PAF's LRPA Project Expected to Benefit with Improvement of PH-Spain Defense Cooperation

The Philippines' Department of National Defense (DND) recently confirmed that they are closer to having a closer defence cooperation agreement with Spain, which is a Memorandum of Understanding (MOU) on Logistics, Defence Materiel, Armaments, and Defence Industry Cooperation which would allow the DND to acquire to have Government-to-Government (G2G) acquisitions and transactions with its Spanish counterpart.

This is in relation to the ongoing Revised AFP Modernization Program (RAFPMP) which is currently in its Horizon 2 phase covering 2018 to 2022. Most of the projects in this phase has not yet been awarded or implemented so there is still a lot of projects that would be up for grabs.

Among those being considered by Spanish defense companies include the supply of mortars, assault weapons, small arms and artillery ammunition, warships and patrol boats, support ships, radar systems, sensors, air dropped munitions, armoured vehicles and support vehicles, infantry equipment, transport aircraft, and many more.

But it appears that the focus is more on the Philippine Air Force's own acquisitions, particularly the Long Range Patrol Aircraft (LRPA) project, which is among the most delayed project in the RAFPMP.

MaxDefense believes that among the foremost reasons on the Philippines' decision to go G2G with Spain is to finally realize the Long Range Patrol AIrcraft (LRPA) acquisition project, which apparently CASA-Airbus Military is the preferred supplier. The C295 aircraft is made by EADS-CASA in Spain, while the sensors and subsystems are from Airbus in France.
Credits to original source of photo.

Background:

The Long Range Patrol Aircraft (LRPA) acquisition project was intended for the Philippine Air Force to acquire it's first two (2) maritime patrol aircraft (MPA) that would be used for maritime surveillance, anti-ship and anti-submarine warfare (ASuW & ASW), intelligence gathering, and command & control (C2). The aircraft are to be able to fly further than the fringes of the country's Exclusive Economic Zone (EEZ), can be armed, and will be the primary surveillance asset of the PAF and Armed Forces of the Philippines in general. The allocated budget (ABC) for the project was Php5,976,000,000.00.

The project is actually part of the Horizon 1 phase of the RAFPMP, and was among the first projects that was implemented by the PAF due to the expected long acquisition period. It was decided by DND and PAF Senior Leaders back then that the acquisition will be via Two-Stage Public Bidding, with the procurement process starting as early as 1st quarter of 2014. It was expected that the winning bidder would be able to deliver both aircraft within 34 months after the release of Notice to Proceed (NTP), or opening of Letter of Credit (LOC).

In the first bidding attempt, none of the participating companies were able to pass the 1st first stage of the bidding. 

Another attempt was made in 2016, and only Airbus Military was able to pass the first stage and be eligible to proceed to the second stage in a couple of months. But after several negotiations in between and conducting the second stage bidding, Airbus Military also failed. 

MaxDefense found out that, due to the poor performance of the Philippine pesos against the US dollar and the Euro, the peso value of the ABC wasn't sufficient enough to allow Airbus Military to deliver two fully compliant MPAs, and allow them provide enough profit or margin. Instead, Airbus proposed to deliver 1 fully compliant aircraft, and 1 incomplete aircraft with the same bid amount they provided in the 1st stage bidding. But based on the government's procurement rules under RA 9184, this is unacceptable, thus Airbus' submitted bid was considered non-compliant, and they were declared disqualified.

With no other bidder in the project, the LRPA Acquisition project was considered a failed bid as of 2017, after more than a year of process.

A third attempt again happened in 2017 but was also considered another failed bidding, after none of the bidders passed the initial requirements under the first stage bidding.

With the failed biddings, the DND is now allowed by law to proceed to a Limited Sourced Negotiated Procurement, which means it can now go directly to several of its shortlisted suppliers/manufacturers and get their best offer. This means the DND can now go directly and negotiate with Airbus Defense & Space, which appears to be the PAF's preferred supplier for the LRPA with their Airbus-CASA C-295MPA Persuader, similar to those sold to the Chilean Navy.

Further reading is adviced, through our previous blog entries on the LRPA's technical specs:

"PAF'S Long Range Patrol Aircraft - Tech Specs, Post-Bidding Report and Updated Analysis" - first posted 29 May 2015.

LRPA Negotiated Procurement:

According to MaxDefense's earlier blog entries since 2014, despite the PAF's preference for refurbished Lockheed Martin P-3C Orion maritime patrol aircraft from either US, Japan or Australia, the PAF is bent on getting new aircraft as well.

The failed biddings in the past means the DND can now go directly and negotiate with Airbus Military as allowed by law. And according to MaxDefense sources from the DND, PAF, and the international defense market community, it appears that the PAF's TWG as well as the PAF leadership are all in agreement that they prefer to deal with Airbus Military to acquire their Airbus-CASA C-295MPA Persuader, similar to those sold to the Chilean Navy. This despite strong offers made by several companies and countries for their products.

The Airbus C-295ASW Persuader of the Chilean Navy, which has an anti-submarine capability including the presence of magnetic anomaly detector (MAD) and munitions firing capability for anti-submarine torpedoes or anti-ship missiles. The PAF LRPA requirement also calls for these capabilities.
Photo taken from Airliners.net.

