Late Deliveries

Putting Arms Makers on the Defensive

Von der Leyen Ursula German defense minister Mazar-i-Sharif, Afghanistan, December 2013 Source Reuters
German defense minister Ursula von der Leyen, during a December 2013 to troops in Afghanistan, wants to penalize defense contractors who don't deliver weaponry or tanks on time.
  • Why it matters

    Why it matters

    Major defense contractors dealing with the German government could be forced to pay financial penalties if they don’t deliver on time or overshoot projected costs.

  • Facts

    Facts

    • Berlin may seek compensation from Rheinmetall and Krauss-Maffei Wegmann for delays in the Puma battle tank.
    • A government report has listed problems with 14 defense procurement contracts.
    • Auditors say Berlin’s scope to penalize contractors may be limited because the agreements were poorly negotiated.
  • Audio

    Audio

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The German government, bent on getting tougher with its arms suppliers, wants compensation from two major defense contractors, Rheinmetall and Krauss-Maffei Wegmann, for delays in the delivery of new Puma tanks.

German Defense Minister Ursula von der Leyen has repeatedly stressed that her patience is running out with defense contractors.

Aviation giant Airbus, Europe’s largest military contractor, was the first to feel her ire when she demanded compensation for delays in delivery of the A400M military transport plane. Now it’s the turn of Rheinmetall and Krauss-Maffei Wegmann.

According to a confidential report compiled for the German Bundestag lower house of parliament, the defense ministry’s equipment procurement office is checking the legal basis for claiming compensation for delays and cost overruns for the Puma tank, an infantry fighting vehicle ordered for the Bundeswehr.

The ministry aims to decide by May whether it will demand compensation and how much the claim will be, according to the report obtained by Handelsblatt, which also lists problems with 14 other government procurement projects.

The defense ministry confirmed it may seek compensation, saying Krauss-Maffei and Rheinmetall were to blame for recent delivery delays of the Puma.


Video: A Puma on the move, uploaded to YouTube by: ArMysInAcTion .

“The Bundeswehr, as the companies’ most important customer by far, is irritated by the industry’s conduct in negotiations on this difficult matter, which doesn’t inspire much confidence,” the ministry said.

Krauss-Maffei could not immediately be reached for comment.

Rheinmetall said that production of the Puma was underway and 19 vehicles had been delivered so far.

Industry sources said there was no basis for compensation claims.

Like so many defense contracts, the Puma project hasn’t run according to plan since it was launched in 2004. According to the defense ministry report, the delays have reached 53 months and costs have more than doubled to €4.4 billion, or $4.8 billion, from an original €2 billion.

But the defense contractors aren’t solely to blame.

Over the years, the contract with the German government kept getting revised — the radio technology was changed and the armor had to be reinforced following experience gained in the German army’s deployment to Afghanistan.

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