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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