Sweden Says No to Less Expensive Air Defence: Dagens Industri Has Document That Proves A French Deal Would Save Billions
(Source; Dagens Industri; published Nov 26, 2017)
(Published in Swedish; unofficial translation by Defense-Aerospace.com)
This slide obtained by Dagens Industri shows that France’s Eurosam quoted a price of €850 million for the SAMP/T medium-range air-defense system it offered to Sweden, or about 50% less than the cost of the Patriot that Sweden finally chose. (DI document)
STOCKHOLM --- Dagens Industri can today reveal that Sweden has received an offer for French air defence systems which is significantly lower than the SEK 10-12 billion that the Swedish government plans to spend on initial procurement of the Patriot system. The competing French package would cost SEK 8.5 billion and covers the entire need of the Armed Forces.

SEK 8.5 billion for a full arsenal of French weapons or SEK 10-12 billion for a smaller number of American missiles that are not enough to protect Sweden - these are two cost options available when the Swedish Armed Forces procure a new medium-range air defence system.

If, or when, a second instalment of Patriot is eventually decided, the figures could increase to SEK 8.5 billion against SEK 25 billion, 30 billion or perhaps 40 billion. Nobody knows, today, how much the Patriot system will cost when the contract is signed, while the French have already committed to a so-called target price.

These figures are set out in classified documents from negotiations between the FMV and the French company Eurosam. Dagens Industri (DI) has also viewed other documents relating to FMV's talks with the French.

The price indications for the alternative French offer are being kept so secret that not even the opposition parties in the Parliament are aware of the figures. The question is how many people in the government are?

According to DI sources, FMV and Eurosam/OCCAR were, as late as April, preparing a deal, and were planning to sign contracts before the end of the year. But three weeks ago, the government instead decided to acquire Patriot, and instructed FMV (the Swedish defense materiel administration) to open negotiations with the United States.

As DI has previously reported, the FMV was left to implement the decision. In its November 7 press release, FMV said that the Patriot purchase "is estimated at just over SEK 10 billion."

What is little known is that FMV had already obtained a significantly lower cost for the Patriot’s direct competitor, the SAMP/T from Eurosam. France also guaranteed that the fire units would be delivered to Sweden in 2019, thereby allowing the Armed Forces to reach an initial operational capability in accordance with the 2015 defence agreement.

One of the documents that DI has obtained is a Eurosam presentation that was distributed at a meeting on April 6th. The document describes what will be delivered and when, the cost as well as a number of other commitments to Sweden. It also showed how the French have adjusted their offer in 2015, 2016 and 2017 to meet the requirements of FMV and the budget of the Armed Forces.

At the April 6 meeting, Joakim Lewin and Magnus Astell from FMV, Thorbjörn Johannesson and Jan Ohlsson from the Armed Forces met with Eurosam's CEO Michel Vigneras. The aim was to allow Eurosam to introduce a so-called ROM price, that is, "rough order of magnitude", an estimate of costs.

In the type of negotiations between Eurosam and FMV, ROM is an indicative price or target price for a quotation. The price in the contract can differ by +/- 10 percent. In this deal there was a clear chance that the price would be pushed down further in the final negotiations.

When the meeting began, the Swedes were excited about the cost of the French offer. In its evaluation, FMV had already found that SAMP/T met the Armed Force's requirements of performance and potential.

The French side said its ROM price was 850 million euros, corresponding to SEK 8.5 billion kronor. It concerned both deliveries for Sweden's Initial Operational Capability (IOC) as well as its Full Operational Capability (FOC).

According to DI sources, the price indication was in line with FMV's expectations. Eurosam also said the target price could come down to 800 million euros, or 8 billion kronor. According to DI sources, the meeting continued in a positive atmosphere, even with representatives of the Armed Forces.

Sweden also got the opportunity to make a smaller part-purchase at a favourable price. The document from the meeting of April 6 states that Eurosam announced in 2016 an indicative fixed price of EUR 400 million, corresponding to SEK 4 billion, for an initial delivery of two fire units and missiles - the same type of smaller part-purchase that is estimated to cost 10-12 billion kroner for the Patriot system.

