grail

It was too delicious to resist. 

A net present value of $20 million on a ten-year training contract of $150 million with 40 % gross margins. The contract was a required offset under the $5 billion acquisition of transport aircraft. The training contract was a small part of the $1.5 billion of offsets but large enough to matter. 

The country leadership team of Big Air promised to depart with the training contract to be delivered to whatever Native company with the right pedigree would advance $4 million plus an equity stake of 26%.

The Native company required no expertise because expertise would hinder the larceny. No, the Native company needed to be a second tier supplier to a first tier outfit that would receive the contract and outsource it. The Native first tier company would be selected by Big Air and the Native second tier company would be selected by the first tier company.  Tinkers to Evers to Chance.

The Foreign Corrupt Practices Act criminalizes bribing foreign government officials to receive contracts and has collected much in fines from perpetrators that have listed shares in public markets. In hindsight the adventure danced around the inverse of the FCPA. Employees of Big Air who were not local government officials were pitching local companies to hire them because they would deliver a derivative contract from Big Air, not the actual contract from the Native government, to the local company without a competitive bid. 

Thinking about this a little harder, in theory, the monies being delivered would originate from the Native budget for the principal contract, flow through Big Air's government to Big Air, and a portion of that flow would be recycled into the Native economy by Big Air to a company that at the time of the principal contract did not exist. On the surface this may not have violated the letter of the law but it would require acrobatics to fit within the four corners of anything resembling a statutory construct. 

Imagine my surprise. Deminimis and FCPA in the same lifetime. 

That a yet to be formed Native company without expertise would receive a gift of $ 20 million in net present value the day the ink dried on the bank account forms may not have been an intended consequence of the offset program designed to create aerospace and defence capability in the Native land. But it was.

 Repeated enough it became an article of faith. 20 million dollars of net present value on a 10 year $150 million training contract with 40 % margins. Like the Lord’s Prayer but that is 66 words. This was 20 words. From the first call in the morning, partner presentations mid-day, supplier call in the afternoon, to board members in the evening.  

The message became hypnotic. The virtuous creation of an industry in a country in which it did not exist. Plug the handset to your ear and fire. 20 million dollars of net present value on a 10 year $150 million training contract with 40 % margins. It became the grail. 

Until it wasn't.