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subsidiaries

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subsidiaries

Post by shobe on Thu Oct 29, 2009 10:19 am

Hi guys.

Need to update myself with so many new topics here, its been ages since i last logged in.
I'm in a bit of a fix so i figured why not ask the procurement practitioners (the real experts) about this issue i'm working on right now.

Facts:
There's this huge huge international company with so many subsidiaries all over the world. It has participated and won in so many civil works projects. But lately, its requirements are being questioned. Apparently, it has been making use of the experiences of its subsidiaries (making it appear to be their own) and use these experiences in the bidding requirements (i.e., construction experience) when tendering their bids.

Issue:
Is this acceptable under the IRR?
Can the mother company (even without consent from its subsidiary) actually make use of the experiences and expertise of its subsidiaries for purposes of bidding?
Please note that this is far different from the nature of a joint venture.


Help please.
Thanks.
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Re: subsidiaries

Post by Guest on Thu Oct 29, 2009 4:19 pm

First Query: IRR of RA 9184 is silent regarding the issue, however give me some time to research on it.

Second Query: A Mother Company cannot make use of the experiences and expertise of its subsidiaries for purposes of bidding.

Reason: A subsidiary is a company controlled by another, usually in the form of ownership of majority of its shares, by a large corporation - called parent corporation. It is a distinct legal entity for purposes of taxation and regulation. (means the parent company is a SHARE HOLDER, having distinct and separate legal personality with each other).
Very different from a JV, which is defined by the IRR of RA 9184 as "Persons/entities forming themselves into a joint venture, i.e., a group of two (2) or more persons/entities that intend to be jointly and severally responsible or liable for a particular contract."

Unless otherwise the parent company and its subsidiary enter into a joint venture, i believe that the mother company cannot make use of the experiences and expertise of its subsidiaries for purposes of bidding.

This is based on my own opinion. So feel free to correct me if i`m wrong.
No case yet relating to your question.

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Re: subsidiaries

Post by RDV @ GP3i on Thu Oct 29, 2009 6:22 pm

shobe wrote:Hi guys.

Need to update myself with so many new topics here, its been ages since i last logged in.
I'm in a bit of a fix so i figured why not ask the procurement practitioners (the real experts) about this issue i'm working on right now.

Facts:
There's this huge huge international company with so many subsidiaries all over the world. It has participated and won in so many civil works projects. But lately, its requirements are being questioned. Apparently, it has been making use of the experiences of its subsidiaries (making it appear to be their own) and use these experiences in the bidding requirements (i.e., construction experience) when tendering their bids.

Issue:
Is this acceptable under the IRR?
Can the mother company (even without consent from its subsidiary) actually make use of the experiences and expertise of its subsidiaries for purposes of bidding?
Please note that this is far different from the nature of a joint venture.


Help please.
Thanks.

Long time, no hear, atty shobe. I miss you and I know the same with engrjhez and the others, too.

I will not be able to answer your query today, since I am about to leave and second, I may need to research on it also. Palusot pareho, hehe.

Your question is very similar to the recent COMELEC bidding. There were issues on the subsidiaries, whether the mother company which formed a JV with other companies could use the experiences of their "subsidiaries". The COMELEC BAC made their decisions during the bid evaluation. I suggest you surf the COMELEC website if their bid bulletins and other information on the bidding process are still posted there.
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Re: subsidiaries

Post by Niwram on Fri Oct 30, 2009 8:29 am

gud morning to all..

I agree to the opinion of wormaixjr, that the parent company cannot make use of the experiences of its subsidiaries, because it has a personality separate from the mother company vice versa.

also with regards to the question if it is acceptable under the Revised IRR of the R.A. 9184, it is not acceptable for the reason that it is silent and has no specific section to support it such practice.
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Re: subsidiaries

Post by engrjhez® on Fri Oct 30, 2009 10:33 am

shobe wrote:Hi guys.

Need to update myself with so many new topics here, its been ages since i last logged in.
I'm in a bit of a fix so i figured why not ask the procurement practitioners (the real experts) about this issue i'm working on right now.

Facts:
There's this huge huge international company with so many subsidiaries all over the world. It has participated and won in so many civil works projects. But lately, its requirements are being questioned. Apparently, it has been making use of the experiences of its subsidiaries (making it appear to be their own) and use these experiences in the bidding requirements (i.e., construction experience) when tendering their bids.

