" . 
FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHII"IPPINES 
Second Regular Session 
) 
) 
) 
SENATE 
COMMITTEE REPORT NO. 1 J a 
Submitted jointly by the Committees on National Defense and Security; and Ways and 
Means on _---'M-"-A-"-R_2_2 _2_01_7 __ _ 
Re: Senate Bill No. 3164 
Recommending its approval in substitution of Senate Bill Nos. 351,2705 and 2938 
Sponsors: 
Senators Laeson and Recto 
MR. PRESIDENT: 
The Committees on National Defense and Security; and Ways and Means to 
which were referred Senate Bill No. 351, introduced by Senator Trillanes IV, entitled: 
"AN ACT 
AMENDING SECTION 4 (B) OF REPUBLIC ACT NO. 7898, 
OTHERWISE KNOWN AS THE AFP MODERNIZATION ACT" 
. Senate Bill No. 2705, introduced by Senator Recto, entitled: 
"AN ACT 
EXTENDING THE MODERNIZATION PROGRAM OF THE ARMED 
FORCES OF THE PHILIPPINES, AMENDING FOR THE PURPOSE 
REPUBLIC ACT NO. 7898, OTHERWISE KNOWN AS THE AFP 
MODERNIZATION ACT" 
and Senate Bill No. 2938, introduced by Senator Laeson, entitled: 
"AN ACT 
AMENDING REPUBLIC ACT NO. 7898, OTHERWISE KNOWN AS 
THE AFP MODERNIZATION ACT, AND FOR OTHER PURPOSES" 


have considered the same and have the honor to report them back to the Senate with 
the recommendation that the attached bill, Senate Bill No.3164, prepared by the 
Committee!!, entitled: 
"AN ACT 
AMENDING REPUBLIC ACT NO. 7898, ESTABLISHING THE 
REVISED AFP MODERNIZATION PROGRAM AND FOR OTHER 
PURPOSES" 
be approved in substitution of Senate Bill Nos. 351, 2705 and 2938 with Senators 
Trillanes IV, Recto and Lacson as authors thereof. 
Respectfully submitted: 
GORIO B. HONASAN II 
C mmittee on National Defense and Security 
mber, Committee on Ways and Means 
Chairmen: 
< 
PAtilkkcsON 
co,;J,& ;n National Defense and Security 
:::s 
LditeN B. LEGARDA 
Committee on National Defense and Security 


~j~,Q~ 
MIRIAM DEFEr\SOR ~~~~O 
Committee on Ways and Means 
G REVILLA, JR. 
itte 
National Defense and Security . 
mber, Committee on Ways and Means 
~.~ 
ANtONio "~~NNY" F. TR~""'LL-A-N-E-'S'IV 
Committee on National Defense and Security 
Member. Committee on Ways and Means 
MA 
nal Defense and Security 
on Ways and Means 
FRANCIS "CHIZ"G. ESCUDERO 
Committee on National Defense and Security 
Member, Committee on Ways and Means 
lj 
~ 
MY1 L.-J~~, K:t-
W1U!! e, 
,J 
0 
PIA S. CAY 
ANO 
Committee 0 'National Defense and Security 
Member. Committee on Ways and Means 
Members: 
R. MARCOS, JR. 
Committee 0 National Defense and Security 
/h~ ry \ 
'Y-~AJ\ \r 
AQU(~N6 "~OKO" L. PIMENTEL 
Committee on National Defense and Security 
~o~L.~ 
Committee on National Defense and SecurIty 
Member. Committee on Ways and Means 
Commi 
n National Defense and Security 
Mem 
, ommittee on Ways and Means 
.~ .. o 
MANUEL "~IT6" M. LAPID 
Committee on National Defense and Security 
Member, eommittee on Ways and Means 
).~JV 
SERGIO R. OSMENA III 
Committee on National Defense and Security 
Member. Committee on Ways and Means 


