MMRCA Misgivings Unfounded (a must read)

[Bang Galore]

As said, the pice was never the limiting factor. Saab for example could had made their offer with the EPE engine too if they wanted. That would had pushed the Gripen to much better flight performance and a TWR above 1 as required, but with the same downsides of increased costs that Boeing tried to avoid too. That's why THEY have not offered it, so why should we ask for a price then? Do you honestly think any vendor has limited it's offer to us and not has given the best possible technical proposal, to the most sensible price (according to them), that would had complied as much as possible to the RFP?

I'm not concerned with it was fair to the vendor, my concern is limited to the fact that we would have had a better understanding of the economics instead of now being in a position of debating blind. It is simply a case of us knowing how much extra we are paying for the additional capability. That alone would make sense. Without a cost-benefit calculation, all we are left with is whatever price the manufacturer quotes and discussing from there.

 

[Capt.Popeye]

I have a problem with the manner in which the down select was done. I would have very much liked to know what the costs of 126 Gripen & 126 SH for us to know how much more we are actually paying & what is specs that come added (in the Rafale, EF), and for what cost. A simple analogy would be a competition between luxury cars - say a Jaguar XJ, a Mercedes S class versus a Rolls Royce Ghost & a Bentley Flying Spur. Down selecting on purely technical grounds might get you the super expensive Rolls Royce Ghost & the Bentley. Is that necessarily the best way to go about it, especially if you do not have an unlimited budget? Far better to have a clearer understanding of what the respective costs of the different products are & then see if the added technical/specs advantages are justifiable at the cost being asked. If we are going to spend $ 18 or 20 billion for the Rafale, I think we should have had a clearer idea of what the same amount might have got us if the choice was different. That would have been a sensible way of going about it. Who knows what other features might have come in a SH or a Gripen if we said $18 billion was the budget? For an example (terms of offer only), the Danish fighter contest makes the economic budget known beforehand ($4.5 - 5.5 billion I think)& then asks for offers to fit that budget. That is the only way to get competitors on an equal plane, not the way the IAF & MoD have done it in the MMRCA contest. Theoretically, if the cost of 126 Gripen cost about $10 billion or less, you would then be in a position to judge whether or not it made sense to buy 126 Rafale at double the price, or not. We simply don't know that answer now.

@Bang Galore;
This post as well as the general arguments that you have put forth indicates that you have not understood how this project was formulated and even more importantly how the selection was made.

So let me try to outline it for you in the simplest possible terms below:
1. the Technical Parameters of the Aircraft's Performance Reqmts were formulated.
2. the add-on reqmts of TOT and Offsets was formulated.
3. Bids based on RFI and RFPs were sought.
4. this was duly received in the 2-Bid form: Technical and Commercial.
5. then all the bidders brought down the aircraft for flight/operational testing/evaluation, which took place apart from studying all the information/plans/details supplied by manufacturers.
6. the down-select was carried which identified the aircraft(s) closest to the operating parameters/specified. Now this is/was an important step, actually the most important one.
7. then the commercial bids were studied; which was in fact a 'run-off' between the 2 aircraft that made'the cut' in step.6 so as to determine L1 which happened to be Rafale.

NOW: if the Gripen or MiG-35 or F-16IN got eliminated in step.6 which was the basis of the ASQRS and the project; how on earth can it matter if one can buy 2 Gripen for the price of 1 Rafale or 3.5 Mig-35s for one Rafale; even it matters not that 1.05 Rafales will come for 1 Typhoon since the final criteria was the L1 aircraft that matches the Tech Op. Specs.

Now if the GoI,MoD and IAF decide to curtail the budget because of paucity of funds, one cannot water-down the selection criteria or shift the choice to some other aircraft.
If that is so; then why not make 1000 Bisons for the same amount of money or something like that???

 

[sancho]

I'm not concerned with it was fair to the vendor, my concern is limited to the fact that we would have had a better understanding of the economics instead of now being in a position of debating blind.

I don't care about the vendors either, I want the best of IAF and India, but the fact is, there is no limitation of what they could have proposed to us based on the budget as you said, they simply have chosen on their own to offer us a certain package to comply to our requirements. If that is still below of what we wanted, it's their mistake or the fact that they simply can't provide more for the mentioned reasons. That doesn't mean we have to waste time then to ask them what other featuers they "theoretically" could add and what that would cost. We asked specifically, they replied and if they can't comply we reject, as simple as that. I only wished that they hade rejected some of them even earlier, which would had saved us even more time.

It is simply a case of us knowing how much extra we are paying for the additional capability.

