By Ducky Paredes | www.duckyparedes.com | May 05, 2014

“First, it is wrong to blame the MRTC during the GMA era for the train congestion because a chronology of events would show that this private operator had four proposals in the past administration to acquire additional LRVS—at no cost to taxpayers—starting from 2000, when MRT3 was just completed, up to 2005, when the train system already reached its

maximum design capacity.“

Communications Secretary Herminio Coloma and Metro Rail Transit (MRT) general manager Al Vitangcol are waist-deep in the MRT3 media quicksand and sinking deeper.

Obviously pissed off by the never-ending bellyaching over kilometer-long queues at MRT3 stations Coloma did the unthinkable when he advised train passengers to just ride buses and other alternative transport modes while waiting for the new Light Rail Vehicles (LRVs) to start arriving from China in one to two years’ time.

Vitangcol also did the unthinkable by resorting to GMA-bashing or blaming President Aquino’s immediate predecessor and her administration for Government’s ills and wrongdoings.

* * *

First, it is wrong to blame the MRTC during the GMA era for the train congestion because a chronology of events would show that this private operator had four proposals in the past administration to acquire additional LRVS—at no cost to taxpayers—starting from 2000, when MRT3 was just completed, up to 2005, when the train system already reached its maximum design capacity.

The DOTC ignored all those proposals back then and such talks reached a dead end in 2006 and 2007 when the DOTC surprisingly insisted instead on the purchase of refurbished or second-hand trains, and also in the following years when MRTC opted for the arbitration route following the continuous delay in the government’s Equity Rental Payments (ERPs).

Second, the Aquino-era DOTC is not spotless either because the MRTC made a fifth offer—when Interior Secretary Manuel Roxas II was still DOTC secretary—to purchase new trains at no cost to the government in November 2010.

And rather than accept the cost-free MRTC proposal, the DOTC opted to dump its private partner and instead awarded a contract to lone bidder Dalian Locomotive & Rolling Stock Co. (Dalian) to supply 48 new trains, without seeking prior MRTC consent, in gross violation of their BLT agreement.

MRTC offered to purchase more LRVs as early as 2000 upon the system’s completion in view of [1] its projection that the maximum daily capacity of 350,000 riders would be met soon, and [2] the two-year lead-time for the manufacture and delivery of the new trains.

But the National Economic and Development Authority (NEDA) required a triggering event of 350,000 daily passengers before it would actually approve the MRTC’s purchase of additional LRVs.

* * *

 It is also wrong for Vitangcol to blame MRTC for the exacerbating commuter woes like the seemingly endless station queues and recurring train accidents and system breakdowns, simply because such problems worsened only in 2012 when DOTC replaced longtime maintenance provider TES-P of Sumitomo Corp. of Japan (TES-P/Sumitomo), which had handled MRT3’s operations and maintenance for 10 years straight.

After the expiry of TES-P/Sumitomo’s contract, the PH Trams-Comm Builder Technology Philippines Corp. (CB&T) took over the maintenance of MRT3 for almost a year, after which it was taken over by its current operator Autre Porte Technique Global Inc. (APT Global).

DOTC awarded a six-month maintenance contract in October 2012 to the PH Trams-CB&T consortium.

Hence, it was under the successive maintenance terms of PH Trams-CB&T and of APT Global that the MRT3 horror tales begone, including four successive glitches over a two-week span in March that was capped by an accident that injured 10 passengers.

Since then, MRT3 passengers endured even longer queues on April 15, when a broken rail forced MRT3 to go on limited morning runs from the Shaw Boulevard to Taft Avenue stations, and again on Labor Day (May 1) when trains stalled near the Santolan station.

* * *

The chronology of events and a clear explanation on what went wrong with the MRT3 with regards to its train congestion and frequent system breakdowns could be gathered from two letters that MRTC directors Rafael Perez de Tagle Jr. and Rogelio Bondoc Jr. sent last April 2 to President Aquino, through Executive Secretary Pacquito Ochoa III.

