Tracking the Armed Forces of the Philippines Modernization program

24Dec/15Off

2015: What’s happening with the AFP modernization program

Whereas 2014 was the year of the "Notice of Award", 2015 was the year of deliveries. No less than 18 projects -- for all three services -- saw their first or full deliveries this year, making it the most active project-conclusion period since the first acquisitions of the AFP Modernization Program in 2003.

Among the capabilities that the AFP acquired this year are:

  • Supersonic flight with a limited capability for conducting air interception missions
  • Close air support platforms that can engage ground targets at night
  • Significant increase in cargo transport capability, both by air and sea
  • Armored, night-fighting-capable, mobility for mechanized troops
12342662_789719857823897_8823577461804422775_n 921233_1255251084501797_5414908113821209557_o
Commissioning ceremony for various PAF assets. Photo c/o DND Armored recovery vehicles during the 80th anniversary of the Armed Forces of the Philippines. Photo c/o DND

To give a more complete view of the state of the modernization program, this year's article is divided into the following sections, presented here in reverse order:

  • Pending acquisitions - these are acquisitions that have been publicly announced, either in conventional media or on the DND Website, that are still in various stages of completion. Some are still awaiting results of bids or re-bids. Others have had Notices to Proceed (NTP) to issued. Notable examples of projects in this state are the Philippine Army Shore-based Missile System and the Philippine Navy Frigate projects. Both of which have experienced very public reversals over the past year.
  • Awaiting delivery - these are are projects for which the acquisitions are in the process of being built from scratch, or are currently undergoing mandatory refurbishment, and have yet to be formally turned over to the AFP for operational use. A notable examples of acquisitions in this state would be the Strategic Sealift Vessel which is currently underconstruction in Indonesia and the ex-ROKN Mulkae class LCU, which is already in the Philippines, but is still awaiting refurbishment before it can be commissioned into service.
  • Acquisition list - these are items that are officially in the possession of the Armed Forces of the Philippines.

In addition to the various official acquisitions, South Korea has committed to providing the Philippines with one surplus Pohang Class corvette (see here). To this date, details of this project have not been firmed up. It is unclear if this project will materialize.

Note: This article is also available on the Timawa.net forum on the long standing What's happening with the AFP modernization thread that's been documenting the progress of the up-arming effort since 2003.

The acquisition list

The following list focuses on actual deliveries of equipment that were made in 2015.

PAF_mod Surface Attack Aircraft / Lead-In Fighter Trainer touchdown After an arduous 5-year process -- from concept to signing -- the Philippine Air Force is finally slated to return to supersonic flight operations after almost a decade with the acquisition of twelve (12) Korean Aerospace Industries FA-50PH Fighting Eagle aircraft worth P18.9B. These will also be the first brand new supersonic aircraft that the PAF will acquire since the factory-fresh F-5A Freedom Fighters that were delivered in the 60s. Subsequent fighter acquisitions had focused on excess defense articles such as the F-8 Crusaders which were recovered from AMARC and 2nd-hand F-5As from South Korea. The first two aircraft were delivered to Clark Air Base on November 28, 2015 with the first aircraft touching down at 10:23AM GMT+8. Details here.

The screen capture on the right was taken from the official PAF video timeline of the event.

Attack Helicopter Acquisition Project ah3 The DND awarded the contract to supply eight Agustawestland AW109E helicopters in late 2013. Training of flight and maintenance crews commenced in Italy in 2014. The first two units were delivered in late December 2014 along with two Philippine Navy Multi-purpose AW109s. The remaining six were delivered this year and commissioned on the 5th of December.  Details here.
Combat Utility Helicopter (CUH)
bell-helicopter Not to be confused with the Arroyo-era CUH project that acquired the W-3 Sokol in 2009, this P4.8B project sought to acquire eight additional helicopters for combat and VIP duties. This project went to Bell Helicopter which will delivered Bell 412EP aircraft by 2015. Three of these helicopters will be delivered in VIP transport configuration. See here.
Refurbished UH-1 acquisition project
11700717_290856624418335_7202593519125218769_o  This P1.26B project sought to acquire 21 refurbished UH-1 Iroqouis helicopters. The helicopters eventually bought were ex-German "D" versions, built under license in Germany aircraft that were equivalent to the "H" versions that were already in service with the PAF. This effort was marred by scandal with allegations of extortion, resulting -- intially -- in the cancellation of the deal while deliveries were being made, and then made even more controversial by the DND's self-exoneration of all charges without the benefit of a third-party investigation. Details of this convoluted affair are available here.
Medium-Lift Aircraft acquisition project 11054305_10206004349448771_7413833246222450866_n Notice of award for this P5.3B acquisition was issued to Airbus for the delivery of three C-295 aircraft on February 2014. The first aircraft was delivered on March 30, 2015, while the second aircraft arrived on September 15, 2015, and the third arrived on December 11, 2015. Details here.
Rockwell OV-10 Bronco refurbishment 12308321_785915654870984_333680633146237671_n  OV-10 #636 returned to service in November 2015. This was part of a PhP16,490,363.56 effort to return two OV-10s to active duty. #402 is also slated for refurbishment See here.

PN_mod  BRP Ivatan (AT-298)
 11807421_10153158676842956_1690246829469356166_o On the 2nd of July 2015, Philippine Navy personnel arrived in Australia to take possession of two Balikpapan Class Landing Craft Heavy (LCH): HMAS Brunei and HMAS Tarakan. They were donated by the Australian government as part of an aid package promised in the wake of Typhoon Haiyan. Both ships were commissioned into the Royal Australian Navy in 1973 and were subject to navigational upgrades before being turned over to the Philippines.

The former HMAS Brunei entered service with the Philippine Navy as the BRP Ivatan on July the 23rd, 2015.  See Timawa discussion here.

BRP Batak (AT-299)
11794552_10153158676787956_6652083775256194849_o The former HMAS Tarakan entered service with the Philippine Navy as the BRP Ivatan on July the 23rd, 2015 and was donated by the Australian government along with the HMAS Brunei as described above. See Timawa discussion here.
BRP Lake Caliraya (AF-81) 11261072_974376752614795_17840048_n The first of three tankers that the Philippine Navy received from the Philippine National Oil Corporation (PNOC) was commissioned into service on the 23rd of May 2015 as the BRP Lake Caliraya . Timawa discussion here.
Agustawestland AW-109E gunships
 aw109e  Two armed AW-109E gunships were commissioned into Philippine Navy service on August 10, 2015. These joined the three AW-109s that were delivered in December 2014. These aircraft featured combination 0.50 cal gun and 2.75 inch rocket pods comparable to those carried by PAF AW-109s.

The photo on the left shows one of these gunships on a deck qualification landing on the BRP Gregorio del Pilar. Photo c/o of the Philippine Navy.

Britten Norman Islander refurbishment
 12063733_1030630973637808_5887084342542447356_n  The Philippine Aerospace Development Corporation (PADC) delivered a refurbished Philippine Navy BN Islander (#PN320) on July 21, 2015 sporting a new grey color scheme. See Timawa discussion here.
PF-16 weapons upgrade f19fa51e220de68bc2d1b9159ef748fb_zps3ece26f4 The two Mk.38 25mm RCWS were initially slated for installation prior to the ship's departure from South Carolina but had been delayed. Timawa discussion here.
General Purpose Machine gun 7.62mm  Capture On January 4, 2015, the Philippine Marines received 220 units of US Ordnance M-60E6 General Purpose Machine Guns via FMS. See Timawa discussion here. Photo c/o Philippine Star.
71155_327179393712_8339928_n ex-Belgian Army M113 Armored Personnel Carriers with RCWS
 elbit2 The first six of 28 ex-Belgian Army M113s from Israel were delivered on July the 28th. These units were armed with Elbit Remote Control Weapon Systems (RCWS) which featured .50 cal machine guns in a gyro-stablized mounts. In an interview with the PNA, Army spokesperson Lt. Col. Noel Detoyato reported that fourteen of the remaining M-113s were configured as fire support vehicles, four as infantry fighting vehicles, and another four as armored recovery units. See Timawa discussion here.
ex-US Army M113A2 Armored Personnel Carriers
acdo3_zps8f095354 The Philippine Army acquired 114 M113A2 armored vehicles, in various configurations, from the US as Excess Defense Articles (EDA) (Timawa discussion here). While the transfer of the vehicles were completed as early as January 2014, difficulties in arranging for transport delayed actual delivery, which eventually cost the GRP P67.5M. The first 77 units were delivered to Subic on December 9, 2015
High Mobility Multipurpose Wheeled Vehicle - Ambulance variant 901a0724  Thirty units of HMMWV ambulances with associated shelter and medical equipment acquired. Twenty-three were delivered on January 26, while the remainder arrived the following month. Total value for this acquisition was 229,944,149.10. Details here.
AFP_philippines_seal Chemical, Biological, Radiological, and Nuclear protective and detection gear
 2 The Armed Forces of the Philippines (AFP)  received $1 million worth of chemical, biological, radiological and nuclear (CBRN) protective gear and detection equipment from the United States intended for the Army Support Command on Thursday at Camp Aguinaldo. According to the US Embassy press release about the donation:

The Dismounted Reconnaissance Sets Kits and Outfits (DRSKO) is a portable collection of Chemical, Biological, Radiological and Nuclear (CBRN) protective gear and detection equipment used to support dismounted Reconnaissance, Surveillance and CBRN site assessment missions. This increases the AFP’s capabilities to conduct CBRN site assessments to mitigate risks and gather intelligence on Chemical Agents, Biological Agents or other potential chemical hazards. The DRSKO is designed to equip a team of 27 CBRN personnel.