I know that that is what you are up to, but you keep ignoring that basic requirements! There is no gain for us to ask what the Super Hornet would cost with EPE engine, IRST, CFTs, weapon pods, enhanced EW..., if those things could not be available when we want the fighter, or when they can't be provided with useful ToT. That might be less costly than a Rafale or EF at the end, but doesn't give us what we wanted, WHEN wen want it!
That's why I keep telling you, that the cost factor only applies to those that can meet the basic requirements => the shortlisted fighters!

 

[Bang Galore]

I don't care about the vendors either, I want the best of IAF and India, but the fact is, there is no limitation of what they could have proposed to us based on the budget as you said, they simply have chosen on their own to offer us a certain package to comply to our requirements. If that is still below of what we wanted, it's their mistake or the fact that they simply can't provide more for the mentioned reasons. That doesn't mean we have to waste time then to ask them what other featuers they "theoretically" could add and what that would cost. We asked specifically, they replied and if they can't comply we reject, as simple as that. I only wished that they hade rejected some of them even earlier, which would had saved us even more time.



I know that that is what you are up to, but you keep ignoring that basic requirements! There is no gain for us to ask what the Super Hornet would cost with EPE engine, IRST, CFTs, weapon pods, enhanced EW..., if those things could not be available when we want the fighter, or when they can't be provided with useful ToT. That might be less costly than a Rafale or EF at the end, but doesn't give us what we wanted, WHEN wen want it!
That's why I keep telling you, that the cost factor only applies to those that can meet the basic requirements => the shortlisted fighters!

I continue to disagree with you on this, I simply don't see the logic of not being able to make an economically informed decision. Maybe the Rafale was the best bet, at whatever price is being quoted but as long as we don't know the prices that others were offering versus capabilities, there will always be doubts & valid ones at that. If Rafale isn't the obvious choice, that too would have been far more clear if we had all the facts. As of now, all we are left with is speculation of cost & possible rip off & a tom-toming of capabilities of unknown economic cost on the other. I simply can't see how this is a good situation to be in. Now simply a free for all & no one the wiser.

NOW: if the Gripen or MiG-35 or F-16IN got eliminated in step.6 which was the basis of the ASQRS and the project; how on earth can it matter if one can buy 2 Gripen for the price of 1 Rafale or 3.5 Mig-35s for one Rafale; even it matters not that 1.05 Rafales will come for 1 Typhoon since the final criteria was the L1 aircraft that matches the Tech Op. Specs.

The final criteria may not be in question but the final cost certainly is. (Btw, I made it clear that I questioned the very way in which the IAF went about the deal, so the parameters that you point out & of which I remain aware are not limiting factors in making my argument) My position is not that the Rafale or the EF did not merit being on the final shortlist ( as per IAF parameters) but that cost was always going to be an important factor in a country like India. Behaving like we can afford anything will simply cause the ax to fall elsewhere. An open budgeted specs sheet is suicidal, everything must finally come down to affordability versus capability. Otherwise we have what we have now, a reluctance to sign any deal & the IAF might well be flying the Bisons that you suggested

 

[sancho]

I simply don't see the logic of not being able to make an economically informed decision

Because you want a cheap figther whatsoever, but you simply have to accept that MoD and IAF wanted something else. And it's not about getting the technically best fighter, but about the best "offer" (fighter + benefits + costs according to a specific timeline).
Btw, now with the delays of delivery, Saab actually would be able to meet the licence production time lines, but still could only offer Gripen C/Ds till 2018 as stop gaps, that's what they did in Switzerland and in Brazil. Again, you might be able to live with that solution, IAF most likely not and by the fact that we already induct LCA MK1 with the same technical level, Gripen C/Ds should be a clear no go.

 

[Bang Galore]

Because you want a cheap figther whatsoever, but you simply have to accept that MoD and IAF wanted something else. And it's not about getting the technically best fighter, but about the best "offer" (fighter + benefits + costs according to a specific timeline).
Btw, now with the delays of delivery, Saab actually would be able to meet the licence production time lines, but still could only offer Gripen C/Ds till 2018 as stop gaps, that's what they did in Switzerland and in Brazil. Again, you might be able to live with that solution, IAF most likely not and by the fact that we already induct LCA MK1 with the same technical level, Gripen C/Ds should be a clear no go.

Nope. Not a "cheap" fighter but one that "might" have been able to marry affordability with capability. I say might because it is conceivable that there is no alternative to the Rafale but I would have liked alternates to be explored more thoroughly. I reject that canard that my arguments have been cost above everything else, it hasn't & such characterisation hardly helps to gain an understanding of an argument different from your own.

We are going around in circles, the same arguments repeated endlessly.