“Such reported accidents and shortages of trains, which causes long lines at the MRT stations, only occurred after the DOTC took over the maintenance of the MRT3 System last October 2012,” said Tagle and Bondoc. “Records would show that these incidents never happened before when MRTC’s maintenance provider, TES-P of Sumitomo Corp. of Japan (TES-P/Sumitomo) was handling the maintenance of the MRT3 System for over 10 years.”

Tagle and Bondoc told President Aquino that three years ago, MRTC already told the DOTC of  the need to bid out the maintenance deal for this train system, as the contract of TES-P/Sumitomo was about to end.

 

But instead of acting on the firm’s reminder in a “timely fashion,” DOTC procrastinated and waited till a few days left in the contract’s term before directing MRTC to conduct a public bidding for a new maintenance provider and to exclude TES-P/Sumitomo from it.

* * *

Given the “very limited time” to conduct the necessary due diligence on the qualifications of prospective bidders and the required newspaper publication of proper notices to interested parties, they said MRTC have had no recourse then but to allow DOTC to select an interim maintenance provider—but on condition that the Terms of Reference (TOR) be first submitted to and approved by MRTC in keeping with their Build-Lease-Transfer (BLT) agreement.

However, DOTC reneged on their BOT pact and named a joint venture (JV) firm between Philippine Trams Rail Management & Services Inc. and Comm Builders & Technology Inc. (PH Trams-CB&T) as the interim maintenance provider through a mere negotiated arrangement instead of the required public bidding,

According to Tagle and Bondoc,  a November 9, 2012 certification by the Securities and Exchange Commission bared that PH Trams was not even a duly registered entity with the SEC, let alone qualified to maintain an important public utility system like the MRT3.

Violating the BLT anew, DOTC later on awarded the one-year P685 million-maintenance contract for MRT3 to Autre Porte Technique Global Inc. (APT Global), without first submitting the TOR to MRTC for its prior consideration and approval, they told the President in their letter.

* * *

On top of these BLT pact breaches, the two MRTC directors noted that this firm had repeatedly requested DOTC for an independent third-party technical audit for the MRT3 to ensure the safety of the riding public and ascertain that the entire system was being properly maintained and run on the basis of BLT agreement’s operational specifications.

The BLT contract terms specify a minimum of 54 to 60 light rail vehicles (LRVs)—consisting of 18 to 20 trains with 3 coaches each—running on the elevated EDSA tracks with a headway or interval between trains of three (3) minutes during peak hours.

“However, DOTC has never responded and/or has ignored the demand of MRTC for the technical audit,” they added. “In fact, DOTC did not even show up during the Jan. 27, 2014 MRTC Board Meeting where DOTC was suppose to present to the MRTC Board the maintenance provider they had already chosen. Notwithstanding the fact that this presentation was even confirmed by DOTC Undersecretary Jose Lotilla, DOTC did not even bother to call up to say they had decided not to come.”

In a separate letter to President Aquino—also dated April 2 and coursed through Ochoa, the same MRTC directors pointed out to the Chief Executive that DOTC’s recent award of a contract to the Chinese firm Dalian Locomotive for the supply of 48 LRVs was in violation of the Revised Build and Lease Agreement—dated Aug. 8, 1997—between the Philippine Government, through DOTC, and MRTC.

This BLT deal, which remains in force, bars DOTC from operating trains in the MRT3 System unless such LRVs, according to De Tagle and Bondoc, are [1] supplied by MRTC, or [2] were acquired by DOTC after MRTC had been afforded its right of first refusal.

In keeping with the BLT accord’s terms and conditions, they noted that MRTC “has long been working with DOTC to procure additional LRVs to increase capacity from 350,00 passengers to 660,000 passengers a day.”

* * *

They told the President that MRTC proposed anew to DOTC the purchase of additional trains in 2002, when the daily target of 350,000 riders was reached that year, and again in 2004 and 2005 when the system “had then already reached its maximum design capacity.”

“The purchase of the additional LRVs would decrease the hastened depreciation of the existing LRVs brought about by the ever increasing volume of passengers,” they added.

