CTO Newsletter

Main headlines from this issue

Poland amends procurement law, paves way for more offsets under Article 346

Poland has issued a legal amendment to the Public Procurement Law (PPL) that is expected to encourage more defence procurements under Article 346 TFEU of the EU Defence Directive 2009/81. Decision No. 74 forms part of a larger effort to streamline Poland’s procurement process and boost local production in the country.

India scrambles over Russian defence deals as US releases sweeping sanctions

India’s defence establishment is walking a fine line between securing critical military equipment from Moscow and maintaining ties with Washington. New export controls are expected to delay India’s joint defence projects with Russia.

South Korea invites foreign suppliers to Incheon city, the new MRO hub

South Korea’s north-western city of Incheon has launched a programme to boost local industry and job creation through the aviation industry. The city will focus on MRO services with a special focus on SMEs and market entrants.

UAE and Turkey establish defence industry cooperation committee

The UAE and Turkey have agreed to establish an official platform for defence industry cooperation. The new committee will enable joint development programmes, share R&D innovations, and promote investment opportunities in both countries.

Australia: Senate report warns supply chains are “vulnerable,” must prioritise local industry

A Senate inquiry has released its report on Australia’s manufacturing capabilities and sovereign industrial base. The report warns that Australia’s defence industry is vulnerable to supply chain squeezes, and recommends federal procurement programmes to “preference” bidders who maximise the use of local suppliers, manufacturers, and service providers.

Main headlines from this issue

Taiwan quietly releases new offset policy

The Industrial Cooperation Programme Office (ICPO) has released four documents outlining Taiwan’s new industrial cooperation guidelines. The policy has already received major pushback from industry members.

Saudi Arabia launches human capital strategy to promote local production

The General Authority for Military Industries (GAMI) has launched a capability development strategy for Saudi Arabia’s defence sector. The Military Industries Human Capital Strategy (MIHC) takes the Kingdom one step closer to its goal of 50 percent defence localisation by 2030.

UAE: ICV programme is “latest round of hoops”

Defence attachés in the UAE are on tenterhooks to learn how Tawazun’s cooperation with the country’s in-country value (ICV) programme will change defence procurement programmes. Foreign contractors will have to continue favouring Abu Dhabi suppliers when devising offset projects, says a Gulf security expert.

Leaked report reveals Hunter-class frigate in disarray

BAE Systems is facing backlash over a leaked naval engineering report from the Australian Department of Defence (DoD) indicating that the Hunter-class frigate programme is riddled with design flaws and prioritises foreign supply chains over Australian suppliers.

Indonesia buys Rafale aircraft and Scorpèse-class submarines with joint production and technology transfer

France and Indonesia have signed a slew of deal for Dassault Aviation’s Rafale aircraft, Naval Group’s Scorpèse-class submarines, Thales Group’s telecommunication technology, and Nexter Munitions’ high calibre munitions. The deals will promote joint production and technology transfer.

Main headlines from this issue

Blenheim, Lockheed, Airbus, and DAPA clash in federal court

Blenheim Capital Partners, Lockheed Martin and Airbus Defence and Space are pursuing their legal battle at the federal level. The federal court’s ruling, says Blenheim, will have major implications for private companies executing offset agreements with foreign governments.

Lockheed submits bid for Greek corvettes, faces competition over local content

Lockheed Martin, partnered with the US Navy, has submitted a proposal to supply four or five corvettes to the Hellenic Navy. The company is banking on local content to clinch the Greek contract.

UK to launch new industrial participation policy by April

The British Ministry of Defence (MoD) has committed to publishing a revised industrial participation policy by the end of the first quarter of 2022. The deadline comes as surprise to some defence industry members.

Germany sells submarines to Israel - to fund 20 percent and buy back Israeli products

Israel has awarded a €3bn (c. $3.4bn) contract to Thyssenkrupp Marine Systems (TKMS) for three diesel-electric submarines. Alongside the purchase, the Industrial Cooperation Authority (ICA) signed an industrial strategic cooperation agreement with Thyssenkrupp to invest in Israeli industries and enable reciprocal purchase of Israeli products. Thyssenkrupp will invest €850m ($955m) over 20 years.

South Korea and UAE sign missile contract and joint technology deal

South Korea and the UAE have signed a memorandum of understanding (MoU) to collaborate on defence technologies, including joint development of weapons systems. The deal comes after the two countries signed a $3.5bn MoU for surface-to-air missiles.

