Ministry gears up for future offsets deals

By Timothy Sifert

Even as the government keeps an eagle-eye on developments of its ongoing offset projects - including the gargantuan Lockheed Martin and the contested Patria deals - the offset office at the Ministry of Economy and Labor and Social Policy has its sights set on two upcoming military tenders to include multi-million dollar offset deals.

"At the moment there is a big challenge for offsets," said Witold Misiowiec, director at the offset office at the Ministry of Economy, in a recent Business Journal interview. "We would be happy if it were just the Lockheed Martin deal."

He deliberated on the future of the newly created offset department. "One of the challenges is to watch for the execution of all offsets. Added to that, we expect to have in the near future two more offset deals."

This week the Ministry of Defense is to begin a tender offering for companies to provide communications lines Polish ground forces, and, later in the year, it would launch the tender for guided anti-tank missiles.

Misiowiec noted that the responsibility for monitoring the offsets of these projects, which are considerably smaller than the $6.028 Lockheed deal, would come under the offset office's charge.

Then it would add to the already copious workload at the ministry. But in the meantime, the office has its sleeves rolled up, working on and monitoring the Lockheed and the Patria deals.

Misiowiec said that, despite criticism from the press, politicians and the business community, it is too early to tell whether the Lockheed deal, for example, would be a success.

"At the moment, some of them have been started," he said, pointing to the three most-recently confirmed deals: the production of the Astra car in General Motors' Gliwice plant; the $690 million Grupa Lotos-Kellogg, Brown & Root contract; and technological advances at the Institute of Aviation.

"These are the most important for the economy because of their high value," Misiowiec added. "Some others have been started, but require signing some documents, and this work is in the advanced stages and we hope to have something formally stated."

The next milestone for the Lockheed deal is December 31, he explained, when "Lockheed must present all the execution of its commitments." Before then, it's difficult to project specifically how well the agreement is running.

In the near future, also, the government will measure whether the company has met with its offset value targets that have been laid out over the ten years of the contract, ending in 2013 (see graph for details). By 2006, 40 percent of the value needs to be met.

Misiowiec also contemplated some of the criticism his office, as well as most parties involved in the projects, have had to field: "Some people can't believe that it's possible to reach these values; they doubt," he said. But at this point, he added, "We shall see."

Finland's Patria has engaged the Polish government with a E1.6 billion offset program for the purchase of 690 armored personnel carriers (APCs). For their part, a few companies - which lost this tender - have complained over the tender process, saying that Patria did not even meet the specifications set by the Ministry of Defense.

That has led many to believe that Patria was able to clinch the deal mainly by virtue of a sweet offset package, and not the quality of its APCs.

Though the offset office did not decide on the tender, Misiowiec was adamant about such accusations: "I would like to stress that the offset was not the criteria for choosing the winners of the tender."