Since this won't be a bidding anymore, the deal won't be purely commercial anymore, and may now include political influence due to its G2G nature. It means that despite the PAF's budget being too low for 2 fully functional C-295ASW Persuaders,  the G2G process allows the DND to make use of other ways to fulfil the deficit. Either by agreements in other matters that will allow the DND get the Spanish government's support, or for the DND to pay the rest of the amount later on as part of an agreement supported by its Spanish counterpart.

In short, a G2G deal with Spain allows the DND and PAF to finally realize the LRPA deal without the hassles of public bidding and long budget requests delaying the project.

Among the delays in the LRPA was attributed to the PAF's insistence of sticking to the specs rather than reducing the aircraft's capability to meet the budget. It was actually a good decision by PAF since they know how difficult it is for them to request for additional funding to fill-up systems that were fitted for but not with the aircraft.
Credits to original source of photo. 

VVIP/Command and Control Turboprop Aircraft Project:

Another project that will benefit from a G2G deal is the Philippine Air Force's VVIP / Command and Control Turboprop Aircraft acquisition project, which is part of the Horizon 2 phase of the RAFPMP. It aims to acquire a new turboprop powered aircraft that will act as one of the the Philippine president's service aircraft while travelling locally, and can also be used as a Command and Control platform, as it would be installed with C3 systems that would allow it to become the president's base of operation during emergencies. It would be one of the aircraft intended to replace the Fokker F.27 Fellowship propeller VVIP aircraft, and Fokker F.28 Fellowship VVIP jet aircraft still in service with the PAF's 250th Presidential Airlift Wing.

The PAF allocated an ABC worth Php1,800,000,000.00 for this aircraft, which MaxDefense believes to be an aircraft that is similar to something already in service. And it turns out our assumption was right.

The VVIP Fixed Wing Aircraft Turobprop aka VVIP / Command and Control Turboprop Aircraft, was among those planned for acquisition within the Horizon 2 phase of RAFPMP with an ABC of Php1.8 billion.
Photo taken from official defense documents.

Apparently another C-295 was ordered from EADS-CASA (Airbus) to fulfil the VVIP  C2 Turboprop Aircraft of the PAF.
Credits to original source of the photo.

According to sources, the Philippine Air Force picked on Airbus-CASA's C-295 medium turboprop aircraft for the project, and the DND was reported to have awarded it only last 16 October 2018.

Medium Lift Aircraft Acquisition Project:

Another Horizon 2 project that may benefit from the planned defense agreement improvement between the Philippines and Spain is the Philippine Air Force's Medium Lift Aircraft acquisition project, wherein the PAF plans to acquire 3 more medium airlifters to boost its current fleet of three (3) EADS-CASA Airbus C-295M medium tactical airlifters. The plan is for these aircraft to replace the two remaining Fokker F.27 Fellowship aircraft in service with the 220th Airlift Wing.

The ABC for this project is Php5,288,609,984.00 for three (3) aircraft.

Since the PAF is already using the Airbus C-295M, it is only logical and practical for the PAF to order another batch of either the C-295M, or the newer C-295W with winglets which is said to have improved performance and fuel economy over the winglet-less C-295M.

MaxDefense expects a contract for additonal C-295s to be only made by 2019 at the earliest, considering the cash flow of the RAFPMP funds are already allocated for several projects approved for implementation this and next year.

The EADS-CASA C-295W medium tactical transport aircraft, with the winglets upgrade compared to the original C-295M that the PAF already has.
Photo taken from Airbus website.

Other Potential Projects:

MaxDefense still cannot discount the strength of Spanish shipbuilder Navantia, which could still be interested in offering their products for the upcoming Corvette and Offshore Patrol Vessel acquisition projects of the Philippine Navy. Although they were absent in this year's ADAS 2018 defense expo in Manila, they still have presence in the region and is monitoring the acquisition plans of the Philippine Navy.

Navantia is still around the corner despite their loss on the Frigate Acquisition Project 3 years ago. They could still be interested in the Corvette Acquisition Project.
Photo taken from Navantia's website.

Another potential project that the Spanish are interested in participating are the Philippine Marines' acquisition of Mortars, specifically 60mm, 81mm, and 120mm, as well as a similar project with the Philippine Army although limited to 60mm and 81m only. NTGS' Alakran 120mm mobile mortar, as well as EXPAL's 81mm EIMOS and its line of 81mm and 60mm mortars are said to be among those being offered for the Marines' requirements

Separately, it was reported that a Spanish company approached Filipino arms manufacturer Armscor Global Defense, which we believe is to discuss possible representation or even local production of munitions that could be marketed to the Philippine government.

What's Next:

At the moment, the deal between Spain and the Philippines is not yet finalized, although it is expected that it would proceed as planned. It would be a win-win situation for both countries, as they both stand to benefit from such deal. 

Nonetheless, the DND and AFP should start negotiations with Spanish defense companies by now considering it takes a lot of time to complete a deal, and more time for the actual delivery.

MaxDefense would provide updates on these upcoming deals with Spain, as well as updates in the modernization program and agreements between the two countries..