RM2.3 billion Eurocopter deal - as presented in Parlimen

RM2.3 billion Eurocopter deal – why no proper short-listing and a bidder which is higher by RM1.256 billion chosen

The following speech by YB Lim Kit Siang was extracted from DAP website:-

Speech (3) by Lim Kit Siang on the 2009 Budget in Parliament on Tuesday, 14th October 2008:



The first thing Datuk Seri Abdullah Ahmad Badawi did as Defence Minister was to announce on 26th September that the Defence Ministry has agreed to acquire new helicopters from European helicopter manufacturer, the Eurocopter, to replace the Nuri.

This RM2 billion deal lacks accountability and integrity.

Four helicopters had been “short-listed” by the Ministry of Defence to replace the fleet of Sikorsky S61-A4 Sea Kings better known as the Nuri.

The four are the Eurocopter Cougar EC725, Sikorsky S92, Agusta Westland EH-101 Merlin and the Russian-made Mil Mi-17 Hip.

However, Abdullah shocked everyone with his announcement as the “short-listing” had not been completed and the pricing of the EC725 is not competitive compared with the other helicopters.

The pricing offered by the “short-listed” helicopters are:

Eurocopter Cougar EC 725 - Euro 463.44 juta (RM2.317 billion);
Sikorsky - US$427.20 juta (RM1.45 billion)
Canadian Kelowna Flightcraft Ltd. Model Kazan MI-172 buatan Russia
- US$312 juta (RM1.061 billion)

This means that there is a difference of RM1.256 billion between Eurocopter Cougar EC 725 with the lowest bidder, the Kazan MI-172 KF – in other words, with US$600 million the Royal Malaysian Air Force can buy 26 units of Kazan helicopters and not just 12 Cougar helicopters.

In his speech yesterday, the Opposition Leader, Datuk Seri Anwar Ibrahim referred to the complaint by the Chairman of Mentari Services Sdn. Bhd. Kapt (B) Dato’ Zahar Hashim about the irregularity of the Eurocopter decision, and this is not just confined to the Kelowna Flightcraft Limited, Canada which submitted the bid for the Russian helicopter but also the other “short-listed” bidders as well, viz:

• Proses penilaian belum selesai tetapi dengan secara tiba-tiba arahan diberi oleh pihak tertentu supaya Letter of Intent (LOI) dikeluarkan kepada Eurocopter. LOI tersebut ditandatangan oleh seorang pegawai paras menengah di Kementerian Pertahanan dan bertarikh 15th September 2008 iaitu dua hari sebelum Datuk Seri Najib Razak berpindah dari Kementerian Pertahanan ke Kementerian Kewangan.

• Kerja yang sudah selesai adalah penelitian dokumen-dokumen tender yang dikemukakan oleh penender-penender. Penilaian fizikal iaitu memeriksa permis dan kilang penender-penender dan melakukan penerbangan ujian (test flights) belum dilakukan oleh kerana kebenaran dari pihak atasan di Kementerian Pertahanan dan Kementerian Kewangan untuk berbuat demikian belum diperolehi. Sewajarnya, penilaian fizikal adalah lebih mustahak dari penilaian dokumen-dokumen (documentary evaluation) dan anggota-anggota yang terlibat berasa hairan apabila mengetahui bahawa LOI telah dikeluarkan sebelum penilaian fizikal dilakukan.

• Proses pengeluaran LOI kepada Eurocopter agak luar biasa dan bertentangan dengan prosedur yang telah diamalkan selama ini. Biasanya LOI dikeluarkan setelah proses penilaian secara menyeluruh selesai dan sebuah jawatankuasa yang dianggotai oleh wakil-wakil dari Kementerian Kewangan dan Kementerian Pertahanan capai kata sepakat tentang produk yang terbaik bersesuaian dengan belanjawan yang telah diperuntukkan. Mereka turut berpendapat bahawa adalah menakjubkan bahawa LOI bagi kontrak yang bernilai melebihi Dua Bilion Ringgit ditandatangan oleh seorang pegawai Kerajaan bertaraf Setiausaha Bahagian dan bukan seorang yang bertaraf sekurang-kurangnya Timbalan Ketua Setiausaha.

