INDUSTRIAL COOPERATION POLICY ICCOPR-071356-1LL Industrial Cooperation Policy in the Spanish...

INDUSTRIAL COOPERATION POLICY INDUSTRIAL COOPERATION POLICY

ICCOPR-071356-1LL

Industrial Cooperation Policyin the Spanish Ministry of DefenseJerusalem, May 8th 2007

Industrial Cooperation Policyin the Spanish Ministry of DefenseJerusalem, May 8th 2007

Mr. Manuel García RuizDeputy Director Industrial Cooperation DirectorateSpanish Ministry of Defence

Mr. Manuel García RuizDeputy Director Industrial Cooperation DirectorateSpanish Ministry of Defence


ICCOPR-071356-1LL

1. Goals2. Policy and Directives3. Industrial Cooperation Agreement (ICA)4. ICA generated activity5. Cooperative programs6. Return on Investment7. Conclusions

1. Goals2. Policy and Directives3. Industrial Cooperation Agreement (ICA)4. ICA generated activity5. Cooperative programs6. Return on Investment7. Conclusions

SUMMARYSUMMARY


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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

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

GoalsGoals


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

programs

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

programs

GoalsGoals


ICCOPR-071356-1LL

ACCESS TO FOREIGN MARKETS:• Promoting subcontracting or cooperative

activities• Improving quality and program management

capabilities• Supporting industry abroad

ACCESS TO FOREIGN MARKETS:• Promoting subcontracting or cooperative

activities• Improving quality and program management

capabilities• Supporting industry abroad

GoalsGoals


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LIFE CYCLE SELF-SUFFICIENCY:• Increasing nationalization levels• Improving capabilities in maintenance

(authorized service centers), logistics and modernization

LIFE CYCLE SELF-SUFFICIENCY:• Increasing nationalization levels• Improving capabilities in maintenance

(authorized service centers), logistics and modernization

GoalsGoals


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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

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

GoalsGoals


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• 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

• 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

GoalsGoals


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• 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

• 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

GoalsGoals


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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

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

Policy and directivesPolicy and directives


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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

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

Industrial Cooperation Agreement (ICA)



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• 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

• 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




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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

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




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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

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




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• 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.

• 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.




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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

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




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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

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




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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

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

ICA´s Generated activityICA´s Generated activity


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• The Defense activities requirements have grown along the years progressively Generated activities through ICA’s

• The Defense activities requirements have grown along the years progressively Generated activities through ICA’s

ICA’s Generated activityICA’s Generated activity

32%

68%

15%

85%

20061984 - 2006

• 329 Finished and Follow-up agreements • 163 agreements in negotiation• Committed returns as of 31st December 2006: 1,822M€

• 329 Finished and Follow-up agreements • 163 agreements in negotiation• Committed returns as of 31st December 2006: 1,822M€


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• 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

• 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

International Cooperative Programs

International Cooperative Programs


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• 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.

• 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.

Cooperative programsCooperative programs


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• 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

• 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



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• 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)

• 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)



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• 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

• 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

Return on InvestmentReturn on Investment


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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

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

ConclusionsConclusions


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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

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

ConclusionsConclusions

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