Armaments Report - Witamy

Armaments ReportJanuary 2018

DEFENCE POLICY

2018 – a year of breakthrough

AIR DEFENCE

What talks on Patriots involve

AIR FORCE

Five jets that might replace MiGs

2Polityka Insight Armaments Report – January 2018

Poland’s largest defence procurement in 2017 (selection)

Boeing 737-800 BBJ aircraft for VIP transportation 3 planes PLN 2.5 bln

„Kormoran II” mine-warfare ships 2 vessels PLN 1.2 bln

„Ratownik” rescue ship 1 vessel PLN 755 mln

AMRAAM air-to-air missiles 95 pcs PLN 590 mln

MSBS Grot-C automatic rifles 50.000 pcs PLN 500 mln

Jelcz type 442.32 trucks 500 units PLN 420 mln

mobile command post units 160 pcs PLN 323 mln

„Holownik” technical support ships 6 vessels PLN 284 mln

ballistic vests 19.700 pcs PLN 194 mln

modernization of Orlik training aircraft 12 planes PLN 186 mln

UKM machine guns 1494 pcs PLN 167 mln

mobile digital comms nods 23 pcs PLN 111 mln

distant recce vehicles Viper 118 pcs PLN 91 mln

night-vision gear 886 pcs PLN 67 mln

GPS receivers 1244 pcs PLN 42 mln

BOR sniper rifles 657 pcs PLN 24 mln

Leopard 2A4 simulator/trainer 3 units PLN 18 mln


What’s new in the defense sector

PIT-Radwar to provide NATO with data on targets. The company owned by PGZ received a contract to develop a system for passing on data from Global Hawk drones to NATO countries. The drones, operating as part of the NATO Alliance Ground Surveillance system, aim to recognise and update the target catalogue for the air force and artillery. PIT-Radwar will cooperate with Ameri-can Northrop Grummanem, the drones’ creator. The contract, worth over EUR 10.5 million, is a serious test for the company specialising in radars and liaison systems, but also reflects trust in its abilities.

ORP Orzeł damaged by fire. A month after the incident, the Polish army finally admitted that Poland’s most advanced Kilo-class submarine had been damaged in a fire. The vessel has been put out of current operation but it is possible that it would eventually be repaired and return to service. The Polish submarine fleet currently consists of only three half-a-century-old Kobben-class vessels. The second submarine of that type will be de-commissioned in 2018.

Macierewicz accuses PGZ of misleading him. In 2016, MinDef cancelled the tender for a battlefield manage-ment system, citing state security. Two private consortia featuring WB Electronics and Teldat had been taking part. MinDef has announced a new tender last summer, stating that only a state-owned company can be chosen. The sys-tem was supposed to be supplied by PIT-Radwar, which is owned by PGZ. Now Antoni Macierewicz says that PGZ misled him by claiming that it has the needed technology. This reflects the deep disappointment concerning PGZ companies’ high tech abilities and could mean a return to private suppliers.

18.10 2017

25.10 2017

02.11 2017

PFR investing in private defence industry. The fund will acquire a stake of 24 per cent in WB Electronics for PLN 128 million. The investment will help the biggest private defence company in Poland to expand exports and enter the civilian drone and electronic system market. Until now, WB Electronics provided drones and liaison systems for the army, but under MinDef Antoni Maciere-wicz the company has been excluded from many tenders. The investment by PFR, which is controlled by Mateusz Morawiecki, could reflect his impatience regarding the low use of Polish technology in public orders.

Poland joins PESCO. Warsaw will announce plans to join the EU Permanent Structured Cooperation (PESCO) during today’s meeting of the foreign affairs council, which will include the NATO secretary general. At the same time, it will also put forward a condition for the EU to pay particular attention to dangers from the east and cooperate with NATO within the PESCO framework. France and Germany, the initiators of common defence policy, want to focus on the south. The effect of the adoption of PESCO at the December EU summit will lead to joint financing of defence projects, coordinated strengthening of armed forces and gradually growing independence from US support.

Poland’s Boeing for VIPs. The 1st Transport Air Base in Okęcie received the first of three Boeing 737-800 BBJs. The airliner, christened “Józef Piłsudski”, will take up air force duty in mid-2018. The new airliner was delivered in a typical passenger version – by 2020 it will be refitted to the VIP/HEAD configuration. Two other Boeings for VIPs are set to be delivered in three years’ time.