/4-? 
JOKER P. ARROYO 
Committee on National Defense and Security 
Member, Committee on Ways and Means 
NGILINAN 
ational Defense and Security 
ittee on Ways and Means 
Ex-Officio Members: 
JIN GOY EJERCITO ESTRADA 
Presi nt Pro-Tempore 
Honorable JUAN PONCE ENRllE 
Senate President 
fWM~MJ~~ 
ALAN PETER "COMPAJiiERO" S. CAYETANO 
Minority Leader 
f 
n. 
'( 'GU(MC-
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sono IJJ 
Majority Leade\J 


FIFTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
Second Regular Session 
) 
SENATE 
S.NO. 3184 
.... (2, 
t: _\_~_ 
" 
(In substitution of Senate Bill Nos. 351,2705, and 2938) 
Prepared by the Committee on National Defense and Security, and Ways and Means, with 
Senators Lacson, Recto, and Trillanes IV as authors thereof 
AN ACT 
AMENDING REPUBLIC ACT NO. 7898, ESTABLISHING THE REVISED AFP 
MODERNIZATION PROGRAM AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
I 
SECTION ONE. Section 4(b) and Section 4(e) of Republic Act No. 7898, otherwise 
2 
known as the AFP Modernization Act, is hereby amended to read as follows: 
3 
"(b) Capability, material, and technology development. -
The AFP 
4 
modernization program entails the development and employment of certain 
5 
capabilities that can address the assessed threats: PrOVided, That the acquisition of 
6 
air force, navy and anny equipment and material of such types and quantities shall 
7 
be made in accordance with the need to deVelop AFP capabilities pursuant to its 
8 
modernization objectives: Provided, further, That the acquisition of new 
9 
equipment and weapons systems, shall be synchronized with the phase-out of 
10 
uneconomical and obsolete major equipment and weapons systems in the AFP 
11 
inventory: Provided, even further, That no major equipment and weapons system 
12 
shall be purchased if the same are not being used by the armed forces in the 
13 
country of origin or used by the armed forces of [at least two countries] 
14 
ANOTHER COUNTRY: Provided, furthermore, That only offers from suppliers 
15 
who are themselves the manufacturers shall be entertained: Provided, finally, That 
16 
no supply contract shall be entered into unless such contract provides for, in clear 
17 
and unambiguous terms, an after-sales services and the availability of spare parts. 
18 
XXX 
19 
20 
(e) 
Doctrines development. - [The transition of the AFP from an internal 
security-oriented force to an external security-oriented force requires the review, 
1 


I 
evaluation and validation of its present set of doctrines for the purpose of 
2 
formalizing such doctrines. Towards this end, t] The Department of National 
3 
Defense and the [general headquarters,] AFP, shall be responsible for the 
4 
generation, evaluation, consolidation and formalization of doctrines; the conduct 
5 
of periodic review and validation of doctrines through field application, testing 
6 
and exercises; and the dissemination of approved doctrines at all levels of 
7 
command. 
8 
The Secretary of National Defense shall formulate guidelines to implement this 
9 
section in accordance with the objectives of the modernization program 
10 
enumerated in the preceding section." 
11 
Sec. 2. Section 6 of the same Act is hereby amended to read as follows: 
12 
"Sec. 6. Period of Implementation. - The REVISED AFP [m]Modemization 
13 
[p]Program under this Act shall be implemented over a period of fifteen (15) 
14 
years EFFECTIVE UPON THE DATE OF THE APPROVAL OF THIS 
IS 
ACT: Provided, however, That payments for amortization of outstanding multi-
16 
year contract obligations incurred under the "REVISED AFP Modernization 
17 
Act" may extend beyond this period." 
18 
Sec. 3. Section 7 ofthe same Act is hereby amended to read as follows: 
19 
20 
"Sec. 7. Submission o/the REVISED AFP Modernization Program. - (a) Within 
21 
[ninety (90)] SIXTY (60) days from the effectivity of this Act, the President, 
22 
upon the reconunendation of the Secretaries of National Defense and Budget and 
23 
Management, shall submit the REVISED AFP [m]Modernization (p]Program as 
24 
provided for in this Act to Congress for its consideration and approval in a 
25 
UlJoint [r)Resolution of the House of Representatives and the Senate. The 
26 
[p]Program shall indicate or show inter alia: 
27 
28 
29 
30 
31 
32 
33 
34 
(1) The size and shape of the AFP in terms of personnel, equipment, and 
facilities during the various phases of the modernization program; 
(2) The modernization projects under it, inclnding the major weapon and non-
weapon equipment and technology acquisitions sought by the respective 
services and units of the AFP, any major infrastructure construction or 
improvement to be made and the particular objective(s) and component(s) 
2 