Issue:
Is this acceptable under the IRR?
Can the mother company (even without consent from its subsidiary) actually make use of the experiences and expertise of its subsidiaries for purposes of bidding?
Please note that this is far different from the nature of a joint venture.


Help please.
Thanks.

Welcome BACk Atty! A cup of coffee and a toast for your return. I love you

In addition to the above comments, I must point out in particular that in evaluating the "key personnel" as reflected in the submitted bid, the subsidiary must present their key personnel and/or the mother company present their key personnel whoever intends to join. Claims of a company that their subsidiaries have accomplished certain projects to attest their proficiency and expertise to the project is unacceptable (at least to my opinion) since the same personnel (their equipment) may not be available to any or all of them. Unless it was declared clear that such accomplished projects were implemented by the same personnel and the same be made available to the bidder/contractor, it will be like using someone else's technical (and even financial) capability in executing the contract.

My two cents. Very Happy
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Re: subsidiaries

Post by shobe on Tue Nov 03, 2009 3:45 pm

thanks for the warm welcome sir rdv and engrjhez Smile

The counsel i'm working with agrees in principle with the comments posted here. I'm very much curious now with how the comelec-BAC resolved the issue. Ano kaya legal basis nila? If any.Thank for the tip sir rdv.
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Re: subsidiaries

Post by RDV @ GP3i on Tue Nov 03, 2009 5:34 pm

shobe wrote:thanks for the warm welcome sir rdv and engrjhez Smile

The counsel i'm working with agrees in principle with the comments posted here. I'm very much curious now with how the comelec-BAC resolved the issue. Ano kaya legal basis nila? If any.Thank for the tip sir rdv.

Good afternoon, atty shobe.

Since the following SBAC Resolution, which I previously downloaded from the Comelec website, is no longer maintained in that website, I have just copy-pasted it here. It is quite long and contains tables showing the matrix of the SBAC decision, but I just could not attach the table. I hope this will be provide you with the necessary information that you are looking for.

OMNIBUS SBAC RESOLUTION NO. 09-001

IN THE MATTER OF THE MOTIONS FOR RECONSIDERATION
FILED BY THE CONSORTIUMS OF:
1. AVANTE INTERNATIONAL/ CANON MARKETING PHILIPPINES /
DB WIZARDS/ NETNODE TECHNOLOGIES/ CREATIVE POINT;
2. INDRA SISTEMAS/ STRATEGIC ALLIANCE
HOLDINGS, INC. (SAHI) / HART INTERCIVIC;
3. SEQUOIA VOTING SYSTEMS, INC./ UNIVERSAL STOREFRONT SERVICES
CORPORATION/ USSC-SEQUOIA VOTING SOLUTIONS, INC.;
4. SMARTMATIC INTERNA-TIONAL / TOTAL
INFORMATION MANAGEMENT, CORP./;
5. SYREX INC./AMALGAMATED MOTORS PHILS., INC./AVISION, INC.;
6. AMA GROUP HOLDINGS CORP./ ELECTION SYSTEMS AND
SOFTWARE INTERNATIONAL, INC. (ES & S); AND
7. GILAT SATELLITE NETWORK LTD./F. F. CRUZ &
CO., INC. / FILIPINAS (PREFAB BUILDING) SYSTEMS, INC.
Promulgation: 13 May 2009

The COMMISSION ON ELECTIONS (COMELEC), having decided to implement the full automation of the National and Local Elections of May 10, 2010 pursuant to Republic Act 9369, created the Special Bids and Awards Committee (SBAC) under En Banc Resolution No. 09-0121 promulgated on February 11, 2009. The President of the Philippines signed Republic Act 9525 on March 23, 2009 allocating a supplemental budget for the said automated elections. The Pre-Bid Conference was held on March 27, 2009, attended by all the movants herein and three other prospective bidders who later failed to submit their bids. The SBAC reset the deadline for the submission of bids and opening thereof from April 27, 2009 to May 04, 2009, pursuant to Bid Bulletin No. 24 dated April 24, 2009.

