Identifier
Created
Classification
Origin
05ANKARA2024
2005-04-07 12:58:00
CONFIDENTIAL
Embassy Ankara
Cable title:  

BOEING PLAYING OUT ITS FINAL ACT IN TURKEY'S

Tags:  MASS MARR MCAP TU 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 002024 

SIPDIS

STATE PLEASE PASS TO EUR/SE AND PM/DTTC

E.O. 12958: DECL: 03/30/2015
TAGS: MASS MARR MCAP TU
SUBJECT: BOEING PLAYING OUT ITS FINAL ACT IN TURKEY'S
ATTACK HELICOPTER TENDER

REF: A. ANKARA 1588

B. ANKARA 1557

Classified By: Political-Military Counselor Tim Betts, reasons 1.4 (d)

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 002024

SIPDIS

STATE PLEASE PASS TO EUR/SE AND PM/DTTC

E.O. 12958: DECL: 03/30/2015
TAGS: MASS MARR MCAP TU
SUBJECT: BOEING PLAYING OUT ITS FINAL ACT IN TURKEY'S
ATTACK HELICOPTER TENDER

REF: A. ANKARA 1588

B. ANKARA 1557

Classified By: Political-Military Counselor Tim Betts, reasons 1.4 (d)


1. (C) Summary: Despite having raised with Post multiple
concerns about the Terms & Conditions (T&Cs) in the attack
helicopter tender issued by Turkey's Undersecretariat for
Defense Industries (SSM) on February 10 (ref a),Boeing
remains engaged in a dialogue with SSM over modifications
that might permit the company to submit a proposal. SSM
appears eager to keep Boeing in the game and the Turkish
General Staff (TGS),which had not commented on the tender
until US contractor concerns surfaced, has now engaged in the
discussion. However, Boeing officials do not expect SSM to
satisfy all of the company's concerns in order to allow the
company to bid and view their outreach efforts as a final
gesture of goodwill. End Summary.


2. (SBU) US-based Boeing representatives came to Turkey on
March 29 to discuss a list of concerns about Turkey's attack
helicopter tender with the SSM Aviation Department head and
helicopter project team. According to a read-out of the
six-hour meeting provided to the US Office of Defense
Cooperation (ODC),Boeing executives explained to SSM that
Boeing would not be able to participate in the tender if it
remained as currently written. Boeing's objective for the
meeting was to determine if SSM would show any flexibility in
the T&Cs to alleviate Boeing's issues with the tender, which
mirror those of Bell Helicopter, which withdrew from
competition on March 18 (ref b). These include: Technical
Data Package (TDP) transfer and updating for 35 years;
contractor liability for performance of integrated Turkish
components; submission of preliminary US Government
authorization and/or licenses with the June 10 proposal
submission; mandatory performance bond replenishment and
SSM's right to make unlimited performance bond drawdowns; and
a 60% offset obligation.


3. (SBU) Boeing additionally raised several company-specific
concerns, including SSM's requirement for the adaptation of
an SSM-approved Quality Assurance System (Boeing will not

change its quality system); contractor compensation for
obsolete components over 30-35 year period; and a Boeing
requirement for specific language in the liabilities section
to insulate its commercial aircraft business unit. According
to the Boeing officials, SSM exhibited some willingness to
consider Boeing's concerns and asked for a complete listing
of Boeing's issues in writing, along with suggested
alternative tender language. However it also requested
Boeing obtain from the USG a letter stating the USG would
grant all required export licenses. Boeing officials told
ODC that they rejected outright the request for a letter from
the USG but agreed to provide the written list of concerns.
They did not provide us with a timeframe for the response.


4. (SBU) In discussions with ODC, the US-based Boeing
representatives were circumspect about the company's ultimate
decision on participation in the tender, and declined to
share the company's concerns in great detail. However they
did reveal that Boeing's latest cost estimate for
participation is $4M-$4.5M, or $2M higher than originally
thought: $2-$2.5M to write the bid and $1.5-$2M to conduct
the aircraft demonstration and live fire test.


5. (SBU) Boeing's Ankara representative was more forthcoming
when he returned from consultations in Seattle. In his
estimation, Boeing was just completing the final act of a
play with a known ending. It would meet its commitment to
provide SSM with suggested contractual changes to address its
18 concerns but did not expect SSM to agree to enough of them
to persuade the company to submit a proposal. Since Boeing
considers all 18 "show stoppers," SSM rejection of just one
could stop the company from bidding. A senior Boeing
executive would visit Turkey in the coming weeks to emphasize
this position with SSM and to remind the Turkish Land Forces
Command that it could acquire Apache helicopters through the
Foreign Military Sales program. If SSM does not concede
enough to allow Boeing to bid, to discourage SSM from trying
to keep Boeing in an fruitless dialogue the company would end
the communication until shortly before the June 10 bid
submission deadline, at which time it would announce its
withdrawal from competition.

6. (C) Following SSM's meeting with Boeing, Undersecretary
Murad Bayar told ODC Chief General Sutton that SSM had not
been particularly surprised by Bell Helicopter's decision not
to bid given Bell's negative experience with the failed
initial tender. However, he emphasized that losing Boeing
would be a very bad outcome for the overall competition of
the tender. Therefore, SSM is willing to consider changing
those contract items and T&Cs that Boeing declares to be
absolute "show stoppers," if they are submitted soon in order
to adjust the T&Cs for all bidders. Aviation Department
Chief Sedat Guldogan told Deputy PolMilCouns his impression
was that Boeing had arrived at the meeting with SSM prepared
to withdraw from competition, but seemed more encouraged by
the end of the day. He asked for any information the Mission
could share on Boeing's latest thoughts on the tender. After
checking with Boeing, we plan to tell Guldogan that the
company is making a good faith effort to be able to bid, but
the T&Cs are making it very hard to do.

7. (C) SSM appears eager for recognition of its outreach
efforts to US contractors. Guldogan told Deputy PolMilCouns
and ODC Defense Cooperation and Acquisitions Officer on March
22 that the tender had been altered even before issuance to
limit the replenishable bid bond to 20% of the contract value
and to limit contractor simple negligence liability to 20% of
the contract value in response to concerns voiced by ODC.
SSM had also agreed to a request by US defense contractors
for bilateral meetings following the March 10 Bidders'
Conference and to the March 29 meeting with Boeing in order
to demonstrate its willingness to accommodate US corporate
concerns. Guldogan asked the Embassy to urge US companies
not to leave the final decision to lawyers, suggesting they
look beyond the contract terms to consider that SSM had never
exercised its right to draw down a bid bond. Separately, the
Turkish General Staff (TGS),which had refrained from comment
about the tender until the US concerns were raised, sent LTG
Babaoglu, Chief of Plans and Principles, to review in detail
with ODC officials the US contractor issues. Judging by his
questions, ODC does not believe LTG Babaoglu was familiar
with the details of the tender before the discussion.


8. (C) COMMENT: While the signs would suggest that Boeing
will ultimately withdraw from the tender, it is making a good
faith effort with SSM to work through its concerns and has
not made a decision to withdraw. SSM appears equally
inclined to work for Boeing participation. TGS engagement is
a positive sign, although we are unsure if they are prepared
to act to ensure a US bid. We share Boeing's pessimism that
SSM will not be as flexible as the company needs to keep it
in the game. But for now the game continues. END COMMENT.
EDELMAN