Defense Ministry Set Penalties for Contract Nonperformance

23.03.2012 Russian defense ministry decided to tighten responsibility of military-oriented companies for timely and high-grade execution of State Defense Order 2012, deputy defense minister Alexander Sukhorukov told Kommersant.

"Defense ministry will consider armament cost calculations in advance. Since May 2011 we have arranged appropriate procedures with the view to place defense orders of 2012 before beginning of the new fiscal year. As of March 15, ninety one percent of long-term contracts under State Defense Order 2012 were prolonged", reports Interfax citing Sukhorukov.

According to him, 35% of sole source contracts have been signed and 80% of specifications have been placed by tenders and requests for quotations.

Sukhorukov also told about steps taken against unfair manufacturers. Among the largest ones he mentioned JSC Kurganmashzavod which frustrated the RUR 3-bln contract for BMP-3 infantry fighting vehicles in 2010.

As for him, defense ministry "is analyzing customer claims and will penalize all unfair manufacturers in accordance with contract terms and active legislation".

"Penalty amounts are stipulated in contracts and normally make 5% for frustration and 0.1% for each day in arrears", specified the defense ministry's spokesman.