09.11 2017

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15.11 2017

The change in MinDef leadership announced on January 9 and the appointment of Mariusz Błaszczak as minister is likely to cause further changes in the ministry’s personnel and may bring partial revision of armament policy. The greatest shock would be caused by dismissal of deputy minister in chargé of modernization Bartosz Kownacki as well as by the shift in PGZ subordination and the Group’s leadership. By the time when this report was published neither of these decisions have been announced.


PLN 37 billion for Polish Patriots. The US military exports agency DSCA has priced the package of Patriot anti-missile system for Poland for the maximum price of USD 10.5 billion (ca. PLN 37 billion). The offer, which includes only the first phase of two-phase Wisła pro-gramme, includes 16 anti-missile launchers, 4 sectoral radars and 208 anti-missile interceptors PAC-3 MSE. The price-cap quoted is a maximum and could be reduced in the contract. Although the Polish DefMin has declared that the entire funding for the Wisła programme shall not exceed PLN 30 billion.

MinDef to buy 1,000 drones from WB Electronics. By the end of the year, Poland’s largest private defence contractor will supply 20 Warmate loitering munition units for the army, while further 980 units will be delivered by mid-2018. The Warmate is an example of the so-called kamikaze drone, a compact electric UAV that carries a small explosive or cumulative charge. It can detect and destroy targets within a radius of 10 km. Warmate UAVs will be used by special forces, infantry and territorial defence units. According to MinDef, the weapons cost just over PLN 100 mln. Last year, Antoni Macierewicz declared that MinDef would place an order for “thousands of drones” with PGZ, a promise that the state-controlled group has been unable to deliver.

Army looking for new planes. The Armaments Inspectorate is launching proceedings for the purchase of multitask combat planes (the Harpia programme). The deadline is December 18; after that, applicants will receive detailed questions. For now, Lockheed Martin, with the F-35, and Eurofighter GmBH, with the Eurofighter Typhoon, have expressed their interest. Saab, with the Gripen-E, might apply too. The programme’s analytical phase will last at least a year, with the planes bought some time in the 2020s. It will be one of Poland’s biggest defence purchases.

US to sell Poland surface-to-surface missiles. The Defense Security Cooperation Agency announced that the State Department approves the sale of compo-nents of the Hilmars missile system to Poland. The first instalment of equipment for the Polish Homar missile system includes 61 ATACMS missiles with a range of 300 km, 27 GMLRS ready missiles and 1642 guidance sets for mounting on GMLRS missiles that will be produ-ced in Poland in the future. The missiles bought in FMS mode have bee valued at up to USD 250 million. If the contract is signed, the missiles will be part of the system produced at Huta Stalowa Wola.

Poland rejects Patriots’ valuation. Deputy MinDef Bartosz Kownacki is negotiating a contract for the pur-chase of a mid-range air defence system in Washington. According to unofficial reports, he called the maximum price of USD 10.5 billion for the Patriots unrealistic and unacceptable. In an interview with portal Defense News, he said that Poland is taken aback by the valuation. At the Pentagon, he supposedly asked for a price three times lower, above USD 3 billion. The Americans have not said whether they are ready to lower the valuation. Talks will move on to a detailed analysis of the costs and neces-sary reduction of the offset, which will determine the fate of the entire programme.

17.11 2017

21.11 2017

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29.11 2017

07.12 2017

MinDef negotiating the price of Patriots. The first round of negotiations started in Huntsville, Alabama, the home of the US Army Aviation and Missile Command. It will include „line by line” analysis of the draft LOA offer. The Polish negotiators, led by Colonel Michał Marciniak, are to significantly reduce the costs of the first round of Patriot missiles with the IBCS system, valued by the Americans at as much as USD 10.5 billion. The fate of Poland’s most important weapons programme and the country’s image as the regional leader in defence invest-ments depend on the talks. MinDef has said that it wants to sign the contract in the first quarter of 2018.

Two CEOs of PGZ companies dismissed. Two experienced defence industry managers were dismissed on Friday: Adam Janik, CEO of Rosomak, Bumar-Łabędy and OBRUM, and Ryszard Kardasz, head of PCO. Kardasz was one of the most influential CEOs within the PGZ group; he formerly controlled Huta Stalowa Wola and PIT-Radwar. Janik led the recovery of armoured transpor-ter producer Rosomak and managed the modernisation of the Leopard 2 tanks in Gliwice. Successors have not yet been announced. The CEO’s dismissal could be linked to PM Mateusz Morawiecki’s greater influence on PGZ companies.

