A year before Rodrigo Duterte stepped down from power, there were some questionable deals on which the Department of National Defense had wasted so much precious resources.
There were acquisitions that were decided politically and the end users were not asked if the equipment or platforms were necessary and beneficial to them in carrying out their mandated tasks of protecting the country’s national interest.
One example is the decision to sign in November 2021 a contract with a Russian defense contractor to acquire 16 Mi-17 heavy lift helicopters, which the air force pilots were not familiar with since they had been using US and NATO standard choppers.
In January, the Philippines released money representing 15-percent downpayment for the Russian choppers, but five months later, the defense department canceled the P12.7-billion contract because of military sales sanctions imposed by the United States on Russia.
It remains to be seen if the Philippines can get back the P2-billion downpayment made to Russia and it looks like the defense department will lose P2-billion from the aborted transaction.
The acquisition of Mi-17 helicopters from Russia was a commitment made by Duterte when he visited Moscow before the pandemic, as the Philippines looked to diversify the sources of its military equipment.
Since the approval of the modernization law during the time of the late president Benigno Aquino III, the Philippines has bought platforms and equipment from Indonesia, Israel, South Korea, and Europe-based companies.
The United States remained the top source of equipment, like drones, refurbished helicopters, and old coast guard cutters, through its Foreign Military Sales (FMS) credit and grants.
Examples of acquisitions are C130 transport planes; maritime domain awareness intelligence, reconnaissance, and surveillance (ISR) equipment; anti-insurgency choppers; and some mobility and communications equipment.
But the more questionable deal involved the acquisition of six Offshore Patrol Vessels (OPVs) signed with Hyundai Heavy Industries (HHI) only two days before Duterte left his office.
Could this transaction fall under a midnight contract in the previous administration?
The Volunteers Against Crime and Corruption (VACC) believes it’s a highly questionable contract. But senior defense officials argued the contract should not be delayed, and invoked national security interests.
Why the rush? Duterte himself already said he would wait for the next administration to approve and sign the contract for the OPVs.
Did the defense department defy the president? Or somebody had pressured the defense department to rush the contract?
The decision to award the contract for the OPVs came in April and it was signed in June. The downpayment for the P30-billion contract was released in August under the new administration.
Everything was rushed including the post-qualification procedure.
In the award for 16 S70i Blackhawk helicopters, it took five months for the post-qualification to happen.
Some people around the president were even trying to shoot down the project, favoring another contractor for the combat utility helicopter project.
They wanted the AW-series of helicopters produced by AgustaWestland. But the earlier procurement of AgustaWestland choppers, like the anti-submarine platform operated by the Philippine Navy and several used by the Philippine Air Force, are now having some difficulties.
The issue is sustainability, the same way that only three of the 12 FA-50 “Fighting Eagles” light fighters, which were acquired from South Korea, are operational.
The delay in the acquisition of multi-role fighters centered also on the sustainability of the aircraft. The Philippines has alloted only $1.2 billion to acquire the top-of-the-line F16 from the United States, which costs about $2.4 billion.
But the American fighter sale includes training, maintenance and spare parts to make the F16 operational for five years. A cheaper offer from Sweden’s Gripen does not include sustainability.
The main issue in the acquisition of the OPVs is the sudden change of the requirements while the defense department’s Bids and Awards Committee (BAC) was in the midst of negotiations with the OPV proponents.
The BAC also failed to notify the proponents about the changes and were surprised when an announcement was made that HHI won the contract.
When the OPV project was announced early in the Duterte administration, the Australian shipyard Austal was the favorite contractor since it has an existing shipyard in Cebu, one of the requirements for the project.
The idea of building some of the OPVs in the country is to generate local labor and the technology transfer to local shipbuilders that will partner with foreign companies.
The defense department was ready to award the OPV contract to Austal but last-minute decisions made by the Australian shipyard changed the mind of the defense department.
The Australian firm wanted to increase the contract price to P42 billion due to inflation, or reduce the quantity to five ships based on a P30-billion contract price.
Defense planners said they could not increase the price because it was the budget given to them by the government, specifically Congress. They do not want to go back to policy makers to change the price for the OPV.
The defense department went back to the drawing boards and invited three proponents — Israel, South Korea, and Turkey — to re-submit proposals for the OPV project.
Among the three, Turkey complied with the requirements, partnering with a local shipyard in Bataan which has a track record in repairing Philippine Navy ships, to build three of six OPVs, generating 4,000 local jobs.
It appeared that Turkey’s military and shipyard management firm or ASFAT would clinch the contract because it was compliant with the defense department’s requirement to have an in-country production and transfer of technology.
To sweeten the pot, Turkey lowered the contract price to P29.5 billion, absorbing the losses since the Turkish shipyard is government-owned.
ASFAT also offered two unmanned sea vessels and a surface drone to widen the Philippine Navy’s maritime domain awareness in the vast South China Sea.
The Philippines would be among the first countries in the region to operate drones in the sea.
But the BAC decided against the Turkish proposals. What it did was change the terms of reference and tailor-fit the requirements to the South Korean proposal, which offered used corvettes and helicopters for P30 billion.
Turkey tried to stop the award, writing to former Defense Secretary Delfin Lorenzana and to BAC members. Turkey did not get any response even after the contract with Hyundai Heavy Industries was signed on June 28.
It appeared the defense department had long decided to get the South Koreans, who also got earlier contracts for two frigates and two corvettes.
When it solicited proposals from Israel and Turkey, the defense department did not expect Turkey to comply with the in-country production and transfer of technology scheme.
Israel and Turkey could have matched South Korea’s offer for the OPVs if they were informed about the changes while the negotiations were ongoing.
Turkey said it could have given eight sea drones if they were informed the in-country production and transfer of technology were no longer required in the OPV project.
The big question now, who decided to change the terms of reference and the requirement in the OPV project? Why was the contract rushed before Duterte stepped down? Did the 2022 presidential elections factor in?
Perhaps, the VACC was right. The new administration has to investigate what happened. The OPV deal might be a larger controversy than the Pharmally deal, the education department’s laptop project, and other irregularities in the Duterte administration.