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Volume 2015
Main headlines from this issue
Offset community tells UAE: “Your financial models do not work”
Dov Hyman, GOCA’s Conference Director, opened his presentation to the Abu Dhabi International Offset (ADIOC) conference by announcing that he was speaking at the request of the Tawazun Economic Council. He then proceeded to address a sensitive topic, hoping he could do so without getting blood on the carpet. The invitation is unlikely to be repeated.....
Twenty projects in the pipeline - TEC introduces “Work Packages”
Matar Ali Al Romaithi, CEO of TEC's Industrial Development Unit, disclosed that more than twenty industrial cooperation projects are in different phases of development, including some in the concept phase.
Korea: DAPA’S multipliers to change this month
DAPA, Korea’s offset agency, is adjusting its multipliers in an attempt to boost defence exports. The new multipliers will become effective this month. A pilot scheme is being introduced for credits to be awarded to foreign contractors when they hire Korean interns.
Turkey launches its civil offset program
Turkey has launched a Public Procurement Law on civil offsets. The law allows procurement agencies such as the ministries for health, energy, communications, and transport to decide for themselves whether purchases qualify for the program and become subject to the offset regulation.
Malaysia introduces a new approach for “Impactful Outputs”
Malaysia has introduced a new ‘Policy and Guideline on Industrial Collaboration Programs (ICPs) in Government Procurement.’ The policy is the third edition of this initiative since 1987.
Main headlines from this issue
India set to approve a civil offset policy
India’s Committee of Secretaries is set to finalise the country’s national offset policy. The new policy is expected to require foreign firms selling goods worth over Rs 300 crore ($40m) to the government or public sector undertakings (PSUs) to source part of their supplies from domestic manufacturers.
Airbus cuts royalties, UK saves jobs
Airbus has quietly persuaded the British government to accept a big cut in royalty payments in return for a guarantee that the company will keep work in Britain. A spokesman for the Department for Business, Innovation, and Skills told CTO the deal is exclusive to the commercial work that Airbus performs in the UK.
The new Buy American minefield
The Republican Senate Majority Leader, Mitch McConnell, has promised to expand in 2015 Buy American constraints for federally-funded procurement projects. A multitude of Buy American laws are already on the books and several new rules are planned.
Polish group faces default penalty for Indian contract
The Polish Weapons Group is facing default under a contract to supply India with 204 WZT-3 armoured recovery vehicles worth $275m. Should a default occur, the Polish Defence Holding will face contractual penalties on non-performance of both the sales and the offset contracts.
SSM fines Thyssen Krupp
Turkey has fined Thyssen Krupp Marine Systems €100m for delays in the construction of six submarines contracted in 2009. The value of the contract is estimated at €2.5bn and includes an offset commitment for 80 percent of purchase contract value.
Main headlines from this issue
France turns a blind eye to deception by China’s “forced technology transfers”
Concerns about illegal copies of French systems manufactured by China are rarely publicized and the French companies involved have never publicly criticized China for doing this. If there are any battles over China’s dark arts, they are hardly bloody.
Argentina demands local assembly
Argentine Defence Minister Agustín Rossi has announced that any company supplying military aircraft to Argentina must agree to develop the country’s aviation industry. He gave the example of the recently acquired.....
Peru: Agency opens this month
Peru’s newly established defence procurement agency will commence operations in February, Emilio Cohayla Escudero, Director for Social and Industrial Offsets, told CTO. The agency was scheduled to have begun work last October.
Kuwait’s offset regime remains unstable - its future looks worse
The situation in Kuwait remains in flux, with publication of the new offset guidelines likely delayed until July at least; the end of the year appears more likely. The current guidelines remain suspended.
Poland takes final breath under the old offset rules
Poland’s Economy Ministry has begun its evaluation of offset proposals for bids to supply 70 helicopters. The acquisition will be the final tender to qualify under the old offset law.
Main headlines from this issue
A new mood in India as Defence Minister sets date for policy review – BAE Systems joins campaign for change
Defence Minister Manohar Parrikar said the government will tackle inconsistencies in Defence Procurement Procedure (DPP) 2013 by March when it will announce changes to the process. The issues that need to be addressed include having a clear offsets policy.
Czech Republic winds up its offset policy
The Czech Republic has decided that it would no longer require offsets when procuring defence equipment although some procurements would qualify under the exemptions to Directive 2009/81EC afforded by Article 346.
Japan’s offer to help build submarines in Australia may be torpedoed
A proposal for Australian industry to be involved in the construction of the Navy’s new submarines, with Japan to be responsible for assembling the boats, has ignited a fierce debate in Australia.
Russia to build Anglo-Italian helicopters
Rostec Corporation and Finmeccanica have entered into a joint venture to produce AW189 helicopters. The companies’ subsidiaries, Russian Helicopters and AgustaWestland, will establish a facility on the HeliVert plant near Moscow. Rosneft will also become a partner.
Israel’s new ICA chief faces work overload following merger
Ziza Eger has taken over as Director General of Israel’s Industrial Cooperation Authority (ICA) following the retirement of Acting Director General Gabriel Golomb.