Main headlines from this issue

DAPA announces offset reforms – Bonus points for commercial tech

South Korea's Defence Acquisition Program Administration (DAPA) is launching reforms to help local industry expand in domestic and international defence markets. The reforms were announced on January 7 but came into force on December 31.

Peru updates offset process – To evaluate social and economic benefits separately

Peru’s Ministry of Defence (MINDEF) has released new offset regulations. Two new General Directives clarify the process for devising and evaluating offset proposals.

Zondo Commission finds SAAT in violation of offset, government pledges to toughen policy

A report from South Africa’s Zondo Commission reveals that South African Airways Technical (SAAT), a subsidiary of South African Airways (SAA), shirked its offset obligations in a tender for component services. The Department of Trade, Industry & Competition (DTIC) has resolved to reinforce its regulations.

Ukraine resists EU pressure, increases local content requirements

Ukrainian President Volodymyr Zelensky has approved a new law on the localisation of industrial production. The country reached a compromise with the European Union after consultations in October 2021.

India’s former MoD acquisitions expert: Offset is a “dying category”

India’s offset policy is inefficient and hampering procurements, says Amit Cowshish, a consultant and former Indian Financial Advisor (Acquisition) at the Ministry of Defence. Moving forwards, India’s offsets programme may fall by the wayside.

Russia-India cooperation yields fruit in Central and Southeast Asia

The Philippines’ Ministry of Defence has confirmed a $375m deal for the BrahMos supersonic cruise missile, jointly developed by India and Russia. The sale comes soon after India and Russia exchanged a non-paper on bilateral industry engagement and joint defence projects in Central Asia.

Main headlines from this issue

India levies penalties on MBDA for offset delays, negotiates engine co-production with “big French company”

The Indian Defence Ministry has imposed a fine of nearly €1m ($1.1m) on MBDA for delays in fulfilling offset obligations under the Rafale aircraft deal. The fine comes after India and France agreed to jointly manufacture aero engines under the Strategic Partnership Model.

Australia consolidates local content requirements

Speaking at the December GICA conference, two Australian representatives outlined the country’s “new and enhanced” Australian Industrial Capability Programme (AIC). The new measures are designed to hold contractors accountable for their obligations and provide an “overall economic benefit” that goes beyond the defence sector.

Event diary 2022

2022 promises many in-person events.

Tawazun joins UAE’s national in-country value programme

The Tawazun Economic Council has signed a MoU with the UAE’s Ministry of Industry and Advanced Technology. The agreement is intended to adjust the procurement policies of public and private-sector entities to benefit national industry.

South Korea steps back from new globalisation strategy

South Korea appears to have shelved plans for a new cross-ministerial strategy to boost its defence industry. The report will now only be shared internally and is restricted from external parties.

Poland to pay Airbus $20m for cancelled helicopter contract

The Polish State Treasury has reached a settlement with Airbus Defence and Space over an unsigned contract for purchase of 50 multi-role H225M Caracal Helicopters. Negotiations were halted after the Polish government deemed Airbus’s offset proposal unsatisfactory, an insider told CTO.

Main headlines from this issue

Turkey announces changes to offset policy

Turkey is planning to launch a new “industrialisation process.” The update will change procurement priorities, multipliers, and export promotion. The government is also preparing to introduce new purchase guarantees, designed to boost the country’s defence SMEs.

US calls for sustainable offsets as Buy American Act faces strict amendments

Offsets should be leveraged to promote common global interests, says a Department of Defense (DoD) representative. The comments, made during the December GICA virtual conference, come as the Federal Acquisition Regulation Council (FAR) considers strict amendments to the Buy American Act.

Brazil: Air Force launches “offset database” and updates multipliers

During December’s GICA virtual conference, Brazil acknowledged the challenges of engaging with Brazilian procurement programmes. To help foreign suppliers navigate the country’s industrial base, the Air Force is launching a new software programme.

France and UAE sign Rafale deal – but offset is missing

France and the United Arab Emirates (UAE) have signed a €17bn ($19bn) contract for several arms procurements. But the deal includes no provision to carry out industrial offset investments in the UAE.

India and Russia start negotiations for jet fighters and air defence missiles systems

India and Russia have renewed a 10-year pact for defence cooperation, and concluded a deal for the manufacture of more than 600,000 Russian assault rifles for the Indian Army. The countries are now negotiating the licensed production of twin-jet fighters and air defence missiles systems in India.

