New Frigate Acquisition Bidding Delay – November 2014

Are our hopes of getting the new Frigates sailing and disappearing off into the sunset, like this Type 45 Daring-class Destoryer? Photo courtesy of Amanda Reynolds thru Wikipedia Commons

Not many people realized it, but the bidding for the two new Frigates by the Philippine Navy (PN) celebrated its first year anniversary last month. Yessir, the bidding is now over a year old. It was October 2, 2013 when the Navy officially opened the bidding for the new Frigate Acquisition Program,¹ and twelve months later where is it now? Sadly it is now in LIMBO, with no end in sight. Last April 2014, the Navy’s Technical Working Group (TWG) announced that they intended to award the bidding by July 2014,² but that month came and went with no announcement of the winner.

The last official update released about the program was in August 2014 when the Department of National Defense (DND) announced that the program is still ongoing, but that it will instead be split into two acquisitions, one for the ship and another for its weapons.³ However, that official release did NOT indicate any timeline, they did not say anything about when the bidding will be completed. In other words, it is OPEN-ENDED, there is no clear schedule WHEN it will be done.

’Sudden Change in Transparency’
What bothers me most about this program is the sudden change in transparency. During the earlier part of the program, the Navy and the Department of Defense (DND) were reasonably transparent about what was going on with the project, they were providing regular updates on what was happening or going to happen. For example, we knew the delays that occurred during the bidding, and that the bidding itself was a success up to a certain point because a number of bidders did come forward to participate.

We knew that the TWG scrutinized closely each bid by giving each supplier a week to present their product for closer scrutiny.⁴ However, the level of transparency suddenly changed after the bidding missed its July 2014 target. Whereas before there were providing regular updates even if nobody was prompting them, now there are NO OFFICIAL UPDATES, with NO CLEAR DEADLINES as to when the program will be completed. Nobody even bothered to explain WHY the July 2014 deadline was not met. What happened, why the miss in the deadline? From being pro-active, the Navy and DND suddenly just clammed up. Nobody wanted to talk officially about it.

’Thailand Example’
What’s even more frustrating is when you look around at how other countries conducted similar biddings and see how much more of a better job they were able to go about it. For example, Thailand conducted their own Frigate bidding a couple of years ago and it took them only seven months from the start of the bidding to the awarding of the winner. True, there were some delays also in that project, but these were limited to the actual funding of the program. Once the bidding started in September of 2012,⁵ by April 2013 they had already announced that the South Korean company Daewoo Shipbuilding and Marine Engineering (DSME) had won the bidding.⁶

Actually, Thailand’s Frigate bidding acquisition is very similar to ours, their budget was around USD 225 million per ship which is only around 10% or USD 21 million higher than the budget for our new Frigates. Of course, people could say that Thailand has had a lot of experience buying new ships as they have had a couple of similar ship biddings already in the past whereas this is the first new Frigate buy in the history of the Republic of the Philippines, hence the discrepancy in the results.

But then again, the Navy did go out of its way to get some assistance from various sources, like the TWG which is composed of civilian experts from various fields. Not only that, they even hired a Technical Consulting firm with a large budget of P25 million (USD 555k)⁷ to assist in the technical aspects of the bidding. None of these, though, helped the process to have a reasonably quick and competent resolution.

’Speculations’
With very few people close and knowledgeable about the project talking in public lately, it’s hard to know what is really happening, thus for now we can only SPECULATE. One thing to remember about this project is that it is probably the largest single military procurement of the PNoy Administration at P19 billion and thus is the largest target for corruption. To illustrate how large P19 billion really is, just consider that a ONE PERCENT “commission” or kickback thru corruption would already be worth an astounding P190 million.

That is a lot of money to share among thieves, hence with only two years left in the PNoy Administration, some people might see this as their last “big ride” to earn some money out of their position in government. Is this another case of PNoy not being able to control his own people, just like what happened with Philippine National Police Chief Alan Purisima? This could explain the sudden lack of transparency as CORRUPTION can only thrive in such an environment. A huge amount of money coupled with lack of transparency is usually a recipe for corruption. It’s possible that different factions within the PNoy Administration are infighting to get into the position to get that large commission for themselves.

Another possibility is that the program might have been a direct CASUALTY of the Supreme Court’s ruling against the Disbursement Acceleration Program (DAP).⁸ With the government suddenly being “handcuffed” in terms of releasing funds, they might’ve found it harder to fund this acquisition, especially since it has a very large budget.

