Defense Secretary Delfin Lorenzana explained that choosing Thales Tacticos as the supplier of the combat management system for the two missile frigates of the Philippine Navy will require additional cost from the government.

During a Senate hearing on the frigate acquisition program Monday, Lorenzana said Thales Tacticos and Hanwha which are subcontractors of Hyundai Heavy Industries (HHI) passed the technical specifications of the Philippine Navy.

“They are both compliant according to the technical specification of the Navy.. when Hyundai will choose (Thales Tacticos) raised its price to seven million dollars. Hyundai said we can put that but you have to pay an additional seven million, that is already above our budget,” he said.

“Its price increased to seven million per ship so that is 14 million (dollar) for two ships that is about 700 million (pesos),” Lorenzana added.

It can be recalled on December 2016, the DND relieved Philippine Navy Flag Officer in Command Vice Admiral Ronald Joseph Mercado because of issues surrounding the frigate acquisition project.

Mercado, who was replaced by Rear Admiral Robert Empedrad, insists that the combat management system for the frigates should be supplied by Thales Tacticos because there are additional specifications that were added in the contact which was not able to be met by Hanwha.

During the hearing, Mercado explained that the additional cost which was emphasized by Lorenana should be shouldered by HHI and not by the Philippines.

“On the cost to the government, I think everyone should now that RA 9184 provides that all bid prices shall be considered as fixed prices and therefore not subject for price adjustment...When they submitted their bid all the technical proposals in there submission (fall) into the financial amount that they submitted 15.7 (billion pesos). If there are escalations later on it is to their risk,” he said.

“Remember when we placed in the contract the validity of the price that they tendered it is valid to the whole period of the contract. So when the contractor, Hyundai for example, should ask the cost estimate from their sub-contractors, they should have placed a validity period for the cost so they are ensured that there will be no descalation of the price. It’s not our problem,” he added. Robina Asido/DMS