Industrial Cooperation Policy in Spanish

1. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
Industrial Cooperation Policy
in the Spanish Ministry of Defense
Jerusalem, May 8th 2007
Mr. Manuel García Ruiz
Deputy Director
Industrial Cooperation Directorate
Spanish Ministry of Defence

2. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
1. Goals
2. Policy and Directives
3. Industrial Cooperation Agreement (ICA)
4. ICA generated activity
5. Cooperative programs
6. Return on Investment
7. Conclusions
SUMMARY

3. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
MAIN INDUSTRIAL COOPERATION GOALS
• Consolidate defense related strategic
industrial sector
• Obtain self-sufficiency in weapon systems
life cycle support and upgrading programs
• Build the basis for the industry to have
access to foreign markets either on
individual or cooperative ways
Goals

4. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
SECTOR CONSOLIDATION:
• Obtaining technologies
• Participating in the supply contracts
• Becoming prime contractor
• Being open to participate in multinational
programs
Goals

5. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
ACCESS TO FOREIGN MARKETS:
• Promoting subcontracting or cooperative
activities
• Improving quality and program management
capabilities
• Supporting industry abroad
Goals

6. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
LIFE CYCLE SELF-SUFFICIENCY:
• Increasing nationalization levels
• Improving capabilities in maintenance
(authorized service centers), logistics and
modernization
Goals

7. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
The Industrial Cooperation Agreement seek the
fulfillment of several objectives, among which are
the following:
• Obtaining of advanced technologies or improving
the existing ones, for their use by the Armed
Forces and the defense industry
• Obtaining of capabilities related to the acquired
system in order to improve the effectiveness and
efficiency of its support throughout its life cycle
Goals

8. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
• The increase of the industrial activity,
fostering the industrial, economic, labor and
commercial interests of Spain
• The leveling of the balance of defense trade
• The increase of the local content of the
supply
Goals

9. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
• The increase of presence of Spanish industries in
the international markets
• The certification of Spanish industries to become
suppliers and, if possible, as a sole source of
components and parts of the systems acquired
• To promote Spanish defense industry and products
in the international markets
• To foster international cooperation
Goals

10. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
Three lines of action of the acquisition
policy:
• Use of local capabilities within the
appropriate scenario of competitiveness
• Requirement of Industrial Cooperation
Agreements
• International Cooperative programs
Policy and directives

11. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
INDUSTRIAL COOPERATION AGREEMENT:
• No National law has been released
• The Secretary of State for Defense’s Directive nr.
375/2000 establishes that an ICA has to be
negotiated prior to the acquisition to any foreign
company
Industrial Cooperation
Agreement (ICA)

12. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
• Directorate of Armament and Material is
responsible of the implementation of the
Directive of Industrial Cooperation Agreement
• Gerencia de Cooperacion Industrial (Industrial
Cooperation Directorate) has the duty to
negotiate and follow-up the industrial
agreements
Industrial Cooperation
Agreement (ICA)

13. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
ICA negotiation:
• To be negotiated with all foreign potential dealers and
sub-contractors
• The ICA is to be taken into consideration in the
evaluation process
• The ICA becomes effective when the acquisition
contract is awarded
• The contract cannot be awarded if the ICA has not
been previously set up
• Every ICA has a compliance plan
Industrial Cooperation
Agreement (ICA)

14. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
The main terms and conditions of the ICA are:
• Commitment. It is a percentage of the contract
value. The reference objective is 100%
• Compliance period. Is similar to the one of the
acquisition contract
• Life-cycle clause. This permits to apply the same
terms and conditions for future contracts
Industrial Cooperation
Agreement (ICA)

15. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
• Milestones. Partial accomplishment milestones are
set up
• Categories: Defense related activities are
preferred. Non defense related activities have to be
agreed case by case and have to be similar in
technologies.
Industrial Cooperation
Agreement (ICA)

16. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
Penalties:
• Increase of commitment. Lack of fulfillment of the
partial milestones conveys to an increase of the
total commitment
• Liquidated damages. Lack of fulfillment of the
commitment at the end of the compliance period
conveys to a penalty in form of liquidated damages
payable to the public treasury
Industrial Cooperation
Agreement (ICA)

17. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
Benefits:
• ICA’s have been an efficient tool of the SMOD
industrial policy
• ICA’s have contributed to the development of
Spanish Technological and Industrial Base for
Defense (TIBD) and contributed to the European
TIBD
• ICA’s have provided strong foundation to Spanish
Industry undertaking the participation in
cooperative programs
Industrial Cooperation
Agreement (ICA)

18. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
Some representative figures as of December
2006
• Generated activity (returns): 8.054 M€
constant December 2006
• About 900 Spanish organizations with effective
participation
• 181 Foreign contractors
• More than 15,672 Approved transactions
M€ = Million Euros
ICA´s Generated activity

19. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
• The Defense activities requirements have grown
along the years progressively
Generated activities through ICA’s
ICA’s Generated activity
32%
68%
15%
85%
2006
1984 - 2006
• 329 Finished and Follow-up agreements
• 163 agreements in negotiation
• Committed returns as of 31st December 2006: 1,822M€

20. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
• A second cooperative effort has as pillars the
Cooperative Programs
• Spain is an active player in armament programs in either
political, military, multilateral or bilateral environments
• NATO
• European Union
• Multilateral
• Bilateral
• Consortia
International Cooperative
Programs

21. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
• NATO Programs:
• SOSTAR (Stand off Surveillance Targeting and Acquisition
Radar) FR, IT, NE, GE, SP (10%)
• NAEW (NATO Airborne Early Warning) 13 nations SP (3,5%)
• ACCS (Air Command Control Systems) 18 nations SP (3,3%)
• MIDS ( Multifunctional Distribution Information System) FR, IT,
GE, USA, SP (15%)
• European Union Programs (EUCLID)  Research
and Development Programs. New Technologies.
Cooperative programs

22. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
• International Cooperative Programs:
• Fighter: EUROFIGHTER-TYPHOON: GE, IT, UK, SP (13,5%)
• Harrier II Plus, VSTOL Aircraft: US, IT, UK, SP
• Beyond visual medium range air-air missile Meteor: SWD, UK,
FR, GE, IT, SP (10%)
• Evolved Seasparrow: AUS, CAN, DK, GE, GRE, NE, NOR, TU, US,
SP (3,2%)
• Transport Aircraft A-400M: GE, BE, FR, TUR, UK SP (15%)
• Tiger Combat helicopters: GE, FR, SP (13%)
• Iris-T Missile: GE, IT, GRE, NOR, SWD, SP (18%)
• Helios observation satellite: FR, BE, SP (3%)
• Pleiades observation satellite: FR, IT, SP (3%)
A-400M and Tiger helicopter are managed by OCCAR
Cooperative programs

23. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
• Bilateral Developments:
• LPD - Landing Platform Dock  NAVANTIA-Royal
SCHELDE (The Netherlands)
• Pizarro - Infantry Fighting Vehicles (tracked)  SBS-
STEYR (Austria)
• Industrial consortium
• Scorpene Submarines  NAVANTIA and DCN
(France)
• AFCON - Frigates and surface ships  NAVANTIA and
LOCKHEED MARTIN (USA)
Cooperative programs

24. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
• This ratio is an indicator to determine the industrial,
technological or/and economic outcome of a
Defence investment
• This ratio is a factor to evaluate programs under:
• Industrial Cooperation / Offsets agreements
• Cooperative Programs MOU´s
• Or a mix of both
• Helps in the analysis of different candidate
proposals, and serves to show other than Defense
merits of a given program
Return on Investment

25. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
Offset, is a debatable concept:
- In the transatlantic scenario
- In the European “arena”
- In the world market
Spain as a member of the EU, NATO, LOI, OCCAR,
has debated and still debates about offset, in each of
the above mentioned organizations as well as in the
frame of the EDA
Conclusions

26. INDUSTRIAL COOPERATION POLICY
ICCOPR-071356-1LL
The SMOD industrial requirements related to its
acquisitions have evolved from offset to a mix of
offset and industrial participation, and finally to
industrial cooperation.
The continuity of cooperative policy, either on the
basis of international collaborative programs or on
the ICA´s basis is to be supported by the SMOD
At the present moment the work is oriented to
industrial participation and industrial cooperation.
Currently cooperative programs constitute our priority
as well as industrial participation in the same
Conclusions