Fighter command
The men from Lockheed have been in town. Quiet, understated suits, plain white shirts, nothing dazzling in the tie department. These are people straight from the high-tech top deck, accustomed to forming their words and phrases carefully. You do so when you are trying to sell a killing machine, and you are in the end game to land a big strategic order. Three of the world's largest military aircraft manufacturers are about to tender their offers to upgrade the Polish air force with 48 multi-role aircraft, the most extensive and costly investment in the country's military history. It is essential, the argument says, to meet Poland's obligations in the NATO club, sharpened by the international uncertainties following September 11 and the terrorist-seeking drive into Afghanistan which followed. For such a mission and potentially others like it, Poland cannot pass muster with the existing force of antique Russian SU-22 bombers and MiG-29 and MiG-21 fighters.
On Nov. 12, the government will receive offers from Lockheed Martin with the F-16, Dassault Aviation with the Mirage 2000-5 and a joint venture between Sweden's Saab and the U.K.'s BAE systems with their Gripen plane. The final decision is currently slated for Dec. 27, but sources close to the government have suggested that the bidders should expect a delay of around two weeks before an announcement.
Corporate men who deal in very large sums of money are not infrequently figures who melt into the scenery. The men from Lockheed are, therefore, cast perfectly among the regular clientele of the Sheraton. They are looking for a deal worth around €4 billion, yet they might be here to buy real estate or sell machinery.
This piece of machinery can be refuelled in mid-air, boasts a fly-by wire flight control system, can carry more than 100 weapons, has sensor pods and pack a lethal punch from 22,000 pounds of armaments.
But hooking a deal like this is no longer a question of what flies fastest and hits the hardest. There is a new word in the weapons lexicon. Offsets. To sweeten a deal, the bidders make a series of binding pledges to counterinvest in the domestic economy. It is thus, so far as Lockheed Martin is concerned, that the gentle pastures of academia at Łód University, the legions of unemployed graduates, and high-tech start-ups, are drawn into the international weapons and armaments industry. Phillip Georgariou is the company's regional manager for industrial co-operation. He is tall and impeccably groomed. And he has the handle on this offset business.
"If you're asking whether somebody is going to come and give you $3.5 billion, the answer to that is no," he said. "Is your economy going to reap considerably more than $3.5 billion worth of benefits? Yes. That's done in a bunch of different ways, but I would say that the primary way is the relationships we are going to build between U.S. companies and Polish companies.
"Some of these projects we've got are guided towards the immediate creation of jobs, but a lot more of them are longer term and help to sustain economic growth over a 10 to 20-year period, which we've done in a bunch of other countries. We've got a lot of experience. So no, on January 1, there won't be a suitcase with $3.5 billion, but there will be considerably more value to the economy over the period of the programme."
The company or consortium which has proved itself most adept at target practice will win the competition. Here are the targets. Aim nearest to the bull's eye: 45% will be awarded on price, 40% on the technical aspects and 15% on the offsets. So the offsets are not the swinger, providing the bidder has price and technical superiority right.
Mac Stevenson is a small and tightly controlled man, moreover vice president for business development and wing comander of the team. He knows where the target is clearly enough.
"I personally believe that's about right because this is about buying a fighter, not an offset project," he said.
This is a man who is happiest debriefing pilots back from missions, studying the effectiveness of the "weapons suite". That's where the deal is.
So, back to offsets. Is this virtual money or the real folding stuff? Georgariou prefers to call it an "offset of the outflow of capital", in this case Polish taxpayers' money which will be required to repay the loan kindly made available by President George W. Bush to buy the fighters. The formula states it takes the form of returning the equivalent in economic value back to the country. Added value everywhere, either as innovation or investments, but also as technology transfer and procurement.
Down to the real money. Vice president Stevenson puts it on the table.
"You have a contract value," he said. "If you say 'I'm going to offset 10% of that contract value,' then if that contract was worth $3 billion, we would provide $300 million worth of that programme. What we search for are those firms in Poland or individuals who have an idea they have not been able to bring to fruition
we can provide expertise to help them to manufacture that product effectively."
The Lockheed people have been working for five years in Poland to find the best marriages between the company's expertise and areas of the Polish economy which need help. They are enthusiastic about the establishment of a "technology accelerator" at the University of Łód and a link with the University of Maryland to provide scholarships for MBA students. Another is a connection between the University of Texas and its School of Entrepreneurship in conjuction with the University of Łód. The idea is to jump-start technology students into the market place, tying them into funding to create viable businesses.
There will be a fund, run by San Dia National Laboratories in New Mexico, a nursery where young start-ups - anything from biomedicine to nuclear medicine - will receive "technical mentoring". Americans express themselves visually, which often confuses Europeans. Follow this one. Does it reflect something that we know about Poland so far?
"So there's this young person straight out of college with his own ideas for a technology he thinks will sell, and we set him up with the funding required and technical mentoring, and he always has an umbilical cord back to the technology accelerator if he needs help to make sure he becomes a success and starts spinning off new business and new economic growth," Georgariou said.
This is about politics, about a competition in which the government needs to make the best case presentation to the electorate for spending $3.5 billion on warplanes while it is fourth from the bottom of the wealth league table among the ten candidates for EU membership.
Here's Georgariou on politicians. It's straight: "They're like anywhere else in the world, and they need to get voted back in. They need jobs right away in large numbers. So we could just expend all our resources in trying to do everything over a two-year period, but they also want long-term sustained growth, so you try to achieve that balance."
Some projects would kick in immediately, others will develop over as long as ten years. The offset system works on scoring points, so much per project, all tied in to a binding legal agreement, and the first one Lockheed has signed.
"We'll start building the relationship over the first year and a half to two years that will then continue giving results past our ten-year thing," Georgariou continued. "It's not that we'll quit claiming credits as soon as we hit the $4 billion mark, we'll continue to yield economic benefits in the long term."
George Standridge is from Alabama. He is the F-16 campaign director for Poland. He led the starburst show laid on at the Sheraton for the media. He uses that soft, mellow drawl to sell, passionately.
"Flat out, it's the best plane in the competition," he said. "It includes the latest technology developed as a result of 12 years of continuous combat, beginning with Desert Storm, then Bosnia and Kosovo and continues in Afghanistan now ... It positions you well for the future battlefield."
The video footage at the press show included footage of operational flights and targets extinguished in Bosnia. Are offsets meant to humanise weapons of mass destruction? The question was intercepted by on-board radar and shot down barely had it achieved lip-off. Stevenson blew away the smoke: "For one thing, we're not talking about weapons of mass destruction here, we're talking about fighter airplanes. Number two, we're not trying to humanise anything. We're trying to meet the requirements that the government of Poland has set out for us. It requires an offset, so we will do it."
Over and out. Glad I packed my parachute, though.
