MMRCA Principals Pore Over Bids

photo Pritishp333

Nov 10, 2011 By Asia-Pacific Staff aerospace daily and defense report

NEW DELHI — The cost of acquiring the winning aircraft for India’s Medium Multi-Role Combat Aircraft (MMRCA) competition is no longer a secret — except to the public, for now.

With final bids in for the Dassault Rafale and Eurofighter Typhoon, the offers of both European companies were opened Nov. 4 and their contents revealed for the first time to the two European rivals, as well as the Indian government’s MMRCA program team, and three defense ministry officers who will spend the next 6-8 weeks boiling the two offers down to a common, comparable form.

Bid details are not yet public. But after the 3-hr. meeting at the Indian air force (IAF) headquarters, a ministry officer in the acquisitions office indicated that certain parameters, including the flyaway cost per aircraft, were not as disparate as might have been expected.

Officials from the two firms would not comment on the bids, though EADS Cassidian released a statement minutes after the meeting, saying: “Our offer for India’s MMRCA tender is backed by the four Eurofighter partner nations as well as their respective aerospace and defense industries. It is competitive and designed to deliver maximum value to India.”

Privately, officials at both companies said they were confident with where their bids were placed. That is not surprising, especially since the biggest factor is still an unknown: how the ministry will arrive at the ownership/life-cycle cost of both aircraft over a 40-year/6,000-hr. run — an exercise it has never attempted before. Mystery also shrouds the benchmark price, a figure that the ministry and IAF jointly formulated this year, and one to which the bid prices of the Rafale and Eurofighter will be compared with, to focus on the more competitive proposal.

“Both companies now know the unit cost of each other’s aircraft,” the ministry officer said. “That was closely held information so far. But the real calculations, which will include [the] cost of flying these aircraft over their lifetime, plus inputs from technology transfer and offsets, will provide a final picture. We have a formula and process. It will now be applied to both bids.”

Industry observers suggest that the government is now well-placed to make a decision, though others indicate that the only real political decision made in the competition so far was the elimination of the two U.S. contenders, Lockheed Martin and Boeing, in April.

“If the two final offers from Dassault and Eurofighter are roughly comparable, the government will perhaps want to leverage more strategic benefits from the potential winner,” says an adviser to the Confederation of Indian Industry, which counts among its members several firms that will be offsets partners to either Dassault or EADS Cassidian. “You couldn’t ask for two aircraft that are more comparable, or bigger rivals in the aerospace market today. It’s an opportunity for India to truly gain something here, over and above the 126 airplanes.”

The lowest bidder, and therefore the one poised to win the $10.4 billion deal, is expected to be formally announced before the new year. Price negotiations will follow with the lowest bidder, leading to contract signature by March 2012, and bringing to an end a 10-year effort by the IAF to buy a stopgap fleet to stem fighter squadron depletion.

The government has not formally announced lowest bidders in arms competitions, but it had apparently decided unofficially last year to begin the practice as an exercise in transparency. In September 2010, the government revealed that General Electric had been identified as the lowest bidder in a competition against Eurojet to power the indigenous Tejas Mk. 2.

As for the MMRCA’s final contract value, it is likely to be well more than the originally budgeted $10.4 billion. It could reach roughly double that figure, taking into account factors such as inflation, currency fluctuation adjustments and the possibility of a larger buy.