Tuesday, March 31, 2009

Iraq to Pay 100% Premium for Helicopters through Carlyle Affiliate?

The Iraqi government ordered 22 military helicopters through an intermediary, ARINC. The Carlyle Group purchased ARINC in October 2007. Defense Industry Daily tracked the story. It said:

WIRED’s Danger Room reports a $325 million contract to the Carlyle Group’s ARINC for 22 Mi-17s. That WIRED report raised a number of questions about the deal, beginning with its a cost that could be up to 100% more than other Mi-17 orders around the world. The report also questioned the lack of any competitive solicitation, despite the existence of numerous Mi-17 sources and brokers in North America and abroad.
Other elements have ARINC purchasing Russian helicopters and funneling them through a United Arab Emirates firm. How many middlemen are needed? How do multiple hands, each with a profit requirement, impact the final purchase price?

Welcome to American purchasing, buying that enriches friends. The Carlyle Group leverages this at every turn.

When the producer is many steps removed from the final customer, it's a disaster for price and quality. 100% markup on a sale? That should help Carlyle meet their targeted 30% annual return. (It turns out no helicopters have been delivered and the Pentagon approved another $80 million for the purchase. Carlyle's government connections continue to pay off for ARINC, not for the people of Iraq). The Government-Industrial Monstrosity is Eisenhower's Military-Industrial Complex on steroids.

Update 8-4-11:  ARINC delivered all 22 premium priced helicopters to Iraq.