Corporate News

By Cliff Harvey C. Venzon, Reporter

Sumitomo loses MRT-3 maintenance deal

Posted on October 18, 2012

THE GOVERNMENT is set to appoint an interim maintenance service provider for Metro Rail Transit Line 3 (MRT-3) after it decided to terminate Sumitomo Corp.’s 12-year contract, which will lapse today, an official said yesterday.

AFTER 12 YEARS, the government has decided not to renew the service contract of Japanese firm Sumitomo Corp. to maintain the Metro Rail Transit Line 3. -- Jonathan L. Cellona
“We will have to get an interim maintenance provider on an emergency procurement basis,” Transportation Undersecretary for Legal Jose Perpetuo M. Lotilla told BusinessWorld in a text message yesterday.

Asked why did the government decide not to renew the Japanese firm’s contract, Mr. Lotilla said: “Sumitomo had certain conditions for the extension that would not be in best interest of the service.”

Sumitomo bagged a 10-year contract to be the MRT-3 maintenance provider in 2010.

The contract, which was supposed to have been expired in August 2010, was extended three times in different terms up to October this year, former secretary of Department of Transportation and Communications (DoTC) Manuel A. Roxas II said in May.

MRT-3 General Manager Al S. Vitangcol, in a telephone interview early this month, said Sumitomo asked for a one year extension but its “proposal to extend the maintenance agreement is unacceptable to us.” Mr. Vitangcol did not elaborate.

Mr. Lotilla said the agency is presently evaluating “three firms” as interim maintenance operator, which will serve for a “period of six months.”

“[The] contract is not yet signed but [the] procurement process has commenced. [The procurement process] is on-going and should be finished before the 18th [of October],” he said, noting that the interim maintenance provider will start this Friday, Oct. 19.

In a disclosure of Metro Pacific Investments Corp. (MPIC) yesterday, MRT-3 concessionaire Metro Rail Transit Corp. (MRTC) said it is willing to maintain the railway after the contract of the interim maintenance provider lapses.

“MRTC has advised DoTC that it is willing to resume the responsibility of maintaining the MRT-3 after the expiration of the DoTC’s interim maintenance contract provided MRTC is given sufficient time to undertake a proper selection process,” MPIC’s disclosure said, denying speculations that the company objected to the appointment of an interim maintenance operator.

Mr. Lotilla, however, said that the Transportation department has yet to decide on MRTC’s proposal.

MRTC in 2010 transferred the authority of scouting a maintenance operator to the Transportation department, previous reports showed.

In November 2010, MPIC entered into a “cooperation agreement” with Fil-Estate Group, which controls the companies behind MRTC.

Under the said agreement, MPIC was vested the rights to expand MRT-3.

In the same agreement, the Fil-Estate Group also appointed MPIC as its “attorney-in-fact” in connection with the exercise of the rights and interests of the group in MRT-3, MPIC’s annual report showed.

Earlier this month, Mr. Vitangcol said the agency had finished the drafting of stricter parameters for the new maintenance contract, which would include penalties for malfunctioning elevators and escalators, and setting a minimum requirement of 19 trains running during peak hours between 7 a.m. and 9 a.m.

Under the present contract, Sumitomo is not penalized for inefficient maintenance services, while the company will only be sanctioned if it fails to run at least 18 trains during the peak hours, he added.

The government pays the Japanese firm $1.4 million per month for its services, according to Mr. Lotilla.

The 16.95-kilometer MRT-3 runs along EDSA (Epifanio Delos Santos Avenue) from North Avenue in Quezon City to Taft Avenue in Manila.

It has an average daily passenger traffic of around 540,000.

MPIC is the local unit of Hong Kong’s First Pacific Co. Ltd., which partly owns Philippine Long Distance Telephone Co. (PLDT).

MPIC earned P3.46 billion in January to June 2012, up by 30.08% from P2.66 billion in the same period last year on strong revenues from its utilities subsidiaries and hospital units.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a minority stake in BusinessWorld.

Shares of MPIC dropped by 0.24% or one centavo to P4.13 apiece when the stock market closed yesterday.