CTO Newsletter

Main headlines from this issue

Czech Republic prepared to defy EC and re-engage with offsets

The Czech Republic is considering re-engaging with offset. The country plans to embark on a major defence equipment acquisition program and will demand offsets on a case-by-case basis, starting with the requirement for 3D radar. The government will not publish rules or guidelines.

Saudi Arabia approves easier credit award process

Saudi Arabia has made no formal changes to its offset guidelines since 2007 or to how the authority is implementing their programs, but has made helpful adjustments to the way the guidelines are put into practice. The Economic Offset Committee declared in June 2013 that it intended to make significant changes to the guidelines, but appears to be in a state of stasis.....

Doubts remain as Kuwait “permanently” ends the offset policy

The Kuwaiti government has announced that the Cabinet has endorsed a proposal to liquidate the National Offset Company. A terse statement said: “The Council decided to permanently stop the offset program.”

Qatar to amend law – Qatari partnership to be mandatory

Qatar’s Shura Council has voted to revoke the law governing public procurement and to introduce changes to streamline and standardise the public procurement process. The proposed amendments will permit tenders valued at $250m or higher to be awarded to foreign entities provided they have a Qatari partner.

Australia: GPA negotiations stall over preferential treatment of SMEs

The Australian government’s negotiations for accession to the WTO Agreement on Government Procurement (GPA) appears to be faltering. Australia’s preferential treatment for SMEs would be prohibited on the basis that it indirectly discriminates against foreign entities.

Japanese delegation refuses to speak about submarine parts for Australian industry

A Japanese consortium competing for the $35.68bn contract to build submarines for Australia has irritated local suppliers by failing to share key information about its proposal or discuss specific collaboration possibilities during their visit. Australian defence contractors said they were rebuffed when they sought one-on-one meetings.

Main headlines from this issue

Elbit overcomes Swiss political battle, lands UAV contract with commitments to civil projects

Swiss offset volumes will receive a boost after a flat couple of years as a result of an unreported offset commitment. The Elbit program in 2015 will be one of the first to re-engage with Switzerland’s offset / industrial participation program.

India: DPP 2013 amended – partnership selection eased

India has amended Defence Procurement Procedure 2013 (DPP 2013) to allow foreign contractors to select partners at the execution phase of the contract instead of the evaluation phase. The change, which is retrospective and takes immediate effect, will make changing partners easier over the intervening period.....

South Africa: German shipbuilder joins competition for patrol vessels

German shipbuilder Abeking & Rasmussen has partnered with Rheinmetall Denel to bid for the supply of vessels to the South African Navy’s Project Biro. One of the challenges reported to be facing contenders will be complying with the varied and sometimes conflicting local content thresholds and industrial participation quotas.

U.S. companies engage with Danish contractors and provide access to U.S. market

Lockheed Martin and the Danish firm Systematic will co-operate on a project to establish an electronic warfare support system in Denmark. In return, SSBV-Rovsing will receive marketing assistance for its solar array simulator in the U.S. market.

Poland: MOD furious at allegations concerning selection of Airbus helicopters

Poland’s MoD has angrily rejected allegations in Wprost, a Polish weekly, that it broke procurement rules when it selected Airbus Helicopters. PZL-Świdnik has issued a lawsuit against the MoD alleging errors in the tender process. Now the MoD is threatening legal action against the weekly. The contract is no closer to being finalised, particularly the offset requirements.

Main headlines from this issue

Political stalemate leaves Belgium in a bind on IP policy, changes grind to a halt

Belgium’s coalition government remains deadlocked over its approach to defence industrial participation and has failed to approve or reject a pending IP proposal. The proposal was put forward last year for the forthcoming F-16 replacement program.

Australia: Submarine competition catches fire - Japan gets serious

A former commander of the Japanese navy, Admiral Takashi Saito, will head a 40-strong delegation to Australia this month to negotiate roles for local industry should Japan be successful in its bid for a submarine contract. The delegation will include government officials and specialists from Kawasaki and Mitsubishi.

“Blame Spain” for EU’S rampant embargo on defence offsets

Another manuscript has been published seeking to explain how the European Union, by challenging national defence offsets, brought discord to a formerly exclusive member state competence. The authors say, with indubitable understatement: “Our process-tracing analysis shows that the EU’s recent challenge of defence offsets was a case of supranational self-empowerment.”

Canada awards radar contract based on ‘value proposition’ policy

The Canadian Department of National Defence has awarded Rheinmetall-Canada and ELTA Systems, an IAI subsidiary, the Medium Range Radar (MRR) program. The deal used the Industrial and Technological Benefits Policy’s Value Proposition to rate and weight bid proposals.

