Turkey: Procurement Mechanism In Turkish Defense Industry

Last Updated: 25 September 2014
Article by Safak Herdem

In the field of defense industry, a new system of governance has been established through the Law#3238 ratified in 1985 in order to realize planning and coordination, taking quick decisions and execution (especially for imports, exports, modernization, research and development, mutual trade, finance) in the government of highest level. Also the basic aim of law is explained as the development of a modern defense industry and ensuring the modernization of the Turkish Armed Forces.

Key Government Bodies in Turkish Defense Matter

In reference to the Law#3238, this system comprises four main pillars as part of the government mechanism in different levels. The levels and relations of the system are shown in figure as below.

Planning and Coordination: Defense Industry High Coordination Council

Decision: Defense Industry Executive Committee

Execution: Undersecretariat for Defense Industries and The Defense Industry Support Fund

Defense Industry High Coordination Council

Defense Industry High Coordination Committee is chaired by the Prime Minister consist of Chief of Staff of Economic Affairs Officer, Minister of State, Minister of National Defense, Foreign Minister, Minister of Finance, Industry and Trade Minister, Force Commander of the Gendarmerie General Commander, Prime Ministry, State Planning Organization Undersecretary of the Treasury and Foreign Trade Undersecretary. The Council is assembled, at least twice a year, upon the invitation of the Prime Minister.

The Council is basically assigned with; following up planning and coordination and giving regulatory directives in accordance with the overall strategy approved by the Council of Ministers and determining the prescribed procurement of weapons systems with support fund and the procurement types of materials and tools with reference to the Strategic Objectives Plan prepared by Chief of General Staff

Defense Industry Executive Committee

The main decision making body of the circle is Defense Industry Executive Committee. It is chaired by the Prime Minister and consists of the Chief of General Staff and the Minister of National Defense.

The Executive Committee is basically assigned with; making critical decisions relating to defense industry issues and major defense procurement according to the Armed Forces Strategic Target Plan, instructing SSM to conduct research and development of modern arms and equipment, and to have their prototypes built and setting the guidelines for uses of Defense Industry Support Fund. The Committee meets at the invitation of the Prime Minister and the Defense Industry Undersecretary executes secretariat of the committee.

Undersecretariat for Defense Industries (SSM)

Undersecretariat for Defense Industries is dependent to Ministry of National Defense as an establishment having the legal personality as well as its extra-budgetary financial resources.

Undersecretariat for Defense Industries performs basically the following tasks;

  • Implementing the decisions of the Executive Committee.
  • Connecting the programs of the procurement extended to years to the purchase contract on the project basis.
  • Reorganizing existing Turkish Industry in line with the prerequisites of the defense industry.
  • Planning the production of modern arms and equipment at private and public sector entities.
  • Conducting research and development of modern arms and equipment, having their prototypes manufactured, paying in advance and identifying long-term orders and other financial and economic incentives.
  • Coordinating export and offset trade issues relating to defense industry products.
  • Making contracts covering technical and financial issues.
  • Giving credit from funds or getting loan within the country or abroad and establishing necessary domestic and foreign-owned companies to participate.
  • Providing to resolve the application failures by the relevant institutions and organizations.

The Defense Industry Support Fund: 

The Fund, designed as the purpose-built financial instrument to enable SSM to carry out its tasks, is a highly flexible and bureaucratic formality-free mechanism with a constant flow of financial resources, fully in control of SSM. The main cash inflow groups are; the resources transferred from the Ministry of Defense budget, allotments from corporate taxes fees and levies imposed on alcoholic and tobacco products, and all forms of lottery, betting and games of chance, items of special consumption tax etc

The Procurement Approach in Defense Projects

The requirement being subjected to an exceptional basis of undersecretary activities are considered to be caused by the unique nature of institution's organizational goal. SSM procurement activities involve an approach beyond purchasing of the only-defined needs. The Undersecretariat procurement programs has been appointed to carry out with the project models based on the development of the defense industry. The projects are primarily implemented through the domestic development, co-development or co-production methods, otherwise with foreign stock purchases. The procurement approaches applied by SSM and their goals are listed below.

Life Cycle Management

  • Transition to life cycle management together with domestic development projects which of addressing the supply and operating period as whole in defense systems introduced to TAF.
  • The developing the performance-based logistics models which the contractors will be responsible the performance and the logistic support of the defense systems in their operating periods.

Domestic Development

  • The implementation of domestic development models and enriching defense industry product portfolio.
  • Guaranteeing the work share contracted to small and medium-sized enterprises.
  • Creating the "Side Industry Integration Principles" in order to increase the number of subcontractors qualified by the main system manufacturers.
  • The realization of R & D projects that includes priority sub-systems, components and technology development under "Technology Acquisition Obligation" concept and benefiting from networks of excellence for the execution of these projects.

Common Development and Consortium

Partnering to co-development or consortiums and/or developing design and being a risk partnership for the development of national markets where it is not cost effective.

Procurement from Abroad

Carrying out procurement from abroad and creation of job opportunities to the national industry in such projects through joint manufacturing and making offset contracts in case of failure to achieve above priorities.

Figure-2:Project Model Range (On The Basis of Units)

Figure-2:Project Model Range (On The Basis of Contract)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Safak Herdem
 
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