Infighting among LTO’s LTMS contractors persists; new charges vs. Dermalog mulled

Filipino construction firm Verzontal Builders Inc. (Verzontal), one of the Joint Venture Agreement (JVA) partners involved in the P3.14 billion Land Transportation Management System (LTMS) project of the Land Transportation Office (LTO), is "seeking justice" as it mulls filing of another civil and criminal complaints against German information technology firm Dermalog due to payment issues.

Verzontal's legal advisor, Atty. Ricardo Gao Pronove III, said in a media interview that the company has not exhausted its legal options in ensuring that Dermalog will be "exposed for its corrupt practices," despite the latest Court of Appeals (CA) decision that dismissed their petition due to technicalities. Verzontal's appeal stemmed from the Department of Justice's (DOJ) instruction to reverse the decision of the Quezon City Regional Trial Court (RTC) Branch 224 in June 2022, which ordered the arrest of four Dermalog executives after being charged with qualified theft.

It can be recalled that in its complaint, Verzontal alleged that Dermalog failed to pay the company its 25 percent share despite completing the civil, mechanical, and electrical works needed in the LTMS project. Verzontal also claimed it was made to believe that the electromechanical works only amounted to P278 million when it was indicated in the contract that it totaled P390 million.

Pronove explained that the new civil case would still be based on Dermalog's failure to pay Verzontal fully for the services it completed in the contract, particularly the construction of LTO's IT center, while the criminal case is related to Dermalog's alleged illegal activities in the LTMS project. He added that they are already beefing up the cases and these are expected to be filed before the year ends.

He also revealed that they were terminated by Dermalog from the JVA without their consent. However, without them, the LTMS contract would be deemed invalid since the Net Financial Contracting Capacity (NFCC) requirement for a publicly-bidded government project was with Verzontal.

"We don't want to partner with them anymore because they are conducting [it] illegally. They are violating the contract," Pronove stressed.

Meanwhile, during a Senate Blue Ribbon Committee hearing on the alleged irregularities of the LTMS in June 2023, Verzontal Director Jose Natividad revealed that they are not privy to the other components of the LTMS projects because there were no coordination meetings among the JVA partners. Other local companies in the JVA include Microgenesis Software Inc. and Holy Family Printing Corporation.

Senate Minority Leader Aquilino "Koko" Pimentel quipped that the Dermalog JVA might not be "a real partnership" but more of a sub-contracting arrangement. Pimentel added that government projects handled by disorganized JVA entities often lead to corruption. He also enjoined other senators to review the Procurement Law to compel JVAs to register with the Securities and Exchange Commission (SEC) before bidding for a government project to avoid issues and irregularities.

Aside from internal disputes in the Dermalog JVA, the LTMS project has been facing delays and issues, which were uncovered by the Commission on Audit (COA) and the Department of Information and Communications Technology (DICT). These findings include, but are not limited to, multiple contract schedule extensions, several undue advance payments, and still pending unfulfilled project deliverables. Verzontal said this justifies their claim that there is really something wrong with the project.

"Would you entrust your personal data with this company? They hold sensitive information of the Filipino motorists, and we need to be cautious about that," Natividad said.

The LTMS project costs Filipino taxpayers approximately P8 billion, consisting of Component A costing around P3.2 billion and Component B which costs over P5 billion.

The Senate committee already subpoenaed Dermalog officials, representatives of Holy Family Printing Corporation and Microgenesis Software Inc., and former LTO key personnel to attend the next hearing.