Time has come to pull them all together
By Timothy Sifert
Professionals directly involved with the country's multi-billion dollar offset agreements say that, despite the fact that key deadlines have been met, the most challenging stage of the much-scrutinized business process remains: privately-owned participants must craft economically viable business plans to make the hefty projects work.
Now that the government, with the aid of the Industrial Development Agency (ARP), has picked out tentative offset partners, the chosen companies are beginning to join forces to ensure that their investments of time, technology and money can meet the government's demand for billions of dollars in offset value.
In the roughly $6.0 billion Lockheed Martin offset project, for instance, the ARP aided the ministry of economy in winnowing down the hundreds of suggested offset partnerships that had US companies saddle up with Polish entities to meet the US defense giant's offset accord.
After that the ARP, for one, takes more of a hands off approach. The companies must take a more active role now.
"Their job is much more difficult, in a way," says Janusz Luks, the director for the corporate counsel for offset programs at ARP.
He explained that the Ministry of Economy and the ARP only tapped offset deals that looked commercially viable from a government. But now the participating companies are actually sitting down to the drawing board to etch out the specific details of the agreements. As such, unforeseen economic and company-specific factors could sideline existing offset agreements.
As the Lockheed Martin offset deal lasts for 10 years, there will be a number of shifts and changes to the partnerships as they stand today, opening up the door for more companies to get a piece of the offset pie.
Nonetheless, some new deals will still be brokered, either out of the government's pool of reserve offset proposals, or from new proposals that surface in the future.
The Ministry of Economy declined to comment on offsets in general. A spokesman did note, however, that "It's a very touchy subject. It is rather hot right now, (people) are trying to look for flaws in the contracts."
The ARP is forever eyeing new business opportunities for Polish companies. In doing so, Luks says, it could dig up new competitive business opportunities that - if given the chance - dovetail with the offset agreements.
"I don't mean we will ax deals to bring in deals," he says.
Meanwhile several high-profile deals have been consummated. Most recently, Texas-based Kellogg Brown and Root, currently a formidable corporate player in the reconstruction of Iraq, signed a $690 million contract to upgrade the Gdańsk refinery, part of Grupa Lotos. That deal will be included in the Lockheed offset agreement.
People overseeing the offsets, namely on the US side, hope that this deal would exemplify the future deals.
This is especially important because a number of US officials have critcized both the Polish government and corporations of hamstringing the offset process. Lack of understanding of how offsets actually work is the main motivator of this criticism.
