See CAG report full text on IAF helicopters: http://www.cag.gov.in/html/reports/defence/2010-11_7AFN-PA/chap1.pdf
Chopper scam: PMO, former NSA, 2 ex-IAF chiefs swung deal in Agusta’s favour, CAG says
A file photo of AgustaWestland (AW101) VVIP Airforce Helicopter. (PTI photo)
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The report discusses in detail how the ministry of defence, at the behest of the PMO, modified some crucial parameters of the operational requirements of these helicopters in 2005 to favour the Anglo-Italian consortium, which became the sole vendor as a result.
The deal is under investigation, both in Italy and India, for alleged payment of 51 million euros (Rs 350 crore) in kickbacks.
The CAG's finding pushed the UPA government on the defensive, with the opposition going ballistic as soon as the 38-page report was tabled in Parliament. MK Narayanan was the NSA in the period under question while Fali H Major and SP Tyagi were the IAF chiefs.
The CAG, which has been under attack from the government and Congress, noted that though the IAF headquarters had in January 2004 emphasized that the altitude requirement of helicopters be kept at 6,000 metres as "an inescapable operational necessity", the ministry of defence (MoD), in consultation with the PMO, lowered this to 4,500 metres.
Moreover, the MoD, at the behest of the PMO and as per instructions of the then NSA, mandated that the choppers for the VVIP fleet ought to have a cabin height of 1.8 metres: a requirement which eliminated competition and allowed Agusta-Westland to become the sole vendor, the report said. "Our examination of the process of framing service qualitative requirements (SQRs) revealed that SQRs so revised led to a resultant single vendor situation again," CAG observed.
The decision to acquire eight VVIP choppers was first taken in August 1999 during the NDA rule.
After floating tentative operational requirements and request for proposal, the technical evaluation committee had shortlisted three helicopters — Mi-172 of Kazan, Russia; Eurocopter's EC-225 and AgustaWestland's AW-101.
However, after flight evaluation, only EC-225 was found worthy, leading the then PMO to observe that single-vendor situation should be avoided and operational requirement could be revised.
In subsequent meetings with officials from the MoD, IAF and the PMO, it was decided to lower the altitude requirement and cabin height.
CAG, however, questioned the government's decision to make the cabin height mandatory at 1.8 metre which removed all competitions for AgustaWestland.
"Air Headquarters, therefore, opined that making cabin height of 1.8 metre a mandatory operational requirement would lead to a single-vendor situation as in that case, only AW-101 of AgustaWestland would comply with all the SQRs," the CAG report said.
The MoD, however, in its response (April 2013) stated that all six vendors to whom the RFP was issued (in September 2006) had the capability to provide helicopters having cabin height of 1.8 metre or above.
But CAG rejected the ministry's response, saying, "It is not acceptable as at least one of the vendors (European Aeronautic Defence Space Company) to whom the RFP was issued in 2006 did not have a helicopter with required cabin height of 1.8 metre." It added, "The fact that making cabin height 1.8 metre as a mandatory requirement, the competition was restricted which led to resultant single vendor situation again."
On the cost factor, the CAG observed that in January 2006, when acceptance of necessity was granted, the projected cost was Rs 793 crore for 12 helicopters. The cost negotiation committee, however, recommended Rs 3,726.96 crore in February 2009, and a year later, the MoD concluded the contract with AgustaWestland and signed the deal for the same amount.
The auditor found that the benchmarked cost of the deal was worked out to Rs 4,877.50 crore, which was more than six times the estimated cost of 2006.
The auditor said Air headquarters' insistence on holding the trials abroad "lacked justification". Air Chief Marshal Fali H Major was the then air chief.
"Although, RFP of September 2006 had clearly stipulated the necessity of sending the desired units of equipment to India for field evaluation in varying climatic, altitude and terrain conditions on 'no cost no commitment' basis, we observed that both shortlisted vendors did not send their helicopters to India. During technical discussions, both the vendors expressed difficulties in providing their helicopters in India for the field evaluation and suggested that the field evaluations be carried out abroad at the sites suggested by them," the audit said.
