DEFENCE PRODUCTI ON, SALES AND PROCUREMENT: I NTERNATI ONAL BEST - - PowerPoint PPT Presentation

DEFENCE PRODUCTI ON, SALES AND PROCUREMENT: I NTERNATI ONAL BEST PRACTI CES:

DEFENCE I NDUSTRI AL COOPERATI ON W I TH FOREI GN COUNTRI ES PROFESSOR ADRI AN KENDRY FORMER NATO SENI OR DEFENCE ECONOMI ST AND ADVI SER TO THE 1 2 TH NATO SECRETARY GENERAL

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∗ Adrian Kendry experience: 1 9 9 0 s Crow e Chair in the Defence I ndustrial Base and w orking w ith AI AA ( LM, NG, B, 3 M, BAE, RR) and NATO ∗ Building I ntegrity program m e and defence industry and procurem ent: EDA, European Defence I ndustry Association ( ASD) , BI Conference and the defence sector ∗ Trends in international defence spending and procurem ent: assessing effectiveness in defence procurem ent in creating capabilities ∗ Meeting the challenges of disruptive technologies and upgrading legacy system s ∗ Meeting the challenges of short term urgent requirem ents ( 0 -3 years) , m edium term needs ( 3 -8 years) , longer term m odernisation of the defence industrial base ( 8 -1 5 years)

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DEFENCE PRODUCTI ON, SALES AND PROCUREMENT: I NTERNATI ONAL BEST PRACTI CES

∗ “The regional security environm ent particularly affects the dem and for m ilitary capital equipm ent, as w ell as m aintenance and life- cycle m anagem ent of existing equipm ent ∗ Understanding the context in w hich Ukraine defence procurem ent reform w ould occur is essential. Military organizational structures globally w ere prim arily designed and built in a period that had considerably less com plexity ∗ I n 2 0 1 6 , the velocity of technological change and the sw iftly evolving international strategic environm ent has resulted in defence establishm ents scram bling to keep pace w ith transform ational change ∗ Under these circum stances, a principally static defence establishm ent can lead to inadequate or inefficient organizational practices and procedures”

∗ ( Dr. Ross Fetterley)

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THE CHALLENGES CONFRONTI NG UKRAI NE’S DEFENCE PROCUREMENT

∗ On partial inform ation, the budget of the Russian Federation provided 2 .5 0 1 trillion rubles for m ilitary funding in 2 0 1 4 . I n 2 0 1 5 the sum w ent up to 3 .0 7 8 trillion rubles. I n 2 0 1 6 , the planned defense w as estim ated at 3 .1 4 5 trillion rubles ∗ Current procurem ent pattern of the Russian Ministry of Defense dem onstrates Russia’s urge for m ore aggressive presence at sea and in the air, the priority is given to navy, air force and electronic w arfare and intelligence ∗ Significant funds are allocated to the m eans of increasing m ilitary and political pressure on neighboring countries and blocks ( m obility of strategic nuclear w eapons, sea com ponent

• f the nuclear triad

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RUSSI AN DEFENCE PROCUREMENT AND POLI CY: UKRAI NI AN ANALYSI S

∗ I m proving the efficiency and adaptability of conventional w eapons through the use of battle m anagem ent system s and support for ground troops ∗ Probably insufficient funds for a large-scale rearm am ent of ground forces ∗ Priority is im proving the efficiency of existing com bat platform s ∗ Utilization of m ore advanced associated technology ( com m and and control and electronic w arfare system s, m odern accurate tactical and guided m issiles, w eapon stations) ∗ Bypassing sanctions through “front com panies” buying dual-use goods

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RUSSI AN DEFENCE PROCUREMENT AND POLI CY

∗ W hat international experiences in accountable, transparent and cost effective defence procurem ent are able to guide Ukraine at the beginning of an uncertain political budgetary and econom ic year? ∗ W hat are the key lessons learned from international defence procurem ent? Trends in international defence spending and procurem ent: assessing effectiveness in defence procurem ent in creating capabilities ∗ UK, US, China, I ndia, France, Germ any ∗ Current Reform Priorities ∗ W eaknesses in oversight structures and possible solutions ∗ Capacity developm ent needs and best practice

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DEFENCE PRODUCTI ON, SALES AND PROCUREMENT: I NTERNATI ONAL BEST PRACTI CES

∗ Transparency and m eeting the challenges of short term urgent requirem ents ( 0 -3 years) , m edium term needs ( 3 -8 years) , longer term m odernisation of the defence industrial base ( 8 -1 5 years) ∗ Oversight Monitoring Com pliance and Penalties ∗ National priorities and m aintaining integrity and reducing corruption ∗ Defence Production, Sales and Procurem ent:I nternational Best Practices ∗ W hat international experience in accountable, transparent and cost effective defence procurem ent is able to guide Ukraine at the beginning of an uncertain political budgetary and econom ic Year?

