G36 Successor: This is the status

Actually okay, the G36, says the Bundeswehr. Here are the latest updates on the current developments in the decision on the successor to the G36 (Project "System Sturmgewehr Bundeswehr"). What will happen to Haenel? Does HK still have a chance? And how is it all going? The ministry summarizes the process:

Currently, the soldiers of the Bundeswehr are fully equipped with the powerful standard weapon, the G36. Starting in 2023, the "System Sturmgewehr Bundeswehr" (SystStGBw), which is technically more powerful in precision criteria, will gradually replace the G36.

On April 21, 2017, the procurement procedure for the SysStGBw was initiated by the Federal Office for Equipment, Information Technology and Use of the Bundeswehr (BAAINBw) with the European-wide publication on the EU tender platform "Tenders European Daily (TED)". The selected negotiation procedure according to § 11 Paragraph 1 Sentence 1 of the "Procurement Regulation for Defense and Security" offers a lot of flexibility in the negotiation phase. The essential procurement principles of competition, transparency, and, above all, equal treatment of bidders must be observed.

History of a Tender

Eight companies submitted expressions of interest in May 2017, of which seven could be considered. These seven companies were asked to submit an initial non-binding offer (indicative offer) in September 2017. This included not only the performance description but also detailed information on the planned comparative testing of the offered weapons at the Wehrtechnische Dienststelle (WTD) for Weapons and Ammunition in Meppen, as well as their testing criteria. The award was to be made to the most economically advantageous offer.

Early exit as a candidate for the successor: the RS556 as a project by Rheinmetall with Steyr.

Subsequently, the BAAINBw answered a total of 150 bidder questions. All participants were informed in anonymized form about all questions and answers.

In February 2018, two companies finally submitted indicative offers with a total of three weapons.

In April 2018, the WTD started the comparative testing of the three offered rifles, which lasted until September 2018 in several phases. In a variety of tests and procedures, the basic precision as well as the influence of the rifle due to shot-induced heating and changes in climatic conditions were tested. The Fraunhofer Institute for High-Speed Dynamics, the Ernst Mach Institute, and the test center Unterlüß of the company Rheinmetall Waffe Munition GmbH supported individual test steps. The comparison test showed that none of the tested rifles met all the "must requirements". This result was explained in detail to the bidders, and the opportunity to improve the offered rifles was granted until February 2019.

During the comparative tests, the BAAINBW informally became aware that Haenel's rifle allegedly infringed on a patent from Heckler & Koch in connection with the "Over-the-Beach" capability. This simply means that the rifle remains capable of firing even after submersion in water. When asked, Haenel explained that this would at most apply to the civilian, semi-automatic rifle CR 223 and not to the offered fully automatic rifle. At that time, it was not yet known whether and in what exact version the bidders would ultimately submit a final offer. The BAAINBw did not immediately pursue the hints, nor was there any legal obligation to do so.

One of two HK candidates: the HK433.

The testing of the improved rifles took place from February 2019 to October 2019. It was found that all three tested products now met all the "must requirements". The Bundeswehr now has three commercially available rifles to choose from that meet the very high technical precision criteria for the G36 successor.

In May 2020, the final binding offer (BestAnd-Final-Offer - BAFO) was requested. Both bidders submitted their final binding offers to the offer collection point of the BAAINBw in June 2020.

Submission of Final Binding Offers

After the submission of the final binding offer (BAFO), there is generally a negotiation prohibition. However, clarification limited to resolving contradictory information in the offers that make evaluation impossible is permissible and necessary. In case of contradictions in a bidder's information in the offer, the bidder should not be immediately excluded. Exclusion of an offer for purely formal reasons is to be avoided as much as possible according to jurisprudence. The bidder should be given the opportunity to clarify the identified contradiction.

Therefore, the BAAINBw sent several clarification letters to both bidders to address calculation errors, inaccuracies, and inconsistencies.

The BAAINBw also noted that there were no comparable offers regarding the STANAG rails, i.e., NATO-standard mounting rails for small arms accessories, and the related covers, possibly because the procurement documents of the BAAINBw had caused misunderstandings. The Federal Audit Office (BRH) also recognized this and requested clarification from the bidders. In weighing the existing options with the legal risks of communication after BAFO, the BAAINBw, in coordination with legal and technical supervision in the ministry, decided that instead of canceling or excluding, both bidders should be given the opportunity to clarify. This approach was not challenged by any of the bidders within the legally prescribed period.

Both bidders were informed that changes to the price levels of the offers were necessary, as the 25 million Euro submission to the Budget Committee of the German Bundestag for the concluded framework contract must specify the price level as of 12/2019. However, the offers contained the price level for the planned series delivery for 12/2022. Both bidders agreed to change the price level.

Second HK candidate: the HK416, which had already been chosen by German special forces.

After evaluating all the documents, the BAAINBw concluded that Haenel had submitted the most economical offer. Heckler & Koch was informed on September 15, 2020, according to section 134 of the Act against Restraints of Competition (GWB). Heckler & Koch contested this, citing alleged patent infringements related to a magazine and the "Over-the-Beach" capability by Haenel.

