In 2008, the Federal Government paid nearly $2 million for each subway car bought from China and, incredibly, five years later the City of Buenos Aires carried out a similar operation with the same vendor and ended up paying $414 thousand dollars less per unit.

The data is shown in the two versions released by the General Audit Office (AGN, for its acronym in Spanish) the same report purchases to China rolling stock that was intended for the former San Martin Train, long distance rail services and the City’s Subway. However, as was published last week both interpretations have differences among themselves.

The Operations

The seller in question is the company CITIC Oriental, whose link with the Federal Government dates from late 2008, when three contracts were signed for the purchase of 279 trains for over $650 million dollars.

However, only the first of these agreements was executed, for 45 trains for line A, which currently connects Plaza de Mayo with San Pedrito-. The research shows that the firm estimated each train at $1,995,000, an amount that concepts such as spare parts and tools, documentation and technical services, and training for commissioning and maintenance, and thus arrived at a total cost of 99.963 million dollars.

The audit adds that after the purchase, the connection between the two sides made no progress for two reasons: One was the "lack of advance payments," and the other, the subsequent transfer of the administration of the subway to the Government of the City of Buenos Aires.

Nearly five years later, in March 2013, the company Subway of Buenos Aires Society of the State (SBASE) convened a public tender to buy 105 more cars. And again it was awarded to CITIC, this time every wagon cost $1,581,000, i.e., $414,000 less per unit and a difference of 21% between the two operations.

The Opinions

The report of the Majority of the Auditor General said "it could not determine the possible comparability" of the two purchases arguing, first, because SBASE is the City’s, tracking their steps corresponds to the Buenos Aires Audit and not the Federal Watchdog.

Second, this version shares the release of the audited entity, namely the Ministry of Interior and Transport (former Secretary of Transport Ministry of Federal Planning), "There -explains the report- referred to some factors that may have influenced the difference in value between the two projects. For example, it is mentioned that for cars purchased by the Federal Government, many of its components were imported from France and transported (then) to China."

This means that, for the devices that made up the cars it was necessary to pay a kind of double freight. From this, most within the AGN suggested that, "if you have elements 100% from China, the price (of the cars) will have less impact on the final cost."

And adds that, in that sense, "it should be analyzed what kind of components are used as to say that (the cars purchased by the Federal Government and City are) identical products."

Third, the majority view also noted that the tender made by the city government "was preceded by the National State, this means that the supplier and manufacturer (the company CITIC) had privileged information about a product and it made all the engineering and design, impacting at least 25% of the contract value."

The report approved by the majority concluded, that the AGN did not have all the information of the second contract in order to permit comparison of the financial conditions of the project.

However, the version of the minority within the College of Auditors considered various alternatives to try to explain the different prices paid by the states concerned.

First, the evolution of the values of the dollar and the yuan were analyzed during the period between one operation and the other. The conclusion was that, after five years, the Chinese currency had grown by 12%, so that "the variation found in the amounts of both contracts cannot be explained by the difference in value."

Also the minority block analyzed two relevant quotes on purchase commodities: oil and steel.

The report says that in November 2008, when it became the first purchase to CITIC, a barrel of oil was trading at US $ S 99.20 (at constant prices of 2013), while in the second operation that number had climbed to U $ S 101.17.

While "it was observed that the value of a metric ton of steel in January 2013, was vastly superior to that registered in August 2008."

Both data led to the conclusion that these minority variables "do not explain the price difference between the two contracts."

The Proposal

In the previous edition, this medium had mentioned that, beyond the two versions of the report, there was also a "Proposal Vote", i.e., another paper by two of the Auditors of the majority, which contained suggestions in modified comments that appeared in the original investigation. Well, with respect to the difference in prices for the subway cars in this Proposal Vote "the modification of observation in the way it was defined in the report of the majority" was requested.