The following are therefore the issues and questions:-

• Technical evaluation process did not follow standard international practice and was not transparent.

• Short-listing of the aircraft not as normally practiced in such tender process.

• What is the criteria for evaluating these aircraft. Is it following standard evaluation process in technical terms. Has it carried out any flight evaluation of all the aircraft.

There have been cases where manufacturers have not been able to prove what they have written in paper when flight test was carried out. There has also been instances where the manufacturers had used a different and higher performance aircraft than was specified in the written technical paper during flight test. This is why it is VERY important that a flight test valuation is carried out to ensure they comply with the specs given in the written documents.

I understand that the EC725 selected is a 40-year old aircraft, certified in the 60s and 70s. It has been modified and upgraded all these while and given a new name and term. Can this EC 725 be guaranteed to last another 40 more years with all the modifications and upgrading anticipated?

If RMAF is buying this 40-yr old aircraft, then it might as well keep the Nuris, modify and upgrade them now. It will cost only a fraction of a new aircraft, especially taking into account the Sikorsky offer had reported by Berita Minggu of 1st June 2008, viz:

Syarikat pengeluar helikopter terkemuka dunia, Sikorsky Aircroft Corporation (Sikorsky) membuat tawaran kepada Kementerian Pertahanan untuk membeli kembali 29 helikopter Nuri atau Sikorsky S-61-A4 Sea Kings, jika Malaysia membuat keputusan membeli helicopter barunya, Superhawks S-92 untuk kegunaan Angkatan Tentera Malaysia (ATM).

Eksekutif Jualan Serantau Sikorsky bagi Asia, Scott Pierce, berkata tawaran itu dibuat melalui bida dikemukakan syarikatnya kepada kementerian berkenaan, selepas Malaysia mengumumkan tawaran tender terbuka antarabangsa berhubung pembelian helicopter baru bagi pasukan itu.

Katanya, jika Malaysia memutuskan terus menggunakan Nuri bersama helicopter terbarunya, Sikorsky yang juga anak syarikat United Technologies Corporation (UTC), menyatakan komitmen membaik pulih atau meningkatkan khidmat Nuri di Negara ini.

“Sikorsky sedia membeli semua baki Nuri daripada TUDM untuk dijual kepada mana-mana pihak yang berminat, tetapi juga TUDM masih mahu menggunakan Nuri bersama helicopter S-92, kita sanggup membaik pulih dan meningkatkan helicopter berusia lebih 40 tahun itu, termasuk menukar daripada kokpit konvensional kepada kokpit kaca (digital).

“Tugas balik pulih Nuri akan membabitkan pemindahan teknologi terkini dan kepakaran kepada orang tempatan”, katanya kepada Berita Minggu pada temu bual di sini, baru-baru ini.

I am not a spokesman for Sikorsky, but this offer warrants an explanation from the Ministry of Defence as to the critera for the final selection of Eurocopter among the four “short-listed” bids.

The government had allocated US$600 million (RM1.93 billion) to buy an initial fleet of 12 helicopters, which will be in service until 2050.

Last year, the government cancelled a defence deal with the European aerospace giant EADS (European Aeronautic Defence and Space Company) for 197 helicopters to the country’s army following adverse observations by Indian watchdog authorities over alleged irregularities in the defence bidding process.

According to published reports, Eurocopter allegedly used a local firm, Global Vectra Helicorp, to help broker the deal despite a ban in India on the use of middlemen in defence deal.

Eurocopter was also accused of presenting a civilian helicopter instead of a military version for statutory field trials by the Indian army.

But what should attract the attention and concern of Parliament is that the EADS deal to sell 197 Eucopters to the Indian government was a US$600 million which the Indian government subsequently cancelled.

Parliament and the nation are entitled to know why for the same amount of US$600 million, the Indian government was offered 197 Eurocopters as compared to 12 Eurocopters to Malaysia.

In the name of accountability, transparency, integrity and good governance, I call for the immediate suspension of the RMAF helicopter award to subject it to a proper and above-board procurement process.