The opening of bids was fully transparent and open to the media and the public. Modern technology, consisting of laptops, projectors, video cameras, close circuit televisions (CCTV), document reader and television were used to enhance public viewing and participation. This was further boosted by the presence of the COMELEC Advisory Council (CAC) which was created by RA 9369. Also present pursuant to RA 9184 (Government Procurement Reform Act) were official observers from the office of the Ombudsman and the Commission on Audit (COA), as well as the duly accredited non-governmental organizations (NGOs) such as Procurement Watch Inc., Transparency and Accountability Network (TAN) and PPCRV/NAMFREL, and representatives of the Department of Science and Technology (DOST) and the Philippine Computer Society. Five (5) official observers were each given one copy of the bid documents, the original of which was submitted to the SBAC. Every document read by the SBAC, using “pass/fail” criteria, was simultaneously being projected on wide screens and TV monitors using video cameras, document reader, and security cameras. Thus, said documents, as well as different views of the venue and of the event, were being shown in the offices of the COMELEC Commissioners and the Head of the procuring entity (COMELEC Chairman). Television crews of various TV stations were also covering the entire event.

The bid documents were opened in the order of their submission on May 04, 2009. The first two (2) bidders, AVANTE International and Indra, were declared ineligible on the first day, May 04, 2009. On the second day, May 05, 2009, the bid documents of the third and fourth bidders were also opened namely, Universal Storefront Services Corporation (USSC)-Sequoia and Total Information Management, Inc. (TIM)-Smartmatic. They were likewise declared ineligible. On the third day, May 06, 2009 the bid documents of the fifth, sixth and seventh bidders, namely the consortiums of Syrex; AMA/ES & S; and GILAT, were opened. All three were likewise declared ineligible. They all failed to pass the pass/fail criteria.

The attached Table I shows the grounds for their ineligibility as well as the dates the rulings were rendered and served on the bidders and the dates said bidders filed their motions for reconsideration. Under the IRR-A, as amended, particularly Section 23.3, the bidders are given three (3) calendar days to file the motion for reconsideration, and the SBAC has seven (7) days from the filing thereof to decide. All the bidders timely filed their respective motions for reconsideration on May 07, 08, and 09, 2009.

In rendering the rulings, the SBAC takes full responsibility. For transparency, accountability and judiciousness of the process, it is worthwhile to mention, however, that the decisions were arrived at collegially after a thorough consultation and passionate discussion with all the COMELEC Advisory Council, Secretariat, Technical Working Group (TWG), DOST representatives, and official observers. Said deliberations followed after open question and answer interaction with the bidders concerned and even with the other bidders. Immediately thereafter, the ruling was announced to the bidders and to the public. Then, the ruling was served in written form. Hence, the grounds for ineligibility were clear to the bidders and everyone.

Making the decisions to declare the bidders ineligible one after the other was not a happy task for the SBAC whose members have all set their hearts and minds to full automation. They have been seriously prayerful that finally the Commission on Elections could set the bearings of Philippine Elections to the right direction. They appreciate the significance of this multi-billion procurement, and so they appropriately prepared and proceeded with great care and caution. At the same time, they want to uphold the law and the rules in order to redeem the Institution that was discredited due to failure to automate the 2004 National and Local Elections, resulting to high-profile cheating and fraud attendant with manual elections. The SBAC was thus torn between “two loves” - the love for automation and the love for the law. It seemed that in obeying the law, it would lose the other, and that was how it felt when all the seven bidders had to be declared ineligible to bid.

In their motions for reconsideration, the bidders presented old and new arguments, and even advanced new dimensions involving international business practices, technological terms and legal deficiencies. Hence, the SBAC has to take a broader view of the law and the rules, painstakingly but enjoyably discovering the raison d’etre thereof in the day-to-day deliberations. Taking a panoramic view, they came up with the attached Table II showing the purpose of the law or rule as well as the bidder’s explanation in the Motion for Reconsideration. Putting the raison d’etre of the law side by side with the bidders’ explanation would reveal compliance or non-compliance with the spirit of the law. From such a revelation, the SBAC could then see graphically whether or not, for the alleged reason for ineligibility, the purpose of the law would still be achieved, and whether or not, in so achieving it, the law or the bidding rule would still be complied with. Table III shows that if in the judgment of the SBAC, the law or bidding rule would be violated by the ground cited for ineligibility, then the motion could not be granted. But if the grounds cited for ineligibility would not indeed constitute a violation of the law or the bidding rule, then the motion for reconsideration should be granted.
AVANTE INTERNATIONAL/
CANON PHILIPPINES/
DB WIZARDS/
NETNODE TECHNOLOGIES/
CREATIVE POINT

AVANTE INTERNATIONAL/CANON PHILIPPINES/ DB WIZARDS/NETNODE TECHNOLOGIES/CREATIVE POINT claimed a particular contract to show that it has acquired experience in a previous project on or after March 14, 2006 amounting to at least 50% of the approved budget for the contract of automation. Said contract is in the name of Canon Singapore which allegedly owns 100% of Canon Philippines. However, Canon Singapore is not a member of the consortium, and for that reason (among other reasons), the SBAC declared the bidder ineligible.