Poland loses a MiG-29 fighter. The jet crashed on approach near the air base in Mińsk Mazowiecki. The pilot survived, although he chose not to catapult, as he was probably trying to land in the forest. It was Poland’s first ever MiG-29 crash. After last year’s fire of the same fighter at Malbork, Poland has 30 MiG-29 aircraft in two squadrons.

Delay affects helicopters. Defence contractors and the Armament Inspectorate agreed that the deadline for submitting final bids in the tender for special forces helicopters set for December 28 would be voided. A new deadline has not yet been set, but unofficial sources indicate that it could be moved to Q1, 2018. The delay has been caused by the fact that all bidders (Airbus Helicopters, Sikorsky Aircraft, PZL-Świdnik) said they would be unable to deliver the helicopters in the required configuration within the specified deadline, or June 2019. Further negotiations will show whether it would be possible to deliver aircraft in their basic version and gradually add additional components.

Airbus secures a contract to modernise Orliks. Twelve PZL-130s Orlik basic training aircraft are set to be overhauled and modernised at PZL-Okęcie, which is owned by Airbus Defense and Space. The modernisation will include changes to the design and avionics – the aircraft will be fitted with new wings and engines, it would get a longer fuselage, new four-blade propellers, digital instruments for student pilot and instructor, air conditio-ning, electric installation and new wiring. It is expected that the modernised aircraft will be ready by October 2020.

12.12 2017

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19.12 2017


FMS support for F-16s. The US Defense Security Cooperation Agency (DSCA) announced it was deter-mined to conclude a USD 200 mln follow-on support contract for Poland’s multi-task aircraft. The contract will include aircraft maintenance, system overhauls and upgrades, engine support, spare and repair parts, support and test equipment, publications and technical docu-mentation, US government and contractor engineering, technical and logistical support as well as additional elements of follow-on support and sustainment services.

PGZ takes over SMW. After more than a year of legal proceedings Polska Grupa Zbrojeniowa signed a contract for the purchase and takeover of the Navy Shipyard (SMW) with the shipyard’s bankruptcy administrator. However, the agreement does not end the process of taking over SMW’s commitments by PGZ. Separate contracts will have to be signed for the completion of the Ślązak patrol ship, current ship repairs and overseas naval equipment suppliers. The process will likely continue until mid-2018.

President critical of army modernisation. In an interview for Polsat, Andrzej Duda accused MinDef of failing to fulfil promises made with regard to defence orders. The president stressed, for instance, that helicopters, which were to have been purchased 2017, failed to have been delivered. The commander-in-chief believes that certain conclusions should be drawn from that situation. Before the interview, the president never explicitly stres-sed problems with army modernisation in his criticism of MinDef. Still, Andrzej Duda failed to make any demands or suggest personal changes.

Over half a billion from modernisation for 2018. CouMin published a regulation on the state-budget’s non-expiring expenditure, PLN 512 mln of the total amount comes from MinDef. The breakdown includes three items: PLN 84 mln for IT equipment and software, which would most likely be used by the so-called cyber troops, over PLN 55 mln for mobile command station modules and PLN 372 mln for M-346 Master/Bielik advanced training aircraft.

Large contracts for the navy. The Armament Inspec-torate announced contracts for the construction of “Ratownik” – a prototype rescue ship as well as two Kormoran II-class mine hunters. The total value of the orders amounts to PLN 1.4 bln – the contracts would be the largest of acquisition of new technologies by the Polish Navy in the 21st century. “Ratownik” will be built by a consortium of PGZ SA, Nauta SA Shiprepair Yard, PGZ Naval Shipyard and OBR CTM S.A. “Kormoran” will be built by a consortium of Gdańsk’s Remontowa Shipbuilding and entities of the PGZ group: OBR CTM S.A. and PGZ Naval Shipyard.

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27.12 2017

MinDef summarises army modernisation. According to MinDef, 2017 marks the second year in a row when all modernisation funds, amounting to a total of PLN 9.3 bln, have been spent. The largest single purchase included three Boeing 373-800 BBJs airliners for VIPs, which cost over PLN 2.5 bln, the second largest order involved the „Ratownik” ship for PLN 755 mln, the third – 95 AM-RAAM missiles for the F-16s at a cost of PLN 590 mln. However, no major contracts have been signed in any of the key defence programmes – Wisła, Homar, Orka, Kruk or the helicopters.

