Ombudsman indicts ex-transport sec Abaya, 16 others over MRT maintenance contract

June 25, 2018

Ombudsman Conchita Carpio Morales found probable cause to charge former Department of Transportation (DOTr) Secretary Joseph Emilio Abaya and 16 others for violation of the Anti-Graft and Corrupt Practices Act over the anomalous MRT3 maintenance contract.

Also facing charges are DOTr Undersecretaries Edwin Lopez,  Rene Limcaoco (head of the negotiating team) and Catherine Jennifer Francis Gonzales (vice-head, negotiating team); MRT3 general manager Roman Buenafe, Camille Alcaraz (assistant secretary for procurement), Ofelia Astrera (vice-chairperson, MRT3 bids and awards committee), Charissa Eloisa Julia Opulencia (Attorney V), Oscar Bongon (chief, engineering division) and Jose Rodante Sabayle (engineer III).    

Private respondents Eldonn Ferdinand Uy of Edison Development and Construction, Elizabeth Velasco of Tramat Mercantile Incorporated, Belinda Tan of TMI Corporation, Inc., Brian Velasco of Castan Corporation, and  Antonio Borromeo, Jun Ho Hwang and Elpidio Uy from Busan Universal Rail, Inc. (BURI) were also included.   

The special panel of investigators found that in October 2014 and January 2015, the DOTr conducted two biddings for the three-year maintenance service contract for the MRT3.  Both biddings failed due to non-submission of bids.

On January 18 2015, Abaya issued a special order creating the MRT3 bids and awards committee (BAC) for the procurement of goods, infrastructure projects and consulting services of the MRT3 system. 

On March 2015, the MRT3 BAC issued Resolution No. 002, Series of 2015, recommending the resort to negotiated procurement through emergency cases under Section 53.2 of the Revised Implementing Rules and Regulations (RIRR) of the Government Procurement Reform Act (Republic Act No. 9184).  

On  October 21 2015, the following firms submitted their proposals: (1)  Busan Joint Venture (Busan JV); (2) Joint  Venture of DM Consunji, Inc., Beta Electric Corporation, Baudis Bergmann Rosch Rail Automation GmbH, and Hamburg Consult GmbH; and the (3) Joint Venture of Schunk Bahn-Und Industrietechnik GmbH and Comm Builders and Technology Philippines Corporation.  

The Busan JV is composed of the following firms: (1) Edison Development and Construction; (2) Tramat Mercantile Incorporated; (3) TMI Corporation, Inc.; (4) Castan Corporation; and (5) BURI.

During the evaluation, all offers were found to be deficient in their eligibility and technical documents and were given the opportunity to cure the defect.

On October 28 2015, the negotiating team, declared the Busan JV as being the sole entity which passed the eligibility on technical and financial documents evaluation.

As a result, the negotiating team recommended to the MRT3 BAC that the bid of Busan JV be declared as the single calculated Officer and that post-qualification proceedings be conducted. 

After post-qualification, the megotiating team recommended to the MRT3 BAC the award of the MRT3 long-term maintenance contract to the Busan JV in the amount of P3,809,128,888.00 as the legally, technically and financially eligible JV.  

On  December 21 2015, the MRT3 BAC issued Resolution No. 14 Series of 2015 recommending that the project be awarded to Busan JV.

On January 7 2016, the DOTr, the MRT3 and the Busan JV entered into a contract for the long-term maintenance contract. 

In its Consolidated Annual Audit Report (CAAR) for 2016, the Commission on Audit (COA) observed that the “DOTr still failed to provide the riding public with a safe and comfortable transport system even with the procurement and delivery from August 2015 to January 2017 of 48 new LRVs with a total cost of P3,759,382,400. 

"Despite four years in the procurement process and total payments of P527,761,083.00 (equivalent to 14% of the contract price) to Dalian, the LRVs remain inoperational and unaccepted by the DOTr as of reporting date  due to glitches in the power supply and signaling system.  These resulted from the DOTr’s poor planning and other major procurement lapses.”

The Special Panel of Investigators found respondents extended unwarranted benefits, advantage and preference to the contractor when it awarded the project to Busan JV, an ineligible and unqualified entity.  

In its 88-page consolidated resolution, it was explained that “as the Busan JV’s offer was still considered as successful, the potential JV partners must enter into a Joint Venture Agreement (JVA) in accordance with its rules.  But they did not.  Still, the Busan JV was awarded the contract- yet another violation of the rules under R.A. No. 9184.”

Procurement documents show that it was only Eldonn Uy of Edison Development and Construction that executed a “Statement to enter Into a Joint Venture” purportedly as the authorized representative of all the members of the Busan JV.

“Since only one potential partner of the Busan JV submitted the required statement, it should have been disqualified from participating further in the negotiated procurement since it lacked an eligibility requirement,” explained the consolidated resolution.

The special panel also found irregularity in the award when the Busan JV was allowed to simply submit a Certificate of Registration of BURI as a Special Purpose Company (SPC) instead of a valid JVA.   

The action becomes even more suspect as it was respondent DOTr Assistant Secretary for Procurement Alcaraz who wrote the Securities and Exchange Commission to facilitate the registration of Busan JV as an SPC.

“This Office notes that [Alcaraz] was the DOTr Assistant Secretary for Procurement and the Chairperson of the MRT3 BAC.  Her action thus reeks of impropriety as it gives the impression that she was acting in favor of the Busan JV,” stated the consolidated resolution.

The Special Panel also mentioned irregularities in the amendment of the original net worth requirement and absence of Bill of Quantities (BOQ) which favored Busan JV.

Based on their 2014 audited financial statements, the net worth of Tramat in 2014 was only P1.9 million while Edison’s was P383.5 million only, both below the P1billion requirement under the amended instructions to offerors.  

In sum, the Busan JV was not technically, legally and financially capable to undertake the MRT3 long-term maintenance contract.  Despite its being unqualified, the contract was still awarded to it by the DOTr, in violation of Section 53 of the RIRR of R.A. No. 9184, which requires that in negotiated procurement, the procuring entity should negotiate with a technically, legally and financially capable supplier, contractor or consultant. DMS