Indian GRSE Faces Disqualification In $319 Million Philippines Navy Frigate Contract

India’s state-owned Garden Reach Shipbuilders & Engineers might lose $319 million Philippine naval contract for supplying two light frigates as it failed to clear financial assessment tests after winning the contract.

Reports from the Philippines suggest that a post-qualification assessment found GRSE deficient on financial requirements. GRSE had emerged as the lowest bidder for a Philippine naval requirement of two light frigates against Korean and Spanish competitors, ET reported Tuesday.

Unlike the Indian system of procurement, where the navy or coast guard makes tranche payments as construction progresses at the yard, the Philippines order was structured around a single payment to be made only when the frigates were delivered, people familiar with the matter told ET.

After GRSE emerged as the lowest bidder, the Philippine Navy assessed the yard to determine whether it was capable of meeting the order. While the yard scored perfectly on physical infrastructure and capability, it did not meet requirements on the financial side, which required adequate funds to construct the vessels over the next few years without any payments from the Philippines. 

While GRSE is still hopeful of winning the contract - a senior official told ET that the final decision has not been taken and that it has not been informed of any disqualification - reports from the Philippines say the navy has already taken a call on the matter.

"They postqualification assessment is on and we are in the race," Commodore Ratnakar Ghosh, Director (Shipbuilding) at GRSE, told ET.

The Central government could offer to back the company and help it to meet the financial requirements of the contract. However, people said GRSE is already running on capacity with several orders from the Indian Navy.

Garden Reach Shipbuilders's bid for the light frigates beat proposals by Korean shipbuilding giants Daewoo and Hyundai and Spain's Navantia to emerge as the winner on both technical and commercial grounds.