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Leaving out the cost of the airframes; support
and maintenance services will be provided by
L-3; Alenia; and the US FMS system itself. One of
the advantages of buying things via FMS is that
we take something “as is”, but in this case the
RAAF plans to carry out its own program of test
In all of this no one has a problem with Alenia
and the C27J – an excellent aircraft – or with L-3,
an extremely competent and reputable supplier.
The concern expressed by a number of observers
is that Defence has made the selection of the
C27J ahead of the Airbus Military C295 without
the benefit of a thorough tender evaluation
process. There has been a lot of ducking and
weaving on this point, with everyone from
the Defence Minister down insisting there has
been a competition. In Senate Estimates, DMO
Deputy CEO and General Manager Commercial,
Harry Dunstall confirmed that there had been
no tender process.
What has taken place is an evaluation of sorts
based on various sources of information. The
Department maintains that the FMS price was
so competitive that there was no prospect of
anyone else being able to match it – but it
seems to have made this rapid decision based
on imprecise supplier information. This is in
spite of international competitions showing that
the C295 is less expensive to buy and 50% less
costly than the C27J to support and operate. If
a supplier is asked simply to provide a price of
an object it always tends to be on the high side
because of a lack of definition about what exactly
is required. This is one of the points made in an
excellent paper by the Australian Strategic Policy
Institute’s Andrew Davies – namely that the
only way of obtaining reliable data is through a
competitive tendering process.
Additionally, in analysing last year’s last
decision to purchase the MH-60R helicopter
via the FMS system, DMO itself concluded that
by running a competition against the NH90
the eventual price was reduced by 25%. In
other words, it seems that the FMS price can be
reduced through competitive pressure.
To summarise the various figures: fly away
cost of 10 basic C27Js about $300 million; L-3
contract value (to them) estimate $600 million;
FMS notified amount to Congress $950 million;
Ministerial announcement May 10 $1.4 billion;
Senate Estimates 29 May precise number $1.404
billion; total following June 3 announcement
$1.467 billion. This, the Australian taxpayer is
assured, is the best possible deal that could be
The RAAF have made no secret of the fact
that they have a longstanding desire to acquire
the C-27J on performance grounds and indeed
it does have the edge over the rival C295 in a
number of areas – though by no means all of
them. This was reinforced in Senate Estimates,
with RAAF producing a list of things that the
C-27J could do but the C295 could not – such
as transporting the Army’s G-Wagons. It might
have been worth exploring the issue of whether
G-Wagon transportability is essential, or whether
other ground mobility assets such as quads or
trail bikes could have served as an adequate
alternative – after all, the Caribou aircraft being
replaced were too small to carry vehicles.
The Senators left the matter at that, but
with respect this takes a superficial view of the
situation. While the C-27J can carry a G-Wagon
in most of its variants so can other assets, such as
C-130s, C-17s and as a sling load by a Chinook.
So the real issue that needed to be explored – and
was not – was what is the most appropriate mix
of transport assets to meet the needs of the ADF.
And just as importantly in times of heavy budget
cutbacks – what represents best value for money
in achieving a desired outcome. APDR
IMAGINARY CONVERSATION FOR AN FMS PURCHASE
Australian official dials US number of a Colonel in Foreign Military Sales:
Hello Colonel; I’m calling from Australia......... Australia..... You’ve got it – the big flat one
with the koalas, not the little one with the mountains and cuckoo clocks ...... Really; when
was your visit?....... I’m glad you enjoyed it so much. I’ll be sure to give your regards to
Kings Cross. Anyway, I’m calling because we want to buy ten of your aircraft...... Ten......
Yep, the number between nine and eleven.....It depends on your view, I suppose. It’s a big
number for us.......Modifications? Only one; we need a red kangaroo painted on them.......
Well, you might think that sounds easy, but it’s not....... Because the paint needs to be a
particular shade of red and needs to be bull dust resistant...... I can assure you no one has
it in stock.....Trust me on this one, Colonel, we’ve done this hundreds of times and no one
ever has that particular shade of red paint in stock......Expensive? You bet it’s expensive.
Incredibly expensive – but we don’t mind because we’ll pay using a currency called
OPM...... Other People’s Money....... Yes, that’s funny.....Really? The funniest thing you
have ever heard? ......Sure, put me on hold so you can tell everyone.
2 minutes elapse to the sound of “Ring of Fire” played on a synthesizer.
Yes, Colonel, I know they all think it’s hilarious – I can hear them laughing in the
background......OK; we’ll send you the specifications for the paint and you just roll that cost
into the final price..... So, what happens now?....... Wait; I’ll read this back to you to make
sure I’ve got it all. Transfer funds; one year before first delivery send crew and maintainers
to the US for training; check local infrastructure and make sure aircraft can fit in existing
buildings, build new things if required...... That’s it?......Fantastic!..... Thanks Colonel, a
pleasure doing business with you.
APDR June 2012.indd 25
7/06/12 5:51 PM
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