PNR entered ₱300 Million Supply contract without Bidding; DOJ said “VOID” Illegal contract

 

The Department of Justice (DOJ) questioned the absence of public bidding in the supply contract that the state-run Philippine National Railways (PNR) has sealed with a Korean firm for the repair of the PNR's south line .

 

In an 8-page legal opinion, Justice Secretary de Lima cast doubt on the validity of the US$6.77 million (₱300 Million) Supply contract with Pandrol Korean Limited for the purchase of rail fastening, clips and insulators for the repair of PNR's main line.

 

"A contract granted without the competitive bidding required by law is void, and the party to whom it is awarded cannot benefit from it," De Lima said.

 

De Lima gave the opinion after PNR General Manager Junio Ragragio sought the DOJ's legal position on the contract, which was entered into by the former PNR management in 2009.

 

Ragragio cited the March 2010 memorandum issued by Marilyn Balbin, the auditor from Commission on Audit (COA), after discovering that the contract was executed through negotiation and not through a public bidding, which is required in procurement activities of state-run agencies, like PNR.

 

Safety issues, contract violations

 

In his letter to the DOJ, Ragragio revealed that the remainder of Pandrol's supply contract remains unimplemented and may compromise safety in the operations of the rail system.

 

"In as much as the rail fastening system, the clips and insulators are necessary to provide exceptional holding force, superior dynamic fatigue strength and stable creep resistance necessary to fasten rail to railroad ties (sleepers), and for the purpose of ensuring safe operations, it is imperative that the issue as to the legality of Pandrol supply contract be finally resolved," Ragragio said.

 

PNR records show that out of the 170,000 pieces of rail fastening system stated in the supply contract, only 80,000 sets were delivered and paid by the PNR.

 

To address and maintain the tracks safe for train operations, the PNR entered into a supply contract with a 3rd entity — Nikka Trading — which agreed to supply 50,000 sets of anti-vandal concrete sleepers, rail fastening assembly for a unit price of US$36.60 per set or a total contract price of US$1.83. This is US$8.35 cheaper than the unit price offered by Pandrol.

 

PNR decided to bid out the 40,000 remaining sets of rail fastening system, but Pandrol insisted that it cannot bid them out as it would constitute a violation of their supply contract.

 

Patent

 

Pandrol added that it holds an international patent, which covers the Philippines, in relation to the rail fastening products. It said the product that Nikka Trading supplied is a non-genuine Pandrol product but contains the same patented special feature as that of genuine Pandrol.

 

The matter, according to Pandrol, has already been brought to the attention of the previous PNR board and to the Department of Transportation and Communications (DOTC), which oversees PNR.

 

Ragragio said in his reply letter to Pandrol that the requirement to justify the direct contracting for the rail fastening products were not complied with.

 

Ragragio added that Pandrol's claim that the current PNR board favors Nikka is without basis considering that the present management is not privy to the contract with the latter.

 

On the other hand, the PNR chief that Pandrol's assertions that it has supplied for all rail lines in the country such as LRT 1, LRT2, MRT3, PNR South Commuter Line and South Rail, fails to mention that the mode of procurement adopted by concerned agencies was competitive biddings and not direct contracting.

 

The PNR also questioned the composition of the previous board that recommended the alternative mode for the supply of the said items.

 

Ragragio noted that Pandrol was represented by lawyer Jaewoo Chung who is the stepson of PNR's Department Manager for Administrative and Finance, lawyer Lynna Goyma Chung, who was a member of the PNR-BAC that allowed the direct contracting.

 

In light of PNR's predicament, the agency tried to get COA's opinion on whether its findings can be used as valid ground not to honor Pandrol's undelivered rail fastening products.

 

The COA, however, begged off from issuing an opinion on the matter, prompting the PNR to elevate the matter before the DOJ.

 

The project

 

The rehabilitation of the PNR Main Line South covers 443 kilometers along the national railway line in the southern part of Metro Manila running from San Pedro to Legaspi in the southern tip of Luzon Island and involves the procurement and rehabilitation of tracks, bridges and rolling stocks.

 

Given the scope of and cost involved in the rehabilitation plans, which have been in the drawing board since the 1970's, the project was divided. The Korean-funded section covers the Southrail line from Manila to Calamba City, while the Chinese-funded section covers the line from Calamba to Legazpi and further on to Matnog, Sorsogon.

 

According to a report by JICA Japan International Cooperation Agency (JICA), which granted concessional loans for the project, two rounds of bidding of the different aspects of the project were declared a failure. "Bidding price from all of the companies were close to double the estimates made by PNR based on the detailed design," it said.

 

In the second round of bidding, which the JBIC requested, "various measures were taken to keep project expenses within the amount covered by the loan," JBIC wrote. This was when direct procurement from the Pandrol was first considered.

 

"There were changes to the list of procurement items (signal systems and some of the communications equipment were removed) and changes to procurement methods (Pandrol rail fastening parts were procured directly from the manufacturer)," JBIC said.

 

However, all the resubmitted bids were again rejected "as they greatly exceeded the original estimates by around 1.7 times."

 

Running out of time since "construction needed to be started right away," JBIC said "it was decided that the scope of the project would have to be greatly reduced." The project was limited to the area between Lucena and Naga, "given PNR's budgetary restraints, and effectiveness," and that "direct direct negotiations were started."