The photo shown on the right was taken from the above-mentioned embassy press release. See Timawa discussion here.

ga GA Special Purpose Rifle (SPR) / Designated Marksman Rifle (DMR) 10872891_714195705362405_2481804744076689959_o Government Arsenal produced 70 units of these SPR/DMR for the Philippine Marine Corps and Philippine Army. For the Marines, this involved upgrading existing Marine Scout Sniper Rifles (MSSR) from their Generation-3 configuration to this, which could be called "Gen 4". For the Philippine Army, particularly the Scout Ranger Regiment, the GA upgraded unused lower-rifle components for M-16A1s that were previously in LOGCOM storage. See Timawa discussion here.
GA 5.56 16 inch mid-length barrel
 12032201_758301020947817_4679245858536353050_n  The Government Arsenal undertook refurbishment of 400 existing M-16A1 rifles to their GA Carbine 16 inch mid-length standard. First units were issued to JSOG and NAVSOG. See Timawa discussion here.

In addition to acquisitions via bidding, South Korea has committed to providing the Philippines with one surplus Pohang Class corvette, a landing craft, and several rubber boats.  These and the aforementioned Korean acquisitions have yet to be delivered and have therefore been omitted from the list above.

Awaiting delivery

A significant number of high-profile projects remain pending, and have been omitted from the acquisition list. These are listed immediately below.

Service  Ongoing projects
 PAF_mod
C-130T acquisition - Two C-130T Hercules are being acquired from the United States as EDA and are due for delivery in 2016. The photograph on the right, c/o of the US embassy in the Philippines, shows PAF personnel inspecting one of the aircraft. See Timawa discussion here. C130a
Light-Lift Aircraft acquisition project - This is an P814M project to acquire two brand-new Light-Lift aircraft to supplement or replace the PAF's existing Nomad aircraft. This project went to PT Digantara of Indonesia which will be supplying two CN212 aircraft. See here. 12247043_215928185405782_8011054129263123361_n
 PN_mod
Strategic Support Vessel (SSV) - Construction for both SSVs are underway. Steel-cutting ceremony for the first SSV took place on January 22, 2015. Delivery of the first vessel is expected in March 2016, with the second vessel to be delivered in 2017. Details here. Photograph of fully assembled SSV-1 below c/o "Mr Kruk" of Kaskus Forum Indonesia. The steel cutting ceremony for the second SSV took place on June 5,2015. 11-27

ex-ROKN Mulkae class (LCU-78) - South Korea promised this EDA item in June 2014 and quietly delivered the boat in July 2015. As of writing the ship remain queued for a refit costing P27,138,295.51, and has not yet been commissioned into PN service. See Timawa discussion here.

LCH 3, 4, and 5 - efforts are underway to acquire three more Balikpapan class Landing Craft Heavies from Australia. Invitiations to bid have even been issued for equipment associated with these vessels. See here.

Amphibious Assault Vehicle (AAV) - Samsung Techwin was declared the lowest single calculated bidder for the P2.5B AAV project. Details here.

 

 71155_327179393712_8339928_n
155mm Towed Howitzer project - the Philippine Star reported that Elbit Systems, an Israeli defense company, won the bid to supply 12 units of 155mm howitzers. A Notice of Award for this project was issued on June 17, 2015. Deliveries are expected in 2016. See here. 12295515_10154172773179123_8435373251160167289_n

5.56mm assault rifle acquisition - this project went to Remington to supply rifles to both the Philippine Army and Philippine Marines in 2013 with deliveries made in 2014. However, issues with rifle quality hounded the acquisition which in faced termination earlier this year. The AFP announced that by August, Remington had replaced all defective rear-sights and that they were satisfied with them. It was unclear whether or not other quality related issues (e.g., quality of hand guards, rumored Front Sight Block alignment issues, etc.) were also resolved. Another batch of rifles is due for delivery.

Rocket Launcher Light Acquisition Project - Airtronic USA, Inc. was selected to supply 400 US-made RPG7 rocket launchers, and associated 40mm rockets, as part of a Foreign Military Sale (FMS) deal. While components of this deal have reportedly been delivered, the remainder remain obscure. For that reason, this project remains listed as "awaiting arrival. See Timawa discussion here.

ga
Laser etching machine. The photo on the right shows GA staff inspecting With completion of a P35M acquisition of laser etching and packaging machines, the GA gained the ability to place serial numbers on EACH individual cartridge it produces and then package them in 30-round cartons which will then be bar coded. This acquisition was designed to facilitate accounting and traceability of ammunition. This was a good governance measure undertaken in light of past controversy over AFP ammunition being found in the hands of enemies of the state. See Timawa discussion on this acquisition here. 1

Pending acquisitions

A significant number of high-profile projects remain pending, and have been omitted from the acquisition list at the bottom of this article. These are listed immediately below.

Service Pending projects
 PAF_mod Long Range Patrol Aircraft acquisition project - the DND declared a bidding failure in August due to documentation deficiencies among bid participants. see here.

Close Air Support Aircraft acquisition project - the bid for this project failed for the second time in December 2015. Based on procurement rules, the DND is now authorized to pursue negotiated procurement. However, an announcement to that effect has yet to be issued. See here.

Air defense radar acquisition project - like the SAA/LIFT project, this P2.68B acquisition is part of the PAF's systems approach to reviving the country's ability to enforce the Philippine Air Defense Identification Zone (PADIZ). This project has been the subject of much speculation, with very little official discussion. The TPS-77 and Elta ELM 2288 are touted as contenders for this project, however media reports have touted the Israeli contender as being favored. See details here.

SAA/LIFT munitions - the ordnance that SAA-LIFT aircraft will carry are being acquired via a separate acquisition project. These include Air-to-Air Missiles (312 Pieces), Air-to-Surface Missiles (125 Pieces), 20mm ammo (93,600 Pieces), and Chaffs/IR Flares. Details here. Upon arrival of the first two FA-50s, however, the PAF revealed that this project had fallen behind and would not yield results till three years.

 PN_mod Frigate Acquisition Program - this P18B project seeks to acquire two brand new multi-role frigates in a complicated two-stage bidding process. To date, the following shipbuilders have signified interest in the project: Navantia Sepi (RTR Ventures), STX Offshore & Shipbuilding, Daewoo Shipbuilding & Marine Engineering Co Ltd, Hyundai Heavy Industries Inc., Garden Reach Shipbuilders & Engineers Ltd of India, STX France SA. Details here.

Anti-Submarine Helicopter Acquisition - as of writing, Agustawestland was the only company that qualified to take part in the bidding in November. Second-stage bidding set for December 22, 2015. See here.

USCGC Boutwell (WHEC-719) - On November 17, 2015, the Office of the President of the United States issued a press statement that confirmed a planned transfer of the USCGC Boutwell to the Philippines as an Excess Defense Article item. This confirmed various US news reports circulating the month before of the impending transfer. Incidentally, the first crew of the BRP Gregorio del Pilar, previously the USCGC Hamilton, served on board the Boutwell as part of their training for accepting the PN's first Hamilton class WHEC. See Timawa discussion here.

Jacinto Class Patrol Vessel Upgrade Phase 3 - this project sought to upgrade the weapons and electro-optical systems of all three ships of the class. See Timawa discussion here.

Jacinto Class Patrol Vessel Upgrade Phase 2 - this is a sought, among other things, to overhaul and improve the main propulsion system, electrical, and various auxiliary systems of BRP Artemio Ricarte (PS-37). Other members of the class had already been upgraded to this standard.  See Timawa discussion here.

Marine Forces Imagery and Targeting Support Systems (MITSS) - this P684.32M project sought to acquire 6 sets of Small Unmanned Aerial Vehicles, 9 sets of Target Acquisition Devices, and 12 kits of Tactical Sensor Integration Subsystems. Details here.

40mm automatic grenade launcher - the DND issued a Notice To Proceed (NTP) in favor of Advanced Material Engineer / ST Kinetics, represented locally be Floro International Corp, to supply and deliver eight (8) units of 40mm automatic grenade launchers for the contract price of P19,750,672.00 on March 4, 2014. Details here.

