offset strategy of the brazilian air force - offsets 2011 conference - sofia, bulgary - dióegnes l....
DESCRIPTION
Apresentação efetuada na conferência "Offsets 2011, em Sofia, Bulgária. O objetivo era apresentar a atual política do MD sobre acordos de compensação, particularmente no contexto da Força Aérea Brasileira.TRANSCRIPT
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Offset Strategy
of the
Brazilian Air Force
A comprehensive approach
Lt Col Diógenes Lima Neto
M.Sc., MBA
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Objective
• To have a better understanding of the
BAF’s offset strategy, with special
attention to the relationships between
commercial contracts, offset
agreements and buyer’s credit
operations.
Air Force Secretariat for Economy and Finances (SEFA)
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Agenda
• Brazilian Military Offset Focuses & Tendencies
• Offset Strategy of MoD and BAF
• BAF’s Offset Features & Portfolio
• SEFA in context
• Negotiating Commercial, Financial and Offset's
Agreements – a comprehensive approach
• Offset Agreements: Controls and Auditing
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Brazilian Military Offset Focus
• NSD is the driver for new high-profile programs, under MoD-issued guidelines for Industrial Participation.
• Other government domains than defense will be increasingly concerned on possible benefits of industrial participation and offsets, such as MoI&T, MRE, MTran, MME and BNDES, specially for large national projects such as high-speed rail transportation and hydrocarbons offshore prospection.
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Legal Provisions on Defense Offsets
• National Policy Defense
– Decree nr. 5484, 30 Jun 2005
• National Strategy of Defense
– Decree nr. 6.703, 18 Dec 2008
• National Defense Industry Policy (NDIP)
– Order nr. 899/MoD, 19 Jul 2005
• Strategic Actions towards NDIP
• Normative Order nr. 586/MoD, 24 Apr 2006
• Policy and Directives on Offsets
– Order nr. 764/MoD, 27 Dec 2002
• Joint-workgroup on improving national defense industry capabilities
– Joint-Order nr. 1068, 21 Jul 2008 (MoI&T and MoD)
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Brazilian Defense Industry’s Synergy
Industrial Associations
• Defense and Security Materials
• Aerospace
• Regional
Government
• MoD
• MoI&T
• MoC&T
•Agencies
Political
• President
• Legislations
• Ministers
• Parliamentary Front on National Security
Defense and Related Policies
• Brazilian Agency for Industrial Dev. - ABDI
• National Development Bank – BNDES
National Policy Defense
National Strategy of Defense
• Defense Industrial Complex
• Research and Projects Financing – FINEP
• Public and Private Universities
• Navy Command
• Army Command
• Air Force Command
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Main civilian players:
Defense Industry Associations
Brazilian Aerospace Industries Association
Brazilian Association of Defense and Security Materials Industries
Federation Industries of São Paulo State
Brazilian Association of Chemical and Biotech Industries
... Among many others...
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Main civilian players:
Defense related industries
... Among many others...
Source: ABIMDE
http://www.abimde.org.br/?on=associados
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Offset area Defense
Threshold FOB 5 million US$, 12 months
Minimum obligation 100% commercial contract
Timeframe Commercial Contract duration
Source of obligation Direct commercial sales or subcontracting (indirect supply)
Multipliers Empirical, case-by-case basis
Penalties Brazilian administrative legislation
Focus Defense and aerospace industry sectors
Direct offsets Preferential
Indirect offsets Acceptable
Eligible activities Transfer of technology, investments, co-production, licensed
production, marketing support, training, other forms of
countertrade.
Offset Strategy of MoDMoD Order 764/MD - Essentials
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Liquidated damages Yes
Bank guaranties Usually 5% of the obligation
Multipliers 1 to 4
Waiver Sole-source suppliers, government-to-government
international agreements (except under competitive
environments)
Banking 50% of new commercial contracts, 5 years, transferable
under the same holding
Pre-offsets No, but may be considered in a case-by-case basis
Swaps No, but may be considered in a case-by-case basis
Industrial
Participation
Acceptable, but only if joint projects are defined upfront and
milestones are established
Penalties Credit-increase based settlements may be accepted
MoU Mandatory, even if the beneficiary is an AF organization
BAF Offset Features
MoD
Army
Navy
Air Force
MoI&T
BNDES
MoC&T
Companies
Universities
Civilian Organ.
