In the world of military contractors, these are known as ‘variation orders’ and ‘ancillary contracts.’ One may notice that these serve as the primary channels for commissions once the main contract is sealed.
The ceremony of launching the PNS Mangro, Pakistan’s third Hangor-class submarine, was all pomp and naval prestige; however, behind the celebratory speeches lie the real money-makers of the deal: the follow-up contracts. Large defence procurements like the Hangor never end with the delivery of the hulls. They spawn a host of smaller projects – how else will the rich get richer? Spares, shore support, simulators, extra tools and training packages, every auxiliary aspect that can be exploited for profit, is. In the world of military contractors, these are known as ‘variation orders’ and ‘ancillary contracts.’ One may notice that these serve as the primary channels for commissions once the main contract is sealed.
Beyond the Launch Ceremony
When a submarine is launched, or any ship for that matter, cameras flash away, and dignitaries salute. But within weeks, procurement officers start floating modification requests, with calls for advanced sonar, upgraded missile systems, extra crew quarters or speciality repair workshops. Each request is treated as an addendum to the original contract, technically necessary on paper, but redundant beyond being a tool to channel money from ‘black’ into ‘white’.
In Pakistan’s case, a worrisome matter is that the Hangor deal might pose additional addenda under the guise of national security, though upgrades and repairs typically follow after working periods of a minimum of 5 to 10 years. By classifying these variations as classified, officials can award them without open tendering through the PPRA. The defence audit board has already flagged the propensity to bypass bidding by chunking jobs into increments for favoured suppliers. That same tactic can easily hide the people who shall profit from each new piece of hardware or service(s) rendered.
Even the seemingly mundane items are profit centres. An investigation by an Indian defence journal, RNA Media notes, that “numerous ancillary contracts, such as spares, shore support, simulators, training packages…” become “potential revenue streams for middlemen or favoured contractors”. All the Pakistani citizen needs to do, is to take a pause and think of the myriad of extra parts a sub needs, which, by a matter of sheer luck or stupidity, weren’t provided for during the procurement, nor do the spares of the same exist inside Pakistani warehouses.
Materials such as extra oxygen scrubbers, replacement periscopes, life-raft systems, and diesel engine overhauls, all sold through long-term contracts, are going to burn through the pocket of the Pakistani taxpayer. Every nut, bolt and sensor might be priced with a margin. Likewise, training the crew in China or Pakistan typically involves expensive courses and equipment simulators. These training contracts are rarely publicised, but they easily run into tens of millions of dollars. Persons well-versed in similar scenarios have warned that while the base boats make headlines, it’s the hidden service agreements that really fatten the wallets of those in the loop.
Spares and Support: Cash Lanes
The naval warfare business is notorious for its maintenance expenses. Over a submarine’s life cycle, the cost of spares and repairs can exceed the purchase price. In the Hangor’s case, each boat is 2,800 tonnes of hardware, and with AIP (air-independent propulsion), its logistics train runs even more complex. All that gear must be maintained, and Pakistan has contractually committed to stockpile spare parts. The Naval News commentary on the launch explicitly mentions a transfer-of-technology plan, implying Pakistani yards will require tooling and technical assistance. But how were these support contracts negotiated? Were multiple firms allowed to bid for the submachine guns, sonar modules, torpedoes or Babur-3 missile launchers? If past deals and PPRA reports are any guide, the answer is likely no. Instead, preferred industrial partners, sometimes foreign, get sweetheart deals to supply Pakistan’s subs. Those partners, in turn, share a commission with their local sponsors.
In sum, what looks like a single $500–600 million submarine order is really dozens of smaller multi-million-dollar contracts. And each one is a potential “cash lane.” Rather than saving money through economies of scale, the pie is sliced and distributed. Service centres, software licenses, and even shore-based training schools are all lucrative avenues. For every add-on approved without oversight, the profit margin for insiders climbs, while the national ledger barely blinks.
At the Sailors’ Expense
Who actually pays in this arrangement? Not the admirals, who win their posts and plums, nor the generals who later run housing empires. It’s the sailors and technicians tasked with maintaining these ships who feel the brunt of the cuts. A classic example from the Agosta submarines is that officers received upgraded systems, but crews ended up working with mismatched parts and frequently experienced breakdowns. Analyses from several media houses bluntly warn that sailors may ‘inherit noisy, unproven submarines’ while others ‘extract profits from the paperwork’.
In modern naval warfare, silence and reliability are lifesavers, and if cost-cutting results in shoddy equipment, the crew’s safety may be compromised, which is unacceptable.
The Pakistani Hangor boats rely on a Chinese CHD620 diesel engine rather than the original German models, raising concerns about both reliability and noise levels. The engine swap was necessitated by export controls, but it accentuates these hidden cost conundrums. Even as extra profits are being eaten from the budget, performance might be sacrificed. A submarine that is noisier or less well-equipped isn’t just less effective; it’s a hazard to its crew in wartime.
Meanwhile, the high price of these hidden extras has real opportunity costs. Every rupee poured into overpriced simulators or luxury accommodations is a rupee not spent on better pay or training for the sailors. In effect, the usual beneficiaries are the same old players, politicians, retired officers, and favoured firms, whilst frontline personnel inherit only the headaches of a harder job and a more complicated maintenance regime.
(Ashu Mann is an Associate Fellow at the Centre for Land Warfare Studies. He was awarded the Vice Chief of the Army Staff Commendation card on Army Day 2025. He is pursuing a PhD from Amity University, Noida, in Defence and Strategic Studies. His research focuses include the India-China territorial dispute, great power rivalry, and Chinese foreign policy.)
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