BAE Systems overhauls Saudi industrial participation portfolio

BAE Systems is advancing its re-organisation of the group's portfolio of interests in a number of industrial companies in Saudi Arabia to comply with commitments under the Kingdom’s industrial participation program….. An expansion of the Omani program has also been agreed.

Main headlines from this issue

India: Eternal recommendations continue to land on Parrikar’s desk

The importance of being earnest has not occurred to India’s defence offset policymakers. As proposals and drafts bumble along, offset practice has become a grisly business with plenty of advice and little action. India’s \Committee of Experts for Amendment of DPP-2013\" chaired by former Home Secretary Dhirendra Singh has now prepared a cock-eyed construct for Defence Minister Manohar Parrikar....."

SQUIRM OF THE YEAR AWARD GOES TO 'MAKE IN INDIA'

Consulting firm Frost & Sullivan has selected the government of India for an award in recognition of the \outstanding contribution\" of the 'Make in India' program's “vision and implementation excellence.\"

The defence directive: The EDA and the EC are vying for advantage – “But at least they are playing the game”

Behind the triumphant words of press releases about the “harmonisation” of defence procurement in the EU, Defence Directive 2009/81/EU leaves many issues “flexibly unclear” and many questions unanswered. Dr Aris Georgopoulos argues: “The role of the EDA remains crucial.”

“EC USED DEBT ISSUE TO CLAMP DOWN ON GREECE’S IP ASPIRATIONS”

“The European Commission is angry with Greece not only because of the debt repayment question, but also Greece’s recent attempts to secure participation for local companies in a government-to-government agreement with the U.S. for the €500m upgrade of the P3 Orion surveillance aircraft.”

Korean professor says technology transfer for the F-35s looks impossible

The United States' reluctance to transfer core fighter jet technology is likely to derail South Korea's KF-X project to build indigenous combat planes, said Choi Jong-kun, a Professor of Politics at Yonsei University. \Given the data from DAPA the transfer of critical technology we wanted and we expected to get seems impossible……\"

Main headlines from this issue

India bumbles back to type as DPP 2015 fades away

Traditional political theatre has interrupted the publication of India’s latest Defence Procurement Procedure (DPP 2015). The Defence Minister has scrapped the plan and is now looking for an October release.

Finland welcomes an independent ‘go ahead’ to demand IP for the fighter replacement program

The Finnish government has accepted the recommendations of an independent study into its forthcoming Fighter Replacement Program. The study determined that the country’s derogation from the defence directive under Article 346 TFEU is justified: Finland can ask for industrial participation.

Oman’s new regulations will make multipliers of ten-plus achievable

The new Omani Authority for Partnership for Development regulations indicate that multipliers for inputs and outputs will range from 1 to 5. In practice, however, those multipliers may even exceed 10.....

Czech Republic celebrates offset benefits and prepares for more with new procurements

The Czech Republic’s economy has gained 31.6bn crowns ($1.3bn) since 2004 from the offset program associated with the lease of the Gripen fighters, Saab officials claimed. Opportunities for future benefit programs remain as the military prepares a number of procurements likely to meet the criteria for offsets under Article 346.

Israel: ICA to introduce penalties for obligors with a broken record

The ICA is to introduce non-performance penalties into offset contracts on a selective basis. The decision marks a significant departure from the policies of predecessors.

Main headlines from this issue

Huge relief as DoD waves indirect offset ‘cost analysis’ on FMS contracts

The U.S. Department of Defence has introduced an interim rule, effective immediately, that will ease the bureaucracy required for foreign military sales (FMS). The new rule no longer requires contracting officers to analyse indirect offset cost agreements between a U.S. defence contractor and an international FMS customer. One U.S. defence contractor described the change as “a blessing.”

Oman regulation confirms input/output approach and launches milestones

Oman has finally published its new Partnership for Development (PFD) regulations, the sultanate’s equivalent of an offset program. Although termed ‘regulations’, the PFD has structured a model designed to offer flexibility based upon a collaborative approach and.....

India is still seeking views for policy changes

Although India is due to publish its Defence Procurement Procedure policy document, DPP 2015 on June 30th, a Committee of Experts convened a meeting this month and listened in silence to recommendations.A delegate described the session as “technical” and “boring” with the usual points hung out to dry.

Airbus Group consolidates Indian operations as it pledges support for 'Make in India'

The Airbus Group has brought all of its Indian operations under one entity, Airbus Group India Private Ltd., in a move which the company said would allow it to greatly support the 'Make in India' initiative. India is the first international market where local operations are being brought under a single company as part of the Group's 'one roof' policy, the company said.

