Ombudsman Conchita Carpio Morales has found probable cause to charge former Transportation Secretary Joseph Emilio Abaya and 16 others with violation of the Anti-Graft and Corrupt Practices Act over the alleged anomalous Metro Rail Transit-3 (MRT 3) maintenance contract.
Also facing charges of violation of Section 3(e) of Republic Act (R.A.) No. 3019 are then Department of Transportation and Communications (DOTC) undersecretaries Edwin Lopez, Rene Limcaoco (head of the negotiating team), and Catherine Jennifer Francis Gonzales (vice-head, negotiating team); MRT 3 general manager Roman Buenafe, Camille Alcaraz (assistant secretary for procurement), Ofelia Astrera (vice-chairperson, MRT 3 Bids and Awards Committee), Charissa Eloisa Julia Opulencia (attorney V), Oscar Bongon (chief, engineering division), and Jose Rodante Sabayle (engineer III). DOTC was renamed Department of Transportation (DOTr) in 2016.
Private respondents Eldonn Ferdinand Uy of Edison Development and Construction, Elizabeth Velasco of Tramat Mercantile Inc., Belinda Tan of TMI Corporation, Inc., Brian Velasco of Castan Corporation, and Antonio Borromeo, Jun Ho Hwang and Elpidio Uy of Busan Universal Rail, Inc. (BURI) are also included in the indictment.
The special panel of investigators found that in October 2014 and January 2015, DOTr conducted two biddings for the three-year maintenance service contract for the MRT 3. Both biddings failed due to non-submission of bids.
The current DOTr management, in a statement, said it will consult with the Office of the Solicitor General as it intends to pursue plunder charges against the indicted personalities, as well as include in the case other officials and personalities exculpated from the resolution, in efforts to promote accountability and transparency.
On January 28, 2015, Abaya issued a special order creating the MRT 3 Bids and Awards Committee (BAC) to procure goods, infrastructure projects, and consulting services for the MRT 3 system.
On March 2015, the MRT 3 BAC issued Resolution No. 002, Series of 2015, recommending resorting to Negotiated Procurement through Emergency Cases under Section 53.2 of the Revised Implementing Rules and Regulations (RIRR) of the Government Procurement Reform Act (R.A. 9184).
The project had a total approved budget of P4.252 billion.
On October 21, 2015, three joint ventures (JVs) submitted their proposals, one of which was Busan Joint Venture (Busan JV), which included Edison Development and Construction; Tramat Mercantile Incorporated; TMI Corporation, Inc.; Castan Corporation; and BURI.
During evaluation, all offers were found to be deficient in their eligibility and technical documents and given the opportunity to correct the defect.
On October 28, 2015, the negotiating team declared Busan JV as the sole entity to pass the evaluation of eligibility on technical and financial documents.
As a result, the negotiating team recommended to MRT 3 BAC to declare the bid of Busan JV as the single calculated offer and to conduct the post-qualification proceedings.
After post-qualification, the negotiating team recommended to MRT 3 BAC to award the MRT 3 long-term maintenance contract to Busan JV for P3.809 billion as the legally, technically and financially eligible JV.
On December 21, 2015, MRT 3 BAC issued Resolution No. 14 Series of 2015 recommending that the project be awarded to Busan JV.
On January 7, 2016, DOTr, MRT 3, and Busan JV signed 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 P3,759,382,400.00.”
It added: “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.”
Unusual perks and favors
The Ombudsman said the special panel of investigators found that respondents extended unwarranted benefits, advantage and preference to the contractor in awarding the project to Busan JV, an ineligible and unqualified entity.
In its 88-page consolidated resolution, it 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 only Eldonn Uy of Edison Development and Construction executed a “Statement to Enter into a Joint Venture,” purportedly as the authorized representative of all the members of 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 Busan JV was allowed to simply submit a certificate of registration for BURI as a special purpose company (SPC) instead of a valid JVA. The action became 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, it further said.
“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 the absence of a bill of quantities (BOQ), which favored Busan JV. A BOQ is an itemized list of materials, parts, and labor, with their costs, required to construct, maintain, or repair a specific structure.
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 figures below the P1 billion required under the amended Instructions to Offerors.
In its financial offer, Busan JV failed to include its BOQ as required in the Instructions to Offerors.
“There are no existing BOQs for the overhauling of the 43 LRVs and the total replacement signaling system components of the MRT3 long-term maintenance contract. Having failed to submit the required BOQ, the Busan JV should have been disqualified outright from the procurement process.”
The consolidated resolution added that “as another favorable concession to the Busan JV, the Negotiating Team then decided that in lieu of the 20% equity requirement, the Busan JV should enter into a Management and Facility Maintenance Services Agreement with Busan to ensure that the MRT3 long-term maintenance contract will be undertaken by a company with the required track record and necessary expertise and experience on railway maintenance.”
“Clearly, efforts were exerted to retain Busan in the JV to fulfill the minimum requirements under the Instructions to Offerors,” the resolution declared.
In sum, Busan JV was not technically, legally, and financially capable to undertake the MRT 3 long-term maintenance contract, the Ombudsman stated.
“Despite [Busan JV] 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,” it added.
“That the Busan JV/BURI was not qualified for and is inept to undertake the implementation of the project is supported by the COA’s audit findings as contained in its 2016 CAAR,” the Ombudsman pointed out.
The consolidated resolution also pointed out that “as then DOTr Secretary, Abaya had supervision and control over the officials under him and was immediately and primarily responsible for all government funds and property pertaining to his agency at the time of the questioned transaction.”
It further stated: “Occupying an executive position, Abaya is required to exercise diligence in the highest degree in the performance of his duties. There is a given authority and responsibility to Abaya as DOTr Secretary to regulate the acts of the DOTr officials responsible for the procurement of the MRT3 long-term maintenance contract and he cannot simply evade such responsibility by invoking reliance on his subordinates, especially considering that the subject contract is one with a scope and magnitude affecting a big portion of the commuting public in Metro Manila, with an accompanying financial impact on the coffers of the government amounting to more than P4billion.”
“By allowing the award of the contract to the Busan JV despite the attendant glaring irregularities, Abaya deliberately ignored applicable laws, rules and regulations, and standard operating procedures, falling short of or disregarding the required competence expected of him in the performance of his official functions,” added the consolidated resolution.
Abaya’s spokesperson Atty. Enricka Gonzalez said: “We find this decision unfortunate, considering that Sec. Jun clearly laid out his defense against the poorly-crafted and unsubstantiated complaint filed by the DOTr,”
Gonzalez said Abaya will consult with his lawyers once they receive an official copy of the Ombudsman’s decision.