Private
Sector
Commercial
Contract
funding
funding
Offset
Agreement
Lenders
Financing
Contract
funding
Defense Offset AgreementsGeneral Schema - Brazil
FINEP
SuppliersOffset
Beneficiaries
MoF
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
BAF’s Acquisition & Offset Process
EMAER(BAF’s Gen.Staff)
Mil.Org.(Buyers)
DCTA(C&T Dep.)
IFI(Inst. for
Ind. Sup.)
SEFA
Policy & Strategy
Co-ordination
Acquisition Process &
Execution
Technical support
Budgetary & Financial
support
Accounting
Internal Control & Auditing
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
SEFA in context Air Force Secretariat for Economy and Finances
Int’l Affairs
Secretariat
Federal Budgetary
Secretariat
General Attourney
National Treasury
Central Bank
Banks
ECAs
Financial Institutions
TCU
MPU
Gov’t Auditing and Control
CGU
Foreign Gov’t Entities
BAF Mil Org
TCU: The Brazilian Court of Audit
MPU: The Federal Prosecution Office
CGU: The Office of the Comptroller General
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
• 5 offset and IP agreements, valued ~US$ 4 billion. (~US$ 500 million credited)
• EADS CASA – P-3 &CL-X
• Airbus – VC-X
• Elbit Systems – F-5BR & AL-X
• Eurocopter – H-XBR
• 18 agreements under negotiation, valued ~US$ 9 billion.
• A-1M – Elbit Systems (T&C agreed)
• CL-X2 – Airbus Military
• H-XBR CLS – Eurocopter & Turbomeca
• F-X2 – waiting final decision from the National Defense Council
BAF’s & Offsets*
SDDP: Underdepartment of Development and Programs *SDDP examples
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
• Industrial cooperation agreement for local production and nationalization of
50 EC-725 helicopters, focused on transfer of technology and local industry
development.
• First joint acquisition program in Brazilian military history.
• 22 ICP projects, managed by SDDP with AF, Navy, Army and MoI&T
participation.
• Keywords in this project:
Industrial co-operation & sustainable benefits
Long term relationship
Pro-active approach
Global strategy
Latest Success Case: HX-BR Project
MDIC: Ministry of Development, Industry and TradeThe first EC-725 shipped to Brazil – Oct 2010
Source: DefesaNet
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
BAF Offset Agreements: Controls and Auditing
• Few years ago, the controlling was made exclusively by EMAER.
• Recently, this control was split between EMAER and SEFA. – EMAER: strategic aspects of offset;
– SEFA: fulfillment of the offset credits and its balance.
• The Brazilian Court of Audit (TCU) has demonstrated some concerns with a possible negligence on the fulfillment on offset credits.
• Additionally to the external control exercised by TCU, SEFA is in charge of all activities related to Auditing inside the BAF realm.
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Brazilian Offset Tendencies• Brazil is moving from decentralized offset management
toward industrial participation using high profile programs as drivers of the change.
• This implies a different approach to manage offset/IP on Government procurements:– Projects must be discussed at the early stages of program
lifecycles, given that effective industrial participation is in fact direct and so set in the beginning for joint development and production to succeed (the CMA issue).
– Industrial cooperation demands more institutional support from the offset authority to the local industry, including investments and continuous workload.
– Sound business plans are paramount.
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Agenda
• Brazilian Military Offset Focuses & Tendencies
• Offset Strategy of MoD and BAF
• BAF’s Offset Features & Portfolio
• SEFA in context
• Negotiating Commercial, Financial and Offset's
Agreements – a comprehensive approach
• Offset Agreements: Controls and Auditing
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Objective
• To have a better understanding of the BAF offset strategy, with special attention to the relationships between commercial contracts, offset agreements and buyer’s credit operations.
Air Force Secretariat for Economy and Finances (SEFA)
BAF CommandMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) Offsets 2011 – Sofia, Bulgaria
Offset Strategy of the Brazilian Air ForceA comprehensive approach
Lt Col Diógenes Lima Neto
International Projects Management
Tel: +351 939 631 921
E-mail: [email protected] / [email protected]
Special thanks to Lt Col Eduardo Quesado for his brilliant contribution.