In its motion for reconsideration, AVANTE INTERNATIONAL/ CANON PHILIPPINES/ DB WIZARDS/NETNODE TECHNOLOGIES/ CREATIVE POINT attached a Board Resolution of Canon Singapore giving consent and approval to Canon Philippines in undertaking the election automation project of May 10, 2010. It also attached a letter of support coming from Canon Singapore. This is like the mother coming to the succor of the daughter. This validates the comments of the COMELEC Advisory Council to the effect that:

“For multinational companies, it is common to have subsidiaries across different locations or jurisdictions. While subsidiaries are separate legal identities from the parent company, they are part of the same global entity. Therefore, the experience of the parent company should count toward the experience of the subsidiaries and vice-versa.”

We adopt said view.

Hence, the experience required of the bidder may be conceded to be shared between the mother corporation and its subsidiary. The purpose of the RFP (Request for Proposal, sometimes called TOR or Terms of Reference), Bid Bulletin No. 14, and the Implementing Rules and Regulations, as amended (IRR-A of the GPPB), in requiring that the contract to be submitted should be the “bidder’s contract”, is still achieved and said rules are still complied with.

The SBAC consulted the COMELEC Advisory Council (CAC) on May 9, 2009. In the meeting, the CAC came up with some points for consideration, one of which is the above-quoted view, later embodied in its Resolution No. 2009-05-001, a copy of which was officially transmitted to the SBAC on May 12, 2009, attached herewith as Annex A. It was issued pursuant to its mandate to “provide advice and/or assistance in the identification, assessment and resolution of systems problems or inadequacies as may surface or resurface in the course of the bidding, acquisition, testing, operationalization, re-use, storage or disposition of the AES equipment and/or resources as the case may be.” (Sec. 9, RA 9369).

However, that is not the sole ground for which the SBAC declared AVANTE INTERNATIONAL/CANON PHILIPPINES/ DB WIZARDS/ NETNODE TECHNOLOGIES/ CREATIVE POINT ineligible. Secondly, it also failed to submit a copy of the said contract, although the first and last pages would have sufficed. Thirdly, it likewise failed to submit a certificate of acceptance issued by its client. These documents are among those included in the checklist required to be submitted with the bid. These two documents would enable the SBAC to verify the existence and validity of the contract as well as the satisfactory execution and completion thereof. Hence, using the pass/fail criteria, AVANTE fails. Said purpose could not be achieved due to its failure to submit the documents. Although AVANTE INTERNATIONAL attached the required documents in its motion for reconsideration, the same could not be accepted nor considered as sufficient compliance because admission of additional documents beyond the deadline (May 4, 2009, 10 a.m.) is considered an improvement of its bid and for that reason it is not allowed. It would violate Clause 3.24 of the RFP. Hence, we deny the motion for reconsideration.
INDRA SISTEMAS S.A./
STRATEGIC ALLIANCE HOLDINGS, INC. (SAHI)/
HART INTERCIVIC

The ISO 9000 Certification submitted does not belong to the bidder but to another entity called Integrated Microelectronics, Inc. (IMI) which the bidder claims to be the manufacturer of the PCOS machines. Neither the Government Procurement Reform Act (R.A. 9184) nor the IRR-A of the Government Procurement Policy Board require an ISO Certification. It is Clause 2.2.6.1.2.3 of the RFP which requires ISO 9000 Certificate or its equivalent. Bid Bulletin No. 04 clarified in an answer to a bidder’s query that it should be submitted by the provider of Component 1B (PCOS). The COMELEC Advisory Council explained the purpose of the rule as follows:

“ISO 9000 is the series for international quality management system standards. The purpose of this requirement is to assure that the manufacturing process of the solution provider complies with international standards. It is therefore more appropriate for the ISO 9000 Certification to be assigned to the manufacturer, whether or not the manufacturer is the same as the solution provider. Given the nature of international technology solutions, it is reasonable to expect that the solution provider may be different from the manufacturer. However, the solution provider must document its relationship with the manufacturer.”