Orka to be first defence decision of 2018. In January, MinDef is to announce the contractor of the submarines with maneuvering missiles. The decision was supposed to be made by the end of 2017, but was postponed, officially due to additional information received at the last minute. According to wPolityce.pl, a portal close to PiS, the mini-stry will opt for French Naval Group’s offer, the Scorpene submarines with MdCN missiles. This will mean a return to European suppliers following the crisis involving the Caracal helicopters. The contract for the submarines, which may be worth as much as PLN 10 billion, will be realised over more than a decade.

Macierewicz leaves the cabinet. In a surprise move the head of MinDef was dismissed in Mateusz Morawiecki’s cabinet reshuffle. Antoni Macierewicz was replaced by the former MinInt Mariusz Błaszczak. The new minister promised continuation of Macierewicz’s policies but the circumstances of reshuffle suggest that Błaszczak was tasked with easing the tensions around the military and speeding up procurement, which may involve reversing his predecessor’s decisions.

27.12 2017

02.01 2017

09.01 2017

Marek ŚwierczyńskiSenior Analyst for Security Affairs

(+48) 22 436 73 14 [email protected]

AUTHOR OF THE ARMAMENTS REPORT:


DEFENCE POLICY

2018 a year of breakthroughThe defence ministry will spend half of the budget earmarked for army modernisation in the coming decade.

Marek Świerczyński, Senior Analyst for Security Affairs

The cost of Wisła set to influence allocation other programmes. MinDef will decide the first phase of the order for the air and missile defence system by March. As a result of cur-rent negotiations, the initial price of the first two batteries will probably be lowered (from USD 10.5 bln). Nevertheless, the complete system will cost more than PLN 30 bln assumed by MinDef. The final value of Poland’s largest-ever defence contract will most likely be known in 2019 only after the ne-gotiations on the purchase of the second phase of the system are concluded, which would prolong uncertainty about the budget for other defence programmes.

Uncertainty over Homar. PGZ and MinDef find it difficult to find common ground with Lockheed Martin, which was chosen in 2017 as the provider of technology for a domestic long-range rocket artillery system. MinDef is also considering the possibility of a breakdown in the negotiations with the US and might re-consider the Israeli or Turkish bid, which would probably move the final purchase decision to next year. If the contract for the Homar system is finalised, it might be-come the second largest defence order. MinDef has announ-ced that it would increase the number of launchers on order from the currently negotiated 56 to 160. The cost of the pro-gramme, now estimated at PLN 8-10 bln, would then exceed PLN 20 bln.

The Orca supplier set to be selected in January. According to unofficial information, Poland will purchase submarines fitted with cruise missiles from France. MinDef has not revealed the value of the contract, but it is estimated at PLN 10 bln. France was the sole bidder that offered modern Scorpene-class sub-marines with underwater-launched MdCN missiles that have a range of 1,000 kilometres. Information about a possible sup-plier does not mean that the contract would be signed already this year. Negotiations will be complicated due to the require-ment that some system components should be produced in Polish shipyards. MinDef also wants to provide the Po-lish Navy with a bridging solution until the order is comple-ted. The French wanted to modernise ORP Orzeł, which has recently been damaged by fire.

Helicopters a symbol of MinDef’s inefficiency. The suppliers were unable to submit final bids for helicopters for special forces in December. A new deadline has not been set, but according to unofficial sources, it might be as late as in the first quarter – a year after the proceedings were opened. Since the evaluation of bids, the selection of aircraft and tests take a minimum of six months, the contract could be signed in the second half of 2018. A little bit later, maybe in 2019, MinDef will order four to eight helicopters. It wants to allocate PLN 7 bln for 12 to 16 helicopters, which means that the cost of a single aircraft will exceed the price of one Caracal aircraft – the latter negotiations were cancelled in 2016.

Narew with recommendation to the UK. According to MinDef announcements, Polish SHORAD system could be created within two years. This indicates a change of the previous concept, based on which the Narew system would use the technologies acquired under the Wisła contract. The defence minister has indicated the British division of the European MBDA company as possible supplier of the CAMM missiles. As in the case of Homar, the whole system would be supplied by the PGZ, which would select a foreign partner to provide missile technologies.

WHAT’S NEXTThe total value of defence orders projected for 2018 might take up half of army modernisation funds planned for the next decade. After a period when most of expenditures were placed in the Polish defence sector, the armament programmes currently negotiated demand much larger input by foreign companies. MinDef estimates that by 2028, it will have PLN 183 bln available to purchase new weapons.


AIR DEFENCE

What talks on Patriots involveNegotiations cover a detailed breakdown of contract costs and will require the US offer to be amended.


