Transfer of Technology and What's Next?

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The new offset law put placed particular emphasis on the transfer of production, overhaul, repair and maintenance capacities to the Polish defence industry. At the same time, the changes in the offset law does have not effect in led to changes in the system of defence procurement. In this situation, it is necessary to amend the existing regulations concerning the procurements of equipment and the after-sales services in order to adjust them to the provisions of the new offset law. 

The new offset law attaches great importance to the transfer of production capacities to the Polish defence industry and to providing after-sales services for the acquired military equipment. The "offset" is generally defined as a cooperation necessary to hold or to establish the production, recovery and maintenance capacities on the territory of Poland. In particular, it concerns a transfer of technologies that is aimed at ensuring the independence from foreign suppliers required by the State Treasury.

At the same time, it is not defined how the production capacity and the capacity concerning after-sales services will be used by the Polish State. It is one thing to establish industrial capacities, and it is another thing to use them by ordering products or services. Obviously, the problem does not concern the capacities used to produce the ordered equipment or weapons. It concerns the maintenance and repair capacities. At a closer examination, it turns out that at the level of both the law and the ministerial legislation there are no clear regulations enabling long-term procurements in the firms in which the capacity to provide after-sales services has been established. In particular, such regulations are not included in the Decision No 118/MON from April 25, 2013, specifying the principles and procedures of placing orders by the Ministry of Defence in the field of defence and state security.

As a consequence, it may happen that the offsetee (a Polish firm, a subsidiary of a foreign supplier or a joint venture company), which has acquired the capacity for servicing, repairs and overhaul of the equipment or military weapons by investing its own financial resources, can be left without orders using its potential as the armed forces can procure this type of services with other entities.

Taking into account that the existing regulations have led in the recent years to such tenders for servicing major equipment that could be won by any firm, including firms from behind the eastern border, it turns out that the creation of the servicing, repair or maintenance capacities on the Polish territory for the purposes of the State security is just a fiction. This is what happens when the building of industrial capacity is not followed by pacing orders.

A lack of appropriate regulations may result in:

1) acquiring services at inflated prices from entities in which there have been established capacities to provide after-sales services,

2) in a waste of industrial capacities established within the offset framework resulting from not placing orders with the companies in which such capacities are located.

The new way of ordering services described above should take into account two priorities:

1) the fiscal interests of the State in accordance with which the order should be granted as cheaply as possible,

2) the security interest according to which the order should be granted to the entity in which the maintenance and repair capacities have been established in order to keep these capacities.

It is possible to regulate the new manner of ordering services in at least a few ways. While establishing them, however, it is necessary to get rid of the naive faith in the effectiveness of "the invisible hand of the market".

Filip Seredyński