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For Military Contractors, Israel Offers Opportunity, Bureaucracy

April 3, 2008 By:
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Israel represents a sizable business opportunity for private American military contractors, although getting a foot in the door, and then navigating the tangle of bureaucracy and regulations, can sometimes be a challenge, according to several speakers at the "U.S./Israel Defense Business Forum."

"You can't just knock on the door and get a meeting," warned panelist Elliot Dater, a former counsel for the Israel Ministry of Defense, who's now in private practice.

Representatives from roughly 35 Philadelphia-area firms attended the April 1 program, held at the Center City offices of the Blank Rome law firm. Sponsored by the America-Israel Chamber of Commerce's Central Atlantic Region, along with the National Defense Industrial Association's Delaware Valley branch, the program provided an in-depth look at the complex processes -- both the written and unwritten rules -- of doing business with Israel's defense sector.

Currently, Israel spends about $15 billion annually on defense, as compared to $515 billion footed by the United States; the U.S. figure takes into account both war funding and the Department of Defense's operating budget.

Still, Dater insisted that Israel does potentially represent a substantial business opportunity for American firms.

Israel receives roughly $2.4 billion in security aid from the United States, three-quarters of which are required by law to be spent in this country.

In the course of the next decade, that number is expected to approach $30 billion overall in U.S. military aid, although Congress could theoretically decide to decrease or eliminate that assistance.

For the most part, American-Israeli military transactions -- ranging from missiles and warships to computers and uniforms -- come in two forms.

Some 40 percent of the funds are spent through government- to-government transactions -- meaning a deal directly involving both the U.S. Department of Defense and Israel's Ministry of Defense, which has a 200-person procurement office in New York, explained panelist Victor Mintz, general consul to the ministry's New York office. The remainder involves a direct purchase from a private American firm.

The major business obstacle, especially for smaller companies that don't have longstanding ties with the Israeli defense establishment, is how to let the brass know about a product that might suit their military needs.

Dater told the 60 or so participants that, oftentimes, the best way to do this is to hire an Israeli go-between -- former personnel from the Israeli Defense Force or the ministry, for example, who could use their contacts to get meetings with top officials, and thus pitch an American product.

Pitch It to 'Em!

Mintz, however, stressed that it is by no means mandatory to hire such a middle man -- although it doesn't hurt -- and that entrepreneurs can pitch the Defense Ministry's office in New York or travel to Israel themselves.

Gary Feldman, director of business development for Lockheed Martin Maritime Systems and Sensors, discussed the development of the Littoral Combat Ship, a smaller warship that his firm initially designed in conjunction with the U.S. Navy, and has now refitted for use by the Israeli Navy. Such a ship has a high maneuverability and can operate in water as shallow as 15 feet, making it highly practical for coastal operations.

Feldman said that, as Israel's security situation goes, so goes the country's defense needs. Specifically, he said that Israel certainly has a need for a system designed to take out low-tech rockets, such as those fired at it daily from Gaza.

Debbie Buchwald, executive director of the America-Israel Chamber of Commerce, said that figures were not available for the amount of defense industry business that Pennsylvania companies do in Israel. She added that, while that number is substantial, there is still room for growth.

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