Panel calls for direct producer contracts for Defense Ministry


A Defense Ministry internal panel considering procurement system reforms issued a report Friday urging that middlemen be bypassed and encouraging direct contracts with equipment manufacturers.

According to the report, coupled with other cost-cutting measures, this would reduce procurement costs by 15 percent in five years from fiscal 2007 to fiscal 2011, which ends in March 2012, while cutting defense equipment traders would help the ministry combat corruption among its bureaucrats.

The panel was called last October in response to the corruption scandal involving former Vice Defense Minister Takemasa Moriya, who was charged with bribery last November.

The report emphasizes the need to promote direct contracts with foreign defense equipment manufacturers instead of relying on trading firms, which tend to seek cozy ties with bureaucrats.

“This report is one of the major outcomes of our efforts to reform (the Defense Ministry) in the wake of Moriya’s case,” Minoru Terada, a Defense Ministry parliamentary secretary who chaired the panel, told reporters, adding, “The report shows specific measures to reduce costs” and make the bidding system more transparent.

But because nearly all the defense equipment contracts involve traders, ministry officials said it would be difficult to immediately shift to direct contracts.

“It remains to be seen how things will go, but we will do our best to facilitate the procurement system” to make it easier for foreign manufacturers to participate in bidding, another ministry official said.

This will include providing bidding information in English when soliciting tenders, boosting the number of ministry officials dealing with bidding at its U.S. offices from the current three to 10 in April and recruiting outside officials with trading expertise.

Moriya allegedly received bribes from defense equipment trader Yamada Corp. He is suspected of accepting around ¥8.86 million in perks in the form of golf outings and around ¥3.63 million in cash from Yamada’s disgraced former executive Motonobu Miyazaki in return for influencing government decisions on procurements in Yamada’s favor and Miyazaki’s.

In November, Yamada was found to have padded bills to the ministry by several million yen for two contracts.

To avoid further overcharging, the report says the ministry should check the price estimates submitted by traders.