SlowManBoeing will not benefit from these criteria in other contests. Nobody looking at the F-35 is also an F-15E+ customer
Australia and Canada are Super Hornet and Hornet operators respectively, and Boeing will offer Super/Silent Hornet to these countries.
SlowManWhat’s really bad for Lockheed Martin is that there is one pricing option that Boeing can use to 100% legally guarantee that it wins the Korean F-X contest if Boeing really needs to use that option(Boeing have used this option in the past), and that option is beyond Lockheed Martin’s reach.
SlowManOr maybe it shows that Korea is paying with its own money, while Israel is paying with Uncle Sam’s money. :diablo:
Or it just reflects that Korea is further along the price reduction curve of increasing production, or that Korea is requesting fewer extras with its aircraft . . .
The Korean government demanded the inclusion of 3 years worth of spare parts in the price. This is why the deal includes 9 spare engines in the price. Japan got five spare engines for 42 units.
Lockheed knows that they can milk the South Korean cash cow in the future through other means like system upgrades or weapons integration, maybe hurting Boeing for the sake of it is also an incentive :dev2:.
And Boeing is trying to do exactly the same to Lockheed Martin by sowing the seed of doubt among JSF partner nations by defeating the F-35 in Korea, which the outsiders falsely presume is just like Japan and would mindlessly buy whatever the US tells it to buy.
This is why the F-35’s defeat in Korea is extra-damaging to Lockheed Martin, because of that expectation.
SlowManhttp://www.defenseworld.net/news/8160/U_S_Offers_Korea_F_35_Aircraft_At_Subsidized_Rates
U.S Offers Korea F-35 Aircraft At Subsidized Rates
Source : Our Bureau ~ Dated : Friday, April 5, 2013 @ 03:29 PMThe U.S has offered Korea 60 F-35 Joint Strike Fighter Conventional Take Off and Landing (CTOL) aircraft at a subsidized cost of $10.8 billion with each jet prices at $180 million.
This is in stark contrast to the differing prices to allies around the world. Japan’s acquisition of 42 F-35As (4 + 38 on option) aircraft will approximately cost $10 billion about $238 million per aircraft. And Israel, has been offered 75 F-35s for $15.2 billion about $202.6 million for each jet.
The Pentagon has yet to issue a statement on the varying price tags.
The very fact that the F-35 prices offered to Korea is 10% lower than the Israeli prices show the level of intensity in Korean competition, with Lockheed attempting to go even lower than this $10.8 billion figure. Lockheed and JSF office never tried to price compete like this before, meaning this is a real contest where anyone of three bidders can win, although the race appears to have tightened to that between Boeing and CASA at this point.
SlowManSorry if I should know this, but is it known what Boeing quoted in total to supply 60 F-15 Silent Eagles?
Somewhere in the $8~9 billion range at this moment, with two more months of negotiation to go.
Given Boeing’s bidding history of recently closed AH-X attack helicopter deal where Boeing initially bid $2.4 billion but cut the price by $800 million to offer the final price of $1.6 billion, it is very likely that Boeing will bid $7.9 billion at the last minute and legally bind the DAPA to pick its bid over others.
Of course Boeing will try to keep its prices as high as possible, but the nuclear option(a $7.9 billion bid) is always there given Boeing’s bidding history.
SlowManAm I correct in thinking that whereas the F-35 quote is for delivery of 60 new frames, the SE quote is for upgrading the F-15K aircraft already delivered to Silent Eagle status?
The F-35 bid is pure FMS.
The Silent Eagle is an FMS + DCS hybrid deal. Stuff that is required for the US export clearance(usually electronics and sensors) is bundled in the FMS, while the rest that can be sold by the vendor directly is in the DCS bundle, such as the airframe and the engine. The DCS stands for the Direct Commercial Sales, where the vendor negotiates with the buyer directly and can offer whatever the term it wants, while the FMS goes through the US military as the middle man(US vendor -> US military -> foreign military), so the US military can control the terms of sales, specifically stuffs like tech transfer.
