DOTr to terminate MRT maintenance contract

Aika Rey
DOTr to terminate MRT maintenance contract
'It is clear to us that the maintenance service provider is not procuring the proper spare parts, consumables, and capital spares for MRT3,' DOTr reveals in its budget hearing at the House of Representatives

MANILA, Philippines – The Department of Transportation (DOTr) vowed on Thursday, August 24, to terminate the contract with the Metro Rail Transit 3 (MRT3) maintenance service provider. 

Defending its proposed 2018 budget before the House committee on appropriations, the DOTr said it is looking into the legal implications of cancelling the P3.8-billion deal with its Korean-Filipino service provider Busan Universal Rail Incorporated (BURI).

“The Office of the Undersecretary for Railways have already signed a position paper that calls for the termination of the contract with BURI,” Undersecretary for Railways Cesar Chavez told the members of the committee.

“This matter is now with the Office of the Undersecretary for Legal and is being reviewed,” he added.

BURI took over as the maintenance service provider of the MRT3 system in January 2016. The rail transit has been experiencing several train interruptions in the past year.

In May, Chavez moved to terminate the contract with BURI during the Senate hearing on the derailment of MRT3.

“It is clear to us that the maintenance service provider is not procuring the proper spare parts, consumables, and capital spares for MRT3,” explained Chavez.

‘Dubious contract’

Lawmakers questioned the validity of the contract with BURI as it was not signed by former Transport Secretary Emilio “Jun” Abaya nor current Secretary Arthur Tugade.

“Why should we continue the BURI contract despite it being unsigned? Despite the overpricing, despite the fake parts, despite the underperformance, despite all the COA (Commission on Audit) reports received by the DOTr, despite all the lies that have been presented to Congress?” Nograles asked.

According to DOTr, Undersecretary for Operations Edwin Lopez signed the deal.

“Since the BURI contract has not been signed by the authorized and indispensable signatory, then there is no valid contract…. If there is no valid contract, then there is nothing to terminate,” said Albay 1st District Representative Edcel Lagman. 

DOTr Undersecretary for Legal Reinier Yebra explained that a contract should not be enforced if it was signed by someone who has no authority. However, the contract has been in effect and the DOTr have paid BURI about P650 million for its service.

“Were also studying the fact that this contract involved a multi-year operational party. So, in theory, if we can split the total amount, then it might not fall into the P500-million threshold – so that’s what we’re looking into now,” Yebra said.

The law states that the approving authority of contracts worth P500 million and up should be the department secretary.

“You are splitting the amount of the contract just so makalusot dahil di na kailangan ang secretary ang mag-sign. That’s difficult to accept, Mr Undersecretary,” Lagman responded.

(You are splitting the contract to justify that the secretary does not need to sign [the contract]. That’s difficult to accept, Mr Undersecretary.)

Chavez said that the department has since withheld payments to BURI due to its questionable billing statements.

“Some of [the purchases] are lacking [in supporting documents]. They cannot prove that these kinds of spare parts have actually been procured,” he said.

Long-awaited improvement?

The DOTr said improvements in the MRT3 service will be felt by the commuting public as early as November 2017.

Chavez explained that electrical power will be increased from 30,000 megavolts-ampere (MVA) to 60,000 MVA, which will allow trains to have an additional car, thus servicing more commuters. (READ: No more long lines by end-2017 – MRT3 management)

“We will reconfigure the 3-car train to 4-car train. Therefore, the average passenger of 1,128 per train set can now accommodate 1,453 at any given time,” he said.

Chavez said that a “substantially improved MRT3 service” will be felt  by August 2018 when the overhauling of train cars is done and the additional equipment is installed.

After hours of deliberations, the appropriations committee approved the DOTr’s proposed budget for 2018. (READ: Education, infra to get bulk of proposed 2018 nat’l budget

The proposed appropriations for next year is a 33% increase from the 2017 budget of P53.35 billion. –

Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at