Why is P17-B MRT rehab double Sumitomo’s offer?

Transport Sec. Arthur Tugade must explain. Why is he borrowing P17 billion from Japan to rehabilitate the MRT-3 commuter railway? That’s despite Japanese giant Sumitomo Corp.’s offer of only P7.5 billion – nearly P10 billion less – to do the work.

Filipinos are entitled to an answer. Their taxes will pay for the 25-year loan. Far too long has MRT-3 been a milking cow of crooked train officials. For five years till last Nov. it sloppily was maintained at multibillion-peso overprices.

Tugade’s Dept. of Transportation (DOTr) announced last week the forthcoming P17-billion loan. The amount supposedly was arrived at after weeklong technical talks with Japan International Cooperation Agency (JICA).

The scope of work was mentioned in the DOTr press release. But there was no breakdown of the P17 billion beside each work item. It only stated that “the project will cost Japanese yen 34.48 billion, or P16.985 billion.” 

DOTr and JICA earlier indicated preference for Sumitomo to handle the rehab. Sumitomo, through MRT-3’s private owner-builder Metro Rail Transit Corp. (MRTC), has quoted only P7.5 billion for the long-overdue work. That offer was sent to Malacañang in 2016, and to Tugade in 2016 and 2017. Sumitomo and MRTC have not received any reply.

Last week’s DOTr press release stated the following rehab works, with no corresponding amounts to justify the P17-billion total: trains, power supply system, overhead catenary system, radio system, CCTV system, PABX public address system, signaling system, rail tracks, road rail vehicles, depot equipment, elevators and escalators, and other station building equipment.

“Rehabilitation and Maintenance project will take 43 months: 31 months for the simultaneous rehabilitation and maintenance works to restore MRT-3 to its original design condition and capacity, and 12 months for the defect liability period,” the DOTr said.

Sumitomo is well versed with the state of MRT-3. With Mitsubishi Heavy Industries it constructed the railway in 1998-1999, then handled maintenance in 2000-2012.

In 2012 the then-Dept. of Transportation and Communications suddenly terminated Sumitomo. Without public bidding it handed over the MRT-3 upkeep to inexperienced, undercapitalized outfits, PH Trams then Global Epcom, for P55 million a month, 2012-2015. It then gave a P3.8-billion three-year contract, starting 2016, to Busan Universal Rail Inc. All were exposed in this column to be owned by then-ruling Liberal Party mates of successive DOTC secretaries and LP presidents Mar Roxas and Joseph Abaya.

MRT-3 rapidly deteriorated in those years from shoddy maintenance, non-replacement of parts, and use of inferior lubricants. Twice to thrice daily breakdowns disrupted operations. Passengers were disgorged from trains and made to walk perilously back to stations. At least five times trains suddenly braked, slamming riders to the walls and floor; most injurious was the crash of three coaches onto the steel railing at the end-station. Of the 73 original coaches making up 24 train sets, only 54 coaches were left for 18 sets.

Tugade rescinded the Busan deal last Nov., after five derailments the previous summer. Temporarily taking over maintenance, DOTr purchased fast-moving parts. In the past few weeks it has had no major failures. But rehab still has to be undertaken, major components replaced, and maintenance reverted to a competent private contractor. MRTC’s build-lease-transfer franchise over MRT-3 is till 2025.

Most of MRT-3’s present technicians were Sumitomo’s employees, merely given different uniforms under the three slipshod servicers in 2012-2017.

The railway must be overhauled every seven to eight years, as Sumitomo did in 2007-2008. DOTC ignored it in 2014-2015.

Monitoring the MRT-3’s dilapidation, Sumitomo in those years first broached to DOTC the need for rehab. All trains were to be overhauled; the tracks replaced; the power supply, catenary, signaling, train communications, security cameras, and public address systems upgraded; and the depot and stations, including elevators and escalators, refurbished.

The Japanese estimated the rehab to cost $150 million, or P7.5 billion. Maintenance would coincide. Completion would be in 26 months. The yearlong “defect liability period”, warranty for short, is incorporated in such work and need not be mentioned separately. In the letters to Malacañang and DOTr, the government is to pay the P7.5 billion to Sumitomo, with MRTC merely as pass-through.

What more deterioration could have occurred from 2017 to the present to justify a nearly P10-billion increase from Sumitomo’s old offer to DOTr’s planned loan?

Roughly two-thirds of Sumitomo’s price, or P5 billion, is for the rehab work and components; one-third or P2.5 billion is for maintenance labor and parts for two years and two months.

Even if Sumitomo’s rehab cost were to be doubled to P10 billion and maintenance to P5 billion – for a total of P15 billion – that is still too much to cover the five extra months under the JICA loan. And there would still be an excess of P2 billion in borrowed money. That cannot be for the warranty, which should come free, and should not be itemized to create an illusion of 12 extra months’ work.

The press release said the DOTr is to sign the JICA loan by next month. That makes more pressing the need for Tugade to explain.

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