 71155_327179393712_8339928_n Shore-Based Missile System - arguably, the AFP modernization controversy of the year was the deferral of the Philippine Army's Shore-Based Missile System (SBMS) to an as yet undisclosed "horizon" of the AFP Modernization Program. This was discussed on the Timawa forum on the following thread. Funds for the P6.5B project -- which originally became public in 2011 and discussed on the forum here -- were realigned to acquire force-protection equipment instead. It was a stunning reversal of a territorial defense initiative that drew boisterous condemnation on defense social media and earned the Chief of Staff AFP, General Hernando Iriberri, the monicker "General Helmet".

To date, it is not clear to which horizon the SBMS had been moved. A new FPE project has been initiated to replace an earlier acquisition that also ended in controversy.

60mm Mortar Acquisition project - 150 mortars are being acquired. Details here.

KM-450 1/4-ton truck acquisition - on October 19, 2015, the DND issued a Notice to Proceed to Kia motors for the supply of 717 trucks to the Philippine Army. See here.

KM-451 ambulance acquisition - on October 19, 2015, the DND issued a Notice to Proceed to Kia motors for the supply of 60 units of Field Ambulances to the Philippine Army. See here.

Related articles:

2014: What’s happening with the AFP modernization program

2013: What’s happening with the AFP modernization program

2012: What’s happening in the AFP capability upgrade program

Flashback: AFP modernization – 2003 to 2006

Flashback: The AFP’s modernization plans in 1995

13Jul/14Off

Licensed manufacture: The key to survival for SRDP companies?

In the wake of efforts by the Senate Committee on National Defense to amend Section 53 of the Government Procurement Reform Act to give the President the power to negotiate modernization-related acquisitions (see here), supporters of local defense industry players sought to campaign the Office of the President to use that power to instruct the DND to buy from local defense manufacturers.

But with only two years remaining in the Aquino administration, such a move would be the kiss-of-death for the object of such a blatant act of patronage. Any such selection would, in essence, be a political decision thus firmly associating that company with the outgoing administration. This in turn gives the succeeding administration a very strong incentive to overturn the decision -- if only to show the country that Malacanang was under new management.

Given the state of the local defense industry, virtually all players are vulnerable to the following two excuses for reversing the "anointment" of a preferred supplier:

  • Qualification for suppliers. Normal bid invitations include a protection against fly-by-night suppliers that stipulate that "bidders should have completed, within five (5) years from the date of submission of bids, a contract similar to the project. With all Philippine defense companies still in an embryonic state, this virtually disqualifies all local players
  • Commoditized products. Unless the preferred company were manufacturing the world's only light saber -- it really wouldn't take much for spin doctors to question the selection. Regardless of the technical merits of company's design, there are virtually no locally produced defense articles that are sufficiently unique to merit being singled out for a negotiated purchase, in lieu of other potentially cheaper imported alternatives

Even if a new administration upholds the previous President's decision, these violations would still give SIGNIFICANT fodder for any political operator who wants to stir controversy. The company that benefited from presidential selection could then be in the unenviable position of becoming a tool for political leverage, or worse . . . impeachment.

Dealing with SRDP barriers

To deal with these omnipresent barriers to SRDP, defense companies could lobby for a change in the rules-of-the-game. The industry could ask Congress to amend procurement rules and make them more favorable to local production. This, however, is a time consuming approach with an uncertain outcome. Furthermore, such amendments have the potential for unintentionally weakening the protections that the current law was meant to implement in other procurement areas (e.g., routine purchases for schools, hospitals, etc.)

This is NOT the only option for the defense industry.

Despite the challenges presented in both the previous (RA 7898) and current (RA 10349) AFP modernization law cited earlier in this article, both actually contain substantial pro-SRDP provisions namely the following:

Sec. 10. Self-Reliant Defense Posture Program. — (a) In implementing the modernization program, the AFP shall, as far as practicable, give preference to Filipino contractors and suppliers or to foreign contractors or suppliers willing and able to locate a substantial portion of, if not the entire, production process of the term(s) involved, within the Philippines.

(b) In order to reduce foreign exchange outflow, generate local employment opportunities and enhance technology transfer to the Philippines, the Secretary of National Defense shall, as far as feasible, incorporate in each contract/agreement special foreign exchange reduction schemes such as countertrade, in country manufacture, co-production , or other innovative arrangements or combinations thereof.

(c) The AFP likewise ensure that in negotiating all applicable contracts or agreements, provisions are incorporated respecting the transfer to the AFP of the principal technology involved as well as the training of AFP personnel to operate and maintain such equipment or technology.

The spirit of the law is clearly in favor of SRDP. But the AFP modernization law does not actually direct the AFP to buy locally. It merely encourages it to do so, and with a very ambiguous caveat: "as far as practicable".  Given the state of the manufacturing industry, there is a significant disconnect between the intent of that section and practical implementation. The law does not lay out a plan for how to develop local defense industries to the point where it would be practical to source equipment from them. Prototypes should not be mistakenly equated with a production-ready design, or production capacity.

These two mandates: "buy local" and "buy only mature products" appear totally contradictory. After all, how can the AFP buy mature products from an immature local defense industry? A potential answer: license-production of existing weapon systems in the Philippines.

What is licensed manufacture?

The following is an excerpt of a document prepared by an organization that monitors the growth of the international arms industry.

Licensed production is where a company's product is manufactured under contract by a company in another country. At its simplest, parts purchased from the vendor are assembled in the buyer country; at its most advanced, a weapon's design, along with the expertise of engineers, is purchased and the equipment built in its entirety in the buyer country.

The document above cites India as an example of a country that insists on licensed production of weapons as a pre-condition for acquiring them from foreign vendors. Russia, Israel, France, and the United Kingdom have all complied with India's demands to secure that regional power's business. It is worth noting that India's procurement policy is the same model espoused by Section 10 of the AFP modernization law. Other countries have adopted a similar approach.

Tim Huxley described in his book Defending the Lion City how Singapore uses a point-system for selecting weapon systems, with contracts awarded to options garnering the highest score. Special additional points are awarded to prospective suppliers that include locally-produced content thus ensuring success for companies that enter into partnerships with Singaporean companies. This strategy has resulted in in-country production of components for Singaporean F-16 multi-role fighters and CH-47 Chinook heavy lift helicopters.

The South Korean aerospace industry benefited greatly from licensed production of 120 KF-16 multi-role fighters. The US Department of Defense notified Congress of the South Korean request for local production in 1991, and a mere ten years later, the first South Korean supersonic aircraft, the T-50 Golden Eagle, took to the air. It was arguably no accident that the Golden Eagle was developed in partnership with Lockheed Martin, the manufacturer of the F-16 from which South Korea obtained the production license.

Incentive to license

The existing legislative framework offers local defense companies a host of under-utilized tools. In addition to Section 10 of the AFP Modernization Law shared above, prospective SRDP entrants also have Republic Act 5183 working in their favor. This law prohibits the Philippine government from sourcing items from companies that aren't majority Filipino owned. This means that any foreign vendor seeking to sell its wares to the AFP needs to establish arrangements with Philippine business entities, which will then be responsible for representing the vendor in public biddings and similar engagements.

The following partnerships have been outcomes of this representation requirement

Philippine company   Foreign companies represented   Acquisition project
Aeromart Commercial & Industrial Corp Marsh Aviation (USA) Service Life Extension Program (SLEP) for OV-10 Bronco aircraft
Aerotech Industries Philippines Alenia (Italy) Supply SF-260 training aircraft for the Philippine Air Force
Firepower Defense Contractors Rheinmetal Denel Munition Pty Ltd (Germany)
Denell Pty Ltd (South Africa)
Companhia Brasilera de Cartuchos (Brazil)
Supply of various small arms munitions for the Philippine Army and general purpose bombs for the Philippine Air Force
Urban Industrial Corporation Arcus Co. (Bulgaria)
Kompanija Sloboda A.D. (Serbia)
Supply of 40mm grenade launcher ammunition and artillery rounds for the Philippine Army

This law virtually ensures that a Filipino company will be involved in any acquisition -- with the exception of government-to-government deals. While the companies that have thus far emerged have been mere middle-men that lacked manufacturing capacity, Philippine defense companies could potentially use this law as a catalyst for licensing talks, thus forging an enduring production partnership instead of just a representation relationship.

Arguably, this law was meant to entice manufacturing  investments to the Philippines. Having defense industry players leveraging the law for licensed production would use the law the way it was intended.

This approach has the following advantages:

1. Existing laws can be used without any changes. This means that this course of action is available today

2. There would be no need to curry political patronage since this simply requires the law to work as written and intended. Although ensuring DND buy-in of the concept would still be necessary, as would an SRDP roadmap.