Australia launches bid to join GPA – offset policy may be at risk

Australia has formally launched its bid to join the Agreement on Government Procurement (GPA). The country said it planned to submit an initial market access offer for GPA accession within the coming months, which will trigger the negotiations on its entry terms.

Main headlines from this issue

Canada announces key policy changes and a new banking approach

The Canadian government has announced a number of enhancements to its Industrial and Technological Benefits (ITB) policy. The banking provision will be changed to boost the attractiveness of investing in Canada in advance of a contractual requirement…..The Investment Framework will increase from 5 percent to 25 percent of contract value the cap on investments in SMEs.....

Russia on course for a formal offset policy

Russia convened a meeting of the Council of Ministers in March to consider the development of offset legislation. The ministries of Economy, External Trade, and Finance were asked to produce a report on ways to increase knowledge of offset practice and to recommend a policy. The report is expected.....

India: D-Day is June 30th; DPP 2015 has stringent penalties, new nodal agency

On June 30th the Indian government will give contractors some good news. It will announce that an amendment to the country’s DPP 2013 will allow the offset policies introduced gradually between 2006 and 2013 to be applied retrospectively. India will also release a new plan: DPP 2015.

Poland: obligors should take an anxiety pill before approaching the MoD

The MoD has acquired just one person from the Ministry of Economy, and contractors will notice when they go for meetings that the offset team is completely new to offsets. Consequently they are inclined to require the obligor to come up with proposals and to figure out how the MoD wants to satisfy the obligation.

Australia to move all ‘Industry Engagement’ matters to the Department of Industry

In April the Australian government released a report proposing the abolition of the Defence Materiel Organisation (DMO) that that all industry engagement matters associated with defence procurements, currently Australian Industry Capability (AIC) and Global Supply Chain (GSC) plans, be moved to the Department of Industry to align with broader industry policies. The government has said the review will be implemented over the next two years.

Main headlines from this issue

South Africa lays out new plans for civil and defence industrial participation

The South African government has set out new strategies for its offset policies. The Industrial Policy Action Plan affects both civil and defence industrial participation. The new strategies will be developed in conjunction with sector desks, and will either become part of the general National Industrial Participation (NIP) guidelines or will be included as annexures to tender documents.

European Parliament committee censures EC’S stance over misuse of Article 346, calls for tougher action

The European Parliament’s ‘Committee on the Internal Market’ has published a report that severely criticises the approach of the European Commission and member states towards Directive 2009/81/EC. The committee, comprising MEPS from every member state.....

India circulates draft offset policy

A ten-member committee from India’s MoD has put a draft offset policy into limited circulation for comments by industry associations. The draft suggests that India will request ‘directed offsets’ with compulsory investment by obligors in selected manufacturing capabilities.

Kuwait: Another battle begins as minister decides to wind up ‘National Offset Company’

Kuwait’s Finance Ministry has said it will ask the Council of Ministers to approve the appointment of a liquidator to wind up the National Offset Company. The company’s former CEO told CTO he would oppose the move because the NOC was not properly established and cannot therefore be subject to liquidation.

Hotchpotch Ukrainian transporter to crash land in Saudi Arabia

Saudi Arabia is to manufacture aircraft under a joint venture with the Ukrainian manufacturer Antonov. The joint venture will build transport planes for military and civilian use in a deal strengthening the kingdom's drive to develop a domestic military industry.

Main headlines from this issue

Behind the shadows of Transparency International’s attack on defence offsets

Transparency International UK has landed another volley on the defence offset industry with a combination of poorly aimed punches….. Although the report reads as if approaching the climax of a disaster movie, a closer look reveals shortcomings in the methodology, and raises questions about the questions and the credentials of the reviewers.

Oman: New CEO will soon release new guidelines

Dr. Dhafir bin Awad bin Bader Al Shanfari, the recently appointed CEO of Oman’s Partnership for Development (PfD) authority, is approaching the final stages of an internal review of new policy guidelines.

India may curb indirect defence opportunities under offset contracts

Indian Defence Ministry officials said that the MoD is finalising an offset policy that will require foreign companies to set up manufacturing bases in India. The plan is to link the offsets policy to the 'Make in India' campaign because the conditions surrounding foreign investment have not been productive.

Australia: Union muscle likely to preclude economic benefits of a foreign submarine build

A report by a group of independent consultants has found that building naval warships in Australia would cost 30 to 40 percent more than in comparable overseas shipyards, but suggested the price premium could be halved with improved productivity. Australia’s shipbuilding industry is highly unionised.

