Pilatus tells HAL to negotiate directly with sub-vendors for licences
to use and maintain equipment
By Ajai
Shukla
Business Standard, 30th Nov 2014
Last
Saturday, the ministry of defence (MoD) postponed a decision on buying 106 PC-7
Mark II basic trainer aircraft from Swiss vendor, Pilatus, to supplement the fleet
of 75 trainers already contracted for Swiss Francs 577 million (Rs 3,727 crore).
The defence
ministry was not convinced by the IAF’s reasons for abandoning a 2009 decision
to buy 75 trainers from the international market in the “Buy Global” category;
while Hindustan Aeronautics Ltd (HAL) built 106 in the “Make Indian” category.
Now more
reasons are emerging for being cautious about buying additional Pilatus
trainers. It is unclear whether the IAF has informed the MoD of these.
With 53
PC-7 Mark II trainers already delivered and more on the way, Business Standard has learnt that
Pilatus is shrugging off direct responsibility for their maintenance, repair
and overhaul (MRO).
This after
Pilatus charged the MoD 80.25 million Swiss Francs (Rs 515 crore) for maintenance
knowhow to HAL in the contract signed on May 24, 2012. This so-called
“Maintenance Transfer of Technology” (MToT) was to be formalised in a separate
contract within three years.
With just
six months left for that deadline, there is no contract in sight, only
uncertainty about how the PC-7 Mark II trainers will operate over decades.
Pilatus has
told HAL --- which will eventually maintain the PC-7 Mark II fleet through its
service life after receiving maintenance technology --- to negotiate directly
with sub-vendors for licenses to use and maintain their equipment.
Pilatus
only assembles and integrates the trainer, using sub-systems bought from global
vendors. That means HAL will now have to seek licenses from sub-vendors that include
Pratt & Whitney; Honeywell Aerospace; Rockwell Collins; Claverham and
Ontic.
Pilatus has
flatly refused to be even a signatory to those licensing agreements.
According
to Pilatus, the PC-7 Mark II has 159 sub-assemblies, which are called “line
replaceable units” or LRUs (e.g. the engine supplied by Pratt & Whitney).
The MToT contract drafted by Pilatus covers just 65 LRUs. Pilatus says 72 LRUs are
non-repairable, which should just be thrown away when they go bad. Seven more
LRUs are the responsibility of the IAF; while the remaining 15 items are on
various countries’ “export control lists” and would have to be stocked in
advance.
Pilatus wants
HAL to negotiate individually with 29 global vendors that provide the 65 replaceable
items. There is no telling what price they will demand. When Pilatus charged Swiss
Francs 80.25 million for MToT, it did nothing to bind the sub-vendors to
conform to this price.
With
foreign vendors confident that the IAF has nowhere else to go, they are
negotiating for fees much higher than had been budgeted.
Contacted
for comments, Pilatus cited a confidentiality agreement with the MoD, but
stated that, “suffice it to say that we are working on this diligently to
achieve an acceptable outcome for the GOI and IAF. As Pilatus does not hold
authority over the individual companies regarding licensing of other vendor IP
rights, it is using its best endeavors to mediate between each company and HAL
to reach an acceptable position.”
A key
vendor, Honeywell, admits it is in “active discussion with HAL on this program”
for a “licensing arrangement”. Another vendor, Rockwell Collins, declined to
comment.
When the
main contract was being negotiated, HAL had alerted the IAF to clearly list Pilatus’
maintenance responsibilities. However, with the IAF eager to seal the contract,
Pilatus’s obligations remained vague.
Now the IAF
itself is passing the buck to HAL. In emailed comments, the IAF stated, “The
MToT of Pilatus was negotiated at contract negotiation stage by a team of HAL
specialists headed by a GM level officer… It will be a prudent to ask HAL
as to why they have not signed the MToT contract with Pilatus.”
Within six
months of the contract, Pilatus made it clear it would assume minimal
responsibilities. On November 30, 2012, a draft contract from Pilatus proposed
to confine MToT to facilities set up by HAL.
Pilatus repudiated
responsibility for renewing original equipment manufacturer (OEM) licences,
updating technical documents, software upgrades and maintenance of special
tools and test equipment --- which are standard MToT components. For these
India would require separate contracts at extra cost, over and above the 80.25
million Swiss Francs the main contract specified for MToT.
Under
Pilatus’ draft contract, India will have to pay for establishing maintenance
facilities like the Engine Test Bed. Pilatus would only provide the design.
According
to established norms, aircraft acquisition contracts include aspects of maintenance,
including details of initial repair kits, base spares, and licensing and
escalation mechanisms for 30 years.
(This is the concluding part of a two-part
series on the Pilatus trainer)