3. The two-countries rule AND the minimum requirement for deal sizes are both satisfied since the Philippine company would leverage those characteristics of their foreign partner

Once this joint venture is established, and wins bids for AFP contracts, the Philippine company would then be completely justified in claiming to have had experience with sizeable government contracts, thus satisfying the minimum deal-size requirement. A status that it could not have achieved on its own. Furthermore, the company could leverage its status as a licensed manufacturer of an established company to sell its own products both domestically and overseas.

Plan of action

How could this all play out? Ultimately that would depend on the nature of the equipment that will be manufactured, the capacity of the Philippine company (which would determine the capital expenditure required), the requirements of the foreign entity, and the export controls of the foreign company's country of origin.

Philippine companies may also have to come to grips with the fact that they can't advance on their own and may need to form a consortium of companies with complementary capabilities. This would potentially cut down on capital expenditures, since the consortium would take advantage of the investments already made in equipment and production space, and enhance the resulting entity's competitiveness as well as credibility as manufacturing partner.

The following simplistic plan of action should, at a high-level, should cover the process in broad strokes:

1. Select a foreign manufacturer whose products are already in use by at least two foreign countries -- or at least the country of origin. This would satisfy the requirements of the AFP Modernization Law

2. Enter into a representation agreement with this manufacturer in accordance with RA 5183

3. Enter into a licensing agreement with this manufacturer to have THEIR products manufactured at the Philippine company / consortium's manufacturing facilities

4. Take part in a bid invitation, and submit a bid that reflects the savings made possible by local manufacture

Conclusion

Instead of leveraging their design portfolios, local defense companies should consider to looking to their manufacturing prowess instead, and enter into licensing arrangements with existing players. This approach would not only allow it to tap into the admittedly small Philippine defense market, it could also launch it into the world stage, where the bulk of the defense dollars are to be sourced anyway.

----------

Author's note: This article is based on the opening message of what eventually became a productive, well-received, email conversation with the founder of a prominent player in the Philippine defense industry. Details of that discussion are being kept private as per request. But the substance of the proposal is shared here.

This post was also posted on the Timawa.net forum here.

ERRATA: The following bullet point was removed from the main article because the IRR of the AFP Modernization law actually exempts local companies from this rule: Section 1 of the revised AFP Modernization Law re-affirmed Section 4 sub-paragraph b of the original modernization law, RA 7898, that explicitly stipulated that "no major equipment and weapon system shall be purchased if the same are not being used by the armed forces in the country of origin or used by the armed forces of at least two countries". This is pretty much a deal breaker for patronage-based SRDP. Any administration looking to establish its anti-corruption credentials could very easily resort to reversing the "hand-out" for a quick win.

3Jan/14Off

A Self-Reliant Defense Posture (SRDP) roadmap and a DARPA-equivalent

In 2013, the Self-Reliant Defense Posture (SRDP) program -- an ongoing albeit lackadaisical effort to create an indigenous defense industry -- saw the most tangible display of high-level support in recent decades, when the Department of National Defense committed significant resources to the modernization of the Government Arsenal (GA), and facilitated the organization of the Defense Industries Association of the Philippines (DIAP). Both actions came on the heels of the successful entry into Philippine Navy service of a series of indigenously constructed marine vessels: The BRP Tagbanua (AT-296), the largest locally manufactured warship in history, and three Multi-Purpose Assault Craft (MPAC) Mk.II, arguably the fastest ships in the fleet. Both joined the fleet a year earlier.

640_ZZZ_022513_2_d  577267_366994123357610_114373295286362_947344_1115157720_n

The year also saw the operational use C-130 #3633, the first Philippine Air Force Hercules transport aircraft to undergo Programmed Depot Management careof the 410th Maintenance Wing. It was an achievement many hoped would herald a new era in improved Hercules availability -- all by Filipino hands.

309447_462461293810892_2075470411_n

Prospects for SRDP looked more promising in 2013 than it had ever been in recent years. But would it really last?

SRDP history shows that the Philippines neither lacks the imagination nor the talent to initiate domestic weapons production. However that same account also shows a long track record of failure to sustain such efforts. While the aforementioned recent SRDP developments showed a promising change in institutional outlook towards self-sufficiency, a change in the status quo will require more than a mere high-level peek into the current state of local-manufacture. This bump in interest must be institutionalized if it is ever to achieve any lasting effects.

Towards this end, the Philippines needs to establish an SRDP roadmap that clearly defines the following:

  • The key defense articles that the Philippines needs to produce on it own to achieve its security goals
  • Among the above-mentioned articles, which does the government intend to produce by itself and which ones will it farm out to Philippine industry

Before local industry commits the capital and resources necessary to research, develop, and eventually manufacture goods for the Armed Forces of the Philippines (AFP), it needs to understand the nature of the demand. Without this, the pool of willing entrepreneurs will be slim at best . . . if not non-existent.

What we need to produce ourselves

SRDP sought to protect the country from geopolitically motivated disruptions in the supply of defense material, as well as to allow local industry and labor to benefit from defense expenditure. The AFP spends billions of pesos to both acquire new equipment and maintain existing ones. Unless local industry learns to satisfy these needs itself, all these funds would be destined for foreign vendors.  SRDP was supposed to control this foreign-currency hemorrhage and help keep funds in-country.

The ability to pursue this program has been hampered by a multitude of factors: funding, lack of an industrial base, etc.. However, even if these prevailing limitations were addressed, the program's objective shouldn't be to completely eliminate importation of all defense equipment from foreign sources.

Very few countries actually design and/or manufacture every single defense article entirely on their own. Even the United States, for all its wealth and manufacturing capacity, still has its soldiers' uniforms manufactured in eastern Europe and Asia. The official sidearm of the US Army is Italian: the M9 Barreta. Its standard Squad Automatic Weapon (SAW) and Medium Machine Gun (GPMG) are Belgian in origin: the M249 and M240 respectively, both built by Fabrique Nationale Manufacturing, Inc. (The latter replaced the iconic M60 machine gun) The UH-72 Lakota Light Utility Helicopter that recently entered service with the Army as a replacement for the UH-1 Huey and the OH-58 Kiowa is manufactured by Eurocopter. The most powerful military force in the world accepts the practicality and cost effectiveness of foreign solutions for their troops. A defense-spending fact that shouldn't be lost upon SRDP advocates.

There are two main reasons for continuing to import items, both of which allow the AFP to acquire equipment in the most efficient and cost-effective manner:

  • Time to deploy
  • Economies of scale

Time-to-deploy

Decades of under-investment in national defense means that the AFP is in such a dire state that many of the items on the AFP modernization list are critical pieces of equipment that cannot be delayed by protracted development times. The military's principal concerns are time-do-deploy and reliability. Acquiring off-the-shelf and proven equipment means that they can field weapon systems to the troops in the shortest possible time and with the confidence that the systems will work as advertised and as proven by other users around the world.

Off-the-shelf products can be deployed significantly faster than something that still needs to make the transition from the drawing board to the field. Take for example the largest military vessel produced by local industry for the Philippine Navy to date: the 51-meter BRP Tagbanua Landing Craft Utility (LCU). From bid initiation, to design definition, to actual delivery, this project took six years to complete. In contrast, Daewoo shipyard can complete an entire 122 meter Makassar class LPD in only four months using pre-existing designs.

Time-to-deploy considerations aren't unique to the Philippines. Even the People's Republic of China isn't immune to such concerns, which is why they are still buying Russian engines for their vaunted new-generation aircraft instead of waiting for their design bureaus to perfect their designs.

How can time-to-deploy considerations be balanced with inevitable delays caused by development? Read on.

Economies of scale

Contrary to a sentiment popular amongst defense-commentators, in-country production will not automatically translate to lower cost of equipment. Setting up of industries is neither cheap nor easy. Acquisition of capital equipment and plant facilities – where none existed before – is a very financially intensive affair. All of those costs will have to be passed on to the buyer and unless the equipment is purchased in quantity, whatever is produced domestically could become the most expensive items of its kind in the world. (See older article about supply-and-demand). When buying equipment from foreign sources that are already ongoing concerns, one not only benefits from pre-existing infrastructure and experience, but also an existing global customer base that allows the vendor to spread out the cost of production resulting in lower per-unit costs.

Ultimately, SRDP program managers must be selective about what is produced locally. A balance between self-reliance and fiscal responsibility must be struck -- all without compromising the AFP's modernization efforts. A proposal for how to do this will be discussed later in this article.

Government-Private sector synergy: Who produces what?