’Possibilities’
If the reason is some sort of corruption and/or infighting, it is possible that PNoy might actually just cancel the program altogether so as not to add to the few corruption issues that hounds his Administration. Or more importantly, so it won’t be another issue that could be used against him once he steps down from power soon. The possibility of cancellation was highlighted by a somewhat reliable source, a former Captain of the Navy and reportedly a member of the TWG looking into the Frigate procurement who for now shall remain unnamed. Let’s just call him “Captain T” at this point.

A couple of months ago Captain T burst out in a social media post his frustration about the whole project, that it all was just a waste of time by those involved in trying to make it work. Back then people (including me) were skeptical about his outburst, but after a couple of months with no news and no results, the possibility of him being right all along is becoming stronger and stronger. Only time, of course, will tell if he is really correct, and we will likely learn soon enough.

If the issue is the disappearance of the DAP, then it’s possible that there is still hope, that the government will eventually be able to find a way to release the money LEGALLY this time. But as to WHEN this will happen (IF it will happen at all) is a big question mark, and with more delays and with time running out on the PNoy Administration’s term (only one and half years left), the less likely it will be that the Frigate Acquisition will push thru because there will be less time for the contract, payments, etc. to be completed. Also, as long as the ships have not been delivered yet, the larger are the chances of them being delayed even further or of them even being cancelled by the next incoming Administration.

’Parting Shot’
When the program finally started over a year ago, I thought everybody (including me) was jumping up and down for joy at the prospect of finally getting our first missile ships!!! Our first brand new major war vessel!!! Back then it felt like a VALIDATION of PNoy’s “Daang Matuwid” (“Straight Path”) wherein large amounts of money will finally be used PROPERLY and without corruption by the government. In fact, this Frigate Acquisition was one of the main reasons why I started blogging enthusiastically about our defense procurement.

More than a year later and all that enthusiasm and goodwill has been replaced by disappointment and frustration, and in a way this sort of reflects the performance of this current Administration in that it had a lot of IDEALISM and a lot of PROMISE initially, but ultimately it failed to live up to its expectation and deliver on those promises. Now, PNoy has already bought a lot of military hardware even without these new Frigates, but considering that we still have a long way to go to before we can have a credible external defense; Or that only about half of the major items have been bought so far; Or that some of the most expensive items failed to materialize means everybody has the right to be disappointed.

The battle is still not lost, though. If the projects pushes thru as planned then I am sure all these disappointments and frustrations will be forgotten, never mind that it took so long. If it does NOT push thru, however, then, well, it will be a major source of disappointment for this Administration. Anyway, I and a lot of people will be waiting, and hopefully it won't be for nothing …

SOURCES:

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1. DND opens bidding for 2 Frigates,
   (https://web.archive.org/web/20131011164909/http://newsinfo.inquirer.net/499507/dnd-opens-bidding-for-2-frigates) 
   
2. DND plans to sign P18-B Navy Frigates Project in July,
   (https://web.archive.org/web/20140729073733/http://www.philstar.com/headlines/2014/04/02/1307776/dnd-plans-sign-p18-b-navy-frigates-project-july) 
   
3. DND to spend P15 B for two Ships, P2.5 B for Ammunition,
   (https://web.archive.org/web/20161104060811/http://www.philstar.com/headlines/2014/08/10/1355874/dnd-spend-p15-b-two-ships-p2.5-b-ammunition) 
   
4. Only proven Ship designs will be evaluated in P18-B Frigate Project,
   (https://web.archive.org/web/20161114140442/http://retiredanalyst.blogspot.com/2014/01/only-proven-ship-designs-will-be.html) 
   
5. Cabinet okays Frigate buy,
   (https://web.archive.org/web/20150404090714/http://defense-studies.blogspot.com/2012/09/thai-cabinet-approves-to-buy-two.html) 
   
6. South Korea has been chosen to build Thai Navy Frigate,
   (https://web.archive.org/web/20160421230610/http://defense-studies.blogspot.com/2013/04/south-korea-has-chosen-to-build-thai.html) 
   
7. Wanted: Consultant for PH Navy's P18.9-B Warships deal,
   (https://web.archive.org/web/20151225105555/http://www.rappler.com/nation/48521-philippines-frigates-consultants) 
   
8. Understanding the SC ruling on the DAP,
   (https://web.archive.org/web/20160422085351/http://www.rappler.com/newsbreak/63267-understanding-supreme-court-ruling-dap)