DOTC at fault for 'inefficient' maintenance providers, letting MRTC off the hook —COA

The Commission on Audit (COA) has scored the Department of Transportation and Communications (DOTC) for failing to sanction the Metro Rail Transit Corporation (MRTC) over its failure to fulfill its duties, leaving the agency to sign deals with "inefficient" service providers to maintain the MRT 3.

In a 2014 audit report published by COA on its website, the audit body pointed out that under Sections 3 and 5 of the Build-Lease Transfer (BLT) Agreement, the MRTC "shall provide technical maintenance of MRT 3 subject to the payment by DOTC of rental and other relevant fees."

The agreement was entered into by the government, through the DOTC, with the MRTC on August 8, 1997 in connection with the government’s construction of a mass rail transport system along EDSA. It took effect in 1999 and is deemed valid for 25 years.

However, the DOTC "assumed in October 2012 the responsibility for securing the maintenance service provider for the MRT 3 by being the contracting party/signatory to the maintenance service agreement without any amendment to the Build-Lease-Transfer (BLT) agreement with Metro Rail Transit Corporation (MRTC)."

COA scored the DOTC for not filing legal action against the MRTC "for not complying with its obligation to provide Technical Maintenance of MRT 3 subject to the payment by DOTC of Rental and other Fees."

"Under these circumstances, it would appear that the contract with the existing provider is of doubtful validity and as compared to the recorded performance of the MRTC contracted service provider, various service interruptions/breakdown were noted caused by inefficient maintenance operations of the system," the COA report added

Inefficient maintenance providers

Following the signing of the BLT Agreement, the MRTC entered into a contract with Sumitomo Corporation on December 10, 1997 to be the MRT 3’s maintenance provider. The maintenance agreement expired on June 21, 2010, but had undergone four extensions from June 21, 2010, to October 19, 2012 or a total of 27 months.

"Allegedly, MRTC’s proposal to extend the maintenance contract for another year was rejected by Sumitomo since the latter wanted a one-year contract extension on a renegotiated term," the COA report said.

After the contract with Sumitomo was not renewed, the DOTC started assuming the responsibility of MRTC to find the maintenance provider for the MRT 3 — PH TRAMS-CB & T from October 20, 2012 to September 3, 2013 and Global-APT JV from September 5, 2013 to  July 4, 2015.

The state audit body said that the maintenance service providers employed by the DOTC were "inefficient" as shown by the frequent breakdown and service interruptions of the MRT 3.

"Furthermore, review of the performance efficiency of the two maintenance service provider procured by the DOTC disclosed that it failed to carry out the maintenance activities and its objectives," the COA said.

"The occurence of the frequent breakdown of the MRT 3 System and the incident that happened on August 13, 2014 where a train overshot from the rails near Taft Avenue station was found to be caused by poor maintenance of the system," it added.

Based on data obtained by the audit team, for 2012, the MRT 3 had 292 incidents of emergency unloading of passengers and 2,617 incidents of unscheduled "train removals" or more commonly referred as train breakdown.

Meanwhile, for 2013, the MRT recorded 281 incidents of emergency unloading of passengers and 2,256 incidents of unscheduled train removals, while for 2014, it has recorded 281 incidents of emergency unloading of passengers and 2,022 incidents of train removals.

The COA also noted the increase in service interruptions of the MRT, which were usually caused by "either broken rails or signaling failure."

Unusable escalators, elevators

"The above figures show that there is a need to give serious attention to the maintenance problems to prevent further breakdowns that may pose grave threats/danger to the safety of the riding public," the report said.

COA also mentioned the unusable elevators and escalators in all the 13 MRT 3 stations, which it noted have not working almost daily since 2013.

"Further, it was also observed that most of the elevators and escalators of the thirteen stations are not working.  The non-availability of these conveyances greatly affects the wellbeing of passengers, especially the elderly, pregnant women and persons with disability," the report said.

"The time performance reliability and accessibility of the MRT 3 system of which the riding public depend as their mode of transportation was not attained," the report concluded.

The state audit body directed the DOTC to provide legal basis for undertaking the responsibility of procuring the maintenance service provider for  the MRT 3 system instead of the MRTC pursuant to the BLT Agreement; and to submit an "action plan" on how it can sanction the MRTC over its non-compliance with the said Agreement.

The DOTC was also directed to "submit corrective measures/proposal to ensure the safety of the riding public as well as to provide a fast reliable and comfortable mode of public transport facility."

DOTC's reply

In a letter of reply to the COA report, the DOTC management reasoned out that no legal action was taken against MRTC because the government’s Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) have already acquired majority of its shares and securities, representing 84.4 percent of the total interest of the equity rental payment (ERP) that the government paid to MRTC under the BLT Agreement.

"As such, any legal actions or sanctions against MRT is improper considering that the financial interest of LBP and DBP may be legally affected or compromised," the DOTC said.

The DOTC further pointed out that it is also “impractical” for the government to sue the MRTC since there is still a pending arbitration case that the latter filed in Singapore over the DOTC’s alleged failure to timely pay the ERP pursuant to the BLT Agreement.

Lastly, the DOTC said the government is already pursuing the implementation Equity Value Buyout of MRTC pursuant to Executive Order No. 126 signed by Pres. Benigno Aquino III on February 28, 2013.

The DOTC said among the components of the buyout are the government’s acquisition of all outstanding shares of stocks and other securities issued by MRTC concerning the MRT 3 project; transfer of rights, title and interest of the MRTC in the MRT 3 project to the government; as well as the termination of the BLT Agreement.

However, in a rejoinder, the COA maintained that pending any amendment or termination of the BLT Agreement, the MRTC must perform its obligation of procuring a maintenance service provider for the MRT 3.

"It is our view that in the absence of an amendment to the BLT Agreement, DOTC should have demanded on enforcing the obligation of MRTC under the agreement,” the COA said. —KBK/JST, GMA News