Indian MMRCA offsets differences near solution
A solution to the vexed issue of third party suppliers within the offset obligations of bidders of India’s estimated $10 billion MMRCA fighter contract appears to be near with the bidders and the MoD reportedly agreeing to the draft of a contract between the prime integrators (the six bidders-Lockheed Martin, Boeing, MiG, Saab, Eurofighter and Dassault), their major sub-contractors and the MoD.
Earlier, the MoD and the prime integrators had serious differences over what industry sources called as “ third party contracts”. The MoD was insisting that the prime integrators sign MoUs on behalf of the sub-contractors while the latter expressing inability to do so on ground that they could not stand guarantee for their sub-contractors’ commitments. “A draft of the MoU is expected to be received from the MoD soon after which the vendors will have to sign these with each of the sub-system providers who have been mentioned under the 50% offsets obligations for the MMRCA contract”, an industry source told Defenseworld.net. There is broad agreement between a majority of the bidders and the MoD over the new MoU, the source said.
A fresh deadline of January 28, 2011 has been set to receive the signed MoUs, after which the MoD will examine afresh the offset proposals and proceed with the rest of the evaluation in selecting an ultimate winner.
Earlier, the six bidders had been informed that their offsets proposals needed to be redrawn as the MoD would only accept the prime contractors’ commitments for any offset work to be done which will have to be direct offsets and involve transfer of technology to India. It is not yet clear what the terms of the new MoU will be like, the sources said stating that however, recent interactions between the MoD’s MMRCA cell and the bidders seems to indicate forward movement.
There are altogether some 500-600 offset proposals as part of the MMRCA bids involving all the prime integrators. “Explaining the MoU to each of the sub-system providers in the context of every one of the offset proposals will be a time consuming exercise involving complex legal and technical issues and the approximate one month time looks too short to accomplish this work”, the industry sources said.
Industry experts as well as defence officials have voiced concern over the offsets policy. At a seminar on the fifth international conference on energising Indian aerospace industry organised by the Confederation of Indian Industry (CII) and Vayu Aerospace, the outgoing Vice Chief of the Indian Air Force, P.K. Barbora said a “well-defined offset policy is the need of the day”. Barbora has been quoted as saying on December 16, “our offset policy is very nascent. It is complicated and foreign vendors find it difficult to understand”. Barbora is reported to have made it clear that the comments were his personal views.
The Indian MoD is scheduled to announce a new edition of its defence procurement policy early next year which is expected to address some of the concerns of international vendors.