Main headlines from this issue
Canada’s new ‘Value Proposition Guide’ is a crossword wrapped in a puzzle
Industry Canada has released its Value Proposition Guide. Canada has chosen a points-based approach, repeating the complexities of the Greek and Turkish strategies that bamboozled the offset community a decade ago.
Korean audit uncovers undelivered technology transfers – someone will be fined
An investigation by Korea’s Audit Board has found that the Surion helicopter project has failed because the technology transfer agreement with Airbus Helicopters covers only 134 out of the 450 components necessary to assemble the power delivery system.
Egypt intends to swap a Russian tourist for a banana
President Abdel Fattah Al-Sisi of Egypt has instructed the cabinet to study how to apply a barter system to correct the tourism drought from Russia following the sinking of the rouble.....
Poland settles “difficult” offset agreement with Kongsberg
The Polish Defence Ministry has signed an agreement with Kongsberg Defence Systems for 24 naval strike missiles and equipment worth 800m zlotys ($175m). The missiles will be manufactured in Norway but.....
“Dutch industrial participation clinches JSF acquisition”
The Netherlands Ministry of Defence has told the Lower House that it is ready to order the first eight F-35 fighter jets. The Defence Minister asserts in a letter that the involvement of Dutch industry is a major reason for the decision.
Volume 2014
Main headlines from this issue
UAE merger widens opportunities for obligors
Matar Ali Al Romaithi, Chief Officer for Tawazun’s Industrial Development Unit, told CTO that the merger of a number of state-controlled defence companies, announced this month, “would provide defence companies with a wider platform to fulfil obligations and provide even greater opportunities of collaboration and growth.”
Oman turf war continues to prolong publication of offset regulations
A tug of war between principal contenders to head Oman’s Partnerships Development Program appears to have turned nasty.
Not much cheer for Swiss offset volumes
Little has come to Switzerland by way of offset volumes over the last few years. The 2014 armour program will provide some new opportunities if approved by parliament, but 2013 was very flat, with less CHF 100m ($104m) agreed.
India: U.S. Calls for offset policy to change ahead of Obama’s visit – but “India has to stand on its own feet”
The U.S. is making a strong pitch for India to overhaul its offset policy for defence purchases ahead of President Barack Obama’s visit next month. The U.S. has raised concerns that American firms could be penalised for delays when Indian firms are found unsuited to enter global supply chains.
Canada: Unclear Value Propositions – “you have just ten days to protest”
Industry Canada has launched a global initiative to brief the defence community on the new Defence Procurement Strategy and ‘value proposition’ procedure. Obligors should be aware of the deadline to file objections if the ‘value proposition’ requirement is unclear...
Main headlines from this issue
Lockheed’s runaway Korean offset
A CTO investigation has uncovered a problem that is giving Lockheed Martin a mighty headache. A service provider has been signed to a package that comprises three satellite communication systems, only one of which is going to Korea, and Lockheed’s space division will not supply any of them.....
Korea: DAPA policy faces annual quota ramp
DAPA wants the offset program to support the opening of new export markets and intends to augment the policy on an annual basis. That will include mandatory export quotas, backed by multipliers.
Offsets are the poisoned chalice
“For ethics and compliance no country is off limits anymore. There is the U.S. legislation, there is the EU legislation, but you will have to cover all the other possible legislations where you are active. As a result, corporate law is really dressed up in new clothes.”
Denmark: Three tenders issued under Article 346
The first tender documents requiring industrial cooperation have been published under Denmark’s new guidelines. They have been issued for three separate requirements.
Canada: key industrial capabilities “are bonkers”
Canada’s Postmedia News takes the Stephen Harper government to task over a “long history of incompetence and waste” in military procurement. The focus is on so-called ‘industrial and regional benefits’ rather than simply getting the best equipment at the lowest price,” the article asserted.
Main headlines from this issue
UK’s DSIEP policy making steady progress as ninth contractor signs up
Safran has signed up to the UK MoD’s Defence and Security Industrial Engagement Policy (DSIEP), the fourth prime contractor to join this year. A total of nine foreign prime contractors have now joined the policy. A Freedom of Information request by CTO revealed that.....
SAAB offers Australia offsets to avert submarine open tender
Saab has launched a pre-emptive bid to build the Australian navy's future submarines amid concern that Prime Minister Tony Abbott will buckle to political and union pressure to have an open tender.
Offset compliance concerns – “Follow the money” says ex Lockheed VP
A former VP and Associate General Counsel at Lockheed Martin said that the only way to identify proposed offset projects that raised FCPA compliance concerns was by conducting risk-based FCPA due diligence on each project.
Sino-Russian joint venture foresees new market penetration
AVIC and Rostec have reached an agreement regarding strategic cooperation that both say will significantly increase interaction between the two companies. Negotiations are under way regarding joint projects in aircraft, helicopter, and engine production, as well as in.....
China to construct Thai railway network in return for rubber and rice
China is to finance the construction of a regional dual-track railways system over three routes for Thailand. Thailand will repay the investment costs to China with rubber and rice.
