Poland Has Transferred the First Funds to Cover the F-35 Procurement

18 maja 2020, 11:10
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Image Credit: USAF

Poland has made the first payment, covering the acquisition of the 5th Generation F-35A Lighting II MRCA. The jets have been procured within the framework of the Harpia programme. Therefore, the implementation of the intergovernmental agreement has been launched on the US side. The Polish MoD admitted that it is in the process of scrutinizing the impact that the COVID-19 pandemic may have on the finances. However, no negotiation has been launched concerning the potential changes in the fighter procurement payment schedule.

Responding to our inquiry, the Operational Center of the Polish Ministry of Defence announced that Poland has already made the initial payment for the F-35. Nonetheless, any further details of the payment schedule, as well as the sums in question, remain confidential. According to the statement made by Deputy Minister of Defence Wojciech Skurkiewicz during the meeting of the Senate’s National Defence Committee, the amount of 1.952 billion zlotys has been allocated to the F-35A acquisition in FY 2020. This constitutes around 11% of the whole value of the deal. 

We also know that in case of the Wisła medium-range air defence system contract, with a similar value (4.75 billion dollars stipulated in the main FMS agreement), the initial deposit was as high as 500 million zlotys. Possibly, we are dealing with a similar amount in the case of the F-35. If this is the case, further payments may be expected to be planned in this year’s budget. However, one cannot rule out a scenario in which the amount is higher, or even close to the financial plans made for this year.

The US-side has received the initial FMS-procedure payment, required to launch the finalization of the Polish F-35 procurement contract. The details pertaining to the remaining payment terms are protected by the Law on Protection of Classified Information, due to the fact that potential disclosure could damage the economic interest of the Republic of Poland.

Operational Centre at the Polish Ministry of Defence

The F-35 acquisition is a relevant item in the modernization budget (13.413 billion zlotys this year). More than 14% of that amount would be used to cover the F-35 procurement then - the whole defence budget is a little lower than 50 billion zlotys. Defence24 also asked about the MoD’s analysis pertaining to delays and schedule rearrangement, related to F-35 payment. The MoD responded: “so far - no talks took place with regards to renegotiation of the Polish F-35 delivery agreement conditions, involving the US Government”. 

At the moment the impact that the SARS-Cov2 pandemic may have on the Polish defence budget is being analyzed, within the scope of securing the ongoing and future financial needs of the Polish Armed Forces.

Operational Centre at the Polish Ministry of Defence

The Polish Ministry of Defence did admit, however, that analytical effort has been launched on the potential impact that the coronavirus pandemic may have on the “current and future financial needs of the Polish military”. It cannot be ruled out then, that the financial burden placed on the FY2020 budget by the pandemic would force the MoD to postpone some of the modernization tasks. On the other hand, though, the increased 2.5% GDP financing could help finance the process of modernization. Step as such - increasing the defence share in the GDP - has been mentioned in the new National Security Strategy adopted by the MoD - if it becomes reality, the increased spending could facilitate the modernization processes.

The Polish Ministry of Defence has signed the F-35 acquisition agreement on 31st January, at the 41st Training Aviation Base in Dęblin. The Contract has a value of USD 4.6 billion, plus the Value Added Tax. The price tag at which the 32 aircraft come, along with the side-packages, was as high as 17.572 billion zlotys on that day, without the VAT. The tax is paid to the Polish Tax Office at the moment when the equipment is delivered, and the amount with VAT included is higher: 20.7 billion. The above means that this year Poland would pay an amount that constitutes around 11% of the total price associated with the contract. The remaining money is to be paid until 2030 - when the agreement commitments would be met by both parties. Around 10% of the total amount would be paid per annum then.

The public discussion following the pandemic outbreak had a recurring theme referring to a potential postponement of the F-35 payment. The reasoning here was seen in the fact that the worsening economic situation would lead to cuts in the MoD’s budget, with the finances expected to be received by the domestic industry. A similar tone of voice was adopted by Tomasz Siemoniak (KO [Civic Coalition] MP and former head of the MoD) and Władysław Kosiniak-Kamysz, presidential candidate from the PSL [Polish People's Party] party. Szymon Hołownia, another presidential candidate, stated that the price is too high when compared to other states. General [ret] Mirosław Różański, Hołownia’s security advisor, announced that the F-35 procurement shall be audited.

F-35 for Poland 

The price of a single F-35A in the Polish contract has been defined as USD 87.3 million. The remaining cost, apart from the acquisition of an extra engine, is related to the training and logistics package, including the following elements:

  • Ground support equipment and pilots’ equipment,
  • Ground training equipment for airbases, Integrated Training Centre and 8 Full Mission Simulators included,
  • A complete logistics support package within the framework of the Global Support Solution, valid until 2030,
  • Operational support IT system for the F-35A,
  • Training for 24 pilots, up to the instructor level as well; training for 90 members of the tech support personnel; both to happen in the US.

The contract has neither included armament for the new aircraft that has some commonality with the F-16C/D platform, already operated by the Polish Air Force nor has it included the infrastructure modifications that would be required by the new aircraft. The MoD expects the latter to have a price tag ranging from 0.7 to 1.8 billion zlotys. The transaction does not include the offset component. The argument used by the MoD to justify this was pointing to the intention of limiting the cost and to the closed profile that the F-35 programme has.

Deliveries of the Polish F-35As would begin in 2024. The first six aircraft (out of 32) are planned to be delivered between 2024 and 2025. Then 4-6 aircraft per year would be delivered until 32 examples are available in 2030. The first 6 aircraft will be temporarily deployed to one of the airbases in the United States of America, for the sake of training the Polish Air Force aircrews and ground crews. The first jets are expected to arrive in Poland between 2025 and 2026. The Polish F-35s are to be at IOC by 2028. 

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