India's AW101 Contract Faces Cancellation

Cancellation of India’s contract to buy 12 VVIP helicopters from AgustaWestland appears imminent, despite the fact that the helicopter-maker has until Nov. 26 to plead its case with the Indian Defence Ministry, according to MoD sources.

However, while India wants to send a strong message against corruption, going so far as to blacklist AgustaWestland is not the preferred option among bureaucrats in New Delhi, an MoD source said.

AgustaWestland is accused of using corrupt practices to win the contract in 2010. The Indian government halted the contract to buy 12 AW101 helicopters this year after Giuseppe Orsi, who was CEO of AgustaWestland at the time of the contract before becoming CEO of parent company Finmeccanica, was arrested in Italy and charged with paying bribes to secure the Indian deal.

New Delhi stopped payments on the contract and referred the matter to the Central Bureau of Investigation. The corruption charges are under investigation separately in Italy and India. Orsi has denied wrongdoing.

AgustaWestland has until Nov. 26 to reply in detail to an MoD-imposed show-cause notice.

The MoD said the contract with AgustaWestland includes specific contractual provisions against bribery and the use of undue influence.

In addition, AgustaWestland signed an Integrity Pact effective for five years from the date of signing, or until the contract is executed, whichever is later. The penalties include forfeiture of the earnest money and performance bond, cancellation of the contract without giving any compensation, recovery of all the sums already paid with interest, cancellation of any other contracts with the bidder and debarment from entering any bid with the government for at least five years, which may be extended.

Past blacklisting of six overseas defense companies on charges of corruption have adversely affected several weapon projects, especially the artillery purchase of 155mm/52-caliber guns. The blacklisted companies include Denel of South Africa, Singapore Technologies, Israel Military Industries and Rheinmetall of Zurich.

While the Indian Army privately says that blacklisting is a retrograde step, analysts feel a strong message should always be sent against corruption.

“You cannot damn the government for not taking any action to deal with instances of corruption and damn it when it does,” said Amit Cowish, a retired MoD bureaucrat. “What action is appropriate under the circumstances is a matter of opinion, and there could be an endless debate on this. It would be unfair to assume that whatever action the Ministry of Defence takes is going to be inappropriate. What is wrong with the government sending a strong message that it is serious about combating corruption?”

Blacklisting AgustaWestland would hit the company, which is also taking part in the Indian Navy’s tender for purchase of 56 naval utility helicopters and another tender for the purchase of 14 medium-lift helicopters for the Coast Guard.

AgustaWestland, meanwhile, has appointed a former Supreme Court Judge, Justice B.N. Srikrishna, to represent the company in arbitration proceedings.

AgustaWestland has delivered three helicopters to India, but three others ready for delivery have instead been sold elsewhere, Alessandro Pansa, the CEO of AgustaWestland parent Finmeccanica, told analysts on Nov. 8. Pansa did not name the new customers for the helicopters.

In response to a global tender in 2006, AgustaWestland’s EH-101, later known as the AW-101 helicopter, beat the Sikorsky S-92.

During trials, the S-92 could not meet all the Staff Qualitative Requirements as the US helicopter did not have a suitable system to warn the pilot about any missiles fired at them, could operate only up to 4,500 meters and could not hover high above the ground.

The AW-101 did fulfill all the requirements, said an MoD source.

If the AgustaWestland contract is canceled, the chances of Sikorsky being considered as the preferred choice is not likely, the MoD source said, adding that India could instead purchase Russian Mi-17V helicopters, which it has already contracted. [via]