Israel's Ministry of Defense today announced that Israeli defense electronics developer Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) would lead the project for developing and procurement of IDF self-propelled artillery in the coming years. The defense industries in Israel have been awaiting the Ministry of Defense's decision on this matter for the past few months. Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) led a consortium in partnership with Israel Military Industries Ltd. (IMI) and German company KMW for joint production of the future cannon. Sources close to these companies, however, were worried that the Ministry of Defense would give the giant venture to Elbit Systems under a single supplier deal for the program.
The Ministry of Defense was careful to maintain ambiguity in the media concerning the decision-making process for this question, declining to spell out its considerations in considering the future cannon. The plan is prestigious and expensive. The monetary value of the project was not stated, but defense sources previously estimated the cost of procuring the guns would be at least $800 million.
Defense sources today said that a special committee in the Ministry of Defense Administration for the Development of Weapons and Technological Infrastructure had analyzed all of the alternatives for the future IDF cannon, and had recommended to Ministry of Defense director general Maj. Gen. (res.) Udi Adam that the Elbit Systems proposal be accepted. The sources added that the committee members had received professional opinions from all the relevant parties in the defense establishment, and that the director general's approval had been legal. Adam is a former IMI chairman.
The gun selected by the Ministry of Defense, which Elbit Systems will develop and produce in the coming years, is the Atmos 155-mm self-propelled howitzer. The IDF demanded a weapon capable of firing six shells a minute at a range of 40 kilometers. The new howitzers will gradually replace the obsolete M-109s that the IDF Artillery Corps has been using for several decades.
Elbit Systems has been active in this area since it acquired Yokneam-based Soltam in 2010. It has sold similar cannons to armies around the world. In order to meet the specifications set by the Ministry of Defense, however, it developed a new version of the howitzer, for which informed defense sources said the initial firing trials would take place only one month from now.
While Elbit Systems is preparing for firing trials of the new cannon, German company KMW, through IAI and IMI, offered the AGM system, which complies with the IDF specifications. Sources close to these companies recently asserted, however, that even though the companies had offered to bring the German howitzer to Israel for a series of demonstrations in order to prove its capabilities, and especially its ability to supply it more quickly to IDF forces, the Administration for the Development of Weapons and Technological Infrastructure had rejected the proposal.
Two months ago, "Globes" revealed that in a closed discussion in the Ministry of Defense, a senior official had decided that the future cannon would be based completely on Israeli industry, with an eye to installing future revisions in it in accordance with the IDF's operational needs, and for reasons having to do with intellectual property.
According to the senior source, production of the future cannon should be in Israel in order to avoid future restrictions on how it is used under various battle scenarios, including the types of shells that can be used. This requirement, according to the source, was made clearer in the process of drawing conclusions from Operation Protective Edge in the summer of 2014, and by concern about a weapons embargo or other restrictions that could be applied to Israel in a future war.
Sources involved in the matter today refused to cite a timetable for the supply of the new artillery systems to the IDF. At the same time, some of the sources argued that the decision to select Elbit Systems as a sole supplier in the project, rather than publish an international tender soliciting additional bids for making the cannon, was very good news to residents of northern Israel. This project is likely to provide jobs for 1,500 employees in the Yokneam and northern region for many years.
In the past, however, other sources said that the IAI bid would also have been good news for residents of outlying areas, because IAI planned to establish assembly lines for the German howitzer at IAI's RAMTA division in Beer Sheva. Orders for this division have been unstable in recent years.
A defense establishment source recently said that 40% of the deals by the Ministry of Defense had been with sole suppliers, and had been exempt from a tender or any other competitive process, even if such a process could have resulted in lower prices.
Published by Globes [online], Israel Business News - www.globes-online.com - on April 4, 2017
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