Consortium member Hart Intercivic is alleged to be the PCOS provider of the consortium and as such it has entered into a Memorandum of Understanding with IMI for the manufacture of the PCOS machines. For the said purpose, Hart Intercivic shall use the facilities and management system of IMI. Just the same, Indra submitted its own ISO 9001:2000.

We therefore find that the purpose of the Bid Bulletin and the RFP in requiring the ISO is still achieved: the PCOS machines shall be produced by a facility that has ISO 9000 Certification to assure that said machines are up to international standards. Is there any law or bidding rule that would be violated? There would be none, if the consortium member (Hart Intercivic) which claims to be the provider of the PCOS machines will be the one to manufacture the machines using IMI’s facility. We therefore grant the motion for reconsideration.

This is subject to post-qualification to ascertain that there is no subcontracting relationship that is prohibited by the GPPB’s Manual for the Procurement of Goods and Services. Page 116 thereof provides as follows:

“Is subcontracting allowed for the procurement of goods and services?

“Generally, a supplier may be allowed to subcontract a portion of the contract or project. However, the supplier should not be allowed to subcontract a material or significant portion of the contract or project, which portion must not exceed twenty percent (20%) of the total project cost. The bidding documents must specify what are considered as significant/material component(s) of the project.

“All subcontracting arrangements must be disclosed at the time of bidding, and subcontractors must be identified in the bid submitted by the supplier.

“Any subcontracting arrangements made during project implementation and not disclosed at the time of the bidding shall not be allowed. The subcontracting arrangement shall not relieve the supplier of any liability or obligation under the contract. Moreover, subcontractors are obliged to comply with the provisions of the contract and shall be jointly and severally liable with the principal supplier, in case of breach thereof, in so far as the portion of the contract subcontracted to it is concerned.

“Subcontractors are also bound by the same nationality requirement that applies to the principal suppliers.”

SEQUOIA VOTING SYSTEMS, INC./
UNIVERSAL STOREFRONT SERVICES CORPORATION/
USSC-SEQUOIA VOTING SOLUTIONS, INC.

SBAC Resolution No. 003 dated May 05, 2009 declared the bidder ineligible “for its failure to submit the Certification of Accreditation as Importer”. Said accreditation is required by Clause 2.2.6.1.1.7 of the RFP as well as the Bid Data Sheet, Bid Bulletin No. 19, and Eligibility Checklist under Bid Bulletin No. 21. The purpose of the rule is to ensure that the bidder can import the machines or parts that are needed.

The COMELEC Advisory Council commented as follows:

“The purpose of import/export accreditation is to assure the ability of the solution provider to import the AES into the Philippines and export the AES from the source country, if applicable. Therefore, its consortium should only be required to submit one import accreditation and one export accreditation. In addition, in the case the AES will be manufactured in the Philippines, import and export accreditations are not applicable and are therefore not necessary.”

So, even if one member of the consortium does not have an import accreditation, the goods could still be imported using the import accreditation of another consortium member. The purpose of the rule would still be achieved.

However, in its Motion for Reconsideration the Sequoia consortium alleged:

“12. During the evaluation of USSC/Sequoia, the Honorable SBAC took cognizance of the fact that certain documentary requirements such as Income Tax and Business Tax returns, audited financial statements or general information sheet are not yet due and are forthcoming from USSC-Sequoia Voting Solutions, Inc. which was incorporated only 16 April 2009. The USSC-Sequoia consortium therefore is validly and legally exempted from submitting the foregoing documents for eligibility.” (Underscoring supplied).

This assertion runs counter to the ruling rendered by the Supreme Court in the case ITFP vs. COMELEC and Mega Pacific, January 13, 2004, G. R. No. 159139. The Supreme Court held:

“At this juncture, it bears stressing that MPEI was incorporated only on February 27, 2003 as evidenced by its certificate of incorporation. This goes to show that from the time the COMELEC issued its Invitation to Bid (January 28, 2003) and Request for Proposal (February 17, 2003) up to the time it convened the Pre-bid Conference (February 18, 2003), MPEI was literally a non-existent entity. It came into being only on February 27, 2003 or eleven days prior to the submission of its bid, i.e. March 10, 2003. This poses a legal obstacle to its eligibility as a bidder. The Request for Proposal requires the bidder to submit financial documents that will establish to the BAC’s satisfaction its financial capability which include:

“1. Audited financial Statements of the Bidders firm for the last 3 calendar years, stamped “RECEIVED” by the appropriate government agency, to show its capacity to finance the manufacture and supply of goods called for and a statement or record of volumes of sales;

“2. Balance sheet;

“3. Income statement;

“4. Statement of Cash Flow;” (Emphasis supplied).

