Philippine Charity Sweepstakes Office General Manager Alexander Balutan said on Wednesday the agency might lose P2.7 billion a month if it would stop the operation of a provider for the lotto online system for Visayas-Mindanao and some parts of Luzon.
Balutan was reacting to what he called unfounded accusations regarding the agency’s extension of the Equipment Lease Agreement with Pacific Online Systems Corp. for one year starting Aug. 1, 2018, PCSO said in a statement.
“I would like to correct the notions that this is a ‘sweetheart deal.’ There is no such thing as ‘sweetheart deal’. The truth is, we cannot afford the interruption in our online lottery operation should the ELA expire without a corresponding substitute. We will risk losing P89 million daily or P2.7 billion monthly based on 2017 revenues,” Balutan said.
He said the decision to extend POSC’s contract that expired last July 31, 2018 was covered by a Board Resolution No. 0229 Series 2018.
The board resolved to approve the extension of ELA with POSC for another year, which is sufficient to complete the Nationwide Online Lottery System bidding process under Republic Act 9184 until a new lottery system is fully realized, and to ensure unhampered operation of the lotto with the reduced lease fee rate from 7.7 percent to 6 percent.
The projected total sales in 2018 of the online lottery is P30.9 billion (or P30,973,902,470 to be exact), which translates to P9.1 billion (or P9,106,327,326.18) allocation for the Charity Fund and P4.5 billion (or P4,553,163,663.09) allocation for the Operating Fund.
“The stoppage of operations would also affect the livelihood and income of more than 8,614 total active Lotto agents and operators nationwide as of June 2018,” added Balutan.
In anticipation of the expiration, PCSO conducted procurement of the NOLS through public bidding last June 2017, with approved budget for the contract amounting to P10.9 billion.
However, the procurement process was impeded and subsequently cancelled when Philippine Gaming Management Corporation (PGMC), provider for Luzon, filed an application for temporary order/writ of preliminary injunction, wherein the Regional Trial Court of Makati City, Branch 143 issued a Writ of Preliminary Injunction on August 10, 2018.
The arbitration case reached the International Chamber of Commerce, International Court of Arbitration (ICC-ICA) to resolve the limited issue of “exclusivity” and all matters related to it.
“PGMC is claiming that it has the exclusive rights to supply online lottery equipment under its ELA with PCSO, which it said we allegedly violated when we allowed POSC to operate and provide lottery equipment in Luzon,” explained Balutan.
Subsequently, a Final Award dated February 20, 2018 was issued in ICC-ICA 20105 CYK/PTA finding that PGMC has no exclusive right to supply online lottery terminals and equipment in Luzon, which Arbitral Award was confirmed by the RTC of Makati City, Branch 143.
The PCSO Board was advised by the Government Commission for GOCCs that it is vested by law with the legal capacity and authority to exercise all corporate powers and conduct business of PCSO taking into consideration our legal obligation and duty to always act in the best interest of the agency, with utmost good faith in all our dealings with the property and monies of the PCSO.
“We were also advised to exercise extraordinary diligence in the conduct of business and in dealing with the properties of the PCSO,” Balutan said.