Central to the DND's ongoing efforts to reviving SRDP is the modernization of the Government Arsenal. The primacy of the Arsenal as an SRDP engine is affirmed in issuances such as Executive Order 303, Series of 2004 which states:

SECTION 1. Sourcing the Government Munitions Requirements. The AFP, PNP, and other government agencies are hereby directed to source their small arms ammunition and such other munitions requirements as may be available from the Government Arsenal;

To this end, the arsenal has increased production to levels that have now surpassed its previous output record of 20 million rounds set in 1978. Production for 2013 exceeded 23 million rounds. It is worth noting that the arsenal achieved this volume with its existing aging equipment. Much of the arsenal's ongoing modernization efforts revolve around replacement or supplementation of existing equipment with state-of-the-art equivalents. Such as the new production line from Waterbury Farrel which will be dedicated to the production of M193/M855 5.56mm rounds. This and other new machines promise even more strides in production capacity thus allowing the GA to satisfy the routine ammunition needs of both the AFP and Philippine National Police (PNP).

374984_520052888030117_1818178626_n

The GA's activities, however, do not end with ammunition production. With the creation of the Small Arms Repair and Upgrade Division (SARUD), the Arsenal has begun providing the AFP with small arms refurbishment services -- bringing unserviceable rifles back to operational status. The SARUD is a key step towards the re-establishment of a small arms manufacturing capability back to the arsenal complex. A function that was lost when the martial-law era Elisco Tool stopped production of Philippine-made M-16s.

The growth in the arsenal's capabilities, however, presents potential private sector SRDP players with an interesting quandry: "Will the business I setup eventually run into conflict with the GA's offerings?" Solution: An SRDP roadmap.

A roadmap for SRDP

An SRDP roadmap would show where government agencies like the Government Arsenal growth are headed, thus allowing defense entrepreneurs to plan their investments accordingly and manage expectations. For example, a for-profit entity that produces ammunition would then understand that its role in SRDP would either be to simply provide surge capacity for national emergencies that call for more output than what the GA can accommodate otherwise it would need to enter into a Joint Venture (JV) with the DND -- provided, of course, that the company is already a mature industry fixture. Areas of concern that are not on the plate of any government agency (e.g., GA, Philippine Aerospace Development Corp, Department of Science and Technology, etc.) would then be fair game and would merit more capital.

A side-benefit of maintaining a roadmap would be the definition of development horizons. It would give a timeline for when a particular piece of equipment is required, and therefore layout the AFP's decision criteria for whether or not to wait for local prototypes to mature or to procure off-the-shelf. This avoids the time-to-deploy conflict between SRDP and the AFP modernization program that is mentioned above and would give private industry time to acquire the expertise and technology required to respond to a future government request for products. It also protects potential SRDP entrepreneurs from a state of limbo where their wares never leave the prototype stage. A situation that currently affects the "Project Trident Strike" Remote Control Weapon System (RCWS) developed by the Naval Sea Systems Command (NSSC) and the Mapua Institute of Technology. This RCWS has reportedly gone through several versions and modifications . . . and is no where near being deployed for operational testing.

72084455_ac89d65f29_o

This roadmap would need to encompass the SRDP development activities of all AFP services and government agencies (e.g., GA, PADC, etc.). It would avoid duplication of effort among these organizations, in the same manner that the US National Aeronautics and Space Administration (NASA) rationalized the aerospace and rocketry programs of various entities within the US government, whose fractured efforts reportedly gave the Soviet Union the opportunity to take the opening lead in the space race.

Drafting and implementing a policy instrument of this breadth requires an entity with the expertise to grasp the technological hurdles that must be overcome, the military's doctrinal considerations that must be satisfied, and possess the required business acumen to see the venture through. It must also have the means to either absorb technology transfers itself, or is able to farm this out qualified private sector entities.

To this end . . . the Philippines needs its equivalent to the American Defense Advanced Research Projects Agency (DARPA).

A Philippine "DARPA"

Before crafting a Philippine DARPA, it would be best to understand what the original DARPA is and map it to the Philippine setting. Like NASA, DARPA was organized in response to the technological challenge that the Soviet Union presented during the space race and continues to play a key role in maintaining American leadership in military technology today. It was established in 1958 to oversee strategic application of United States research and development capacity to benefit of national defense and has since given rise to now-ubiquitous technologies such as the following:

  • ARPANET – this effort to link computers into a national network became the basis for the modern Internet
  • GPS –  early DARPA work on a positioning system called “TRANSIT” laid the groundwork for what eventually became the current Global Positioning System
  • M-16 assault rifle – DARPA initiated the Project Agile study that eventually created the rifle that has been the official US military assault rifle for the past 50 years

In recent years, it has organized technology competitions like the DARPA Robotics Challenge whose participants are currently tasked to develop robots that are capable of "assisting humans in responding to natural and man-made disasters".

DARPA leverages both government and private sector research organizations for its projects. The agency's 50th anniversary publication summarizes how it manages its projects as follows:

 The DARPA program manager will seek out and fund researchers within U.S. defense contractors, private companies, and universities to bring the incipient concept into fruition. Thus, the research is outcome-driven to achieve results toward identified goals, not to pursue science per se. The goals may vary from demonstrating that an idea is technically feasible to providing proof-of-concept for an operational capability. 

By design, DARPA leverages the industrial capacity and existing research infrastructure of the United States to achieve its goals. As a consequence -- surprisingly, as related by the document linked above -- DARPA doesn't have its own organic research facilities and is entirely dependent on the capabilities of its research partners. DARPA projects are also focused on developing cutting-edge technologies, leaving comparatively less risky development projects to other procurement organizations within the Department of Defense. For this reason, a pure US-DARPA model is at best a source of inspiration for what can be done, but cannot be completely replicated in a country with limited manufacturing capacity like the Philippines.

Other nations who've adopted national policies that apply technological solutions to defense, and developed indigenous military industrial complexes have come up with their own variations of the DARPA concept. Consider the following countries: South Korea, India, Pakistan, and Singapore. These countries have very robust domestic defense materiel production capabilities and are even able to export their products, or take part in co-production ventures.

Lessons from South Korea

Thanks to the selection of the Korean Aerospace Industry FA-50 Golden Eagle for the Philippine Air Force's Lead-In Fighter Trainer / Surface Attack Aircraft requirement, the Defense Acquisition Program Administration (DAPA) has gained prominence in the Philippine defense social media circles for its involvement in negotiations for the purchase of the aircraft. DAPA defense materiel acquired from South Korea and is tasked with the harnessing of manufacturing capacity of South Korean industry in that country's defense.

7655222040_e5315e1603_o

It's Website describes its function as follows. The DAPA is tasked implementation of the following national policies:

  • Reinforcement of R&D in national defense
  • Reinforcement of global competitiveness of the acquisition program
  • Expansion of export support for the defense industry
  • Prioritization of domestic R&D
  • Strengthening cooperation of nation-wide science and technology

Like the US DARPA, this entity leverages already existing capabilities, but adds a marketing function to the equation because of its involvement in the export of South Korean defense technology.

Lessons from India

The Indian Department of Defense Production (DDP) takes a direct hand in the production of military equipment for the Indian military, from the HAL Tejas Light Combat Aircraft to the Arjun Main Battle Tank. The following organizations fall under this department's control:

  • Ordnance Factory Board (OFB)
  • Hindustan Aeronautics Limited (HAL)
  • Bharat Electronics Limited (BEL)
  • Garden Reach Shipbuilders & Engineers Limited (GRSE)
  • Goa Shipyard Limited (GSL)
  • Hindustan Shipyard Limited (HSL)
  • Mazagon Dock Limited (MDL)
  • BEML Limited (BEML)
  • Bharat Dynamics Limited (BDL)
  • Mishra Dhatu Nigam Limited (MIDHANI)
  • Directorate General of Quality Assurance (DGQA)
  • Directorate General of Aeronautical Quality Assurance (DGAQA)
  • Directorate of Standardisation (DOS)
  • Directorate of Planning & Coordination (Dte. of P&C)
  • Defence Exhibition Organisation (DEO)
  • National Institute for Research & Development in Defence Shipbuilding (NIRDESH)

DDP efforts put India in a position to absorb foreign technologies as part of co-production ventures. Hindustan Aircraft Limited, for example, is now gearing up for local production of France's most advanced combat aircraft to-date: Rafale Multi-Role Fighters. It is worth noting that the DDP was created at a time when the defense industry was the reserved for the public sector. In 2001, India opened the industry up to private sector involvement with up to 100% domestic participation and a maximum of 26% foreign direct investment.

Lessons from Pakistan

Like it's similarly-named Indian counterpart, the Pakistani Ministry of Defense Production (MODP) participates in the manufacture of defense materiel for its armed forces. Among other achievements, it is the driving force behind local production of the Chinese JF-17 Light Combat Aircraft. Its Website describes its role as follows:

  • Laying down policies or guidelines on all matters relating to defence production
  • Procurement of firearms, weapons, ammunition, equipment, stores and explosives for the defence forces
  • Declaration of industries necessary for the purpose of defence or for the prosecution of war
  • Research and development of defence equipment and stores
  • Co-ordination of defence science research with civil scientific research organizations
  • Indigenous production and manufacture of defence equipment and stores
  • Negotiations of agreements or MOUs for foreign assistance or collaboration and loans for purchase of military stores and technical know-how or transfer of technology
  • Export of defence products
  • Marketing and promotion of activities relating to export of defence products
  • Coordinate production activities of all defence production organizations or establishments

Like the Indian model, the Pakistani government is deeply involved in the manufacture of its own defense articles. Like the South Korean DAPA, the MODP also takes steps to promote the export of Pakistani technology.

