This report offers insights into the market opportunities and entry strategies adopted by foreign OEMs...
WikiLeaks has disclosed that diplomats sometimes use a smear campaign to lessen the chances of other countries winning defence contracts. However, there is also an increasing trend for companies to use a variety of positive promotion techniques to secure bids.
Some of the diplomatic cables published by WikiLeaks reveal the negotiations US embassy staff were involved in to influence the outcome of defence deals in favour of US companies.
A series of communiqués from 2009 shows that the US Department of State wanted to use the fact that India had decided to drop the Dassault Rafale from its Medium Multirole Combat Aircraft (MMRCA) programme to “attack the French bid” for the Brazilian F-X2 programme. The Indian Ministry of Defence reversed its decision one month later, following intervention by the French government.
Around the same time, the US Embassy in Brazil dispatched a diplomatic cable, entitled ‘Brazil’s fighter purchase: endgame strategy’, which described how to promote the F/A-18E/F Super Hornet built by US company, Boeing. In another example, it was revealed that British aero engine stalwart, Rolls-Royce, lost a contract to supply helicopter engines to the Spanish military, after US diplomats lobbied the Spanish Prime Minister to opt for General Electric engines instead.
While no-one would suggest that there was anything underhand in these dealings — in fact, it is a key part of a diplomat’s job to promote business deals with their parent country’s businesses —providing evidence of a competitor’s potential shortcomings may not seem like the most positive way of conducting a deal.
Furthermore, while technical superiority, through-life price and the opportunity to create jobs in the purchasing country are often cited as they key reasons for one supplier’s product being chosen over another, manufacturers are increasingly promoting alternative value-added factors as incentives to select their product.
For example, to support its bid to win the £7bn contract to supply the Indian Air Force with MMRCA, the Eurofighter consortium has offered to make India a partner. If this were to go ahead, India would be offered the blueprints of the Typhoon and the opportunity for technological and development participation in future tranches of the programme.
In addition, defence companies have also begun to flaunt their moral superiority over others in order increase their advantage in deals.
Indeed, defence companies are keen to disassociate themselves from any perceived underhandedness, such as the recent accusations of bribery and corruption levelled at BAE Systems over a contract with Saudi Arabia.
For instance, the US Air Force recently admitted a mix-up when it sent the technical specifications of bids it had received from Boeing and EADS to the rival companies. To ensure both had equal access to information to support their bids, the US Air Force then sent both companies a full set of the data.
Boeing reacted to this in an unprecedented way by issuing a press release declaring how its employees responded to receiving EADS’ information in an ‘exemplary’ way. “When faced with the unusual and delicate situation of receiving a disc containing our competitor’s sensitive data recently, the two Boeing employees that received the disc acted in an exemplary fashion, by opting to safeguard and return it to the customer without gaining access to its contents,” said a Boeing spokesman in the statement.
As it would seem, the maintenance of a pristine reputation could be a new asset for companies wishing to promote their bids for defence contracts over those of their rivals.
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