USSC-Sequoia Voting Solutions Inc. is in the same situation as MPEI in the Mega Pacific case. If it is exempted from submitting the income tax and business tax returns for 2007 and 2008 as it claims for the reason that they are not yet due since it got incorporated only on 16 April 2009, then it would be making virtue out of its month-old registration. On the contrary, it should be its drawback. The purpose of the law and the rules in requiring submission of the said documents – which is to ensure that the COMELEC will contract only with qualified bidders of proven track record - would not be achieved if, instead of being disqualified it is exempted. Moreover, contrary to its allegation, the SBAC has not yet reached the point to pass upon USSC-Sequoia’s audited financial statement as said document is considered a financial eligibility document, not a legal eligibility document. Hence, we deny the motion for reconsideration.
SMARTMATIC INTERNATIONAL/
TOTAL INFORMATION MANAGEMENT, INC.

The bidder was declared ineligible by Resolution No. 004 because the ISO 9001:2000 certification submitted by Smartmatic does not belong to it. In seeking for reconsideration, Smartmatic International argued as follows:

“The arrangement between Smartmatic and Smartmatic Subsidiary is one of contract-manufacturing or manufacturing outsourcing. Under this agreement, an enterprise (like Smartmatic subsidiary) manufactures products for another entity (like Smartmatic). Many well-known companies use contract manufacturing as an alternative to operating and maintaining their own factories, including Apple, Nokia and Samsung. xxxx”

In addition, Smartmatic cites 31 Cornell International Law Journal 93, “The Foreign Based Company Sales Income of Controlled Foreign Corporations”:

“Contract manufacturing is among the services that a related person might perform for a controlled foreign corporation. If the related person provides only a service to the controlled foreign corporation and has financial interest only in the fee it receives for the service, while the controlled foreign corporation bears the risk of loss throughout the manufacturing process, the controlled foreign corporation may be deemed to be the manufacturer for the goods produced. The assistance of the related person does not bring the subsequent sales transactions of the controlled foreign corporation within the four types of tainted transactions because, instead of distributing goods purchased from a related person, the controlled foreign corporation is selling goods it has manufactured itself.”

Finally, the bidder concludes that “on the basis of the foregoing provisions of the manufacturing agreement, SMARTMATIC is the manufacturer of the voting machines to be manufactured by SMARTMATIC subsidiary considering that in all phases of the manufacturing process, the components and inputs are owned by SMARTMATIC.”

We grant SMARTMATIC’s motion for reconsideration on the same ground we granted the motion of INDRA consortium. The purposes of the rule requiring the ISO Certification as well as of the rule prohibiting subcontracting can still be achieved as long as the contract with Jarltech International, Inc. (Jarltech) is not the subcontract that is prohibited by the GPPB Manual, and if indeed, Jarltech is Smartmatic’s subsidiary.

During the opening of bids, Smartmatic categorically stated that it owns 51% of the shares of Jarltech but we observed that its motion for reconsideration failed to make such assertion although it repeatedly calls Jarltech its subsidiary. This will be verified during post-qualification. Also to be verified is Smartmatic’s relationship with Kenmec Mechanical Engineering Co., Ltd. with whom Jarltech in turn allegedly has entered into an outsourcing contract.
CONSORTIUM OF SYREX CORPORATION/
AMALGAMATED MOTORS PHILIPPINES, INC./
AVISION, INC.

The reason for ineligibility of the consortium is the failure of Syrex Corporation to submit its Certificate of Registration. Its submission is required by IRR-A Section 23.6 and IRR-A Section 24.7.

The timely submission of said document does not merely prove juridical personality. The “pass/fail” criteria are intended to filter the diligent complying bidders and separate them from those who are not. With the presence of the required document, the bidder passes; but without the document, it fails. In its motion for reconsideration, the consortium of Syrex Corporation explained that it did not submit the Certificate of Registration “as this may lead to confusion of the Honorable Committee.” This proves either gross negligence or bad judgment or both.

