Smiles and frowns over defense deals

May 16, 2012 at 3:01 PM
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MADRID, May 16 (UPI) -- There are smiles and frowns this week over contracts gained and contracts lost by Europe's defense equipment manufacturers.

On the positive side, Italy's Iveco touted the use of its Light Multi-role Vehicles in a military parade through Moscow's Red Square as a result of a joint venture agreement reached last year with Russia's Oboronservice, which is controlled by Russia's Ministry of Defense.

Airbus Military of Spain, however, was less than happy. Australian Defense officials this week announced the government had decided to acquire 10 C-27J Spartan airlifters from Alenia Aeronautica of Italy and not Airbus Military's C295 military transport aircraft.

"There was no tender process and certainly no competition," Airbus Military said in a statement.

"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."

In the case of Iveco, a Fiat company, the use of its vehicles in the parade marking the victory over Nazi Germany in World War II was a symbolic milestone. Never before, it touted, had foreign-made vehicles been used in the annual parade.

"This year's parade was a historical event, since it was the first time ever that foreign-made armored vehicles have participated in the celebrations of the Russian nation's victory over Nazism," it said.

"The participation of the Iveco LMV (light multi-role vehicle) in Russia's most famous military parade follows the agreement that Iveco Defense Vehicles signed with Oboronservice, a company controlled by the Russian Defense Ministry, in June 2011."

The Iveco LMV is a four-wheel-drive vehicle with modular armor. It weighs 6.5 tons and has a maximum speed of 81 miles per hour. Its crew capacity ranges from 1+3 to 1+6 depending on the variant.

More than 3,000 of the multi-role vehicles have been sold to more than 10 countries, including Austria, Belgium, Croatia, Norway, Spain and Britain.

Iveco's 2011 agreement with Oboronservice established an industrial joint venture to localize production of the vehicle, with adjustments for the Russian market.

Production of the first 100 LMVs has been completed. The companies plan to boost production to as many as 500 vehicles a year.

It appears to be a win-win situation for the two concerns. Australia's decision on a military transport, however, has cost Airbus Military a potential sale worth more than $1.4 billion.

Defense Minister Stephen Smith and Minister for Defense Materiel Jason Clare said the 10 C-27J to be purchased would enhance airlift capability, but Airbus retorted it would be at greater monetary cost.

"In a press conference immediately following the announcement, the minister (Smith) clearly stated that there had been a competition between the C27J and the Airbus Military C295 airlifter." Airbus Military said. "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.

"We are even more disappointed that this decision appears not to have been made out of rigorous evaluation of tender-quality information … which is normally required before such large sums of taxpayer dollars are spent.

"The Department of Defense seems to have rejected its own tried, tested and proven process of evaluating competing platforms."

It said its aircraft are cheaper to buy and maintain. The purchase price for 10 Airbus Military C-295 aircraft was offered at a bit less than $400 million.

"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 of taxpayer's money was not sufficient justification to hold a competition to determine which aircraft option represented the best overall value for money."

The Alenia aircraft are being procured through the U.S. Foreign Military Sale program since the aircraft use the engines and systems used by Lockheed Martin's C-130J.

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