The audit also pointed out that although AgustaWestland had initially offered (Feb 2007) to provide an AW-101 helicopter for field evaluation trial, yet they finally offered only representative helicopters, Civ-01 and Merlin MK-3A and a mock up of the passenger cabin, stating that the helicopter offered by the vendor was still in its developmental phase.
http://timesofindia.indiatimes.com/india/Chopper-scam-PMO-former-NSA-2-ex-IAF-chiefs-swung-deal-in-Agustas-favour-CAG-says/articleshow/21813680.cms
Contract deviated from rules: CAG
Manu Pubby Posted online: Wed Aug 14 2013, 01:26 hrs
New Delhi : The entire process to procure helicopters for VVIP travel — from framing technical requirements in March 2005 to the signing of the deal in February 2010 — deviated from the rules and several undue exceptions were granted to winning contender Italian firm AgustaWestland’s AW 101, according to a special audit report on the controversial deal.Taking a strong line on the deal that is currently under investigation for bribery charges after a series of reports in The Indian Express, the CAG report has revealed that the IAF did not even test the AW 101 during field trials in Italy, opting for only “representative helicopters” as the machine was not ready for trials.
It also says that the then Air Chief Marshal F H Major insisted that trials be carried out in the UK and US, despite objections from Defence Minister A K Antony that the “fidelity and credibility” of the tests could be compromised if conducted abroad.
The CAG report raises questions about the fairness of the trial process, saying that although a single trial directive was issued, the IAF in 2008 chose to employ different methodologies for the evaluation of the the two contenders —the AW 101 and S 92 — in contravention to the Defence Minister’s directions.
Dissecting the contract from 1999, when the requirement for new VVIP choppers was first put up, the CAG says in its report that deviations started after the UPA I government gave its go-ahead to the project and initiated the contract in March 2005.
The key change in technical requirements, currently being probed by the CBI, was the reduction of the service ceiling from 6,000 metres to 4,500 metres that enabled the Italian firm to participate.
While the defence ministry in a detailed statement issued earlier this year put the blame for the critical changes on the NDA government by citing a 2003 meeting by then NSA Brajesh Mishra where the matter was discussed, the CAG report says the changes were actually initiated in 2005.
Even after the meeting by Mishra in 2003, the IAF had in 2004 stuck to its position that the service ceiling should not be reduced. In a presentation to the Defence Secretary in January 2004, Air HQ said a 6,000 metre service ceiling was an “inescapable operational necessity” as many areas in the north and northeast are accessible only with such a capability.
However, just a year later in March 2005, months after Air Chief Marshal S P Tyagi took charge, the IAF changed its stance and the requirement was relaxed, the CAG report says. A new requirement for 1.8 metre of cabin height was also introduced.
Tyagi has been named in an FIR by the CBI that is currently probing the case.
Bribe money: CAG report boosts CBI case
The CAG report on the VVIP chopper deal has strengthened the CBI case on the allegations of bribery to fix the contract in favour of Italian firm AgustaWestland by pointing out a vital link with a software company that is under the scanner for being the route through which money exchanged hands.
The report has revealed several discrepancies in the offset programme associated with the deal that mandates that at least 30 per cent of the contract value of Rs 3,546 crore has to be invested in the Indian defence sector. While it says several programmes which were to be considered as offsets were not compliant with rules, the report specially points out a contract with software firm IDS Infotech.
The firm had been named in 2008 as one of the Indian offset partners of AgustaWestland that said it has given the Mohali-based company a contract for translation of drawing of the AW 129 helicopter into software. This had been accepted by the Defence Ministry’s Technical Offset Evaluation Committee. But the CAG report says the “details regarding type of services and export orders to be executed by IDS Infotech was not clearly indicated in the offset contract”.
As reported by The Indian Express, a key document in possession of Italian investigators that has been shared with CBI is a copy of a contract between IDS Infotech and AgustaWestland dated January 2007 that promised a “compensation” of five per cent of the value of the deal if the Italian firm won the tender.