Lessons from Singapore

The Defense Science and Technology Agency (DSTA) is the latest Singaporean Ministry of Defense (MINDEF) organization dealing with defense-related R&D and procurement. Its official Website describes its role as follows:

  • Acquiring platform and weapon systems for the SAF
  • Advising MINDEF on all defence science and technology matters
  • Designing, developing and maintaining defence systems and infrastructure
  • Providing engineering and related services in defence areas
  • Promoting and facilitating the development of defence science and technology in Singapore

It was established in 2000 and absorbed the functions of the what was then known as the Defense Technology Group (DTG). Tim Huxley, in his book Defending the Lion City, credited DTG with facilitating the creation of the Singaporean defense industry by acting as intermediaries between foreign defense companies who were willing to enter into Industrial Cooperation Programs (ICP) with Singapore and state-owned corporations to include the following:

  • Chartered Industries of Singapore (CIS) - initially established in 1967 to produce small arms ammunition, it eventually branched out into license production of M-16 rifles. By the 70s this company was manufacturing larger weapons like machine guns, mortars, and grenade launchers
  • Singapore Shipbuilding and Engineering - established in 1968 to maintaining and building naval vessels, entered into a technology transfer arrangement with the German firm Lurssen which eventually resulted in the construction of motor gun boats for the Royal Singaporean Navy
  • Singapore Electronic and Engineering Ltd - established in 1969 to provide electronic engineering services for the Singaporean Air Force

These and other companies were brought under a holding company owned by the Singaporean Ministry of Finance but directed by MINDEF. By 1989 this holding company was restructured to accommodate diversification of its activities beyond purely military ventures such as electronics and engineering and renamed Singapore Technologies (ST) Holdings.

The ICP arrangements brokered by DTG, now DSTA, initially allowed Singaporean companies to accomplish self-reliance activities such as in-country manufacturing components for the Singaporean Air Force's CH-47 Chinook helicopters and F-16 fighters. In 1999 it allowed Singapore to become a major participant in the US-UK Joint Strike Fighter (JSF) program.

Implications for Philippine SRDP

Close scrutiny of the histories of the five self-reliance samples presented above offer a number of take-aways:

Stable self-reliance policies.  The political decision to establish and maintain a domestic defense industry must be measured in decades, not mere years, to give these policies a chance to yield results. The Indian Tejas LCA program, for example, started in 1983 but even as late as 27 years later (as  per Air Forces Monthly, May 2010) HAL was only producing its third Limited Series Production aircraft. Although the Tejas program is sometimes touted as an example of why domestic production is more a political decision than a practical one, it remains an example of the length of the gestation period for such endeavors -- which go beyond time-in-grade timetables of individual officers, even beyond normal Presidential terms.

In the Philippines, a fair number of SRDP-related endeavors are conducted by service-level research organizations, often resulting from serendipitous pairings of SRDP-minded officers with industrialists and/or inventors willing to take a chance at dealing with the Philippine government. While efforts these do have their place in the grand scheme of things, the more complicated projects that take this route that have historically churned out one-off products. Often times, when time-in-grade issues force AFP personnel handling projects to leave their positions, development stops. Even when a project reaches completion, the departure of its original proponents often cause a change in the institutional stance towards the endeavor, resulting in either outright cancellation of the project or worse: indefinite postponement.

An SRDP-czar-like body such as Philippine DARPA, that is independent of the various services but is supported by the Department of National Defense, could presumably provide some stability to the these sorts of efforts.

Each to his own competence. The military shouldn't run these programs alone. Other sectors of the government have a role to play and their respective skill-sets must be brought to bear (e.g., Finance, Trade & Industry, etc.). Singapore, for example, drew about the expertise of the Ministry of Finance to setup financial a holding entity to manage and finance the various self-reliance companies and architect their expansion into alternative profit centers. Ministry of Defense involvement was primarily at the technical and requirements definition level.

Interfacing with private sector entities such as the aforementioned Defense Industry Association, or similar organizations, could draw in additional talent that would otherwise not be available in government service.

Profit. Export of whatever defense articles are produced is a key goal. This not only extends the longevity of the production line, it also facilitates achievement of economies of scale. As mentioned earlier, the South Korean DAPA served as the primary point of contact for the South Korean defense industry.

Mature procurement system. For the non-American samples, their self-reliance programs are closely tied to their procurement procedures. Implementation of an SRDP roadmap cannot outstrip the efficiency of the DND-AFP's overall acquisition system. Therefore advancement of the DND's procurement service is essential to progress in SRDP.

In the Singaporean system, both foreign and domestic defense companies take part in open bidding for MinDef contracts. However procurement rules grant participants in Industrial Cooperation Programs with Singaporean companies additional "weight" in the final selection. There are no such protections in the Philippine setting, where the original SRDP Presidential Decree was actually amended in December 2003 through GPPB Resolution 06-2003  which deprived the government of the option to pursue SRDP acquisitions without subjecting potential participants to public bidding. This reflects an institutional attitude towards defense that generally hostile to SRDP.

Arguably, DARPA, DAPA, and DSTA represent the ideal free-market oriented relationship between the defense department and private industry. With indigenous defense-oriented companies actively taking part in developing tailor-made weapon systems in response to government requests and receiving production contracts in open competition with both domestic and foreign companies. At this point in history, the Philippines is nowhere near having this state of affairs. Despite SRDP being a 14-year-old program, the Philippines remains closer to the starting points for DDP, MODP, and DSTA than the present-day state of either DAPA or DARPA.

In crafting its equivalent to DARPA / DAPA / DDP / MODP / DSTA, the Philippines with two choices:

1. Select an existing government entity and expand its role

2. Create a completely new entity with resources drawn from existing entities

The United States faced a similar question when it evaluated its efforts to put a man on the Moon by the 70s. One of the candidates foundations for the expanded effort was the National Advisory Committee for Astronautics (NACA) which had been organized in 1915 and had been guiding American aerospace development since then. However, on the strength of the General Accounting Office which had judged NACA as having become too lethargic to keep pace with technological developments at the time, the US Congress enacted legislation that created an entirely and NASA was born. What route the Philippines ultimately takes will depend on similar evaluations of existing Philippines departments and/or government owned and controlled corporations.

The following organizations, theoretically at least, possess the key elements necessary for the creation of a Philippine DARPA:

Government Arsenal - as already mentioned earlier, this institution has been chosen as the lynchpin for renewed SRDP efforts. Its plant site in Limay, Bataan has been designated as a Defense Industrial Estate and the GA recently issued a bid invitation for consultancy services for the creation of a Master Development Plan for its continued development. For this reason, this is the logical base upon which a Philippine DARPA and SRDP-roadmap-custodian can be based. However, to approach the capabilities of the above-mentioned self-reliance organizations it will require significant expansion beyond its current areas of expertise which are primarily in manufacturing and research & development and currently focused ordnance and small arms technology.

Defense Industry Association - this is an group of Philippine companies that are have chosen to involve themselves in the domestic security market place. Its members include companies that were part of the original SRDP effort in the 70s and have varying levels of expertise in their respective fields. Arguably DIA members would be involved primarily in production and certain aspects of R&D, leaving responsibility for SRDP policy direction to the DND itself. How this relatively new entity develops remains to be seen

Philippine Aerospace Development Corp - this aerospace SRDP pioneer has assembled a total of 67 Britten Normal Islands and 44 BO-105 helicopters for the Philippine market and has established overhaul and maintenance facilities for various relatively low-technology aircraft  and engine components. The company is currently in such a dismal state that the Commission on Audit recommended considering closure of the company in 2012. Despite being certified for BN Islander overhaul, that still didn't make it the preferred vendor for the Philippine Navy's Britten Normal Islander refurbishment programs which when to Hawker Pacific Ltd instead.

padc

Philippine Investment & Trading Corporation - the PITC brings the necessary expertise to sell Philippine products to the world and would be a key player in the export of whatever defense articles the Philippine defense industry produces. This organization brings complex financial transaction experience to the table and was the AFP's agent for past counter-trade deals that eventually acquired the SIAI-Marchetti S211 aircraft, and various communications equipment. What the organization lacks however, as reported for the Commission on Audit, is the technical expertise to adequately comprehend military requirements.

pitc_1

While the Government Arsenal's central role in SRDP, at least in the near term to mid-term, is both logical and inevitable, where SRDP goes in the long term will depend on a NACA-NASA-like evaluation of the GA's performance, as well as those of the other entities listed above. Only time will tell if the SRDP roadmap and responsibility for a Philippine DARPA will go to an existing SRDP actors or an entirely new entity. All that is certain is that if the goals of SRDP are ever to be achieved the status quo cannot continue.