 

[sancho]

Nope. Not a "cheap" fighter but one that "might" have been able to marry affordability with capability.

That's what Rafale is afterall, it offers the capability IAF requires, with the lowest per unit and operational costs! Whenever you add capability to the consideration, it will get the prime factor.

 

[Bang Galore]

That's what Rafale is afterall, it offers the capability IAF requires, with the lowest per unit and operational costs! Whenever you add capability to the consideration, it will get the prime factor.

That it might well be but for now it is not as clear as you might wish it to be.(if you see my posts on the MMRCA from before, you would see my initial support for a twin contract between the SH & the Gripen to supporting the Rafale when the choice was made), I'm not anti-Rafale because I have an axe to grind but because I see costs of $18-20+ billion as very prohibitive for this single contract. The behaviour of the French while negotiating (after the horrendous -in my view, contract for the up-gradation of the M2k) have not helped matters in the least. Unlike you, I remain wary of the price of this massive contract & the price the French may continue to extract if we simply roll over & allow them too. You seem to dismiss cost worries as something irrelevant, that is not about to be my opinion.

 

[Capt.Popeye]

The final criteria may not be in question but the final cost certainly is. (Btw, I made it clear that I questioned the very way in which the IAF went about the deal, so the parameters that you point out & of which I remain aware are not limiting factors in making my argument) My position is not that the Rafale or the EF did not merit being on the final shortlist ( as per IAF parameters) but that cost was always going to be an important factor in a country like India. Behaving like we can afford anything will simply cause the ax to fall elsewhere. An open budgeted specs sheet is suicidal, everything must finally come down to affordability versus capability. Otherwise we have what we have now, a reluctance to sign any deal & the IAF might well be flying the Bisons that you suggested

, I do not look forward to disagreeing with you, but all the facts dictate that I must. And therefore seek to correct you.
For starters; the IAF did not go about the deal or the process, it was the MoD that controlled/managed it.

The IAF's brief was solely to draft the ASQR(s) and then conduct the Technical Evaluations on their basis and submit the report on that. In fact, the IAF just stated in their Evaluation Report which Aircraft complied/did not comply and to what extent respectively.
After that the L1 decision was taken by MoD NOT IAF.

The MoD was involved in overseeing the entire process; from sending the RFIs and RFPs right upto notifying the various contendors about the choice of L1. And then negotiating/re-negotiating all the Commercial aspects of the contract(s).

Cost issues were already factored in when the bids first arrived; but they cannot/could not be considered into the final figures because they were/and are subject to further negotiation.
Which the buyer usually hopes to negotiate down-wards and the seller hopes to keep constant or hold-out for the least discounts.
Then again; passage of time and changes in currency parity rates also come into the picture apart from changes in input/raw material costs. In this case these factors have; as they inevitably would have.
Let me tell you that in case of contracts for large Capital Assets there are Price-escalation clauses built in just as there are penalty clauses for deficient performance. And all of these are time-bound and time-linked, among other things. This contract is no exception.

So your "beef" with the IAF is simply unfounded. They had no role whatsoever in the cost-escalation; while their role ended with the Technical Evaluation.
Your arguments lack motive power and are bordering on fallacy; just as Bharat Karnad's did; which is why I was so dismissive of his piece.

BTW, are you an accountant by profession?

 

[Bang Galore]

, I do not look forward to disagreeing with you, but all the facts dictate that I must. And therefore seek to correct you.
For starters; the IAF did not go about the deal or the process, it was the MoD that controlled/managed it.

My mistake. There was supposed to be an IAF/MoD there but was overlooked. I still hold on to the rest of my points made. I'm no Bharat Karnad nor do I have(or seek) as wide an audience ( I seriously doubt anyone in any position will read what we say ) but to dismiss the costs (of the deal)that seem to be taking shape as something irrelevant suggests that whatever your qualifications, managing a budget in an economy that still has some way to go to recovery is not your area of concern. In the end, affordability has to be a key criteria and someone (in this case, me) have to be around to make that argument in the face of people simply believing that we simply don't need to bother about costs. You work with the economy you have, not one that you wish you should have. People complained about the Vikramaditya's costs (& rightly) regardless of the fact that we had no real alternative available. Why is it so hard to appreciate that not everyone has to work only from the perspective that you might prefer, there is something to say for playing the Devil's advocate.

The proof of the pudding is in the eating, the IAF is struggling to arrange resources for initial down payment of this deal. The IAF has been given about 20500 crores for capital expenses & the Rafale payment alone will be over 15000 crores.. The IAF has the Chinook & Apache deals that it wants signed. Chances of a Rafale deal being signed in this fiscal look dicey.

