Special board to get on with state defense order

24.08.2011 A special governmental board will be set in the nearest time to cope with problems appearing while conclusion of contracts under state defense order in 2011, writes Kommersant. The board will include representatives of Defense Ministry, Ministry of Industry and Trade, and United Shipbuilding Corporation (USC). The newly formed agency will settle discords regarding military production costs between defense ministry and USC.

The decision to set the board was made at the meeting on defense order issues held by Vice Premier Igor Sechin. In the nearest two days USC must submit detailed and justified cost estimate of its production to defense ministry. If the ministry considers substantiation adequate, state defense contracts would be signed in 2011; if not, defense ministry would continue trying to reduce prices.

According to the board's decision, a new cost appraisal form was introduced. Now the costs will be determined not by the 'price plus inflation' formula but in a manner ignoring inflation markups. The newspaper does not specify details of the new cost calculation method. The government expects that the work of state board and new price determination formula would help to sign defense contracts with USC in the nearest two weeks.

As USC earlier declared, some shipbuilding companies happened to be almost closed down because defense ministry failed to tie contracts with them. The question was Zvezdochka, Sevmash, and Admiralteyskie Verfi shipyards. In particular, Sevmash is supposed to deliver three nuclear-power subs in the current year: one Project 885 Yasen and two Project 955 Borei subs.

It was reported in July that Russian defense ministry had failed to conclude about one third of contracts in 2011 due to disagreement with defense companies on costs. Presently, most of contracts have been signed, and the rest of them must be concluded in the current month at the direction of Russian Prime Minister Vladimir Putin.