An Italian Panther AS565 MBe | Photo: Lorette Fabre/Airbus
StratPost spoke to Ashish Saraf, Vice President for Industry Development, Strategic Partnerships & Offsets at Airbus India at DefExpo 2018, last week, where he outlined their bids for the Indian Navy’s Naval Utility Helicopter (NUH) program and explained how this process was different from earlier acquisition programs.
The Indian Navy had issued a Request For Information (RFI) for the NUH program last August, under the requirements for strategic partnerships outlined in Chapter 07 of the Defence Procurement Procedure (DPP).
Ashish Saraf, Vice President, Industry Development, Strategic Partnerships & Offsets, Airbus India | Photo: Airbus Group
Two helicopters for the same program
Airbus India’s vice president, Ashish Saraf told StratPost the company has offered two different models to the navy for consideration. “We have offered two helicopters for the NUH program. One is the Panther AS565 and the other is the H135M. Both these helicopters — we believe — meet the specifications that the navy has asked for and they are still in the process of preparing the SQRs (Staff Qualitative Requirements). But as far as the RFI is concerned we believe that both of them meet the requirements and for both of them, we have proposed setting up a line in India and making the Panther or the H135M right out of India in partnership with Mahindra,” he said.
But Airbus would quite like the navy to pick the Panther.
The Panther is really the one that we would like the navy to choose.
“And the reason behind this is that it will not only meet the SQRs, but we believe it’s a much more advanced aircraft in terms of what has been requested for the Naval Utility Helicopter program. Similarly, the H135M meets the requirements, but it gets in at a level which just about meets the requirements — it will not be an advanced helicopter for NUH. And the Panther is tested by the navies of 18 countries including the U.S. Coast Guard and we think that it is certainly an advanced aircraft because such programs — they’re not programs for the short term — these are programs we’re talking about for ten fifteen twenty years and that is where — if we are to be forward-looking, Panthers would be the right aircraft,” explained Saraf.
A Royal Jordanian Air Force H135M over the Dead Sea | Photo: Obrusnik Wolfgang/Airbus
Only one bid for the RFP
But Airbus will have to decide which of the two aircraft to bid once the eventual Request For Proposal (RFP) is issued.
“We will have discussions with the navy and we will also look at what the competition is coming up with or being proposed — and then based on that, we’ll take a call,” said Saraf.
He also said they hope the requirements of the RFP are more exacting than indicated in the RFI. “We sincerely hope that they are at levels higher than the current ones, wherein more advanced parameters are being put out in terms of payload, in terms of harpoon, in terms of torpedo-carrying capability, range, top-speed and so on, wherein aircraft like the Panther can actually be present,” he said.
Explaining the split between flyaway and domestic manufacture, Saraf said, “The good part about this is that the first ten percent is an off the shelf buy. So out of 111, we are looking at about 11 aircraft to be delivered off the shelf. That will get things started in terms of meeting the operational requirements of the navy and also getting their personnel trained and skilled to operate the aircraft. And this, I think, can kick-start the process early on as the factories are getting built and the supply is being enabled to feed the final assembly lines in India.”
Strategic Partnerships and Chapter 07 requirements
We are exploring uncharted territories — there is no question about it.
Saraf admitted the process to implement strategic partnerships under Chapter 07 is likely to throw up challenges. “We are working very closely with the government and the customer, which is the navy to look at the addressing these challenges. I mean, we are exploring uncharted territories — there is no question about it. But in terms of planning in terms of taking the next steps, I guess, the more discussions and concrete steps only will let us learn and learn as we improve the steps. There is no silver bullet to it,” he said.
But the RFI process isn’t simple, either. Saraf said they’ve had a lot of discussions with the navy and the defence ministry on a range of issues with respect to the RFI, which will inform the setting of the SQRs in the RFP.
“We’ve had various sorts of consultations including, not only consultations on the product parameters — because that’s the most important part — but also in terms of how you look at technology transfer, how you look at pricing, not only in terms of the platform-pricing but also in terms of the life cycle cost, or the TCO — Total Cost of Ownership over an extended period of time. How do you evaluate the Enhanced Performance Parameters (EPP) in terms of such a large program?” he asked.
Elements of the RFI requirements
Saraf then launched into a veritable primer on each aspect of the process parameters.
