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Airbus lashes out tenderly over Caribou replacement

Expanded concerning the ‘arithmetic’.

In the most plainly spoken media release Airbus has ever uttered in Australia, the European plane maker has responded in harsh terms to yesterday’s announcement that an Italian battlefield airlifter purchased from the US will be the ADF’s Caribou replacement.

The politically damaging claim made in the Airbus Military statement is that:

In a press conference immediately following the announcement, the Minister clearly stated that there had been a competition between the C27J and the Airbus Military C295 airlifter.

Airbus Military is obliged to place on the public record our disappointment at the Minister’s choice of words, because there was no tender process and certainly no competition.

And it didn’t stop there. An Airbus Military spokesperson claimed there was something wrong with the arithmetic in the Minister’s statement, querying how Australia could only be getting 10 C27Js for $1.4 billion when the price to the US, which is no longer buying nine of them, was around $US 31 million.

The statement goes on to say:

We are even more disappointed that this decision appears not to have been made out of rigorous evaluation of tender-quality information for which Australia is justly renowned and which is normally required before such large sums of taxpayer dollars are spent. The Department of Defence seems to have rejected its own tried, tested and proven process of evaluating competing platforms. Following the selection last year of a new naval combat helicopter, the Department of Defence stated publicly that holding a competition between the two contenders had resulted in a 25 percent savings in acquisition cost.

We certainly do not begrudge the ADF making decisions about preferred capability and platforms following careful consideration of tender-quality and commercially-binding information. But on this occasion, selection of the C-27J for $1.4 billion seems to have been based largely on the RAAF’s own desktop assessments. When compared to other projects with similar size price tags that go through an arduous process of tender responses and deep investigation of all areas concerning ownership of a capability, this effort falls short of a full evaluation process.

Airbus Military proposed the C-295 aircraft as the Caribou replacement. The C-295, like the C-27J, has recognised strengths and weaknesses. The C-295 is the world’s most popular battlefield airlifter, with global sales at 100 units. It is cheaper to buy and operate than the C-27J. For the RAAF’s fleet of 10 Battlefield Airlifters, a C-295 purchase, offered at 400 million AUD would have provided savings of $1 billion compared to the C-27J FMS. In addition, the industry involvement Airbus Military had committed to the Department of Defence and Industry had substantial components for Australian Small/Medium Enterprises (SME’s) we doubt could be complied through an FMS case.

In the current climate of fiscal restraint and public concerns over Government waste and expenditure, it is surprising that the opportunity to save at least $1 billion AUD of taxpayer’s money was not sufficient justification to hold a competition to determine which aircraft option represented the best overall value for money.

It should also be noted that Australia has committed $1.4 billion to an aircraft that will be delivered in 2015 only, representing a three year time gap. Airbus Military is of the opinion a competition could have been done in this period, complying with the same schedule, as the C295 could be available in a six months time period.

Airbus Military considers that the current situation would allow the Government to take the necessary time to put in place the processes to understand precisely what it will cost to own and operate the C-27J over the next 30 years, and what might be the risks involved in operating an aircraft that, according to a US military report, is “not operationally suitable” and did not achieve the desired reliability or mission availability rates when deployed to Afghanistan.

Despite Airbus Military expending considerable resources responding to enquiries and requests for rudimentary information, we are concerned that the outcome may have been pre-determined from the start.

 

The price quoted by Australia of $1.4 billion for does sound wrong, even if it we cut the Minister some slack about total service lifetime costs and the initial purchase, because it would politically stupid to quote anything but the lowest possible price, and push the hypothetical life time costs out in the distant future, thus making the government look more prudent in its spending. Airbus claims it could have sold 10 C295s for $35 million apiece, saving the public purse more than $1 billion.

More might be heard on this topic during the day, and if the Minister or the opposition responds, on a day when other events are dominating the headlines coming out of Canberra, their words will be added to this post.

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  • 1
    ltfisher
    Posted May 11, 2012 at 12:28 pm | Permalink

    Why would a Minister bother responding to an other Airbus whinge? As in the US Air Force tanker replacement issue a few years ago Airbus isn’t the preferred military aircraft for the world and neither we nor any other government has to explain to them why we didn’t select their offering. It seems that the age of European colonialisn lingers on.

  • 2
    AngMoh
    Posted May 11, 2012 at 12:59 pm | Permalink

    Yes it is an Airbus whinge. But if you buy 10 C27Js with a list price of about USD$55M each for AUD$1.4B and announce it as a huge bargain, then there is some fishy business going on. And if free money is going to be thrown around, then everyone would like to have a bit.

    I don’t understand what European colonialism has to do with this when we are talking about the French (or maybe more Spanish) versus the Italians…

  • 3
    TT
    Posted May 11, 2012 at 2:29 pm | Permalink

    AngMoh: not sure where you get US$55M each from? When Australian Government request for the purchase just before Christmas last eyar, it was quoted for US$950M (i.e. $95M for each if you divide the figure up). Yes, that figure includes initial spares and initial training, but you also need to consider RAAF need to do preparations themselves to faciliate the C-27J, develop local training to train pilots and maintenance
    crews and logistics staff. Also, the Government may also use a more conservative currency exchange rate (given IOC is not due til 2016) to ensure if the Aussie dollar do go south, the acquisition cost will not get ballooned as a result.

