Defense Secretary Voltaire Gazmin deferred the tender and the awarding of the contract for the helicopters and ordered investigators to report back within 30 days.

Fernando Manalo, defense assistant secretary for acquisition, installation and logistics, is leading the inquiry that, depending on the findings, could scupper the deal worth between $75 million and $90 million.

Assistant Secretary and retired Gen. Ernesto Boac, chairman of the bids and awards committee, made the announcement before the start of a post-qualification meeting for the project in which several PZL Swidnik employees were present.

"Our action is to defer whatever are the next stages of the bidding process," Boac said.

He also said the inquiry would question members of the defense department's bids and awards committee's technical working group over allegations that they might be involved in any collusion.

"We in the DND (Department of National Defense) are sensitive to issues from the public as articulated in the media and amplified by some congressmen," Boac said. "This is a paramount issue that we have to take and we fully support the decision of the SND (secretary of National Defense)."

The decision to suspend the tender pending an inquiry was met with approval by the Makati Business Club, an influential non-profit, free-market business forum whose members include more than 800 chief executives and senior managers in some of the largest Philippines corporations.

"It only showed that they (DND officials) are sensitive to criticism," MBC representative Magdaleno Albarasin said. "That's being democratic. They are open to suggestions. But it is important that the board will do a good job."

Suspicions over the contract have been growing for several weeks. Some members of the House of Representatives and the media have claimed that contractors colluded among themselves so that PZL Swidnik would get the contract.

Bayan Muna party-list House of Representatives member Teodoro Casino had questioned the withdrawal of other defense contractors including Boeing, Asia Aerospace/MD Helicopter, Eurocopter and Elbit System/Joavi Phils.

"When only one bidder qualifies in any bid process, that is usually a tell-tale sign that the bidding is tailored-fit for one supplier," he said in a written statement.

The move by the department of defense is seen as part of the larger fight against corruption as the country embarks on a major military modernization program.

Last month, the defense department said it will invite members of the media to witness the bidding process for the acquisition of military hardware.

"In pursuit of transparency, we will be inviting the media to observe bidding," Defense Department spokesman Eduardo Batac said. "We are eyeing two or three media men for each bidding. As Defense Secretary Voltaire Gazmin said, we are not hiding anything."

Batac said the move is in line with the drive by President Benigno Aquino's administration to ensure transparency and accountability in government. Representatives from the Makati Business Club and the Catholic Bishops Conference of the Philippines also will be invited as observers.

"We are just trying to be transparent," Batac said. "By way of a better-informed media, we can avoid, for example, speculation on corruption practices occurring only because there is lack of information or lack of understanding."

In January 2008, the Philippines stopped a $29 million MD530F helicopter supply contract to Asian Aerospace Corp., a local partner of MD Helicopters, after an inquiry uncovered what it said were irregularities in the bidding process.

The government said at the time it would re-tender for the six night-capable attack helicopters after an inquiry found "serious flaws" in the tender completed in September 2007.

One of the other aviation firms tendering for the deal was PZL Swidnik. It protested the bidding process because the MD530F with its 1,500-pound payload failed to meet the tender requirements of a 3,000-pound payload.

PZL Swidnik was offering an advanced model of the Russian-made Mi2-Plus helicopters.

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