Main headlines from this issue

Blenheim fights on against Lockheed, Airbus, Korea, and DAPA

Blenheim Capital Partners has launched an offensive against the Republic of Korea and its Defence Acquisition Program Administration (DAPA). The South Korean government’s US-based counsel, however, is refusing to recognise the complaint because of a legal technicality.

Switzerland releases details on F-35 fighter jet procurement

Armasuisse released the information on November 26, five months after Switzerland declared its intention to procure F-35A Lightning II jets from Lockheed Martin and the Patriot system from Raytheon. The report provides a budget for the procurement and outlines suppliers’ offset obligations.

Norway: New procurement programme for battle tanks requires 100% offsets

Norway expects the supplier country's defence market to open to Norwegian weapons systems, and for strategic cooperation between Norwegian contractors and the supplier’s defence industry. The tender will see competition between Germany’s Krauss-Maffei Wegmann (KMW) and South Korea’s Hyundai Rotem.

Brazil and UAE move towards defence industry cooperation

Brazil’s Ministry of Defence and Emirati company International Golden Group (IGG) have signed an MoU for the development, production, and sale of defence articles. The memorandum is one of many new commercial deals between Brazil and the UAE.

Israel and Morocco sign defence co-operation agreement

The agreement formalises defence relations between the two formerly hostile countries and establishes a foundation for future cooperation.

Main headlines from this issue

South Korea lists 20 offset programmes, outlines new strategy

South Korea's Defence Acquisition Program Administration (DAPA) has published a list of projects expected be subject to offset between 2021 and 2023. Simultaneously, the Korea Research Institute for Defence Technology Planning and Advancement (KRIT) released a new K-Defence Globalisation Strategy.

‘Buy American Act’ amendments will permit waivers, industry remains wary

American defence companies are concerned that new amendments to the Buy American Act could derail future deals.

Russian industry looks to offsets to take South American markets

Members of the Russian state-owned holding conglomerate Rostec are leveraging offset programmes to secure South American procurement programmes.

Australia: Senate hearing on AUKUS exposes uncertain timeline, capability gap, and unclear local content

One month after Australia, the United States and Britain declared the AUKUS pact, the partners are untangling knots in the proposal. Head officials from Australia’s Department of Defence (DoD) and Royal Australian Navy (RAN) were challenged on the subject during a Senate estimates hearing on October 27.

India and Israel to form collaboration task force

India and Israel’s Joint Working Group (JWG) on Bilateral Defence Cooperation has agreed to form a task force. The task force will formulate a comprehensive, ten-year roadmap towards new areas of defence cooperation.

Main headlines from this issue

Malaysia demands countertrade in first-ever open international tender for military aircraft

Malaysia’s tender for light combat aircraft requires 50 percent of payments to be made through countertrade in palm oil. Moving forwards, the country is expected to enforce its countertrade requirement in all international open tenders.

Australian Labor Party pledges new “Buy Australian” plan

Anthony Albanese has laid out a 10-point plan to boost local industry through procurement if his party returns to power. The government would break tenders into multiple packages to allow smaller companies to bid, and to maximise small business participation in procurement.

Indonesia struggles to fulfil KF-21 cost-sharing agreement, negotiations still underway

Indonesia has made no payments towards the development KF-21 fighter jet in more than five months, reports South Korea’s Defence Acquisition Program Administration (DAPA). Speaking at a parliamentary audit session on October 12…

Turkey and Nigeria sign memorandum on defence industry cooperation and technology transfer

The governments of Nigeria and Turkey have signed a memorandum on cooperation and technology transfer in defence procurements. The MoU was one of seven deals signed during President Recep Erdogan’s diplomatic visit to the Gulf of Guinea from October 17 to 20.

Saab expands operations in Finland as Helsinki prepares final decision on HX fighters

Saab is expanding its R&D operations in Finland, especially in the fields of data-link communication and VR/XR technology. Saab’s latest activities come as Helsinki prepares its final decision on the HX fighter jet programme.

Main headlines from this issue

Court dismisses Blenheim lawsuit against Lockheed Martin, Airbus, South Korea, and DAPA Blenheim files for appeal

The Eastern District Court of Virginia has dismissed Blenheim Capital Partner’s civil lawsuit against Lockheed Martin, Airbus Defence and Space, and South Korea’s Defence Acquisition Program Administration (DAPA). The court dismissed Blenheim’s complaint on the grounds that it lacked subject matter jurisdiction to hear the case. Grant Rogan, CEO of Blenheim Capital Partners, has filed an appeal with the Fourth Circuit.

