DEFENCE TECHNOLOGY: Offsets, Procurement and Delivery

armasuisse

DEFENCE TECHNOLOGY:

Offsets, Procurement and Delivery

SMi Offsets Conference 2011

February 7th and 8th, Sofia, Bulgaria

Per Magnus Larsson, Attorney-at-Law

Senior Legal Advisor & Offset Manager

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Aktenzeichen: MS 35618/01

armasuisse

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Per Magnus Larsson

DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery

• General Basis

• Definition of Swiss Offset

• Reference Frame for Swiss Offset

• Strategic Goals of Swiss Offset

• Security-Relevant Technology and

Industry Base (STIB)

• Conclusions

Agenda

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Per Magnus Larsson


armasuisse is a group within the Federal Department of

Defence, Civil Protection and Sport (DDPS) of the Swiss

federal Administration and as such reporting directly to

the Head of Department (Minister of the MoD):

• armasuisse

• Federal Office of Topography – swisstopo

• Federal Office of Defence Procurement

• Central Services

• Legal Affairs, Transport and Customs

• Legal Affairs and Offsets

• Offset Office Bern

General BasisOffset Organization within armasuisse

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Die neue Schweizer Offset-Policy 2010

armasuisse is the federal competence center for:

• Procurement of technologically complex systems and

materials

• Defence technology and quality assurance

• Real Estate DDPS

• Geographical reference data of Switzerland

With its services, armasuisse aims at optimum customer

satisfaction, both within the federal administration and

externally. armasuisse provides its services on time,

independently, efficiently and based on economic

principles.

General BasisCompetence in procurement and technology

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Armament procurements in Switzerland are governed by

the following basic decrees:

• Principles of the Federal Council regarding the

Armament Policy of the DDPS (30 June 2010)

• Procurement strategy of the Federal Council for the

DDPS (31 March 2010)

• Industrial Participations Strategy (31 March 2010)

• Offset Policy of the National Armament Director

(15 December 2009, updated 1 July 2010)

General Basis Armament Policy

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Objective is a sustained and effective generation of

volume of business and know-how and/or technology

transfer in favour of Swiss industry relevant and

indispensable to security, armament and national

defence, i.e. to develop further economic relations to

other countries, in particular to generate additional

contract and export volumes, and promoting the

international competitiveness of Swiss industrial

enterprises. Offsets in Switzerland produce a high

economic benefit and contribute to the maintenance of

its high-tech industrial base, and to the preservation of

attractive jobs.

General BasisOffset Policy as a part of the armament policy

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• General Basis






• Conclusions

Agenda

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They are primarily defined as transactions which are

directly connected to the respective defence

procurements. The main focus is on aspects of security

and armament policy. Direct offsets take place in the

form of full or licensed manufacture, subcontractor

relationships, joint ventures, and other forms of

cooperation. Direct offsets are realized to create

capacities or know-how contributing to maximum

autonomous maintenance, quality maintenance and

upgrading of a system, and to the growth of the armed

forces and of core capabilities of security and defence

relevant industries.

Definition of Swiss OffsetDirect Offsets

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They are not directly connected to the respective

defence procurement and are primarily related to

industrial contracts, offset-relevant financing activities,

technology transfers, investments, marketing/sales

support etc. Indirect offsets can be divided into:

• indirect offsets relevant to security and

armament policy and

• civilian industrial indirect offsets

Therefore weighting of the different participation

alternatives always has to take into account security

and armament political considerations.

Definition of Swiss OffsetIndirect Offsets

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In Switzerland indirect offsets are realized if they open

up new markets to competitive Swiss industry, give

access to advanced technologies, ensure the

preservation and/or development of additional know-

how, and lead to additional contract and export

volumes, and, above all, to additional turnover.

With direct and indirect offsets 100 % of the contract

value have to be compensated, indirect offsets

supplementing direct offsets accordingly. armasuisse

reserves the right to establish directives in view of the

accomplishment of defence related indirect offsets.

Definition of Swiss OffsetIndirect Offsets (continued)

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• General Basis






• Conclusions

Agenda

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Reference Frame for Swiss OffsetThe Offset Management Model

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Reference Frame for Swiss Offset The Offset Process

The handling of offset transactions in Switzerland can

be broken down into five phases. For better

understanding the procurement process is shown in the

graphic chart below:

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• General Basis






• Conclusions

Agenda

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• Strengthening of the imperative industrial

potential for the defence and security of

Switzerland:

• Relevant security and armament part of Swiss

industry as well as research institutes shall be

developed with a focus.

• Necessary to ensure Switzerland’s autonomy

regarding maintenance and upgrades of its

defence systems

• In times of crisis and conflicts a decisive element

of the Swiss defence effort

Strategic Goals of Swiss OffsetProcurement

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• Preservation of existing and acquisition of

additional know-how:

• Co-operation with foreign companies must be

focused on the future.

• Preservation of existing and acquisition of

additional know-how strengthens Switzerland as

location for research, development and industry.

