In a last-minute twist, General Electric of the US has bagged the hotly contested $800-million tender to supply 99 engines for India's Tejas light combat aircraft (LCA). After both engines in the contest -- GE's F-414 and Eurojet's EJ-200 -- were found technically suitable, the F-414 has been declared the cheaper option.
The choice of the GE-414 engine boosts the chances of America's F/A-18 fighter and the Swedish Gripen NG in the $11-billion tender for an Indian Air Force medium fighter. Conversely, it is a blow to the Eurofighter, which is powered by twin EJ-200 engines.
In the initial commercial bids, opened in mid-September, Eurojet ($666 million) had bid lower than GE ($822 million). But, after two weeks of intensive evaluation by a defence ministry price negotiating committee, GE has been ruled the cheaper option.
"After evaluation and acceptance of the technical offer provided by both Eurojet and GE Aviation, the commercial quotes were compared in detail and GE Aviation was declared as the lowest bidder. Further price negotiations and contract finalisation will follow," the Defence R&D Organisation (DRDO) announced today.
DRDO insiders say the price negotiating committee held several meetings for clarifications with Eurojet and GE representatives since the commercial bids were opened. After factoring in these clarifications, the GE engine was found to be cheaper.
The decision to buy the GE engine had been taken last week, but was only announced today in Bangalore in the presence of representatives from both companies.
Eurojet executives complain that a revised bid, submitted by them last night, was not taken into account.
Top DRDO officials emphatically reject any suggestion that US pressure had resulted in turning around the decision in favour of GE. "We had to factor in several expenses that the companies had not included in their bids. This is not surprising, since this was an extremely complex bidding process. But, after we evaluated and added in all expenses, GE was the cheaper vendor," said a senior DRDO official.
Company and DRDO sources say the additional expenses added on to the Eurojet bid included the cost of extra transfer of technology that the company had offered and the price of tooling to build the engine in India.
Although narrowly pipped at the post, Eurojet has not given up hope. Said Eurojet Business Development Executive Paul Herrmann: "We remain optimistic about this tender. Over the next year, I believe the Indian defence ministry will encounter problems in obtaining US sanctions for transfer of technology relating to the GE engine. And, if GE fails to meet these Indian requirements, the contract will come to us."
In a statement, the company said: "We expect further details from Indian authorities and more information about the process leading to the announced selection."
Defence ministry indicate that negotiations with GE will continue at least until mid-2011. Thereafter, the US company would be given 121 days (plus an allowable extension of two months) to obtain permission from the US government to transfer technology to build the engine in India.