1 
under Sections 3 and 4, respectively, of this Act to which such intended 
2 
acquisition, construction or improvements belongs; and 
3 
4 
(3) The priorities, schedules as well as estimated average cost of each 
5 
modernization project or upgrading to be undertaken. 
6 
7 
PROVIDED, THAT IN THE IMPLEMENTATION OF THE AFP 
8 
MODERNIZATION PROGRAM, THE ACQUISITION OF EQUIPMENT 
9 
OR UPGRADING TO BE UNDERTAKEN SHALL BE DEVOTED 
10 
TOWARDS THE DEVELOPMENT OF THE AFP WITH SHIFTING 
11 
CAPABILITY TO MEET INTERNAL AND EXTERNAL THREATS. 
12 
13 
(b) 
In the event Congress approves the REVISED AFP ImJModernization 
14 
[p)Program, the [j)Joint [rJResolution shall be the basis for subsequent executive 
15 
and legislative actions to implement the AFP [m]Modernization [p]Program from 
16 
year to year until its complete and full realization." 
17 
Sec. 4. Section 8 ofthe same Act is hereby amended to read as follows: 
18 
"Sec. 8. 
Appropriations for the REVISED AFP Modernization Program. - The 
19 
arumal appropriations for the REVISED AFP [m)Modernization IpJProgram 
20 
shall include the amounts necessary to support the funding requirements for all 
21 
modernization projects approved by Congress under the preceding section." 
22 
The funds to be appropriated by Congress under this Act shall be treated 
23 
as a distinct and separate budget item from the regular appropriation for the 
24 
Department of National Defense (DND) and the AFP and shall be administered 
25 
by the Secretary of National Defense. 
26 
[The proposed program shall be based on a ceiling, for the first five (5) 
27 
years, of Fifty billion pesos (p50,000,000,000.OO); provided, that thereafter, this 
28 
amount may be increased commensurate to the increase in the Gross National 
29 
Product (GNP).)" 
30 
Sec. 5. Section 11 of Republic Act No. 7898, otherwise known as the AFP 
31 
Modernization Act, is hereby amended to read as follows: 
32 
"Sec. 11. 
AFP Modernization Act Trust Fund. - There is hereby created a trust 
33 
fund, to be known as the AFP Modernization Act Trust Fund. Said trust fund 
34 
shall be used exclusively for the AFP modernization program INCLUDING 
3 


