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Acquisition Management

Force Development, Capability Analysis and Materiel Acquisition Planning are all conducted by separate and individual defense agencies according to their immediate needs and budgets. National level defense budgets are not developed and spent on a national program basis. Individual Armed Services control the spending of their own budgets and procurement processes. These processes do vary from one agency to another but are structured along similar lines. While procurement policies and guidelines tend to be highly detailed and process driven the decision making process is not transparent.

Official guidelines for procurement procedures tend to be in Thai language only, and there is significant variation in interpretation of them across all agencies and at times within individual agencies. While procurement selection and acquisition procedures are highly structured there is very little delegation of authority regarding procurement decisions. Multi-Service or Task Force procurement programs are not common. Nor is procurement for common assets across the Services.

Reforms directed at creating a more centralised procurement structure for the armed forces, have increased the audit capacity of the Supreme Command and the MoD, but not reduced individual services' control over priorities, spending and selection processes. Public tendering of procurement contracts is not the norm and recent attempts to do so by some services have more often than not ended in controversy due to intervention by high-level internal review committees.

There were three defense procurement processes in Thailand, first, through government togovernment sales (Foreign Military Sales (FMS) program), second via public tenders, and third, by direct commercial sales from foreign manufacturers. The FMS program is coordinated by the Joint U.S. Military Advisory Group, Thailand (JUSMAGTHAI). Most military hardware and software acquisitions are initiated by the individual military branches within the Royal Thai Armed Forces. Each service makes known its specific requirements for an intended acquisition, including prices, expected payment schedules, etc., and then approaches governments or invites bidders to compete for the order. For procurements of most major systems, special committees are formed composed of senior military officials.

A specific set of rules, commonly referred to as the "Prime Minister's Procurement Regulations," governs public sector procurement. These regulations require that nondiscriminatory treatment and open competition be accorded to all potential bidders. However, in reality the system is not entirely transparent, and the Thai government is not a signatory to the WTO Agreement on Government Procurement. Some observers feel that the Royal Thai Government does not always provide a level playing field for foreign bidders. Generally, the procuring government agency provides preferential treatment to domestic suppliers who under a “Buy Thai” policy receive an automatic price advantage of 3-7 percent rate (depending on the product) over foreign bidders in initial bid round evaluations.

The procurement process is opaque, and politicization of that process increased markedly in the 1990s. All large procurements require cabinet approval. The Ministry of Defense can present any proposal for military procurement to the cabinet for approval. While other organizations, including the Foreign Affairs Ministry, the Finance Ministry, the Commerce Ministry, and the Office of the Prime Minister, have some influence over the approvals of large procurements, most input comes from the individual military services.

The most successful entrepreneurs conduct their business in a low key, almost secretive fashion. This makes life somewhat bewildering for the new market entrant and frustrating for established successful international defence companies. The key is finding efficient, effective and appropriate representation. It is not difficult to understand why there are so many local Thai entrepreneurs in this market place. Sales commissions based on contract value have been the norm and in the 1980's and early 1990's considerable sums were made by these groups in commissions. Generally, it is mandatory to have such representation when dealing with Thai Government contracts.

Although Thai law does not require use of local agents and distributors, it is one of the most efficient and effective ways to enter the market in Thailand. The agent and distributor facilitate and expedite the market entry with their market knowledge and established network. Among many business cultures in Thailand, interpersonal relationships are a vital factor for successful business transactions. Local agents and distributors are accustomed to local business practices and requirements. They are in the market and can deliver what is required for a successful business arrangement that companies in the U.S. cannot conveniently provide from afar. In addition, local agents and distributors will take care of regulatory affairs and acquire import permits for U.S. exporters.

The key to successful bidding on Thai government contracts and supply tenders is to have a reputable local representative with good access to the procuring agency and knowledge of specific procurement requirements. Good market intelligence is notoriously difficult to obtain in Thailand due to the security classification of both budgets and procurement planning. In addition, almost all documentation is in Thai language. Priorities are reviewed on a regular basis and changes made to them accordingly. It is not unusual to find that an approved and budgeted program is shelved, the TOR's changed significantly, or reviews undertaken leading to significant changes of program direction late in the decision making process.