Separate talks with suppliers and the US government. Since private defence companies are independent of the Pentagon and protect their business secrets, negotiations with indivi-dual suppliers are held in separate (not joint) sessions. The US government instructed private contractors on the procedure but refrains from influencing the content or outcome of the talks. Polish negotiators hold two-hour „face-to-face” meetin-gs with suppliers, during which they can ask any questions apart from the price, which is only discussed with government officials. According to unofficial information, the largest part of the contract involves the cost of PAC-3 MSE missiles and Lockheed Martin offset. The cost of launchers, communica-tion systems, generators and Raytheon’s project management ranked second while Northrop’s IBCS command system is supposed to be the least expensive component.

Negotiators want to know the cost of offset. Whenever the pri-ce includes the cost of integrating US components with Polish systems or elements, the Polish team asks for a summary of the cost of such integration. This makes it possible to estimate the total cost of the offset and technology transfer so that the Po-lish government can decide what elements can be abandoned if the total price turns out to be prohibitive. A new cost estimate, however, requires suppliers to recalculate the project’s spread-sheets, which might take several weeks. During the negotiations, the Polish team is also trying to remove multiple price overhe-ads, for instance those that involve the purchase of Jelcz chassis by Raytheon and their resale to Poland under FMS procedure.

The bid’s 120 lines set to be analysed. Each line of the Letter of Offer and Acceptance (LOA), which also serves as a draft FMS contract, corresponds to a specific product or service, type of product or action included in the contract. Nearly 80 of them are the responsibility of the contractors (Raytheon - 30, Northrop Grumman - 30, Lockheed Martin - 20), the rema-ining involve technologies owned by the US government. Each line contains a description, number of units and the price of the contracted weapon. FMS rules require that the final price should be „reasonable” but the Pentagon does not insist on breaking it down into components, or provide the contrac-tors’ margins, which the Polish side is said to have requested. Unofficially, the Polish side aims to reduce the price for the first phase of the Wisła system from USD 10.5 to 5-5.5 bln.

Amendment to LOA in March 2018. At the current stage in the negotiations, the US side is supposed to take on Polish questions, reservations and conclusions but has no plans to amend the government proposal by the end of 2017. LOA will be sent to Warsaw in December and revised after negotiations on the cost of individual components, their number and the scale of the offset are concluded. Since the original price tag was rejected and MinDef announced it would re-select only key technologies from the offer, the Pentagon expects that the contract would significantly change but will not offer a specific date when those changes are introduced. In addition, there are additional negotiations set to change the hierarchy of US contractors. Northrop Grumman would no longer like to act as Raytheon’s contractor. Instead, it wants to offer Poland its IBCS via the US government.

Poland may increase missile defence budget. Deputy Defence Minister Bartosz Kownacki declared that the funds for the Wisła system will come from the 2018 budget as well as the budget for subsequent years. The head of MinDef bud-get department Major General Sławomir Pączek said that PLN 200 mln had been earmarked for that purpose in next year’s budget. The initial fee that will have to be paid when Poland signs the FMS contract will be much higher and could amount to a third of the total cost. Romania, which has orde-red a more modest Patriot package in current configuration, had to pay USD 768 mln to place the order. Even if Poland ma-nages to reduce the final price, it will be necessary to increase next year’s budget for the Wisła system.

WHAT’S NEXTMinDef says it wants to sign the contract for the Wisła system by March. That would require resending to Poland the US formal response to request for offer, or LOA, which would include the results of the ongoing negotiations over the price and offset. The next round of negotiations will be held in late January or early February. This means that the first quarter or even the first half of 2018 are a more realistic date to sign the contract for IBCS-enabled Patriot systems.


BMS as the most important order domestically. The order for the digital communications and battlefield management sys-tem (BMS) for mechanised battalions will be placed with the PGZ group. In 2016, MinDef broke off a tender, which included a number of consortia of private electronic companies, and de-cided to take full control over the creation of BMS. In its first phase, the system is set to be installed, at an estimated cost of PLN 1 bln, on 300 wheeled Rosomak armoured vehicles. Ultimately, BMS will also link tanks and new infantry fighting vehicles, and the value of the contract will reach billions of zloty. In order to complete the order, PGZ will need techno-logical support, most likely from WB Electronics or Teldat.