I 
ALL NECESSARY EXPENSES TO IMPLEMENT THE PROCUREMENT 
2 
OF EQUIPMENT SUCH AS EXPENSES FOR PRE·SELECTION AND 
3 
POST-QUALIFICATION STAGES, but not to include salaries and allowances, 
4 
shall be funded out of the following: 
5 
(a) Appropriations for the AFP [m]Modernization [pJProgram; 
6 
(b) The proceeds from the sale[, lease or joint development] of military 
7 
reservations, as may be authorized by Congress, PURSUANT TO THE 
8 
PROVISIONS 
OF 
EXISTING 
LAWS 
AND 
REGULATIONS 
9 
GOVERNING SALES OF GOVERNMENT PROPERTIES, including 
10 
such immovable and other facilities as may be found therein, not 
11 
OTHERWISE covered by the Bases Conversion Development Authority, as 
12 
provided for in Republic Act No. 7227, AS AMENDED; 
13 
(C) THE PROCEEDS FROM THE LEASE OR JOINT DEVELOPMENT 
14 
OF MILITARY RESERVATIONS, AS MAY BE AUTHORIZED BY 
15 
THE PRESIDENT, PURSUANT TO THE PROVISIONS OF 
16 
EXISTING LAWS AND REGULATIONS GOVERNING LEASE OR 
17 
JOINT 
DEVELOPMENT 
OF 
GOVERNMENT 
PROPERTIES, 
18 
INCLUDING SUCH IMMOVABLES AND OTHER FACILITIES AS 
19 
MAY BE FOUND THEREIN, NOT SPECIFICALLY ENUMERATED 
20 
UNDER REPUBLIC ACT NO. 7227, AS AMENDED; 
21 
l(c)] (D) Shares of the APP from the proceeds of the sale of military camps 
22 
provided for under Republic Act No. 7227, AS AMENDED, AS 
23 
WELL AS THE PROCEEDS FROM THE LEASE AND/OR 
24 
JOINT VENTURE AGREEMENTS AND 
SUCH OTHER 
25 
DISPOSITIONS PERTAINING TO THE SAME CAMPS; 
26 
(E) 
THE 
PROCEEDS 
DERIVED 
FROM 
PUBLIC-PRIVATE 
27 
PARTNERSHIPS ENTERED INTO BY THE DEPARTMENT OF 
28 
NATIONAL DEFENSE OR THE ARMED FORCES OF THE 
29 
PHILIPPINES, AS MAY BE AUTHORIZED BY THE PRESIDENT, 
30 
PURSUANT TO THE PROVISIONS OF EXISTING LAWS AND 
31 
REGULATIONS; 
32 
[(d)] (F) Proceeds from the sale of the products of the Ig]Government la]Arsenal 
33 
AND/OR, IN CASE OF JOINT VENTURE, ALL INCOMES 
4 


1 
EARNED 
FROM 
THE 
EQUITY 
SHARE 
OF 
THE 
2 
GOVERNMENT ARSENAL FROM THE JOINT VENTURE; 
3 
(e») (G) The proceeds from the disposal of excess and/or uneconomically 
4 
repairable equipment and other movable assets of the AFP and the 
5 
government arsenal; 
6 
(f)) (H) Funds from budgetary surplus, if any, as may be authorized by 
7 
Congress subject to the provisions of Section 8 of this Act; (and) 
8 
9 
10 
11 
(I) 
DONATIONS 
COMING 
FROM 
LOCAL 
AND 
FOREIGN 
SOURCES, SPECIFICALLY EARMARKED TO BE USED FOR 
THE AFP MODERNIZATION PROGRAM; AND 
12 
[(g») (J) All interest income of the trust fund. 
13 
The trust fund shall be administered by the Secretary of National Defense 
14 
in accordance with existing government auditing rules and regulations. THE 
15 
DEPARTMENT 
OF 
NATIONAL 
DEFENSE 
SHALL 
CONDUCT 
16 
PERIODIC STUDIES ON HOW TO MAXIMIZE THE UTILIZATION OF. 
17 
THE TRUST FUND AND HOW ADDITIONAL REVENUES CAN BE 
18 
GENERATED TO FUND THE AFP MODERNIZATION PROGRAM. 
19 
Sec. 6. Section 12 of the same Act is hereby amended to read as follows: 
20 
21 
"Sec. 12. 
Modernization of the Government Arsenal. - The modernization of 
22 
the government .arsenal, for the development of production capabilities to 
23 
enhance self-sufficiency in defense requirements, shall be part of the AFP 
24 
modernization program. The government arsenal shall be effectively utilized in 
25 
the production of basic weapons, ammunition and other munitions for the use of 
26 
the AFP, (and) the Philippine National Police (PNP) AND OTHER 
27 
UNIFORMED GOVERNMENT AGENCIES, and for the sale and export of 
28 
products in excess of (AFPIPNP) THE requirements OF THE AFr, PNP AND 
29 
OTHER UNIFORMED GOVERNMENT AGENCIES. The government 
30 
. arsenal may use s.uch production facilities as it may own or be provided with 
31 
under this Act or as it may arrange, under joint venture, co-production or similar 
32 
agreements with local and foreign entities. 
33 
Sec. 7. Section 14 of the same Act is hereby amended to read as follows: 
5 


