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Industrial Cooperation Policy in the Spanish Ministry of Defense Jerusalem, May 8 th 2007

Industrial Cooperation Policy in the Spanish Ministry of Defense Jerusalem, May 8 th 2007. Mr. Manuel García Ruiz Deputy Director Industrial Cooperation Directorate Spanish Ministry of Defence. SUMMARY. Goals Policy and Directives Industrial Cooperation Agreement (ICA)

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Industrial Cooperation Policy in the Spanish Ministry of Defense Jerusalem, May 8 th 2007

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  1. Industrial Cooperation Policy in the Spanish Ministry of Defense Jerusalem, May 8th 2007 Mr. Manuel García Ruiz Deputy Director Industrial Cooperation Directorate Spanish Ministry of Defence

  2. SUMMARY • Goals • Policy and Directives • Industrial Cooperation Agreement (ICA) • ICA generated activity • Cooperative programs • Return on Investment • Conclusions

  3. Goals MAIN INDUSTRIAL COOPERATION GOALS • Consolidate defense related strategic industrial sector • Obtain self-sufficiency in weapon systems life cycle support and upgrading programs • Build the basis for the industry to have access to foreign markets either on individual or cooperative ways

  4. Goals SECTOR CONSOLIDATION: • Obtaining technologies • Participating in the supply contracts • Becoming prime contractor • Being open to participate in multinational programs

  5. Goals ACCESS TO FOREIGN MARKETS: • Promoting subcontracting or cooperative activities • Improving quality and program management capabilities • Supporting industry abroad

  6. Goals LIFE CYCLE SELF-SUFFICIENCY: • Increasing nationalization levels • Improving capabilities in maintenance (authorized service centers), logistics and modernization

  7. Goals The Industrial Cooperation Agreement seek the fulfillment of several objectives, among which are the following: • Obtaining of advanced technologies or improving the existing ones, for their use by the Armed Forces and the defense industry • Obtaining of capabilities related to the acquired system in order to improve the effectiveness and efficiency of its support throughout its life cycle

  8. Goals • The increase of the industrial activity, fostering the industrial, economic, labor and commercial interests of Spain • The leveling of the balance of defense trade • The increase of the local content of the supply

  9. Goals • The increase of presence of Spanish industries in the international markets • The certification of Spanish industries to become suppliers and, if possible, as a sole source of components and parts of the systems acquired • To promote Spanish defense industry and products in the international markets • To foster international cooperation

  10. Policy and directives Three lines of action of the acquisition policy: • Use of local capabilities within the appropriate scenario of competitiveness • Requirement of Industrial Cooperation Agreements • International Cooperative programs

  11. Industrial Cooperation Agreement (ICA) INDUSTRIAL COOPERATION AGREEMENT: • No National law has been released • The Secretary of State for Defense’s Directive nr. 375/2000 establishes that an ICA has to be negotiated prior to the acquisition to any foreign company

  12. Industrial Cooperation Agreement (ICA) • Directorate of Armament and Material is responsible of the implementation of the Directive of Industrial Cooperation Agreement • Gerencia de Cooperacion Industrial (Industrial Cooperation Directorate) has the duty to negotiate and follow-up the industrial agreements

  13. Industrial Cooperation Agreement (ICA) ICA negotiation: • To be negotiated with all foreign potential dealers and sub-contractors • The ICA is to be taken into consideration in the evaluation process • The ICA becomes effective when the acquisition contract is awarded • The contract cannot be awarded if the ICA has not been previously set up • Every ICA has a compliance plan

  14. Industrial Cooperation Agreement (ICA) The main terms and conditions of the ICA are: • Commitment. It is a percentage of the contract value. The reference objective is 100% • Compliance period. Is similar to the one of the acquisition contract • Life-cycle clause. This permits to apply the same terms and conditions for future contracts

  15. Industrial Cooperation Agreement (ICA) • Milestones. Partial accomplishment milestones are set up • Categories: Defense related activities are preferred. Non defense related activities have to be agreed case by case and have to be similar in technologies.