It does not suffice for Syrex to state that it has sufficiently established its status and juridical entity when it submitted the “Certificate of Filing Amended Articles of Incorporation”. The Checklist of Documents for bidding purposes does not give the bidder the option to withhold the document that is required and submit some other document instead which in its judgment can be a substitute. It would not hurt Syrex to submit the original Certificate of Registration together with the original articles of incorporation except for the possibility of “confusion of the Honorable Committee”. While the purpose of the certificate of registration may still be achieved in its absence, yet the purpose of the “pass/fail” criteria of ensuring that the bidder complies with the rules with diligence and sound judgment is not achieved. The “pass/fail” criteria as well as IRR-A Section 23.6 and Section 24.7 are violated. Hence, we deny the motion for reconsideration.
AMA GROUP HOLDINGS CORP./
ELECTION SYSTEMS & SOFTWARE INTERNATIONAL, INC.

The certificate of accreditation as importer does not belong to the consortium but to Teletech Telesystems Inc. (TTI) which is not a member. It submitted TTI’s certification of accreditation as importer, explaining that AMA Group Holdings Corp. (AMA) and Election Systems & Software International, Inc. (ES & S) are not importers and that they will not import. Allegedly, the bidder consortium has no need to import parts or personnel.

If that is so, then indeed there is no need for the accreditation as importer. Neither the law nor the rules and bid bulletins require what is not necessary. On the other hand, it would be a great achievement for a Philippine Corporation like TTI, or a local bidder to be able to produce locally or to have in its stock all the raw materials or supplies needed to manufacture machines for an automated election system. If this representation is true, then it should be an advantage and not a liability. Hence, we reconsider and rule to allow the opening of the bid documents of AMA/ES & S.

However, this claim is subject to verification during post-qualification. Also to be verified is the nature of relationship between the AMA/ES & S joint venture and the TTI in view of the GPPB ban on subcontracting. We do not just take at face value the assertion made by the joint venture that since ES & S owns the design, the operating system, and software technology to produce the PCOS machines, it will not subcontract with TTI.
GILAT SATELLITE NETWORK LTD./
F. F. CRUZ & CO., INC./
FILIPINAS (PREFAB BUILDING) SYSTEMS, INC.

Resolution No. 007 dated May 07, 2009 declared GILAT SATELLITE NETWORK LIMITED/F. F. CRUZ & CO., INC. / FILIPINAS (PREFAB BUILDING) SYSTEMS, INC. ineligible because the contracts that Gilat International submitted are not in its name. To show experience of having completed a single contract equivalent to at least 50% of the ABC or three contracts whose aggregate amount is at least 50% of the approved budget, the largest of which is at least 25% thereof, Gilat submitted contracts entered into by its alleged wholly-owned subsidiaries which are not members of the joint venture.

The movant argued as follows:

“10. X x x notwithstanding that the contracts submitted by Gilat to this Honorable Committee are not in its name but in the name of the Gilat’s subsidiaries, these contracts are indeed Gilat’s contracts and are being presented and asserted as such by Gilat x x x.

“11. It is now a well-recognized standard international business practice for global companies such as Gilat to enter into contracts directly or indirectly through wholly owned subsidiaries with contracting parties in other countries. To a large extent, such business practice is adopted, in the case of global companies such as Gilat, to simplify taxation and audit, to strengthen global competitiveness as well as to comply with regulatory requirements of countries imposing local presence of contractors and the giving preference to the hiring of local employees.

“If this Honorable Committee would not recognize this international business practice, strong and efficient companies well-positioned internationally would have difficulty in satisfying this Honorable Committee’s eligibility requirements for technical documents. In no uncertain terms, the contracts submitted by GILAT to this Honorable Committee are considered its contracts and are being represented by GILAT to this Honorable Committee as such xxx.

“Movant bidder wishes to emphasize, however that xxxx it is Gilat itself, the parent company and entity possessing the financial strength and manufacturing capability, which will undertake and perform the technical requirement of the project, if movant successfully wins the bid.” (Emphasis supplied).

We reconsider, not only because Gilat claims to wholly own the alleged subsidiaries which entered into said contracts but also because this matter is proper for post-qualification. A subsidiary that is 100% owned by a mother company is nothing but a property of the latter. Hence, whatever said subsidiary owns, including its contracts, is likewise owned by the mother company. All the subsidiaries’ liabilities are also liabilities of the parent company. It is also worth reiterating the CAC’s comments, as follows:

“For multinational companies, it is common to have subsidiaries across different locations or jurisdictions. While subsidiaries are separate legal identities from the parent company, they are part of the same global entity. Therefore, the experience of the parent company should count toward the experience of the subsidiaries and vice-versa.”

