Senators seek probe on frigate project
Marvin Sy (The Philippine Star) - January 20, 2018 - 12:00am

MANILA, Philippines — The Senate minority bloc has called for an inquiry into the controversial purchase of two frigates for the Philippine Navy and the overall status of the Armed Forces of the Philippines (AFP) Modernization Act.

Senate Resolution 584 was filed by Senate Minority Leader Franklin Drilon and  Senators Francis Pangilinan, Paolo Benigno Aquino IV, Antonio Trillanes IV, Risa Hontiveros and Leila de Lima last Thursday in response to reports on the controversy surrounding the acquisition of the two frigates, the first military contract signed under the Duterte administration.

The minority senators pushed for the Senate committee on national defense and security and the Congressional Oversight Committee on the AFP Modernization Act to conduct the inquiry and “determine whether or not such acquisition promotes the goals of the modernization program and complies with pertinent laws.”

The Department of National Defense (DND) yesterday welcomed the minority senators’ move to conduct an inquiry on the controversial multibillion-peso project.

“DND welcomes the plan of the Senate to conduct an investigation on the Navy’s Frigate Acquisition Project. We have long been waiting for an opportunity to shed light on this issue so that the truth will finally be known,” DND spokesman Arsenio Andolong said.

Based on the DND’s report on the status of the frigate acquisition project dated Oct. 20, 2017, four suppliers participated in the bidding process.

The Garden Reach Shipbuilders and Engineer (GRSE) emerged as the firm that submitted the lowest bid, followed by Hyundai Heavy Industries (HHI).

The report indicated that the project was awarded to HHI on Aug. 18, 2016 even if it submitted a higher bid than GRSE.

GRSE was disqualified for failure to meet the net financial contracting capacity requirement for the project.

HHI was given the notice to proceed for the project on Dec. 13, 2016 and the firm committed to deliver the two frigates by 2020.

The controversy emerged when former flag officer in command Vice Admiral Ronald Joseph Mercado reportedly resisted the implementation of the P16-billion project because of the findings of the Philippine Navy project management team’s issues against HHI.

The contract with HHI stipulates an option between Hanwha Thales of Korea – a subcontractor of Hyundai – and Tacticos Thales of the Netherlands to provide the combat management system (CMS) for the frigates.

Mercado allegedly wanted Tacticos Thales to take care of the CMS for the two ships because Hanwha Thales consortium was reportedly dissolved in July 2016.

HHI reportedly insisted on tapping Hanwha Systems, the subcontractor that replaced Hanwha Thales.

Last Dec. 18, Mercado was relieved from his post, just a few months before he was set to retire in March 2018.

Defense Secretary Delfin Lorenzana said he fired Mercado for insobordination.

Rear Admiral Robert Empedrad, the AFP deputy chief of staff for reserve and retirees affairs, replaced Mercado.

Citing news reports, the minority senators noted that Lorenzana allegedly formed a steering committee headed by Defense Undersecretary for finance, munitions, installations and materiel Raymundo Elefante to address the issue with the Navy project management team.

The steering committee submitted a resolution affirming Hanwha Systems as the CMS provider for the project.

In the first week of December last 2016, the steering committee was dissolved.

“There have been allegations that the formation of said committee, in the first place, violated the Government Procurement Act, which does not provide for a creation of a steering committee, but for a technical working group to serve as the technical arm for the bids and awards committee, composed of technical, financial and/or legal experts,” the resolution stated.

Special Assistant to the President Christopher Go was implicated in the deal as he allegedly intervened on behalf of the supplier of the Korean CMS provider.

Go’s alleged participation was exposed by former Marine captain and Rep. Gary Alejano of party-list Magdalo.

Alejano revealed that on Jan. 4, Mercado wrote Lorenzana saying that the contract with HHI has “grossly disadvantageous” provisions to the Navy and the AFP. –  With Jaime Laude, Jess Diaz, Christina Mendez

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