

“The use of RFID tags is a threat to the right to privacy of citizens as the technology, given the proper configuration, may be used by government operatives or malicious elements for information gathering, tracking and surveillance especially since as per the LTO’s implementing rules, the tags will store “other data deemed necessary,” which is ambiguous,” petitioners said.

They also pointed out that there is neither sufficient information nor public advisory and wide public consultation on the project. “From all angles, this project does not pass muster. It would be more prudent for the government to shelve it for the meantime.”