MANILA, Philippines—Local information technology provider Total Information Management Corp. (TIM) had backed out of a joint venture for election automation, fearing the deal gave its foreign partner unbridled power that could lead to potential abuse, according to an industry source close to TIM.

Under the contract between TIM and Smartmatic International Corp., the Commission on Elections (Comelec) would have paid the providers P7.19 billion for the lease of goods and purchase of services.

Documents obtained by the Inquirer showed that TIM, for one, was questioning the authority to be bestowed upon the chair of the joint venture to sign checks singly in case of disagreements.

Contrary to true joint venture

“This is contrary to the nature of a true joint venture and would expose us to possible liabilities for violations of existing Philippine laws,” said a letter sent by TIM president Jose Mari Antunez to Smartmatic chief finance officer Armando Yanes dated June 25.

Yanes, on the other hand, replied the next day to demand that TIM honor the contractual obligation to incorporate the joint venture corporation which will enter into a contract with the Comelec.

Yanes said failure to comply with such an obligation shall entitle Smartmatic “to legal remedies available to us.”

No say on counting software

Other industry sources said TIM was likewise opposing several key provisions in the joint venture agreement as well as in the contract on the 2010 automated election system.

The sources explained that the local partners were concerned that TIM had no say on the counting software development, despite being the technical partner, and would be a lame duck if electronic cheating were to occur.

One bone of contention, one source explained, was a provision in the proposed contract with Comelec and Smartmatic-TIM joint venture which stated that: “The providers shall be liable for all their obligations under this project and the performance of portions thereof by other persons or entities not parties to this contract shall not relieve the providers of said obligations and concomitant liabilities.”

The provision further added that Smartmatic, as the “provider with the greater track record in automated elections, shall be in charge of the technical aspects of the counting and canvassing, software and hardware, including transmission configuration and system integration.”

Troubleshooting

Smartmatic will also be primarily responsible for preventing and troubleshooting technical problems of the election.

As such, the source said TIM did not want to be part of a system that could be vulnerable to electronic cheating.

TIM had likewise questioned the provisions mapping out the contributions of the parties to the joint venture.

For instance, provision 3.2 of the joint venture said that Smartmatic, among others, shall be responsible for “any other activity not expressly written in this agreement or assigned to TIM.”

Documents also showed that funding was not a reason behind the pullout because TIM had obtained a credit line from British bank HSBC for the project.