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International Public Procurement Conference
Professor Trevor Taylor
Emails:
Tel: +44 7818 444350
Dublin
August 2014
‘Challenges to the systematic study of
international cooperation in defence
procurement’
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
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
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
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
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?
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
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
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
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
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
The agenda of potential for international cooperation in defence procurement: the life cycle
Development Research Production/
Assembly Support Disposal
Testing
Financial and technological realities for major systems
Development Research 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
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)
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
