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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.
Main headlines from this issue
Kuwait offset program: Contractors left hanging as program suspended – Validity of bank guarantees questioned
The decision of Kuwait’s Council of Ministers to transfer responsibility for management of the country’s offset program from one government agency to another, to disconnect the Ministry of Finance from the National Offset Company, and to suspend the entire civil and defence program, has caused immense confusion. No-one has come out with an official statement or clarified the situation to foreign contractors.
Poland appoints a Brigadier General to head the MoD’S offset bureau
The Polish government has appointed Brigadier General Stanis?aw Butlak to head the offset bureau at the MoD. The high rank demonstrates Poland’s commitment to continue crucial offsets under the country’s defence procurement policy.
Canada: Bidders must overachieve to get maximum points – secretariat staff arrangement now in place
According to a recent RfP Canada now appears to expect companies to over-perform in order to receive maximum points in their contract bids…… An initial secretariat staff arrangement is now in place in Public Works and Government Services Canada to support the early implementation of the Defence Procurement Strategy.
South Africa: Denel seeks civil benefits
Denel Aviation is holding discussions with government departments in South Africa to participate in offsets arising from the acquisition of new fleets by South African Airways and South Africa Express Airways.....
Canada: F-35 work rises significantly
Industry Canada has tabled a report identifying the value of work that Canadian firms have secured on the F-35 as US$587m. That is an increase of $83m over the results published in the fall 2013.
Main headlines from this issue
Kuwait: Civil and defence offset policy suspended – MoF Cancels NOC contract
Kuwait’s Council of Ministers has passed a resolution suspending the offset program on all government defence and civil procurements, current and future. The decision reflects the council’s recognition that the Kuwait Direct Investment Promotion Authority (KDIPA) is not ready to manage the offset program, and won’t be for some time.
Turkey’s civil program: different guidelines for different ministries
The Turkish government has decided that each ministry participating in the new civil industrial participation program can apply its own offset policy. There will be no central authority. The penalty for non-performance has been set at.....
South Africa: AMD study finds DIP has delivered the goods – Policy review imminent
A review of the DIP policy is imminent following the release of the South African Defence Review 2014. We are told that the Defence Review still needs to be approved by Parliament and only then might Armscor re-evaluate the current DIP policy to ensure alignment with the document.
South Africa: Leaked letter – two evidence leaders challenge Arms Procurement Commission’s credibility
Two evidence leaders have accused the commission of deliberately excluding them from meetings, and challenged its credibility.....
Japan: MHI’S F-35 participation “Nowhere in sight”
Mitsubishi Heavy Industries’ swelling participation in the F-35 stealth fighter program could be delayed for the second straight year by an intra-governmental spat over subsidies.
Main headlines from this issue
Poland’s largest arms procurements will not be based on fully competitive tenders: “We will rely on Article 346”
The Deputy Defence Minister said that Poland's largest arms procurements, the missile defence program, the acquisition of military helicopters, and the requirement for unmanned aircraft, will not be based on fully competitive tenders because they would not allow the government to impose requirements such as “Polonisation.”
Spanish IP policy: “I am not allowed to explain anything”
Spain’s industrial participation policy remains a mystery even to personnel at the MoD. Nobody seems to know what the policy is or what effect the recently announced organisational restructuring within the MoD will have on existing industrial participation contracts.
Feisty MP tells Seriti Commission “all offset deals are crooked”
Judge Willie Seriti has begun phase two of the commission’s public hearings by calling Cape Town Mayor Patricia De Lille to testify about the allegations she presented to parliament in 1999 when she was an MP. “You cannot thumb-suck something because you want to sell this deal to the country…”
McKinsey raises the bar on offsets but should consider a different kind of bar
Although they are not usually reported in annual filings, offset contracts are increasingly becoming a C-suite agenda item, says McKinsey & Company in an insight report on the industry. The report is replete with banalities.....
Kenyan law imposes 30 percent partnership quota for construction projects
The regulations restrict the categories of work open to foreign contractors and also stipulate that foreign contractors must either enter into joint ventures with local contractors or locally subcontract a percentage of the work.
Main headlines from this issue
Indonesia’s new strategy is slip-sliding away
Indonesia’s countertrade and offset guidelines appear to be in trouble. The guidelines are ready but will not address some key issues because the government has not agreed on some aspects of policy, and are concerned about a lack of experience in application.
Kuwait to suspend civil offset policy
Kuwait is understood to be placing its civil offset policy on hold. The suspension is expected to be confirmed later this year and to last for up to a year. Government officials declined to comment. The policy has been in force since 1992.
EDA surrenders – offset portal closed
The European Defence Agency’s (EDA) offset portal is gone, victim to a boycott by disaffected member states.....
European Union paper sees small loophole in Article 346
A paper examining the application of EU law to defence issues has found a loophole in Article 346 TFEU. But states that it may be too small to squeeze through a fat offset contract.
Poland: President signs the new law
Poland’s President Bronislaw Komorowski has signed the New Offset Act. The Act will be published in the Official Journal and will come into force by early August.
Main headlines from this issue
Denmark’s new guidelines show determination – multipliers and penalty provisions retained
Denmark’s new industrial cooperation guidelines retain multipliers and penalty provisions, becoming one of the few EC member states to do so on a formal basis. A new National Defence Industrial Strategy has been issued in relation to the new guidelines.....
Substantial confusion remains as Poland’s parliament passes new offset law
Poland’s new offset law has passed through parliament and is expected to be signed into law by President Bronislaw Komorowski. Barring the unforeseen the new offset law will become effective by August.....
Polish government refuses to face contractors at DKF conference
The Deutsches Kompensation Forum (DKF) / Wierzbowski Eversheds conference in Warsaw, Poland, was knocked for six on June 30th as two key speakers pulled out, leaving more than a hundred delegates bemused but hardly surprised.
Turkey’s new civil offset policy gets prenuptial contract
Turkey is preparing to roll out an eccentric, convoluted, yet formal civil offset policy. The Turkish parliament has approved primary legislation to justify civil offsets. Five ministries will include industrial participation requirements in selective tenders from August.
Americans in a muddle over the Buy American Act
When the Buy American Act (BAA) requires the American administration at national or state level to use local content, does that amount to an offset? “American and foreign contractors are not speaking the same language,” said ECCO Chairman Christian Sylvain.