^ guys it doesn't work that way. (Now that the JSF has been flown off to another thread, I can stop lurking)
It would have been broken down into the following which a bean counter (finance guy) would include:
a) Fly-away Costs
b) Initially to ramp up induction and also to impart training leading to the various phases of ToT: SKD, CKD costs
c) Training costs for all personnel for manufacturing, quality checking and operational duties etc.
d) Costs of Capital goods for various factory related items to be able to produce ---> assemble -----> manufacture----> Test components/assemblies/full product.
e) Costs of certain components which cannot be manufactured locally because of lack of infra/higher costs due to lower volumes.
f) Annual Maintenance costs which will be calculated as proportional to the Mean Time Between Failure (MTBF) of components and their estimated periodicity of replacement.
g) Guarantee of serviceability by ensuring the availability of components in e) above over the life cycle of the a/c.
h) Costs of upgrades and replacement thereof, which have been demonstrated during the technical evaluation (like AESA, imporovements to Spectra for e.g)
i) Costs of the 50% plowback into India as a contractual requirement.(if such costs are applicable)
j) Costs of guarantees
There maybe many more items like simulators etc.
The flyaway cost of an aircraft is actually a poor indicator. the MoD has to ensure that there are not hidden costs.
For e.g: I might say that I have an a/c at a flyaway cost for $65M (say a 5th gen A/C
), but the annual maintenance costs of each may be 40%.
Or the cost of my 4th gen is $75M, but the annual maintenance cost is 15%.
So the exercise of normalising the Tiffy and the Raffy costs so we are comparing apples to apples is a very important exercise for the bean counters in MoD and MoF to accomplish faithfully and accurately. Hopefully we have the MoF bean counters involved because i) It will save precious time and they would understand also the technical nuances of the purchase; and ii) It shouldn't be like the tanker deal where the MoF shot down the preferred IAF choice on costs.
Also, both the contenders would have to see the calculations our chaps make, initially only of their own calculations and point out any lacunae if it exists due to wrong assumptions. If our bean counters forget to add or project lower costs, the manufacturer may not point out the additional cost omitted, because they want the order. This additional omitted cost cannot be claimed later as the manufacturers would have agreed to our calculations. If our bean counters have inadverdently assumed costs in excess, the manufacturer can point that out, justify and reduce it.
When the final selection is made there maybe two scenarios:
One is we ask the manufactures to rework the finances as per our format and give us the best possible price!
The
second is to announce the winner and show the loser why they lost out financially, not by sharing the details, because that would be now under the purview of the secrets act and relate to showing them config, abilities, reconfig for Indian role etc., but to announce the total and the costs of a few major heads, sufficient to ensure there is no doubt on the integrity of the selection process and the financial calculations.
In either case the
second will happen and
one maybe omitted.
There will still be rumblings from the loser. It is an imperfect world after all.
Been there, seen it and enjoyed!
Cheers
