Russia Tightens Defense Contract Standards

The Russian parliament approved on Wednesday in the first reading a government sponsored bill penalizing officials for failure to place state defense contracts on time.

The bill sets out the main principles and procedures of state price regulation under defense contracts.

It also introduces antimonopoly measures, including with regard to suppliers of parts, components, and raw materials to defense contractors.

In 2011, wrangling over prices between the Defense Ministry and defense firms jeopardized the state defense order.

Putin warned in February that any attempts to overprice arms and military equipment delivered under government defense contracts will be relentlessly suppressed. He warned that prices for arms and military equipment under defense contracts must not be plucked out of thin air, but allowed that arms manufacturers should have profit margins of 13-20% to be able to develop and pay competitive wages to employees.

Missile designer Yury Solomonov has said the current standoff between arms makers and the Defense Ministry over the pricing and quality of weaponry for the Russian military may continue to disrupt state defense orders in 2012.

A number of military and defense industry officials have recently been fired or reprimanded for their poor performance in the implementation of the arms procurement program.

Russia has said it will spend at least 2.8 percent of GDP a year on defense programs over the next eight years.


Leave a comment