Monday, 16 February 2015

Rafale proposal “effectively dead” as Dassault bid not cheapest



By Ajai Shukla
Business Standard, 16th Feb 15

Even as three Rafale fighters line up in Bengaluru for eye-popping aerobatics displays at the Aero India 2015 exhibition this week, senior ministry of defence (MoD) sources say the proposal to buy the French fighter is “effectively dead”.

The reason: During three years of negotiations between Dassault and MoD officials in the so-called “contract negotiation committee” (CNC), it has emerged that Dassault’s bid was actually higher than that of the Eurofighter Typhoon, not lower as the MoD had announced on January 31, 2012.

Dassault had submitted a sketchy commercial bid, and when the CNC obtained details from the French company to arrive at the actual cost of the Rafale, the figures added up to significantly more than had originally been estimated.

This confusion is due partly to MoD inexperience with “life cycle costing” (LCC). The global tender for 126 medium multi-role combat aircraft (MMRCA) was the first time the MoD was awarding a contract based on LCC. This meant the winner would not be the fighter with the cheapest purchase price; instead the chosen fighter would be the one that was cheaper to buy, fly, maintain and overhaul over its 30-40 year service life.

“An inexperienced MoD, working off incomplete and sketchy details provided by Dassault, had incorrectly adjudged the Rafale cheaper. Now, after three years of obtaining clear figures from the French, we find India would be paying significantly more than had been initially calculated,” says an official in the CNC.

Contacted for comments, the MoD has not responded.

The MoD has been backing away from the Rafale for two months now. On December 30, 2014, Defence Minister Manohar Parrikar admitted for the first time there were “complications” in the negotiations with Dassault, and outlined the IAF’s alternatives.

“The Sukhoi-30MKI is an adequate aircraft for meeting the air force’s needs”, said Parrikar.

Last week the prime minister was pointedly distanced from the Rafale. On Saturday, an unusual MoD press release denied a newspaper report that the PM would fly in the Rafale during the Aero India 2015 air show at Bangalore this week.

“It is clarified that there is no plan for the Prime Minister Shri Narendra Modi to fly in any fighter jet. The news item is incorrect, misconceived and is not based on facts”, stated the MoD.

This is the second time the MoD has gone wrong in LCC evaluations. As Business Standard reported on Saturday (“Defence ministry official questions whether Pilatus was cheapest trainer”, February 14) an internal MoD noting last month sharply questioned the award of a contract for 75 PC-7 Mark II basic trainer aircraft to Swiss company, Pilatus. There too, the LCC was calculated incorrectly.

Significantly, that noting, signed by AR Sule, the MoD’s “Finance Manager (Air)”, who handles financial aspects of military aircraft purchases, alerts the defence minister to issues with LCC evaluation in the MMRCA tender.

Sule writes: “The issue (with LCC calculations) may be brought to the notice of the RM (Raksha Mantri) as two high value cases of IAF based on LCC model are at CFA (competent financial authority) approval stage.”

Dassault’s impending loss, however, will not be the Eurofighter Typhoon’s gain. Eurofighter GmbH has maintained an expensive presence in Delhi for the last three years, just in case Dassault’s bid encounters trouble. But Parrikar has made it clear that procurement procedures do not permit the second-placed vendor, i.e. Eurofighter GmbH, to be awarded the contract in place of the “preferred vendor”, i.e. Dassault.

Dassault was adjudged winner of the MMRCA tender through a two-stage process. In the first stage the IAF ruled out on April 27, 2011 four of the six competing fighters. Boeing’s F/A-18E/F Super Hornet; Lockheed Martin’s F-16IN Super Viper; Saab’s Gripen NG, and the Russian MiG-35 were adjudged not to have met the IAF’s performance requirements.

In the second stage, the commercial bids of the remaining two vendors --- Dassault’s Rafale, and the Eurofighter Typhoon --- were compared on a “life cycle basis” to select the lower bidder. On January 31, 2012, the Rafale was chosen as the cheaper of the two options, a decision that the MoD is now walking away from.

A senior official familiar with the Rafale contract negotiations says, “Given the value of this contract, it was always going to be scrutinised in detail. No MoD official is willing to endorse a Rs 100,000 crore contract with Dassault when it seems as if Rafale is not even the cheapest option”.

This means the IAF would have to look elsewhere for fighters to increase its depleted squadrons from the current 35 to the authorized 45 (with 18 fighters in each squadron).

Besides enlarging its Sukhoi-30MKI fleet from the 272 fighters HAL will build by 2018, the IAF could order more indigenous Tejas Mark I fighters, over and above the 40 now on order from HAL. The IAF could also intensify its co-development of the Indo-Russian Fifth Generation Fighter Aircraft (FGFA) with Sukhoi.

For Dassault, an Indian cancellation would be a serious blow. The French air force and navy, dogged by budget cutbacks, have reduced their planned Rafale numbers from 310 to just 180. On Friday, Egypt announced it would buy 24 Rafale fighters, becoming the first and only overseas buyer for Dassault.

"India will take longer than Egypt," said Eric Trappier, the CEO of Dassault on Friday.

14 comments:

Anonymous said...