HSW’s dominant position in PGZ. Assuming that the con-tracts for Wisła and Homar are concluded in 2018, Huta Sta-lowa Wola will receive orders for dozens of missile launchers. In addition, Jelcz, which is overseen by PGZ, could poten-tially receive orders for hundreds of vehicles and chassis. As a result, the portfolio of orders placed with HSW will grow by several billion zloty – excluding the current large contracts for self-propelled Krab gun-howitzers and self-propelled Rak mortars. In 2018, HSW is also set to demonstrate a prototype of the Borsuk infantry fighting vehicle – by the end of the de-cade, MinDef might order several hundred IFVs of this type.

PGZ set to modernise tanks. Bumar-Łabędy has proposed to carry out a limited modernisation of older T-72 and PT-91 tanks. The Armament Inspectorate should choose one option, as modernisation of those tanks was included in the recom-mendations of the Strategic Defence Review and became one of MinDef priorities. Parallel to that, WZMot in Poznań and Gliwice Bumar are carrying out contracts signed in 2015 for the modernisation of Leopard 2A4 tanks with the technologi-cal support of Germany’s Rheinmetall Landsysteme. In 2018, work will conclude on a prototype of a modernised version of the Leopard called 2PL.

Ships to be built under the auspices of PGZ. In 2018, PGZ has formally taken over the Naval Shipyard in Gdynia. PGZ will participate in the construction of two Kormoran II-class mine hunters, commissioned by MinDef at the end of 2017. The gro-up will also sign a contract with the Armaments Inspectorate to complete the Ślązak patrol vessel – its construction began in Gdynia’s Naval Shipyard in 2001. Legal complications mi-ght, however, delay the ship’s inauguration scheduled for Q3, 2018. The inspectorate seeks, for instance, PLN 220 million in compensation for the delays.

Key resignations of CEO. At the end of 2017, PGZ lost long- -standing and influential executives – Ryszard Kardasz at PCO and Andrzej Janik at the Rosomak-Bumar-Obrum group. The-ir positions have been taken over by people that had worked outside the defence industry, and held managerial post in automotive, finance or chemistry sectors. The departure of Janik and Kardasz, who served as CEOs of defence compa-nies for over a decade, signals an end of an era of charismatic leaders who built their companies’ position on personal ties and contacts.

WHAT’S NEXTPGZ CEO Błażej Wojnicz managed to pull through a crisis in 2017 that involved Autosan’s failure to participate in a defence tender. Late this year, Wojnicz implemented a new code in the capital group that enables the head office to better oversee the group’s independent entities. The new structure of PGZ’s management board allows the CEO or deputy CEOs to personally supervise departments responsible for parti-cular type of weapons, which should improve the efficiency of management, crucial for the implementation of multi-billion contracts.


DEFENCE POLICY

Polish defence sector in 2018PGZ could sign multi-billion dollar contracts, but their effective implementation will require additional efficiency in managing the companies.


AIR FORCE

Five jets that might replace MiGsUS producers top the list of options in the decision on new multi-task aircraft. European producers will entice MinDef with their industrial offer.


Lockheed Martin offers the F-35. It will be the only fifth-genera-tion aircraft on the list with low radar detection capability. It is the most modern tactical aircraft currently manufactured, set to replace the F-16 and several carrier-capable fighters in the US and NATO member states. Lockheed has offered Poland the che-apest version of the three F-35 models, which still costs about USD 100 mln per plane without offset. The company, which won the tender for multi-task aircraft in 2003, hopes that Poland would join in the group of countries that supplement and replace their F-16s with new generation aircraft. Lockheed, however, must get rid of the image of a costly and uncooperative supplier.

Boeing promotes the F/A-18E/F. Poland will be offered a new gene-ration of twin-engine Super Hornet, a fighter mainly used by the Navy and US Marine Corps. Boeing benefits from the fact that its aircraft are being considered as a cheaper alternative to expensive F-35s even in the US. The Super Hornet, however, is not popular in Europe, and in global tenders, it typically lost to the Gripen, F-35 or France’s Rafale. With regard to its industrial offer, the company will use excellent rooting in Poland on the civil aviation market and the fact that it also offers the AH-64 Apache attack helicopter or P-8A Poseidon patrol aircraft.

Polish company suggests modernising F-16s. A private company called Fights-On Logistics is the biggest surprise on the list of bidders registered with the Armament Inspectorate. The com-pany openly declares that it does not want to supply new com-bat aircraft, but wants to encourage MinDef to create a training centre using second-hand F-16s modernised by Polish companies. According to the Flights-On Logistics, the technology required to modify aircraft retired from the Dutch, Danish or Norwegian air force could cost USD 15 mln per plane and allow Poland to expand its fleet in an economic way with newer aircraft that have broad export possibilities.

