IPPC6

1. International Public Procurement Conference
Professor Trevor Taylor
Emails:
TrevorTaylor@rusi.org
t.taylor@cranfield.ac.uk
Tel: +44 7818 444350
Dublin
August 2014
‘Challenges to the systematic study of
international cooperation in defence
procurement’

2. Introduction and Summary
 As scholars interested in defence procurement, and in particular with
the potential of international cooperation to strengthen procurement
performance, we face real obstacles in trying to generate findings
based on normal social science methods
 defence markets are flawed
 the concepts of value and success are elusive
 there are many forms of cooperation and combinations of
partners
 projects as sui generis

3. Defence markets as flawed
 The operation of competition in defence markets
 because of the limited number of orders in equipment categories
 Losers often abandon the sector
 because of the high barriers to entry for any would-be new
suppliers, the trend to the emergence of duopolies and monopolies
 The drive for innovation in defence markets
 because of the risk and centrality of the single ‘home customer’
before export sales can be concluded
 because of the protracted periods before R&D can be turned into
sales
 companies must rely on their home governments to fund
most research and development in the sector

4. The nature of ‘value’ and ‘success’ can be elusive
 Defence equipment has three dimensions of value
 The economy
 Employment, sometimes with specific regional implications
 Management skills:
 transferable to the civil economy
 Technological expertise:
 development and retention
 perhaps transferable to the civil economy
 Tax revenues associated with defence contracts
 Can lead to exports
 Foreign exchange and the balance of trade
Many stakeholders
outside defence
have an interest in
these factors

5. The nature of ‘value’ and ‘success’ can be elusive
 Defence equipment has three dimensions of value
 The economy
 Foreign relations
 Defence projects involve long-term relations
 The selection of partners has implications for
foreign relationships
 National projects reduce dependence on others
which can have linkages to issues outside the
defence domain
 National projects can lead to exports and influence
in the wider world
Foreign ministry
interest in
defence
procurement

6. The nature of ‘value’ and ‘success’ can be elusive
 Defence equipment has three dimensions of value
 The economy
 Foreign relations
 Military capability
 Not a simple calculation
 envisaged and actual utility and relevance of a system can be
very different
 a system’s significant virtue can be its interoperability with other
systems
 how much value should be attributed to the ability of a state to
sustain and modify its equipment for operations, as opposed to
reliance on external companies and governments?

7. Cooperation in defence procurement can and does
take many forms
 As regards purchase
 Country B buys from Country A
 a bilateral relationship over many years for a major
system
 Example: UK purchase of C.17s from the US

8. Cooperation in defence procurement can and does take so
many forms
 As regards purchase
 Country B buys from Country A
 Countries B,C and D buy collectively from Country B and operate
national fleets
 To secure greater bargaining power
 A better price for a large order
 Example
 Belgium, Denmark, Netherlands and Norway but the
F.16 in 1976

9. Cooperation in defence procurement can and does take so
many forms
 As regards purchase
 Country B buys from Country A
 Countries B,C and D buy collectively from Country B and operate
national fleets
 Countries B,C,D and E collectively fund a purchase from Country
A of a multinational fleet operated by an international body
 Economies of scale regarding purchase and support
 Example: the NATO AWACs fleet

10. Cooperation in defence procurement can and does
take many forms
 As regards purchase
 Country B buys from Country A
 Countries B,C and D buy collectively from Country B and operate
national fleets
 Countries B,C,D and E collectively fund a purchase from Country
A of a multinational fleet operated by an international body
 Purchases often involve ‘offsets’
 defence direct offsets
 defence indirect offsets
 non-defence (indirect offsets)
Easing the pain of
purchase, while
increasing the cost

11. Cooperation in defence procurement can and does take
many forms
 All the above cases involve the purchase of systems that were
already developed and largely produced by one country
 But cooperation can also be involved at one or more stages of the life-
cycle of equipment

12. The agenda of potential for international cooperation in
defence procurement: the life cycle
DevelopmentResearch
Production/
Assembly
Support Disposal
Testing

13. Financial and technological realities for major systems
DevelopmentResearch
Production/
Assembly
Support Disposal
Testing
Comprehensive
programme
unaffordability
Unaffordable
except for/including
the US
Expensive but
nationally
appealing
Increasingly
expensive with
economies of scale
visible
Revenue or
significant cost?
Rising cost of
specialised facilities

14. Illustrations of different forms of collaboration at life cycle
stages
 European Defence Agency and European Union collaborative research
programmes
 The Typhoon collaborative development and production programme
 The A400M collaborative development, production (and support?)
programme
 The F.35 US-led collaborative development, production and support
programme
 Cooperative support (NATO Management & Supply Agency)
 European MLRS users
 Cooperation on testing (UK use of facilities in US and Australia)

15. Conclusion and the methodological dimension
 How can we learn from historical experiences in this area?
 the aggregation of projects with very different characteristics to
generate quantitative evidence as hazardous
 Claims about ‘lessons learned’ and ‘best practice’ from projects
must include reference to the specific contexts of projects
 Building carefully qualified case studies may be the most valuable
form of study
 Using time, cost and performance to the point of delivery of a
produced piece of equipment is a necessary but not sufficient metric of
procurement performance