Insights into who developed PhilGEPS
By Michael Alan Hamlin
April 28, 2003http://www.teamasia.com/media/2003/04282003.htm
Department of Budget & Management (DBM) assistant secretary Eduardo P. Opida is unfazed that rights to an e-procurement solution the government intends to purchase for P250 million are in dispute. "According to the contract's provisions, the government will be held free by the contracting partners from any individual claims made against any of them," he said. As usual, Opida misses the point.
The dispute, you'll recall, involves an e-procurement solution offered to government by a consortium of companies led by Hong Kong-based EWETC
. EWETC says it developed the technology in the Philippines using Filipino engineers. However, Veronex, Inc., which is presently headquartered in Canada, claims it funded the development of the EWETC solution to the tune of US$8 million, paid for EWETC's Filipino engineers to be trained in the U.S., and paid other sums to EWETC's president, Thomas J. Price, first as an employee, and later as a joint venture partner. Price was formerly president and COO of Veronex. The claims are made by David Hite, chairman and CEO of Veronex.
In the interest of full disclosure, some of my clients participated in the bidding for the government's e-procurement system, and lost.
So what does Opida miss, or ignore, as the case may be? For starters, as in all legal disputes, claimants will follow the money. According to public documents on file with the SEC, three of the companies in the consortium EWETC leads - ABC Consulting, Infomediary, and EWETC itself - have negative net working capital as calculated by DBM's Net Financial Contracting Capacity formula. Thanks to Right Computer Systems, net working capital for the consortium as a whole is around P150 million, which incidentally, is less than that required by DBM for qualified bidders for the project in the first place.
But the principal point is that if the EWETC consortium - which calls itself iTBF - is awarded the contract, EWETC will suddenly become an attractive target for Veronex, which may try to recover its investment. Despite his claim, there is good reason that should be a concern to Opida, and the government. A judgment in Veronex's favor, as anyone who has been involved in cross-border legal disputes knows, can be fairly easily implemented in the Philippines and even more easily in Hong Kong, where EWETC is registered.
Although Opida argues that the EWETC consortium is contractually obligated to indemnify government against any claims, that's going to be cold comfort if EWETC is left without an e-procurement technology or the financial wherewithal to provide one to the government, as a result. While that outcome may be far from certain at this point, dismissing the prospect is incredibly irresponsible.
If DBM goes ahead with its contract with the EWETC consortium, it will be knowingly contracting for intellectual property whose ownership is under vigorous - some say convincing - dispute. I don't know of any organization that would enter a contract under such circumstances, especially one as strategically important as the government's e-procurement initiative.
But there are even better business reasons for caution. Although DBM claims it did a full due diligence with respect to EWETC and the technology it is offering, in fact the solution appears to have never been sold previously, and EWETC's rather crude website offers no reference sites, no client list, and no testimonials, typical features for any legitimate firm with a legitimate technology and real clients.
In fact, as I've previously noted, Price himself has publicly claimed that EWETC developed its e-procurement solution over a two year period on spec for the Philippine government, despite the fact that there was no guarantee that the government would purchase the solution. For a startup with a shaky balance sheet, that's a pretty gutsy move. And it confirms that this is an untested solution, and that the Philippine government appears to be the only taker for EWETC's technology.
So let's see. We don't know if EWETC owns the technology it's trying to sell, and second, we don't know if it works. Does that leave you unfazed?
(Michael Alan Hamlin is the managing director of consultancy TeamAsia and the author of three books on Asian economies and companies. His latest book is Marketing Asian Places, of which he is a co-author (Wiley, 2001), and he is currently at work on High Visibility: The Making and Marketing of Asian Professionals into Celebrities. Write him at firstname.lastname@example.org.).
Copyright © 2003 Michael Alan Hamlin. All Rights Reserved.