Defense Companies Fined for Frustrated State Order

18.11.2011 In 2011, Russian defense ministry recovered RUR 8.7 bln from military-oriented companies for frustrated armament deliveries under state defense order, reports Interfax citing Chief of General Staff Gen Nikolai Makarov addressed the session of the Public Chamber. "If you fell behind, pay money and give it to people", explained Makarov stressing that recovered money had been returned to federal budget.

In the current year, defense contracts were tied with delays. As a result, directors of some companies including Moscow Thermotechnics Institute said they could not deliver products in time. Defense minister Anatoly Serdiukov said early in Oct 2011 that only RUR 20 bln out of 581 bln were not put in defense contracts in 2011. Serdiukov explained protracted negotiations and contracting as the need to reduce prices for military products.

Later on, deputy minister of economic development Andrei Klepach said defense order 2011 would be frustrated; most probably, defense order 2012 would face the same problems. According to Audit Chamber's deputy chairman Valery Goregliad, the reason of poor realization of state defense order is current contracting system. As for Serdiukov, to avoid frustrations of defense order in future, the list of needed acquirements would be agreed before the year is over in order to start order execution in the beginning of a new year. By the way, defense contracts will be financed in advance.

Several contracts were signed early in Nov 2011. Defense ministry tied contracts with United Shipbuilding Corporation for construction of nuclear-powered submarines (projects 885 Yasen and 955 Borei), development of modernized submarines (projects 885M and 955A), and construction of Project 21300 rescue ship. Large contract for 65 operational training airplanes Yak-130 remains unsigned; 16 of them are supposed to be delivered till the current year is over.