“However,” they bewailed, “said proposals were never acted upon by DOTC, which instead pushed in 2006 and 2007 for “the purchase of refurbished (second-hand) LRVs under the so-called Emergency Relief Vehicles and Works for the MRT3 System.”

De Tagle and Bondoc said the DOTC finally relented in 2008 and accepted MRTC’s proposal on the acquisition of brand new LRCs as provided in the Feasibility Study, which was released in October 2008 after being crafted with inputs from MRTC representatives.

However, this purchase plan was “relegated to the back seat” that year as the DOTC’s new BLT breach concerning the “continuously delayed” Equity Rental Payments (ERPs) to MRTC, forced this company to file an arbitration case in Singapore to resolve the dispute, they said.

* * *

De Tagle and Bondoc told President Aquino that MRTC was aware of and respects Malacañang’s plan to buy out the private owners and completely take control of MRT3, but they urged him to tell the DOTC to respect the BLT pact and comply with its terms and conditions until such time that the Palace carries out and completes its takeover move.

They were referring to President Aquino’s issuance on Feb. 28, 2013 of Executive Order No. 126 on the reverse privatization of MRT3, meaning the government takeover of this train system prior to its re-privatization under the Equity Value Buyout (EVBO) plan of the DOTC and Department of Finance (DOF).

EO 126 requires DOTC and the DOF to discuss this reverse-privatization plan with the MRTC shareholders, but neither of these two agencies has initiated such talks with the private owners at this stage.

DBP and LandBank own between them about 80% of the MRT3 bonds issued by MRTC, covering the monthly leases collected from Phase 1 of this EDSA rail system. MRTC’s common shares still belong to the firm’s original shareholders and are not covered by these two state banks’ combined stake.

Thus, Bondoc and De Tagle are correct in claiming that this EVBO plan has not even began yet—in the absence of any talks about it by both parties.

* * *

As early as January last year, Abaya announced that an EO was to be issued by Malacañang detailing the government’s $1-billion MRT3 takeover plan.

National Treasurer Rosalia de Leon said the DOF was already in talks with DBP and LandBank on the purchase of these two banks’ 80% economic interest in MRT3 plus the 20% balance held by private shareholders, and that money was no longer an issue as the national government was awash in cash.

President Aquino then signed EO 126 in February last year, and this EVBO directive popped up every now and then in the course of the year, until Abaya announced his planned meeting with Purisima before end-2013 to finalize this takeover plan.

This EO directs the DOTC, DOF, DBP and LandBank to execute the buyout through the purchase of all outstanding shares of stock and other securities issued by MRTC or all of its rights, titles, and interests under the BLT agreement.

* * *

In January this year, Abaya said the Department of Budget and Management (DBM) had already tucked a P56-billion outlay in the 2014 national for the EVBO plan.

He said that Purisima and De Leon would finalize the timing of the proposed takeover, but nothing has been heard about this ever since.

As noted by De Tagle and Bondoc in one of their letters to President Aquino, neither the DOTC nor DOF has talked to MRTC about the planned buyout or the settlement of any MRT3-related concern from the time EO 126 was issued almost 14 months ago.

The President could prove to the public that Malacañang is serious about addressing the nagging MRT3 issues by considering the three proposals by De Tagle and Bondoc, which are [1] an independent audit of the MRT3 system to determine its safety, [2] a public bidding by DOTC to select a highly competent maintenance provider, and [3] DOTC’s compliance with the BLT contract until such time that Government had taken over MRT3 from the private stockholders—by way of its long-stalled $1-billion EVBO plan.

DOTC urgently needs to agree to an independent technical audit of the MRT-3 System.

After such assessment, a public bidding should be conducted so that a financially and technically qualified maintenance provider with adequate experience, may be properly selected to maintain the MRT-3 System.

But, DOTC cannot be allowed to do it alone. Considering that it has repeatedly demonstrated its lack of technical or moral competence to conduct independent and objective bids.