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Tuesday, November 21, 2017

Industrial Cooperation : way to win International tenders

Credit: Justin Howe, U.S. Army
Polish Rosomak in Afghanistan

Within the defense industry, it is almost impossible to produce everything at home, especially when it comes to big equipment.

Military equipment research and development programs are extremely long, costly and risky, so countries have to specialize in certain components and look elsewhere for the rest. International tenders have become the norm, but for certain programs that costs billions, returning some of the nations’ investments back home is crucial. The solution is clear – industrial cooperation is necessary.

There is no country in the world that wouldn’t like to see its local industries benefit from large state investments. Historically, it’s been hard to do so in the defense industry. Armament manufacturers were known to deliver turnkey equipment and then move on to the next buyers, but times have changed. Countries are now establishing long-term relationships, exchanging technologies and often standing side by side on the battlefield.

In 2013, Finland and Poland partnered on a manufacturing license agreement to build the Rosomak 8x8 wheeled armored vehicle. Through Patria, a well trusted provider of defense and security technology solutions and support services (owned by the state of Finland), and Wojskowe Zaklady Mechaniczne S.A (WZM) (owned by the Ministry of Defense of Poland), the two parties signed an agreement that enabled them “to take good cooperation”(1). WZM received the license rights to manufacture the Rosomaks until 2023 and maintenance rights until 2052. This represented a great gain for Poland, considering the substantial order (more than 200 pieces) and the extended maintenance timeline, according to Seppo Seppälä, President of Patria.

Patria, of course, kept the full rights to the Rosomak as the sole source provider of the most critical vehicle components, but because part of the assembly chain is based in Poland, the country is able to benefit from its investment. The Rosomak was used by the Polish Army in Afghanistan and proved to be a success of manufacturing partnership. Today, Patria proves to be a smart sale from Finland, as many of these manufacturing agreements are flourishing. In fact, each buyer country is now producing it under the builder’s guidance.

Recently, one of these partnerships brought much attention to the industry by turning sour: Australia and its Collins class submarines, what is known as the “sub replacement project.” The project is the most expensive defense procurement in Australian history to date, and one that failed. In 2009, the Australian Government announced that a class of twelve submarines was to be built in Australia (2). There were significant delays in getting the project running, and the start of construction date was pushed beyond 2017. At the end of 2014, operational capabilities had still not been defined, in the midst of increasing speculation that the Australian government would purchase Soryu-class subs directly from Japan.

Today it remains unclear what the “competitive evaluation process” (3) launched by the Australian Government will lead to. Technically, besides Japan, Germany and France designs are still in the race. This demonstrates how pushing for manufacturing at home can lead to national industry disasters. In this case, Australia might be the one to blame.

But on the other hand, trying to keep some of the production line within borders could be a reasonable choice, for both economic and political reasons. Since a recent scandal with Russia over the NATO missile Shield, the Danes are focused on Defense investments (4). In the past years the Royal Danish Army and the Defense Acquisition and Logistics Organization (DALO) had launched two tenders for the replacement of its M113 (armored personal carrier vehicles), and its F-16 fighter jets. Many were expecting to see an important industrial partnership for these replacement programs. However, Denmark’s choices, the F-35 and Piranha V armored vehicle, may not result in a valuable manufacturing partnership. General Dynamic Land Systems is known for its reluctance to produce within the investing country’s borders. For instance, in the UK for the production of the FRES-SV vehicle, this almost caused the contract to be broken (6), and over in Israel for the production of the Namer vehicle, the country was disappointed in not being able to benefit from the assembly line or any major part of the manufacturing process (7).

In Denmark, Boeing is also establishing presence with the goal of selling F-18s to the Danish Air Force by partnering with Danish-based industries. In 2013, the Boeing Company was “welcoming the decision by the Danish Government to re-open the New Combat Aircraft competition (…) the competition will allow Danish leaders to learn more about Boeing’s F/A-18 Super Hornet.” As the Super Hornet was already delivered successfully to both the U.S. Navy and the Royal Australian Air Force, implementing local partnerships in Denmark is a big plus for Boeing, but it does raise broader questions of technology transfer.

In the U.S., the question of manufacturing abroad versus creating ‘Made In the USA’ technologies remains both a political and ideological debate. Typically, the U.S. industries want to keep complete control of all assembly lines. The access to technologies, which was reserved for allies, is also being redefined as the list of allies changes. In the coming year, we will probably see a change in direction from the U.S Department of Defense as far as industrial cooperation and manufacturing abroad (8).

(1) Patria and Poland signed a new Rosomak manufacturing license agreement, Patria.fi, August 1st 2013

(2) At the ASC shipyard in the South of the country.

(3) Australia’s Submarine Pay: Run Silent, Run Japanese? , The National Interest, Kyle Mizojami, September 14th 2014

(4) Scandal started by the Russian ambassador warning Denmark about the program. In which Holder K. Nielsen, defense spokesman for the Socialist People’s Parrty,responded “His opinion is based on the assumption that a war has broken out and in that case Denmark, as a member of NATO, would already be a target”.

(5) Nexter and Hydrema join forces for Denmark’s M113 replacement program, army-technology, December 19th 2014

(6)http://www.theregister.co.uk/Print/2008/12/11/hutton_defence_kit_announcement/

(7) http://www.globes.co.il/en/article-1000909206

(8) According to Arming our allies: cooperation and competition in defense technology, Office of Technology Assessment Congress of the United States, DTA



About the Writer

Megan Morris is a writer for BrooWaha. For more information, visit the writer's website.
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