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DEFENCE PRODUCTI ON, SALES AND PROCUREMENT: I NTERNATI ONAL BEST PRACTI CES

∗ AK and Ukraine ∗ Ukraine JW GES 2 0 1 2 . UKROBORONPROM m anagem ent of defence sector and budgetary, delivery, technological and DI B m anagem ent challenges. ∗ AK and Building I ntegrity: The Defense Acquisition Process US AI AA and EU ASD and EDA ∗ Building I ntegrity program m e and defence industry and procurem ent: EDA, European Defence I ndustry Association, BI Conference and the defence sector ∗ ∗ Global defence spending and procurem ent: ∗ Accountability and Meeting the challenges of disruptive technologies and upgrading legacy system s

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DEFENCE PRODUCTI ON, SALES AND PROCUREMENT: I NTERNATI ONAL BEST PRACTI CES

∗ Defense Procurem ent & Contracting Overview ∗ Legal Aspects of Contracting ( Contract Law , Form ation, and I nterpretation) ∗ Transparency, Fraud & Ethics ∗ Acquisition Planning ∗ Com petition ( I nternational Com petitive Bidding through Directed Single Sourcing) ∗ Contracting for Services ∗ Outsourcing ∗ Supplier Source Selection ∗ Foreign Military Sales / Foreign Military Financing and Offsets ∗ Contract Managem ent

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PRI NCI PLES OF DEFENCE ACQUI SI TI ON: THE NAVAL POSTGRADUATE SCHOOL MONTEREY CALI FORNI A

GLOBAL DEFENCE SPENDI NG

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GLOBAL DEFENCE SPENDI NG 2 0 1 4 AND 2 0 2 0

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DEFENCE SPENDI NG 2 0 1 3 AND 2 0 1 4 , BI LLI ONS $ CURRENT EXCHANGE RATES 2 0 1 4 2 0 1 5 % CHANGE USA 7 6 2 .9 7 4 4 .9

• 2 .3 6

CHI NA 1 3 0 1 4 5 1 1 .5 JAPAN 4 0 4 2 .8 7 RUSSI A 6 2 7 7 2 4 I NDI A 3 6 .1 4 0 1 0 .8 UK 5 5 5 4

• 1 .8

FRANCE 4 0 .9 4 1 .2 .7 GERMANY 4 4 .3 4 1 .7

• 5 .8 6

TURKEY 2 0 .6 2 3 .9 1 6

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TRENDS I N I NTERNATI ONAL DEFENCE SPENDI NG: NATO AND THE REST OF THE W ORLD

DEFENCE SPENDI NG AS % GDP

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∗ “W hile insisting on the undisputed fact that NATO rem ains the prim ary fram ew ork for m ost Mem ber States, the Strategy underscores that the EU needs to be strengthened as a “security com m unity: European security and defence efforts should enable the EU to act autonom ously w hile also contributing to and undertaking actions in cooperation w ith NATO” ∗ ( Federica Mogherini, Novem ber 2 0 1 6 )

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EUROPEAN UNI ON GLOBAL STRATEGY ON SECURI TY AND DEFENCE

∗ For Europe to achieve strategic autonom y and becom e a security provider capable of responding to external crises and keeping its territory and citizens safe, Mem ber States need to have at their disposal “all m ajor high- end m ilitary capabilities and equipm ent”, as w ell as the technological and industrial m eans to acquire and sustain such capabilities ∗ “This im plies full-spectrum land, air, space and m aritim e capabilities, including strategic enablers”

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EUROPEAN UNI ON GLOBAL STRATEGY ON DEFENCE AND SECURI TY

∗ Europeans m ust also im prove the m onitoring and control of flow s w hich have security im plications ∗ This requires investing in I ntelligence, Surveillance and Reconnaissance, including Rem otely Piloted Aircraft System s ( RPAS, or drones) , satellite com m unication

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EUROPEAN UNI ON GLOBAL STRATEGY ON DEFENCE AND SECURI TY

NATO DEFENCE SPENDI NG

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NATO DEFENCE EXPENDI TURES % GDP

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THE NATO 2 % AND 2 0 % COMMI TMENTS

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NATO DEFENCE EXPENDI TURE 2 0 0 8 -2 0 1 5

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NATO EQUI PMENT EXPENDI TURE 2 0 0 8 -2 0 1 5

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DEFENCE SPENDI NG, CAPABI LI TI ES AND OUTCOMES

Nations tend to focus m ore on how they spend their m oney ( efficiency) rather than w hat capabilities in w hich to invest ( effectiveness) ( NATO STO Future Defence Spending Study February 2 0 1 6 )

