Wednesday, June 1, 2016

Analysis: Frigate Acquisition Project

A project that has been dragged on for years, and risks to go on until the new administration sits in.


This project was made introduced by the Philippines Department of Defense as the result of rejecting the deal regarding the second-hand Maestrale-class frigates from Italy which they point out that it was all due to logistics and upkeep expenses are all of the problem. Thus, it was leading to the Defense Secretary deciding to have new hulls instead that economy-wise, will have a longer life span servicing the navy for more years to come.


There are several shipbuilding industries who participated in the deal, and they were the following:

- Garden Reach Shipbuilding and Engineering, offers Kamorta-derived ships for the Navy.
- Hyundai Heavy Industries, offers HDF-3000 which is Incheon-derived ships.
- Daewoo Shipbuilding and Marine Engineering, offers DW-2000 ships.
- STX Korea, offers the same type of ship as Hyundai would do.
- Navantia, offers the Avante 2200 combatant
- STX France, offers the N2GF or the Upgraded Floreal class.

These bidders are doing their best to bagged the project. It was then given through the bid bulletins in February and March 2016 that issues as per exchange rates, sovereign guarantees, timeline of the opening of bids and so on that it make the process a bit delayed. Not to mention also that the bids and awards committee takes two years just to hire a consultant regarding the project, citing the problems as per balancing the ship's capabilities given the balance.

As the result, STX France did not give their bid on the second bid opening, and upon the event, out of five bidders, two were come out flexible as per project giving Php 16bln or in US Dollars, at around 340 million. And these were, Garden Reach Shipbuilding and Engineering which designated in Kolkota, India and Hyundai Heavy Industries who are from South Korea.


In this process is where the shipbuilder must undertake for so that every technicalities like financial standing, building capabilities and other factors regarding the project stands out and hence, the contract will be signing out.

Garden Reach Shipbuilding and Engineering
Kamorta-class corvette. Source: GRSE website.
This is the shipbuilding industry, undertaking from the Indian government, and is situated in Kolkota, India. They are the ones who made the Kamorta-class heavy corvettes for the Indian navy and as well building other ships for Indian navy and some of its neighbors like Sri Lanka. As per bid results, this industry shows out as the most responsive bidder in the project and is now undertaking post-qualification process. Rumors show that such process are already done with this industry and the result will be gone public soon.

Hyundai Heavy Industries
Incheon-class Frigate. Source: Republic of Korea Navy.
The second winning bidder after GRSE. This shipyard was designated in South Korea and has reputation of building both civilian and military-type ships. Reports do include that the South Korean Navy's DAPA tapped Hyundai to built Aegis destroyers. Yonhap News says it so.


While we are writing this blog, there were news brewing out of our beloved sources that the PQ team will be going to South Korea by next week, probably starting June 6. All of which means one thing: GRSE failed the post-qualification process.

This means that it will be HHI's turn to undertake Post-qualification process. Time-wise, there are chances that this project will be dragged up until the new administration sits in. Unless the PQ team do its best to sign up the contracts on or before June 30. In this case, the bidding process continues, and with one of two bidders failed the bid, everything goes on and the project in such a case now hangs in the balance. All of which will mean the success and failure of this project in this crucial phase of the process. 

The thing is, the committee simply doing its job of making the 16 billion pesos of money's worth out of this project. In other words, this project is a balancing act of capabilities and worth of having such capabilities that suit naval needs.


As of October 19, 2016

The Hyundai Heavy Industries, after months of waiting, have recently awarded by the DND through its "Notice of Award" where the HHI and its Incheon-class frigate is considered the preferred bidder for the program. Furthermore, the negotiations for the settlement of system and other matters are taken place wherein the terms in the contract will be ironing out that it will favor both sides.

The signing of contract is suspected to take place within this month, especially by next week. The weapons systems with regards to this project will be leaning on "Korean-made" products, and the Fitted-for-but-not-with weaponry will be installed later as part of the plans laid out by the Philippine Navy. The ship will be derived from HDF-3000 or the original layout there is of the Incheon-class frigate. It is suspected that the later design of the frigates created by HHI such as HDF-3500 will be integrated in these ships, conforming to the specifications laid by the bidding team.


The time span of the overall process was indeed that long but with justifiable reasons. One of which is the committee's hiring of the expert to give up the glimpse as to what kind of combat warship will suit the needs of the navy. Another is that funding allocation gives problem to some of the bidders in the project. And now, with GRSE, accordingly suffering some financial problems and giving PQ process to HHI adds more time to the bid process. Overall, the slow and thorough process will definitely gives two outcomes, wither to give worth for it or failure of the project in general.


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