The Weekly Wire: Week of 8/10/15

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Australia flag

Australia

At a press conference on Tuesday, August 4, Australian Prime Minister Tony Abbott announced updates and an accelerated schedule for two major shipbuilding programs: Offshore Patrol Vessels (Corvettes), and future Frigates. Abbot announced that the Offshore Patrol Vessels (OPVs) would begin construction in 2018, moving up the original schedule for those program by several years. The competitive evaluation process for those ships will begin in October. The government also moved up the schedule for the future Frigate program by almost 5 years, and announced plans to start construction in 2020.The Australian government touted the benefits of these shipbuilding programs, estimating that they will provide for US$69 billion (AUS$89 billion) of defense spending, much of which will be reinvested into Australia’s domestic industrial base. Officials also estimated that the programs will employ about 2,500 Australians by 2020. Furthermore, these programs create a schedule of construction that will support a continuous shipbuilding industry in Australia through 2040. Defence Minister Kevin Andrews summarized the program updates succinctly by saying “It means that over the next 25 or so years, we’ll be effectively rebuilding the naval fleet in Australia.”

These announcements come several months ahead of a possible government decision on the design of the future Submarine. Recently, Australia’s domestic industry has protested the government’s apparent inclination to choose a foreign manufacturer for the submarine-build program. It’s possible that the government hopes to provide a compromise with this announcement, promising at least $30 billion of government spending for domestic industry before announcing a decision to award the submarine build program to a foreign manufacturer. The Future Submarine program is estimated to be worth about $35 billion.

India flag

India

On July 30 2015, India’s defense minister Manohar Parrikar formally announced the termination of the Medium Multi-Role Combat Aircraft (MMRCA) tender. Once touted as “the mother of all defense deals”, the competition followed a tortuous path to its ultimate demise. An initial tender for the 126 medium-range air-superiority fighters was floated on August 28, 2007 but required another five years for a winner, when Dassault Aviation SA was selected as the L-1 bidder on January 31, 2012. Negotiations on a final contract agreement dragged on for another three years and stalled – mostly following disagreements over the total cost of the contract (which reportedly doubled since Dassault’s selection) as well as Dassault’s unwillingness to assume responsibility for the 108 fighters to be license-built by local partner Hindustan Aeronautics Ltd (HAL).

The failed procurement leaves India with a precarious shortfall of fighter aircraft that will only increase over the next decade – a significant number of its long-serving Mig-21, MiG-25, and MiG-27 fighter aircraft will be retired en masse without any replacement plan on the horizon. Additional procurements of the SU-30MKI (of which 272 have already been purchased from Russia since 2002) becomes more likely, despite problems with maintenance and serviceability. The possibility that the MMRCA competition will be globally re-tendered to the five losing bidders from 2007 also exists – albeit with greater offset requirements under the “Make in India” policy. Effectively, the cancellation of the MMRCA award to Dassault Aviation SA re-opens the door for the Eurofighter Typhoon (the original L-2 bidder), F/A-18 Hornet (Boeing Co.), JAS-39 Gripen (Saab group), F-16 Falcon (Lockheed Martin Corp.), and MiG-35 (RSK MiG). In the meantime, questions over India’s ability to retain regional aerial superiority or parity with more distant neighbors will continue to grow – as will its ability to conduct business with Western defense suppliers in an open and competitive environment.

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