MRT-3 deteriorating due to crime upon crime (2)

The Transport Safety Agency alerted the MRT-3 in Aug. to tighten up against terror attacks. At once the railway’s private guards offered to lend security x-rays for the busiest three of 13 stations. Usec for Rails Noel Kintanar nixed the idea, preferring to purchase the equipment in one go for all the stations. MRT-3 general manager Roman Buenafe, since resigned in Oct., his then-deputy and replacement Deo Leo Manalo, and then-head executive assistant Joel Erestain acquiesced. The x-rays have not been installed. Kintanar left yesterday.

Commuter safety seemed of no import to those four high-schoolmates. Always they opted for big (commissionable?) spending. They must have picked up the attitude from two other school chums, ex-transport secretary Joseph Abaya, and LRT-1 and -2 appointee Honorito Chaneco, who twice also headed MRT-3.

Unconcern for safety marked Abaya and Buenafe’s contracting of an inept maintenance outfit for MRT-3, for three years starting Jan. 2016. Chaneco and Erestain were involved in its making. Kintanar abetted that P4.25-billion grant under the new admin. Manalo retains it to this day.

That outfit is newborn, underfunded Busan Universal Rail Inc. A mere assignee of the original contractor, BURI acts unbound by safety conditions. Since Jan. it has not purchased spare parts, only cannibalizing from wrecked trains, tracks, and power supplies, or using up leftovers of long-time but suddenly removed predecessor Sumitomo Corp. Riders are imperiled, inconvenienced, and shortchanged by twice to thrice daily breakdowns. BURI continues to draw tens of millions a month from the Dept. of Transport (DOTr) to the dismay of state auditors.

BURI’s entry into the picture is in breach of procurement, anti-dummying, and anti-graft laws. The P4.25 billion first was awarded on Jan. 7, 2016, to giant Busan Transport Corp., net worth equivalent to P39 billion. Lacking political connections at the DOTr to clinch the deal, it brought along four influential Filipino dummies. All had no knowledge of railways. Edison Construction Development Inc. was into real estate; Tramat Mercantile into general merchandising; TMI Corp., agricultural supply; and Castan Corp., plumbing. Odd, yet they pressed on.

There were two blocks at first. The Constitution requires foreigners in public utilities to have 60-percent Filipino partners. Furthermore, the MRT-3’s maintenance terms of reference (TOR, Section 6.1.10) required the Filipino side to hold as working capital at least half the P4.25-billion contract budget. That meant P2.125 billion, which Edison, Tramat, TMI, and Castan did not have, jointly or individually.

They went around the hurdles. The DOTr simply changed the TOR via an addendum, called Eligibility Documents. The new requirement was for any Filipino partner owning 25 percent or more to have a net worth of at least P1 billion. The four dummies still didn’t have such cash. So they simply wrote in the following ownership: “Edison, 24.5 percent; Tramat, 24.5 percent; TMI, 24.5 percent; Castan, 22.5 percent, totaling 96 percent.” With that, they claimed jointly to have P1-billion working capital. Giant, experienced Busan Transport was listed as a minority of four percent.

They overlooked the obvious question: if the Filipinos were so big as to hold 96 percent, then why did they need a wee, potentially troublesome foreign shareholder? Only a dummy wouldn’t guess that it’s to skirt the Anti-Dummying Law.

They needed to keep up the pretense. BURI was incorporated on the same first week of 2016 (Securities and Exchange Commission, Company Reg. No. CS201600028). Its main incorporators were the same Filipino firms Edison, Tramat, TMI, and Castan, holding 96 percent. Busan Transport was four percent.

Notably, however, their combined working capital in BURI was only P432 million. That’s less than half the P1 billion the Filipino firms previously declared to become eligible for the contract, which already was less than half the original TOR requirement of P2.125 billion.

Government contracts normally forbid transfer or assignment to any party other than the awardee. That’s to ward off influence-peddlers, carpetbaggers, or saboteurs. But not the MRT-3 maintenance, which specifically directs the contracted Korean firm and Filipino “partners” to incorporate (Contract Item 3). Thus came in BURI, like a photo bomber.

The Government Procurement Reform Act prohibits the reduction of the contractor’s working capital. That’s to ensure sufficient funds to deliver the purchased goods or services. Not the MRT-3 contract, which states that the original contractors -- with “prior [financial] agreements” for higher capital – may form a company with only P432 million. The contract even directs Busan Transport quickly to raise its equity to at least 20 percent (Item 5). It in effect makes the Korean buy out portions of and thus recompense the Filipino dummies for a job well done.

They then tried to erase their dirty tracks with yet another rider. “{As] the whole agreement between the parties,” the contract “supersedes and extinguishes any prior drafts, agreements of any nature, whether in writing or oral, relating to such subject matter” (Item 8). That practically invalidates the TOR and Eligibility Documents, which normally form part of any government contract.

The assignment unbinds BURI from commitments to safety and good work. No wonder BURI sees no compulsion to replace worn-out crucial parts.

BURI’s managing director is Eugene Rapanut, Philippine agent of Busan Transport. He also brokered the P3.8-billion purchase of faulty coaches from China, allegedly with P200-million kickback. None of the 48 new coaches are operational.

Behind the four Filipino dummies is Marlo dela Cruz. Brother William “Bong” dela Cruz is BURI’s general manager. Marlo was the principal of fledglings PH Trams and Global Epcom, which elbowed out Japanese giant Sumitomo to become MRT-3’s maintenance servicers in 2012-2015. Abaya signed both times; Chaneco on the second.

Drafting the BURI contract were U-Sec-lawyers Rene Limcaoco, Catherine Gonzales, and Edwin Lopez. Signing for Abaya was Buenafe. Kintanar, Manalo, and Rapanut’s college fraternity-mate Erestain helped in implementation later.

Rapanut and Dela Cruz reportedly are Liberal Party-mates of president Abaya. Their control of the railways is complete.

The BURI contract came with yet another breach of the Procurement Act. The contracting was done by closed-door talks instead of open bidding. Abaya misrepresented to the Government Procurement Policy Board that two previous biddings for the maintenance had failed. Allowed to then negotiate with parties of his choice, he threw in previously unbidded works: replacement of the signaling, overhaul of 43 coaches, and additional maintenance.

During the talks Abaya’s U-Secs and Buenafe went through the motions of calling in renowned parties like DMCI Group, Singapore MRT, and the Hamburg metro builder-operator.

Rapanut then had just partnered with dela Cruz. He was sore at being eased out of the LRT-2 maintenance deal, despite offering the lowest bid. On Oct. 12, 2015, he fired off two memos to Chaneco and the U-Secs, saying in so many words that they were favoring the long-time LRT contractors Comm-Builders Transport and Autre Porte Technique. So he got the MRT-3.

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