Denmark Prioritizes Jobs in New Fighter Competition

Danish F-16 in flight - photo Danish Ministry of Defense

Sep. 1, 2013 - By GERARD O’DWYER – Defense News

HELSINKI — Job creation will stand as the chief factor when the Danish government convenes to select a replacement type for its aging F-16 fleet in mid-2015.

Denmark will look for substantial long-term industry value from bidders in the restarted Fighter Replacement Program (FRP), said newly appointed Defence Minister Nicolai Wammen, who replaced Nick Hækkerup following a Cabinet reshuffle by Prime Minister Thorning-Schmidt’s coalition government on Aug. 9.

The government, which hopes to use the FRP as a mechanism to inject significant new investment into an economy weakened by the global financial crisis, has set job creation as the cornerstone of its revised fighter procurement policy, Wammen said.

Moreover, the FRP will be used to bolster sustainable export growth within the country’s tiny defense industry

“All four candidates will be informed of our thinking and requirements. It will be made crystal clear that if there are not jobs coming to Denmark, then we will not be buying planes from that quarter,” Wammen said in a statement.

The bidding line-up includes Boeing’s F/A-18E/F Super Hornet, Lockheed Martin’s F-35 Lightning II Joint Strike Fighter, Saab’s Gripen-DK NG and Cassidian’s Eurofighter Typhoon. Denmark is looking to begin retiring the first of its F-16 fighters in 2020.

Denmark is expected to purchase 24 to 30 new fighters at an estimated cost of $3.8 billion to $5.5 billion. A final decision on the number of aircraft to be acquired is anticipated in the next six months.

All bidders will need to bring real jobs to the negotiating table for what will be a “huge” capital investment undertaking by the Danish state, Wammen said.

Denmark’s defense industry has welcomed the government’s clear message to potential bidders. However, industry chiefs want the government to ensure any future supplier agreements with 100 percent countertrade guarantees.

“This is about maximizing gains for Denmark, the national economy and for industry,” said Jan Falck-Schmidt, CEO of Falck-Schmidt Defence Systems, a domestic supplier of missile, force protection and life-cycle systems and services. “It is not enough to ask candidate manufacturers if jobs will emerge. What is needed is for the Danish government to demand 100 per cent countertrade. This will focus attention on value-added contracts and serious job creation initiatives.”

Only time will tell if the Danish government is serious about pushing job creation to the front when it comes to implementing the FRP, said defense analyst Jens Ringsmose. Other considerations, including a wish to retain a strong political alliance with the U.S, can also be expected to play a crucial role in the aircraft selection process, he added.

“The message is that jobs will be the most important parameter in this massive acquisition. In this way [Wammen] avoids having to explain the other major contributory reasons that are at least as important; not least the alliance with the United States,” Ringsmose said.

While the FRP competition needs to be industry and value centered, it must also be run in a fair and equitable manner, said Lene Espersen, the opposition Danish Conservative party’s defense spokeswoman.

“This is a very large item of expenditure for Denmark, and we must derive as much value in terms of jobs and long-term economic growth as possible. The project must be used not alone to expand the order books of our defense groups but help them grow into more export-driven niche suppliers of weapons and military systems in the future,” Espersen said. “Above all this competition must be about buying the best aircraft from European and the American bidders in an environment of trust where all are competing on a level playing field.”

The government’s final decision could favor the purchase of a reduced number of fighters as part of a broader strategy to purchase specialized unmanned aircraft, Espersen said.

“Drones will never replace conventional combat aircraft, but they will play an increased role in international operations. They will become increasingly used in Denmark’s Arctic territories. The drone dimension could add an interesting feature to the fighter replacement competition,” Espersen said.

The mistakes made in the original competition, which saw Eurofighter withdraw from the contest due to what it perceived as a contest weighted in favor of Lockheed’s F-35 JSF, cannot be repeated, said John Dyrby Paulsen, the Social Democrat’s spokesman on defense.

“There is already a perception that Lockheed Martin has an advantage in this competition because Denmark has invested in the JSF project. This must be a real competition. We must not be bound by some sense of loyalty to choose an American plane. The final decision must be based on the economic value to Denmark on the one hand and the need to buy the best aircraft for our needs on the other,” Paulsen said.

Denmark, which is a Tier-3 partner in the JSF project, restarted the FRP in March after suspending the competition in 2010 due to a need to divert funds in a battle to fight off recessionary fears and support the country’s then-ailing banking system. As a Tier-3 partner, Denmark has so far invested around $200 million in the JSF development program.

“Industry’s position has always been very clear: Military procurements must result in concrete contracts for the Danish defense equipment and aerospace industries,” said Frank Hall, general secretary of the Danish Defense & Security Industries Association (DDSIA).

The DDSIA plans to hold regular meetings with all bidders in the coming months. Talks will be routed through the organization’s dedicated FRP unit, the Danish Industry Fighter Aircraft Team, which was established in 2008 to explore the potential for partnerships and contract work with all candidates in the competition.