Sikorsky’s demurral in Poland’s $3 billion utility helicopter competition comes as a bit of a shock. Sikorsky has deep roots in Poland, and their PZL Mielec subsidiary has served as the S-70i Black Hawk helicopter’s global center for several years now, selling an international export variant of the UH-60 to customers from Colombia to Saudi Arabia and beyond. As the only competitor with proven helicopters in all roles and a deep industrial relationship, it was hard not to see them as the favorite.
The whole episode serves as a fine reminder that key information like full RFP specifics and relationship dynamics is often privately-held. Sikorsky’s pullout leaves Poland with an arguably riskier set of acquisition choices, and a significant industrial question.
Contenders & Considerations
Sikorsky’s withdrawal leaves a tender in place for 70 helicopters: 48 multi-role transport, 16 Search And Rescue/Combat SAR, and 6 anti-submarine machines. Assuming that Sikorsky and the Polish MON remain adamant in their positions, the remaining competitors are both European.
AgustaWestland and its PZL Swindik subsidiary would make Poland the major launch customer for their AW149 medium utility helicopter, which also has an armed variant but not a developed ASW variant. The AW149 was offered to Turkey in an earlier tender, but it lost to the S-70i.
Airbus doesn’t have the same local base as Sikorsky or AgustaWestland, so their medium-heavy EC725 Cougar would depend on a recent teaming arrangement with Heli Invest/WZL-1. Its SAR/CSAR performance is a cut above, but with added size comes added costs. Nor is there a tested, in-service ASW variant. Airbus will point to Brazil as an example of successful local industrial cooperation and naval use, but Brazil’s EC725s are used for utility roles, not anti-submarine warfare.
NH90? The big missing piece in this competition has always been the NH Industries consortium’s NH90 for land and naval use; both Airbus and AgustaWestland are consortium members, with AgustaWestland as the lead for the naval anti-submarine warfare (ASW) variant. There are rumors that one of those companies might be willing to change their bid offering, so it’s worth mentioning the NH90.
NH90s come in different variants, but if Poland is really insistent on a single helicopter type for both army transport and naval anti-submarine work, the NH90-NFH is an ASW helicopter that also has a “Caiman” naval utility variant, and a kit called FAME that transforms NH90s for combat search and rescue. The French have ordered both NH90-NFH variants, alongside the standard land forces NH90-TTH variant. An all NH90-NFH buy might offer single-helicopter commonality, while meeting all requirements. In exchange, naval helicopters have features like folding rotors and tails that tend to add cost and complexity.
The bad news is that the Germans are having a lot of trouble with their NH90 fleet, production is backlogged, and the NH90’s industrial cooperation arrangements are well set. Which means that technology transfer for a fully Polish build would require cooperation from several companies and countries. Would partial participation in a larger program be compliant with Poland’s RFP?
Sikorsky: A larger industrial fade?
The longer term question involves Poland’s industry.
Poland is no longer Sikorsky’s only low-cost manufacturing option. A major Turkish “T-70” order is setting up a manufacturing location in Turkey, and the $3.5 billion deal could lead to 600 helicopters being produced there (109 T-70s + any added orders + S-70i exports). Then there’s India, whose competition for naval helicopters could also lead to another larger scale H-60/S-70 local build and export deal.
Either or both of those deals could become part of a gradual Sikorsky strategy to move its work and investment out of Poland, in order to better serve the industrial imperatives of major customers.
Poland is known to want a deeper industrial tie-up with Airbus. The question is what price they’re willing to pay. Especially since the same goal could be achieved by awarding the Kruk (“Raven”) attack helicopter competition to the Tiger HAD. The MON’s public statement has made compromise very difficult, but existing jobs are very important to politicians. What was intended to be a guarantor of firmness could instead become an invitation to a political override.
Contracts & Key Events
Nov 13/14: According to the information provided by Deputy Defence Minister Czeslaw Mroczek, Sikorsky is formally requesting a bid extension beyond Nov 28/14, which was already an extended date due to requests from both Sikorsky and AgustaWestland. The MON hasn’t answered this request letter yet, and Airbus is pushing to leave the deadline in place. An open letter from Airbus Helicopters President Guillaume Faury says:
“I see it as a clear intend to destabilize the tender, thus jeopardizing the vital interests of Poland. This tender started two years ago with precise rules and agenda. The postponement of the tender would be unfair for those bidders who are strictly following the rules and providing solutions in due time…. I confirm that Airbus Helicopters is ready to deliver its offer on November 28. We would not understand a new postponement, especially just after the first one where two additional months were already granted.”
This tender has clearly been problematic for Sikorsky, raising questions about its information input quality and decision process. Airbus might as well push, since a direct competition with AgustaWestland vastly improves their odds. On the Polish side of the fence, telling workers at an important employer that their jobs will be put at risk, without a chance to compete, is a political problem. We’re betting that Sikorsky gets their extension, though we wouldn’t be surprised if it’s shorter than they’d like. Sources: Dziennik Zbrojny, “Sikorsky to Polish MoD: give us more time” and “Airbus: we are ready to present an offer on November 28”.
Nov 4/14: DID has spoken to our friends at Dziennik Zbrojny, who have had a chance to speak to their sources. Poland’s RFP apparently demands just 50% common parts, which means Sikorsky can offer their S-70i for the transport/CSAR and the S-70B Seahawk for naval ASW. The challenge is that given all of the other requirements, it’s believed that none of the helicopters will be able to meet 100% of the RFP’s requirements.
