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AUSTRALIAN OVERLANDER OUT FOR REBID

August 14, 2008 by

AUSTRALIAN OVERLANDER TRUCK DEAL WITH BAE SYSTEMS OUT FOR REBID
By Julian Nettlefold

12 Aug 08. Reports from Australia suggest that the multi-billion dollar Overlander truck contract awarded to BAE Systems in has been cancelled. There are differing reports as to the reasons for this cancellation, which we report below. If BAE Systems fails to win this contract in the next round of bidding it puts into question the takeover of Tenix Defence for in which was going to be the Support Centre for the Stewart & Stevenson trucks as S&S does not have any worldwide service support centres. This was trumpeted by BAE Systems as its first overseas truck sale beating majors such as Renault, IVECO, MAN and Oshkosh. (See: BATTLESPACE UPDATE Vol.10 ISSUE 03, 23 Jan 2008, BAE SYSTEMS TO ACQUIRE TENIX DEFENCE).

We reported at the time of the Tenix deal: ‘Looking at the contract value, for over 3000 trucks this signifies, as is common in many civil fleet buys, that the money for Land 121 is in the Through Life Support element of this contract, not the up front purchase cost. Stewart & Stevenson’s CEO Mike Grimes was replaced by Denny Dillinger after the first FMTV award as there was little or no profit for the company in its win against Oshkosh. Thus, with the huge 10,000 truck award, won last year for the U.S. it is a simple exercise to tack on the Australian Requirement on to this line at little or no costs apart from labour and components. Interestingly this was the offer made to the U.K. for the SV requirement won by MAN. In that case it was lack of a Through Life Support package that caused MAN to win over S&S.’

Sources suggest that part of the reason for the cancellation may be that the initial bid of standard 4×4 trucks at a good price, as they came off the back of the huge US Army FMTV buy was matched with higher prices for the 8, 15 and DROPS vehicles and the Support programme which are not part of the US buy. We reported at the time of the award in October 2007.

BAE Systems has been selected by the Australian Government as the preferred bidder for one of the largest Australian Army projects for decades, the next generation of medium and heavy tactical trucks and modular payloads. Minister for Defence, The Hon Dr. Brendan Nelson, announced today that the Australian Government will negotiate the final contractual terms with BAE Systems to meet the medium and heavy truck segment of Land 121 Project Overlander.

The Land 121 Project will replace over 3000 of the Australian Defence Force’s tactical trucks over a six year period, commencing 2009. The contract is expected to have a total value of A$1-1.5bn (approx £436m – 653m / US$880m – 1.3bn). In addition to equipment, the contract includes payload modules, technical services and spare parts for the life of the equipment. (See: BATTLESPACE ALERT Vol.9 ISSUE 19, 05 October 2007, BAE SYSTEMS WINS SELECTION IN AUSTRALIA).

Following today’s announcement, a BAE Systems Land 121 project office will be established in Adelaide, “Being close to the future location of the 7 RAR battalion group was an important factor in our choice of location”, Dellinger says. “With an already strong presence in Australia, an important home market for our company, we have plenty of capacity in Adelaide to establish our Land 121 team and embed the technology needed to provide cost effective through life support providing skilled jobs for many years.”

The Age newspaper reported that The Department of Defence has been forced to recall a bungled $1.6bn tender for trucks, amid claims the former federal government rushed the decision through in a bid to win votes ahead of the last election. The tender for up to 2,400 armoured and conventional trucks was awarded to BAE Systems in October last year.

It’s believed the tender, announced by then defence minister Brendan Nelson, was meant to be a straightforward purchase of trucks already available, but defence ordered trucks in sizes which had not pr

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