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NATO COUNTRY DEFENCE RESOURCE MANAGEMENT PRACTI CES

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NATO COUNTRY DEFENCE RESOURCE MANAGEMENT PRACTI CES

THE CHALLENGES FOR EUROPEAN AND NATO DEFENCE PROCUREMENT AND THE DEFENCE I NDUSTRI AL BASE

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• Europe continues to face challenges w ithin the defence procurem ent

cycle

• From concept developm ent to production and retirem ent, all the

stages w ithin the system life cycle require full cooperation, not only betw een NATO m em bers but also betw een Ministries of Defence and defence contractors

• Defence com petition is constrained by industry w orking for national

governm ents

• Bringing civilian technology com panies, SMEs and start-ups into the

fold to foster higher levels of innovation and to leverage new er technologies

• These include artificial intelligence, Big Data and robotics, also

presents difficulties as these com panies m ay find defence too slow , com plex and highly regulated

∗ Reshaping the European defence industrial and technological base as a fundam ental basis for generating sm art defence and sm art arm ies ∗ This requires both reform initiatives from the dem and side ( nations m ust agree on com m on requirem ents for proposed equipm ent platform s) and the supply side ( the m easures to consolidate and im prove the industrial and technological base) ∗ I nteroperability issues can only be tackled if there is a com m on strategy tow ards the developm ent of new capabilities and im plem enting best strategies to optim ise NATO’s System Life Cycle

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THE CHALLENGES FOR EUROPEAN AND NATO DEFENCE PROCUREMENT AND THE DEFENCE I NDUSTRI AL BASE

THE CHALLENGES FOR EUROPEAN AND NATO DEFENCE PROCUREMENT AND THE DEFENCE I NDUSTRI AL BASE

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• Despite the fact that m odern m ilitary establishm ents are infinitely

m uch m ore capable and lethal than form er generations, they are less robust than earlier generations

• This is due to vast advances in technology and the com plexity this

brings, the proliferation of interdependencies, and the constraints inherent in leaner organizational structures

• Countries faced w ith the com bination of an extended operational

tem po and funding constraints due to challenging fiscal restrictions, both organizational reform and adaption to shifting circum stances can fall behind other nations in a transform ing international security environm ent

• This can result in institutional governance issues, due to

m isaligned organizational priorities and structures

EUROPEAN DEFENCE R&D: THE W AY AHEAD

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• Europe is under pressure to invest as m uch as the US does in

defence R&D. The European Com m ission’s Defence Action Plan acknow ledges the need for the European defence industry to innovate

• Eizbieta Bienkow ska, the European Com m issioner for I nternal

Market, I ndustry, Entrepreneurship and SMEs, told the NATO I ndustry Forum that under the plan, the EC proposes funding of € 9 0 m illion ( € 2 5 m illion in 2 0 1 7 ) over the next three years for defence research to foster innovation in the defence supply chain.

• Research is expected to focus on so-called ‘disruptive’
• technologies. Bienkow ska also talked about financial tools for

defence-related SMEs and w orking tow ards a European Defence Fund to support the financing of jointly agreed defence capability program m es.

THE UK MoD AND PROCUREMENT POLI CY

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• MOD is one of the biggest public procurem ent organisations in Europe ( £ 1 9 billion

w ith UK industry) , the single largest custom er for UK industry w ith diverse range

• f requirem ents ( m ilitary fighting vehicles to facilities m anagem ent) custom ers

include arm ed forces and national security agencies

• Prom ote innovation in business and w ith current and potential suppliers to deliver

business in an increasingly efficient and effective w ay.

• Principal Areas:
• technology: cloud and digital, netw ork services, softw are and technology products

and services

• vehicle platform s: the procurem ent and support of ships, subm arines, aircraft,

vehicles

• supporting services: w eapons and general requirem ents including food, clothing,

m edical supplies and tem porary accom m odation

• buildings: facilities m anagem ent, m aintenance and repair, utilities and fuel
• people: perm anent and tem porary staff ( including clinical staff) , outsourced

services ( such as language and em ployee services) and advisory services

∗ Com petition is the default position in procuring in the dom estic and global defence and security m arket for proven products ∗ Principle qualified by need to take action to protect technological advantage to m aintain national security ∗ Netw ork of supply chain advocates helps tackle reported cases of poor procurem ent practice and im prove standards

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UK MoD PROCUREMENT POLI CY

.

∗ Procurem ent ∗ Capability Planning ∗ Arm am ents ∗ Supply Chain ∗ Logistics ∗ Strategy ∗ Bilateral Cooperation ∗ Defence Policy developm ent ∗ I nteroperability ∗ I ndustrial Cooperation

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KEY DECI SI ON MAKERS OF: GOVERNMENT – MODS/ ARMED FORCES