  16. Industrial Cooperation Agreement (ICA) Penalties: • Increase of commitment. Lack of fulfillment of the partial milestones conveys to an increase of the total commitment • Liquidated damages. Lack of fulfillment of the commitment at the end of the compliance period conveys to a penalty in form of liquidated damages payable to the public treasury

  17. Industrial Cooperation Agreement (ICA) Benefits: • ICA’s have been an efficient tool of the SMOD industrial policy • ICA’s have contributed to the development of Spanish Technological and Industrial Base for Defense (TIBD) and contributed to the European TIBD • ICA’s have provided strong foundation to Spanish Industry undertaking the participation in cooperative programs

  18. ICA´s Generated activity Some representative figures as of December 2006 • Generated activity (returns): 8.054 M€ constant December 2006 • About 900 Spanish organizations with effective participation • 181 Foreign contractors • More than 15,672 Approved transactions M€ = Million Euros

  19. ICA’s Generated activity • The Defense activities requirements have grown along the years progressively Generated activities through ICA’s 1984 - 2006 2006 15% 32% 68% • 329 Finished and Follow-up agreements • 163 agreements in negotiation • Committed returns as of 31st December 2006: 1,822M€ 85%

  20. International Cooperative Programs • A second cooperative effort has as pillars the Cooperative Programs • Spain is an active player in armament programs in either political, military, multilateral or bilateral environments • NATO • European Union • Multilateral • Bilateral • Consortia

  21. Cooperative programs • NATO Programs: • SOSTAR (Stand off Surveillance Targeting and Acquisition Radar) FR, IT, NE, GE, SP (10%) • NAEW (NATO Airborne Early Warning) 13 nations SP (3,5%) • ACCS (Air Command Control Systems) 18 nations SP (3,3%) • MIDS ( Multifunctional Distribution Information System) FR, IT, GE, USA, SP (15%) • European Union Programs (EUCLID) Research and Development Programs. New Technologies.

  22. Cooperative programs • International Cooperative Programs: • Fighter: EUROFIGHTER-TYPHOON: GE, IT, UK, SP (13,5%) • Harrier II Plus, VSTOL Aircraft: US, IT, UK, SP • Beyond visual medium range air-air missile Meteor: SWD, UK, FR, GE, IT, SP (10%) • Evolved Seasparrow: AUS, CAN, DK, GE, GRE, NE, NOR, TU, US, SP (3,2%) • Transport Aircraft A-400M: GE, BE, FR, TUR, UK SP (15%) • Tiger Combat helicopters: GE, FR, SP (13%) • Iris-T Missile: GE, IT, GRE, NOR, SWD, SP (18%) • Helios observation satellite: FR, BE, SP (3%) • Pleiades observation satellite: FR, IT, SP (3%) A-400M and Tiger helicopter are managed by OCCAR

  23. Cooperative programs • Bilateral Developments: • LPD - Landing Platform Dock  NAVANTIA-Royal SCHELDE (The Netherlands) • Pizarro - Infantry Fighting Vehicles (tracked)  SBS-STEYR (Austria) • Industrial consortium • Scorpene Submarines  NAVANTIA and DCN (France) • AFCON - Frigates and surface ships  NAVANTIA and LOCKHEED MARTIN (USA)

  24. Return on Investment • This ratio is an indicator to determine the industrial, technological or/and economic outcome of a Defence investment • This ratio is a factor to evaluate programs under: • Industrial Cooperation / Offsets agreements • Cooperative Programs MOU´s • Or a mix of both • Helps in the analysis of different candidate proposals, and serves to show other than Defense merits of a given program

  25. Conclusions Offset, is a debatable concept: - In the transatlantic scenario - In the European “arena” - In the world market Spain as a member of the EU, NATO, LOI, OCCAR, has debated and still debates about offset, in each of the above mentioned organizations as well as in the frame of the EDA

  26. Conclusions The SMOD industrial requirements related to its acquisitions have evolved from offset to a mix of offset and industrial participation, and finally to industrial cooperation. The continuity of cooperative policy, either on the basis of international collaborative programs or on the ICA´s basis is to be supported by the SMOD At the present moment the work is oriented to industrial participation and industrial cooperation. Currently cooperative programs constitute our priority as well as industrial participation in the same

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