Monday, 9 May 2011

BAE Systems Decision On Artillery Contracts A Mistake

Ajai Shukla / New Delhi May 09, 2011, 0:34 IST

The feeling is taking root within BAE Systems that the British defence multinational has blundered in opting out of the Indian tender for 155 millimetre towed artillery guns. This was evident on Friday, in the company’s Annual Business Review meeting in New Delhi, when senior executives argued that last month’s decision not to bid in the MoD’s Rs 8,000-crore tender for 1,580 towed guns would seriously disadvantage BAE Systems in competing for other tenders in the Indian Army’s Rs 20,000-crore artillery modernisation programme.

This growing fear was summed up by a source that was present in that meeting: “If we don’t take part in this tender, we’ll remain out of the Indian market for the next three decades.”

Shortly before the tender deadline of April 28, BAE Systems had written to the MoD that it would not bid in the contract for towed guns. Now, opinion within the company is veering around to the viewpoint that BAE Systems must bid for this tender.

The deadline of April 28 has since been extended by two months and the MoD will now be accepting bids up to June 28. BAE Systems, therefore, has the time to change its decision.

Last month, BAE Systems had explained why the company was not bidding, despite participating creditably in earlier tenders, including field trials. To conform to the stringent Indian Army specifications laid down in an earlier RFP (Request for Proposals, as the MoD terms tender requests), BAE Systems had made expensive modifications to the gun it was offering, a modernised version of the battle-proven, albeit controversial, Bofors FH-77B gun. But the current tender, issued on January 28, diluted the gun’s specifications in order to bring in more vendors. That made the BAE Systems gun over-designed, over-qualified, and probably too expensive.

The company’s spokesperson, Guy Douglas, told wire service, IANS, that the BAE Systems FH-77B 05 gun “was specifically designed for and demonstrated to meet the Indian Army’s requirements as stated in previous RFPs… We found that the new RFP includes technical and performance relaxations that allow less capable weapon systems to enter the competition. This significantly reduces the competitive advantage FH-77B 05 derives from its greater capability.”

It is not yet clear which artillery manufacturers will compete in this new tender for the long-delayed purchase of

155mm towed guns, a procurement that has dragged on for almost a decade. Many of the world’s premier manufacturers have been eliminated through blacklisting, including Singapore Technology Kinetics (STK); South African company, Denel; Israeli company, Soltam; and German manufacturer, Rheinmetall.

Fuelling the growing belief that BAE Systems must bid in this tender are behind-the-scenes requests from the army’s artillery directorate, which has become convinced, over several rounds of earlier trials, of the quality of the FH-77B 05 Bofors gun. Given the army’s backing, BAE Systems’ “pro-participation” advocates argue that a few tens of millions of dollars spent on modifications would be an acceptable price for winning this Rs 8,000-crore contract and taking pole position in the other lucrative gun contracts that total up to Rs 20,000 crore.

Contacted for comments, BAE Systems spokesperson, Guy Douglas, denied that there was a rethink under way and ruled out the possibility of a new decision ahead.

The expansively named Artillery Vision 2027 and the MoD-sanctioned Artillery Modernisation Plan visualise four major gun purchases ahead: besides the contract for 1,580 towed guns, the army is also buying 140 ultralight 155mm, 39 calibre howitzers from BAE Systems for about Rs 3,000 crore. Another Rs 3,500 crore is up for grabs for the purchase of 100 track-mounted, 155 mm, 52 calibre howitzers; and Rs 4,000 crore for 180 similar vehicle-mounted guns for self-propelled artillery regiments.

BAE Systems has tied up with a Mahindra group company, Defence Land Systems, as a manufacturing partner for artillery contracts that it wins in India. Mahindra is likely to play an important role in any BAE Systems decision to participate in the tender. The final decision will be taken by BAE Systems’ Land & Armaments Divisions.