“[Defense Secretary Voltaire] Gazmin terminated the contract and issued a blacklisting order against the supplier,” said Communications Secretary Herminio Coloma Jr. in a text message to the Malacanang Press Corps yesterday.
“We only have accepted 7 UH-1 helicopters,” Coloma also said in the text message. “We continue to commit to the observance of our procurement laws and defend what is advantageous to the government.”
The Department of National Defense (DND) earlier said they were planning to scrap the contract for the supply of 21 UH-1 helicopters worth P1.2 billion, citing the supplier’s failure to deliver the air assets on time.
In a notice to terminate forwarded last March to the joint venture of Rice Aircraft Services Inc. and Eagle Copters Ltd., Defense Secretary Voltaire Gazmin informed the supplier of its failure to comply with the delivery schedule.
“You are hereby ordered to submit a verified position paper stating why the contract should not be terminated within seven days upon receipt thereof,” Gazmin said in the notice addressed to Robert Rice, the official representative of the joint venture.
Gazmin, who cited the procurement law, said the contract for the purchase of UH-1 helicopters will be partially terminated for exceeding the 10 percent maximum liquidated damages.
Gazmin said the liquidated damage is equivalent to one tenth of the one percent of the unperformed portion per day of delay. The supplier pays liquidated damage if it fails to meet delivery timetables.
The government has the option to terminate a contract if the supplier exceeds the 10 percent maximum liquidated damages as provided by law.
Gazmin said the joint venture of Rice and Eagle Copters exceeded the 10 percent maximum liquidated damages on January 31, 2015.
“You failed to comply with the agreed schedule of requirement of the contract agreement which provides that the delivery should be within 180 calendar days upon the opening of the letter of credit,” Gazmin told the supplier.
A letter of credit is a document that assures the supplier that the government will honor its financial obligations.
Gazmin said the letter of credit was opened on March 27, 2014 and deadline for the delivery of contract was on September 23, 2014.