Before they stepped down from office, transportation officials of the Aquino administration lodged a counterclaim against the owner of Metro Manila’s most congested railway line, claiming that the company failed to “perform its contractual obligations, including constructing and maintaining” the train system.
According to documents obtained by the BusinessMirror, former Transportation Secretary Joseph Emilio A. Abaya told an international arbitration center in Singapore that Metro Rail Transit Corp. (MRTC) failed to deliver what was stipulated under the build-lease-transfer (BLT) agreement signed almost two decades ago.
The team claimed that the company breached numerous sections of its maintenance obligations, and were listed under the following points: poor track maintenance; poor structural maintenance; lack of ultrasonic testing; lack of records for maintenance and functional testing of work tracks; and incomplete spare parts.
Abaya’s camp, likewise, claimed that there was a “material breach of the BLT agreement arising from abnormal lateral movement of the train system,” and, thus, reflects that the company was not able to “construct and maintain the MRT [Metro Rail Transit] Line 3 system to the standards required.”
Given these circumstances, the team contended it is necessary for what is called as the residual-value buyout. In a nutshell, a residual-value buyout is a scheme that allows the government to pay in “scrap value” the facility to the contractor.
Lodging such a case also gives the impression that the contractor was not able to finish the construction of the facility and, thus, also gives the need for the government to step in and continue building the infrastructure.
Based on Senate records, a residual-value buyout is “a scheme that is only available to the government in the event that the project is not completed.”
The counterclaim stemmed from the arbitration case lodged by MRTC against the government for its delayed payment of equity rental payments. Such an issue was already cured due to negotiations between the two parties that led to the acquisition of the government-owned banks of bonds in the private company.
Sought for comment, the owners of the rail facility said they were surprised to receive a counterclaim from the previous administration, calling it a nuisance case that only blocks the new administration from implementing much-needed reforms in the train system.
“The case is preposterous. It is like a poison pill for the new administration. It will keep the new government from doing the right thing for the train system,” MRT Development Corp. COO Rafael P. Perez de Tagle Jr. said in a phone interview.
He said his group has already replied to the counterclaim case by asking the Permanent Court of Arbitration in Singapore to take the matter lightly because of the turnover of officials. The transportation agency is now led by Secretary Arthur P. Tugade.
“They are claiming that we were not able to finish the MRT, but we have completion reports to belie that,” Perez de Tagle added. “The MRT has been there for 16 years, and it is not yet completed? I think they are trying to cover their tracks, a desperate effort to avoid charges.”
A copy of the completion report that the BusinessMirror was able to acquire shows that in July 2000, MRTC completed the design and construction of the train line, and appointed Sumitomo Corp. as its maintenance contractor. Aside from the facility, the company also delivered 73 light-rail vehicles to the government.
Transportation Spokesman Cherie Mercado-Santos deferred to give comment. The new transport team has only been onboard for a month now.
Perez de Tagle said his group is now coordinating with the new set of government officials to iron out what needs to be done with the said counterclaim.
“We’re looking to look closely with them to do a realistic and permanent solution to the MRT. We’re confident that the government also wants [to], because that was a promise of President Duterte during the campaign,” he said.
Today the MRT operates within the 15 to 20 trains daily. It is designed to handle 350,000 passengers per day, based on its rated capacity. It also has a crush capacity of 560,000 passengers per day.
The train system handles about 350,000 passengers per day, but operates in under capacity due to the dilapidated trains and worn off tracks.