Admissions & obfuscations in IAF clarification on BS reports

Two news reports in Business Standard, on Monday and Tuesday, have elicited a "clarification" from the Indian Air Force (IAF).

The two articles (July 29, Indian Air Force at war with Hindustan Aeronautics; wants to import, not build, a trainer; and July 30, IAF diluted at least 12 benchmarks for trainer aircraft) reported on a letter from Indian Air Force (IAF) head, Air Chief Marshal N A K Browne, to Defence Minister A K Antony, requesting that a contract for 106 trainer aircraft be awarded to Swiss company, Pilatus. Hindustan Aeronautics Ltd (HAL),currently developing the trainer, should be stripped of the contract, says Browne.

The news reports are based on documents available with Business Standard. They report Browne's unprecedented assault on HAL, which he has accused of misrepresenting the cost of their trainer - called the Hindustan Turbo Trainer-40 (HTT-40) - and of being incapable of delivering it on time to the IAF. Browne has written to Antony that the HTT-40 would cost Rs 43.59 crore apiece at 2011 prices and, after factoring in forex escalation and inflation, would cost Rs 59.31 crore in 2018 and Rs 64.77 crore in 2020. The IAF chief contrasts this with the cost of the Pilatus PC-7 Mark II, which he claims costs just Rs 30 crore apiece.

 

That figure of Rs 30 crore is incorrect. The cost of the PC-7 Mark II is derived from the IAF's contract for 75 PC-7 Mark II trainers, signed on May 24, 2012, for Swiss Franc 557 million (Rs 3,606 crore). The contract specifies that each trainer would cost SwFr 6.09 million. Since payment is linked to delivery, the cost of each PC-7 Mark II is touching Rs 40 crore today.

The news reports also reveal that at least 12 changes were made to performance benchmarks for the basic trainer the month after it was decided to buy 75 out of the IAF's overall requirement of 181 trainers from the global market, while HAL developed the remaining 106. Surprisingly, the performance benchmarks imposed on HAL (in a March 2009 document called the Preliminary Staff Qualitative Requirements or PSQR) were exceptionally stringent. These were subsequently diluted, the month after it was decided to buy abroad, and issued in October 2009 in a document called the Air Staff Qualitative Requirements (ASQR).

In a happy coincidence, the diluted ASQR allowed the PC-7 Mark II to qualify (it did not meet the PSQR requirement which had been imposed on HAL). Without that dilution, Pilatus would have had to field the PC-21, a costlier trainer and unlikely to have been the lowest bidder. Making the PC-7 Mark II technically compliant by lowering the specifications brought a low-cost trainer into contention. Meanwhile the other trainers that qualified - the Korean Aerospace KT-1 and the American Hawker-Beechcraft T-6C Texan-II - were qualitatively better (meeting the PSQR requirements) but also more expensive. The PC-7 Mark II won the contract as the cheapest trainer that met the (lowered) specifications.

Comments were sought from the IAF before each news report but it chose to remain silent. Today, the IAF has responded with a lengthy "clarification". Its first response is that the stringent benchmarks in the PSQR imposed on HAL in March 2009 were only "Desirable" parameters for the trainer, not "Essential" parameters. In lengthy citations of the Defence Procurement Policy, the IAF tries to suggest there was no dilution of QRs, only a legitimate paring of the "Desirable" parameters.

This is not a valid argument. The PSQR, of which Business Standard has a copy, does not differentiate between "Essential" and "Desirable" parameters. All parameters are listed together, with no differentiation. HAL officials, speaking anonymously, confirm that until the parameters were diluted in the ASQR issued in October 2009, the HTT-40 was being built to meet all the parameters in the PSQR.

The IAF also suggests no rules were broken, since the PSQR was revised downwards along with the ASQR, after the benchmarks were lowered in October 2009. "The amended 'PSQR' after ratification by (the MoD) on Dec 1, 2009, were issued to HAL…Therefore, as on date, PSQR and ASQR are similar."

This neatly sidesteps the essential point of the news report, that performance benchmarks were irregularly lowered when it came to a global buy. The PSQR was lowered, as was the ASQR. It matters little that they are similar today. In that respect, the IAF confirms a key point made by Business Standard.

The IAF seeks to validate the selection of the PC-7 Mark II by stating, "It needs to be noted that the (tender) for BTA received maximum responses, generating the largest competition in aircraft procurement in recent history, wherein M/s Pilatus was one of the three vendors who met all ASQR and… emerged as the L1 (lowest bid) vendor on the basis of their commercial offer."

This evades the point that lowered benchmarks appear to have allowed the PC-7 Mark II to meet the specifications, introducing a low-cost aircraft into the contest. The deal was held up for almost a year after the Korean defence minister wrote personally to Antony, requesting him to intercede. An internal MoD investigation eventually gave a go-ahead.

The IAF also suggests the compromise made in crucial safety specifications, by removing the need for a 'zero-zero' ejection seat (which allows the pilot to bail out even while the aircraft is stationary on the ground) was done because "retaining the ASQR of 0-0 ejection seat would have narrowed the competition to only two vendors". Lowering the specifications "ensured that more than seven vendors remained in the competition."

On the one hand, this argument accepts that specifications in even "Essential" parameters were lowered. However, the Defence Procurement Procedure (DPP) nowhere states that important safety compromises can be made to generate competition. And, the fact is that the PC-7 Mark II does not have a 'zero-zero' ejection seat.

The IAF also tries to justify its dilution of multiple criteria reported by Business Standard by responding that "both the ASQR and current PSQR" do not stipulate requirements for parameters like cockpit pressurisation, external vision criteria, in-flight simulation (for simulating failures), takeoff within 1,000 metres and maximum speed of 450 kmph.

That the ASQR and current PSQR have identical benchmarks do not exonerate the improper dilution of benchmarks in the "current PSQR" after taking a decision to buy the basic trainer from the global market.

In other respects, as evident from the Pilatus PC-7 Mark II webpage on the internet, the IAF "clarification" contains outright falsehoods. It claims "the maximum speed of the PC-7 Mk Il is 555 kmph and not 448 kmph as falsely stated in the news article". In fact, as is well known, the maximum speed of an aircraft is calculated in level flight at sea level and the Pilatus website (www.pilatus-aircraft.com) states this is 448 kmph.

The IAF "clarification" admits the IAF chief gave out false figures in his letter to the RM, since the current exchange rate was not factored in. The IAF now says the PC-7 Mark II would cost Rs 38.3 crore. And, it now says the HTT-40 would be 25 per cent more expensive than the PC-7 Mark II.

Browne's letter to Antony had stated, "As per the contract, the unit price of PC-7 Mk II is Rs 30 crore for the mean delivery year of 2014. The aircraft would be supplied at the same cost up to 2017 under the 'Option Clause'. Hence, the HTT-40 will be more expensive to the IAF when compared with the PC-7 Mk II by over 89 per cent from 2018 onwards."

"It is unprecedented for a service chief to present incorrect figures to the Raksha Mantri," says a senior MoD official anonymously. "And, what makes this doubly damning is that the air chief is using incorrect figures to make a case for a foreign vendor."