Italy & Israel: A Billion-Dollar Offer They Didn’t Refuse

The Israeli Air Force has known since December 2008 that its fleet of A-4 Skyhawk jet trainers and light attack aircraft would leave service. It took until July 2012 to sign a contract for the Skyhawk’s successor, despite justifiable complaints from South Korea that the process lacked full professional formality. The first M-346 Master trainers should begin arriving in Israel around mid-2014, where they will be operated by the IAI/Elbit “TOR” joint venture as a public-private partnership service to the IAF.

Italy’s M-346 eventually beat KAI’s supersonic T-50, thanks to a combination of air force evaluations, geo-political considerations, and countervailing industrial offers. For most countries, “industrial offsets” mean sub-contracting work in their country, sometimes even in sectors of their economy outside of the defense industry. Israel’s weapons industry is far more developed, however, and so their advanced trainer competition saw “industrial offsets” as the purchase of full-fledged Israeli weapons systems. South Korea was already a customer for Israeli radars, UAVs, and missiles, and was seen as the favorite thanks to their relationships and their jet. Italy was a much smaller customer, but relations between Silvio Berlusconi and the Jewish state had been good for a long time. By October 2011, reports surfaced that Italy had made Israel a very impressive offer – one that would make Italy a major export customer for strategic systems, even as it equalized purchases on both sides. In the end, it was an offer the Israelis couldn’t, and didn’t, refuse.

The deal’s components are as follows:

Ascent’s Long-Term UKMFTS Contract for Military Flight Training

Hawk LIFT

Back in October 2006, an $840 million contract for BAE’s Hawk LIFT trainers aimed to provide advanced jet training for both Royal Air Force and Royal Navy pilots, as part of the consolidated UK Military Flying Training System (UKMFTS). In November 2006, the Ascent team of VT Group plc and Lockheed Martin announced their status as Preferred Bidder to provide military flying training to the Royal Navy, Royal Air Force and Army Air Corps for the next 25 years.

In June 2008, they secured the contract. That began a combination of infrastructure build-out, aircraft modification, and managed competition, aimed at fulfilling a contract estimated at up to GBP 6 billion (about $11.7 billion)… when it was signed. It’s hard to evaluate that number until Britain finally buys its training aircraft and associated training service, and as of 2012, they haven’t even put out the RFP.

Britain’s A330 Voyager FSTA: An Aerial Tanker Program – With a Difference

FSTA Concept

Back in 2005, Great Britain was considering a public-private partnership to buy, equip, and operate the RAF’s future aerial tanker fleet. The RAF would fly the 14 Airbus A330-MRTT aircraft on operational missions, and receive absolute preferential access to the planes. A private contractor would handle maintenance, receive payment from the RAF on a per-use basis – and operate them as passenger charter or transport aircraft when the RAF didn’t need them.

The deal became politically controversial, and negotiations on the 27-year, multi-billion pound deal charted new territory for both the government, and for private industry. Which may help to explain why a contract to move ahead on a “Private Financing Initiative” basis had yet to be issued, and procurement had yet to begin, over 7 years after the program began. In March 2008, however, Britain issued the world’s largest-ever Defence Private Finance Initiative (PFI) contract. This FOCUS Article describes the current British fleet, the aircraft they chose to replace them, how the new fleet will compare, the innovative deal structure they’ve chosen, and ongoing FSTA developments.

24-Year, GBP 1.5B contract to Maintain UK’s Hercules Fleet

UK C-130 C5

In mid-2006 the UK MoD added another platform to the expanding list of long-term, performance-based, public-private, “contracting for availability” maintenance solutions for Britain’s key military platforms, by awarding Marshall Aerospace a GBP 1.52 billion contract ($2.86 billion conversion back then) to begin supporting its fleet of C-130 Hercules transport aircraft until 2030.

The deal has several segments, with mechanisms for price adjustments upward and downward as the contract continues. Britain’s SDSR plans may also cut the deal off early, if the entire C-130 fleet retires by 2022 as planned. As prime contractor, Marshall Aerospace is working in partnership with the Defence Logistics Organisation (DLO), the Royal Air Force, Lockheed Martin and Rolls-Royce to deliver the Hercules Integrated Operational Support (HIOS) programme. The HIOS programme will provide guaranteed levels of aircraft availability to a fleet that includes both older C3/C1 models (C-130K stretched and normal) and C4/C5 models (C-130J-30 and C-130J).

Britain’s $1.2B E-3D AWACS Support Contract

British E-3 Sentry

Britain’s E-3D Sentry Airborne Warning and Control System (AWACS) is based on Boeing’s 707 family, and its ability to see and direct air operations within hundreds of miles provides vital strategic support. Since its introduction in 1992, the RAF’s fleet of 7 E-3s has been used in every major UK military operation, including Bosnia, Kosovo, Afghanistan, Iraq, and Libya.

That availability depends on effective maintenance, and the UK MoD has a new approach. It’s meant to give them more flyable planes, while costing less money. The new Sentry Whole Life Support Program (WLSP) began in August 2005, when Northrop Grumman won a 20-year, GBP 665 million (then $1.2 billion) contract. Under that contract, NGC’s team is providing aircraft maintenance and design-engineering support services through 2025, in order to improve availability and reduce overall ownership costs. As is typical of recent British contracts, the government has chosen a public-private partnership founded on an unusual military combination: fixed base costs, and guaranteed time in-service percentages for the planes.

