US News Heckler & Koch stops awarding assault rifles for the time being
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In the dispute with the federal government, the weapons manufacturer Heckler & Koch has taken another legal step in order to get a major assault rifle order from the federal government.
An application for a review procedure was submitted, the company from Oberndorf in the Black Forest announced on Tuesday. Such an application is also called an award complaint, it has suspensive effect - so the re-armament of the Bundeswehr with 120,000 assault rifles is on hold for the time being. The tendering process, which began in 2017, has become a hangover for the army.
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The Ministry of Defense surprisingly decided in mid-September to award the contract of up to 245 million euros to its small competitor C.G. Wanting to forgive Haenel. The Bundestag should still approve the recommendation of the ministry - but it can only do so after the end of the legal dispute between H&K and the federal government.
The dispute ends up in the first instance with the Federal Procurement Chamber, which is located at the Federal Cartel Office, while the second instance would be the Düsseldorf Higher Regional Court. According to the public procurement lawyer Jan Byok from the law firm Bird & Bird, the legal dispute is likely to drag on for several months, probably half a year. From his point of view, H&K is in a difficult position. "There are only a few cases in which the plaintiff has prevailed against the procurement office in the arms sector - it used to be different, but today the office works much more thoroughly and makes fewer mistakes."
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The importance of the prestigious order for the traditional Black Forest company can also be seen from the large price reduction: As dpa learned from informed sources, Heckler & Koch initially demanded 235 million euros for the 120,000 assault rifles. In the course of the award procedure, Heckler & Koch lowered its claim to 179 million euros. According to reports, the final offer from competitor Haenel was around 50 million euros lower.
procurement lawyer Byok stated that the allegation of price dumping - i.e. a price below production costs - could play a role in the complaint process. Dumping prices are prohibited in public procurement.
C.G. Haenel is a small arms manufacturer from Suhl in Thuringia. He belongs to the arms company Caracal from Abu Dhabi in the United Arab Emirates. According to the Federal Gazette, Haenel made only 7.1 million euros in sales in 2018 with nine employees plus management. In 2017 there were only four employees. The figures for 2019 have not yet been published. In a first public announcement, Haenel boss Olaf Sauer recently stated that they now have 120 employees. For comparison: Heckler & Koch has around 1,000 employees and annual sales of 239 million euros (2019).
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In view of the high demand from other countries, the highly indebted company from Baden-Württemberg would be able to cope with the defeat in the tender - the order books are full and the company returned to profitability in 2019. Since H&K had significantly reduced its price, the profitability of its own range is likely to have lost a lot anyway.
The damage to reputation weighs more heavily - in sales talks with foreign customers it was always an advantage to be able to refer to the regular customer Bundeswehr. This selling point will no longer apply to assault rifles. With machine guns and grenade launchers, however, the Oberndorfer continue to do business with the federal government. But, of all things, in their favorite assault rifle discipline, they would have to accept a setback.
It is not the first time that Heckler & Koch and the federal government argue with each other in court. In 2015, the then Federal Defense Minister Ursula von der Leyen (CDU) accused the company of defects in the G36 assault rifle, but suffered shipwreck before the Koblenz regional court.
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