DOTr threatens to terminate MRT maintenance provider's contract

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Story updated to include statements of the DOTr and Busan.

Metro Manila (CNN Philippines, October 20) — The Department of Transportation (DOTr) issued on Tuesday a notice to terminate the contract of the Metro Rail Transit's (MRT) maintenance provider, Busan Universal Rail, Inc.

In a Friday statement, the DOTr announced that it gave the notice for four reasons:

  • Poor performance
  • Failure to put in service and subsequently ensure the availability of contractually obligated number of trains, and more importantly, for failure to put in operation reliable and efficient trains
  • Failure to implement a feasible procurement plan for spare parts, as it in fact failed to procure and store the required volume of  spare parts, which affected its ability to effect immediate repairs on defective trains and other facilities of the MRT-3 system
  • Failure to comply with the contractual requirements of a complete and up to date Computerized Maintenance Management System

The DOTr said Busan has seven days to respond upon receiving the notice to respond. After getting Busan's response, the agency said it will decide within 10 days whether or not to terminate the contract.

Busan Legal Counsel Charles Mercado told CNN Philippines "Balitaan" on Friday that the company is preparing its position paper.


Mercado said Busan's job is not to prevent glitches, but to fix glitches as these occur.

"Binabaliktad lang kami ng DOTr," he said. "Sinasabi nila, kasalanan namin yung glitches. Bakit namin gugustuhin na magkaroon ng glitch, eh may mga sumasakay? Ayaw naman naming masaktan yung mga tao o magkaaberya."

[Translation: The DOTr is twisting us around. They say the glitches are our fault. But why would we want glitches to happen, but  there are people riding the train? We don't want people to get hurt or be inconvenienced.]

Above expectations

Meanwhile, Busan said in a Wednesday statement that it performed beyond the government's expectations and that terminating its contract will not resolve the troubled rail system's problems.

"The immediate contract termination being pushed by DOTr's Undersecretary for Rails, Cesar Chavez, and the withholding of payments due to the service provider not only lacks due process, but likewise have placed the MRT operations in peril," the  company said.

Busan was pertaining to the ₱176 million in payments that Chavez withheld, which formed the basis of a graft complaint it filed against Chavez.

Related: MRT-3 maintenance provider sues Transportation Usec over unpaid billings

For his part, Chavez said he only wanted to protect public funds, as the government is strict on billings to guarantee the quality of spare parts and make sure the commuters are safe.

DOTr Undersecretary for Legal Affairs Reinier Yebra told CNN Philippines' "Balitaan" on Friday that they are now looking for a new maintenance provider.


"Right now, the different sectors in DOTr, together with Legal, are closely coordinating in procuring the replacement maintenance provider which is our top priority right now," he said.

Go to arbitration

Instead of terminating its contract, Busan called on the government to comply with an Oct. 13 court order issued by Quezon City Regional Trial Court (RTC) Branch 105 for the two parties to conduct arbitration proceedings.

"We believe that at the end of the day, our actual performance and compliance with contractual obligations could help the DOTr see the light and avoid a protracted legal conflict", the company said.

"The RTC Judge ordered the DOTr and BURI to proceed with the arbitration proceedings before the Philippine Dispute Resolution Center, Inc. (PDRCI), an agency in charge of assisting and resolving contractual and legal disputes between government and private entities," Busan added.

But Yebra said he has not yet received the notice for arbitration hearing.

Gov't vs. Busan

The notice is the latest in a long-running dispute between the government and Busan.

The DOTr claims one of the causes of the MRT-3's numerous glitches in the past months, which have forced thousands of irate  commuters to find other means of transport, was due to Busan's alleged failure to purchase enough spare parts for the trains.

Read: DOTr: MRT-3 problems due to maintenance provider

But Busan — whose three-year maintenance contract with the DOTr expires in January 2019 — said the rail system's  glitches are down to design flaws, with the company saying that it has submitted evidence to the government about these.

"Through the years, the deterioration of the rails and passenger loading above the intended usage only worsened the system's  condition and resulted in more glitches," the company said in its Wednesday statement.

The MRT-3 — which traverses six cities from Pasay in the south to Caloocan in the north and serves half a million people each day — runs only 20 three-coach trains at most during peak hours due to power constraints.

This is despite the arrival this year of 48 additional coaches from a ₱3.8-billion deal between Chinese company Dalian Locomotive  Corp. and the Aquino administration in 2014.

Of the total contract price, ₱526 million was paid to Dalian.

However, a series of breakdowns and technical glitches plagued the trains during their initial use, throwing schedules in disarray  and worsening congestion on the trains that were already operational.

Read: DOTr: MRT-3 problems due to maintenance provider

The DOTr said in September 2017 that it was considering returning the trains to China.