Defense News
08/23/2010
Taiwan To Compete for DoD Contracts
By WENDELL MINNICK
TAIPEI — Taiwan will be allowed to bid for U.S. Department of Defense (DoD) contracts now that an amendment has been made to the U.S. Defense Federal Acquisition Regulation Supplement (DFARS).
The decision to amend DFARS came after Taiwan became a signatory of the Government Procurement Agreement (GPA) under the World Trade Organization (WTO) in July 2009, said a DoD statement.
The GPA opens up government contracts to international competition. In Asia, Japan, Hong Kong, Singapore and South Korea are GPA signatories. There are a total of 41 signatory members of the GPA worldwide, including Taiwan.
Taiwan’s defense industry is “gearing up to take advantage of this new opportunity,” said a Taiwan defense industry source.
The new status does not replace or alter the 2004 Master Information Exchange Agreement (MIEA), which only allows for “reciprocal balanced exchanges of research and development information” between Taiwan’s Ministry of National Defense and the U.S. Defense Department, said a U.S. government document.
The MIEA did not allow for the exchange of defense articles or services, nor did it allow Taiwan companies to bid on DoD contracts.
“Despite Taiwan’s long history of producing top-tier high technology, in particular information technology, for the international market, it has been barred from selling directly to the U.S. Department of Defense,” said a former DoD official.
The main reason was a successful effort by China to block Taiwan’s accession to the GPA until last year.
“Now that Taiwan is a member of the WTO GPA, it has become eligible to sell directly to the Pentagon,” he said.
Relations across the Taiwan Strait have greatly improved since the Beijing-friendly Chinese Nationalist Party (KMT) won both the legislative and presidential elections in Taiwan in 2008. China eased off efforts to sabotage Taiwan’s bid to join international agreements and organizations like the WTO GPA. Though Taiwan has been a WTO member since 2002, it has not been allowed GPA status.
China is not a party to the GPA, though since 2003, it has served as an “observer” to the agreement and is in negotiations for accession. There are a total of 23 observers in the GPA.
“Taiwan produces a considerable amount of the best off-the-shelf technology that the U.S. government spends billions procuring every year,” said Rupert Hammond-Chambers, president of the U.S.-Taiwan Business Council, Washington. Taiwan produces everything from personal computers and laptops to clothing and tools, he said.
“Taiwan has always demonstrated a capacity to produce goods at low cost and high quality with speed to market,” he said. “It will make them well-suited and competitive to execute quickly on price and quality for government requirements.” However, the process of breaking in Taiwan companies as DoD suppliers will be slow.
“Initially, the benefits are minimal. Doing business with the U.S. government and more specifically the U.S. Department of Defense is a highly complex matter, and Taiwan companies have no experience in selling to this customer,” Hammond-Chambers said.
“That said, over time it is likely that Taiwan will become an increasingly important vendor for the U.S. government and the Defense Department,” he said.