Main headlines from this issue
Greece signals policy shift, passes law on “offset benefit contracts”
Greek policy on defence procurement appears to be shifting from obedience to the defence directive to a policy that takes advantage of the directive’s exemptions. The move comes as the country gazettes a law regulating “offset benefit contracts” (OBCs), resolving an anomaly that has troubled Greek offsets since 2009.
“Something has to give” says study of Canada’s IRB policy
A study released by The School of Public Policy and the Canadian Defence and Foreign Affairs Institute criticises Canada’s insistence on industrial and regional benefits when buying military equipment. The study argues that the equipment is secondary to industrial participation.
Government review to “optimise New Zealand industry involvement”
A new report undertaken by New Zealand’s MoD sees any move to quotas or offsets as potentially damaging to the development of the country’s industrial capability and competitiveness. Instead, the government should give local companies a higher profile in tender and contract processes.....
Indonesia to trial ‘multipliers’ on radar acquisition project
Multipliers were decided in principle long ago, but the decision now is to walk them through a pilot project and ascertain their significance during the negotiation process.
Argentina asks for share in Brazilian manufacture of Gripens
The Argentine Defence Minister has announced the decision of the government to begin negotiations to purchase 24 Swedish-designed Gripen NG combat aircraft that will be produced in Brazil. The conditions of purchase.....
Main headlines from this issue
Kuwait: How do contractors get their candy?
Kuwait’s National Offset Company has granted offset credits worth $27m to Hyundai Heavy Industries despite questions over its authority……. Nobody in Kuwait is willing to give straight answers and make clear whether the NOC retains a role in managing offset projects or issuing credits.
Brazil wants major defence procurements to share offsets with Health Ministry
Brazil is almost ready to introduce a National Compensation Policy, known as PNAC. The PNAC will replace the current MoD offset policy and bring civil procurement agencies into its reach.....
Canada tries hard to make a complicated offset policy sexy
To put things simply: the IRB will become an ITB under a DPS with VPs where KICs will be a significant factor. Which leaves the obvious question, what about the CCP?
Peru: New agency is ready to start
It’s taken two years since Peru’s MoD asked Congress for powers to establish a new defence procurement agency but operations are ready to commence this October.
EC awash with “under-the-table” deals – although costs are significant
What does offset cost? Enrique Navarro, Chairman of the Spanish advisory service company MQ GlobalNet, estimated the answer at anything from between.....
Main headlines from this issue
Latin America: “We love offsets – they are heaven”
“They didn’t think we could deliver, but we could,” said Juanita Rodríguez Kattah, Director of Science, Technology, and Innovation for Colombia’s Ministry of National Defence (MoND), of the ministry’s conference in Cartagena. “Yes, we had some wrestling matches,” admitted Dov Hyman, a GOCA Executive Board Member.
Colombia targets education, R&D, technology transfer
Colombia’s Minister of National Defence, Juan Carlos Pinz?n Bueno, told the first offset conference in Latin America that offset policy has been a key element in the institutional development of the defence sector in science and technology. Colombia adopts two approaches.....
40 F-35 fighter jets for Korea ignites a fat offset package – and a major internal investigation by Lockheed
South Korea’s deal to buy 40 F-35 fighter jets includes an offset package worth 50 percent of the value of the jets, which cost $7.06bn. The package includes a military communications satellite that will be launched into orbit and then operated by Korea. But the comsat will be supplied by.....
Algeria tells defence contractors to offer systems development
Major General Rashid Chouaki, head of Algeria’s military manufacturing, told the Algerian newspaper El Watan that foreign partnerships, investment, and collaboration will play a vital role in the development of the country’s defence industry.
UK prepares for sales by inviting South Africa to bid into UK market
UK Trade and Investment (UKTI), a government agency, has invited South African firms to bid for defence contracts for the UK. UKTI spokesman Adam Thomas said the UK is looking to form joint ventures and industrial partnerships with South Africa’s biggest defence companies as well as SMEs.
Main headlines from this issue
Hopes rise for defence directive meltdown
EU member states may be about to witness a meltdown of the strict interpretation of Directive 2009/81/EC. Burkard Schmitt, the European Commission defence expert who was behind the directive, is leaving, and Donald Tusk, Poland’s Prime Minister, has been appointed President of the European Council.....
Burkard Schmitt’s concession rings true for Belgium
Belgium will introduce a new procurement approach for the forthcoming F-16 replacement program. Belgium is currently forming a new coalition but if the incoming government supports the approach, the country will no longer ask for offsets. It will ask for “unsolicited proposals.”
Kuwait minister makes statement on policy suspension
Kuwait’s Finance Minister, Anas al-Saleh, has broken the government’s silence on the suspension of the country’s offset policy concerning both civil and defence procurements and announced that new rules could be ready in about six months.
EC roadmap foresees guidance note on G2G contracts
The commission will organise two workshops with member states in autumn 2014 and develop a guidance note on the use of the exclusions from Directive 2009/81/EC. This will focus on government-to-government sales.....
Australia’s shipbuilding tender faces reality check on extent of local industry involvement
A parliamentary committee report on the future of Australia's naval shipbuilding industry has addressed the issue of industry involvement.