Thales not keen on new deal with CAAP till ‘existing claims’ settled

THALES Corp. is unwilling to enter into a new service contract with the Civil Aviation Authority of the Philippines (CAAP) due to its P987 million claims still unpaid by the Philippine government, arising from the installation of the country’s air traffic management system.

During Thursday’s hearing on the Philippine airspace shutdown on New Year’s Day, Thales country manager Harry Nuske said, “We are not willing to enter into a new contract [with the CAAP] until the existing claims are settled.” The French company was the equipment supplier of the Communications, Navigation, and Surveillance/air Trafffic Management (CNS/ATM) in joint venture with Sumitomo Corp., under the P10-billion project funded by a loan from the Japan International Cooperation Agency.

He also clarified that they were in talks with the CAAP for “support service that relate to software, not a UPS [uninterruptible power supply] support.” In the initial hours of the system shutdown, CAAP’S engineers thought the failure was due to a blown UPS, but further investigation showed it was due to the tripping of a circuit breaker.

See related story in A16, “Senate grills CAAP on lapse, P1B owed to JV tech provider”

According to Transportation Undersecretary Robert C.O. Lim, the P987-million claims of Thales include: P477 million in suspension claims arising from the three-year suspension of the CNS/ATM project from 20102013; P387 million in prolonthe gation claims due to the prolonged suspension of the work; and P121 million in escalation claims. The suspension claims came about because of the notice of disallowance issued by the Commission on Audit on the procurement of the equipment, which was only cleared in 2013 after repeated appeals made by the then Department of Transportation and Communications.

CAAP Director General Manuel Tamayo told lawmakers, “We totally agree that [that we should get an outside maintenance provider], even while our own technicians are fully qualified [to maintain the equipment].” He added, “We tried negotiating with the supplier for services, and they sent us a quotation. In fact we had a budget in 2020 specifically for that.” But the DOTR and Thales could not settle their claims and counterclaims. The DOTR had counterclaims against Thales for the delay in supplying the equipment needed for the project.

The warranty on the CNS/ATM equipment and services expired in 2020, just two years after the system was actually operated. The project had been mulled since the early 2000s, but had been delayed until an actual contract was signed in November 2010 between government and Sumitomo-thales. The latter was contracted to build the air traffic management building, automation equipment, terminal radars and other components.

In his earlier testimony, former Transportation Secretary Arthur Tugade said in Filipino, his administration didn’t pay Thales “because they didn’t submit the documents [which covered their claims].” He added his agency discussed with Thales and Sumitomo the possibility of settling the claims covered by documents, “but we will go to arbitration on the outstanding claims. Unfortunately, the discussions just hanged.”

DOTR thereafter organized a committee to look at Thales’ claims but Tugade said, “They [committee] advised me not pay the claims because the liquidated damages [owed by the French firm] because of the delay from the project were larger, so why should I pay for that? These are not debts we owe them but claims, wherein talks on their settlement should have been pursued six months ago when we left office.” He didn’t say how much DOTR was owed.

DOTR’S Lim expressed optimism the claims of both DOTR and Thales will be resolved by February this year.