The DAPA strongly preferred the DCS over the FMS, but the US tried to impose the FMS sales term on both the F-35 and the Silent Eagle to give an advantage to the F-35(Every parent has his/her favorite child). The DAPA in return threatened to disqualify both, and won the right to buy the Silent Eagle on a DCS sales term so that the DAPA can negotiate a much fatter offset and tech transfer package relative to the F-35 directly from the vendor(Boeing).
So now the Boeing is the leader in the two horse race with the Typhoon trailing behind, while the F-35 horse stumbled and is laying flat on the track behind, with several local press now reporting that the DAPA is not seriously considering the F-35 bid.
SlowManHere is a comparison of how a corruption-free, political-influence-free open bidding can drive prices down.
India, US set to ink $1.4bn deal for 22 Apache helicopters
TNN Aug 21, 2012, 03.06AM ISTNEW DELHI: India is getting ready to order 22 heavy-duty Apache helicopters for around $1.4 billion, in what will be yet another big defence deal to be bagged by the US.
India paid $1.4 billion for 22 Apaches.
Korea’s paying $1.6 billion for 36 Apaches a year later.
Japan paid $10 billion for 42 F-35s.
Korea is offered $10.8 billion for 60 F-35s a year later.
SlowManWas the Rafale/F-15 deal decided by this independent civilian board?
No. The DAPA was created afterward, and the military is unhappy with the DAPA because it keeps buying the “best value” items instead of what the military prefers.
Although the attack helicopter contests ended in Boeing’s win, Boeing had to offer a deep discount(36 Apaches for $1.6 billion), a price Boeing claims is lower than what they sell to the US Army.
The fact that Lockheed priced 60 F-35s only $10.8 billion(Down from $14.1 billion submitted at the beginning of contests in June 2012, chopping more than $3 billion off the price) shows the high level intensity of the F-X contest, as the F-35 has become an underdog and the US DoD and State department’s lobbying doesn’t work, because the DAPA has no direct working relationships with these organizations.
Accordingly, the Typhoon bid has a fair chance, as long as they are willing to price compete. AugustaWestland proved this and Rolls Royce proved this. Unfortunately, there was a $0.9 billion price gap between Boeing and CASA based on last known price, and Boeing is now said to be down to $8~9 billion range, within a striking distance of $7.9 billion which would binds the DAPA to automatically pick the Silent Eagle.
SlowManChinese Su-27 crashed, two pilots dead.
http://english.sina.com/china/p/2013/0331/577150.html
SU-27 fighter jet crashes in E China, two pilots died
2013-03-31 23:17:04 GMT2013-04-01 07:17:04(Beijing Time) SINA English
SlowManYou Boeing chaps are very confident.
Well, that’s the word on the street and newspapers. I am just being the messenger.
It won’t cause anything among the F-35 partners, despite reducing numbers they’re still committed to the F-35.
Those sitting on the fence will surely convert to open bids contests like Denmark
Aftermath of the Silent Eagle’s win.
– Denmark : Open bid contest
– Netherlands : Open bid contest
– Canada : Open bid contest.
– Australia : 48 Super Hornets + start considering Silent Hornet options.
– Turkey : Will cut F-35 orders to make funding available for TF-X.
SlowManRACR? Really? Raytheon was an American defence contractor the last time I looked.
But not the one backed by the US government. The USAF backed the Northrop Grumman’s SABR, but the DAPA picked RACR and created a configuration exactly the opposite of the USAF F-16s because of pricing.
The US DoD and State department is backing the F-35, but the Silent Eagle is currently leading the contest because of pricing and offset benefits.
Simply put, the DAPA doesn’t care about the national origin; only the price, offset, and value preposition.
SlowManThings are going to be interesting when the DAPA officially announces the Silent Eagle as the winner of the contest. This would cause a firestorm in the JSF partner camp, where several partner nations finally convert to open bid contests and Boeing goes after JSF partner nations with the Silent Hornet, arguing that the Silent series of RCS reduced jets are real compelling solutions. Which in turn would raise the price for remaining JSF partner nations, which in turn force the committed nations to cut their orders to cope with rising costs.
