COA questions P4.25-B MRT-3 maintenance deal with BURI

MANILA, Philippines — The Commission on Audit has found several irregularities in the previous administration's awarding of the P4.25-billion contract to Busan Universal Rail Inc. for the upgrade and maintenance of the Metro Rail Transit Line 3.

In its 2017 audit report on the Department of Transportation (formerly Department of Transportation and Communications or DOTC), the COA said the contract amounting P4,251,900,000 was awarded by DOTC to BURI on Dec. 23, 2015, even if BURI has no proven legal personality and financial capacity to carry out the project.

Just last month, the Office of the Ombudsman has ordered the filing of a graft case against former Transportation Secretary Joseph Emilio Abaya and 16 other officials of DOTC, MRT as well BURI, in connection with the alleged anomalous maintenance deal.

Just like in the findings of the ombudsman, the COA, in its own audit report, said the contract was awarded to Busan Joint Venture or Busan JV even before its incorporation. The contract was formally signed by the DOTC, MRT-3 and Busan JV on Jan. 7, 2016.

Busan JV was then composed of five firms namely, Edison Development and Construction, Tramat Mercantile Incorporated, TMI Corporation Inc., Castan Corporation and BURI.

The COA said that instead of requiring to submit a valid joint venture agreement (JVA), the DOTC allowed Busan JV to simply submit the Certificate of Registration of BURI as a Special Purpose Company.

“Clearly, the contract was awarded to the Busan JV but the contracting parties are DOTr and five individually named entities...The legal personality of BURI as a Special Purpose Corporation is doubtful [due to] the non- submission of a valid JVA,” the COA report read.

The P4.25-billion contract included the maintenance of the MRT-3 system for three years, general overhauling of 43 units of light rail vehicles (LRVs), total replacement of the signaling system and additional maintenance works.

Aside from the lack of JVA, the audit body said the contract was also awarded despite BURI's failure to submit a detailed breakdown and itemization of the costs and quantity of goods and services it offered “hence the reasonableness of the contract cost could not be determined.”

Furthermore, the COA said there was also no available document showing the computation of the Net Financial Contracting Capacity of BURI, hence it cannot be ascertained if it is financially viable to implement the project.

Notice of Suspension

The COA said it has already issued against the concerned former DOTC officials 20 Notices of Suspension all dated Nov. 10, 2017, covering the payments made to BURI totaling P978,245,058.40 for services it rendered from Jan. 9, 2016 to May 18, 2017.

The NS is issued by the COA to give the concerned officials the opportunity to justify the questioned transaction. If the COA is not satisfied by the justification, it usually issues a Notice of Disallowance to compel the return of the disbursed amount by the concerned officials.

The three-year contract was supposed to end in January 2019 but it was ordered terminated by the DoTr under the Duterte administration on November 6 last year.

Decreased ridership

In the same audit, the COA noted a 20-percent decline in the MRT-3 ridership from 2013 to 2017 due to “recurrent incidents of train removals, service interruptions and passenger unloading.”

The COA records show that from 176,058,278 passengers per day in 2013, the ridership dropped to 140,152,161ppd in 2017.

Despite this, the COA said the revenue collections from ticket sales increased by 29 percent or P619.465 million in 2017 owing the fare hike which took effect in 2015.

The agency blamed the declining ridership to the delays in the implementation of the MRT-3 expansion project, particularly the use of 48 light rail vehicles or coaches procured from Dalian Locomotive and Rolling Stock Company of China for P3.759 billion.

The COA said that while all the 48 LRVs were already delivered as of January 2017, none of them is currently in use as they are not equipped with Automatic Train Protector contrary to what was agreed upon in the contract.

It said that to date, only 4 LRVs are ready for acceptance while 17 LRVs remained uninstalled with ATPs. 

The COA said there were also other technical issues with the new LRVs that has yet to be resolved such as their weight compatibility with the existing rail, compatibility with the existing depot maintenance equipment, such as the lifting hoist and wheel truing machine and compatibility with the existing signaling system software.

The agency said that considering that all LRVs delivered remained unaccepted, the DoTr must impose against Dalian liquidated damages amounting P1.296 billion.

The COA said the DoTr, during the exit conference held on May 18, 2018 agreed to the imposition of of liquidated damages against Dalian. — Elizabeth Marcelo