Since the MON have backed themselves into a corner, and the government as a whole hasn’t intervened, the question becomes whether Sikorsky will bid anyway. They could still choose to do that, and let the Polish government worry about the compliance issues. The upside is clear, but the downside would be twofold. One, preparing these kinds of responses costs money, often 6-7 figure money, though in this case we’re likely talking about marginal costs beyond an investment that’s already partly made. Two, a situation without a clear compliant winner is very open to subsequent litigation and other political games.
Oct 27-30/14: Sikorsky out. Sikorsky privately informs the Polish MON that it cannot bid on the competition as is, and the Polish MON proceeds to issue a public statement in response. The tone of Sikorsky’s representatives had not been especially happy during September’s MSPO 2014 exhibition in Kielce; nevertheless, this is a bit of a shock. The Poland’s MON’s public statement makes any kind of future accommodation very difficult:
“We would like to note that it is the ordering party that is Ministry of National Defence who defines the needs of the Armed Forces. Bidders are not there to indicate what they have for sale. The final requirements concerning the multi-role helicopter have been known since May 2014 and Sikorsky Aircraft Corporation has such helicopters within the product range they offer. That is why we hope that it will place a bid in the set term that is till 28th November and that the letters it sent are only an element of negotiation tactics…. the Ministry of National Defence does not plan to cancel the procedure at request of one of the bidders or to change its terms…”
The MON is correct to cite the timing issue as odd, though it is consistent with repeated but failed attempts at discussion and diplomacy. Note, too, that the MON’s cited Nov 28/14 deadline is later than the original Sept 30/14, reportedly at the request of both Sikorsky and AgustaWestland. Local media source Dziennik Zbrojny:
“The American side had repeatedly informed the Poles of the impossibility to fully meet the Polish demands, in technical, economic, legal and financial terms…. The American company suggests that the current requirements may meet only one of the three bidders, which contradicts the principle of competitiveness. SAC therefore calls for changing the requirements and organization of a new tender.”
Sikorsky representatives have told DID that their notice was a private courtesy, not a public negotiating tactic or a firm withdrawal. Local subsidiary PZL Mielec also issued its own public statement in response to the MON:
“The Consortium of Sikorsky Aircraft Corporation and PZL Mielec intends to not submit an offer for the procurement of utility helicopters for the Polish Armed Forces unless the terms of the procedure are amended…. The decision of the Consortium is not a negotiation tactic as has been described and is not meant to exert any pressure on the Ministry of National Defence. It is simply meant to inform…. we strongly believe that the BLACK HAWK produced in Poland is the best solution for the Polish Armed Forces…. The Consortium is not… trying to change Poland’s operational requirements…. However, it is impossible to submit an economically viable offer that would be 100% compliant with each and every requirement, including technical, legal and financial aspects.”
Sikorsky representatives added that Polish laws prevent them from being more specific, which leaves observers guessing. It’s possible that the RFP’s exact terms re: commonality presented an issue, given required naval design differences like weight-adding folding tails and rotors for compact storage, anti-corrosion treatments, etc. on Sikorsky’s Seahawks. We’d need a copy of the full RFP to know for sure. The problems may also have extended into ASW technology transfer, where Sikorsky would face unique legal restrictions under American export laws. Sources: Polish MON, “MOD’s reply to the letter from Sikorsky AC” | Dziennik Zbrojny, “Sikorsky will not make a bid in the Polish tender for helicopters?” | Reuters, “Sikorsky withdraws from $3 bln helicopter tender in Poland”.
Readers with corrections, comments, or information to contribute are encouraged to contact DID’s Founding Editor, Joe Katzman. We understand the industry – you will only be publicly recognized if you tell us that it’s OK to do so.
DID thanks our friends at Dziennik Zbrojny for their assistance.
* AgustaWestland – AW149.
* Airbus – Cougar. They would offer the EC725 to Poland, rather than the AS532-AL.
* Sikorsky – S-70i Black Hawk Helicopter.
* DII FOCUS – NH90: Europe’s Medium Helicopter Contender.
* DID – Turkey’s TUHP: $3.5b for 109 T-70 Helicopters – and More. Actually, the S-70i. Turkey has positioned themselves to be able to step into Poland’s prime industrial role for the type.
* DID – Brazil’s $1B+ Order for EC725 Cougar Helicopters. Would be touted by Airbus as a template. Equips the Army, Air Force, and Navy, but the naval helicopters are for utility use, not ASW.
News & Views
* DID (Guest, Sept 9/14) – Polish Defence Modernization: Between strategic intent and spending reality.
* DID (Guest, Aug 17/14) – Poland’s Balancing Act: A Briefing for the Defense Sector. Looks at other aspects of the issue, incl. a changing industrial landscape and 3 big near-term programs.
* Foreign Policy Association (Sept 18/13) – Beyond Air and Missile Defense: Modernization of the Polish Armed Forces.
* DID (Oct 2/12) – Polish Equipment Issues and Consequences. In August 2009, Polish Land Forces Commander Lt. Gen Waldemar Skrzypczak resigned, accusing defense bureaucrats in Warsaw of “serious incompetence” in procurement that was partly responsible for the deaths of Polish soldiers.