COA to defense dep’t: Go after Canadian firm that didn’t deliver

MANILA, Philippines – Government auditors said the Department of National Defense (DND) should go after a Canadian firm that failed to deliver P366 million worth of equipment that the Government Arsenal purchased in 2011.

The Commission on Audit (COA) said Waterbury Farrel, a division of Magnum Integrated Technologies Incorporated of Canada, should face sanctions and pay damages because its failure to deliver adversely affected the modernization program of the Armed Forces of the Philippines.

The Arsenal is mandated to supply bullets to the military and the Philippine National Police. Its ultimate goal is to not only supply all the ammunition needs of both forces but to eventually export supplies.

In 2011, the DND bids and awards committee set aside P306 million for 5 pieces of equipment that would increase the Arsenal’s yearly production from 15 million to 20 million rounds of small arms ammunition.

A separate P82 million was allocated to acquire a “multi-station bullet assembly machine.” It was meant for in-country production of SS109 ammunition since the military demand for its Squad Automatic Weapon, M4, and K3 rifles had increased.

In all, P471.322 million had been disbursed as of December 2014, according to the Arsenal’s liquidation report.

However, in a Value for Money Audit released last November 27, COA said that of the first 5 equipment purchased from Waterbury Farrel, 3 were not delivered and 2 did not work and did not comply with specifications in the contract.

The 3 pieces of equipment that didn’t come were worth P241.15 million, while the defective ones had a value of P94.71 million.

This prompted the Arsenal to delay the processing of payment for Waterbury Farrel. In turn, the supplier withheld the delivery of 3 other machines with a total cost of P241.145 million “until full payment shall be made for the first delivery.”

“In effect, the amount of P333,757,400 was not yet fully utilized for the intended purpose of modernizing the production of ammunitions at Government Arsenal which caused deterrent in the AFP Modernization objectives,” the COA said.

COA recommended that the Arsenal ask the DND to demand “liquidated damages to the supplier.”

“The non-performance of the obligations by the supplier requires rescission thereof and the forfeiture of the supplier’s performance security of P16.8 million,” the government auditors said. 

Image of ammunition from Shutterstock