Future Philippine Navy Frigate

First Stage Bid

In May 2013, the Department of National Defense opened the "Frigate Acquisition Project" for the acquisition of two brand new frigates for the Philippine Navy with the contract price of Php 18 billion (around US$437 million as of May 2013), after rejecting the decision to procure two Maestrale-class frigates from Italy due to preference to acquire new ships. The tender was a two-stage bidding system, with proponents needing to pass the initial bid stage by meeting the minimum requirements set by the program, before finalizing their offers and submit for the second and final bidding.^[12]

Seven bidders participated in the first stage bid, namely Garden Reach Shipbuilders & Engineers (GRSE) of India, STX France SA, Navantia SA of Spain, Hyundai Heavy Industries (HHI) of South Korea, STX Offshore & Shipbuilding Co. Ltd. of South Korea, Daewoo Shipbuilding & Marine Engineering (DSME) of South Korea, and ThyssenKrupp Marine Systems (TKMS) of Germany.^[13] Initially only four shipbuilders qualified, with GRSE, STX France, and TKMS disqualified for failing to meet documentation requirements. A Motion for Reconsideration was provided by GRSE and STX France, which were accepted by the DND Bids and Awards Committee.^[14]

Pre-Second Stage Bid Changes

With six proponents passing the first stage bidding phase, successive meetings were held with the Philippine Navy, wherein the DND found out restrictions in the export of munitions through third party shipbuilders. This paved the way for the split of the project into two lots by August 2014:

Lot 1, with an Approved Budget for Contract (ABC) worth Php 15.5 billion (around US$348 million as of August 2014), covering for the platform (ship hull and all working components, guns, and missile and torpedo launchers; and

Lot 2, with an ABC worth Php 2.5 billion (around US$56 million) for munitions, missiles, and torpedoes.^[15]

Delays were encountered from 2014 to 2015 due to funding issues, with then Pres. Benigno Aquino III gave the DND the authority to enter into Multi-Year Contracts (MYC),^[16] while also approving the remainder of the project list submitted in 2013 by the Armed Forces of the Philippines under its AFP Modernization Program Horizon 1 Phase (2013-2017), which includes the Frigate Acquisition Project.^[17]

Second Stage Bidding

A new Supplemental Bid Bulletin for the project's Lot 1 second-stage bidding was released by the DND in February 2016, with an updated technical specifications provided for the proponents to follow and the schedule for the Submission of Bids and Opening of Envelopes (SOBE).^[18] The updated specifications was understood to be more detailed, and included improved features over the initial technical specifications provided during the first stage bidding. The ABC was also increased to Php 16 billion (around US$355 million) to cover for the peso's declining value over the US dollar, and to allow the improvements of the ships' key features.

Of the six proponents that passed the first stage bidding phase on 17 March 2016, only four submitted their bids for the second stage bidding phase: South Korea's Hyundai Heavy Industries (HHI) and Daewoo Shipbuilding & Marine Engineering (DSME), Spain's Navantia SA, and India's Garden Reach Shipbuilders & Engineers (GRSE). STX Offshore & Shipbuilding Co.'s bid submission was rejected after submitting beyond the deadline, while STX France SA did not submit a bid.^[19]

Of the four bids, only the bids of GRSE and HHI were deemed compliant, while DSME and Navantia's bids were disqualified for failing to meet documentation requirements. No Motion for Reconsideration were submitted by the two shipbuilders. Also, the DND Bids and Awards Committee confirmed GRSE, which offered a platform based on their Kamorta-class large ASW corvette design with a bid value of Php 15.047 billion, as the lowest bidder. HHI, which offered their HDF-3000-based frigate design with a bid value of Php 15.744 billion, was named as the second lowest bidder.^[19]

Post Bid Qualification and Contract Awarding

As part of the procurement process, the lowest bidder will undergo a post-qualification inspection wherein members of the bids and awards committee and the project management team will conduct inspections at the proponent's office and shipbuilders, and confirm the submissions provided including their account books.

The joint DND-PN team conducted the post-bid qualification inspection of GRSE in June 2016, wherein they found that it did not meet financial requirements, specifically the Net Financial Contracting Capacity (NFCC), which gave the DND-PN team a reason to conduct a post-bid qualification inspection with the second lowest bidder, HHI. This was done and completed in July 2016, wherein the team found that HHI was able to comply with the requirements and was considered the Lowest Post-Qualified Bidder while declaring GRSE as Post-Disqualified.^[20]

A Notice of Award with the amount of Php 15,744,571,584.00 (around US$336.912 million) was released by the DND and awarded to HHI in August 2016, which initiated contract negotiations between the DND-PN and with HHI from September to October 2016.^[20][21]

On 24 October 2016, the contract to supply two brand new general purpose stealth frigates was signed between the Department of National Defense, represented by Defense Sec. Delfin Lorenzana, and Hyundai Heavy Industries, represented by its Senior Vice President Mr. Ki Sun Chung, under the presence of officials from the DND, AFP, PN, HHI, and the South Korean Ambassador to the Philippines. On the same day, HHI released a computer generated image of the frigate in their website, and released information about the dimensions of the ships.^[22]

On April 30 2018, the HHI will officially starting to steel cutting and begins the construction of the Two frigates according to Navy spokesperson, Capt. Lued Lincuna. Lincuna said TIAC’s acceptance of the CDR marks a significant step forward and a milestone for the project, which consists of the approval of 71 critical detailed design drawings as submitted by HHI^[23], On the 16th of September 2018, HHI had started the construction of the 2nd Philippine frigate after the steel cutting of the first frigate^[24].

Anti-Air capabilities

Once completed and delivered fully functional in 2020, the two missile-armed frigates contracted from Hyundai Heavy Industries (HHI), will serve as the Navy's first anti-air missile platform.

This was the response of Philippine Navy flag-officer-in-command Rear Admiral Robert Empedrad when asked if the PN has any "anti-access or area capability" during the Senate hearing on the Frigate Acquisition Project (FAP) last week.^[30]

Frigate Project Dilemma

In January 2017, Go gave Defense Secretary Delfin Lorenzana a white paper endorsing a supplier that now stands to be selected to provide the critical Combat Management System (CMS) to be installed in the warships. The total project cost is P15.5 billion. Go's office also asked a Navy officer involved in the implementation of the project – then Frigate Project Technical Working Group chairman Commodore Robert Empedrad – to a meeting in Malacañang to discuss the selection of the CMS. Empedrad would later submit a written report addressed to Duterte and Go. Go issued a blanket denial when reached for comment, saying he never intervened in the project. He said he did not give Lorenzana any white paper related to the project nor asked Empedrad to brief him on the CMS selection.^[34]

The DND announced that it is welcoming any investigation on its PHP18 billion FAP, noting that it has nothing to hide regarding the matter. DND public affairs office chief Arsenio Andolong made the statement in response to plans of the Senate minority bloc to conduct an investigation on the FAP. ^[35]

This was the remark of Department of National Defense (DND) spokesperson Arsenio Andolong when asked about the program's status after HHI was banned from participating in any South Korean tenders for two years after its top executive was found guilty of offering bribes in order to win the bid to supply parts for four nuclear reactors to be constructed at the United Arab Emirates. The case stemmed in 2013 and in 2015, HHI was convicted and was penalized by a two-year ban. It sought to have the ban nullified in 2015 and the South Korean Supreme Court on Dec. 22, 2017 ruled with finality against the shipbuilder.^[36]