Smartmatic’s tainted past, low bid raise questions

By Aries Rufo, abs-cbnNEWS.com/Newsbreak

Posted at May 19 2009 08:30 PM | Updated as of Dec 16 2009 11:38 PM

The vendor that could potentially win the bid to automate next year’s national elections has a checkered track record. And should it bag the multi-billion peso contract, rival bidders say the country should brace itself for a raw deal.

The tandem of Smartmatic and Total Information Management Corp. (TIM) inches closer to bagging the P11.3 billion automation project after it passed the eligibility, technical and financial screening of the Commission on Elections’ Special Bids and Awards Committee (SBAC).

The consortium earned the right to demonstrate their Precinct Count Optical Scan (PCOS) machines to the Comelec as a final requirement before the project is awarded.

But its critics—led by rival bidders—score the consortium’s “outrageously” low bid on two aspects: That the vote-counting machines come election time may be inferior and have not been tested before.

Comelec has strict requirements on the quality and reliability of the vote counting machines.

Abs-cbnnews.com/Newsbreak sought officials of the Smartmatic/TIM group for comments. An executive explained that they could source the machines at lower cost, but declined to comment on the issue of the machines’ reliability.

P7.2 billion bid

Should the group eventually bag the automation project for the 2010 polls, this will be Smartmatic’s second business venture involving Philippine polls. In 2008, Smartmatic partnered with Strategic Alliance Holdings Inc. to supply the counting machines in Maguindanao during the elections in the Autonomous Region in Muslim Mindanao (ARMM).

At the time, however, the partners used Direct Recording Electronic (DRE), a technology more expensive than the Precinct Count Optical Scan (PCOS) machines for the 2010 elections.

For the May 2010 polls, Smartmatic/TIM submitted a bid of P7.2 billion, besting the consortium of Spain-based Indra Sistemas S.A, Hart Intercivic and Strategic Alliance Holdings Inc. The latter submitted an P11.2 billion offer and could only provide 50,000 out of the required 82,200 machines to automate the polls.

The P7.2 billion bid offered by Smartmatic/TIM translates to almost P4 billion savings for the Comelec.

The “low” financial bid of Smartmatic/TIM surprised the other bidders, some of whom agreed to talk with abs-cbnnews.com/Newsbreak. They noted that the total financial bid of Smartmatic/TIM to automate the entire election process was even lower than what the Comelec allotted P8 billion budget for the PCOS alone.

Of Comelec’s P11.3 billion total budget for the poll automation project, P8 billion is allotted to lease the PCOS; P1.5 billion for services such as training some 164,400 Board of Election Inspectors; and P1 billion for the printing of ballots.

Cheaper machines

A Smartmatic/TIM official, who agreed to be interviewed on condition of not being named, told abs-cbnnews.com/Newsbreak that the group was able to come up with a lower cost because its PCOS machines “are cheaper.”

“We came up with a financial costing for the PCOS [that is] about half of the Comelec budget of P8 billion. But on the other required goods and services, our costing was near the Comelec estimate,” the official said.

The official said Smartmatic plans to manufacture the counting machines in Taiwan.

However, aside from the delivery of 82,200 machines to be deployed nationwide, there are “peripheral” components required by Comelec. These include providing the batteries, generators servers, printers, electronic transmission, cables, and canvassing hardware among others.

By extrapolation, if Smartmatic/TIM actually bid only P4 billion for the entire PCOS component, each Smartmatic machine plus peripherals will only cost about P48,661. At an exchange rate of $1: P48, each unit will cost a little over $1,000.

Such low unit has raised suspicion among other bidders. They cited that the average cost of a PCOS machine plus other components is in the range of $4,000 to $5,000.

Based on a study conducted by the New Yorkers for Verified Voting, www.nyvv.org, an optical scan can cost as high as $5,500 per unit. One bidder explained that such price is due to the stringent requirements and specifications of US federal authorities to ensure quality of the machines.

With Comelec’s required volume of 82,200 machines, the other bidders said the average amount of PCOS machines could go down to $2,500. This price is still 1.5 times higher than Smartmatic/TIM’s estimated $1,000 unit cost offer.

One of the bidders said Smartmatic/TIM may resort to sacrificing quality to meet the lower unit cost. “It is like having a Rolex watch but its components inside are from Seiko.”

Untested and untried

Critics of Smartmatic/TIC also noted that the PCOS technology offered by the group is “an experimental unit since it has never been used before.” They expressed concern that an untried technology and possibly inferior components of the machine could make Smartmatic/ TIM’s machines vulnerable to failure and malfunction.

Comelec requires that the PCOS machines and election technology to be used in 2010 have already been used in previous elections.

The Smartmatic/TIM group said it will use “Smartmatic Auditable Election System (SAES) 1800” for the May 2010 polls. A quick check with Smartmatic’s website showed that this election technology boasts of a 99.99999 percent accuracy rate.

But a closer look would show that SAES 1800 might be a new product, and thus, has not undergone rigorous test. In Smartmatic's product page, SAES 1800 does not appear in the Portuguese and the French versions. Search engines do not provide additional reference to SAES 1800.

In its website, Smartmatic listed all the elections they have managed, but there was no reference to any project involving PCOS or the use of SAES 1800 election technology. One bidder said this is because Smartmatic’s technology is really DRE technology, which it had used in the ARMM elections.

Also, Smartmatic/TIM submitted a certificate of acceptance—one of Comelec’s technical requirements—addressed to Dominion Voting System, an election provider in Canada, not to Smartmatic/TIM.

The document, which certifies that the technology has been previously used in a statewide or nationwide election, was issued by election authorities in Canada, thus raising the suspicion that the SAES 1800 is actually a prototype of the voting machines used in Canada.

When other bidders noted the discrepancy, the Comelec special bids and awards committee said it would address the issue in the post-qualification stage.

We sought to interview an official of Smartmatic/TIM but the executive declined. The official said issues against the group would be addressed only after it is awarded the contract.

Not new to controversies

While a young multinational company, Smartmatic has been hounded by controversies since it was founded in 2000. Its corporate website said it has offices in the USA, Mexico, Venezuela, Barbados, Spain, the Philippines and Taiwan. However, critics say it has no meaningful experience in implementing election system outside Venezuela.

In 2006, the US Treasury investigated Smartmatic over alleged ties to the anti-US Venezuelan government of President Hugo Chavez, who is alleged as a secret business partner of Smartmatic.

The US Treasury probe was prompted by Smartmatic’s acquisition of Sequioa Voting Systems, one of the leading US election providers. The panel sought to determine whether Smartmatic’s acquisition of Sequioa “threatens to impair the national security.”

Incidentally, Sequioa was one of the losing bidders to automate the May 2010 polls.

A parallel probe was conducted by the US State Department over allegations that Smartmatic evaded taxes and bribed its way in cornering the $91 million contract to supply voting machines in Venezuela. In 2004, Smartmatic cornered the contract for the presidential recall referendum in Venezuela where Chavez won. The result of the election was widely questioned.

Smartmatic has denied the allegations but intense scrutiny forced it to sell Sequioa that year.

The Philippines’ national elections might be Smartmatic/TIM’s biggest contract yet.