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Commuter Rail | The Curse of Current Contracts


Source:  Diário do Centro do Mundo, with an “exclusive” on alleged bid rigging in recent contracts on the CPTM — the Sambodian Metro North.

Cartel formation in subway contracts has yielded most of the headlines so far, which almost unanimously focus on the São Paulo cases, whereas Brasília and Rio may also have experienced similar bid rigging and the federal government may have footed part of the bill.

The Folha de S. Paulo for example timidly suggests — in a story buried on p. A9 — that the antitrust agency is following leads that suggest the operation of the same, or related, cartels in five other major cities: Cuiabá, Fortaleza, Recife, Rio de Janeiro and Salvador.

For example, and I translate from the print edition — the Folha has retreated behind a paywall —

In Salvador, a consortium formed by Siemens, Camargo Correa and Andrade Guitierrez won a 1999 auction to install the subway system, which had already consumed R$ 1 billion.  Federal prosecutors  and police point to fraud in the transaction.

The absence of domestic engineering giants such as Odebrecht — one of the most prominent home-grown Brazilian multinationals –from the hurricane of accusations has been notable, I thought.

O Globo details the case further:

A proceeding in which a consortium including Siemens is suspected of overbilling the Salvador subway project by as much as R$ 166 million awaits the judgment of the federal accounting tribunal (TCU).

Along with Siemens, Camargo Correia and Andrade Gutierrez also belong to the consortium. The TCU said that the case would be heard by the plenary session as soon as the defenses of the companies involved are presented — to date, only one party to the actionhas filed its defense.

Work on the  Salvador subway has lasted more than 13 years so far. In current numbers, the alleged overbilling amounts to R$ 400 million, the TCU charges. Late last year, the TCU the consortium members and others involved to repay the values in question or present a defense.

These are all projects mentioned in exchanges of e-mail among Siemens executives at the time the auctions were held.

… In Recife, Siemens performed maintenance on the South and Central lines of the subway, together with TTrans. In all these cases, federal funds financed the contracts.

Revista Ferroviária is an interesting B2B source on the domestic railway sector, by the way.

The present article is exclusively sourced to union officials, so bear that in mind.  The officials suggest that a current CPTM contract involves overbilling of R$ 300 million.

As the press covers the the formation of a cartel in the supply of equipment and services for the subway and commuter systems of São Paulo, the state-owned commuter rail system CPTM has gone on a shopping spree with taxpayer money.

On July 3, 2013, the Official Diary of the state government published the notice of ratification of competitive bidding process No. 8085132011. With this, it is revealed that CPTM will buy 65 trains from foreign consortia for R$ 1.8 billion.

The deal is among the largest in the history of CPTM, which was born from the merger of state-owned Fepasa (owned by the state of São Paulo) with CBTU (owned by the federal government) in 1992, as part of a program that then-president Collor referred to, generically, as a downsizing of the apparatus of the state.

Unlike what happened to other state-owned companies,  CPTM remained under the control of the state government.  “It was not privatized, but it was the private contractors, the huge multinational engineering firms, that  dealt the cards,” says Rogério Centofanti, a trained psychologist and advisor to the Railway Workers Union of the Sorocabana Zone, with 30 years experience in the field.

“It is as if the state owned the cow but companies like Siemens, a Alston and  CAF did all the milking,” adds Éverson Craveiro, president of the union.

This symbiosis began in 1997, during the Covas administration, when the government of the state accepted the donation of 48 trains from Renfe, the state-owned Spanish train company.

According to Craveiro, the donation was a case of Greeks bearing gifts. “The cars had air conditioning and ambient music, but by European standards they were no long useful, they were on their way to the junkyard,” Craveiro says.

But like the epic of Troy, the enemies were concealed, and the check was not long in coming. In the donation contract, the state government agreed to an exlusivity  clause: the reburbishment of the trains would be assigned to Renfe. And refurbishment was definitely needed.

According to Craveiro, the state spent nearly the same value as for a new car, and it opened the way for foreign companies to operate in the railyards of the state, which until that moment had mainly been done by domestic companies — Mafersa chief among them.

Craveiro himself filed to bring charges in the case, through a public-interest civil suit that was archived because of the existence of a similar proceeding, in the case filed by a state legislator, Caldini Crespo (DEM).

Caldini Crespo filed suit against the state, but oddly, over the years, exerted direct political influence over the  CPTM and Metrô, naming political allies to the boards of directors of the two companies.

After running twice for mayor of  Sorocaba, cradle of the railway sector, Crespo faded from view after losing despite engaging in million-dollar campaigns.

