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DoTC ignored 3 MRT proposals to buy more trains

/ 12:15 AM September 05, 2014

(Concluded from Wednesday)

At the Senate hearing on the frequent MRT breakdowns, Sen. Chiz Escudero asked Undersecretary Jose Lotilla why the government has not sued Metro Rail Transit Corp. (MRTC) or MRT Holdings, the owner of the trains, for defaulting on its duty to buy more trains as the present number has exceeded its rated capacity.

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“Don’t you have any plans in your pipeline to sue MRTC?” Escudero asked. “Why do you allow them to [bombard] the government with litigations left and right by way of [temporary restraining orders] when clearly they did not perform [according to] their contract?”

Lotilla answered, “We hope to go in that direction.”

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When Escudero pressed why the matter was still being studied, Lotilla said the maintenance records were still with MRTC and the government was loath to file a case unless it had gathered sufficient evidence.

Either Lotilla was lying or was wrongly informed. Records show that since the Department of Transportation and Communications awarded the maintenance contract to PH Trans-CB&T, and later to APT Global (without any public bidding as required by law), MRTC was no longer furnished copies of the maintenance records. These were given to the DoTC. So the maintenance records are with the DoTC, not the MRTC. When Sumitomo/TES was the maintenance provider of the train system, MRTC was furnished with the maintenance logs every month.

On the failure to buy additional trains, records show that it was the fault of the DoTC, not of the MRTC. Records show that the DoTC received three proposals—in 2004, 2008 and 2010—to buy additional trains, upgrade the systems and back-to-zero-hours works, at no cost to the government. The DoTC never acted on these proposals.

The reason: The DoTC wanted to buy the trains itself. But the build, lease and transfer (BLT) agreement gives the owners the right of first refusal.

Apparently, to get around this provision, the DoTC asked the opinion of the Department of Justice on whether it can, on its own initiative as the operator of MRT3, proceed with the procurement of additional Light Rail Vehicles under its emergency relief measure.

The DoTC also asked the DoJ whether MRTC, by its actions, has waived its right of first refusal on the procurement of additional trains and has unreasonably withheld its consent in contravention of the BLT agreement.

The DoJ replied that in the past it has had occasion to pass upon the same issues.

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According to that opinion, the provisions of the BLT agreement are clear and sufficiently explicit. Which means that MRTC’s right of first refusal remains and cannot be presumed to have been waived.

Why does the DoTC want to assume that MRTC had waived its right of first refusal? Because the DoTC wants to buy the additional trains itself. Why? I do not have the answer to that, but what happened recently—when an ambassador accused the manager of MRT3 of trying to extort $30 million from him in exchange for buying the additional trains from his country—may be an indication of the reason.

At any rate, the government has already ordered 48 new coaches from China without the consent of MRTC, in violation of the BLT agreement.

The trains made in China are cheaper, the government said. Maybe, but that poses risks to the riding public. The new trains may not be compatible with the rails, the signaling system, and other specifications which were made for the original trains made in Czechoslovakia. If that is so, the danger of more accidents increases.

As can be seen, it is MRTC that should sue the DOTC for numerous violations of the BLT agreement. In fact, it has done that. It has sued the Philippine government in the arbitration court in Singapore for nonpayment of numerous obligations. It has also petitioned for a temporary restraining order from a Makati court to stop the DOTC from buying the new trains from China as it is a violation of MRTC’s right of first refusal.

In February last year, the Office of the President issued Executive Order No. 126 to buy the remaining shares of MRT Holdings in MRTC to avert the arbitration case and assume control of the MRTC board. Earlier, the President ordered the Land Bank and the Development Bank of the Philippines to acquire shares of stock and other securities (including MRT3 notes and preference shares) representing economic interest in MRTC. It is estimated that the government now owns 70 percent of MRTC. It wants to buy the 30-percent shares remaining with MRT Holdings. However, it is not willing to pay the correct price. So the owners are not selling.

The government said that it wants to own the train line and that it would privatize it. That does not make sense. Why privatize something when it is already privately owned?

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TAGS: APT Global, Chiz Escudero, DOTC, emergency relief measure, Jose Lotilla, metro rail transit, MRT, MRT Breakdowns, MRT Holdings, PH Trans-CB&T
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