The government failed to protect its interest when it entered into maintenance agreements for Light Rail Transit 1 and 2, a special audit report of the Commission on Audit (COA) showed.
The observation was made in a 122-page report on the Light Rail Transit Authority (LRTA) released on Tuesday.
The audit covered assessment of the basis for contract costs as well as compliance by the maintenance contractors with provisions under the deal, and evaluation of select transactions and operations of the LRTA from January 2007 to July 2011.
“The overall result of audit illustrates that the interest of the government was not protected under the maintenance contracts,” state auditors said.
This was worsened by the LRTA’s alleged failure to monitor contractors’ compliance with the provisions of the contracts and to impose sanctions for non-complianc,; manage its financial operations efficiently and effectively and comply with existing laws.
“These deficiencies contributed to LRTA’s non-attainment of the objectives of outsourcing and non-fulfilment of its obligations with the BTr [Bureau of the Treasury],” COA said.
Based on the audit report, the P1.29-billion deal with Comm Builders & Technology Inc., PMP Inc. and Gras Saobracaj Joint Venture (CBT-PMP-GRAS Joint Venture) was effective from January 2009 to December 2011.
Meanwhile, the P1.059-billion deal with Telefonica Inc., Societe des Transports Intercommunaux de Bruxelles (STIB), Pacific Consultants International Inc. and Autre Porte Technique Global Inc. (TSPA Joint Venture) took effect on June 16, 2007 to June 15, 2012.
Under the deals, the contractors shall, among others, provide the required number of light rail vehicles (LRVs).
But COA found, among others, that “[t]he maintenance contractors were not able to deliver the daily train requirements of at least 114 LRVs for Line 1 and 16 trainsets for Line 2. Yet, both contractors were just the same paid in full.”
“For the sample months alone, only 98 LRVs for Line 1 and 13 train sets for Line 2 were provided,” the auditors said.
But the LRTA failed to make the necessary cost reduction equal to the unprovided LRVs, according to COA.
“Such failure to provide the required number of LRVs deprived the riding public with fast and convenient mobility,” the auditors said.
They added that the reported number of train sets made available for the day was “questionable” because there were several LRVs included both in the reports of those available for operation and those undergoing repair for the same period.
“The LRVs can either be operating or under preventive maintenance but not both. With this practice of reporting, there is no assurance that the reported number of operating LRVs that have undergone complete maintenance can be relied upon. Hence, such report could not serve the purpose of being the basis for evaluating contractors performance,” the auditors said.
Aside from operational LRVs/trainsets, the LRTA also turned over non-operational LRVs/trainsets and equipment to the contractors but the latter failed to put these units into operation as required under the deal.
“As of audit date, the number of non-operational units increased which manifests the contractors’ inability, not only to put to operation defective units but also to maintain in operating mode, units under their custody,” the auditors said.
Based on the audit report, 101 LRVs under Line 1 were reported to be undergoing preventive maintenance within the sampled period from January to March 2010.
Train sets under Line 2 totaling 13 were also reported to be undergoing the same preventive maintenance within three to four months covering September, October and November 2010 to January 2011.
“It is worth mentioning that these units, which were reported to be under preventive maintenance within the three to four-month period were also reported to have been made available for operation upon request of the LRTA. Under this condition, LRTA could not accurately assess the performance of the contractors,” the auditors said.
COA also found that the contractors of both line systems were unable to perform all the required maintenance activities under the deals for each LRV.
“In 15 out of the 29 types of scheduled maintenance activities, 50 to 100 percent of LRVs have not undergone the required number of maintenance activities within the year,” the auditors said.
The audit found that the revenues generated by the LRTA were not enough to support its operations.
From 2007 to 2011, the LRTA’s revenue was P14.367 billion but its operating expenses for the period was P19.939 billion, “not to mention its obligations to repay their contracted loans,” the auditors said.
They also found that the agency granted various types of incentives to its officials and employees allegedly without legal basis from January 2007 to December 2011 alone.
“LRTA granted incentives and allowances amounting to P400.448 million to its officials and employees without meeting the required conditions and/or in the absence of legal basis, and in the presence of unpaid obligations to various creditors and unremitted obligations to BTr,” the auditors said.
They recommended that LRTA document, validate and verify the contractors’ compliance with the maintenance deals “particularly in providing the daily LRV requirements, and undertaking the required maintenance activities as payments thereto would depend on documented performance.”
Also, COA directed the LRTA to stop granting incentives and allowances without legal basis as it ordered all officials and employees to refund the unauthorized incentives and allowances that they received.