EXCLUSIVE: Rappler obtains documents showing controversy-riddled bidding processes that seem to favor a company and have caused delays in the delivery of much-needed equipment
At the height of
the Zamboanga
siege in September 2013, the Department of National Defense (DND)
tried to rush the delivery of armor vests to its troops.
The delivery had
been delayed to begin with. As early as December 2012, Serbian company
UM-Merkata was awarded the contract to deliver 3,480 units of armor vests –
force protection equipment, as they are called in bid documents – worth P120 million
($2.7 million)*.
About 3,000
troops were to be deployed to Zamboanga in the biggest operation of the Philippine military
in recent history. They badly needed the armors as protection in the combat
zone manned by an estimated 500 heavily-armed followers of Moro National
Liberation Front Commander (MNLF) Habier Malik.
(At least 25 policemen and soldiers were killed while 194 were wounded in the
20-day conflict.)
But the vests
from the Serbian company never reached the troops, forcing the Philippine Army
to request an emergency purchase of about 1,000 vests for an additional cost of
P28.3 million (about $630,000). The emergency purchase was made through the
Philippine International Trading Corporation, a unit under the Department of
Trade and Industry.
One year after
the siege, the armor vests that the Serbian company was supposed to deliver
have yet to reach soldiers in the battlefield. They are locked in a warehouse
inside Camp Aguinaldo
Worse, the
supplier of the armors for the emergency procurement, Stone of David Tactical
Equipment Company, is curiously linked to the Serbian company UM-Merkata.
Christopher Manaluz, the local representative UM-Merkata, is the general
manager of Stone of David.
Failed
tests
What happened
after the emergency purchase was made?
UM-Merkata
eventually delivered the body armors to the Armed Forces of the Philippines
"The samples
(Soft Ballistic Panels) failed to comply with the Back Face Signature
requirement since it exceeded the maximum allowable of 44 mm.... Exceeding the
required BFS even without bullet penetration can cause fatal internal injuries
to the user (soldier)," read the analysis portion of the May 26, 2014,
Initial Technical Inspection Report.
Rappler learned
that Defense Secretary Voltaire Gazmin ordered the termination of the contract
after it failed the tests twice. But the Serbian supplier is still exhausting
its appeal. It is the Department of National Defense (DND) that is on top of
the procurement of military equipment and supplies.
"There's
still appeal, submission of a position paper. Then there's a request for
arbitration. There's a clause in the contract that allows that," according
to Patrick Velez, Defense Assistant Secretary for Acquisition, Installations,
and Logistics.
Favoritism?
Last year's DND
bidding for the armor vests was marked by allegations of favoritism. It
appeared at the time that one person was set to win 3 separate contracts
totalling about P2 billion (about $45 million).
UM-Merkata was
also set to win in 2013 the succeeding bidding for a much bigger project –
44,0000 units of armor vests worth P1.76 billion (about $40million) following
the curious disqualification of the lowest bidder Kolon Global of South Korea.
But UM-Merkata's
luck changed in 2014, coincidentally when the leadership in the DND bid and
awards committee also changed.
UM-Merkata was
disqualified in the P1.7-billion project because of questionable documents.
Now, it also stands to lose the first project worth P120 million because of
defective units.
Rappler obtained
documents on the controversy-riddled bidding processes for the two projects for
the military's armor vests. What is happening shows the continuing struggle
inside the defense establishment, which has been notorious for corruption, to
fix its systems.
Transparency of
government contracts would have prevented delays because it would have allowed
the public to flag down the problems that persisted in the contracts since the
beginning. It is critical in a department that is getting up to P80 billion
(about $1.8 million) for the revived Armed Forces of the Philippines (AFP)
Modernization program.
The officials who
have been on top of the first project for body armors last year were:
Fernando Manalo –
Defense Undersecretary for Finance, Munitions, Installations, and Materiel
Undersecretary
Efren Fernandez, former Bid and Awards Committee (BAC) chairman
Patrick Velez,
Assistant Secretary
Editha Santos,
Defense Acquisition Office lawyer
(BAC shuffles
officers every year. In 2014, Defense Undersecretry Natalio Ecarma III
succeeded Fernandez to become chairman of the BAC that was in charge of the
armor vests.)
IN CHARGE: Defense Undersecretary for Finance Fernando Manalo (center) with Assistant Secretaries Efren Fernandez and Patrick Velez. Rappler file photo
Early problems
It was barely two
weeks since he assumed as chief of staff of the Armed Forces of the Philippines
(AFP) in January 2013 when General Emmanuel Bautista, now retired, raised the
alarm over the first contract for armor vests that he was being asked to sign.
Bautista wrote
Gazmin detailing his hesitation to sign it: UM-Merkata shortened the required
warranty period. A number of crucial documents were missing. As early as then,
Bautista was not satisfied with the results of the tests.
