To arrive at a comparative price, audit adopted the price escalation formula and used the industrial cost indices published by the French National Institute of Statistics and Economic Studies. This was the Aligned Price, i.e., the price of 36 flyaway aircraft in 2016 if the prices were the same as the bid of 2007. This included going into the increase in cost of items used to make the aircraft and its weaponisation.
The contract consisted of six different packages with 14 items.
Price of seven items were higher than the Aligned Price, i.e., the price at which the contract should have been signed. Three items, including basic aircraft, were procured at the same price. Four were purchased at lower than the Aligned Price.
Overall, the contract of 2016 was concluded at 2.86% less than the price of the 2007 offer.
(Prices have been redacted by the CAG at the request of MoD)
SPEED OF DELIVERY
In 2007, the first 18 flyaway aircraft were to be delivered between 37 months and 50 months of signing the contract. In 2016, the first 18 aircraft were to be delivered in 36 to 53 months after signing of Inter-Governmental Agreement. The remaining 18 to be delivered in 67 months. This is better than the delivery schedule of 2007 by five months. However, with India specific enhancements, the aircraft will come in 71 months as against 72 months in the 2007 offer.
In 2007, Dassault Aviation had offered performance and financial guarantees, which were about 25% of the contract value. This was embedded in the bid cost. In 2016, there was no such guarantee. This led to savings for Dassault not passed on to India
METHOD OF SELECTIONMoD said the 36 Rafale IGA procurement was undertaken with the L-1 (lowest) bidder in the DPP (Defence Procurement Procedure).
CAG will come out with a separate report on all offset deals of the last five years for procurements by Army, IAF and Navy. The offset draft report has been sent to MoD for comments but is not likely to be ready before LS polls.
Rafale row: Who got a better offer? A comparison of UPA and NDA deals – Times of India