Procurement: The Curse Of The Gorshkov

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November17, 2008: Russia is risking its reputation as a reliable source of weapons, and related services, over a botched deal to refurbish an old Russian aircraft carrier (the Admiral Gorshkov) for the Indian Navy. The latest twist in this four year old saga has Russia threatening to give the Gorshkov back to the Russian Navy if the Indians don't, again, come up with more money. All this is a sad tale of bungling, corruption, greed and lost blueprints. Work on the Gorshkov is about half completed. The 44,000 ton Gorshkov, was supposed to be delivered this year, and renamed the INS Vikramaditya. But now delivery has been delayed until 2012. The Russians admitted that this project suffered from inept planning, shoddy workmanship, and poor management.

The original price for the refurbishment of the of the Gorshkov was $1.5 billion. Building a Gorshkov type carrier today would cost about $4 billion, and take eight years. Last year, the Russians admitted there were problems, and demanded another half billion dollars to make it all right. India went along with that. But this year the Russians raised the price again, and now want $3.5 billion for the job, and an additional four years. The Indians refuse to pay, and the Russians are playing hardball with one of their biggest arms export customers.

Given that India currently has $10 billion worth of Russian military items on order, and has been Russia's biggest, and most profitable customer for military equipment for decades, the Gorshkov is looking to be an error of gigantic proportions. The boss of Sevmash naval shipyard, when the Gorshkov deal was negotiated, has been fired and is under criminal investigation, on suspicion of financial mismanagement. Naturally, the Indians were not happy, and at first insisted that the Russian government (which owns many of the entities involved) make good on the original deal. India sent its own team of technical experts to Russia, and their report apparently confirmed what the Russians reported, about shipyard officials low-balling the cost of the work needed. This is a common tactic for firms building weapons for their own country. It gets more complicated when you try to pull that sort of thing on a foreign customer. The Russian government initially offered to cover some of the overrun cost. But now they insist that India cover all the costs, or lose the ship entirely. There's no word on whether or not the Indians would get any of their money refunded.

The Admiral Gorshkov entered service in 1987, but was inactivated in 1996 (too expensive to operate on a post Cold War budget). India is building another carrier, from scratch, but that 37,000 ton vessel won't be ready until 2015. India's sole aircraft carrier, the 29,000 ton INS Viraat, is currently spending 16 months in a shipyard getting maintenance and upgrades, leaving India with no carrier capability. This was to have been avoided by the timely arrival (this year) of the refurbished Russian carrier. If that had happened, the INS Viraat would have been retired in 2012, after 53 years service (for Britain and India). But now the INS Viraat will get its engine and hull refurbished, and its electronics upgraded, and possibly serve for another decade.

 Unless the Russians suddenly backtrack and offer to eat the overruns, this is not going to end well for anyone involved. Indian officials believe that they can persuade the Russians to make a deal that will be more acceptable.

 

 


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