Crespo’s law suit against the state went nowhere, as did  an investigation  opened at the time by the state accounting tribunal (TCE) — which currently counts among its members Robson Marinho, former chief of staff of the  Covas government and accused by Swiss authorities as being the owner of an account used to receive bribes from Alstom.

“The CPTM became a trading desk for the Toucan government,” says  Centofanti, who went on to detail the most recent purchase, worth R$ 1.8 billion. In the call for bids, CPTM estimated the price per train car of  R$ 23.7 million, but the lowest bid was R$ 26.2 million, offered by the IESA/Hyundai consortium.

It was a bid that exceeded the reference price, and yet was the lowest of the three responses received. Even so, the consortium received the right to sell  only 30 of the 65 train cars  ordered by CPTM.

The lion’s share  – 35 trains — went to a consortium of  CAF and  Alstom, which will charge R$ 28.9 million per train.

Had the state not divided the bidding into two lots, CPTM  —  with taxpayer money, recall — could have bought all the train cars for about  R$ 1.5 billion.

However, due to the unusual rules of the bidding process, the final amount was  R$ 1.8 billion. So where does this difference of R$ 300 million go?

A IESA/Hyundai could have obtained the contract for the entire order, having participated in the bidding on both lots. Oddly, in its bid for one of these lots — the one for 30 cars — the consortium presented a lower price and finished in first place. In the other lot, for  35 train cars, it presented a price much higher than that presented by CAF/Alstom, and finished in second place.

This is an indication that there was collusion among the companies involved, but CPTM — managed by the state government of São Paulo — rather than suspend the auction on suspicion of cartel formation, ratified the auction anyway.

Also scandalous is the purchase three years ago, by CPTM, with taxpayer funds, of nine railcars for an even higher price: R$ 31.6 million each.

According to the union, these trains have not yet entered service becaue they have not been adapted for the obsolete tracks of the metro area. They are sitting in the railyard at Presidente Altino station, where, until several months ago, the union occupied a small building. The union was evicted after Craveiro went public with his accusations.

Among other things, he said that trains manufactured by foreign firms and purchased by the state are not appropriate for the CPTM. “Infrastructure  projects are necessary. When we put these trains in service, it is as if we had put a Ferrari motor into a VW Beetle. … This is why there are so many blackouts and accidents in the system,” says Craveiro.

In the most recent session of the parliamentary commission of inquiry (CPI) of Transportation in the São Paulo city legislature, a state civil servant, Rosimeire Salgado, coordinator of mass transit for the city secretariat of metropolitan transport, under whose umbrella the CPTM operates, admitted that the company needs more energy capacity in order to make the cars run adequately.

For this to happen, there are public works that need doing, but these are civil engineering projects that do not figure in the portfolio of equipment and services provided by the giants, Alstom, Siemens e CAF.

Rosimeire attributed the lack of resources to the fact that the adaptation of the CPTM lines has not been done — this is one of the reasons why the trains here provide a jerkier ride than a panful of popcorn, while in Europe they glide like skates over ice.

“There are R$ 66 million for maintenance,” said Rosimeire. It may seem like a small amount relative to what is spent on importing foreign trains, but it is enough to satisfy companies that flock to the engineering giants.

Such is the case of Tejofran, which prior to the rise of the PSDB to power worked exclusively in the area of cleaning services for public buildings. Now, one of its most prosperous businesses is train maintenance. Trains of the CPTM.

A Tejofran belongs to Antônio Dias Felipe, aka Português. When Covas was governor, he got angry  when journalists asked him about his friendship with the Portuguese and related it to the contracts  Tejofran had with the government.

These were contracts in which  Tejofran supplied the mop and broom and the State supplied the money. Along with cleaning services, after nearly 20 years of Toucan administrations, Tejofran works with pliers and screwdrivers in handl, performing the most complex tasks, and therefore the most expensive, on the system. But it remains difficult to question the government about Tejofran.

In the last meeting of the  CPI of Transportation, the son of  Mário Covas and a city councilmember, known as  Zuzinha, paid close attention to the proceedings. He is not a member of the commission, but has drawn up a chair and closely observed the commission members assigned to questioning state bureaucrats.

Tejofran was not cited a single time. Coincidentally or not, Zuzinha is a godson of  the Portuguese. Zuzinha began his professional career at  Tejofran, where he was formally hired as an attorney. Portuguese was the best man at his wedding.

“It is time to take a cleaning brush to these promiscuous relationships. Someone is benefiting, but it is not the passenger, who pays too much for a service of dubious quality,” says Centofanti, the Sancho Panza of the campaign for the moralization of the state-owned CPTM.

His latest adventure, alongside Craveiro, as Dom Quixote: they have organized other unions into an Association of São Paulo Train Users. There are a lot more allegations coming. But who will take them seriously?