Empedrad OK’d controversial provision in frigates deal

MANILA, Philippines – Who gave shipbuilder Heavy Hyundai Industies the “sole right” to choose the makers of the Combat Management System (CMS) and other critical subsystems that will be installed in the two warships of the Philippine Navy?

One of the unanswered questions in the Senate probe on the frigates deal mess was finally answered at a House hearing on Wednesday, March 7.

New Navy chief Rear Admiral Robert Empedrad said it was a “collegial decision” they made when he was chief of the Philippine Navy Technical Working Group (TWG). He said the provision is also “advantageous” to the Navy.

“The final selection of maker to be the shipbuilder’s sole right is not absolute. It can only be exercised as long as the equipment and system fufill the requirement and other design and build aspects,” said Empedrad, who showed a Powerpoint presentation during the hearing.

Ousted Navy chief Vice Admiral Ronald Mercado, who fought for the power of the Navy to choose the subsystems of the warships, called the provision disadvantageous. In an earlier Senate hearing, Senator Panfilo Lacson also blamed the provision for the entire frigates deal mess. (READ: Senate probe exposes root of frigates deal mess)

Mercado was relieved in December 2017 for alleged insubordination after he fought to get the CMS of Tacticos Thales installed in the frigates. Hyundai chose the other CMS supplier, the cheaper CMS of Hanwha Systems. 

In the Senate hearing, senior Navy officers, including Empedrad, agreed on their preference for Tacticos Thales. But Empedrad said they had to respect the sole right of Hyundai to choose. (READ: Navy chief still wants proven technology over Korean system for warships)

But in the House, Empedrad vouched for the CMS of Hanwha. “It’s inaccurate to state that inferior equipment will be placed in the Philippine Navy frigates because the TWG crafted the best technical specifications at the time of the bidding,” he said.

Empedrad said the decision to give the shipbuilder the “sole right” to choose the makers of the subsystems is anchored on the Procurement Act, which prohibits reference to brand names. He said the Bid and Awards Committee also allowed the supplier to subcontract subsystems of the frigates. 

“It is to be reemphasized that the equipment in the maker’s list were rated passed in 2nd stage SOBE (Submission and Opening of Bid Envelopes) and are post-qualified. No new equipment was added after the signing of contract,” said Empedrad. 

Empedrad said the provision was actually advantageous because “engaging suppliers of more than 200 minor and major subsystems is beyond the project management capacity of the Philippine Navy,” meaning HHI supposedly bears “all risks” for the project. 

Both Hawha and Tacticos passed the post-qualification assessment of the Navy. But Mercado maintained that the CMS of Hanwha was effectively disqualified when a new requirement was inserted after the post-qualification assessment – the compatibility with Tactical Data Link 16. This supposedly leaves them with the CMS of Tacticos Thales as the only qualified CMS. 

Empedrad and Mercado have been referring to different sets of technical specifications. Empedrad cited the requirements in the bid documents. Mercado cited requirements in the Contract Agreement, which included additional requirements. 

On Wednesday, Mercado said it was also Hanwha Thales and not Hanwha Systems that the Navy approved during the post-qualification assessment. (READ: Mercado: Navy did not approve Hanwha Systems as ‘substitute’)

Hanwha Thales was a joint venture company that split a month after the Philippine Navy conducted tests. It is now Hanwha Systems, after Thales divested its shares from the company.

Mercado is retiring on Friday, March 9. It is not clear if more hearings will be conducted. – Rappler.com