Is the NSICMS a proven system? The PQ Team, when it post-qualified Hyundai, went aboard ROKS Jeonbuk (FFG 813), one of the most modern frigates of the Republic of Korea Navy commissioned in May 2015, which was the basis for the design of the PN frigates. The PQ Team observed that most subsystems installed onboard the vessel are locally made (indigenous products) by South Korea such as C-Star Missile by LIG Nex1, Main and Auxiliary Engines by STX-MTU and more importantly, the Naval Shield Integrated Combat Management System (NSICMS) by Hanwha. This validates that the NSICMS is indeed a proven design. As a matter of fact, NSICMS has been installed in ROKS Daegu (FFG-818), the newest ROKN ship commissioned into service last 18 February 2018.
Dr. Claudio, I take umbrage of your dragging into this discourse the sacrifices of our sailors and marines in the field as if I don’t care about them. You have, actually, trivialized their deeds by connecting them with VAdmMercado’s relief. I know their sacrifices being a combat officer myself for most of my military service. They have nothing to do with this case and it was insensitive of you to drag them into this. VAdmMercado is not the Philippine Navy. As I said earlier, what I am questioning are his actuations with regard to the FAP during the last 18 months of his service. I am assuming from your letter that you have been talking only to VAdm Mercado. Talk to other PN officers and enlisted personnel, Dr. Claudio, because the reaction I got from some of them of his relief was, pardon the pun, “utter relief.”
Lately, a letter to Congressman Gary Alejano purportedly from Thales Nederland circulated online, disputing the price of the Tacticos CMS that was divulged by Hyundai. According to the letter, it is not true that the price of Tacticos is $7M/per ship. Again, this information is irrelevant to the FAP. Thales Nederland should have gone to Hyundai to air this concern because it has the sole obligation to choose and install a CMS that is compliant with the FAP technical specifications from the Navy.
Below is my statement during the HoR Hearing on 7 March 2018 which, unfortunately, was not broadcast live on TV:
CHAIRMAN, AS THE PRESENTATION OF RADM EMPEDRAD, THE FOIC, HAS SHOWN EARLIER, THE FRIGATE PROJECT WAS CONDUCTED ABOVE-BOARD AND SHOULD HAVE PROCEEDED AS SCHEDULED IF NOT FOR THE MEDDLING OF A CERTAIN INDIVIDUAL AND HIS STRANGE FIXATION ON A PARTICULAR COMBAT MANAGEMENT SYSTEM.
CHAIRMAN, DURING THE COURSE OF THIS PROCEEDINGS, WE WILL ESTABLISH THE FOLLOWING:
-THAT THE FRIGATE ACQUISITION PROGRAM IS ESSENTIAL TO OUR NATION’S TOTAL DEFENSE. THUS, THE PROJECT SHOULD NOT BE DELAYED;
-THAT THE DEPARTMENT OF NATIONAL DEFENSE HAS ENSURED THAT THE PROCUREMENT PROCESS FOR THE FRIGATES ARE DONE AND COMPLETED STRICTLY IN ACCORDANCE WITH OUR LAWS, NAMELY, RA 9184 (THE GOVERNMENT PROCUREMENT REFORM ACT), AND RA 10349 (THE REVISED AFP MODERNIZATION ACT);
-THAT IF THERE IS SOMEBODY WHO INTERFERED WITH THE FRIGATE ACQUISITION PROJECT AND CAUSED DELAY, THAT PERSON IS NO OTHER THAN THE FORMER FOIC- VADM RONALD MERCADO. HE IS, IN FACT, THE CAUSE OF ALL THIS MESS.
CHAIRMAN AND MEMBERS OF THE COMMITTEE, IN JUNE 2016 AFTER THE TWG ARRIVED FROM KOREA AND FINISHED POSTQUALIFYING HYUNDAI TO BE THE BUILDER OF OUR FRIGATES AND BEFORE I SIGNED THE NOTICE OF AWARD, VADM MERCADO TRAVELED TO PARIS AND FROM PARIS, HE MADE A SIDE TRIP TO THALES IN THE NETHERLANDS. THIS IS A VIOLATION OF THE PROCUREMENT LAW THAT PROHIBITS CONTACT WITH ANY PROPONENT BY MEMBERS OF THE TWG BEFORE THE NOTICE OF AWARD IS SIGNED. PERHAPS VADM MERCADO WOULD LIKE TO EXPLAIN WHY HE VISITED THALES IN THE NETHERLANDS.
ON 13 NOVEMBER 2016, VADM MERCADO BECAME THE FLAG-OFFICER-IN-COMMAND OF THE PHIL NAVY.
SOMETIME IN FEBRUARY 2017, HYUNDAI INFORMED THE DEFENSE ACQUISITION OFFICE (THE IMPLEMENTOR OF THE PROJECT) THAT IT IS CHOOSING NAVAL SHIELD OF HANWHA AS THE CMS TO BE INSTALLED TO THE YET TO BE BUILT PN FRIGATES. UPON KNOWING THAT HYUNDAI WOULD CHOOSE THE HANWHA NAVAL SHIELD OVER TACTICOS OF THALES NEDERLAND, VADM STARTED TO WORK FOR THE SELECTION OF TACTICOS. HOW DID HE DO IT?
