Price comparisons with inadequate assumptions - Saab comments on Norwegian evaluation

Following are the part of Saab comment regarding price issue on the Norwegian choice of fighter aircraft and a number of ambiguities in the Norwegian evaluation. A key argument for Gripen is its extremely competitive life cycle cost. Compared to competing aircraft Gripen is a cost effective alternative. Therefore, it was a great surprise to Saab when the Norwegian evaluation committee concluded that Gripen would have a higher life cycle cost. It is not consistent with what we know of the costs of keeping different air crafts operational over time. If the claimed estimates are correct it would be cheaper for Norway to obtain JSF, even if Sweden would have developed and given 48 Gripen Next Generation (NG) as a gift to Norway. It should be unreasonable. It also turns out that the Norwegian estimates to a large extent rests on previously undisclosed conditions and complex re-calculations and assumptions. It is Saab’s assessment that only 20 percent of the Norwegian evaluation committees cost estimates are based on the facts presented in the Swedish offer. Remaining estimates represents, according to our view, assumptions and self-made estimates, not based on information that has been confirmed by us. The number of aircraft has been changed from 48 to 58 and the operational life cycle has been extended from 25 to 35 years. These are two new conditions entirely decisive for the calculation. That these calculations to a large extent have been conducted without dialogue is most unusual and has contributed to an incorrect picture of the alternatives.

Three examples of assumptions which have great effects on the calculation concerns upgrade costs, crashes and fuel consumption. It is our view that the calculations have a weak or non-existing relation to the Swedish offer or from the gathered experience of Gripen. Saab’s own calculations of upgrade costs are based on 50 years of experience of developing and upgrading fighter aircraft to customers in Sweden, Denmark, Finland, Austria, Hungary and the Czech Republic. Norway has applied its experiences from the F16 to these costs – a very different and in important aspects non-comparable aircraft. Upgrade costs according to the Norwegian calculation are several times higher than the costs Saab and Swedish authorities have calculated and provided.

Our estimated value of fuel consumption is based on experience from 120,000 flight hours with Gripen. Even though the Norwegian specification of requirements seeks lowered fuel consumption, the evaluation committee chooses to raise the values we have provided, adding further additional costs. The cost for replacing aircraft is part of the estimation, with the assumption that almost half of the aircraft fleet will crash in 35 years. This is completely unfounded if applied to Gripen’s statistics. This also adds further billions to the calculation. Further to this is a number of questions that the Norwegian evaluation group has chosen not to respond to, such as what specific currency rate was used, what price was used for calculating purchase of further aircraft, what other considerations in the calculation that had the procurement price as basis for the calculation and how much the weapon procurement was estimated to.

Saab has not received any information that makes us change our understanding of the accuracy of our initial calculation. However, should we adjust our calculations according to the new information, Gripen is still faced with a total cost that substantially falls short of the published figures. The evaluation has undergone external quality inspection in Norway. Given that there are in our view many apparent unreasonable assumptions and calculations regarding the economic evaluation, it reasonably also casts some doubt over the operational evaluation.

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