 

[Capt.Popeye]

My mistake. There was supposed to be an IAF/MoD there but was overlooked. I still hold on to the rest of my points made. I'm no Bharat Karnad nor do I have(or seek) as wide an audience ( I seriously doubt anyone in any position will read what we say ) but to dismiss the costs (of the deal)that seem to be taking shape as something irrelevant suggests that whatever your qualifications, managing a budget in an economy that still has some way to go to recovery is not your area of concern. In the end, affordability has to be a key criteria and someone (in this case, me) have to be around to make that argument in the face of people simply believing that we simply don't need to bother about costs. You work with the economy you have, not one that you wish you should have. People complained about the Vikramaditya's costs (& rightly) regardless of the fact that we had no real alternative available. Why is it so hard to appreciate that not everyone has to work only from the perspective that you might prefer, there is something to say for playing the Devil's advocate.

Of course there is nothing wrong with playing "Devil's Advocate", but that does not allow any of us to endeavor "to shift the goal-posts"..................

Bharat Karnad trotted out entirely specious and untenable arguments for the most part.

Now, if cost is the issue; then one can easily go in for a curtailed or truncated order, even the initial one at least; and then wait out.
But one can't just "throw the Baby out with the Bath-Water" to use that familiar adage.

 

[Bang Galore]

Of course there is nothing wrong with playing "Devil's Advocate", but that does not allow any of us to endeavor "to shift the goal-posts"..................

Bharat Karnad trotted out entirely specious and untenable arguments for the most part.

Now, if cost is the issue; then one can easily go in for a curtailed or truncated order, even the initial one at least; and then wait out.
But one can't just "throw the Baby out with the Bath-Water" to use that familiar adage.

The main non-specious & a tenable argument will be cost & affordability, that will not go away. Did you read up the part of the IAF/MoD struggling to make even that initial payment ? Proposing to reduce the size should then bring the question over whether another choice would have been better (cost per unit will increase). At what point (& at what size), does a deal fail its overall purpose?

All & any goal posts should be shift-able in such cases, being cussed about methodology won't help if the overall plan is in danger of falling apart. Another year will go by & maybe another before the economy allows a proper chance. Even if the Rafale down payment is made next year, it will pretty much wipe out the IAF's capital expenses budget for the most part, easy to dismiss costs till one is faced with actually screwed up finances. we are in an economic mess & until we do better on that score, capital costs will not have an easy ride.

 

[Capt.Popeye]

The main non-specious & a tenable argument will be cost & affordability, that will not go away. Did you read up the part of the IAF/MoD struggling to make even that initial payment ? Proposing to reduce the size should then bring the question over whether another choice would have been better (cost per unit will increase). At what point (& at what size), does a deal fail its overall purpose?

All & any goal posts should be shift-able in such cases, being cussed about methodology won't help if the overall plan is in danger of falling apart. Another year will go by & maybe another before the economy allows a proper chance. Even if the Rafale down payment is made next year, it will pretty much wipe out the IAF's capital expenses budget for the most part, easy to dismiss costs till one is faced with actually screwed up finances. we are in an economic mess & until we do better on that score, capital costs will not have an easy ride.

Then its very simple............make and buy more Bisons and/or Sukhois. Or auction off Anthony's "teflon-coated dhotis" to raise the funds.
If MoD got itself into this jam then MoD has to find a way out of it. But some of the things that you say above again do not hold up.
If the funds for the initial payment were unavailable, that means that the allocation for the fiscal have gotten used up. Which will need the the MoF and MoD to rearrange allocations going forward or throw out meaningless subsidies.
Or again; confiscate Anthony's Dhotis and even put a lien on Chidambaram's Dhotis (though they are not teflon-coated).

 

[Bang Galore]

If MoD got itself into this jam then MoD has to find a way out of it. But some of the things that you say above again do not hold up.
If the funds for the initial payment were unavailable, that means that the allocation for the fiscal have gotten used up. Which will need the the MoF and MoD to rearrange allocations going forward or throw out meaningless subsidies.

Good luck with the subsidy throwing or the capture of Antony & Chidambaram's dhotis. The entire amount budgeted for the IAF's capital expenses for the year is 20500 crores. Period. The Rafale down payment will be around 15000 crores. Dhotis are the way to go. look at the big picture. Even if the government rustles up money elsewhere, this is a big expense that is coming at a cost of something equally important. Surely that alone warrants a closer look at how we are spending the money.

 

[KalaGhoda]

Gujrati at helm, good for the deal.

At the same time, the process of infrastructure improvement plans of IAF should take into account the arrival of Rafale..it will take some time, but it shouldn't be unexpected.