Scope of a Patent

Whether and to what extent Haenel's rifle design infringes on a patent of Heckler & Koch, or if the alleged patent infringement regarding the magazine exists, could not be conclusively clarified by the Ministry of Defense and the BAAINBw at that time. In the scope of their offers, bidders had stated that they were not aware of any third-party intellectual property rights relevant to the contract. They also made the provisions of section 11 paragraph 1 of the General Terms and Conditions for Procurement Contracts of the Ministry of Defense (ABBV) part of their final offers and signed the contract text accordingly. The following provision states: "The contractor assures that, to the extent he has not provided the contracting authority with corresponding information, there are no circumstances, in particular no intellectual property rights of third parties known to him, which prohibit him from manufacturing and selling the contract items in the Federal Republic of Germany, and that no claims of infringement of rights concerning the contract items have been raised against him, either judicially or extra-judicially."

In late September 2020, Heckler & Koch filed a review request with the Procurement Chamber, again raising the points from the contestation and, primarily, the alleged violation of a patent of Heckler & Koch.

Since, based on a patent assessment conducted by the BAAINBw, a patent infringement by Haenel cannot be ruled out, the BAAINBw, in coordination with the Ministry of Defense, decided on October 9, 2020, to declare the decision of September 15, 2020, to Heckler & Koch as irrelevant in accordance with section 134 GWB and to reset the process back to the "Offer Evaluation" stage. This approach does not constitute a cancellation of the entire procurement process. Given that the process has been reset to the Offer Evaluation stage, the evaluation of the already submitted offers will now be repeated, taking into account all aspects.

Following the withdrawal of the letter, Heckler & Koch declared its review application as completed in accordance with section 134 GWB, so the Procurement Chamber promptly closed the review procedure.

The impact of the patent issues raised on the further course of the procurement process is currently being evaluated. To make an informed decision, the Ministry of Defense has engaged an independent patent attorney to prepare an expert opinion. Based on this opinion, it will be assessed what consequences need to be drawn in the procurement process.

The Ministry of Defense and the BAAINBw have thoroughly reviewed the previous, yet unfinished procurement process for the successor to the G36. There were no indications of biased decisions. The equal treatment of bidders was ensured at all times. The procurement principles of competition and transparency were adhered to.

The unexpected winner: MK556 from Haenel.

The internal review of the previous process by the Ministry of Defense and the BAAINBw has led to conclusions that can be applied to future projects, focusing on quality assurance in technical and business questions. Even though there are no legal obligations for patent research in the procurement process, it is practical to ensure maximum clarity at all times in an ongoing procurement process. Bidders must be more explicitly informed at the beginning of a process to disclose any indirectly affected intellectual property rights or patents and existing licenses related to the contract. Moreover, if indications arise during the process that patent rights may be affected, this needs to be probed by the contracting authority.

The review also revealed that the documents that the contracting authority used to initiate the BAFO did not clearly define the expected content, which was necessary to prevent misunderstandings on the bidder's part. Therefore, decisions on inquiries had to be made multiple times after BAFO, without which a technically and legally conclusive decision could not be made. To minimize risks in the procurement process, efforts must be made to reduce such inquiry needs. This includes adapting the official documents for the procurement process, which request prices and services.

Quality Assurance in Every Procurement Process

Further steps in quality assurance aim to minimize the inherent risks in every procurement process going forward. For procurement processes over 25 million Euros that are competitively awarded, an independent evaluation commission will be formed at the BAAINBw in the future. It will consist of technical, business, and legal experts who have not been involved in the respective procurement process so far. If it is clearly established during the review that due to uncertainties in the BAFO submitted by bidders, no offer is eligible for award, there is the option to reset the procurement process back to the state before receiving the BAFO, thus avoiding risky inquiries.

The comprehensive "Joint Report of the Ministry of Defense and the BAAINBw on the current developments in the decision on the successor to the G36 (Project "System Sturmgewehr") is Classified as VS-Confidential and will be separately sent to the Security Office of the German Bundestag. The report provides a detailed description of the procedural steps taken in the as yet unfinished procurement process. This includes trade secrets of the participating bidders and other confidential information. Their disclosure to the public could jeopardize the further course of the procurement process (section 5 of the Procurement Regulation stipulates confidentiality of the procurement process) and would also affect the constitutionally protected areas of the bidders. Unauthorized access to the report would therefore be detrimental to the interests of the Federal Republic of Germany.

To ensure maximum transparency of the process, the comprehensive report has also been sent to the Federal Audit Office. The Ministry of Defense offers to discuss this report with the Defense Committee spokespeople in a classified session adhering to the current COVID-19 guidelines.

HAENEL DEFENCE online: www.cg-haenel.de/defence_de

HECKLER & KOCH online: www.heckler-koch.com

The Bundeswehr online: www.bundeswehr.de

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