This is exactly the kind of fuck up that the air force did not need, although ajai, the scenario that you've outlined is also confusing. So the mmrca was a two step process. The first one was technical, and 4 out of 6 got left out. Thats fine, as they didnt meet iaf's performance standard. But rafale trumped out typhoon in the second round, primarily because of economic advantage, which i understand was on loose ground. What i couldnt gather from the article was, why isnt the typhoon not the second choice, automatically if rafale deal goes south? Why this sudden realization that su30s can do the job? We've had them for some time now, so why the fuck did we not go for them in the first place itself? Now some have claimed that su30 cannot carry out ground based terrain hugging attacks. This brings us back to square one. What the FUCK is going on? Its pretty intriguing, and some one does need to investigate.
On a personal note, i dont think things are as bad. Foul play, for such a big deal, which has been in the public eye, is not easy, nor viable to commit. Hope the deal goes through.

Anonymous said...

The defence ministry need look nowhere other than within the country. A fraction of the money saved from these foreign deals should be diverted to setting up the worlds best production lines for LCA and Sukhoi manufacture. This will give production agencies the much needed experience in mass production which will come in handy for AMCA production in 5 years. There seems to be no great threat perception for the next 5 years. Augmentation of squadron strength with LAC and Sukhoi is the best bet at the moment.Side by side a big drive to produce world class avionics for future aircraft should be started NOW. All this will augur well in the next ten years and India will be a great fighter aircraft manufacturer.

SK said...

Colonel,

Going by the statement of French DGA chief and Indian RM, it seems your analysis is correct. Rafale is facing some deal breaker issues and the contract may not go through.

However, there are some like Prasun who think you are misinforming the public. He calls it cheap form of yellow journalism. He argues that Rafale deal will be contracted by June this year.

Its very hard to figure out where is the actual truth. On one hand, IAF's squadron strength is going down considerably. While on other, paying 30 billion USD for 189 planes without any ToT is suicide. Tough choices.

Anonymous said...

Just more lies and misinformation.

Anonymous said...

It was so clear since the beginning that MoD accepted incomplete and sketchy details from Dassault. The French proposal was made of just few pages against the hundred of pages of the Eurofighter proposal. Now, after three years of obtaining clear figures from the French, India"discover" that it would be paying significantly more than had been initially calculated. I would like to see some head rolling at MoD now. Indian Air Force lost 3 years without having a new fighter and Indian industry lost an opportunity for more business

Jayesh said...

HA HA! This is a joke. I told this 4 years ago. No body believed me at that time. Any one reading the RFP will understand the joke of the specs given. It is only in India you can make a fool out of the Public. I hope journalists like you expose the truth.

victor raj said...

Eurofighter typhoon is a paper tiger. It is not a good fighter. Instead we could upgrade Su30mki. Also I think we are just find out a reason for avoiding Rafale now. If 30 billion dollars is the problem for national security. Why don't we just get back some black money from the swiss and buy it. We could just increase the defence budget?

saffronbandit said...

Excellent article..
With 'make in India' being the mantra , this calculation error will be a convenient escape hatch for the NDA.
The IAF will willy nilly have to make do with more SU-30's and the Tejas -so the sooner Vayu Bhavan and the DRDO/HAL stop working at cross purposes, the better it will be for the IAF.

Anonymous said...

wihfull thinking ;)

Abhiman said...

This is really excellent news, because import reduction is implies indigenous resurgence.

However, only for the sake of diplomatic face-saving, we could truncate the order to only, say, 40 Rafales. The monies saved can be invested in speeding up the Tejas Mk.2 as well as kickstarting the AMCA program with private participation (albeit in lower rungs).

Anonymous said...

Col. Shukla, we greatly appreciate your lone crusade against the flawed Pilatus deal. While the aircraft itself is good (Swiss goods are known for their quality), it is definitely not cheap. Certain vested interests in IAF have deliberately downplayed its cost vis-a-vis the HTT-40 and misled the nation. This should be investigated and the role of bribery in cash (or more probably in kind) should be explored.

Parthasarathi said...

Sir,

MOD took 3 years to understand that the bidding was incomplete and sketchy ! Is it true? Or seriously these " babus" are incompetent ! If really they are that incompetent then still why they are in the MOD. ?
Secondly we all know that if we buy Rafael our air force will be bankrupt. Or there will not be any money left for " capital expenditure " . The same problem our army is facing now. Still we were negotiating with Dassault. It was a crime.
My suggestions are
1) Scrap negotiation for the Rafael deal immediately. No more baggage no more burden.
2) Buy few squadrons of mothballed F 16 C thru. Govt to Govt negotiation. It is just a temporary measure. We may get a very good price. And still those fighters can fly another 15 years at-least. We may upgrade them with Israeli avionics the way we have done in case of Sea Harrier.
3) If SAAB is wiling for technology transfer and willing to make Gripen in India then why we should not look into that option !
Actually there are many possibilities. But who will bell the cat !
Regards,

Anonymous said...

I am sure that MOD is not going to purchase any other foreign planes because he knows more than anybody. what is the real requirement of IAF in case of war with Pakistan. Only Stealth aircraft with superior counter measure will be able to escapee from missile attack. That is the reason USA is avoiding direct confrontation with Russia. They are afraid of Russian S 400 missiles and torpedo VA-111 Shkval.

ROBINSON said...

How can MoD allow India to be humiliated like this? After so long, they finally realize that its not cheap?