On 10th October Les Palmer talked to Members about his time in Jakarta negotiating the first Indonesian Hawk contract for Mk53 aircraft, spares and support. In his introduction Ambrose Barber explained the function of the Contracts Department as landing the fish that the Marketing Department has hooked
Prior to Les’s 1977 arrival in-country to join Bill Bedford at the
Jakarta Hilton the preliminary marketing effort had been carried out by
Peter Martin (he of the black eye patch) and Johnnie Johnson, both of
them sadly no longer with us. Peter had been an RAF Hunter pilot flying
in the ‘Confrontation’, an undeclared war in Borneo with Indonesia over
the creation of Malaysia. He flew against the now Air Vice Marshal Moch
Slamet, Inspector General of the Indonesian Air Force, so they
immediately had a rapport. Johnnie had been the CO of Changi RAF base
in Singapore at the same time so was also considered an old adversary,
Changi being just 20 minute’s flying time from Indonesian territory.
Indonesia, continued Les setting the scene, is a country of 240 million people with the largest Muslim population in the world, 90% of whom are literate speaking over 400 languages. The 4,000 mile long archipelago is made up of 17,500 islands, 6,000 of which are inhabited. The city of Jakarta houses 10 million people and next door to the Roman Catholic cathedral is the largest mosque in SE Asia which 120,000 worshipers can attend, and not far away is the largest Buddhist temple in the world, Borobudur.
Les found the first setback was that no loan had been arranged for the Hawk purchase, the usual provider, Lloyds Bank, having refused because the Indonesian Bouraq Airlines had defaulted on a loan for HS 748s. Also there was general political antipathy towards the Indonesian military because of the internal conflict in East Timor. A Finnish bank operating in Jakarta also refused but they recommended the US Manufacturers Hanover Trust bank and they agreed to loan Indonesia the funds for the eight Hawks.
So now Les was ready to talk contracts with the assistance of HSA’s
local agent, Raharto, who proved to be invaluable with his many
influential contacts. But Les found that the negotiating phase had not,
in fact, been reached and that there was still an evaluation going on
between the Hawk, the Macchi MB339, the Alpha Jet and the Czech L29.
argely due to Bill Bedford’s charm, knowledge and experience as a pilot the competing aircraft were eliminated during a lengthy series of technical discussions. The atmosphere changed when civilians joined the talks together with army Colonel Slamet Shalib representing the Minister of Defence, General Habbib, for detailed examination of the draft contract, paragraph by paragraph, under the chairmanship of Air Vice Marshal Suwongso. Also joining in the talks were Dr Normin Pakpahan from the Ministry of Finance and Dr Almatseer from the Ministry of Plans who simply opposed everything! Consequently progress was slow; too slow for Gen Habbib.
By now Christmas was approaching but Bill and Les were advised not to go home but HSA management thought they should see their families and, anyway, they wanted some first hand reporting on all the money that was being spent. So home they flew.
They arrived back in Jakarta when the first presidential election was in full swing, January 1978. All the civilian negotiators were absent awaiting the outcome of any government changes. After the election, which the existing president won, work resumed and much progress was made… until the vexed question of price ‘escalation’ arose. This concept was not recognised in SE Asia. However an Air Force ‘expert’ Colonel Sudarsono’s wildly inaccurate calculation showed that HSA’s formula would lead to the final contract total price hugely in excess $40m. This resulted in a dead stop. The saviour was the UK Embassy Commercial Councillor who guaranteed that the formula used by HSA was from official UK Government documents.
The next hiccup was caused by the change in Company name from Hawker Siddeley to (nationalised) British Aerospace. All the Indonesian staff officers’ paperwork cited HSA as the seller and unscrambling this was a major setback because the customer was worried that, as the UK Government owned BAe, there might be government interference in the sale. A sweaty Les guaranteed that there would be no such interference. In the event there was none - whew!
They were now at the financial stage where hard numbers would be agreed. Then came a shock from Col Sudarsono who stated that $40 million was the absolute maximum, not a penny more, and Les was already well over that figure. However help came from the Buying Office at Kingston who negotiated lower margins with suppliers, but the Rolls-Royce man in Indonesia would not agree to reduce the price of the 11 engines plus spares. This was resolved satisfactorily between Kingston and Rolls-Royce top management who agreed to a reduction, celebrated amicably with the local R-R man over afternoon tea with cucumber sandwiches in Bill Bedford’s room, number 1127 - yet another example of Bill’s gift for smoothing the way.
The Air Force had wanted the expensive Red Arrows type smoke system but much simpler inexpensive American Sanders wing tip smoke pods were substituted. Meanwhile Dennis Whitaker, Paul Knight and Eddie Hunt had carefully sorted out the product support aspects, spares and ground support equipment and Ted Pincombe had resolved an addition required in the cockpit. The contract price was now just under $40 million.
The way was now clear to recreate the much adjusted 32 page contract document - in a bare office without air conditioning, no photocopier, no computer, a mechanical typewriter but no typist. Again, Bill to the rescue; he courted a typist from the British Embassy and got her to come and type out the new contract. This she did leaving Les and Bill to collate the copies but, disaster, there was one page missing which was found screwed up in the waste paper basket; and no typist. Once more Bill solved the problem by going to the next door establishment, a military brothel, and getting one of the girls to iron the page.
The contract was submitted to the Indonesian authorities and Les was
invited to a “contract initialling ceremony” at the Air Force
headquarters where the document was presented on a cushion by a
glamorous lady and each page was initialled by Les and the Air Vice
Marshal Suwongso, Chairman of the Hawk contract committee. After the
government decree was issued the contract could be signed. Both Les and
Bill had power of attorney but Bill was to sign for BAe because he was
so well thought of by the Air Force.
The ceremony was attended by Colin Chandler, who flew in from Korea, John Coombes and some HQ people. There was a buffet party afterwards with a band on the lawn (all paid for by BAe) but Les couldn’t stay. He had to rush off to the Bank of Indonesia for Manufacturers Hanover to generate the signal confirming that the contract was signed. The exchange rate was struck in New York and the money was transferred to BAe. Luckily an exchange rate profit was made which went towards paying for the seven months of expenses. Next the support items were introduced by Change Orders.
Written into the contract were options for more aircraft which allowed the Indonesian Air Force to short-cut their system and just keep signing, so in quite a short time the order went up to 20 aircraft. One follow-on contract was signed off in half an hour. Bill was all set to rush off and signal home when Les said, hold on, lets have a couple of days in Bali first!
Indonesia had been a difficult place to work but living at the Jakarta Hilton with its 32 acre garden, beautiful rooms and lovely staff had kept Les and Bill sane. Les praised Bill, saying he was the key man who charmed the Air Force people and made the contract possible.
Les’s talk gave an insight into a very important part of the business that is little known to those outside the Contracts Department and he certainly showed how, to follow Ambrose’s analogy, they had to play the fish before landing it.
The vote of thanks was given by John Glasscock who observed that the
very effective sales organisations like that described by Les have been
dismantled by BAE Systems because employing agents and paying
commissions is no longer permitted.