WHEREFORE, the resumption of the evaluation of eligibility requirements and opening of bids of the consortiums of Indra Sistemas, S.A., Hart Intercivic, and SAHI; Smartmatic and Total Information Management; AMA and ES & S, and Gilat Satellite Network Ltd. /F. F. Cruz & Co., Inc. /Filipinas (Prefab Building) Systems, Inc. is hereby set on Friday, May 15, 2009 at 10:00 a.m. at the Convention Hall, Bureau of Treasury, 3rd Floor, Palacio del Gobernador, Intramuros, Manila.

The Secretariat is hereby directed to notify all the bidders, official observers, and the public of this Omnibus Resolution.

SO ORDERED.

Intramuros, Manila. May 13, 2009.
THE SPECIAL BIDS AND AWARDS COMMITTEE
(Sgd.) ATTY. FERDINAND T. RAFANAN
Chairman
(Sgd.) ATTY. ADOLFO A. IBAÑEZ
Vice-Chairman (Sgd.) ATTY. DIVINA E. BLAS-PEREZ
Member
(Sgd.) ATTY. REY D. DOMA
Member (Sgd.) MRS. AIDA C. FERNANDEZ
Member
Attachments:
download PDF version here

1. Omnibus SBAC Resolution No. 09-001, PDF format (6,322 KB)
2. Annex A, PDF format (1,319 KB)
3. Table I, PDF format (1,159 KB)
4. Table II, PDF format (1,569 KB)
5. Table III, PDF format (1,516 KB) [img][/img]
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Re: subsidiaries

Post by shobe on Thu Nov 05, 2009 11:47 am

Thanks sir rdv.

I don't agree with the resolutionthough.

“For multinational companies, it is common to have subsidiaries across different locations or jurisdictions. While subsidiaries are separate legal identities from the parent company, they are part of the same global entity. Therefore, the experience of the parent company should count toward the experience of the subsidiaries and vice-versa.”

Liability-wise, i am not quite sure if piercing the corporate veil concept under the corporation law can apply in such case. Wonder what the SC had to say about this. Suspect
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Re: subsidiaries

Post by RDV @ GP3i on Thu Nov 05, 2009 11:55 am

shobe wrote:Thanks sir rdv.

I don't agree with the resolutionthough.

“For multinational companies, it is common to have subsidiaries across different locations or jurisdictions. While subsidiaries are separate legal identities from the parent company, they are part of the same global entity. Therefore, the experience of the parent company should count toward the experience of the subsidiaries and vice-versa.”

Liability-wise, i am not quite sure if piercing the corporate veil concept under the corporation law can apply in such case. Wonder what the SC had to say about this. Suspect

In the decision of the Comelec BAC, I am of the impression that if follows the advice of the Comelec Advisory Council (CAC). There is are tables/matrices attached to that omnibus SBAC resolution but unfortunately I could not post them here (I cam email them to you if you need it).

Not being a lawyer, I am in no position to comment on the legal standing of subsidiaries in relation to their parent company. I don't know if that decision was also raised when the award of the contract was questioned before the Supreme Court.

Finally, welcome back, atty shobe.

RDV
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Re: subsidiaries

Post by Guest on Thu Nov 05, 2009 5:43 pm

G.R. No. 142616 July 31, 2001
PHILIPPINE NATIONAL BANK, petitioner,
vs. RITRATTO GROUP INC., RIATTO INTERNATIONAL, INC., and DADASAN GENERAL MERCHANDISE, respondents.
Is a great example of the piercing the veil of corporate entity.

"In Concept Builders, Inc. v. NLRC,
SC have laid the test in determining the applicability of the doctrine of piercing the veil of corporate fiction, to wit:
1. Control, not mere majority or complete control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own.
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest and, unjust act in contravention of plaintiff's legal rights; and,
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
The absence of any one of these elements prevents "piercing the corporate veil." In applying the "instrumentality" or "alter ego" doctrine, the courts are concerned with reality and not form, with how the corporation operated and the individual defendant's relationship to the operation.

But still the general rule is that a parent company is a distinct and separate entity from its subsidiary.

I believe the doctrine cannot apply to the COMELEC case because it lack other requirements set forth by the above mentioned case.
Furthermore, I think it only apply to cases of liabilities of the subsidiary.

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