THE Land Transportation Office (LTO) has rejected Dermalog’s request for another contract renewal and an additional P2.5 billion budget to upgrade the Land Transportation Management System (LTMS).
In rejecting Dermalog’s request, LTO cited unresolved cybersecurity gaps, audit findings and system deficiencies despite 13 contract extensions granted to the German technology provider.
Dermalog sought the renewal during a House Committee on Transportation hearing, asking lawmakers to support additional funding for cybersecurity upgrades, fraud detection measures, and anti-corruption features for the LTMS. Its contract with the LTO expired on May 30, 2026.
LTO Executive Director Martin Ontog warned that another extension could delay the government’s full control of the LTMS and prolong problems affecting millions of driver and vehicle records.
Ontog said existing cybersecurity deficiencies could expose sensitive data to breaches and risk noncompliance with the Data Privacy Act.
The P3.14-billion LTMS, a component of the Department of Transportation’s (DOTr) P8.2-billion Road IT Infrastructure project, has been repeatedly flagged by the Commission on Audit (COA) over delays, incomplete functions, and operational issues.
Ontog said four consecutive COA Audit Observation Memoranda (AOMs) documented deficiencies in the system.
COA’s 2021 report found the LTMS only 67 percent complete as of December 2020 and questioned the payment of full maintenance costs despite the project’s incomplete status.
By 2022, completion reached 82.6 percent, but auditors found seven of nine project activities remained unfinished.
COA’s 2025 and 2026 findings identified 61 unresolved issues, including critical and high-severity concerns carried over from previous years and newly recorded deficiencies.
Among the issues cited were problems with the Motor Vehicle Inspection Report System (MVIRS), including plate assignments for exempt vehicles during initial registration, lack of connectivity with the Land Transportation Franchising and Regulatory Board (LTFRB), and inability to correct vehicle ownership records.
Ontog said these issues continue to affect the LTO’s delivery of services.
COA recommended that the LTO require Dermalog to provide a definite timeline for resolving remaining LTMS issues and consider sanctions if the company fails to comply with project requirements.
Ontog said reports from LTO field officers validated by the Transportation District Officers Association of the Philippines (TDOAP) showed that the system still cannot process several legally required transactions.
Among them are Public Utility Vehicle (PUV) transactions, Motor Vehicle User’s Charge (MVUC) exemptions for diplomats and economic zone locators, and automatic penalty collection for new registrations.
“Every gap requires formal change orders subject to budget appropriation, and every change order requires Dermalog’s participation. This is a structural lock in the LTO and nothing gets resolved without the involvement of the vendor and without additional government payment,” Ontog said.
He also disclosed that Dermalog’s 90-day proposal submitted on last May 4 to Acting Transportation Secretary Giovanni Lopez included a condition requiring the LTO to settle the contractor’s P1.2-billion financial claim within 45 days.
Ontog said the claim had been denied and suspended through a COA Notice of Suspension involving LTO payments to Dermalog.
“LTO is open to 90 days, but solely to complete the transition of LTMS control to the government and not a renewal. Any condition that delays, dilutes, or monetizes that turnover is unacceptable,” he said.
Ontog said Dermalog’s failure to comply with 13 demands for full LTMS turnover, the expiration of its contract, and unresolved cybersecurity concerns raise serious questions over extending the company’s control of the system.
While the LTO is prepared to facilitate an orderly transition, it cannot support arrangements that would further extend contractor control over an IT system that faces operational deficiencies, audit issues and pending turnover obligations, he said. Franco Jose Baroña