Fot. Pawel M

amcarz / FO

RUM


Leonardo designates the Eurofighter. The Italian compa-ny is the smallest shareholder in the European consor-tium that produces the Eurofighter Typhoon (which also includes Airbus and BAE Systems), yet it has a strong po-sition in Poland due to the ownership of the PZL-Świdnik plant. During further negotiations, the proposal’s advan-tage might be the industrial offer. The fast twin-engine aircraft capable of carrying 9 tonnes of weapons will be presented as a modern design that performs equally well in air defence and offensive missions. Italy and the Uni-ted Kingdom will use it alongside superior F-35s, which only serves to confirm the advantages of the Eurofighter.

Saab recommends the Gripen-E. Fifteen years after losing to the F-16 in the competition for Poland’s first multi-task air-craft Sweden has returned with a new model. In 2016, Saab launched a new single-engine Gripen. Unlike the first mo-dels, the aircraft is larger and offers improved performance. It has a new engine, active radar and is capable of carrying a wide range of air-to-air and air-to-surface missiles. Saab is traditionally open to extensive industrial cooperation, inclu-ding the production of aircraft in the target country, which could be a serious argument when evaluating the industrial side of the offer.

WHAT’S NEXTThe programme of a new combat jet codenamed Harpia is at an early stage of market analysis, so it is difficult to determine whether it will lead to the purchase of new multi-role fighters. According to the Armament Inspectorate, the technical dialogue will last a minimum of a year, possibly longer if MinDef expands the list of contractors to include, for instance, France’s Dassault Rafa-le aircraft. However, if the current proceedings fail to culminate in the purcha-se of new aircraft, and when the obsolete MiG-29s and Su-22s are withdrawn from service after 2025, the Polish air force will find itself in a critical spot.


DEFENCE POLICY

Boeing bolstered before helicopter tenderUnprecedented support provided by MinDef gives Boeing a privileged position but does not decide the tender.


Antoni Macierewicz supports the Apache. MinDef revealed that during the September visit in the US he had a “long and important” conversation with Boeing representatives about the order for the AH-64 Apache attack helicopters. According to him, the aircraft has some unique characteristics and could offer Poland security guarantees, despite a rather steep price tag. The advantage of the Apache is also said to have come out of analyses conducted as part of the ”Strategic defence review”(SPO). The authors of the document stressed the ne-ed to purchase a large number of helicopters with the largest possible firepower. A war game carried out in September by the Pułaski Foundation showed that the Apache is unrivalled when confronting Russian armoured units.

Bell offers lower costs. The second US bidder has begun pro-moting the AH-1Z Viper in Poland, which is used by the US Marines. The producer says that the helicopter, which is one of Bell’s latest models, is comparable to the Apache and also offers a lower price and maintenance costs. Bell has stressed that its maintenance is similar to another of Bell models, the UH-1Y Venom, which could complete the fleet of medium--sized helicopters. Because both models share 85 per cent of the components, Bell’s bid would offer its full benefits if Poland purchased both models. The producer has already signed three agreements with PGZ and launched an active me-dia campaign, openly arguing with supporters of the Apache. Antoni Macierewicz visited the Bell stand at MSPO.

Turkish ATAK supported by Leonardo. The T-129 ATAK he-licopter, designed by the Turkish Aerospace Industries, is the 21st-century variation of the Italian Mangusta A-129 The advantage of the Turkish bid rests with the price, which wo-uld be much lower than that of the US or European aircraft as well as in a potentially large transfer of aviation technology and weapons. Turkey has developed a range of missiles for helicopters and other platforms, and Poland seeks to acquire such technology. The support of Leonardo is also important. The Italian group owns PZL-Świdnik, which is backed by PiS politicians who actively support the move to order aircraft manufactured in Poland. The weaknesses of the ATAK involve lower takeoff weight (hence fewer weapons) and a short servi-ce history.

The Tiger with relatively the weakest position. Last year, the well-known German-French Airbus design was plagued with a series of failures and accidents that resulted in a tem-porary grounding of the aircraft in Germany and Australia. The chance that the Tiger would be chosen by Poland is now smaller after the cancelled the Caracal order and the attitude of the PiS government, which remains at odds with France and Germany. The Tiger’s last dynamic presentation in Poland took place in 2015 and for the three last years, the model was also presented at MSPO. This year, for the first time ever, Airbus decided not to present any helicopters during the exhi-bition in Kielce, nor did it become involved in a promotional campaign. The aircraft capabilities roughly resemble those of the Viper, although the Tiger can use a smaller range of weapons.

