Midnight escape from MRT suits?

IF THERE are midnight appointments, are there also midnight escapes?

In what looked like an attempt to escape responsibility for ruining the Metro Rail Transit, then Transportation Secretary Joseph Emilio Abaya rushed – one month before he left office – a counterclaim in the arbitration case filed by MRT Corp. against the government (DOTC).

Abaya in effect told the arbitral panel in Hong Kong in a counterclaim filed May 30, 2016, that the MRT-3 mess over which he presided was not due to mismanagement and bad maintenance but to his claim that it was not yet complete when the DOTC took over.

MRT Corp., the private owner of MRT-3, is wholly owned by MRT Holdings which in turn is owned in equal parts (mostly 18.6 percent) by the Ayalas (Ayala Land Inc. group), Ramcar (Agustines group), Anglo (National Bookstore group), Sheridan (Unilab group), Metro Global (Fil-Estate group), DBJ (Seiko group), and Emerging (Lao group).

In December 2008, MRT Corp. filed an arbitration case in an exasperated effort to collect payment from the DOTC based on the Build Lease Transfer agreement that they entered into in August 1997.

Under the BLT agreement, MRT Corp. was to design, construct, and maintain the MRT-3 system. It ran smoothly, given occasional minor glitches, under the maintenance services of Sumitomo Corp. until 2012.

Negotiations have taken place, meantime, leading to the Land Bank of the Philippines and the Development Bank of the Philippines buying 80 percent of MRT bonds. Of the 15 board seats, 10 are now held by the banks as nominees of the private owners. The deal made the government the biggest recipient of MRT lease rentals estimated at $10 million a month.

After Abaya took over, with notices from the private owners to the DOTC that the Sumitomo contract had expired and either a bid, renewal or another extension was due, the DOTC in 2012 appointed PH Trams-CB&T to replace Sumitomo.

PH Trams was awarded the contract not through bidding but via emergency procurement, after then MRT General Manager Al Vitangcol gave MRTC 12 days to find a new maintenance provider. The short notice forced MRTC to authorize DOTC to hire a replacement in the interim.

A two-month-old company, PH Trams-CB&T, was appointed by Abaya. After failing to stem the system’s deterioration, PH Trams was replaced with APT Global, whose representative Marlo dela Cruz turned out to be the same chairman-incorporator of PH Trams, and whose performance in maintaining the MRT turned out to be no better than that of PH Trams.

• Non-completion or bad maintenance?

IN A MOVE that looks like an attempt to shift blame and lay the basis for his defense in criminal proceedings, Abaya filed last May 30, 2016, a counterclaim with the arbitration panel alleging that the MRT’s problems arose from the MRT Corp.’s failure to complete the system.

Abaya is saying in effect that the MRTC did not fulfill its obligation to complete the project and that there lies the primary cause of MRT problems.

If upheld by the arbitration body, Abaya’s counterclaim could also be an indirect way of evading criminal liability for the MRT mess.

It is timely to recall that PH Trams-CB&T picked by Abaya had a subscribed capitalization of only P2.5 million, equivalent to 120th of the P300-million value of the contract it was given.

With maintenance under Abaya’s chosen firms, MRT service decayed. Reports of glitches were so frequent – from monthly to weekly to almost daily – that they ceased to become news.

From the required 18 to 20 trains (of three coaches each) running at peak hours, the new normal under Abaya was only 12 trains, sometimes as low as only six trains even at rush hour.

While MRT capacity is 550,000 passengers, bad maintenance under Abaya eroded service to a level of only 1/4 of the trains running at 1/3 the ideal speed. Waiting in long lines at stations under sun or rain became life-threatening.

In February 2016, the Senate released a committee report that Abaya and other DOTC officials “may have violated” the Anti-Graft and Corrupt Practices Act in relation to contracts with subsequent maintenance providers.

In Abaya’s counterclaim, the DOTC alleged that as a result of MRTC’s failure to perform its contractual obligations, including constructing and maintaining the system, “the MRT-3 system is unable to meet the current needs and is hampering (Metro Manila) development.”

This seems to go against the fact that MRT-3 construction was completed and the contract requirements were fulfilled. In July 2000, MRT Corp. completed the design and construction, and appointed Sumitomo as maintenance contractor.

This is reflected in a Completion Agreement saying: “The parties recognize that as of 10 October 1999, Seventy-Three LRVs have been delivered by MRTC pursuant to and in accordance with the BLT Agreement.” It also recognizes the completion date of the MRT-3 system as July 15, 2000.

Then President Erap Estrada inaugurated the initial section of the MRT from North Ave. in Quezon City to Buendia Ave. in Makati on Dec. 15, 1999, while the remaining stations opened in July 2000.

Abaya also asked the arbitration panel to compel MRT Corp. to sell the MRT-3 system to the government under a Residual Value Buyout scheme. This is almost like selling it on a “por kilo” basis considering how it has deteriorated under Abaya.

The Residual Value Buyout, according to those familiar with it, is available to the government only if a project is not completed. The option could have been invoked during the MRT-3 construction, not 16 years later. Neither can it be invoked after a completion agreement has been acknowledged by DOTC itself.

Abaya’s biggest problem is that MRT-3 worked until he entered the picture and the maintenance providers he appointed failed to properly maintain the system.

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