Defense enterprises began to minimize their participation in the work on the state defense order (GOZ). In order to stop the confusion and vacillation, the FAS of the Russian Federation has prepared amendments obliging them to participate in all defense tenders. Mashnews figured out what the obligation for defense industry enterprises would lead to.
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| Source: RIA Novosti |
You can't dodge
The Federal Antimonopoly Service (FAS) has developed amendments to its own order No. 510/21 dated May 26, 2021 with a long title - "On Approval of the form and procedure for issuing a request for termination of actions (inaction) that contain signs of violation of legislation in the field of state defense orders." Now, if the sole contractor of the State Defense Committee does not participate in tenders of the Ministry of Defense, the FAS will issue demands to him to stop violating the 275th Federal Law "On the State Defense Order".
The draft document was published on August 20. When it is adopted, enterprises - the only performers in the state defense order market - will not be able not to participate in tenders of the Ministry of Defense.
The FAS developed this document because in July Vladimir Putin signed amendments to the law "On the State Defense Order", where he expanded the duties of the sole executors of the State Budget.
If earlier the law stated that the contractor occupying a monopoly position in the market is obliged to conclude a defense contract, now Article 15.9-1 obliges the sole executors, at the request of the state customer and the head contractor, to submit price proposals for products according to the State Budget and other information. Otherwise, it becomes a violation of the legislation in the field of the state defense order.
The defense industry survives on civilian orders
In the documents of the FAS, we are talking about the only performers, they are really rigidly tied to the execution of the state defense order, for the rest everything is not so strict, explained Elena Tkachenko, professor of the Department of Economics and Management of Enterprises and Production Complexes of St. Petersburg State University, Doctor of Economics, Elena Tkachenko.
However, there are quite a lot of single suppliers in the defense industry, she says. By accepting documents on responsibility for failure to submit an application for a tender, the authorities cut off escape routes for enterprises.
Military orders are unattractive for enterprises, both economists and industrialists say.
Lev Zasypko, First Deputy General Director of Marine Integrated Systems LLC, agrees with the professor. The right way is to find customers who are not related to state financing, this is not only a way to reduce dependence on the state budget, but also to fulfill the instructions of the President of Russia, as well as a way to load existing capacities and guarantee the financial stability of the enterprise, he told Mashnews.
Enterprises have a desire to minimize work with the state budget. "Because low profitability, problems with the Federal Antimonopoly Service and military acceptance, arising from the lack of a unified methodological basis for determining prices, leads to an overflow of courts with cases accusing the management of enterprises of fraud, misuse of funds, non-fulfillment of the state defense order. Moreover, these are often not only arbitration disputes, but also criminal cases. Under these conditions, the directors of defense enterprises are not very willing to work with the state defense order. I personally heard the words of the heads of such enterprises, "That's it, this is my last order, I'm leaving it," says Tkachenko.
We need to change the system
Mikhail Danilenko, the owner of the St. Petersburg military-industrial holding Kingisepp Machine-Building Plant (KMZ), says that in conditions when the Russian economy is taking on the challenge of a whole pool of Western countries, Russia needs to act more broadly. To build up competencies and strength in conditions of market pricing and free development of entrepreneurship.
He is supported by Lev Zasypko. Regulations have created a system that prevents enterprises from investing in production. It is necessary to break this system by reviewing legislation, he says.
"At the same time, the treasury support system for funds under the state defense order works only in one direction – the expenses of the performers are controlled, because the district prosecutor will not make demands to the deputy Minister of Defense or even to the minister himself. And even if it does, it won't do anything. But in the opposite direction, the system works perfectly, in which case, three skins will be pulled off with all the proletarian hatred. After all, if the contractor of the state defense order has responsibility up to criminal, then the head customer has administrative and fines. The state customer is not touched at all," explains Lev Zasypko.
There are links, but there are no acts
According to Professor Elena Tkachenko, the state defense order system is aimed at reducing the profitability of enterprises, this does not allow their development, and the uncertainty with the legal regulation of the public health sector only exacerbates the situation.
The law on the state defense order contains references to regulations that have not yet been adopted, she explains. There is still no single methodological basis for calculating and recognizing the costs of implementing the State budget. In the current regulations (government Decree No. 1465 and order of the Ministry of Industry and Trade No. 334), there is no unambiguous interpretation of which costs should be attributed to the cost of the state defense order. The 29 points reflected in the 334th order are of a general descriptive nature and have an ambiguous interpretation. That is, enterprises do not understand how to report, and the FAS arbitrarily interprets vague provisions of laws and orders, the economist says.
There are more reports at times
Business leaders do not always cope with the stricter requirements of the Ministry of Defense and the Federal Antimonopoly Service. If most private companies (as a rule, these are small and medium-sized enterprises) have learned to play by the new rules, besides they have simpler accounting and accounting, then in the old defense industry enterprises they adapt to changes with difficulty. Factories that have existed since Soviet times continue to operate in the concept of separate accounting, which was established by 2004, says Elena Tkachenko.
Here, the 1C system failed, it fully began to take into account the specifics of the state defense order only last year, and then at each enterprise this program needs to be configured manually, it will take a year or two. It is worth noting the low qualifications of accounting and economists at defense industry enterprises, they themselves often cannot arrange their expenses so that they are later recognized by the state customer, Tkachenko notes.
Mikhail Danilenko speaks about the growing bureaucratic burden on enterprises working with government orders.
No one thinks about product development, no one thinks about optimizing production. The only goal is to deliver the minimum amount on time, which will allow you not to lose control over the established enterprises and not fall under criminal liability, Mikhail Danilenko explains.
Programmable loss
Profitability in the defense industry is calculated using the formula "25 +1". According to it, a profitability of 25% is set for the company's own costs, and 1% for the introduced costs, explains Professor Tkachenko.
The logic of this formula is to reduce the cost of the state for the implementation of the state budget. Deputy Defense Minister Tatyana Shevtsova (she held this post from 2010 to June 2024) explained that, in her opinion, the executors of the state defense order earn too much. If, at each stage of rocket production, the manufacturer of each of its parts lays down 20% of profitability, the result is 800%, Shvetsova said. However, economists believe that such calculations are incorrect.
The Ministry of Defense, as a state customer, works with a minimum planning horizon – he needs to get products at minimum prices here and now, and what will happen next with this enterprise is not his problem, Tkachenko notes.
The use of the "25 +1" formula has led to an increase in debt and an increase in the number of defense enterprises requiring rehabilitation, the economist believes. In a large machine–building enterprise, 85-90% of costs are imported from external suppliers, that is, the parent company's own costs are relatively small in percentage terms.
The specificity of the formula "25 + 1" is also that it forces defense industry enterprises to recreate Soviet monster enterprises instead of building normal technological chains.
"In the current foreign policy conditions, the defense industry will be plowing at full capacity for 10 years, but what next? Such a technique will tightly bind enterprises to the state defense order and deprive them of competencies in industries working for the market. To understand, now strategic defense industry enterprises are working in three shifts to fulfill the state defense order, they even physically have no time to diversify orders, but then they may lose the competence to work with other customers," Tkachenko warns.
At the same time, it is difficult to cancel the "25 + 1" principle, because you will have to change the accounting model again. There will be no less problems than with its implementation, believes the professor of St. Petersburg State University.
Change approaches
Mikhail Danilenko, the owner of KMZ, considers it necessary to change pricing approaches - he proposes to take the prices of 2021 for the base value and index them according to the market deflator, instead of "confirming the same squeezed price in each contract with a couple more trucks of paper."
