23.11.2021
Author: Jarosław Kruk -Attorney at law, Managing partner
A few interesting events happened in the defense industry during the last few months.
Among them we can distinguish:
announcement of purchase of 250 Abrams tanks of the latest version for a considerable amount of USD 24 million each (it is interesting whether these include the Israeli active defense system);
announcement of a new military doctrine in Poland, announcements of increasing the manpower of the Armed Forces to over 250 000 soldiers plus at least 50 000 in Territorial Defense Forces (WOT); announcements of the use of flexible, modern methods of financing purchases for the Polish Army.
The above announcements were endorsed by Deputy Prime Minister Kaczyński, assisted by the Minister of National Defense - practically as serious as possible - in Poland.
CAs for tanks, I think that the recent purchases of equipment in the USA, tanks and the F-35, will be the subject of lectures at the best business academies in the future, under the slogan "the most effective way to buy weapons systems"; without tendering, from a single supplier, compared to tenders carried out by Finland, Belgium, Switzerland. Perhaps even someone for detailed analysis of this subject will get some serious reward in economics. Polish action in this field breaks all the rules of conducting negotiations and economics, but this is becoming the new norm.
I recently had an opportunity to talk to my dear colleague, a Belgian lawyer who was heavily involved in negotiating industrial cooperation agreements for the purchase of the F-35. He told me that the negotiations regarding the talks with the manufacturer of the F-35 and other bidders (Rafael, Typhoon, F-18) were very turbulent, and the bidders more than once modified their offers to the benefit of the Belgian business, which finally "won" a lot. We in Poland, when buying the F-35, have “achieved” for the economy a letter of intent between LM and PGZ and probably not much more. And we paid more for the planes than Belgium.
The Abrams tank is also very expensive, like 4-6 T-90 MBTs from our potential enemy. But they say it's good, and if it gets Israel's active defense system, then it’s cool. The question is whether Abrams is appropriate for the planned theater of operations - eastern Poland? I do not know. Logistics will not be as great as politicians and military officials say. "We can make it" – does not sound convincing. (By the way, retired military men say the opposite.) There will be little or no benefit to the economy. The purchase of Abrams is politically motivated by the foreign and domestic policy. Before the elections, the "Sovereign" will see powerful tanks during a parade, preferably in desert camouflage, to which the tank has become accustomed over 30 years on television.
We can criticize more, but from my 15 years of offset work experience, I can say that we have the best defense minister for at least 15 years. With a human, not administrative, approach to soldiers, as demonstrated in veteran matters. I never expected to write something like this, but it's true. Decisions to buy weapons systems are always political, however it would be good, if they were not caused by a miscalculation that purchasing weapons in the USA at any price would provide us with unconditional cooperation on their part, but with a sober and cold calculation, including the needs of our economy.
It seems that when making purchases, no one takes logistics into consideration and does not count the costs of maintaining the equipment. In a situation where Polish companies do not have any service capabilities, the F-35 or Abrams during every repair or replacement of parts will have to be carried out with the help of American specialists and wait for the delivery of parts from the USA. In the case of the F-35, promises were made to establish a central warehouse in Europe and to implement fast delivery of parts. May it be so. This failed with the F-16, despite the existence of many European users. You have to wait a long time for the delivery of parts, for a more serious service you have to send the planes to the USA. It is very expensive and it reduces the combat readiness.
Generally, it is most profitable for a manufacturer when his staff or selected subcontractors perform as many service activities, repairs, etc. as possible. It is not profitable for the manufacturer to locate warehouses with parts in the territory of the user's country or to train his companies for servicing and repairs, unless this is guaranteed in the supply contract (in this case FMS). I would like to hope that such provisions are in the contract for the F-35, but to be honest I doubt it a bit. It is best for the manufacturer when the equipment maintenance costs are more than 4 times higher than the purchase costs, he constantly earns.
The third tank system is an extravagance that the richest countries cannot afford, but we "can make it". Two types of fuel, kerosene and crude oil, it is difficult to drive with in one vehicle, different parts stores, technicians trained for several systems. Incredible costs, due to which there will be no money for training, parts, fuel, missiles in the future that, or it will work only in small amounts. That will be enough for a parade twice a year. In the event of an emergency, it is easy to make a mistake, minor negligence and the weapon system becomes useless.
The above, unfortunately, proves that decisions about the purchase of weapon systems are made in a voluntary manner, for the current political need without taking into account the subsequent maintenance costs, which is quite sad. As a result, the concept of establishing an army of at least 250,000 active duty soldiers plus 50,000 WOT can be treated as a political step calculated for the current goal - the next elections, in view of the expected aggravation of the international situation. With such profligacy, Poland will not be able to afford an army of this size, regardless of the views on the legitimacy of our country having such large armed forces.
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