The Procurement Service of the Department of Budget and Management (PS-DBM) has been ordered to pay ₱2.185 billion to a software company for Microsoft licenses and subscription services it allegedly failed to settle.

In a 20-page decision, the Commission on Audit (COA) directed PS-DBM to pay the amount to Crayon Software Experts Philippines Inc. (CSEPI), which had an agreement with the agency to supply the software services.

Under a memorandum of agreement signed on June 25, 2020 between PS-DBM and Microsoft Philippines Inc. (MPI), the government agency agreed to continue subscribing to Microsoft software licenses and services.

The agreement required PS-DBM to issue a purchase order to a designated “fulfiller,” which would provide the licenses and services and be paid by the agency. Microsoft Philippines would not directly supply the licenses, as this responsibility would be handled by the fulfiller.

During the public bidding, CSEPI offered the lowest mark-up among the participating fulfillers. On November 24, it signed a fulfiller’s agreement with PS-DBM.

However, the deal ran into problems after the DBM raised an issue involving the standard input value-added tax (VAT) for each sale of the licenses.

Because of this, CSEPI increased its reseller’s mark-up to 0.50 percent, bringing the total mark-up to 7.5 percent.

The dispute led CSEPI to file a money claim before the COA, saying it should be paid for the services it delivered, including the increased mark-up.

In its decision, the COA en banc ruled that CSEPI’s petition was partly valid. It ordered PS-DBM to pay ₱2.18 billion for the services rendered but denied the additional ₱219.8 million representing the mark-up difference for lack of merit.

The 20-page decision was signed by COA Chairman Gamaliel A. Cordoba and Commissioner Douglas Mallillin.