MEP revives tirade against EC’S stand on Portuguese offsets

Ana Maria Rosa Martins Gomes, a Portuguese Member of the European Parliament (MEP), has restarted her crusade against the European Commission’s refusal to take action against the Portuguese government over alleged irregularities in the performance of offsets. The contracts relate to an historic submarine purchase.

Main headlines from this issue

Bilateral countertrade stumbles back from the dead

Bilateral countertrade, long thought to have died and been buried, appears to have won a second life. The appearances, though, may be no more than phantoms….. Now Thailand has stepped up engagement with Russia and China…. For Russia and China, a deal that exchanged rusting steel for eternal shipments of rubber, rice, and frozen chickens would be highly desirable.

Confusion as ministers give different takes on Russian missile and oil-for-goods deal with iran

The ghost of bilateral countertrade has been heard again in Russia. According to Deputy Foreign Minister Sergei Ryabkov, Moscow is supplying Tehran with grain, equipment, and construction materials in exchange for Iran's crude oil.....

U.S. closes eyes to the ‘Buy American Act’ and attacks Philippines for restrictive countertrade practices

The Philippines has made little progress towards opening up its market to American goods and services, according to the 2015 National Trade Estimate report published annually by the Office of the United States Trade Representative (USTR).

Poland’s Wisła program is full of empty promise, says former minister

Andrzej Karkoszka, Poland’s former Deputy Defence Minister, has cast doubt on the commitment of foreign suppliers to meet their requirements in the supply of the Wisła AMD program.

Turkey’s civil offset law is a paper tiger

Turkey’s Public Procurement Law on civil industrial participation/offset may have little practical value. The new regulations contain many ambiguities and inconsistencies, making the legal basis for the law untenable.

Main headlines from this issue

Civil offset stress test as Malaysia implements new policy

Malaysia has revised its approach to civil offset. The country now requires at least 40 percent of the projects to be identified and agreed before an Industry Collaboration Program main agreement is signed. The balance must be identified and agreed.....

South Korea: DAPA launches web site and introduces ‘Offset Challenge Products’

DAPA, Korea’s offset agency, launched a new English-language website on April 1 to provide information on Korean defence companies, their products, and the recently announced ‘Offset Challenge Products’ policy. OCPs is a confusing name but means.....

Kuwait’s Finance Minister: “National Offset Company referred for prosecution”

An audit had found suspected manipulation of public funds and the case will be referred for public prosecution…. A court has dismissed a case brought by the former NOC Chairman, Anwar Al-Jawdar, against Othman Al Quraishi, the CEO that he fired.....

“Malaysia’s defence offset policy has largely failed”

A report in a Fitch Group publication claims that while the government is looking to reduce Malaysia's dependence on imports and increase the capabilities of local manufacturers, its defence offset program to date has largely failed to deliver sustained growth.

India revises threshold for imminent national offset policy

India’s Commerce Ministry is finalising a national offset policy. The quota will be 30 percent of purchase contract value. The new threshold has not been disclosed but is believed to have been raised following inter-ministerial consultations.

Main headlines from this issue

Turkey opens civil offset law to all ministries

Turkey’s Public Procurement Law on civil industrial participation/offset now allows procurement agencies to decide whether imports qualify for the program. It also lets them subject those imports to the civil offset regulation. The ministries of health, energy, communications, and transport are the procurement agencies most likely to exploit the law but any ministry may do so.

Surprise decision sees academic appointed to run Oman bureau

The contest between the two principal contenders to head Oman’s Partnerships Development Program is over. Support for the incumbent, Saleem Bin Qasem Bin Ahmad Al-Zawawi, fell away, leaving Dr. Dhafir bin Awad bin Bader Al Shanfari to be appointed CEO.

Austrian spy kept Eurofighter informed during offset negotiations

The Eurofighter Typhoon offset team allegedly received sensitive information from a spy in the Austrian Ministry of Economy before an agreement was reached on the offset contract.

Offset is alive and flourishing within NATO

Despite Directive 2009/81/EC curtailing offsets for defence procurement by European member states, and although U.S. policy also considers offsets ‘market distorting,’ NAPMO is continuing to follow a policy on behalf of its members that requires industrial returns in recognition of those nations’ contributions to the program.....

Indonesia’s GCI radar contract will set the pace for guidelines

Indonesia’s offset and countertrade guidelines are far from complete although multipliers have been decided….Some principle guideline features are a long way from resolution. For instance, a tussle over the penalty provisions.....