The agreement says AgustaWestland will utilise its “engineering activity and consultancy” in case it wins the chopper contract and the “compensation” agreed is that IDS Infotech would be engaged to get “business for minimum of five per cent of the total value of the order”. It is signed by then AgustaWestland MD Bruno Spagnolini, currently facing trial in Italy.
Italian investigators believe the engineering and software contracts were the route through which a part of the alleged bribe money was routed.
The CAG says that while IDS was listed as an offset partner since 2008 it was replaced in August 2012 with AgustaWestland saying the work identified under the project had been completed prior to February 2010 when the chopper deal was formally signed with India.
http://www.indianexpress.com/story-print/1155112/
It also says that the then Air Chief Marshal F H Major insisted that trials be carried out in the UK and US, despite objections from Defence Minister A K Antony that the “fidelity and credibility” of the tests could be compromised if conducted abroad.
The CAG report raises questions about the fairness of the trial process, saying that although a single trial directive was issued, the IAF in 2008 chose to employ different methodologies for the evaluation of the the two contenders —the AW 101 and S 92 — in contravention to the Defence Minister’s directions.
Dissecting the contract from 1999, when the requirement for new VVIP choppers was first put up, the CAG says in its report that deviations started after the UPA I government gave its go-ahead to the project and initiated the contract in March 2005.
The key change in technical requirements, currently being probed by the CBI, was the reduction of the service ceiling from 6,000 metres to 4,500 metres that enabled the Italian firm to participate.
While the defence ministry in a detailed statement issued earlier this year put the blame for the critical changes on the NDA government by citing a 2003 meeting by then NSA Brajesh Mishra where the matter was discussed, the CAG report says the changes were actually initiated in 2005.
Even after the meeting by Mishra in 2003, the IAF had in 2004 stuck to its position that the service ceiling should not be reduced. In a presentation to the Defence Secretary in January 2004, Air HQ said a 6,000 metre service ceiling was an “inescapable operational necessity” as many areas in the north and northeast are accessible only with such a capability.
However, just a year later in March 2005, months after Air Chief Marshal S P Tyagi took charge, the IAF changed its stance and the requirement was relaxed, the CAG report says. A new requirement for 1.8 metre of cabin height was also introduced.
Tyagi has been named in an FIR by the CBI that is currently probing the case.
Bribe money: CAG report boosts CBI case
The CAG report on the VVIP chopper deal has strengthened the CBI case on the allegations of bribery to fix the contract in favour of Italian firm AgustaWestland by pointing out a vital link with a software company that is under the scanner for being the route through which money exchanged hands.
The report has revealed several discrepancies in the offset programme associated with the deal that mandates that at least 30 per cent of the contract value of Rs 3,546 crore has to be invested in the Indian defence sector. While it says several programmes which were to be considered as offsets were not compliant with rules, the report specially points out a contract with software firm IDS Infotech.
The firm had been named in 2008 as one of the Indian offset partners of AgustaWestland that said it has given the Mohali-based company a contract for translation of drawing of the AW 129 helicopter into software. This had been accepted by the Defence Ministry’s Technical Offset Evaluation Committee. But the CAG report says the “details regarding type of services and export orders to be executed by IDS Infotech was not clearly indicated in the offset contract”.
As reported by The Indian Express, a key document in possession of Italian investigators that has been shared with CBI is a copy of a contract between IDS Infotech and AgustaWestland dated January 2007 that promised a “compensation” of five per cent of the value of the deal if the Italian firm won the tender.
The agreement says AgustaWestland will utilise its “engineering activity and consultancy” in case it wins the chopper contract and the “compensation” agreed is that IDS Infotech would be engaged to get “business for minimum of five per cent of the total value of the order”. It is signed by then AgustaWestland MD Bruno Spagnolini, currently facing trial in Italy.
Italian investigators believe the engineering and software contracts were the route through which a part of the alleged bribe money was routed.
The CAG says that while IDS was listed as an offset partner since 2008 it was replaced in August 2012 with AgustaWestland saying the work identified under the project had been completed prior to February 2010 when the chopper deal was formally signed with India.
http://www.indianexpress.com/story-print/1155112/