1 
2 
"SEC. 14. MODERNIZATION PLANNING AND PROCUREMENT. - THE 
3 
AFP MODERNIZATION PROGRAM PLANNING AND PROCUREMENT 
4 
SHALL BE CONDUCTED IN ACCORDANCE WITH THE DEFENSE 
5 
SYSTEM OF MANAGEMENT (DSOM) WHICH IS DEFINED AS A 
6 
STRATEGY-DRIVEN, CAPABILITY-BASED MULTI-YEAR PLANNING 
7 
AND EXECUTION PROCESS. IN THIS REGARD, STRATEGIC 
8 
PLANNING, 
CAPABILITY 
ASSESSMENT 
AND 
PLANNING, 
9 
ACQUISITION PLANNING, PROCUREMENT AND CONTRACTING, 
10 
AND RESOURCES PLANNING AND FINANCIAL MANAGEMENT 
11 
SHALL BE TREATED AS AN INTEGRATED AND WHOLISTIC 
12 
PROCESS. 
13 
UPON 
PRIOR 
APPROVAL 
BY 
THE 
PRESIDENT 
OF 
THE 
14 
PHILIPPINES, WHEN THE PROCUREMENT FOR USE BY THE AFP 
15 
INVOLVES MAJOR DEFENSE EQUIPMENT IN ACCORDANCE WITH 
16 
THE DEFENSE SYSTEM OF MANAGEMENT, AND THE EQUIPMENT 
17 
OR MATERIAL REQUIRED IS NOT AVAILABLE LOCALLY AND THE 
18 
SECRETARY OF NATIONAL DEFENSE HAS DETERMINED THAT 
19 
THE INTERESTS OF THE COUNTRY SHALL BE PROTECTED BY 
20 . 
NEGOTIATING DIRECTLY WITH A MANUFACTURER OR AN 
21 
INSTRUMENTALITY OF ANOTHER COUNTRY WITH WHICH THE 
22 
PHILIPPINES HAS ENTERED INTO A DEFENSE COOPERATION 
23 
AGREEMENT 
OR 
OTHERWISE 
MAINTAINS 
DIPLOMATIC 
24 
RELATIONS, THE PROCUREMENT BY THE ARMED FORCES OF 
25 
THE PHILIPPINES OF THE EQUIPMENT ABOVEMENTIONED 
26 
SHALL BE EXEMPTED FROM THE REQUIREMENT OF PUBLIC 
27 
BIDDING UNDER REPUBLIC ACT NO. 9184: PROVIDED, HOWEVER, 
28 
THAT 
THE 
PERFORMANCE 
BY 
THE 
SUPPLIER 
OF 
ITS 
29 
OBLIGATIONS UNDER THE PROCUREMENT CONTRACT SHALL BE 
30 
COVERED BY A PERFORMANCE SECURITY IN ACCORDANCE 
31 
WITH SECTION 39 OF REPUBLIC ACT NO. 9184; PROVIDED, 
32 
FINALLY, THAT MAJOR DEFENSE EQUIPMENT SHALL REFER TO 
33 
AIRCRAFTS, 
VESSELS, 
TANKS, 
ARMORED 
VEHICLES, 
34 
COMMUNICATION EQUIPMENT, RADAR SYSTEMS AND HIGH-
35 
POWERED FIREARMS." 
36 
Sec. 8. Section 16 ofthe Same Act is hereby amended to read as follows: 
37 
6 


