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JR Central worker admits leaking price limit in maglev contract bidding: sources

JR Central President Koei Tsuge speaks during a news conference about suspected rigging of a construction project bid related to the firm's maglev train line, in Nagoya, on Dec. 13, 2017. (Mainichi)

A Central Japan Railway Co. (JR Central) employee has admitted to leaking the maximum contract value for a project related to the firm's maglev high-speed train to contractor Obayashi Corp., sources close to the matter told the Mainichi Shimbun.

The JR Central employee has reportedly told the special investigation unit of the Tokyo District Public Prosecutors Office that they passed information on the price limit of construction work for the train line's Meijo emergency exit, in Nagoya's Naka Ward, to Obayashi. Investigators are also likely interviewing related parties on suspicion that Obayashi may have acquired similar information on three other projects the general contractor made successful bids for.

According to the sources, JR Central announced in May 2015 that it would select a joint venture to undertake the Meijo emergency exit construction by evaluating their technological proposals and prices. The project was open for many firms to bid on.

An Obayashi-led joint venture and one led by major general contractor Kajima Corp., among other groups, competed for the contract. The two joint venture firms advanced to the second selection stage, in which the Obayashi group proposed to do the work for roughly 9 billion yen while the Kajima team bid about 10 billion yen, and the Obayashi-led venture won the contract.

At some point in the bidding process, the JR Central employee is believed to have leaked the price limit for the project. The Obayashi bid was apparently the highest possible figure that would not exceed the maximum cost estimated by JR Central.

While the contract value was not the sole focus in the bidding system, and JR Central looked at overall project proposals including construction methods, the construction cost was believed to be a particularly important factor. The information on the upper price limit, therefore, gave Obayashi a great advantage in the bidding.

A JR Central executive denied the company leaked information on the price, telling the Mainichi Shimbun, "(Obayashi's successful bid) is the result of a competition among companies on how cheap the construction could be done."

A senior Kajima official said 10 billion yen was the lowest figure the company could offer. The official added, "Obayashi probably thought if they could get the Meijo emergency exit contract, JR Central would have them work on the tunnel that starts from the exit."

Meanwhile, an Obayashi executive told the Mainichi Shimbun, "I heard that our price was lowered (to about 9 billion yen) after JR Central indicated design changes regarding safety measures."

The special prosecutorial team suspects that the information leak interfered with a fair bidding process. If a rigged bidding case involves a public entity, it can be subject to the criminal charge of obstructing bids involving public projects. However, as JR Central is private, the team raided the firm on suspicion of fraudulent obstruction of business.

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