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“I think we should call the bluff and say, ‘OK let’s terminate the contract, as you wanted to,’ ” Harry Roque of the University of the Philippines Law Center suggested during an interview on ANC’s “News@8”.

Roque added that instead of negotiating with China National Machinery and Equipment Corp. Group (CNMEG), the Chinese company that was awarded the Northrail project, the government should file a suit against the contractor to cut losses.

The losses that Roque referred to were the $150 million pre-paid to the contractor even if it has yet to start the construction of the railway.

“We could file a suit. Given the fact that they have not started with anything, I feel that we have more than a chance of recovering our 150 million dollars,” the lawyer said.

On June 3, the Chinese company sent a letter to the North Luzon Railways Corp. (NLRC), threatening to terminate the contract within 30 to 60 days if the government fails to take steps to comply with the terms of the contract and remedy several breaches of the original agreement.

Among the alleged breaches of contract cited in the June 3 letter were:

- failure to provide contractor access to the site and the necessary right of way;

- failure to remove all residents living along the right of way and to dismantle and remove all obstacles including trees, shelter and building facilities;

- failure to provide land to contractor for temporary use;

- failure to approve the design document and technical specifications;

- failure to make payments to the contractor;

- failure to provide the diagram of existing undergound networks pertaining to the electricity, gas, water and sewerage facilities in the working area;

- failure to compensate the contractor for extra costs;

- failure to adjust the contract price.

Hold out

In an earlier letter, CNMEG executive project manager Ren Junan wrote to then-NLRC president Arsenio Bartolome III to ask for a $299.4-million increase in the original contract price. The price adjustment includes $210,770,635 in “contractor’s extra costs” and $88,634,975 for “variations of scope of works from the original contract.”

If approved, the price adjustment would inflate the project cost to more than $800 million.

The company had threatened to pull out from the project if the additional money is not honored by the government.

Bartolome, meanwhile, had recommended to President Arroyo to junk the contract.

Roque described the threat as a hold out. “It’s as if they are pointing the gun at us and saying if we don’t agree to more [money], [we’d] lose what we already paid.”

World’s most expensive railway

If the government continues to negotiate with the Chinese contractor and a middle ground is reached, Roque said the Philippines would have to most expensive railway in the world.

The lawyer said that at $800 million, the 32-kilometer diesel train system would cost “roughly P1 billion per kilometer.”

The mass transit system will start in Caloocan City to Malolos town in Bulacan province.

“Probably the most expensive railway project in the whole world,” he said.

What Mrs. Arroyo wants, Pamintuan will do

In a radio dzMM interview, newly-appointed NLRC president Edgar Pamintuan said, “The President wants us to continue coming up with a mass transit system.”

Pamintuan had said that despite the threat, he will try to talk with the CNMEG and convince the company to continue the project.

He said if ever the CNMEG makes good its threat, the government would still have to look for another contractor because “we must have a mass transit system.”

Even before the alleged overprice in the Northrail project was mentioned by Rodolfo Noel “Jun” Lozada, the Senate star witness in the botched national broadband network project, Roque had filed a case asking the nullification of the railway project.

Roque said the project violated the Government Procurement Act because it did not go through a competitive bidding.

The lawyer also suspects that the Chinese contractor is asking for more money because the pre-paid $150-million for the project might have gone to corruption.

“It seems to me, the money they have already received may not have gone for the purposes that they intended it to be,” he said.