The offset will not be crucial for the decision. According to SPO recommendations, the firepower in relation to mainte-nance cost during the helicopter lifecycle would be crucial when deciding the order. This would reduce pressure on a low purchase price and offset. In one of the interviews, Maciere-wicz openly stated that in case of attack helicopters and other types of offensive weapons Poland has no time to carry out of-fset negotiations or implement respective technologies in the industry. This is a signal that MinDef wants a fast procedure, order and implementation of attack helicopters, which could become one of the most expensive defence investments ever.

WHAT’S NEXTThe Armament Inspectorate said it wanted the proceedings on the order for 32 attack heli-copters under the Kruk programme be launched in 2017. This however did not happen, as SDR recommendations pointing to urgent purchase of such aircraft were not implemented. Antoni Macierewicz’s departure from the ministry makes his selection of a preferred supplier less relevant, a sit might only have been a tactic to force Boeing’s rivals (Bell, PZL-Świdnik and Airbus) to place more attractive bids.


DEFENCE POLICY

WB Group back in game for defence ordersThe private defence contractor will fill in the place that MinDef initially reserved for PGZ but will share the market to stay in the game.


WB delivers loitering munition. In November MinDef signed an agreement to purchase 1,000 Warmate loitering munition systems, the first batch of which was hastily delivered in late December. Small aircraft with a range of 10 km and capable of carrying various types of warheads up to 1 kg, will be used by infantry squads or platoons, special forces or WOT units. Army units will typically use sets of ten drones. Warmate systems can be used for reconnaissance purposes, to destroy targets in a guided mode, to independently detect and attack targets in an autonomous mode, or combined with a larger WB FlyEye drones to operate in swarms.

WB Group back in favour. The order marks a breakthrough for Poland’s largest private defence company. Over the two recent years, WB Group fell out of favour among MinDef leadership – it was ejected from the order for Orlik/Wizjer unmanned aerial vehicles and battlefield management systems (BMS). A year ago, Antoni Macierewicz announced that in 2017, WOT would be equipeed with “thousands of drones” manufactu-red by the state-controlled PGZ. But the defence company was unable to fulfil the order, and WB Group signed, at the same time, several export contracts for Warmates. In the end, MinDef decided to place the order with the private supplier.

Orders to develop artillery systems. WB Group has installed its communications systems and electromechanical compo-nents in over 1,000 vehicles and guns. They can be found in, among others, Krab gun-howitzers and self-propelled Rak mortars. MinDef decision to purchase another 480 Krabs for artillery units will require placing an order for Topaz fire con-trol systems and FlyEye UAVs to provide the artillery with tactical reconnaissance, and both systems are manufactured by WB. Topaz is set to be used in three long-range Homar roc-ket artillery divisions, planned to be ordered in the coming months.

WB set to tighten partnership with PGZ. Warmate UAVs might be equipped with warheads manufactured by Belma (part of PGZ), designed by the Military Institute of Armament Tech-nology (WITU), which is overseen by MinDef. It would be yet another area of cooperation between WB Group and state--owned entities – it currently involves artillery systems, radio stations and internal communication between vehicles. It is possible that a consortium, founded in 2015 (and disbanded a year later) that combined WB and PIT-Radwar in an attempt to produce BMS, might be re-established. MinDef has stressed it is disappointed with a lack of progress at PGZ after a rival tender was cancelled in 2016.

A chance for civilian orders. The Polish Development Fund (PFR) paid PLN 128 mln to take over 24 per cent of WB Group shares from a new offering, becoming a minority, yet still an influential shareholder. This has signalled trust towards UAV technologies developed by the company and is a gesture that points to PFR’s readiness to further support it, which also inc-ludes the “Żwirko i Wigura” programme – the development of legal and technical infrastructure to make UAVs flights possi-ble. PFR investment paves way for further orders placed with WB for UAVs systems that might be used by, for instance, the police, border guard or energy companies. This will also allow the company to shape technological requirements for the use of UAVs in Poland.

WHAT’S NEXTThe order placed with WB Group does not indicate that MinDef will no longer want PGZ subsidiary companies to develop drones or command systems. The ministry has simply become aware that state-controlled entities need more time to develop the necessary tech-nology, which they had not earlier had contact with, so they are currently unable to deliver the finished product within an ambitious timetable. In return for the order, WB Group will have to agree to share the sector, but in view of a growing number of orders, it will do so to retain good relations with state investors and customers.

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Documents

Armaments Report - Witamy