Australian shipbuilder Austal remains interested in the P30-billion contract for the Philippines’ offshore patrol vessel (OPV) project despite the Department of National Defense’s (DND) apparent preference for Korean Hyundai Heavy Industries (HHI).
Dave Shiner, Austal regional director for Asia, said the company remains open for discussions with the government for the project as a new administration is set to take over come July.
This follows after the DND earlier this month announced the Philippine Navy’s technical working group picked HHI for the project covering the delivery of six patrol boats.
Austal’s proposal was earlier reported to be beyond the project’s approved budget for the contract.
“Austal’s position remains that we are committed to supporting the Philippine government through the transition. We are of the opinion that our OPV solution is a strong technical solution. We also believe it provides additional benefits and advantages to any other bidder because it would be entirely produced in the Philippines in Balamban with a shipyard that is already established. We believe there is merit and advantages to our proposal over and above that from other bidders. We’re simply ensuring that the incoming administration is aware that also remained keen to discuss options for OPV in the event they elect to reconsider their current preference,” said Shiner.
Shiner, however said a modification of certain terms in the bidding process – terms that would be more aligned with international procurement environment – which include exemption for locally-based bidder from value-added tax (VAT) could significantly reduce local bidder’s costings.
“To say that there’s a P12-billion difference in the price that’s quoted is a number that only applies in a certain set of circumstances. There are opportunities to see let’s say alternative pricing subject to the terms and conditions which are negotiated. So for example currently VAT would apply to an onshore bid. That does not apply to an offshore bidder. Our view would be that that is not helping or assisting the development of sovereign technical capability,” Shiner said.
“Other areas might be the approach to fixed pricing on a program like OPV, which is likely to extend between five, six and seven years. It’s very difficult to price economically, a fixed component, particularly post-COVID, where you’d have fluctuation not only in labor and materials escalation, but also in foreign exchange rate variation. There are perhaps other more efficient, efficient ways to deal with that commercially, rather than having to price that as a fixed number,” he added.
Austal, however, said it is also open to possible partnerships with the potential winning bidder for the project for the OPV ships to be built in its facilities in the Philippines.
The OPV project aims to replace the Navy’s World War II-era decommissioned ships. The project involves the construction of six ships.
