DND, SoKor firm to sign P16-B ship agreement

Alexis Romero (The Philippine Star) - September 17, 2016 - 12:00am

MANILA, Philippines - The Department of National Defense (DND) and a South Korean firm are set to sign a multibillion-peso deal for the purchase of two ships for the Navy, the first military contract to be inked under the Duterte administration.

The agency issued a notice of award to Hyundai Heavy Industries Inc. last Aug. 18 and a contract could be signed this month for the two new frigates, DND public affairs chief Arsenio Andolong told The STAR yesterday.

The notice of award is a document that declares a supplier as the winning bidder. It was formally accepted by Hyundai Heavy Industries last Wednesday.

“We were informed though that anytime this week, officials from Hyundai will be arriving in Manila to receive and review the Notice of Award,” Andolong said.  

“Ten days after the formal receipt … the notice to proceed and contract for the project will be signed,” he added.

The P16-billion ships acquisition project is one of the biggest items in the military’s modernization program. It aims to enhance the Philippines’ territorial defense and disaster response capabilities.

Four companies submitted bids for the project: Hyundai, Indian firm Garden Reach Shipbuilders and Engineers, Spanish shipbuilder Navantia S.A. and South Korea’s Daewoo Shipbuilding and Marine Engineering Co.

Navantia and Daewoo were disqualified because of their failure to meet some technical requirements.

Garden Reach offered to supply the two frigates for P15.08 billion while Hyundai’s bid was P15.74 billion. Garden Reach was declared the lowest bidder but was disqualified during the post-qualification phase because of its failure to meet some financial requirements.

“Per government procurement law, if it is determined at the outset that the bidder has no financial capacity or it has financial capacity but its resources are thinly spread throughout too many ongoing contracts, it will not be allowed to participate in the bidding process,” Andolong said.

Hyundai, the company that offered the second lowest bid, was considered and was able to meet the post-qualification requirements.

“After the contract has been signed by both parties, DND will issue a notice to proceed for Hyundai to fulfill its contract obligation within the specified period of time,” Andolong said. 

A South Korean firm, however, questioned the DND’s decision to divide the frigate acquisition project into two components.

STX Offshore & Shipbuilding Co. Ltd. said the project, which was originally priced at P18 billion was divided into the bidding for the two vessels and their weapon system and the bidding for ammunition.

STX, one of the companies that expressed interest to join the bidding, said the Philippine government “shall be grossly disadvantaged with the modification in the bid structure, aside from committing a serious violation of the country’s existing procurement laws.”

“Splitting the Authorized Budget of Contract (ABC) and the items to be bid out after the first stage of the bidding, and before the second stage, is tantamount to changing the terms and conditions of the bid in the middle of the game,” the company said in a statement.

According to the company, the bidders were made to believe that the approved budget of contract is P18 billion and the items for bidding are the vessels, weapons system and ammunition.

“It is thus unfair for everyone, especially for those who failed to pass the initial stage, to have the terms substantially changed when the bid has already been submitted,” STX Korea said.

The Korean firm believes that the DND Bids and Awards Committee purposely split the project to make it appear that the winning bidder has offered the lowest price, now at P16 billion for the two vessels alone.

“One major effect of such modification is that there would be limited number of possible bidders for the ammunition considering that launchers are usually tailor fitted for certain kinds of ammunition.”

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