COA: Gov’t lost P1.5B in potential revenue from LTO-Stradcom’s failed deal

The government lost P1.5 billion in potential revenue in 2006 to 2018 as the Department of Transportation was not able to remedy the agreement between Stradcom the then Department of Transportation and Communication (DOTC)-Land Transportation Office (LTO).

The agreement covers the LTO Information Technology (IT) project, the Commission on Audit (COA) said.

State auditors noted the IT project under a Build-Own-Operate (BOO) Agreement dated March 26, 1998 would have provided a revenue-sharing scheme between LTO and Stradcom, according to COA’s annual audit report on the DOTr.

The DOTr did not act on the LTO’s longstanding proposal to amend the contract between the DOTC/LTO and Stradcom Corporation for transportations IT Project, according to the COA report.

In the same report, the commission said the DOTr responded to the COA findings saying the current administration could not give a categorical statement in the absence of grounds to demand a 16.65% revenue sharing scheme to since the proposed amendment to agreement was not even approved during the previous administration.

Under the LTO’s proposed amendment in 2009, contractor Stradcom was required to give the LTO a 16.65% of the gross revenue from other IT fees for miscellaneous registration and license transactions, plus a share in interconnectivity fees.

“Further review of the LTO IT Project and the BOO agreement disclosed that the DOTC/LTO failed to approve the proposed supplemental agreement on revenue sharing scheme which relinquished the government’s opportunity to generate estimated additional income. This was submitted to the Secretary of the DOTC in August of the same year (2009) but the same, to date, had remained not acted upon,” state auditors said.

“Based on provided available data, the estimated share of the government from the interconnectivity fee collected by Stradcom from 2006 up to December 31, 2018, computed based on the actual number of motor vehicles and motorcycles registered, would have been P1.5 billion had the proposed supplemental agreement been approved by then officials of the DOTC.

“This has been the subject of a previous audit observations issued by COA auditors,” the commission added.

In a letter dated November 21, 2011, Jose Perpetuo Lotilla, who was then a DOTC undersecretary, informed state auditors that the proposed amendment agreement was received on August 12, 2010 and referred to the Legal Service on August 13, 2010 for review, the commission noted.

COA was also informed that the DOTC Legal Service was advised to expedite a review of the proposed agreement so that the DOTC might comply with the audit recommendation.

The desired results from these actions, however, did not materialize.

“Upon inquiry, it was informed however, that the proposed Amendment Agreement has not been approved by the concerned DOTC officials,” COA said.

On that note, the commission tasked the present DOTr to explain why the agreement was not approved.

In future IT concession agreements, the DOTr must carefully conduct feasibility studies to include a more balanced, fair and equitable revenue-sharing scheme to avoid any substantial losses on the part of the government, the state auditors noted. —VDS, GMA News