This is the reason why Lockheed offered a deep discount for the F-35 in the Korean contest, $10.8 billion for 60 units vs $10 billion for 42 units to Japan with a separate price guarantee letter(Japan got none and is at the mercy of Lockheed’s price gouging, while Lockheed is guaranteeing in letter to the Korean government they would not charge more than what they quoted in the bidding), fearing that they are about to lose the contest; this really shows the sign of desperation on Lockheed’s part.
SlowManOn a side note, Eurofighter bid just became a casualty of Noth korea rethoric, there s no way that the ROKAF ends with anything else than an usa plane.
Not at all.
Decisions where European vendors beat US vendors this year
1. F-16 Upgrade Program : BAE beat Lockheed Martin <= Most notable because LM was the original vendor and still lost in the upgrade program.
2. ASW helicopter : AW-159 beat MH-60R.
3. A2G cruise missile : Taurus KEP-350 beat Lockheed Martin’s JASSM
One more decision where the DAPA brushed off the USAF pressure
1. RACR beat the USAF backed SABR in the F-16 AESA contest, in spite of a heavy USAF lobby for the SABR in order to create an economy of scale for the USAF’s own F-16 AESA upgrade program by combining orders between itself, Taiwan and Korea.
The reason why the US lobbying/pressure doesn’t work in Korea unlike Japan is that the weapons purchase decision is made by an independent civilian agency, not by the weapons user.
This is why the local press is already reporting that the F-35 is being no longer considered in Korea for being a mismatch to the Korean requirements.
SlowManhttp://nbiz.heraldcorp.com/view.php?ud=20130404000446
Local press is reporting that the F-35 is being removed from considerations.
The F-35 was seen as not being compatible with the ROKAF’s warfighting plans, which calls for dropping thousands of tons of munition on North Korean targets per day, and the F-35 with its limited weapons payload was seen as not fitting with this “WW2 style bomb truck” model required to destroy North Korean military. Furthermore, the ROK military projects that there would be stealth drones to carry out stealthy infiltration strikes in the mid-2020 time period when the F-35 becomes fully operational, so there is no need to invest money in the F-35.
For this reason, the ROKAF test pilots were evaluating the max payload configuration of the Typhoon when they visited Spain to see what the maximum realistic weapons payload was, because the bombs tonnage that the Typhoon could drop in a day was important to the ROKAF. The F-35 gets an F in this regards.
SlowManIf two bidders come in between that figure and the 20% over-run margin, then… they are compared based on a weighted ranking scale (one part being cost)?
1. 2 Bidder at $7.9 billion : Both bids are evaluated per existing formula and DAPA cannot cancel the contest, must take one.
2. 1 Bidder at $7.9 billion : The DAPA must take this bid, since they cannot cancel the contest.
3. Any number of Bidders in between $7.9 and $9.5 billion : The DAPA can cancel the contest and report to the Parliament that they found no bidder that met the conditions approved by the Parliament. Or, the DAPA can continue the bid evaluation and pick a winner. However, the penalty scoring applies to price category, where the penalty score increases exponentially as the bidder’s price moves further away from $7.9 billion, so that the bidder’s scores in the pricing category becomes essentially zero at $9.5 billion.
4. All bids over $9.5 billion : The DAPA then must cancel the contest since they have no legal authority to sign a contract valued over $9.5 billion.
All prices discussed here means the final total price agreed with the vendor, not preliminary prices.
Would the same ranking comparison apply if two bidders come in below $7.9B or would the lowest bid win?
The same ranking comparison applies, but the exponentially increasing penalty scores makes the higher price bidder’s win unlikely.
Do lifecycle costs come in here anywhere
This is considered in the operations category.
As for the currency of contract, the approved budget is in US dollar(7.9 billion), not in Korean won.
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