Since SAMP/T is launched vertically, and its radar has 360-degree coverage, each fire unit with only two missile launchers is able to cover a larger area than an entire Patriot battery.

A single SAMP/T fire unit and one other lorry would be enough to engage simultaneous incoming targets from all directions around the F7 in Såtenäs, one of Sweden's most important air bases.

The April 6 meeting was the final negotiation between FMV and Eurosam, and FMV was later forced to announce that it had no mandate to negotiate further.

French President Emmanuel Macron personally tried to break the deadlock during his meeting with Swedish prime minister Stefan Löfven, government sources state sources to DI. But on Thursday (Nov 23) it was clear that the Parliament’s Defense Committee forces the Government to inform the Parliament about an acquisition of the Patriot before taking a final decision.

(EDITOR’S NOTE: The Patriot offer is not only about 50% more expensive than Eurosam’s, as DI reports here, but despite this higher price it can only deliver three of the four fire units that Sweden needs to protect all of its territory.
Furthermore, the cost of further Patriot follow-on deliveries and upgrades cannot be estimated in advance, and conclusion of an FMS sale as Sweden intends will commit it to keeping its Patriots at the same standard as the US Army’s, whatever the cost.
Finally, Patriot deliveries can begin in 2020 at the earliest, while Sweden’s requirement is for 2019 deliveries – which Eurosam has guaranteed.
The original Nov 6 statements by FMV and the Swedish Ministry of Defence are available here.)


FMV Interview: "Basically, There Is No Price Negotiation"
(Source; Dagens Industri; published Nov 26, 2017)
(Published in Swedish; unofficial translation by Defense-Aerospace.com)
At the FMV, nobody wants to comment officially on the negotiations with Eurosam and the price information that France has submitted to Sweden. On the other hand, the FMV holds the door open to a French deal - if the offer on the Patriot becomes too expensive.

"What we have got now is a mandate to negotiate the Patriot and then we will report the results when we are done. Because this is an intergovernmental agreement, it is a government decision under the constitution," says Joakim Lewin, Planning Officer at the FMV. FMV's counterpart is the US Defence Security Cooperation Agency. If the deal is executed, the US Government will sell Patriot to Sweden through the Foreign Military Sales (FMS) process.

The possibilities of negotiating an FMS price are limited. It is not even certain that the Swedish Armed Forces budget of SEK 10-12 billion is enough for the purchase three fire units and missiles, let alone the four fire units Sweden requires. "Basically, it's not a price negotiation, but there are other things to negotiate that bring added value," said Joakim Lewin.

Q: You have already said you want the stuff. Is it not difficult to negotiate price and added value?
A: "Yes, you can never negotiate price directly in a FMS deal. Poland has received a price for Patriot and Romania another, but the difference is due to offset deals”.

Q: The meeting held on April 6 with Eurosam – which you attended - shows that you have had deep discussions with the French.
A: "Yes, we've had deep discussions about both options."

Q: What did you think of the offer presented by the French? You had obtained pretty good conditions.
A: "Yes, that's our job. I do not comment on individual offers, but our job is to get the best possible options. "

Q: I have documentation from the meeting. The interesting part is that you at the FMV were completely prepared to go ahead with the French, and sign contracts.
A: "Yes ... so, we found out as much as we could about both options and then we presented both options. The Armed Forces took note of this, analysed the security threat scenario, and then advocated the Patriot option. "

Q: Is it possible that the Patriot becomes too expensive when negotiations with the United States have ended?
A: "Yes, it can happen. We cannot know until we have tried. "

Q: If it gets too expensive - are we back to square one?
A: "Yes."

Joakim Lewin states that there are two good air defence systems that meet each other.

"We do not think SAMP/T is a bad solution. It's a great system. There are advantages and disadvantages of both options. Whichever one chooses, it will be a big boost for the Armed Forces” he says.


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