FIRST, HE TRIED TO INFLUENCE THE PROJECT MANAGEMENT TEAM (PMT) LED BY THEN COMMO EMPEDRAD TO WORK FOR THE ADOPTION OF TACTICOS. WHEN BOTH COMMO EMPEDRAD AND MAJ DAYAO, THE LAWYER OF THE PMT RESISTED, EXPLAINING THAT IT WOULD VIOLATE THE CONTRACT, THEY WERE RELIEVED AND REPLACED IN MARCH 2017 BY CAPT VILLA AND LCDR ESTEBAN, RESPECTIVELY.
SECOND, VADM MERCADO DIRECTED THE PN OWNER’S REPRESENTATIVES WHO WERE SENT TO HYUNDAI IN KOREA NOT TO DEAL WITH HYUNDAI UNTIL THE CMS ISSUE IS RESOLVED. THE PN OWNER’S REPRESENTATIVES IS A TEAM OF NAVAL OFFICERS WHO ARE THERE (SOUTH KOREA) TO SUPERVISE AND MONITOR THE BUILDING OF THE FRIGATES. ONE OF THEIR FUNCTIONS IS TO WORK WITH THE HYUNDAI ENGINEERS TO FINALIZE THE CRITICAL DESIGN REVIEW (CDR) OF THE SHIP. THE CDR IS VERY IMPORTANT TO THE BUILDING OF THE SHIP. THE BUILDER CANNOT PROCEED UNTIL IT IS FINALIZED AND AGREED UPON BY BOTH SIDES. VADM MERCADO, THRU CAPT VILLA, PREVENTED THEM FROM PERFORMING THIS FUNCTION.
ACCORDING TO CAPT BARTOLOME, HEAD OF THE PN OWNER’S REPRESENTATIVES, IN A PERIOD OF 10 MONTHS (JANUARY – OCTOBER 2017), HE SENT MORE THAN 200 COMMUNICATIONS COMPOSED OF LETTERS AND DRAWINGS OF THE SHIP TO CAPT VILLA FOR GUIDANCE BUT HE RECEIVED NO REPLY.
SOMETIME IN SEPTEMBER 2017, THE HYUNDAI PEOPLE COMPLAINED TO THE DEFENSE ACQUISITION OFFICE THAT THE PROJECT COULD NOT MOVE FORWARD BECAUSE THE PN OWNERS REPRESENTATIVES REFUSE TO WORK WITH THEM TO FINALIZE THE CDR AND THAT THE PROJECT WAS BEING DELAYED. THE SCHEDULE FOR FINALIZING THE CDR WAS OCTOBER 2017.
THIRD, VADM MERCADO LIKEWISE STARTED TALKING PUBLICLY BEFORE NAVAL OFFICERS ABOUT STOPPING THE CONTRACT IF TACTICOS IS NOT ADOPTED AS CMS FOR THE FRIGATES. VADM MERCADO, IN FACT, CONFIRMED THIS IN A DND SENIOR LEADERS ROUND TABLE DISCUSSION HELD IN SEPTEMBER 2017. IN THAT MEETING, VADM MERCADO HAD A HEATED DISCUSSION WITH THE HEAD OF THE DEFENSE ACQUISITON OFFICE, DIR. DELA PAZ. VADM MERCADO OPENLY SAID THAT IF THE TACTICOS IS NOT ADOPTED, HE WOULD HAVE THE CONTRACT CANCELLED. THIS WAS RECORDED IN THE MINUTES OF THE MEETING.
THE HYUNDAI COMPLAINT THAT THE PROJECT IS BEING DELAYED ALARMED ME, AS THE SIGNATORY OF THE CONTRACT AGREEMENT AND IMPLEMENTOR OF THE PROJECT. I FORMED A STEERING COMMITTEE TO LOOK INTO THE CMS ISSUE BROUGHT OUT BY VADM MERCADO. THE COMMITTEE CAME UP WITH A MEMORANDUM STATING THAT THE CHOICE OF THE CMS WAS HYUNDAI’S AND IT WAS PROVIDED FOR IN THE CONTRACT. INSTEAD OF COMPLYING, VADM MERCADO CONTINUED TO INSIST ON TACTICOS, EVEN ARGUING THAT WHEN TDL-16 WAS INCLUDED IN THE BUILDING SPECIFICATIONS, THE HANWHA NAVAL SHIELD HAS BEEN DISQUALIFIED. ANOTHER MEMO WAS SENT DIRECTING THE NAVY TO STRICTLY ADHERE TO THE CONTRACT, BUT VADM MERCADO, TOO, IGNORED THIS. HE CONTINUED TO INSIST ON TACTICOS.