• The Contract & Industry Team [updated]
  
• UK E-3D WLSP [updated]
  

Frontline Commanders Requesting Renewable Power Options

WANTED: stuff like this…

On July 25/06 Al-Anbar commander and U.S. Marine Corps Maj. Gen. Richard Zilmer submitted an MNF-W priority 1 request. It pointed to the hazards inherent in American supply lines, and noted that many of the supply convoys on Iraq’s roads (up to 70%, by some reports) were carrying fuel. Much of that fuel wasn’t even for vehicles, but for diesel generators used to generate power at US bases. That is still true, and Afghanistan has even more daunting logistics. By some estimates, shipping each gallon of fuel to Afghanistan requires 7 gallons of fuel for transport.

A number of Pentagon projects use alternative energy at various installations, but Zilmer’s request is believed to have been the first formal request from a front-line commander. Not to mention the first formal request that acknowledges the security dimension of alternative energy sources, in response to the growth of “systempunkt” terrorism and the non-linear battlefield. It has not been the last.

• The Need on the Ground
  
• Options and Considerations
  
• Contracts and Key Developments [updated]
  
• Additional Readings
  

Canadian Forces Seek to Build Excellence in Foreign Flight Training

In 2005, the Canadian Department of National Defence awarded a 22-year, $1.77-billion (USD $1.5 billion) contract to an “Allied Wings” team lead by Kelowna Flightcraft Ltd. of Kelowna, British Columbia, who beat out a competing group led by Bombardier’s military training division in Mirabel, Quebec. The long-term contract will provide primary flight training training and support services to the Canadian Forces and international allies. These services will be provided out of the “Canada Wings Aviation Training Centre” in the Southport Aerospace Centre near Portage la Prairie, Manitoba.

This is not the first time the Canadian government has chosen a public/private approach to aviation training. Bombardier was already managing the Contracted Flying Training and Support (CFTS) program, and the public-private NATO Flying Training in Canada (NFTC) program has been running since 1997. In some ways, however, the new “Allied Wings” contract was a logical next step aimed at solidifying Canada’s traditional advantages, as Canada attempts to make itself an international center of excellence for foreign military aviator training:

• NATO Flying Training in Canada
  
• Primary Training: Competition for CFTS [updated]
  
• The Big Picture: International Flight Training in Canada [updated]
  
• Contracts & Key Events [NEW]
  
• Additional Readings & Sources [updated]
  

MASS for Effect: The UK’s Long-Term Ammo Contract

81mm mortar
(click to view larger)

A weapon without ammunition is useless, which is why ammunition is almost always a strategic national capability whose production must remain in-country. On the other hand, government demand has a tendency to swing up and down within narrow limits, and the demands of efficiency usually lead to a single supplier situation – often using equipment that dates back to World War 2. The USA has run into problems because of its reliance on a single small arms ammunition plant, for instance, and has moved to modernize and diversify its base. Its ally Australia is modernizing key ammunition facilities, and trying to modernize its industrial approach as well.

Then there’s Britain, whose long-term defense contracting practices are establishing world-class benchmarks. The UK MoD had been working on an arrangement that secures national supply needs from British sources, and ensures that modernization investments continues to improve industrial efficiency. Hence the new 15-year, GBP 2+ billion “Munitions Acquisition Supply Solution” (MASS) program, inaugurated in August 2008.

• BAE and The MASS Program
  
• Contracts & Key Events [updated]
  

Australia’s Intelsat-Hosted IS-22 Satellite

(click to visit)

Intelsat is a commercial satellite provider, who launches and maintains global coverage for its customers with over 50 satellites. One interesting wrinkle is a program that lets customers pay to host partial or full payloads on Intelsat’s birds, locking in recurring service revenues and defraying the cost of deployment.

Australia is a US military partner for the Wideband Global SATCOM program, buying WGS-6 and gaining access to the constellation’s services under Joint Project 2008, Phase 4. In April 2009, a decision was made to add a partial communications payload on Intelsat’s IS-22 UHF satellite, under JP 2008, Phase 5A. That is now a full UHF payload, under a revised contract – and the USA will benefit, as well…

Australia’s A$ 1B+ P3 Accord Support Program

AP-3C over Darwin

In November 2005, the Australian Government, Tenix Defence and Eurocopter subsidiary Australian Aerospace (AA) have signed the P3 Accord Master Agreement to provide capability upgrades and Through Life Support (TLS) for the Royal Australian Air Force (RAAF) AP-3C Orion maritime patrol and anti-submarine warfare aircraft. The three parties have established a Joint Management Office (JMO) to supervise all Accord activities under a unique risk-sharing contractual arrangement. The JMO will develop and implement all RAAF AP-3C capability upgrades and TLS solutions through to the aircraft’s planned withdrawal date – at which point it will likely be replaced by the 737-based AP-8A MMA.

The combined value of the TLS and block upgrades to the aircraft is expected to be more than A$ 1 billion, and the project is moving on to a new phase – even as some of the efforts that led to the most recent announcement win Australian awards…

• Australia’s AP-3C Programs [updated]
  
• The AP-3 Accord
  
• AP-3 Accord Updates [updated]