SC nullifies RFID deal for lack of public bidding

The Supreme Court (SC) has nullified the deal entered into by the government in 2009 requiring vehicle owners to install electronic identification tags on their cars, jeepneys, and buses.

At the same time, the SC ordered a refund of the fees collected during the implementation of the Radio Frequency Identification Project (RFID) prior to the Court’s issuance of its January 12, 2010 status quo ante order (SQAO) which restored the prevailing situation prior to the program's rollout.

The RFID Project came to fore following a Memorandum of Agreement signed by the then-Department of Transportation and Communications (DOTC), Land Transportation Office (LTO) and Stradcom Corporation (Stradcom) on June 16, 2009.

In a decision dated January 31, the SC said the RFID Project should have undergone public bidding as required by the Build Operate Transfer Law (Republic Act 6957).

Section 5 of RA 6957 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 decision read.

The SC said the project did not fall under the exception to the rule on public bidding under 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 decision stated.

“Likewise, 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. 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,” it added.

The LTO has charged P350 for each RFID microchip that stores vehicle information.

According to the SC, in just three months when the RFID Project was implemented prior to the issuance of the SQAO, the LTO had already generated P29,894,200 in RFID fees.

“Clearly, the evils sought to be avoided by the requirement of competitive public bidding are evident in this case,” the SC said.

Contrary to Stradcom’s claims, the SC 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 Implementing Rules and Regulations of the BOT Law, the RFID Project MOA is not an allowable contract variation as it allows an increase in the agreed fees, tolls, and charges to be exacted upon the public.

“As previously stated, the RFID Project will entail an additional charge of P350 for every motor vehicle. 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 SC said.

However, the Court said that the increase in fees impose by the DOTC/LTO does not need approval from the National Economic and Development Authority (NEDA).

The RFID deal was challenged before the SC by militant party-list groups Bayan Muna, Gabriela ans Anakpawis, and Pagkakaisa ng mga Samahan ng Tsuper at Operator Nationwide (Piston). — RSJ, GMA News