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 General political 20 conditions General economic Rev. SipolB, Rev. conditions MS 35618/01MS KMG/KMV, Rev. öB, Compatibility Regulatory policy Owner strategy RUAG 2011-2014 underway Cooperation strategy in force in Relevant Relevant - Industrial participation - strategy incl. offset policy Armament Armament policy Security Per Magnus LarssonMagnus Per General conditions General Procurement Procurement of defence equipment Technology & Industry Base (STIB) Technology Procurement strategy Delivery Procurement,TECHNOLOGY: