P1.2-B chopper deal ‘fixed’

From the Manila Times (Mar 10): P1.2-B chopper deal ‘fixed’
 

THE contract for the procurement of 21 refurbished UH-1 or Huey helicopters to the tune of P1.2 billion was “tailor-fitted” for a “favored” bidder who, after three failed bid attempts, eventually managed to bag the deal through negotiation with officials of the Department of National Defense (DND), documents showed on Monday.

Documents obtained by The Manila Times showed that as early as June 2012, the DND had requested the Government Procurement Policy Board (GPPB) to allow it to enter into “emergency procurement” for various aircraft, including the 21 Huey helicopters.

But in a letter to Defense Secretary Voltaire Gazmin dated Sept. 28, 2012, Budget Secretary Florencio Abad, who chairs the GPPB, informed the DND that their request was denied, saying the agency should make the acquisition through competitive biddings.

According to The Times source who provided voluminous documents that are related to the “onerous” and “disadvantageous” aircraft procurement, the DND then conducted three successive biddings, which all failed.

“The project was designed for negotiated procurement from the beginning. DND had been negotiating with Rice Aircraft Services Inc. (RASI) from the start. The Terms of Reference was prepared specially for Rice as evidenced by inclusion of the required Structural Life Extension Program (SLEP) as stated on pages 27 and 32 of the TOR. On both pages, you will see that there was a requirement that the helicopters ‘must have undergone a SLEP which has been successful and has a verifiable history, with complete documentation from an authorized repair facility,’” the source pointed out.

The Times also obtained a copy of the TOR.

Records showed that each aircraft cost around P54 million, as indicated in various “request[s] for payment” addressed to Susan Mariano, International Trade Department head of the Land Bank of the Philippines. The requests were made by Col. Glenn Cruz of the Armed Forces of the Philippines Quarter Master Service.

RASI and its Canadian partner Eagle Copters Ltd were awarded the P1.2-billion contract in December 2013. RASI participated in the three biddings required by the GPPB. In the end, it won the contract.

“RASI is the only one that can comply with this requirement because UH 1D was the only one that underwent this program because of its old age. This program is not necessary. Other models operate perfectly without SLEP. SLEP is [required] merely to avoid corrosion. This corrosion problem should not be a problem because our PAF [Philippine Air Force] has credible maintenance facility and personnel,” The Times source explained.

In his letter to Gazmin, the DBM chief repeatedly referred to the 21 refurbished choppers as “UH-1H” or Hueys, far from actual deliveries of the older and “obsolete” UH-1D model.

In the same letter with accompanying resolution by the GPPB, it was stated that some of the helicopters should be “mission-capable”.

All eight aircraft (not nine as previously reported) that have been delivered to the PAF hangar had “compatibility” and safety issues.

The UH-1D is older than the UH-1H. The UN-1D’s manufacturer, Dornier, has long folded up and no spare parts are being manufactured specifically for the UH-1D.

In the absence of spare parts, the supplier allegedly fitted Bell spare parts which were specifically designed for the UH-1H, thus there is always an issue of safety, The Times source said.

In an undated letter signed by Robert A. Rice, president of RASI, to Defense Undersecretary for Finance, Munitions and Materiel Fernando Manalo, chairman of the Special Bids and Awards Committee 1 and of the Negotiating Committee, the supplier admitted that the parts required by the DND in the TOR are already “obsolete and out of date.”

Rice said “RASI has made the necessary additions to incorporate all eligible and OEM approved part numbers. These additions are the equivalent, if not superior, to the part numbers that were previously listed in the TOR.”

“RASI’s objective is to deliver 21 UH-1 helicopters with the ‘latest and greatest’ components that will prove to be beneficial to the Philippine Air Force,” his letter to Manalo read.

The source, who was privy to the questionable chopper deal, said the joint venture of RASI and Eagle Copters Ltd defrauded the government by submitting the Statement of Compliance during the negotiation, stating that they will comply with all requirements for the procurement of the 21 refurbished UH-1H.

“This act deprived the government the opportunity to negotiate the project with a qualified supplier who can deliver superior quality of Bell UH-1H instead of UH-1D… The Joint Venture companies also deprived the PAF the chance to acquire better helicopters that are necessary to carry on with its missions and enhanced its capability as part of the AFP Modernization Program,” the source added.

In Malacañang, Presidential Communications Secretary Herminio Coloma Jr. said they have inquired with the DND about the chopper “fiasco” and was promised that the department is “keenly looking” at it, quoting DND Public Information Office chief, Peter Paul Galvez.

But The Manila Times source maintained that the DND should stop the ongoing acceptance of three of the aircraft “before it’s too late and [before the supplier gets] paid.”

Senate probe

The P1.2-billion helicopter deal should be investigated by the Senate, Sen. Joseph Victor Ejercito said.

Estrada, a member of the Senate Committee on National Defense and Security, was referring to the report published by The Times on Monday about the defective helicopters.

“This [deal] means that we spent P1.2 billion for choppers that can’t be used because the model is already obsolete,” Ejercito said in an interview.

If there were “errors” in the P1.2-billion contract, the defense department is mandated to terminate the contract, a department official said also on Monday.

“Well, the supplier must comply with what is mandated by the contract, we are also mandated to terminate the contract if we found there are [errors]. We are doing what we are supposed to do to see to it that no delivery is accepted unless it complies with what is stated,” Defense Undersecretary Manalo said in a news briefing.

While pointing out that DND officials did not violate any regulation in the procurement law in the acquisition of the helicopters, Manalo added, “If there is an agency that will run after us, then I will accept my fate.”

He said the procurement of 21 helicopters is in the implementation stage and 21 helicopters have been delivered.

But Manalo also explained that delivery is different from acceptance.

“The helicopters were delivered and since [they are of the] knockdown [kind], it’s part of the contract [that we make] the supplier assemble the helicopters and that is not [acceptance]. The interpretation is if [they are] not accepted [they cannot be paid for] as if [they have not been] delivered,” he said.

In the same briefing, Defense Assistance Secretary for Acquisitions Installations and Logistics Patrick Velez also admitted that the contract was not for UH-1D, but for UH-1 and officials deliberately did this to entice more bidders.

Manalo said payment for the helicopters will only be made upon delivery and acceptance of the aircraft.

He added that based on his personal assessment, the supplier must be able to deliver everything not later than April 15, 2015.

“Otherwise, we have reasons to terminate the contract, in addition to that, the supplier must pay maximum liquidated damage amounting to P120 million. The aircraft must be delivered and accepted and they still have to pay liquidated damage,” Manalo said.

Liquidated damage, he also explained, is the damage paid by the supplier for delayed delivery.

http://www.manilatimes.net/p1-2-b-chopper-deal-fixed/168301/