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2011  -  DND


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DND Procurement  –  Helicopters and Disposals  –  June 2011

Sea King Disposal: Yet another Danish Example of Procurement
Practices that Actually Work —  and, in this Case, Make Money!

In March/April 2011, the Danish military announced that they were preparing their old Sikorsky S-61 [1] SAR helicopters for sale. No big deal ... the Danes had finally arrived at a reasonable point in the drawn-out attempt to field reliable EH-101 SAR helicopters.

Canadians who have followed the servicability travails of the CH-149 Coromorant fleet and the dragged-out attempt to replace CF Sea King shipboard helicopters will feel the Dane's pain. But, of more interest, is the Danish process of procurement and disposals. And those two processes are intimately linked  in the Danish system. As aircraft types age and become more difficult to maintain, a replacement type is selected and purchase begun. This will have been agreed to, and budgeted for, in the Four-Year Defence Plan.

Danish military procurement is handled by Forsvarets Materieltjeneste or  the Defence Acquisition and  Logistics  Organization.  DALO is responsible for disposal of surplus military equipment as well. This makes DALO equivalent to DND's ADM (Mat) aka the Materiel Group. ADM (Mat) also has a golem called DSAL ( Disposal, Sales, Artefacts & Loans ). What DND lacks is the sensible linkage of  Danish military procurement: the Defence Plan agrees purchase and assures budget; DALO initiates purchase plans and oversees service entry; unsuccessful service introduction results in retaining the older system until  'bugs' are worked out; successful service introduction results in disposal.

Different for Danes –  DALO Disposals or Why Now-Surplus Assets Remain Assets

How Danish military disposals differ from Canadian is partly procedural but also about attitude. ADM (Mat) loves biz-admin jargon about Life Cycle Management but part of a life cycle is death and decay. For any CF replacement project, DND will first announce the lack of any remaining value in the item to be replaced. Try selling used cars that way! A case in point  is the last helicopter type made redundant by the CF and sold off  through DSAL, the Labrador.

CH-113 Labradors were bought as SAR helicopters at the same time as the Sea Kings. By the time the CH-113s retired in 2004, the tired Labs were derided as unflyable death- traps. The surplus aircraft were parked at CFB Trenton and their sale was contracted to Lancaster Aviation. Despite the in-service denigration, all the Labradors were bought by Columbia Helicopters for heli-logging.  Luckily, the Oregon-based firm saw value in these maligned helicopters but not because of any real sales effort from DSAL or DND.

It helps to pay attention to the details. Public speculation that Columbia might snap up the surplus Labradors began before those helicopters were officially retired – if DSAL knew that, they might not have needed to farm out disposal to a contractor. Or is such 'situational awareness' cultural perhaps? Something must explain that  DSAL doziness.

Contrast with DALO's effort at disposing of  the S-61s.  First, this sale was handled by DALO itself.  Great emphasis was put on the high-quality maintenance lavished on the aircraft. Terms of sale were flexible (no insistence on a 'lot' buy ) resulting in a finalized sale within three months of  launch. The sale garnered  Danish taxpayers something of a windfall.  In constant dollars, the 46-year old helicopters sold for half again what was originally paid for them.[2] No storage fees, no contractor fees, just money in the bank.

Timing Turns up Trumps with Triton – or Making Your Own Luck with Observation

As in all things, timing is also critical. So is luck. The Danish procurement system may be more sensible but it helps that Sikorsky is currently hungry for any used Sea Kings. The reason is a fat contract to supply the US State Department with 110 uprated S-61s.

The Sikorsky S-61T Triton represents a modest rebuild of old Sea Kings, upgraded with 'glass' cockpits and  Carson's composite rotor blades. As the news release says,  if  all goes well,  the ex-Danish S-61s will be "in Iraq before the end of the year." S-61Ts cost a fraction of modern helicopters and avoid embarassment. [3]

Ironically, this means that Canada's much-despised fleet of shipboard Sea Kings might actually be worth more now than was paid for them in 1963-'65.  But  it is safe to predict that DSAL will miss this boat too. With replacement shipboard helicopters, the CH-148 Cyclone, running behind schedule, Sikorsky isn't likely to be knocking on DND's door about buying surplus Sea Kings. And short of that, how will DSAL ever hear about it?

Translated text of  the 06 June 2011  Forsvarets Press Release on the S-61 sale follows:

S-61 helicopters have been sold  —  S-61 helikopterne er blevet solgt

Forsvarets Materieltjeneste [in English DALO, the Defence Acquisition and Logistics Organization] has now sold the Air Forces' seven old Sikorsky S-61 rescue helicopters, accessories packages, and spare parts.  The buyers will collect the helicopters as soon as possible from the Karup Air Base [ Flyvestation Karup, located  in central  Jutland ].

2011-06-06 - hrs. 13:14

It's a complex process to sell military helicopters, but DALO has succeeded in selling Denmark's old Sikorsky S-61 Sea King rescue choppers. The S-61 has been replaced in Danish Air Force service by EH-101 Merlin helicopters. These aircraft now take on the tasks that the old rescue choppers performed in the decades after 1965 when the S-61s were delivered to the Danish military.

In all, seven S-61 helicopters, spare parts, and accessories packages have been sold. The overall selling price is around 40M DKK [ Danish Kroner = Cdn $7.5M ], a good price which can be attributed to an overall high standard of maintenance. The original purchase cost in 1965 was scant USD 690,000 [$4.875M in current USD] per helicopter.

Sold to three different buyers

Arrangements for the sale of the seven Danish S-61s gave market options priority for sake of a quick sale. The good price is due to the willingness to sell these helicopters, their accessories, and  the spare parts as separate packages. To facilitate the S-61 sale, DALO sought legal advice from chamber counsel [Kammeradvokaten, a legal counsel who advises outside of  the courts] in the final phase of  the sale.

All three S-61 buyers are from the United States. The buyers for most of the S-61 spare parts were Electronic Manufacturers Associated Inc. and Clayton International Inc. All seven helicopters, accessories packages, and  some spares were bought  by Helicopter Support Inc., which is [a wholely-owned subsidiary of ]  Sikorsky Aircraft Corporation.

If everything goes according to plan, the ex-Danish S-61 helicopters will be renovated, upgraded and resold to the US State Department for civilian use in Iraq before the end of the year. Such a quick turnaround is only possible because of  maintenance quality.

Important work before the sale has been finished

Even though the sales contracts have been signed, the seven S-61s have yet to leave Danish soil. DALO, in collaboration with  Helicopter Wing Karup,  must now separate spares packages for individual buyers and  prepare helicopters  for shipment.  Buyers can collect aircraft and spares at  Karup after export and import permits are completed.

[1] The seven aircraft include six  S-61A-1s (three of  which are not currently airworthy) and a single S-61A-5 combining features of  the 'A-1 model and S-61D export Sea King.

[2] Admittedly, the used helicopters on offer did also include "accessories packages".

[3] At present, US government officials in places like Iraq and Afghanistan rely heavily on Russian Mil helicopters for aerial transport. For comparison, a S-61T costs US $8M, used Soviet-era Mil Mi-8s about US $4M and new-built Mi-17s around US $6.5M each.

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