AIR 87 bids go in

The four shortlisted contenders for Army's long-delayed Armed Reconnaissance Helicopter Project, Air 87, submitted their tenders for the $1.4 billion contract on April 30. But the program may face one final, and possibly massive, hurdle at the end of this year.

The Defence Materiel Organisation (DMO), aims to evaluate the tenders and sign the prime contract with the winning bidder by the end of this year, according to project director Colonel Mark Patch. The Army is seeking up to 24 helicopters, with the first aircraft due to enter service from 2003/4.

Boeing is offering the AH-64D Apache, in partnership with BAE Systems Australia; Agusta is teamed with Tenix Defence Systems to offer the A129 Scorpion; Bell Helicopter Textron is teamed with Raytheon Australia, Helitech Pty Ltd, and Rockwell Australia Ltd to offer the ARH-1Z; and Eurocopter is teamed with ADI Ltd, Celsius Hawker Pacific Pty Ltd and Brown & Root Services Asia-Pacific to offer a variant of the Franco-German Tiger.

But Australia faces a general election in late-November or early-December and industry executives and analysts fear that administrative paralysis caused by the election and a possible change in government may result in further delays.

And some industry sources have expressed doubt that the DMO will be able to evaluate the tenders properly, down-select to just two bidders, and then select a winner in such a short timeframe. The Request for Tender (RFT) for Project Air 87 was far more complicated than a project of this magnitude required, complained one source. The Army is seeking a proven design which is in service with a parent defense force and with few specific-to-Australia modifications, but the RFT ran to 3,400 pages and listed over 1,300 specific requirements, the source said.

However, DMO sources have pointed out that the project office is using computer-based tender evaluation tools to help hasten the process without cutting any corners.

But observers have warned that the general election could result in a delay to the contract signature. If Prime Minister John Howard calls the election for November 24 or December 1, then his government will be in caretaker mode and so unable to sign major contracts during the run-up.

If Howard's Coalition government is replaced by a new ALP administration, the incoming Minister is unlikely to approve a contract of this magnitude without at least familiarising himself with it first, so some delay is almost inevitable. But a senior ALP source told ADM that an incoming Labor defense minister would not seek to delay the Air 87 contract unnecessarily as the project had already been subjected to repeated reviews before receiving funding approval two years ago, as well as further significant delays in 1999 and 2000 while Howard's government prepared last year's Defence White Paper.

Despite being delayed by nearly two years, the RFT still calls for deliveries from about 2003/4, with the Army planning to field its first fully trained and operational armed reconnaissance helicopter squadron by the end of 2007.

The DMO's COL Mark Patch wouldn't be held to a schedule for down-selection to the last two bidders; that would depend on the quality of the tenders and how competitive each one is, he told ADM. But he said the project office aims to conduct parallel contract negotiations with the two shortlisted contenders in the second half of this year in order to identify the bid which offers the best value for money, and to select a prime contractor and sign the prime contract before the end of this year.

The DMO has not disclosed its budget for this project and Patch declined to comment on speculation the budget had grown from $1.2 to $1.4 billion to accommodate recent US-Australian dollar exchange rate fluctuations.

"We are tasked with finding the best value for money offer, and we will have the wherewithal to pay for that," was all he would say.

A senior Boeing source told ADM last month that the company recognises affordability is a key issue for the Australian Army. Boeing's AH-64D bid does not include the Lockheed Martin Longbow targeting radar in the baseline configuration, but the radar and other technology enhancements are available as add-on packages if the Army's budget allows and if future growth demands.

Otherwise, Australia's baseline configuration will match that of the US Army's current Multi-Year Procurement II package. The AH-64D is the lowest-risk contender because it is the only contender able to meet the all of Australian Army's operational requirements without significant modification or development, the source said.

Italy's Agusta has taken what Canberra-based project manager Marc Coughlan termed a value for money approach based on a "rationalised capability assessment of what an Armed reconnaissance Helicopter requires to meet the Army's needs."

Agusta is offering what it believes is the cheapest helicopter both to buy and operate. Based on the upgraded A 129 Scorpion which is currently in production for the Italian Army, the aircraft features new engines and avionics, and is "significantly" cheaper than its rivals, he said - to the point where funds previously allocated to Air 87 could be released for other purposes.

Bell Helicopter Textron's AH-1Z for the US Marine Corps was rolled out earlier this year; this is the basis of the company's ARH-1Z bid for Australia. Bell has also offered a very tempting AII package revolving around development and manufacture of the Eagle Eye Tiltrotor UAV in Australia to satisfy the global market.

Eurocopter's "Aussie Tiger" bid is based on the French Army's HAP Tiger configuration; The French and German armies have a total joint requirement for 427 aircraft, with the first batch of 160 already in production.

By Gregor Ferguson, Mesa and Adelaide