CHAIRMAN AND MEMBERS OF THE COMMITTEE, IT IS NOW MARCH (2018) AND THE CRITICAL DESIGN REVIEW IS NOT YET FINISHED. HYUNDAI HAS REQUESTED FOR ADJUSTMENT OF THE TIMETABLES OF THE PROJECT BY SIX MONTHS. I HAD TO ACCEDE BECAUSE THE DELAY WAS NOT CAUSED BY THEM BUT BY ONE OF US. THIS DELAY WILL ALSO CONSEQUENTLY DELAY THE DELIVERY AND EVENTUAL UTILIZATION OF THE FRIGATES. FORTUNATELY, HOWEVER, WE HAVE NOT RECEIVED ANY REQUEST FOR PRICE ESCALATION.
IN SUMMARY, MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE, VADM MERCADO COMMITTED THREE OFFENSES IN CONNECTION WITH THIS PROJECT:
INTERFERING WITH THE PROCUREMENT PROCESS.HIS INSISTENCE ON TACTICOS OF THALES IS IN VIOLATION OF THE CONTRACT AGREEMENT AUTHORIZING HYUNDAI TO CHOOSE THE CMS TO BE INSTALLED. IT IS AGAINST RA 9184, THE GOVERNMENT PROCUREMENT LAW, TO INDENTIFY BRANDS OR EVEN TO HAVE CONTACT WITH PROPONENTS BEFORE THE NOTICE OF AWARD IS GIVEN. BY INVOKING, WRONGLY, THAT THE HANWHA NAVAL SHIELD HAS BEEN DISQUALIFIED BY THE ADOPTION OF THE TACTICAL DATA LINK 16, HE WAS, IN FACT, TAILOR FITTING A PRODUCT TO DISQUALIFY ANOTHER- ALSO A VIOLATION OF RA 9184.
USURPATION OF AUTHORITY.AFTER THE CONTRACT AGREEMENT WAS SIGNED, THE IMPLEMENTATION OF THE PROJECT HAS BECOME THE SOLE RESPONSIBILITY OF THE SECRETARY OF DEFENSE. THE DEFENSE ACQUISITION OFFICE (DAO) ASSISTS HIM. THE PROJECT MANAGEMENT TEAM AND THE OWNER’S REPRESENTATIVES, IN TURN, ASSIST THE DAO. BOTH THE PMT AND THE PN OWNER’S REPRESENTATIVES ARE ALL NAVAL OFFICERS BUT ARE WORKING UNDER THE SECRETARY OF DEFENSE. THEY REPORT DIRECTLY TO THE DEFENSE ACQUISITION OFFICE. THEY ARE NOT WORKING UNDER VADM MERCADO IN THIS PROJECT. THEREFORE, HE HAS NO BUSINESS ORDERING THEM WHAT TO DO AND WHAT NOT TO DO IN CONNECTION WITH THE FRIGATE PROJECT. IF VADM MERCADO HAD ANY CONCERNS ABOUT THE PROJECT, HE SHOULD HAVE COME TO ME. HE DID NOT, CHOOSING INSTEAD TO INTERFERE THRU THE PMT, THE PN OWNER’S REPRESENTATIVE AND THE SOCIAL MEDIA.
FOR IGNORING AND NOT COMPLYING WITH SEVERAL MEMOS FROM THE SECRETARY OF DEFENSE.
THOSE THREE REASONS ARE WHY VADM MERCADO WAS RELIEVED. I HAVE LOST TRUST AND CONFIDENCE IN HIS ABILITY TO LEAD THE PHILIPPINE NAVY. HOW CAN YOU CONTINUE TO HAVE CONFIDENCE AND TRUST IN A LEADER WHO INTERFERES IN A LEGALLY BINDING CONTRACT, USURPS YOUR AUTHORITY AND DEFIES YOUR ORDERS?
IN CONCLUSION, MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE, THERE IS NO ISSUE IN THE FRIGATE ACQUISITION PROJECT AND IT SHOULD HAVE MOVED SMOOTHLY EXCEPT FOR THE FORMER FOIC’S FIXATION AND INSISTENCE ON TACTICOS OF THALES NEDERLAND.
THE FRIGATE PROJECT WAS CONDUCTED ABOVE BOARD AND I WILL ENSURE THAT IT WILL CONTINUE THAT WAY UNTIL THE TWO FRIGATES ARE DELIVERED TO THE PHILIPPINE NAVY, IN ACCORDANCE WITH THE CONTRACT AGREEMENT.
THANK YOU!
After I delivered my statement, VAdm Mercado was also asked to give his statement. I was expecting him to refute and/or comment on my charges against him. But he did not. All he did was to state that he has served the Navy honorably in his entire career and that the Navy garnered several awards during his watch. Again, those are irrelevant to the issue at hand, as pointed out earlier.
During that same HoR Hearing, Congressman Danilo Suarez asked an innocuous question, “Admiral Mercado, do you know who the Thales Nederland representative in the Philippines is?” It was a simple question answerable by YES or NO. What did VAdm Mercado do? He looked around and said, “Your Honor, there are TWG members who are here and maybe they can answer your question.” The collective sighs and groans of people from the Philippine Navy behind me were palpable. They told me later that VAdm Mercado is, in fact, very closely acquainted with the Thales representative.
I rest my case.
Sincerely,
DELFIN N. LORENZANA
Secretary of National Defense
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