​Settle by negotiation

​Settle by negotiation

[시사타임즈 = 이철원 시사타임즈 회장] The Arau Unit, which was suddenly decided to dispatch troops to the Philippines at the end of 2013, had many difficulties as the budget for dispatch was urgently organized. In addition, the local financial network was destroyed by typhoon damage, so there was no choice but to open an additional account in Manila. Therefore, when withdrawing the budget, it was necessary to travel by plane, and flights were frequently restricted, so in some cases, it was necessary to travel by boat or vehicle for 8 hours. Under these circumstances, the Aarau Unit Coordinating Team and the Logistics Team signed a contract for meals, fuel, and vehicle insurance, which was most important for mission performance, at the beginning of the deployment, which required the most budget, by demonstrating excellent negotiating power on good terms. These contracts not only saved the defense budget, but also played a decisive role in the successful mission of the Arau Unit.

 

 

▲Our warship moored at the pier. ⒞시사타임즈

The food service contract management team conducted market research from the day they arrived in Cebu, checked the detailed shape and quality of the items, and prepared a draft contract and special conditions. Although we were introduced to three marts by the Korean Association of Cebu, H Mart, the only company that submitted a business proposal, was the first to be selected as the contract negotiator. In addition, according to the National Contract Act for domestic corporations in Korea, companies contracting with the government are required to deposit a contract performance deposit in a bank, which is 10% of the total contract amount, or about 150 million won. However, the contract law in the Philippines does not stipulate this, so H Mart expressed displeasure when we asked for it.

 

Therefore, we informed them that we cannot give the down payment and advance payment, and that the price can be paid within the shortest time if there is no problem after the product is delivered. Instead, we respect the local contract law and do not need to deposit a separate contract performance deposit. In the end, in the absence of a budget, the meal service contract was settled through negotiation through external accounts. As a result, erosion was supported without payment for the first month of the deployment, and although corrosives were supplied daily by ships and planes from other islands, stocks and corrosives were smoothly supported during the deployment period regardless of the weather.

 

When the unit is deployed, the most urgent need is to supply oil for the operation of two naval amphibious support ships and 72 heavy equipment and vehicles to be used for restoration work. The cooperative team arrived in Cebu on December 18, before the main unit deployed, and performed their duties with priority on the fuel contract. In principle, oil companies in Cebu do cash transactions, but when we said we would pay the price in mid-January next year, all the oil companies expressed their displeasure. The coordinator said, “We are a unit dispatched on behalf of the Korean government, so we will pay the price without any problems. If you do not sign an oil contract, there will be a problem in supplying oil to the two amphibious ships arriving in Cebu on the 27th. I can't go back to the unit if I can't solve the oil problem."

 

Then, I asked the Defense Attaché for help, received a payment guarantee from the Korean Embassy in the Philippines, opened a letter of credit for credit purchase, and signed a provisional contract. In the end, we negotiated a 12% tax cut and an additional special discount of 3 pesos per liter (75 won). This was an achievement that resulted in a budget savings of more than 200 million won, considering the annual fuel consumption of the contingent units, and of course, a month could be used as a credit without payment. Although it took three days for an oil trailer to arrive from Manila to the operation area by changing ships twice, the Arau unit was never restricted from performing its mission due to oil during the deployment period. Rather, the local government and the Philippine military did not supply oil, so they asked us for fuel support.

 

According to the vehicle insurance contract, the budget was implemented around mid-January, so the main unit somehow arrived and requested to sign an insurance contract before operating the vehicle. However, the results of the on-site inspection were very negative. The Cebu Korean Association said, “Currently, most vehicles in the Philippines do not have vehicle insurance, and there are many cases where they do not even have vehicle registration. Even in the event of a fatal accident, an agreement can be reached for 3 to 5 million won, so it is quicker and easier to reach an agreement without purchasing insurance.” Moreover, in the Tacloban region of Leyte, where the South Korean military will be active, maintenance companies were also damaged by Typhoon Haiyan, so in the event of an accident, maintenance support was not provided.

 

After the main unit arrived in Tacloban on December 28, the vehicle insurance was not resolved until January 3, 2014, when the equipment was fully deployed. Who's going to get car insurance without paying for insurance? The local ground transportation management office (LTO) head said, “Even if there is a traffic accident, you just need to reach an agreement with the person concerned.” However, since it was urgent to purchase insurance as early as 1 second in a situation where many incidental heavy equipment moved individually every day, I contacted an insurance company in Manila. And since I haven't received the vehicle insurance budget yet, I explained that I could deposit the insurance premiums after mid-January regardless of the contract date and asked for understanding.

 

Philippine insurance companies' own car insurance premiums were quite high, and the premiums varied a lot depending on the value of the car. That is, insurance premiums vary according to the value of the vehicle, even for the same type of vehicle. So, in order to lower the amount of car insurance, we reduced the value of the car by 60% and submitted the documents. I said, “Since the Korean military bases are supplied with vehicles at ex-factory prices excluding taxes from the government, the price of our vehicles is about half of the market price.” In the end, this was accepted, saving more than 130 million won in insurance premiums from car insurance contracts.

▲Oil delivery to local oil companies. ⒞시사타임즈

 

In addition, when negotiating with an insurance company, the insurance company paid the liability insurance premium equivalent to 1,000 pesos (25,000 won) per vehicle, saving an additional 2 million won in budget. In addition, a provisional contract called ‘Safety Coverage’ came into effect on January 15th before the formal contract to deposit insurance premiums was made, creating an environment where everyone can drive safely. When negotiating with insurance companies, it was recognized that the Arau Unit was a government institution rather than a mere individual or corporate contractor, and it was understood that insurance premium payment was delayed due to the budget system of the Korean government. The official contract came into effect on the 26th, 10 days later. At this time, in cooperation with the Korean embassy in the Philippines, they sent documents proving that the Arau unit was a Korean contingent unit and received a 12% tax reduction. In the end, half of the allocated vehicle insurance budget was saved, and the payment was paid at the end of January, 20 days after the insurance was applied. 

 

The fact that the unit members were able to perform their duties well in the disaster area where the infrastructure was destroyed in this way without any problem of supply support was the generous support of the Cebu Korean president (Jo Bong-hwan) and Korean residents, the devoted cooperation of the Defense Attaché and the cooperation of the Arau Unit Coordinating Team and the Logistics Team. It was because of his professionalism and negotiating power.

 

People who know speak “In the Philippine society, it is close to a miracle to sign a contract for fuel, meals, and insurance on such good terms as a credit card.”

 

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