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GICC Budapest 2010 - Offset Strategy of the Brazilian Air Force
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Transcript of GICC Budapest 2010 - Offset Strategy of the Brazilian Air Force
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
Offset Strategy of the
Brazilian Air Force
Offset Strategy of the
Brazilian Air Force
A comprehensive approachA comprehensive approach
Major DiMajor Dióógenes Lima Netogenes Lima NetoM.Sc., MBA
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
ObjectiveObjective
• 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 CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
AgendaAgenda
• 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 CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
Brazilian Military Offset FocusBrazilian Military Offset Focus
• NSD will be 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 MDIC, MRE, MTran, MME and BNDES, specially for large national projects such as high-speed rail transportation and hydrocarbons offshore prospection.
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
Brazilian Offset TendenciesBrazilian 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.
MoDMoD
Army
NavyAir Force
MoTradeMoTrade
BNDES
MoC&TMoC&T
FINEP
Companies
UniversitiesCivilian Organ.
Private Sector
SuppliersSuppliers
Commercialcontract
funding
funding
OffsetAgreement
LendersLenders
FinancingContract
funding
Commercial, Offset and Financing relationshipsCommercial, Offset and Financing relationships
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
Offset Strategy of Offset Strategy of MoDMoD
• MoD - Strategic level– Order nr. 764/MD/2002, “Policy and Directives for Offsets”.
• BAF – Strategic level
• DCA 360-1/2005, “Policy and Strategy for Offset Agreements”.
• Order nr. 1.396/GC4/2005 – Institutes the Air Force Offset Committee, under the AF General Staff.
– Execution level• ICA 360-1/2005, “Principles for Offset Agreements
Negotiations”.
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
Offset area Defense
Threshold FOB 5 million US$, 12 months
Minimum obligation 100% commercial contract
Timeframe Commercial Contract duration
Source of obligation Direct commercial sales or subcontracting (indirect supply)
Multipliers Empirical, case-by-case basis
Penalties Brazilian administrative legislation
Focus Defense and aerospace industry sectors
Direct offsets Preferential
Indirect offsets Acceptable
Eligible activities Transfer of technology, investments, co-production, licensed production, marketing support, training, other forms of countertrade.
Offset Strategy of Offset Strategy of MoDMoDMoD Order 764/MD - Essentials
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
Liquidated damages Yes
Bank guaranties Usually 5% of the obligation
Multipliers 1 to 4
Waiver Sole-source suppliers, government-to-government international agreements (except under competitive environments)
Banking 50% of new commercial contracts, 5 years, transferable under the same holding
Pre-offsets No, but may be considered in a case-by-case basis
Swaps No, but may be considered in a case-by-case basis
Industrial Participation
Acceptable, but only if joint projects are defined upfront and milestones are established
Penalties Credit-increase based settlements may be accepted
MoU Mandatory, even if the beneficiary is an AF organization
BAF Offset FeaturesBAF Offset Features
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
• 5 offset and IP agreements, valued ~US$ 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, KC-X – selection in progress
BAFBAF’’ss & Offsets& Offsets**
SDDP: SDDP: UnderdepartmentUnderdepartment of Development and Programsof Development and Programs *SDDP *SDDP examplesexamples
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
• 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 MDIC participation.
• Keywords in this project:
� Industrial co-operation & sustainable benefits
� Long term relationship
� Pro-active approach
� Global strategy
Latest Success Case: HXLatest Success Case: HX--BR ProjectBR Project
MDIC: MDIC: MinistryMinistry ofof DevelopmentDevelopment, , IndustryIndustry andand TradeTrade Recent Success Story: HX-BR Project
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
BAFBAF’’ss Acquisition & Offset ProcessAcquisition & Offset Process
Internal Control & Auditing
Accounting
Budgetary & Financial support
Technical support
Acquisition Process & Execution
Co-ordination
Policy & Strategy
SEFAIFI(Inst. for
Ind. Sup.)
DCTA(C&T Dep.)
Mil.Org.(Buyers)
EMAER(BAF’s Gen.Staff)
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
SEFA in context SEFA in context Air Force Secretariat for Economy and Finances
Int’l AffairsSecretariat
IntInt’’l Affairsl Affairs
SecretariatSecretariat
Federal BudgetarySecretariat
Federal BudgetaryFederal Budgetary
SecretariatSecretariat
General AttourneyGeneral General AttourneyAttourney
National TreasuryNational TreasuryNational Treasury
Central BankCentral BankCentral Bank
BanksBanksBanks
ECAsECAsECAs
Financial InstitutionsFinancial Institutions
TCUTCUTCU
MPUMPUMPU
GovGov’’tt Auditing and ControlAuditing and Control
CGUCGUCGU
Foreign Gov’t EntitiesForeign Foreign GovGov’’tt EntitiesEntities
BAF Mil OrgBAF Mil Org
TCU: the Brazilian Government Accounting Office
MPU: a public prosecution serviceMPU: a public prosecution serviceCGU: federal comptroller general CGU: federal comptroller general
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
FINANCING PROCUREMENT
Negotiating Commercial, Financial and Offset's Agreements Negotiating Commercial, Financial and Offset's Agreements –– a comprehensive approacha comprehensive approach
RFI / RFP PROPOSALS EVALUATION SHORT LISTSHORT LISTSHORT LIST
FIRST PHASE - PRELIMINARY ASSESSMENT
SECOND PHASE – FINAL SELECTION
REVISED REVISED
PROPOSALSPROPOSALSANALYSISANALYSIS
FACE TO FACEFACE TO FACE
ONON--SITE SURVEYSITE SURVEY
FLIGHTSFLIGHTS
COMPLEMENTARYCOMPLEMENTARY
INFORMATIONINFORMATIONBAFOBAFO
THIRD PHASE - CONTRACTING
AWARD AND SIGNATUREAWARD AND SIGNATUREAWARD AND SIGNATURE
COMMERCIAL, LOGISTICS , TECHNICAL OFFSET
SELECTED BIDDER
SELECTED SELECTED
BIDDERBIDDER
BAF Commander
FINAL COMMERCIAL NEGOTIATIONFINAL COMMERCIAL NEGOTIATION
COMMERCIALCONTRACT
OFFSET OFFSET AGREEMENTAGREEMENT
Courtesy of Maj Int Eduardo Quesado Filgueiras – SDDP/COPAC
BAF CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
BAF Offset Agreements: Controls and AuditingBAF 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: accomplishment of the offset credits and its balance.
• Our Government Accounting Office (TCU) has demonstrated deep concerns with a possible non-utilization of some of those 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 CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
AgendaAgenda
• 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 CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
ObjectiveObjective
• 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 CommandBAF CommandMinistry of DefenseMinistry of Defense
Air Force Secretariat for Economy and Finances (SEFA) GICC – 2010 – Budapest, Hungary
Offset Strategy of the Brazilian Air ForceOffset Strategy of the Brazilian Air ForceA comprehensive approachA comprehensive approach
Major Diógenes Lima NetoDivisão de Contratos e Convênios
Secretaria de Economia e Finanças da Aeronáutica – SEFAEsplanada dos Ministérios, bloco “M”, 2º andarBrasília – Distrito FederalBrasilCEP 70.045-900
TEL: +55 (61) 3962-1463
E-mail: [email protected]
Special thanks to Maj Eduardo Quesado Filgueiras, from the SDDP/COPAC, for his precious support in the elaboration of this presentation.