"The purpose
of the Post Qualification to the Lowest Calculated Bidder is to 'verify,
validate and ascertain all statements made and documents submitted by the
bidder.' In this case, the Test Laboratories (Beschussamt Mellichstadt and
Concordia Textiles and Test Results submitted by UM-Merkata during the Bid
Opening were not validated if they were compliant to the bidding requirements because
different Test Laboratories (TNO Defense adn Doo Jugoinspekt) were used during
PQ Test and Evaluation," his letter read.
Gazmin's response
was curt, distancing himself from the problem. "Is the CSAFP [Chief of
staff, AFP] requiring me to answer this (sic) questions? What is the role of
the USecs and ASecs?" read Gazmin's handwritten note in a memo sent to his
deputies in the defense department.
A week later,
Velez wrote Bautista to respond to the issues one by one.
With regard to
the different test laboratories, Velez wrote: "The PQ team conducted
document verification with the Test Laboratories. What was not conducted in the
Test Laboratories was teh testing by the PQ Team of the samples which were done
in another testing facility."
The contract was
signed another week later, on March 4. Bautista finally signed it.
Now that the
project is delayed because of the tests, Velez maintained it is not the fault
of the defense department. "It’s not the lapse of the DND. It’s the
supplier," Velez told Rappler. He said it's possible that the units tested
during the post-qualification were different from the ones delivered to Camp Aguinaldo
Zamboanga
rush
The Zamboanga
crisis would happen 6 months later after the contract signing, but the necesary
force protection equipment had yet to be delivered.
UM Merkata
earlier requested to move the Pre-Delivery Inspection (PDI) from July to
September. But then there were problems because some members of the inspecting
team from the Philippine military were apparently denied a visa to go to Serbia
To rush the
delivery during the Zamboanga siege, DND-Defense Acquisition Office (DAO)
lawyer Edita Santos suggested the cancellation of Pre-Delivery Inspection (PDI)
altogether. This proved to be a mistake. Pre-delivery inspection would have
shown – early on – the defects in the units and would have stopped its delivery
to AFP.
While they used
the siege to justify the shortcut in the process, the timing was also off. DAO
forwarded its recommendation to cancel the PDI to the Philippine Army, the end
user, on September 18. Acting Army Adjutant Joel Sergio and UM-Merkata approved
the recommendation on September 27 or a day before the crisis was declared
over.
Velez defended
their move. He said the PDI is not required under the law and was only
"created for the convenience of the supplier so it won't deliver the good
before it is checked."
Bigger
project
As the first
project was hitting delays, the defense department was also battling
allegations of favoritism with the succeeding project for armor vests.
In November 2013,
South Korean firm Kolon Global Corporation was making noise over its
disqualification in the project to supply 44,000 armor vests for the Army.
Kolon was the
lowest bidder, offering to supply the armor vests for a bargain of P800 million
(about $18 million) or less than half of the P1.76 billion (about $38 million)
approved budget for the contract. But it was disqualified in the
post-qualifiation because DND said its armor vests failed to meet two
requirements: the ballistic insert (the metal plate that protects the torso
from bullets) is not multi-curve and it was 5 millimeter shorter than required.
Kolon maintained
that its ballistic insert is multi-curve and ergonomic and complies with the
required length. The checkers must have measured the vest length straight from
edge to edge. The curve should have been considered, it said.
The company that
stood to benefit from Kolon's disqualification was UM-Merkata, the second
lowest bidder which offered P1.2 billion (about $27 million). During this time,
Manaluz's UM-Merkata and Stone of David had already won the first contract with
DND and the emergency procurement of the Philippine Army.
But UM-Merkata
would lose its lucky streak by 2014. The Serbian company was eventually
disqualified because its audited financial statement and net financial
contracting capacity proved to be questionable. It means it couldn't show that
it has the capacity to finance the big contract worth almost P2 billion.
The DND awarded
the contract only in July 2014 to the 3rd lowest bidder, the joint venture of
Achidatex and Colorado Shipyard. Now, there are questions about the joint
venture, too. A white paper claims the joint venture could not have qualified
for the project because the documents they submitted belongs to Rabintex, a separate
company that has the experience and track record in supplying armor vests.
Achidatex did
acquire the assets of Rabintex but not the company itself, the white paper
argued. A defense official who saw the white paper said there may be an
argument against the joint venture.
There is no
telling what will happen to the two projects for armor vests and when they will
be delivered to the battlefields. It's not only the troops in Zamboanga who
needed those body armors. Every day, troops are fighting communist insurgents,
terrorists, and Muslim separatists. Who knows how many lives the body armors
could have saved?
http://www.rappler.com/newsbreak/68431-zamboanga-siege-body-armors
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