Northrail chief endorses higher cost for rail project

BACOLOR, Pampanga – An electricity-run and, because of this and other factors, a more expensive Caloocan-to-Clark railway system.

After weeks of renegotiations with the Chinese, North Luzon Railways Corp. (Northrail) president Edgardo Pamintuan said yesterday he has recommended to President Arroyo that Chinese contractor China National Machinery and Equipment Corp. Group (CNMEG) be allowed to push through with the project and yield to its initial demand for $299-million more supplementary cost for the project.

In an interview with newsmen during President Arroyo’s visit here, Pamintuan tried to justify the $299 million additional cost to cover “extraordinary inflation”, currency exchange, and “variation costs”.

“This project was conceived way back in 2003. Now even the cost of steel has gone up by as much as 80 percent,” he said.

Pamintuan also said that CNMEG’s demand for the increased cost was borne of the need to construct two-way viaducts instead of mere embankments along the railway.

“Of course, since the project will now be electricity run instead of diesel, it will have to cost even more,” he said, while refusing to reveal how much the total cost of the project would be.

He also said that apart from shift from diesel to electricity, so-called standard instead of narrow gauge for the tracks were agreed upon.

Initially, the entire project from Caloocan to Clark was estimated at $1.008 billion, including $421.05 million for Section 1 from Caloocan to Malolos and $673.67 million for Section 2 from Malolos to Clark. The Chinese Export-Import Bank had already extended a $400-million loan for the project, with $105 million of this amount already turned over to CNMEG.

Pamintuan said another concern was that part of the $400-million loan had already been released for the project. “We can not just back out, or we might get sued. Also, we (Philippine government) has already spent much for the project, “ he said.

Last February, however, CNMEG workers were reported to have abandoned the project site. “There was even a notice of termination,” he said.

This was after the contractor complained of delays in right-of-way concerns which were in the hands of the National Housing Authority. It was at this time that the contractor also demanded the $299- million additional cost.

Earlier, Pamintuan said the president had given him full authority to decide on the controversial project. Yesterday, he said he had forwarded to the President his decision favoring CNMEG for the project.

“She doesn’t want a half finished railway from Caloocan to Malolos, Bulacan. She wants the entire stretch up to Clark finished by 2010,” he said.

Arsenio Bartolome III, Pamintuan’s predecessor at the Northrail who resigned last June, had earlier recommended the termination of the contract with the Chinese firm after it unilaterally suspended the construction work and demanded close to $300 million in additional costs to continue the project. In his letter to the President last April 24, he cited various “options for future directions” on Phase 1 of the Northrail project”.

Critics of the project said nothing much had been done on the project and yet in its letter, the Chinese contractor already made “variation orders” that would cost $299.4 million as of March 31. 

Bartolome said the suspension was against the contract agreement as well as “project negative slippage of more than 15 percent” and that this could be basis for termination of the contract under the governing provisions of Republic Act 9184 or the Government Procurement Reform Act.