So four parameters:
The product or the platform price,
Performance Based Logistics (PBL),
Transfer of Technology (ToT),
and
Enhanced Performance Parameters (EPP).
So the discussions are centered around how do we combine these factors to come up with a proposal that can create or justify all these parameters and create a winning formula.
Enhanced Performance Parameters
Explaining the concept of Enhanced Performance Parameters, he said this is a new factor in Indian acquisition that is expected to shift the process away from a mere L1 determination.
These are nice-to-haves, if you will. We strongly believe that these should not be utilised or over-leveraged to add more equipment.
“These should be purely performance parameters that would adhere to the product definition as such,” said Saraf, clarifying further, “What I’m trying to say is that if the SQR says one torpedo-carrying capability — the EPP should not say two torpedo-carrying capability, because then you are essentially adding a piece of equipment. If it says one torpedo-carrying capability, the EPP could reasonably mean that if the SQR says the torpedo should be 300 kilograms, then the EPP could say that it could be a 500-kilogram torpedo.”
“That is a real EPP. Or the top speed — if the SQR says 150 nautical miles, the EPP could reasonably say 180 nautical miles, for example. That becomes an enhancement on the product definition,” he emphasized.
Saraf went on to explain how Enhanced Performance Parameters would factor in the process.
“The way the EPPs are designed or are expected to be designed is that for every EPP the end customer will give due weightage. So as it stands currently, EPPs carry a weightage of ten percent overall. You cannot assign a weightage of more than 3 percent to one EPP. So you could do 3,3,3,1 (percent) or you could do 0.5 percent for twenty EPPs — it should not exceed ten percent. And each EPP will be weighed based on its weightage and that much credit will be begin to the OEM in terms of lowering the platform price,” he said, explaining further, “So for example — if we meet all the EPPs on the platform, we will be given a ten percent advantage over the competition — assuming they don’t meet any of them.”
Saraf said they were happy about this new set of data points.
This is the first time it has been introduced wherein we are saying that we will value the technology of the product and not just purely go based on L1.
“That’s why sometimes it’s also called the L1-T1 approach, where it’s a combination of an L1 and a T1 product. We are very happy that a model like this has been considered,” he said.
If we have to add three percent to our cost to get only that one percent credit, then we would rather forego that EPP than get credit for it.
But Saraf was also cautious about how EPP-weightage could play out. “There is fine-tuning required because there have been cases where the weightage of the EPP is sometimes lower than the cost of adding that EPP. If an EPP — let’s say — instead of a 300-kilogram torpedo, we consider a 500-kilogram torpedo — if it is three percent higher for an OEM, cost-wise — the EPP weightage given to them — it’s only one percent. So if we have to add three percent to our cost to get only that one percent credit, then we would rather forego that EPP than get credit for it,” he explained.
“So the customer certainly needs to be cognizant of the fact that what they add really provides them a technology and a cost advantage and that’s when consultations really help,” he said.
The EPP model is limited in scope, explained Saraf. Properly so, in his opinion.
“So currently — and we hope it stays this way — the EPP model applies only to the platform price. It will not be extended to the ToT or the Performance Based Logistics or the Total Cost of Ownership because the way the spares and maintenance costs are calculated is completely different and the model is different across different suppliers, so this is purely focused on weighing the product definition,” he said.
Naval Multi Role Helicopter (NMRH) program
Royal Thai Air Force H225M helicopters | Photo: Anthony Pecchi/Airbus
Airbus is also contending for the Indian Navy’s requirement for 123 Naval Multi Role Helicopters (NMRH), a program that is expected further down the road.
The RFI for the NMRH was also issued in August last year.
“We have proposed the H225M for the NMRH. It’s the same — ten percent of the shelf, 90 percent made in India using a strategic partner,” he said.
Saraf would like to see the government allow the same Indian strategic partner under the DPP’s Chapter 07 for both, the NUH and NMRH programs.
“We hope that the government combines these and allows a strategic partnership to be extended beyond one program. Because that is where economies of scale can really be achieved. Because if a strategic partner has already gone down the path of establishing helicopter manufacturing facilities in India, it will certainly be significantly better for the nation to combine them because the cost advantage will be tremendous. But at this point we do not have any indication if that will be allowed or not, so we also not be able to comment on whether we will be able to maintain the same partner or not,” he explained.
Nice Article. Very informative.