MMRCA vendors to resubmit offset plans by next week

Less than a month before the expiry of the commercial bids for the Indian Air Force (IAF) order for 126 Medium Multi Role Combat Aircraft (MMRCA), the Ministry of Defense has asked the six vendors to resubmit their proposals for technical offsets. Earlier this week, the ministry sent letters to the MMRCA-6, asking them to send in their revised bids within ten days.

The terms of the estimated USD 10 billion-tender mandate the winning vendor to plow back 50 per cent of the value of the order into India. The vendors had submitted their original offset proposals in July 2008, but it was only last year, after the IAF submitted its report on the flight evaluation of the six aircraft, that the ministry began work on the offset evaluation in earnest. It found the offset proposals submitted by all six vendors to be unsatisfactory and after repeated rescheduling of deadlines for the submission of revised offset proposals, has finally asked the vendors to send in their plans by the middle of next week.

The ministry had earlier initiated moves to amend the Defense Procurement Procedure (DPP) to be able to invite and consider offset proposals from only vendors that had first been declared technically qualified and was also planning to seek approval from the Law Ministry to apply this amendment with retrospective effect, specifically with an eye on the MMRCA tender process.

While the fate of this proposed work-around is unclear, the current urgency seems to stem from the looming deadline of April 28, when the commercial bids submitted by the vendors are due to expire. The IAF has also been putting pressure on the ministry to bring the tender to its logical conclusion. Also noteworthy is the readiness of the ministry to take on the challenge of completing the formidable task of evaluation and validation of the offset proposals in the two weeks after the deadline for resubmission and before the expiry of the commercials bids, something which it has not accomplished in almost three years.

And though the likely response of the ministry in the event of the inability of one or more vendors to submit their revised proposals by next week is open to question, chances are that this would lead the ministry to request the vendors for an extension of the validity of their commercial bids.

The MMRCA-6 were asked to either extend the validity of their bids or resubmit revised bids, after they expired last year. While the vendors were given around six-weeks’ notice in that instance, this time around there has been no word so far, even though the remaining shelf-life of the commercial bids has dwindled to only three-weeks now.

Also, indications are that if these three weeks do expire without the seals on the commercial bids being broken, unlike last year, vendors may be asked to merely extend the validity of their existing bids, without the option of revising them. The ministry is likely to mandate this if it considers the prospect of any last-minute undercutting of prices by the MMRCA-6 to be undesirable.

While the offset proposals do not have a direct bearing on the determination of either the shortlist or the L1 vendor (Lowest bidding technically qualified), such proposals that are validated by the ministry as compliant are a necessary condition for the completion of the tender process by each vendor and, in effect, for being considered for the shortlist, assuming technical compliance.

The six vendors are the Russian MiG-35, the French Dassault’s Rafale, the European Eurofighter Typhoon, the Swedish SAAB’s Gripen, Boeing’s F/A-18 Super Hornet and Lockheed Martin’s F-16.