• Additional jobs generated on long term basis

• Swiss industry keeps its competitiveness and may

even develop new products or upgrades for the

defence market.

Strategic Goals of Swiss OffsetProcurement (continued)

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• Access to technologies at state-of-art and

beyond:

• Through mainly direct Offsets (Swiss sub-

contractors for purchased defence products)

access to foreign defence technologies for use,

service, maintain, overhaul and repair the

products

• Additional spin-offs for Swiss defence industry

supporting the Swiss defence effort and leading

to new developments/products for the defence

market

Strategic Goals of Swiss OffsetTechnology

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• Verification and quality matters:

• Additional know-how and technology transfers

lead to state-of-the-art knowledge within

procurement organization and its related Swiss

industrial partners (e.g. RUAG).

• Ensures verification processes during

development of defence products.

• Enables armasuisse to master quality tests on

complex defence systems.

• Enables armasuisse to determine and argue

eventual warranty cases.

Strategic Goals of Swiss OffsetDelivery

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• General Basis






• Conclusions

Agenda

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Security-Relevant Technology and


Security-Relevant

Technology & Industry Base (STIB)

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Colour code: General conditions underwayin force

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• Goals of Swiss Armament Policy:

• Long-term provision

• Access to critical know-how

• International armament co-operation

• R&D only selective, production of defence equipment in

Switzerland

• Differentiated technology level, clearly prioritized

• Competence networks in support of armament

procedure

• Maintenance, quality maintenance, upgrade as

autonomously as possible by Swiss industry base


Industry Base (STIB) (continued)

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• Goals of Swiss Procurement Strategy:

• Starting point: armed forces requirements

• Principle of competitiveness and economic efficiency

• Objective justification of exceptions

• Observation during the entire life cycle

• Securing interoperability

• Capability of integration into existing systems

• Distinction between initial & subsequential procurement

• Typification of goods to be procured

• Preservation of Technology and Swiss Industry Base

• Systematic controlling for better transparency



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• Goals of Swiss Industrial Co-operation Strategy:

• Principle: 100 % compensation in Switzerland for major

procurements abroad

• Strengthen competitiveness of Swiss industry

• Make possible access to high technology

• Acquire additional know-how

• Open access to foreign markets

• Differentiated compensation value to be recognized

• Creation of a competence center within administration

• Operate the Offset Office Bern

• More active information and control policy



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• Goals of STIB:

• Preserve scientific and technical core

competences considered important within

framework of procurement and co-operations

• definition of the target status by the DDPS and a

survey of the actual situation in the market

• Possibility of systematic promotion of security-

relevant technology and industry base through

procurements, co-operations, industrial

participations, research projects



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• Winnings and advantages of STIB:

• Common categorization of technologies and skills: specific classification leads to common language for military planners, procuring authorities, domestic companies, foreign prime contractors

• Current technology overview: All contribute to identification of companies and research institutions, also helps finding partners for specific projects

• Better coordination and controlling: Through market segmentation information on current offset transactions, procurements or research projects more systematically distributed and preparable



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• Web survey covers three main topics:



References

Company

profile

Technologies

Contact address &

point of contact

industry

size & founding year

Categorisation and

evaluation of own

capabilities and

skills

Important reference

projects, awards,

major contracts etc.

during the past five

years

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Industry Base (STIB) (continued)Address

Address: Aaa Ltd.

Ruhrmattstrasse 153

3000 Bern

Tel.: +41 31 123 45 67

Fax: +41 31 123 45 68

Internet: ww.123.ch

E-Mail: [email protected]

POC: Max Mustermann

Tel.: +41 31 123 45 69

E-Mail: [email protected]

Company data

• Founding year: 1980

• Corporate structure: AG

• Industry: Electronic & electrotechnical

industry

• Staff:

Technologies

• 2005: Development of a new generation of sonar

sensors

• 2007: "Innovation award": award for the sonar sensors at

the International Submarine

Fair, Abu Dhabi

• 2009: Major contract: Integration into BAE Supply Chain

for Vanguard Submarines

1 –9 10 -49 50 -249 250+

X

Technology / skill Managea-

bility

Use in end

product …

Acoustic sensors –

active

production sonar

Acoustic sensors –

passive

production sonar

Acoustic

signatures

Basic

research

Coating of outer

cover – being

planned

References

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• General Basis






• Conclusions

Agenda

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• Access to multilateral information- and co-

operation networks

• Early identification of armament relevant von

developments

• Participation at research and development

programs of EVA-member states

• Know-how networking / cost sharing

• Participation of Swiss industry market access/

preservation of know-how and competitiveness

ConclusionsOffsets, co-operations, technology share

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For further information on the Swiss Armament and

Offset Policy please consult:

www.armasuisse.ch “Industrial Participation”

* * * * *

Thank you for your interest!

Any questions?

ConclusionInformation and Questions

http://www.armasuisse.ch/

Documents

DEFENCE TECHNOLOGY: Offsets, Procurement and Delivery