This article is also available on the Timawa.net forum at the following location: http://www.timawa.net/forum/index.php?topic=36697.0

9Oct/13Off

Where are the defense entrepreneurs?

A fair number of discussions about SRDP, on various social groups, trumpet the abundance of skills in the Philippine labor force. This is how pronouncements typically go:

"We have so many engineers, computer graduates, OFWs with technology exposure overseas, etc. . . . so we should be able to make our own weapons!!!".

These assertions, however, overlook one very important ingredient in every successful venture: The Entrepreneur

A weapons manufacturing company is a business. It needs start-up capital and it needs a market that it can satisfy and from which derive profits that sustain the business. Without capitalists and businessmen to get these ventures going . . . the much heralded engineers, computer graduates, etc. won't have a company to work for and no weapon systems will be produced.

Even if a venture were to benefit from government assistance, to succeed there would still be a need for a business savy manager with an eye towards customer satisfaction as well as profitability. One way or another you need to attract business talent to the mix.

So when scratching our heads about why SRDP isn't taking off, you shouldn't just ask why aren't our engineers being employed . . .

. . . you really also ought to ask, where are the defense-oriented entrepreneurs?

Why aren't there any entrepreneurs lining up to produce weapons for the AFP despite the billions of pesos lined up for such projects?

That will require a discussion into government procurement practices, the problems plaguing the Self-Reliant Defense Posture program that are only now being addressed through the partnership between the Government Arsenal and a newly formed Philippine defense industry association, as well as gaps in national policy with regard to domestic production. You'd also have to go into the barriers to setting up any business in the Philippines in the first place. Topics that deserve an article all to themselves.

At this point let us simply salute the brave few who dared to risk time . . . and capital . . . to satisfy a customer whose rules and policies remain murky, and who decisions appear . . . randomly reversible.

This article was first posted on the Timawa.net forum here.

7Jul/12Off

PAF 65th anniversary

@ 11:47: "We are not expanding to be a ground force rather we are powering up to project air power in service of our country and our people."

10May/12Off

Modernization: The funding is there

Philippine military-oriented social media groups, from Facebook to Timawa.net are buzzing with talk about raising funds to help the AFP Modernization program. The Department of National Defense is reportedly even investigating a suspected scam involving individuals who are supposedly raising funds for the acquisition of equipment from concerned, but naive, Filipino nationals. But the sad reality is . . . there is no need for such efforts.

Turn the clock back a decade ago, then funding concerns were legitimate. The 1997 financial crisis was followed by political uncertainty that led to the ouster of a President by a text- message-revolution. This was followed by sweeping reforms in government procurement that left the AFP dazed and confused . . . so much so that it didn't buy anything till 2003. Almost a decade after the AFP Modernization Law went into effect.

Today, in the 2nd decade of the century, the funding uncertainty and procedural confusion are things of the past. A long line of DND personnel (both in the current administration AND before), in cooperation with other government agencies (e.g. GPPB, etc.) have cut swaths of clarity through the tangled web of red tape. There is now enough knowledge to allow the application of the nation's treasury to the cause of national defense. Consider the following:

  • Procedural impediments to effiicient use of the AFPMTF have been addressed. Modernization funds leftover for the year, and funds derived from authorized income, can now be accessed  with less difficulty than in years past
  • Proper access to Petro-pesos, both present and future, have been worked out. Malampaya funding has already been leveraged to acquire one ship for the Philippine Navy, and more acquisitions are lined up
  • Challenges with the Government Procurement Reform Act of 2003 have been dealt with, particularly the cumbersome bidding process which often yield the cheapest equipment rather than the best
  • Procedures for Multi-Year Obligation Authority (MYOA) were finally worked in the closing months of the previous administration. Acquisitions are no longer limit to the Annual modernization budget. Funds can be sourced from several annual budgets
  • The DND is now in the process of professionalizing the procurement process with the creation of the Office of Defense Acquisition

EVERYTHING has been worked out . . .

. . . except for the political intestinal fortitude to stay the course. As a modernization-minded AFP officer once said "Mindsets are the hardest things to modernize".

6Jan/12Off

The PAF’s piecemeal acquisitions

The 305th Contracting Office of the AFP Procurement Service currently has  P7,928,421.13 worth of bid invitations on PhilGEPS that dramatically illustrate the challenges that AFP logisticians face.  Instead of establishing service support agreements with aircraft suppliers, the service is inviting potential suppliers to 18 individual bids for C-130 components. These appear in the table below.

For discussions about the difficulties that PAF has been experiencing with establishing logistical agreements and using GPPB mandated Order Agreement Lists, see here.

Reference # / Solicitation # Amount  Description
1695835 / CP-11-547 400,063.00 Procurement of 1 ea landing Gear Edge Cargo Ramp 353617-5 & 10 other L/I for use of C-130 arcft
1695834 / CP-11-546 373,169.00 Procurement of 1 ea Hose Assy, Hydraulic Suction Pump 698243-1 & 9 other L/I for use of C-130 arcft
1695833 / CP-11-543 490,597.00 Procurement of 2 ea tube Assy 370742-321 & 5 other L/I for use of C-130B arcft
1695832 / CP-11-545 499,163.00 Procurement of 1 ea Nuts, Vertical Stabilizer 68457-1812 & 17 other L/I for use C-130 acft
1698265 / CP Nr S-11-251 705,000.00 Procurement of 6 ea Fuel Nozzles 6890918/ 5232105-5H/ 6809611/5232212-7B for use of C-130 Acft
1698264 / CP Nr S-11-250 394,606.25 Procurement of 1 ea Ignition Unit, APU 899580-2 & 1 other L/I for use of C-130 Acft
1698263 / CP Nr S-11-249 451,702.50 Procurement of 2 ea Troop Seat ACA3102-17R & 4 other L/I for use of C-130 Acft
1698262 / CP Nr S-11-248 422,206.25 Procurement of 1 ea Ignition Unit, APU 899580-2 & 2 other L/I for use of C-130 Acft
1698261 / CP Nr S-11-247 215,682.50 Procurement of 4 ea Gasket Engine Generator LS35377-01 & 6 other L/I for use of C-130 Acft
1698260 / CP Nr S-11-246 379,601.25 Procurement of 1 ea Vane Segment Assy, Turbine 1st Stage 6847957/ 6847961 & 1 other L/I for use of C-130 Acft
1698259 / CP Nr S-11-245 462,448.75 Procurement of 6 ea Seal Labyrinth Rear Turbine 6844617/ 6897646 & 2 other L/I for use of C-130 Acft
1698258 / CP Nr S-11-244 472,120.00 Procurement of 3 ea Ring Air Seal 2nd Stage Vane 6844620/6892269 & 2 other L/I for use of C-130 Acft
1698257 / CP Nr S-11-243 494,201.25 Procurement of 6 ea Saddle Turbine 1st Stage 6852237/6856654 & 1 other L/I for use of C-130 Acft
1698256 / CP Nr S-11-242 497,023.75 Procurement of 7 ea Vane Segment Assy, Turbine 1st Stage 6847957/6847961 & 1 other L/I for use of C-130 Acft
1698255 / CP Nr S-11-241 336,177.50 Procurement of 1 ea Connector Plug MS3126F22-55PW & 2 other L/I for use of C-130 Acft
1698254 / CP Nr S-11-240 353,513.75 Procurement of 1 ea Wiring Harness 43631-1 & 2 other L/I for use of C-130 Acft
1698253 / CP Nr S-11-239 481,562.50 Procurement of 1 ea PTT Switch 421510 & 3 other L/I for use C-130 Acft
1698252 / CP Nr S-11-238 499,582.88 Procurement of 2 pails Lubticating Oil MIL-L-7808 & 16 other L/I for use of C-130 Acft

 

29Dec/11Off

Requirements for 2nd-hand equipment

To protect the AFP against accepting unsupportable surplus equipment, Administrative Order 169, series of 2007 stipulated the following acceptance criteria.

3.2.3. Used equipment or weapons system may be acquired, provided that:

a. The used equipment: or weapon system meets the desired operational requirements of the AFP;

b. It still has at least fifteen (15) years service life, or at ieast fifty percent (50%) of its service life remaining, or if subjected to a life extension program, is upgradeable to attain its original characteristics or capabilities;

c. Its acquisition cost is reasonable compared to the cost of new equipment; and

d. Tbe supplier should ensure the availability of after-sales maintenance support and services,

To download a copy of this Administrative Order, click here.

 

24Nov/11Off

AFP seeking a way out of government procurement rules?

