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DEFENCE I OFFSET

Jarosław Kruk 

WHAT IS THE FUTURE OF POLISH OFFSET AFTER GENERAL SKRZYPCZAK'S RESIGNATION? MILITARY VARIETIES.

14/12/2013

Offset has always been the object of controversy between the Ministry of Economy and the Ministry of National Defense. To the military men it was a mere impediment to a problem-free purchase of armament. It was not only that there was „some other centre” which co-decided about the choice of armament, but also the chosen supplier had to worry about „an economy”. Since May, 2012 the Ministry of National Defense has been fiercely campaigning against offset.

Things started with the purchase of some transport jets Casa without offset. Then, in counteraction against the parliamentary interpellation, Minister Skrzypczak replied that when the Ministry of National Defense chooses public procurement procedure, offset is not necessary. Just to refresh memory – The Defense Directive was implemented in February 2013. I must admit that the purchase of Casa for the Ministry of National Defense, though most likely only by accident, can indeed be explained. In the Implementing Regulation to the statute, cargo planes are not classified as military equipment the purchase of which requires offset. The Defense Directive was implemented into the Polish legal order. Just to keep things orderly – the Act of 10 September 1999, hereinafter referred to as “the Offset Act” has not been amended. 307 Rosomaks were purchased without offset. The transaction value amounted to more than PLN1.65 billion. Certainly, Patria supplies are a significant percent.

The question arises: is the agreement valid?

And this question is worth being asked because in view of the information about delay in implementing the Polish unmanned tower, the new Rosomkas may prove useless. The loss of the Polish armament industry – perhaps one hundred – to three hundred million zlotys. In our practice this is a great opportunity for the team to come to settle accounts with the predecessors in connection with their exceeding powers. For the Polish armament industry – insurmountable loss, the Patria offset could be favorable for HSW Siemianowice and other establishments.

The Minister of National Defense has acquired the right to decide which transactions may be excluded from public procurement because of the basic interests of the State security – Article 346 of the European Treaty. To this day the Ministry of National Defense has not exercised this power to exempt purchase from the public procurement law, not even once. I admit having made a mistake when I myself wrote that this authority should be granted to the Ministry of National Defense, not to the Council of Ministers. Unfortunately, it was a huge mistake. Now I have no doubt that the entire Council of Ministers should decide about the things which represent the essential security interests of the state.

Tender for training jets without offset has been announced. Second-hand Leopards were purchased in Germany without offset, and the day before the entry into force of amendments to the law on public procurement tender for the helicopters (with offset) was announced, thereby increasing their number from 26 to more than 70. In April, a political decision was made to move the new offset agreements to the Ministry of National Defense. The issue of amending the statute was the subject of a recent debate held among the Standing Committee of the Council of Ministers. New contracts are expected to be passed to the Ministry of National Defense, while old ones concluded before the entry into force of the amendments to the “Offset Act” are still to be performed by the Ministry of Economy.

Personally, in all these activities I can see the driving power of General Skrzypczak, who, in my opinion, sought to obtain full control over the purchase of armaments and – to some extent – over the defense industry. In my opinion, the idea was wrong. This is because the Ministry of National Defense has no interest whatsoever in supporting offset. And to the satisfaction of foreign suppliers, the very fact of its transfer to the Ministry of National Defense will make it die slowly.

The price of all military equipment includes offset. If some country does not want it, then the suppliers will get bigger bonuses. You can give some “beads” to that State, such as luxury cars for those senior in rank, etc. The Ministry of National Defense has never presented any analysis in support of the fact that the purchase of arms without offset is cheaper. Moreover, such an analysis should be comprehensive, i.e. it should relate not only to the price for a piece of weaponry, but it should also show how much the economy loses if it has to buy some technology without offset. A perfect example is the recent purchase of Leopards.

In addition, since the decision to transfer the offset to the Ministry of Defense the situation of the armament industry has changed. The implementation of decisions of the government to appoint the exclusive center for consolidation of the armament industry, i.e. Polish Armaments Group (Pegasus) has been triggered. As a result of its formation, the Ministry of National Defense is expected to lose control over the Military Repair and Production Company (WPRP), which, in turn, in the first place should be incorporated into Pegasus. By this fact, the Ministry of National Defense will be deprived of the impact on the defense industry. So, for what sake should the timid Ministry of National Defense perform offset transactions? For no sake, I think; unless the idea is that no one should interfere in the purchase of equipment.

And a few more words about modernization of the Polish Armed Forces …

The situation of withdrawal of security clearance by the Military Counterintelligence Service (SKW) and the subsequent resignation of General Skrzypczak, including his misfortunate letter to the Ministry of Defense of Israel concerning unmanned aerial vehicles, is not a good sign for the process of transformation of the Polish army. All transactions initiated with the participation of General Skrzypczak “may be sort of smelly”. At this point, I don’t judge whether it’s right or wrong. I am trying to look at this issue from the perspective of a lawyer representing a losing bidder. If I were in his shoes, I would take every opportunity to undermine a decision unfavorable for his client. In the above situation, he has a very strong argument; bid rigging could be an option at the very beginning.

Fortunately, the Minister of National Defense knows very well how to get rid of “the smell”. He should immediately publish a response from the Ministry of National Defense of Israel (from July this year) to the letter of General Skrzypczak concerning unmanned aerial vehicles. As every lawyer knows, the addressee’s understanding of a declaration of intent or information (here the Ministry of National Defense of Israel) determines its interpretation. In this situation publicizing this response as soon as possible will purify the atmosphere around modernization.

And to finish up – the arms industry news …

Rumour has it that the Military Repair and Production Enterpise (WRPP) is working on the creation of some holding structure to have a stronger position in Polish Armaments Group (Pegasus), as I anticipated before. The new President would recommend consolidation of WPRP to the maximum of 3.

And as I am reading our Armed Forces restructuring program I can see that we are buying this and that, but somehow I see no records on the purchase of ammunition. This is the question of whether I have poor eyesight, or they forgot about ammunition…

 

 

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