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PARTNERING ARRANGEMENT BETWEEN MOD AND AGUSTAWESTLAND

24 Mar 05. The Ministry of Defence has today announced that it intends to develop a long-term partnering and business transformation arrangement with AgustaWestland, which has been outlined in a ‘Heads of Agreement’. The MoD has also indicated that AgustaWestland’s Future Lynx is its preferred option for meeting the Land Find and Maritime (Surface) Attack elements of the Future Rotorcraft Capability requirement. These decisions are subject to continuing
negotiations with the company and, in the case of Future Lynx, to agreeing acceptable contract conditions and prices.

The MoD and AgustaWestland have committed to work toward a partnering and business transformation agreement that builds on the new integrated operational support arrangements agreed for the Sea King fleet. This support will be further developed to optimise more aspects of managing and sustaining the current and future helicopter fleets.

The Future Lynx decision builds on previous extensive assessment and de-risking work, as well as analysis conducted into future rotorcraft requirements. Competition remains the cornerstone of MoD procurement policy. This applies to the Future Rotorcraft Capability requirements as elsewhere, in particular for the Land Lift (Medium) element.

The Secretary of State for Defence, Geoff Hoon, said:, “I am pleased to announce both our decision to work together with AgustaWestland toward a long-term partnering arrangement, and our decision that Future Lynx is our preferred option for the Land Find and Maritime (Surface) Attack requirement.

“This is excellent news for AgustaWestland, for the highly skilled staff at its Yeovil plant, and for the British defence industry, including Smiths Industries at Cheltenham, Thales at Raynes Park and
Taunton, GD(UK) in St Leonards-on-Sea and South Dorset Engineering Ltd in Weymouth.

Comment: This is not good news for EADS which had been lobbying hard for its NH90 equivalent. It is also very good news for jobs in the South-West just prior to a General Election in mainly Liberal Democrat and Conservative heartlands, not to say pro-hunting! But it does pose the question, why does helicopter procurement always get treated differently? For years Westland and AgustaWestland have lived in a non-competitive environment; the heavy-lift requirement in 1995 nearly went their way too, saved by some strong Boeing lobbying. The company has soaked up money for the EH101 where Government funding of some £300m plus was given on a premise of orders for 1000+ machines, the U.S. order would have helped get nearer this magical figure and returned some royalties. A huge sum was invested in the civil version which has yet to find a customer, unless you treat the Japanese Police as one. It also poses the question of utilising a thirty year old design which can only be upgraded up to a point in favour of new technology from the world’s largest helicopter company, Eurocopter

The Apache contract while nominally competed was always going Westland’s way. The other two competitors GEC and BAE were told that their bidding costs of some £15m could have been clawed back under unfair competition, but why upset your biggest customer? In addition the company’s EH101 was procured on a NAPNOC basis. One can understand the frustration and anger of such companies as BAE SYSTEMS who have been complaining about procurement policies for years, and here the Government hands out £1bn on a non-competitive basis, no wonder they are looking to the United States and others might follow at this rate, given the parlous state of the budget? Fingers crossed for the Government that this one goes well and they won’t be facing another NAO criticism!

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