I 
"Sec. 16. 
[Annual) Reports. - [Not later than the end of the first quarter 
2 
of the succeeding year: 1 
3 
(a) NOT LATER THAN THE END OF THE FIRST QUARTER OF 
4 
THE SUCCEEDING YEAR, [T)the Secretary of National Defense shall 
5 
submit to the President and Congress an annual report on the status of the 
6 
APP Modernization Act Trust Fund, as provided for in Section II of this 
7 
Act; 
8 
9 
(b) The Chief of Staff, AFP, shall submit to the President and Congress 
10 
QUARTERLY, through the Secretary of National Defense, a[n annual) 
II 
report containing the progress of the implementation of the modernization 
12 
program under this Act to include the AFP modernization activities 
13 
implemented prior to the approval of this Act." 
14 
15 
Sec. 9. Insert three sections after Section 16 of the same Act which shall now become the 
16 
new Sections 17, 18 and 19 respectively, which shall read as: 
17 
"SEC. 17. EXEMPTION FROM VALUE-ADDED TAX AND CUSTOMS 
18 
DUTIES.-
THE 
SALE 
OF 
WEAPONS, 
EQUIPMENT 
AND 
19 
AMMUNITIONS TO THE AFP, WHICH ARE DIRECTLY AND 
20 
EXCLUSIVELY USED 
FOR ITS PROJECTS, UNDERTAKINGS, 
21 
ACTIVITIES AND PROGRAMS UNDER THE AFP MODERNIZATION 
22 
ACT, SHALL BE EXEMPT FROM THE VALUE-ADDED TAX: 
23 
PROVIDED, THAT THE IMPORTATION OF THE SAME BY THE AFP 
24 
SHALL LIKEWISE BE EXEMPT FROM THE VALUE-ADDED TAX 
25 
AND CUSTOMS DUTIES." 
26 
SEC. 18. 
CONGRESSIONAL OVERSIGHT COMMITTEE. THERE IS 
27 
HEREBY CREATED A CONGRESSIONAL OVERSIGHT COMMITTEE 
28 
TO MONITOR AND OVERSEE THE IMPLEMENTATION OF THE 
29 
PROVISIONS OF THIS ACT. THE COMMITTEE SHALL BE 
30 
COMPOSED OF SIX (6) MEMBERS FROM THE SENATE AND SIX (6) 
31 
MEMBERS FROM THE HOUSE OF REPRESENTATIVES WITH THE 
32 
CHAIRPERSONS OF THE COMMITTEE ON NATIONAL DEFENSE 
33 
AND SECURITY OF BOTH HOUSES AS JOINT CHAIRPERSONS OF 
34 
THIS COMMITTEE. THE FIVE (5) OTHER MEMBERS FROM EACH 
35 
CHAMBER SHALL BE DESIGNATED BY THE SENATE PRESIDENT 
36 
AND THE SPEAKER OF THE HOUSE OF REPRESENTATIVES, 
7 


1 
RESPECTIVELY. THE MINORITY SHALL HAVE AT LEAST TWO 
2 
REPRESENTATIVES FROM BOTH CHAMBERS. 
3 
SEC. 19. SUNSET REVIEW. - AS THE NEED ARISES OR WITillN FIVE 
4 
(5) YEARS AFTER ITS EFFECTIVITY, THE CONGRESSIONAL 
5 
OVERSIGHT COMMITTEE SHALL CONDUCT A SUNSET REVIEW OF 
6 
TillS ACT. THE TERM "SUNSET REVIEW" SHALL MEAN A 
7 
SYSTEMATIC EVALUATION OF THE ACCOMPLISHMENTS AND 
8 
IMPACT OF TillS ACT, AS WELL AS THE PERFORMANCE AND 
9 
ORGANIZATIONAL 
STRUCTURE 
OF 
ITS 
IMPLEMENTING 
10 
AGENCIES, 
FOR 
PURPOSES 
OF 
DETERMINING 
REMEDIAL 
11 
LEGISLATION." 
12 
Sec. 10. The succeeding sections of the same Act are hereby amended and renumbered 
13 
accordingly. 
14 
15 
Sec. 11. Repealing Clause. -
All laws, executive orders, rules and regulations 
16 
inconsistent with or contrary to this Act, are hereby deemed accordingly repealed or amended. 
17 
18 
Sec. 12. Separability Clause. - If, for any reason, any section or provision of this Act is 
19 
declared unconstitutional or invalid, the other sections or provisions not affected thereby shall 
20 
remain in full force and effect. 
21 
22 
Sec. 13. Effectivity Clause. - This Act shall take effect fifteen (15) days after its 
23 
publication in at least two (2) newspapers of national circulation. 
8