FAR extends deadline for comments to Buy American Act amendments

The Federal Acquisition Regulation Council (FAR) has extended the deadline for submitting comments on the proposed changes to the Buy American Act (BAA) from September 28 to October 28, 2021. The extension comes after requests from the Council of Defence and Space Industry Associations and the Professional Service Council, representing over 400 government contractors.

Czech Republic: “There is no pattern” in industrial participation requirements

The Czech Republic has announced two major defence procurements. Each purchase carries a unique amount of industrial participation. The larger procurement is for a SPYDER air defence system produced by Israel’s Rafael…

Upcoming offset conferences

Including ECCO, GIGA and DKF.

Ukraine calls for more technology transfer in shipbuilding industry

Ukraine’s state-owned defence company, Ukroboronprom and the national shipbuilding association Ukrsudprom have presented a draft strategy for the development of the country’s shipbuilding industry between 2022 and 2030. The draft strategy focuses on increasing technology transfers and decreasing reliance on foreign production.

Main headlines from this issue

Tawazun threatens to call in offset penalties, prepares for renegotiations

The UAE’s offsets agency Tawazun has sent letters to a number of defence primes threatening to call in offset penalties. The agency accuses the companies of failing to meet extended deadlines for fulfilling offset obligations, says a defence industry source. Tawazun would not identify the firms.

UK appoints new directorate for industrial participation, further muddies responsibility

The UK government has transferred its industrial participation portfolio to the newly-created Directorate of Industrial Strategy and Exports (DISE). DISE, however, will not work alone on the UK’s industrial participation portfolio.

South Korea moves closer to “Made in Korea” policy

South Korea appears to be moving closer to an industrial policy that requires suppliers to use local contractors whenever possible. It is reportedly developing a new programme that will prioritise local sourcing in industrial co-operation projects linked to defence contracts. The policy will run alongside South Korea’s offset policy.

Australia scraps $70bn deal with Naval Group, plans to build nuclear subs with British and American technology

Australia, Britain, and the United States have announced a historic defence agreement that will see Canberra build nuclear-powered submarines with British and American technology. The pact, AUKUS, freezes out Naval Group’s $70bn deal for 12 Attack-class submarines, Australia’s largest-ever defence contract.

India signs $2.7bn contract with Airbus Defence for transport aircraft

India has signed a Rs200bn ($2.7bn) contract with Airbus Spain to procure 56 C-295 transport aircraft. Most of the aircraft will be manufactured locally. It marks the first time military aircraft will be made in India by a private company.

Main headlines from this issue

EC Surrenders; Infringement procedures against Denmark withdrawn; New Danish guidelines introduce tech transfer valuation

The European Commission has given way to Denmark and closed its case concerning an alleged breach of Defence Directive 2009/81. Denmark has renewed its guidelines, introducing a new method for the valuation of technology transfers, and increasing the scope for industrial cooperation projects by foreign partners to Danish primes.

Lindsey Shanson’s farewell message

The decision was not easy, but I have decided that at 75, and having owned and edited CTO since 2000, it is time for a handover.  I have passed the business to an expanding British media concern, but I will continue with the company as Consulting Editor...

Washington still sets the rules in Europe-U.S. defence collaboration – ‘Juste retour’ is ‘just a myth’

The transatlantic defence market is not a level playing field. That is the unsurprising opinion in a new policy report from the Armament Industry European Research Group (ARES).  While none of the EU countries nor the UK or Norway disputed the reality of the industrial benefits in terms of workload and jobs, it is undeniable that the F-35 technology transfers were limited, if not totally excluded, say the authors.

Ukraine and U.S. sign memorandum on industrial participation; Ukroboronprom signs $2.5bn in deals with U.S. firms

The U.S. and Ukrainian governments have signed an MoU on industrial participation in arms procurements. The memorandum also emphasises the benefits of industrial participation for digital economy development, defence, and cybersecurity...

Pakistan’s major arms procurements to include technology transfer

The Pakistani government has published a three-year performance report. The report stipulates that technology transfer will be part of all big-ticket arms contracts as part of a larger strategy to create an internationally competitive defence production sector.