A LOSING bidder in the procurement of two frigates for the Navy has questioned the alleged modification by the Department of National Defense (DND) of the project’s bid structure, claiming the acquisition was split into two components.
STX Offshore & Shipbuilding Co. Ltd. (STX Korea), one of the six bidders in the supply of the two frigates worth P18 billion under the Armed Forces modernization program, claimed the defense department split the project by separately bidding the two vessels and their weapon systems and the ammunition.
“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 said the acts was “grossly” disadvantageous, aside from “committing a serious violation of the country’s existing procurement laws.”
STX Korea said the company and the other bidders were initially made to believe that the whole project was P18 billion and this is the reason it joined the bidding.
“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,” it said.
Another Korean company, Hyundai Heavy Industries Inc. (HHI), won the bidding.
STX Korea said the DND’s Bids and Awards Committee (BAC) released the project’s technical specifications in January this year, but it also 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 ammunition, which could be in the form of missiles, ammunition, torpedoes and other forms of armaments.
Angara Abello Conception Regala & Cruz, STX Korea’s legal counsel, argued 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.”
It said if the ABC was to be adjusted, the BAC should conduct a rebidding.
“Upon adjustment of ABC, the procuring entity must conduct rebidding with readvertisement or posting. Any succeeding adjustment of the ABC shall be in accordance with these guidelines,” the law firm said.
STX Korea said it believed the BAC “purposely” split the project to make it appear that Hyundai 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,” it said.
“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 added.
STX Korea said Defense Secretary Delfin N. Lorenzana has already signed the contract for the two vessels pegged at P15,744,571,584.
No splitting
RESPONDENT to the allegations, DND Spokesman Arsenio R. Andolong said the department did not split the project, as the separation of the vessels with launchers and the procurement of the missile/ munitions (weapon systems) was a result of the technical discussions with all of the bidders.
“Said eligible bidders suggested to the Navy’s technical working group to acquire missile-munitions through a government-to-government transaction to facilitate export-import license of these defense items. Hence, upon recommendation of the Navy, the DND-Armed Forces decided to divide the project into two lots: Lot 1 for the platform with launchers and Lot 2 for the missiles-munitions,” Andolong said.
He said the DND did not violate any provisions of the Government Procurement Reform Act in modifying the bidding documents, as the Lot 1 project underwent two bidding stages as required by the procurement law.
“The allegations that the government will be put into a disadvantage is not correct, precisely because the procurement of missiles and torpedoes will be made through a government-to-government transaction,”
he said.
Also, Andolong said the ABC of the project and the deliverables were not changed.
“STX Korea was mistaken in its belief that the project was purposely split. It was made clear to eligible bidders that the budget for the project is P16 billion for the platform and launchers. This was discussed during the prebid conferences.
Further, “it was also included in the revised bidding documents and bid bulletins issued/posted by the BAC,” he said.
“All bidders who participated in the first stage bidding passed the eligibility requirements, as well as initial technical proposals and were declared eligible to bid by the DND-BAC for the frigate project.
Hence, no prospective bidders were unfairly disadvantaged,” Andolong added.