Strategic Goals of Swiss Offset Procurement

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 - Agenda

• General Basis • Definition of Swiss Offset • Reference Frame for Swiss Offset • Strategic Goals of Swiss Offset • Security-Relevant Technology and Industry Base (STIB) • Conclusions

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 2 Aktenzeichen: Per Magnus Larsson MS 35618/01 - General Basis Offset Organization within armasuisse 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 armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 3 Aktenzeichen: Per Magnus Larsson MS 35618/01 - General Basis Competence in procurement and technology 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. armasuisse Die neue Schweizer Offset-Policy 2010 4 Aktenzeichen: Per Magnus Larsson MS 35618/01 - General Basis Armament Policy 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)

armasuisse Die neue Schweizer Offset-Policy 2010 5 Aktenzeichen: Per Magnus Larsson MS 35618/01 - General Basis Offset Policy as a part of the armament policy 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. armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 6 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Agenda

• General Basis • Definition of Swiss Offset • Reference Frame for Swiss Offset • Strategic Goals of Swiss Offset • Security-Relevant Technology and Industry Base (STIB) • Conclusions

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 7 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Definition of Swiss Offset Direct Offsets 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. armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 8 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Definition of Swiss Offset Indirect Offsets 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.

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 9 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Definition of Swiss Offset Indirect Offsets (continued) 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.

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 10 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Agenda

• General Basis • Definition of Swiss Offset • Reference Frame for Swiss Offset • Strategic Goals of Swiss Offset • Security-Relevant Technology and Industry Base (STIB) • Conclusions

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 11 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Reference Frame for Swiss Offset The Offset Management Model

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 12 Aktenzeichen: Per Magnus Larsson MS 35618/01 - 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:

armasuisse Die neue Schweizer Offset-Policy 2010 13 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Agenda

• General Basis • Definition of Swiss Offset • Reference Frame for Swiss Offset • Strategic Goals of Swiss Offset • Security-Relevant Technology and Industry Base (STIB) • Conclusions

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 14 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Strategic Goals of Swiss Offset Procurement • 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

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 15 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Strategic Goals of Swiss Offset Procurement (continued) • 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.

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 16 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Strategic Goals of Swiss Offset Technology • 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

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 17 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Strategic Goals of Swiss Offset Delivery • 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.

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 18 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Agenda

• General Basis • Definition of Swiss Offset • Reference Frame for Swiss Offset • Strategic Goals of Swiss Offset • Security-Relevant Technology and Industry Base (STIB) • Conclusions

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 19 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Security-Relevant Technology and Industry Base (STIB)

Armament policy

KMG/KMV, Rev. öB,

Rev. SipolB, Rev.

Regulatory policy

Industrial participation Industrial

Owner RUAGstrategyOwner

strategy incl. offset policy offset incl. strategy

Procurement strategy Procurement

Procurement law

General General political

Cooperation strategy Cooperation

KMG/KMV etc.

General General legal

(WTO), FHG,

conditions:

conditions conditions

2011

2014

development of Swiss

conditions conditions MP 09/10,

General General economic

General General military

Armed Forces

Technological

Compatibility conditions

Security-Relevant Technology & Industry Base (STIB)

Procurement of defence equipment

Colour code: General conditions in force underway

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 20 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Security-Relevant Technology and Industry Base (STIB) (continued) • 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

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 21 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Security-Relevant Technology and Industry Base (STIB) (continued) • 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 armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 22 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Security-Relevant Technology and Industry Base (STIB) (continued) • 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 armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 23 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Security-Relevant Technology and Industry Base (STIB) (continued) • 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

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 24 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Security-Relevant Technology and Industry Base (STIB) (continued) • 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

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 25 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Security-Relevant Technology and Industry Base (STIB) (continued) • Web survey covers three main topics:

Contact address & point of contact Categorisation and industry evaluation of own size & founding year capabilities and skills Company Technologies profile

References

Important reference projects, awards, major contracts etc. during the past five years

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 26 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Security-Relevant Technology and Industry Base (STIB) (continued) Address Technologies

Technology / skill Managea- Use in end Address: Aaa Ltd. bility product … Ruhrmattstrasse 153 3000 Bern Acoustic sensors – production sonar Tel.: +41 31 123 45 67 active Fax: +41 31 123 45 68 Internet: ww.123.ch Acoustic sensors – production sonar E-Mail: [email protected] passive POC: Max Mustermann Acoustic Basic Coating of outer Tel.: +41 31 123 45 69 signatures research cover – being E-Mail: [email protected] planned

Company data References

• Founding year: 1980 • 2005: Development of a new generation of sonar sensors • Corporate structure: AG • 2007: "Innovation award": award for the sonar sensors at • Industry: Electronic & electrotechnical the International Submarine industry Fair, Abu Dhabi 1 –9 10 -49 50 -249 250+ • 2009: Major contract: Integration into BAE Supply Chain X • Staff: for Vanguard Submarines

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 27 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Agenda

• General Basis • Definition of Swiss Offset • Reference Frame for Swiss Offset • Strategic Goals of Swiss Offset • Security-Relevant Technology and Industry Base (STIB) • Conclusions

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 28 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Conclusions Offsets, co-operations, technology share • Access to multilateral information- and cooperation 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

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 29 Aktenzeichen: Per Magnus Larsson MS 35618/01 - Conclusion Information and Questions For further information on the Swiss Armament and Offset Policy please consult: www.armasuisse.ch “Industrial Participation”

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Thank you for your interest!

Any questions?

armasuisse DEFENCE TECHNOLOGY: Offsets, Procurement, Delivery 30 Aktenzeichen: Per Magnus Larsson MS 35618/01