Pentagon Contract Announcement
(Source: US Department of Defense; issued May 31, 2012)
L-3 Communications Integrated Systems, L.P., Greenville, Texas, is being awarded a $321,770,026 firm-fixed-price contract to purchase 10 C-27J aircraft, 10 option kits, and one lot each production cost and software reports and contractor logistic support cost and software reports for the Commonwealth of Australia by issuing a delivery order.
The location of the performance is Greenville, Texas. Work is to be completed May 24, 2012.
ASC/WLNJ, Wright-Patterson Air Force Base, Ohio, is the contracting activity (W58RGZ-07-D-0099 0078).
(EDITOR’S NOTE: It is high time for the Australian Ministry of Defence to come clear on the true cost of this purchase, as there are too many contradictions in official statements regarding this contract.
Announcing the deal on May 10, Defence Minister Stephen Smith said the “acquisition of the 10 C-27J aircraft with associated support equipment will be conducted through a Foreign Military Sales (FMS) arrangement with the United States at a cost of around $1.4 billion.”
He noted that this price only covered “initial logistic support, including training for aircrew and maintenance personnel…” and that follow-on support would be covered by “a separate agreement with the C-27J manufacturer, Alenia” obviously at additional cost.
The very next day, L-3 Communications announced that it had been selected by Australia to provide C-27Js at “an approximate value of $600 million [which] includes the supply of 10 new C-27J aircraft worth about $300 million, plus contractor logistics support, spares and training.”
There is thus a discrepancy of about $800 million between the two figures, or over 50% of the contract’s value.
Furthermore, the Pentagon contract announced yesterday (see above) confirms L-3’s price estimate, and sets the price of the ten aircraft at precisely $321.7 million.
It is obviously impossible that the “initial logistic support, including training for aircrew and maintenance personnel” described by the minister could account for the difference, or $1,079 million.
There are only very few ways to account for the missing billion+ dollars: (a) supporting the ten aircraft for an “initial” period is three times as expensive as buying them; (b) the minister and his staff can’t count, or (c) the missing billion + is headed elsewhere.
Australia’s defense procurement system is well-known for its cavalier disregard of costs, prices and over-billing, but in this case the discrepancy is so massive that a clear and cogent ministerial explanation is clearly necessary.)
