COA questions P24 billion worth of military procurement

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The audit review of 23 contracts reveals various deficiencies

IRREGULAR PROCUREMENT. The military failed to complete procurement documentation.

MANILA, Philippines – The Commission on Audit (COA) found P24 billion worth of anomalous procurement under the Armed Forces of the Philippines (AFP) Modernization Program.

Based on an audit report, covering transactions of the AFP General Headquarters (GHQ), the military has violated Republic Act 9184 or the Government Procurement Reform Act for employing alternative modes of procurement.

“Review of the procurement activities under the AFP Modernization Program disclosed that no public bidding was conducted for 19 out of 25 projects…during the year 2014,” COA said in the report released on November 4.

“The conduct of audit review of 23 contracts disclosed various deficiencies such as the conditions under which the alternative modes of procurement may be adopted were not met.”  

COA also revealed the AFP-GHQ did not submit a complete documentation of the projects, which impeded the audit process. 

Among the questionable transactions was the P18.976 billion contract with Korea Aerospace Industries (KAI) as the supplier and Korea Trade-Investment Promotion Agency (KOTRA) as the contractor for the acquisition of 12 FA-50 jets.

AFP-GHQ defended that the Government Procurement Policy Board, through Resolution No 30-2012, recognizes KOTRA as an “agency or instrumentality” of the government of South Korea, and thus, exempting them from public bidding.

But according to auditors, the Korean suppliers did not qualify to be exempted from public bidding because the Defense Cooperation Agreement with the South Korean government signed in May 1994 only allows Seoul to recommend suppliers to the AFP.

“There is nothing in the Implementing Arrangement which forces upon the AFP the selection of (ROK’s) recommended suppliers or which expressly provides for a set of rules other than those under RA 9184,” COA said.

Also deemed irregular was the P4.763 billion procurement of 8 Bell 412EP helicopters from Canadian Commercial Corp (CCC).

Auditors said he helicopter units were acquired through negotiated procurement and must abide by the Memorandum of Understanding (MOU) between the AFP and CCC.

“It is necessary to determine whether or not said MOU can be used as basis by the Procuring Entity to exempt this procurement from the provisions of RA 9184,” the report said.

But “from the perusal of the MOU, we did not find any provision expressly providing the use of a set of procurement rules and regulations other than those provided in RA 9184.”

The deal with CCC was not a regular transaction because it must be considered for a “long-term cooperation for an effective and uninterrupted implementation” of contracts, AFP-GHQ argued.  

Other contracts that did not undergo proper procurement were:   

  • P882 million deal with Elbit Systems Land and C4I Ltd of Israel for 14 M113A2 Fire Support Vehicles (FSVs), four M113A2 Infantry Fighting Vehicles (IFVs), six M113A3 Armored Personnel Carrier (APCs), and four Armored Recovery Vehicles (ARVs) from the
  • P188.866 million worth of C4I/GIS computer systems from Triton Communications Inc. and Geodata Systems Technologies
  • P52.599 million purchase of 340 portable radio transceivers from Triton
  • P19.978 million Technical Forensic Upgrade System (TFUS) from Anascomm Electronics Supply Co.                                                                                           

AFP-GHQ insisted that these deals should be qualified under emergency procurement because there was a need for “immediate action…to prevent damage to or loss of life or property and to restore vital public service.”  

“It cannot be that the threat is continuous and existing. It is not dependent on an instant calamity because internal security situation is volatile and there is a need to undertake procurement through emergency method,” the AFP added in its defense. –

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