The two companies earlier formed a joint venture to supply 21 UH-I helicopters to the Philippine Air Force (PAF) for PhP1,263,600,000.
"In compliance with Section 88, Rule XXII of the IRR of Republic Act No. 9184 (Philippine Procurement Law), the contract agreement between the DND/AFP and the Joint Venture of Rice Aircraft Services Inc. and Eagle Copters Ltd. for the supply and delivery of 21 UH-I helicopters for the PAF with corresponding contract price of PhP1,263,600,000 shall be partially terminated for exceeding the ten percent maximum liquidated damages," the DND order signed by Secretary Voltaire Gazmin said.
The letter was sent to Robert Rice Jr., the representative of the joint venture.
"Liquidated damages" refers to "at least equal to the one-tenth of the one percent of the cost of the underperformed portion of every day of delay."
And once the "cumulative amount of the liquidated damages reaches 10 percent of the amount of the contract, the procuring entity shall rescind the contract without prejudice to the other courses of action and remedies open to it," DND said.
It added that maximum liquidated damages was reached last Jan. 31.
“You failed to comply with the agreed schedule of requirement of the contract agreement, which provides that the delivery should be within 180 calendar days upon opening of the Letter of Credit… The deadline for the delivery for the contract is on 23 September 2014,” the DND stressed.
It added that eight out of the 21 choppers were only delivered as of Wednesday.
Rice and its joint venture partner were given seven days to respond to the termination letter.
Four (4) upgraded UH1Ds and two regular hueys were formally accepted today March 11, 2015.