The Government Procurement Reform Act (RA 9184), which currently governs all government procurement activities went into effect eight years after the Modernization Law. The complexities of the law’s checks and balances have been blamed for much of the delays in the implementation of the modernization program. Among the issues is the primacy of bidding as a means of acquisition. Both the DND and Commission on Audit have bewailed the AFP’s lack of procurement expertise, which have reportedly contributed to the glacial pace of the modernization program.

In response to the issue, Senators Juan Ponce Enrile and Panfilo Lacson submitted separate AFP Modernization bills that sought to exempt the AFP Modernization program from the requirements of RA 9184, and allow it to develop its own procurement system. Passage of this law would have widespread implications for the law itself, which the Government Procurement Policy Board is still laboring to promote throughout the government establishment. If one government entity is exempted . . . what is to keep other departments from seeking the same? What will happen to the body of knowledge and best practices built up over the past 8 years since the law was passed?

Are the perceived difficulties with procurement law a function of defects in the law, or are they the result of shortcomings in the expertise within the DND-AFP?

In an effort bring this issue to light, the following discussion threads were opened on the following fora:

Timawa.net forum:  http://www.timawa.net/forum/index.php?topic=29661.0

GPPB forumhttp://gppb.topicsolutions.net/t2224-proposals-to-exempt-the-afp-moderniztion-from-ra-9184

The latter forum is a venue where Philippine government procurement professionals, and procurement trainers from the Department of Budget and Management, come together to broaden understanding of procurement law.

The following is a presentation of the challenges that the AFP faces with regard to prevailing regulation. It was written primarily for the GPPB forum, has been reposted on the Timawa forum, and is based on five-years of informal interviews with various AFP personnel who have been involved in procurement. The following essay was written to frame the still-ongoing-discussion on the aforementioned fora.

Corruption is not the issue they want to address.

The problem they seek to address are the perceived incompatibilities between the needs of maintaining what is arguably the most equipment-dependent branch of the government and a procurement system that by design has to cater to the needs the entire government, everything from buying paper supplies, to janitorial services, to constructing buildings.

These are actually incompatibilities that BREED corruption, as creative solutions to equipment needs also create opportunities for malfeasance. The same way that poor budgetary forecasting create the need for funds conversion . . . which then give thieves a chance to get at the AFP's coffers. There are legitimate needs for conversion (e.g., using money for bullets to buy bandages). Sadly not all instances of conversion are legitimate but happen because of a culture of budgetary make-do.

Here are some real-life examples of how acquisitions were believed to have been made difficult by prevailing regulation. Whether or not this is the result of a defect in the AFP's understanding of the law, or if there is a need to adjust the law, is unclear. I trust that if there is a place where that question could be answered, it would be here in this assemblage (referring to the GPPB forum) of procurement professionals.

The AFP's 5.56mm Squad Automatic Weapon (SAW) project

This was the first item acquired as part of the AFP Modernization program. A Belgian company, FN Herstal, won the public bidding for Phase 1 of the project on March 18, 2003, and the AFP received brand new, factory-fresh, weapons that were widely regarded as the cadillacs of this weapons category.

Photo c/o Citemar

A few years later, the AFP initiated Phase 2 of the project to acquire a second lot of SAWs. As per the IRR of RA 9184, the AFP can only issue a follow-on order from the same supplier for a smaller amount than the initial order. So the another bid was called, and FN Herstal put in an offer that was identical to its previous winning price. This time, however, a South Korean company, Daewoo, took part in the bid, and submitted a bid that was lower than the Belgian company. So in 2007, the AFP took delivery of the K-3 SAW

Now, the AFP has two SAWs in its inventory. Both fire the same round, but their operating parts are not compatible with each other, so unlike our standard assault rifle: the M-16, soldiers will not be able to swap components in the field if a unit is ever fielded with one of each type. It also requires AFP armorers to become familiar with more types of weapons, and logisticians have to support different weapons types. That gives Murphy's Law a lot of room to throw a monkey wrench in support and supply. Imagine sending the wrong part to the wrong unit. At the very least that could open an opportunity for pilferage, at worst, it could cost a life.

As the AFP grows, and the increasing number of units require a third batch of SAWs . . . could we be looking at yet a third SAW in the inventory?

Combat Utility Helicopters

This issue has not cropped up yet since we are still awaiting their delivery, but this matter has actually already been discussed here before, and the responses from the subject matter experts here indicate that the AFP is under a Damocles sword in this situation.

The PAF has a published need for 100 operational transport helicopters to meet its mission objectives. Based on numerous reports, the PAF only has 80+ UH-1 helicopters in its inventory, of which only half are operational at any given time. It is woefully lacking in assets. With the retirement of the UH-1 from the US Army in 2009, the global supplies for this helicopter type is expected decline, and consequently, the price of whatever is available -- even if it manufacture new by its company of origin -- will rise correspondingly.

Anticipating a need for a replacement helicopter, the AFP initiated the Combat Utility Helicopter project to find a replacement. Because of budgetary constraints, the AFP is only given P5 billion a year for modernization and this amount is shared by all 3 services, the project only sought to acquire 8 aircraft.

Eight aircraft . . . to make up for a shortfall of approximately 60. Without question more helicopters will be coming.

It took the PAF over four years, from July 2008 to November 2011, to take delivery of just 8 aircraft. Timawans familiar with the aerospace industry point to the Philippine's attrocious reputation when it comes to acquisition projects for high-value equipment. As reported in FlightGlobal, the general reaction to a Philippine request for bidders is often met with a rolling-of-the-eyes, a half-hearted bid, and an expectation that nothing will happen to the project.

Based on discussions with the SMEs on this forum, logistical concerns are not a valid justification for a follow-on order (see "transmogifier" discussions). So we are arguably looking at yet another bid invitation for the next batch of helicopters. A bid that will be undertaken in the vendor environment shared above.

The winner of the CUH bid, PZL Swidnik, was embroiled in a controversy in a separate bid project. How they, and their parent company Agusta-Westland, view future projects with the Philippines is suspect. If they do not take part . . . are we going to be faced with same situation with our helicopters that we did with the SAW project? Multiple equipment performing the same mission?

A helicopter, like any aircraft, is essentially an assemblage of thousands of individual parts flying in very very close formation. Those individual parts are different for each make of aircraft. So having a plethora of aircraft in your inventory means that you cannot leverage enconomies of scale when buying parts -- a logistical nightmare that the Malaysians are reportedly facing.

Different aircraft also means different skill-sets for both flying and maintaining them. This complicates training, and requires adjustments in manpower.

Spare parts

On the subject of spare parts (e.g., aircraft, ships, etc.), we also discussed that here before without a satisfactory resolution.

Individual components have programmed lifetimes. So theoretically, it should be possible to know when a particular part will have to be replaced. Such a well ordered state of affairs fits in well with Order Agreements, and Order Agreement Lists stipulated by GPPB Resolution No. 06-2005, Annex A.

However in reality, equipment do not just fail based on programmed lifetimes. This is particularly true in a military organization where the high tempo of operations for individual equipment, dictated by a low inventory, and the constant prospect of battle damage can completely disrupt time tables. This is also true damage that result from human factors (e.g., mistakes, failure to follow procedure, etc.). This is actually a downward spiral.

A portion of equipment is down because of lack of parts because they take so long to acquire, this means that whatever is operational is used for much longer thus increasing wear. When they do finally go in for maintenance, much more of the of the equipment has to be repaired, this plus how long it takes to acquire parts, means that is stays in the shop for longer than it should. This then means even fewer operational equipment . . . which means more wear for whatever is left . . .

The aforementioned resolution requires the purchasing agency to list all the parts that it requries in an OAL list, open that list up for bidding, and then enter into a 1-year agreement with the winning manufacturer. There are a multitude of issues with this procedure.

First, the vast majority of the AFP's equipment is foreign. That means whatever parts they require will have to be imported. The specialized nature of these components means that whatever local suppliers of these equipment are on-hand, will arguably not keep them in-stock in sufficient quantities. What supplier would commit to a one-year freeze on the price of components given the prevailing foreign exchange instability? If a supplier would bite, you can expect a hefty premium built into their bid submissions, an price buffer that will adversely impact the AFP's ability to acquire spares in quantity.

Second, the enumeration of individual parts in the OAL. A small trainer aircraft reportedly has over 100,000 parts, from blots, panels, wires, wire tie-downs, etc. This is significantly more complicated than for complicated aircraft and even ships. Is that really practical?

Technically oriented services have reportedly been able to get by with piece-meal bid invitations for individual, or groups of parts. A tedious process that not only adds cost but time to the process.

A blanket Service Support Agreement is reportedly one method that logisticians are looking at, but it is not clear (in fact unlikely) that this solution is compatible with the procurement law.

As of writing, the matter of a middle ground between improvement of the law, and its outright abandonment, remains elusive.