bloomberg.com,
Talks between Germany and Deutsche Telekom AG, Siemens AG and International Business Machines Corp. on the country's biggest public-private project are progressing well, Defense Minister Peter Struck said.
Germany wants the companies to replace and maintain its armed forces' terrestrial phones and its computer systems for 6.6 billion-euros ($8.6 billion) over a decade. The Telekom-led TIS venture, which has yet to make a bid, is in exclusive talks to gain the project after a rival bid dropped out last year.
Struck hopes public-private ventures, in which companies arrange financing that is repaid by the government in installments, will help stretch payments for projects from satellite-based intelligence systems to uniforms. Germany has cut defense spending in real terms since 2002, delaying plans to raise equipment outlays as missions abroad multiply and unemployment erodes growth in government revenue.
Dubbed Herkules to reflect the contract's size, the project “is designed to improve the entire information technology'' of the armed forces, Struck told reporters in Berlin. “We will take a decision by the end of March,'' he said.
Defense projects, including the Eurofighter combat jet and the A400m transport plane, have been delayed as industry and parliament wrangle over cost overruns and obsolete designs in long- term projects. Lawmakers have fixed spending on Herkules, now two years overdue, at an annual 660 million euros, plus interest on loans, for a decade.
`Promising' Talks
TIS will bid for Herkules in February, said Joern Roggenbuck, a Munich-based spokesman for Siemens Services. Pre-bid talks with the Defense Ministry have been “constructive and promising,'' he said. He couldn't give details on how the companies would share work from the contract.
Former preferred bidders ISIC21, a group led by Computer Science Corp. that included the European Aeronautic, Defense & Space Co., dropped out last year after a dispute over a planned profit margin of about 300 million euros, lawmakers including Elke Leonhard, a Social Democrat, said.
The army, which has drawn up a contingency plan to renew its personal computers and thirty year-old phone system, has demanded a free PC and phone upgrade from bidders, claiming original designs outlined in the public tender for Herkules are obsolete. Base closures since 2001 led to savings on the project that protect the winning bidder's margins, army generals said.
The winning bidder must also enroll army civilian technicians to run the system, Leonard said in an interview last June. CSC and EADS initially said they didn't need the staff.
