PCSO to pursue lower lease rates for lotto equipment

MANILA, Philippines — The state-controlled Philippine Charity Sweepstakes Office (PCSO) is seeking lower lease rates from lotto equipment service contractors, citing the need to boost available charity funds and to comply with directives from the government’s oversight bodies to ensure a fair deal for the government.

This is amid a heated verbal and legal battle with the local gaming unit of large Malaysian conglomerate Berjaya which has been protesting the PCSO’s alleged violation of an exclusive equipment leasing deal and forging of a new contract with Berjaya’s rival firm without a prior bidding.

In a statement on Sunday, PCSO manager for lotto operations Remeliza Gabuyo said the leading operator in Luzon, the Berjaya-owned Philippine Gaming and Management Corporation (PGMC), had yet to agree to lowering the lease rate from the present 10 percent of retail receipts excluding paper supply.

On the other hand, the statement cited that another service provider, the Pacific Online Systems Corp. (POSC) had agreed to the lower lease rate in June, resulting in P9 million in savings for PCSO from June to December 2012.

POSC has signed with the PCSO an agreement to extend its equipment lease, which expired on Sunday (March 31). The extension will be up to July 2015 and the new lease rate will be at 7.7 percent, paper supply included.

From the point of view of the PCSO, the additional reduction in the lease rate will mean more savings and more funds for addressing the medical requirements of the country’s marginalized sectors.

Gaby said that had the PGMC likewise agreed to the same terms, the PCSO would have saved an additional P35 million per month from June to December 2012. She added that the PCSO could have then used the same savings for the urgent medical and health needs of indigent patients, thus arriving at a “win-win” situation beneficial to all stakeholders.

PCSO chair Margarita Juico pointed out that the Senate Blue Ribbon Committee had noted in its official, final report that the lease rate of the lotto equipment was disadvantageous to the government while the Commission on Audit observed the rates to be unjust.

The Senate directed the present PCSO board to seek a rate lower than the present 10 percent, which was negotiated during the term of Manuel Morato who was PCSO chair from 1994 to 1998. Morato has been charged with plunder and electioneering charges before the Sandigbanbayan and the Quezon City Regional Trial Court, respectively, for other transactions, she noted.

Juico added that under their contract, the lessors were supposed to upgrade equipment every two years to keep the terminals and other hardware and software at optimum efficiency.  She noted that the terminals were over 16 years old.

While the PCSO is not a profit-oriented institution, it has to remain viable to fulfill its mandate of being the principal government agency raising funds for health programs, medical assistance and services and charities, which are national in character, according to Juico.

PCSO reported that as a result of its revenue raising initiatives, sales grew by 15 percent last year, grossing P36.4 billion. Gross receipts are divided into three funds: prize (55 percent), operations (15 percent) and charity (30 percent).

Juico pointed out that savings would result in higher allocations for all three funds. Prize money will increase, operations will be more cost-effective and charity activities will expand to reach more people in need, she said.

“PCSO is not an institution for profit. Rather, it was created to extend charity assistance and help partner-institutions become more efficient in living out our shared vision whether this is to help ease the medical burden of the underprivileged or to provide educational grants or to establish low-cost housing in calamity-stricken areas or to promote sports, wellness and healthy lifestyles,” Juico said.

“While we understand and respect that our service providers are business entrepreneurs who naturally need to have certain returns on invested capital, we urge that they be fair, reasonable and have a heightened sensitivity towards PCSO’s own needs to satisfy all our stakeholders both in the government and private sector. At the end of the day, we have a critical mission to fulfill for our people and we do not intend to abdicate that role by, so to speak, dropping the ball at anytime, anywhere,” Juico added.

PGMC said it based its lawsuit on two grounds (1) alleged violation of its exclusivity agreement between PCSO and PGMC over the Luzon area; and (2) prohibition against entering into government contracts without a prior public bidding. PCSO, on the other hand, was effectively claiming that this was not a new contract and that there was no exclusivity in territory under the old contract with PGMC.