ONE of six bidders in the acquisition of two Navy frigates, originally priced at P18 billion, questioned the Defense Department’s bids and awards committee over its modification of the bid structure by splitting the project into two components.
STX Offshore & Shipbuilding Co. Ltd. (STX Korea) 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,” STX Korea said.
It added that initially, the six bidders were made to believe that the ABC is P18 billion and the items for bidding are the vessels, weapons system and ammunition, “and we joined the bidding on the basis of those parameters.”
“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.
According to their statement, on January 2016, the BAC released the technical specification for the project but removed all references to ammunition. The BAC also attached a memorandum to the bid document, specifying the need to split the bidding for the vessels and the ammo, which could be in the form of missiles, bullets, torpedoes, etc.
The Korean firm believes that the BAC 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.”
“Effectively, the one who will manufacture the launchers in the first bid will more or less be the most qualified to be the provider of the ammunition in the second bid,” STX Korea said.
“In other words, there will be no competition for the bid of ammunition as the manufacturer of the launchers in the first bid is the only manufacturer of the ammunition which will fit such launchers.”
Shortly before the election, the remaining four bidders asked the DND to defer awarding the contract until President-elect Rodrigo R. Duterte has assumed office.
The four bidders are Garden Reach Shipbuilders & Engineers Ltd. (GRSE), STX France SA, Thyssenkrupp Marine System and Hyundai Heavy Industries Inc. (HHI).
However, on September 1, MaxDefense showed a photograph of the notice of award for the frigates with Defense Secretary Delfin Lorenzana signing the contract in favor of Hyundai Heavy Industries of South Korea worth PhP15,744,571,584.00.
However, there was no mention of the weapons system, although the frigates were describe as able to “survive at Sea State 7” with no degradation of anti-air, anti-surface, and electronic warfare capabilities at Sea State 5 and no degradation of anti-submarine warfare capability at Sea State 4.
According to MaxDefense, the signing of contract is scheduled two weeks from now.
The lawyers for STX Korea, Angara Abello Conception Regala & Cruz, argues that the ABC can only be adjusted downward in certain circumstances, “if there is a need to reflect actual market prices or scope of works or suit actual field conditions of the project.”
If the ABC is to be adjusted, the BAC should conduct a rebidding: “Upon adjustment of ABC, the procuring entity must conduct rebidding with re-advertisement or posting. Any succeeding adjustment of the ABC shall be in accordance with these guidelines.”
The Korean firm said the bidding process was not in accordance with existing regulations for government procurement and a violation of the Government’s Procurement Policy Board.
They firm said they wrote the Defense Department,saying it can comply with the ABC as well as the technical and financial specifications of the initial bid but they did not get a reply.
“STX Korea respectfully submits that the BAC should maintain the terms of the original bid of P18 billion for the two vessels and ammunition to avoid complication in the bidding process.”