G.R. No. 216098 & G.R. No. 216562, April 21, 2015.
Bishop Broderick S. Pabillo, et al. and Integrated Bar of the Philippines v. Commission on Elections and Smartmatic-TIM Corporation.

FACTS

Petitioners assail COMELEC Resolution No. 9922 dated December 23, 2014, which approved a direct contracting arrangement with Smartmatic-TIM for the diagnostics, maintenance, repair, and replacement of the COMELEC’s Precinct Count Optical Scan (PCOS) machines, and the resulting Extended Warranty Contract (Program 1) dated January 30, 2015. The COMELEC’s authority to automate elections stems from Republic Act Nos. 8436 and 9369. In 2009, Smartmatic-TIM won the public bidding and entered into a Contract for the Provision of an Automated Election System. This contract included an option to purchase (OTP) the goods, with a warranty provision stating that for the PCOS machines, Smartmatic-TIM “shall warrant the availability of parts, labor and technical support and maintenance to [the] COMELEC for ten (10) years, if purchased.” The COMELEC fully exercised the OTP in 2012. In 2013, Smartmatic-TIM proposed to “extend the warranty” of the PCOS machines for three years. The COMELEC Advisory Council recommended reusing the existing technology for the 2016 elections. Negotiations ensued, and the COMELEC’s Law Department, in a memorandum, raised concerns about resorting to direct contracting under the Government Procurement Reform Act (RA 9184), questioning whether Smartmatic-TIM was the sole provider and if the COMELEC’s IT Department could perform the services itself. Despite this, the COMELEC En Banc approved the direct contracting arrangement.

ISSUE

Whether the COMELEC committed grave abuse of discretion in approving, through direct contracting, the Extended Warranty Contract (Program 1) with Smartmatic-TIM for the PCOS machines.

RULING

Yes, the COMELEC committed grave abuse of discretion. The Supreme Court granted the petitions, declared COMELEC Resolution No. 9922 and the Extended Warranty Contract (Program 1) void, and made the temporary restraining order permanent. The Court ruled that the contract was not a genuine warranty extension but a procurement of services for the maintenance, repair, and rehabilitation of the PCOS machines, which must comply with the competitive bidding requirements of RA 9184. The conditions for the alternative method of direct contracting under Section 50 of RA 9184 were not met. Specifically, the services were not proprietary, as Smartmatic-TIM failed to prove it was the sole source or that the items were of exclusive manufacture. Furthermore, the COMELEC did not conduct the required detailed engineering study to justify direct contracting. The Court also found that the COMELEC failed to substantiate its claim of urgency and necessity for the contract. The contract was essentially for preparatory work for the 2016 elections, which was not an unforeseeable circumstance justifying direct contracting. The COMELEC’s actions were contrary to law and constituted a whimsical, capricious, and arbitrary exercise of judgment.