Another Helicopter Tender Part 2

One of the two Leonardo AW189 9M-BOE of the Fire and Rescue Department as seen stored at the Leonardo hangar in Subang in March 2018. Malaysian Defence picture.

SHAH ALAM: In an earlier posting entitled Another Helicopter Tender, Malaysian Defence wrote about a tender for four helicopters for the Malaysian Maritime Enforcement Agency – Agensi Penguatkuasaan Maritime Malaysia (MMEA/APMM). The tender was published in June last year and was supposed to close in July but it was later extended to August 19. More importantly, the validity of the tender was supposed to end on January 15 and today is already February 1.

Hong Kong based Government Flying Service (GFS) Airbus H175. Airbus

Checks with industry sources indicated no decision has been made. I am guessing here but it is likely that they will have to re-tender the procurement process with a new validity date. In the earlier post, I guessed that the Home Ministry tender board will not have enough time to decide and get it endorsed from the minister due to the political changes brought about by the general election.
Leonardo AW139
MMEA Leonardo AW139 landing onboard a ship. APMM

It may be one of the reasons that the tender failed to find the winning bid. There is also another reason, all the bids were much higher than the reserved allocation. I have no inkling of the allocation for the four helicopters, but it is unlikely more than RM450 million. Why? Because of the list price of the helicopters being sought even with public security equipment – FLIR turret, NVG compatible cockpit and winching gear – should not be more than RM450 million. This include the Leonardo AW189 and the Sikorsky S-92. The Airbus H175 is much cheaper than both helicopters while the bigger H215 is just slightly more expensive the former.

Out of the seven bids for the tender, the cheapest was RM486 million while the highest was RM770 million. I am guessing two of the bids – the lowest and the second lowest (RM488 million) was from the same people with two companies and the same type of helicopter. Another group representing another helicopter, bid with three different companies (RM529 million; RM559 million and RM590 million). While another company offering another type, bid with two entries (RM755 million and the highest bid, see above).

APMM AS 365 Dauphin – M70-01

Even the cheapest bid meant that the helicopters would cost some RM121 million each which is meant that the ministry cannot go ahead with the procurement. This the reason I have stated that with even open tenders, our security services will not get the right equipment and especially numbers to do their job properly. It is likely we can get better prices if we open the tenders to OEM. Since we tend not to buy the maintenance package, reserved them for local industry players, if indeed we want to allow the industry to grow instead of helping out marketing agents.

Hopefully, the special one will be able to see this as well and make the necessary changes to our procurement rules.

— Malaysian Defence

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9 Comments

  1. Fully agree with your point. Ita time now we stop the practice of procuring from local agents. Buy from the manufacturer direct.
    Then get the Co to lay their plans on how to develop local talents in maintenance

  2. Mat Bon – ”Ita time now we stop the practice of procuring from local agents.”

    It’s part and parcel of the current system remember? On paper it’s intended to ensure local companies gain revenue and eventually contribute in a tangible way – so goes the theory.. In truth only a select few companies are actually offering any value; the rest are merely part of the gravy train as part of a system which caters for it.

    Defence procurement has become part of the patronage system [happened during Dr. M’s tenure] and we won’t do away with the local agent syndrome because it’s politically ingrained in our extremely flawed system and because we have an inability to learn from our mistakes.

  3. “even open tenders, our security services will not get the right equipment”
    The problem isn’t of the process (open tender) but therein lies the issue of unrealistic expectations and thus underbudgeting, the same thing that plagued the LCS. One way they did to help is removing the maintenance & service package to lower the buy in price, which then can be plug into OPEX instead of CAPEX.

  4. I agree with Marhalim and other in that open tenders should only be open directly to OEM instead of middlemen eventhough the same middleman will do all the servicing and maintenance. Just another oppurtunity for more rakyat money to be wasted. If PM X really hold on to his words, he should already known this and do something already.

  5. The main issue isn’t open or closed tenders, its the need to have a local Malaysian company fronting any purchases. Sometimes OEM will use agents because its cheaper and easier to sell (e.g., small contract value / market). It can be a closed tender and the OEMs might prefer a subcontractor to avoid the paperwork and contracting challenges. It can be an open tender and OEMs might still prefer to be a subcontractor for the same reason. In larger deals, OEMs might prefer direct negotiation for better control of project outputs and outcomes (as well as pricing). But that is not possible because a very specific type of local partner is always required to front projects.

  6. luqman – ” If PM X really hold on to his words, he should already known this and do something already.”

    Get real. ”PMX” is part of the system and has no intention to change things. The system is intended to generate revenue for selected Bumi companies and is part of the patronage system. ”PMX” will not change it.

    kel – ”Sometimes OEM will use agents because its cheaper and easier to sell”

    ”Sometimes” OEMs will choose local agents because it’s a requirement..

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