September 13, 2011

India must take a long, hard look at its aeronautical policies

TIME TO TAKE OFF

As the long-awaited air force proposal for the purchase of the medium multi-role combat aircraft enters its final lap after a torturous decade, there must be considerable anxiety within air headquarters that watch this slow process unfold even as they stare at dwindling combat-aircraft force levels and safety problems with ageing fleets.

Since defence procurements attract great public attention, it was natural for the ministry of defence to approach this entire programme with due caution. The principle articulated in the foreword to the Defence Procurement Procedure is for the process to be impartial and transparent. It lays down various steps with competitors being kept abreast of respective performances at each level. As this process unfolds in slow time, however, one concern seems to rear its head. In our anxiety to keep the process clean and corruption-free, have we compromised national security interests? Put differently, the question is, impartial towards what objective and transparency at what cost?

But to the background first. Faced with rapidly dwindling force levels, a need to replace ageing MiG-21 fighters and the delayed light combat aircraft programme, the Indian Air Force had issued its first global request for information in 2001 with December 2005 as the planned date of issue of a formal request for proposals. In the interim, the IAF’s concept expanded from a lightweight multi-role fighter to encompass medium fighter categories as well, a shift not without significant consequences as the two categories would then fall into differing weight, performance and cost domains. Important, because all things being equal the DPP stipulated the lowest cost to be the winner.

The RFP was issued in August 2007 to six companies that appeared to meet the air staff qualitative requirements and other conditionalities. Amongst the contenders were two aircraft from the United States of America — Lockheed Martin F16 IN and Boeing F/A-18 E/F — the Eurofighter Consortium Typhoon, representing the United Kingdom, Germany, Italy and Spain, the Russian United Aircraft Corporation MiG 29, the French Dassault Rafale and the Swedish Saab Gripen NG. Of these, the F16 and the Gripen were single-engined, with the others being twin-engined and in a relatively heavier class. To keep the evaluation transparent, the IAF identified 643 parameters against which each of the six competitors would be extensively evaluated, technically and operationally. At the time, the project was estimated to cost Rs 42,000 crore.

The defence aerospace market is not only fiercely competitive but, due to its technological and military-industrial impact, envelops a much wider strategic, economic and geopolitical canvas. Not surprisingly, the US president on his visit to India had reportedly lobbied to the prime minister on behalf of the US bidders as had the president of France and other senior leaders of the countries involved. Focused on its desire to be impartial and transparent, one could anticipate that the ministry of defence was now riding a tiger of its own making.

When in June 2011 the ministry shortlisted two aircraft, the Euro fighter Typhoon and the Dassault Rafale, the inevitable aftershocks followed. It was more than a coincidence that a day after this announcement the US ambassador to India resigned for personal reasons. Being part of the Eurofighter Consortium, the German ambassador stated: “We regard India as a strategic security partner and that is why we do not insist on an end user monitoring agreement” — an indirect reference to certain US laws in this regard and India’s sensitivity to these.

Whilst this decision appeared divorced from any geopolitical influence and seemed driven purely by the state of advanced technology of the chosen platforms and performance preferences, other significant programme elements of transfer of technology, offset obligations and costs had not contributed to this decision-making.

Not surprisingly, there has been muted criticism, although, from all accounts, the competitors who stand rejected still harbour hopes. There is even talk of the IAF being offered a fifth-generation fighter, and companies that should have packed their bags continue to advertise. It is difficult to judge whether these are signs of over-optimism or there is more to these than meets the eye.

One reason for this uncertainty is that the process is far from over. The evaluation of offset proposals along with technology sharing of the shortlisted companies continues. Significantly, prior to the opening of commercial bids the defence ministry is to carry out a bench- marking exercise to determine what ought to be the fair benchmark cost for this project. It is then that the biggest anti-climax of this exercise may unfold because benchmarking, which is a process of estimating the fair price, is by no means a simple task for this programme. It involves flyaway and production costs, life-cycle costs, technology transfers and complex offset arrangements, amongst many others. Since militaries and sellers rarely share commercial data on such programmes, comparisons with other similar programmes may at best be rough estimates; hardly conducive to realistic benchmarking.

This then raises more questions than answers. In keeping with our desire to be totally transparent, will the benchmarked figures become inviolable? What if both the short-listed candidates are substantially above the benchmark? Is there an option to revert to some of the rejected but certainly lower-cost bidders? If so, what criteria will then be followed? Will, for example, the cost benefits of the shortfalls against the 643 test points for which they were rejected be weighed against costs? If not, are we so inhibited by our own process that we are willing to pay very high prices? What if after losing, vendors dispute the benchmarked figure and are able to disprove them? Where does that leave the IAF, and indeed, the robustness of this entire process?

This brings us back to the initial poser. Being impartial to all the competitors is one thing, but to put our national security and strategic interests to inquiry by commercial enterprises is quite another. By quantifying in detail the 643 test parameters, we have, to a great extent, also bared open our operational and technical philosophy and thinking. Many an insightful analyst will already have scrutinized this data to access the IAF’s operational thinking. Potential adversaries must also long for access to this information.

As to transparency, if we choose to display transparency on our sleeves rather than practice it in spirit, the price that we pay may well be delayed decision-making to the detriment of our national security, if those who lose out choose to question the very basis of our decision-making. What if forces inimical to our security interests exploit this to create mischief?

The following lessons emerge from the unending saga of the MMRCA. Firstly, because we suffer from a lack of confidence in the integrity of our own decision-making processes and people, we have externalized factors like impartiality and transparency, which, though vital, should have remained internal to the system. In the process, we have deprived the operational user of the freedom to make optimum operational and technical choices. The cure may well be worse than the disease.

Secondly, no operational requirement can be absolute. It must be tempered with the practical budgetary and industrial environment within which the entire national security edifice operates, including strategic benefits expected to flow into defence research, development and industry. Shortlisting based on just operational evaluation without other factors runs counter to this philosophy. Hence affordability must begin to form a significant input for the defining of service operational requirements.

Ashley J. Tellis, a senior associate at the Carnegie Endowment for International Peace, who specializes in international security, defence and Asian strategic issues — and had written a research paper titled, “Dogfight!: India’s Medium Multi-Role Combat Aircraft Decision” after the IAF had submitted its evaluation report to the defence ministry — had this to say, once the shortlisting was known: “the deeper problem with the current two-step approach is... that it potentially permits a costly misallocation of defence resources that could over time subvert India’s larger national security. Simply put, a procurement process that does not include shadow prices in the first step of its evaluation is fundamentally flawed.... There is no such thing as ‘best’ technology in the abstract, especially where defence procurement is concerned. The pre-eminence of any war-fighting technology in the real world can be judged only against the constraints of price and, particularly in regards to India, against additional variables of consequence... what economists call, ‘constrained maximization’.” These are sound words.

Recognizing that aeronautics is one of the most significant technological influences of modern times, empowering the nation with strength for international partnership and economic development, The Aeronautical Society of India had submitted, in 2004, a proposal for an overarching national aeronautics policy, along with a supporting organization, with a view to according national aeronautics the status of a national mission. The mission was expected to encompass civil and military needs as well as those of research, development and the aeronautical industry. It would strive to bring Indian aeronautics on to the international stage as an equal partner, rather than as a perennial buyer. If there is one lesson that emerges from the MMRCA process, it is that this dormant proposal needs a long, hard look.

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