COA calls out Navy over delayed projects

MANILA, Philippines — The Commission on Audit (COA) has called out the Philippine Navy (PN) over the delayed completion of three modernization projects worth P154.648 million and the non-delivery of several procured items totalling P2.267 billion.

“Projects worth P154,648,440 payable through Deposit on Letters of Credit (DLCs) were not implemented, thus resulting in accumulated idle funds and depriving the government of the benefit that could be derived therefrom,” the COA said in its 2018 audit report on the PN. 

Based on the COA report, the unimplemented projects include ammunition acquisition with contract price of P16.459 million awarded to Talon Security Consulting Ltd. as well as Phase 3 of the upgrade of a Jacinto Class Patrol Vessel (JCPV), specifically the restoration and sustainment of its 76mm compact naval gun system, upgrade of electro optical fire control system and sensors with a contract price of P221 million awarded to Filipino company Propmech Corp. and Swedish defence company SAAB A.B.

The third project, meanwhile, involves acquisition of tactical equipment with contract price of P31.556 million awarded to the joint venture of Koporacija Krusik Ad Valjevo and Stone of David Tactical.

COA records showed that Talon Security and the joint venture of Koporacija and Stone of David have yet to fulfill any of their deliverables as of end of 2018, even if their DLCs were opened in 2010 and 2017, respectively.

As to the upgrade of the Navy’s patrol vessel, COA said Propmech-SAAB joint venture was only able to fulfill P114.367 million worth of deliverables, leaving a balance of P106.632 million even if the DLC for the project was opened in 2016.

“It must be noted that the delayed or non-delivery of goods and services is a breach of contract and can affect the operational tempo of the PN, which may hinder the accomplishment of its mission,” COA said. 

“We recommended that (PN) management demand the deliveries of goods and services and/or ensure that contracts with suppliers who failed to comply with their obligations are terminated to prevent the accumulation of idle funds which can be used for other beneficial purposes,” it added.

In its response to the audit report, the PN informed COA that Talon Security has already delivered the goods but the PN Technical Inspection and Acceptance Committee (TIAC) has yet to conduct functional testing on all the items, while the contract with Koporacija-Stone of David joint venture is undergoing deliberation at the Navy Contract Termination Review Committee. 

In the same audit report, COA has also took the Navy to task for failure to demand the delivery of the items it procured through Philippine International Trading Corp. (PITC).

In its response to the audit finding, the Navy said liaison officers were already designated to constantly coordinate with the PITC for the timely determination of the status and immediate conduct of procurement procedures.

“Procurement outsourcing with the PITC is ineffective due to non-implementation or delayed completion of procurement procedures which resulted in accumulated fund transfers totaling P2,267,040,511.09,” the COA report read. 

COA said the delivery of the procured items has been delayed for one to five years.

COA noted that at the start of 2018, the PITC still has a balance of P1.075 billion due to the Navy for the undelivered items procured in previous years, and yet the Navy still transferred an additional P1.274 billion to it during the year. 

The COA said PITC was only able to deliver 3.5 percent or P81.84 million worth of items as of end of 2018, leaving a balance of P2.267 billion.