    Have a look at this Flight Global news page if you want to know what’s included in the US$950M package:
    http://www.flightglobal.com/news/articles/possible-australia-c-27j-deal-valued-at-950-million-366351/

  • 4
    TT
    Posted May 11, 2012 at 2:31 pm | Permalink

    I am rather surpised that the Government didn’t use this opportunity to buy the 27 C-27J from USAF at the same time, given it is “surplus to their requirements”. We could have pick it up for bargain basement price?

  • 5
    Bushranger 71
    Posted May 11, 2012 at 2:45 pm | Permalink

    Relating defence expenditure to GDP is smoke and mirrors stuff as it all has to be paid for from revenue. In 2008 it was around $22billion but now nearer $28billion. The unrealistic compounding defence expenditure increases out to 2030 devised by Howard and endorsed by Rudd are simply not affordable.

    Australia could have a quite effective military for around $20billion per annum if funds were astutely spent. Instead, we forfeit comparatively low-time platforms that get snapped up by the rest of the world for putting through ongoing manufacturer upgrade/refurbishment programs (Iroquois, C-130E & H, Caribou and Blackhawks/Seahawks intended to be shed). These well proven cost-effective military assets remain in operational service worldwide with 2 ex-RAAF now turbo-engine Caribou operating in Afghanistan and more of the former ADF herd being converted.

    Both the USAF and RAAF are in denial regarding STOL airlift requirements and military experience in SE Asia and the regional tropical archipelago over the past 50 years is not being heeded. The C-27 simply does not have the STOL performance of the Caribou enabling very basic airfield operations in the nearby mountainous wet tropics.

  • 6
    NeoTheFatCat
    Posted May 11, 2012 at 2:46 pm | Permalink

    It’s weird that the Italians would allow the USAF to undercut them in what is essentially a commercial transaction. I did read somewhere about the reasoning for this strange Italy > USA > Australia deal, but can’t quite recall …

  • 7
    TT
    Posted May 11, 2012 at 4:27 pm | Permalink

    NeoTheFatCat: hardly anything like the commercial transaction! You need to view Alenia C-27J as an US aircraft type, not Italian. US made quite a fair bit of modification (e.g. cockpit, propeller and engines) from the original G.222 (or C-27A) design. Those changes are subject to ITAR, thus effectively no one can buy C-27J from Alenia or Italian Government one way or the other.

    The other point is L-3 is the prime contractor of C-27J on behalf of US DoD for this Australian FMS purchase (see the FlightGlobal article link I posted in earlier comment if you are itnerested), as well as when US Army placed their order back in 2007. Alenia (believe it or not) is just a sub-contractor for C-27J!

  • 8
    Fueldrum
    Posted May 11, 2012 at 5:09 pm | Permalink

    Airbus is “whinging?” Excuse me?

    The Minister stated that there was a competition/tender process and the C-27 won. This is plainly not the case.

    I’m not a big fan of Airbus and their taxpayer subsidies but this is a pretty clear case of someone misrepresenting the calibre of their product.

    That someone takes his advice from the Australian DoD.

  • 9
    ltfisher
    Posted May 11, 2012 at 8:50 pm | Permalink

    Fair go Fueldrum: the Minister responded in answer to a doorstop question that “There was a competition”. He did not mention a tender as there wasn’t one. In their statement above Airbus acknowledges what the Minister said. The Minister is not obliged to define the competition process for the benefit of Airbus. That there were two competing products is quite clear and acknowledged by the Minister who said that Airbus had been advised of the Government’s decision. Ironically the way that things have turned out, with the Italian manufacturer getting a contract for the long term maintenance, the Europeans might come out of the deal quite reasonably.

  • 10
    Smeg Lister Of
    Posted May 11, 2012 at 9:04 pm | Permalink

    Its simple really, Airbus just SUCK !

  • 11
    howard
    Posted May 12, 2012 at 6:07 am | Permalink

    As I recall, one of the requirements was that the new airlifter was to be able to carry the Mercedes G Wagon. The C-295 can’t do that the C-27J can.

    What Airbus seems to be missing (intentionally or not, I don’t know) is that Australia has been working on this for almost 20 years. In the last go around they drew in tenders including the CN-235 and C-295, so the MoD is quite aware of the dimensions of the airplanes. The CN-235 and C-295 could barely carry the Perentie vehicle that the G Wagon replaced. Then there is also the compatibility with the existing fleet of C-130s that has to be considered.

    So, there may have been an internal competition, and the C-295 was eliminated because it couldn’t do the job.

  • 12
    Uwe
    Posted May 14, 2012 at 1:36 am | Permalink

    howard, know your specimen! ( From an aussi mcycle mag ;-)

    That includes the ability to carry the new Mercedes-Benz G-Wagon. This vehicle comes in various configurations and those with the larger load modules won’t fit on either aircraft.

    via:
    http://news.ninemsn.com.au/national/8430696/airbus-says-c-295-best-choice-for-aust

    My guess here is some US insidious political leveraging inside the coalition of the willing.

  • 13
    keesje
    Posted May 15, 2012 at 12:10 am | Permalink

    To me selection of the C-27J seems logical. probably absorbing examples all ready build for the cancelled USAF order. Its bigger, more powerfull and for a hercules operator has some nice commonality. The C-295 seems far more fuel efficient, lean and better suited for passenger transport, patrols etc. Two entirely different aircraft. IMO Airbus should stop whining..

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