 

"As a result, the track improvement project was reduced to the area between Lucena and Naga, contracts were made for the procurement of Pandrol rail fastenings directly from the manufacturer, and installation of signal equipment and station repairs were removed from among the items covered by the loan," the Japanese funder wrote.  

 

With report from Rappler.com

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Philippines to use Coconut oil to replace Diesel for ₱19.6Billion; 5% Biodiesel Blend mandate Q4 2013

 

With the approval of the National Biofuels Board (NBB) to increase the mandated biodiesel blend from 2% to 5%, the Philippine Coconut Authority (PCA), in collaboration with the University of the Philippines − National Center for Transportation Studies (UP−NCTS), PCA launched the road test of (B5) in public transport vehicles using 5% coconut oil Biodiesel blend  held on July 30, 2013.

 

The study will make use of seven (7) in−use jeepneys of operators belonging to transport groups identified by the PCA and Department of Energy (DOE). The tested jeepneys have undergone inspection at the North Motor Vehicle Inspection Center (NMVIC) of the Land Transportation Office (LTO) for assessment of roadworthiness and compliance to emission standards.

 

The duration of this on-road test was 25 days. For the first five days, the test jeepneys make used of the existing blend (B2). In the succeeding 20 days, these jeepneys were fuelled with the 5% − coco methyl ester (CME) biodiesel blend (B5). After the 25−day on−road test, the participating jeepneys were tested for fuel economy and power efficiency. Opacity tests were also conducted to compare emission performance of B2 and B5 biodiesel fuel blends.

 

PCA Administrator Euclides G. Forbes bared that mandated use of biofuels would strengthen the domestic market for coconut which will create a ₱19.6 Billion − income as B5 means greater demand for CNO. The country would also save as much as ₱15.5 Billion on fuel displacement.

 

"This aims to reduce the dependence on imported fuels with due regard to the protection of public health, the environment and the natural ecosystems consistent with the country's sustainable economic growth that would expand opportunities for livelihood, " he added. As the CME blend increases from 2% to 5%, about 1,099 CME plant workers, 13,183 coconut oil (CNO) milling workers and 23,070 farm workers will be hired. Moreover, coconut farmers will benefit ₱4.838 Million per year from the lien collected through the Social Amelioration and Welfare Program (SAWP).

 

Research and experiments on the use of coco biodiesel as fuel were pioneered by PCA in 1983 together with the other agencies such as Industrial Technology Development Institute (ITDI), Philippine National Oil Company (PNOC−ERDC), National Power Corporation (NPC), and the Department of Science and Technology (DOST). In May 2001, PCA together with the Department of Agriculture (DA) launched a Biodiesel Development Project to test the viability of coconut biodiesel as engine fuel wherein test results showed a reduction of around 50% on their smoke emissions.

 

"As to the B5 blend, the visible cloud of black smoke consisting of carbon and sulfur particulates is reduced by as much as 80%," Forbes added. Carbon dioxide (CO2) is a greenhouse gas dominant in automotive emissions which mainly contributes to global warming. In contrast, coco biodiesel has a neutral carbon footprint. Coconut tree, once planted, absorbs CO2 during growing stage (called carbon sink). Every liter of fossil diesel displaced by cocodiesel represents a CO2 reduction of 3.5 kg per liter of fuel used.

 

The Administrator ensures the increased productivity and sustainable supply of biofuel feedstock as PCA continues to implement its massive planting and replanting programs.

 

Philippines' bio-fuel thrust behind coconut oil surge

 

In April this year, coconut oil prices were ruling at a discount to crude palm oil in the global market.

 

Then, coconut oil ruled at $793 a ton and crude palm oil at $800 a ton.

 

But now, coconut oil prices are quoted at about $900 against $721 for crude palm oil.

 

In India, coconut oil prices have increased from Rs 61 a kg in April to Rs 78 now.

 

Prices of copra, from which coconut oil is derived, have increased to Rs 5,500 a quintal from Rs 4,200 in April.

 

During the same time, palm oil prices have ruled almost unchanged at Rs 55 a kg.

 

"The current premium that coconut oil enjoys over palm oil is not justified. It has to drop along with other oils," said Dorab Mistry, Director, Godrej International, at a global vegetable oil conference in Mumbai on Sunday.

 

According to Thomas Mielke, Editor-in-Chief, Oil World, coconut oil began to rise after the Philippine Government announced that it would increase the use of coconut oil as a bio-fuel.

 

The Benigno Aquino Government on September 20 said it has sought comments from the stakeholders.

 

The B5 or five per cent coconut oil blended diesel may be implemented before the year-end.

 

The Philippines had passed a Bio-fuels Act in 2006 making it compulsory to blend coconut methyl ester in diesel distributed locally.

 

It was aimed at making the country less dependent on fossil fuel.

 

Besides, it has abundant sources of alternative energy such as coconut oil.

 

In 2012, the Philippines exported 1.5 metric ton of copra, coconut oil, copra meal, desiccated coconut, coco shell charcoal, activated carbon and coco chemicals a 1.5% increase compared to volume exported in 2011..

 

This year, coconut oil exports from the Philippines increased to 10.23 lakh tonnes during January-May, more than double during the same period a year ago.

 

Exports have increased mainly because buyers feared they could be caught short by the increased use of coconut oil for bio-fuel.

 

"Coconut oil prices are surging since some buyers feel that they are not adequately covered in case of any shortage.

 

"But with the current peak production season on, we have to see how the seasonal support for it is," said Mielke.

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