SC asked to void LTO contract with German firm

SC asked to void LTO contract with German firm

/ 05:25 AM March 18, 2024

PHOTO: Facade of Land Transportation Office building with LTO logo superimposed. STORY: SC asked to void LTO contract with German firm


MANILA, Philippines — The Supreme Court has been asked to void the P3.19-billion Land Transportation Management System (LTMS) contract between the Land Transportation Office (LTO) and a joint venture led by a German firm, Dermalog Identification Systems GmbH.

In a petition, jeepney operator Gerald Domingo and motorist Jose Carlito Montenegro also asked the high tribunal to stop the LTO from using the LTMS and to order Dermalog to turn over to the agency “all data owned by LTO,” particularly those concerning motor vehicles and drivers’ licenses.


The petitioners said the 2018 contract was “flawed from inception” and the LTMS delivered to the LTO was “incomplete” despite numerous extensions and change orders that incurred additional expenses.


“After years of waiting, the much-heralded Land Transportation Management System of the LTO remains incomplete and not fully utilized due to inherent defects in its design, illegal amendments to the contract and flawed acceptance,” Domingo and Montenegro said in their civil action case.

According to the petitioners, “various change orders are needed to complete the system, which will cost the government hundreds of millions of pesos” on top of the P2.31 billion already paid to Dermalog.

“The DOTr (Department of Transportation) and the LTO allowed, accepted, and continuously used the LTMS in spite of the complaints from end-users, substandard materials, and delay in the delivery of the core system,” they added.

“Instead of penalizing the Dermalog [joint venture], LTO further contracted amendments and granted extensions to Dermalog Joint Venture, to the prejudice of the government and the public,” Domingo and Montenegro said.

No ‘effective control’ by LTO

The pair said they went straight to the Supreme Court because of the importance of transport services’ efficiency and the threat to “informational privacy and national security” since Dermalog has not turned over “effective control” of the LTMS to the LTO.

The LTO signed the contract agreement on May 28, 2018, with the Dermalog joint venture, which had offered the lowest bid of P3.19 billion.


The petitioners claimed, however, that the LTO granted 13 deadline extensions and prolonged the delivery schedule by three years or from 2018 to 2021.

“Despite these delays, the LTO did not impose liquidated damages [on] Dermalog for each month of delay, as required under the contract,” they said.

The arguments were similar to the ones raised at a hearing of the House of Representatives.

However, some congressmen, particularly Antipolo Rep. Romeo Acop and Sagip party list Rep. Rodante Marcoleta, have been pressuring LTO to rescind its contract with the Dermalog joint venture, purportedly because of contract breaches.

Acop, chair of the House committee on transportation, cited a government audit report saying that the government suffered P1.119 billion in damages, after Dermalog failed to submit its deliverables on time.

Lawmakers’ arguments

Marcoleta, on the other hand, told LTO chief Vigor Mendoza II to immediately start the process of rescission because termination could ensure LTO’s complete control over the LTMS to implement changes.

But Mendoza said that while the Commission on Audit found grounds for termination, there is also an arbitration clause in the Dermalog contract, and the contract itself is set to expire next year.

Mendoza said at the House hearing that LTO was taking steps to possibly revoke the contract, but Transportation Secretary Jaime Bautista denied on Friday that the government has terminated the contract with Dermalog.

“No Dermalog contract was terminated,” Bautista said in a statement. “The Land Transportation Management System, developed by Dermalog, is owned by the government. The LTMS is currently being maintained by Dermalog.”

READ: Pimentel seeks Senate probe on LTO’s ‘undue payment’ to IT provider

The Hamburg-based Dermalog Identification Systems GmbH is the largest German biometrics manufacturer and it partnered with local companies to develop the LTMS for the LTO’s driver licensing and vehicle registration processes.

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Since the Dermalog portal was launched in the country in 2020, Dermalog said in a statement that its system has issued 28 million driver’s licenses, or about 30,000 per day. It also handles 70,000 to 80,000 vehicle registrations per day. INQ

TAGS: Dermalog, Land Transportation Office

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