“Faster, “Doing more “Affordability” with less” cheaper, “Smart Defence” better” “Pooling and Sharing” Public Private Business Models for Defence Acquisition Presentation at ISMOR 29 Tuesday, 28 August 2012 Thomas Ekström FOI, The Swedish Defence Research Agency thomas.ekstrom@foi.se “Adequate/Reduced/Optimised/Minimised Logistics Footprint/Tail/Burden”
Outline of presentation • Introduction • Theoretical Frame of Reference • Research Methodology • The Four Cases • Results and Implications for Practise
Background to the Research NEW PUBLIC MANAGEMENT PEACE DIVIDEND GLASNOST & PERESTROJKA REDUCTION OF DEFENCE BUDGETS – COMPETITION IN THE TRANSITION FROM NATIONAL “DOING MORE WITH LESS” DEFENCE SECTOR DEFENCE… “ADEQUATE/REDUCED/OPTIMISED/MINIMISED LOGISTICS FOOTPRINT/TAIL/BURDEN” INCREASED TECHNICAL COMPLEXITY LEADS TO …TO INTERNA - INCREASED PRICE PER UNIT AND INCREASED TIONAL MISSIONS: COMMERCIAL BEST PRACTICES – PRICE FOR SERVICES GLOBAL CHAPTER VI ½ “FASTER, CHEAPER, BETTER” RMA NCW NEC NBD SFOR KFOR EUFOR ISAF I G C W SCM Push/Pull TPL T O T ODS Lean/Agile JIT STEALTH
The Cold War System Domestic defence The Swedish Defence The Swedish Armed Forces industry Materiel Administration (FMV) F inancial flow Information flow S ystem S ystem Capability procurement specification requirement S ystem S ystem Capability Capability delivery integration delivery storage P hysical flow
The Post-Cold War System Multinational defence The Swedish Defence The Swedish industry Materiel Armed Administration (FMV) Forces F inancial flow Information flow Capability Capability procurement requirement Capability delivery P hysical flow
Research Purpose • “Study, analyse, and evaluate Business Models (BMs) regarding how they can handle the new supply concept that a new logistical interface brings about, with a particular emphasis on the risk taking that is part of the business concept” .
Research Problem Areas of key challenges that FMV faces during the transformation Sourcing Business Internal Moral, Supply Support issues Models issues ethics chain chain
Research Questions • Research Question 1: How can a generic Business Model for a non-profit, governmental, Defence Procurement Agency be described? • Research Question 2: Which strengths and weaknesses do different Business Models have in the context of defence acquisition? • Research Question 3: Which risks are associated with different Business Models in the context of defence acquisition?
Decomposed Research Purpose Decomposed Research Purpose Relevant area of theory study, analyse, and evaluate business Business Models models regarding how they can handle Performance Measurement the new supply concept Military Logistics that a new logistical interface brings Public Private Participation about with a particular emphasis on the risk Supply Chain Risk taking Management that is part of the business concept Defence Acquisition
Key Constructs Public-Private Business Models Defence Acquisition Military Logistics Participation The Business Model The spectrum from public Value-for-Money (VfM) Functions (Source: Canvas (Source: provision to outright privati- (Source: e.g. Grimsey e.g. Foxton, 1994, Osterwalder and Pigneur, sation (Source: e.g. Grimsey and Lewis, 2004, p 135) p 11) 2010) and Lewis, 2004, p 54) The Business Model Bundling (sharing of Off-The-Shelf (OTS) Principles (Source: building blocks (Source: responsibilities) (Source: (Source: e.g. Lawrence, e.g. Foxton, 1994, Osterwalder and Pigneur, Grimsey and Lewis, 2009, p 167) pp 3-7) 2010, pp 16-17) 2004, p 129) Types of public private Modes of delivery Alternatives contracts (Source: e.g. Sols (Source: e.g. Grimsey (Source: e.g. et al, 2007) and Lewis, 2004, p 54) Kress, 2002, p 10) (Defence acquisition Distribution transition staircase) (Source: channels (Source: The UK MoD, 2005c, p 135) The author) (Defence Lines of Development) (Source: The UK MoD, 2011d)
Public Private Participation P ublic P rivate P articipation P ublic P rivate Cooperation (P P C) P ublic P rivate P artnerships (P P P s) P ublic provision P ublic procurement P P P s Concession P rivatisation
The Business Model Canvas Key Key Activities Value Propositions Customer Customer Partnerships Relationships Segments “The most important “The collection of “The network of “The types of “The various things a company must products and suppliers and do to make its business services that create relationships that a groups of people or model work”. partners that value for a specific company organisations that customer segment”. make a establishes with an enterprise aims business model specific customer to reach and work”. segments”. serve”. Key Resources Channels “How a company “The most important communicates and assets required to reaches its make a business model customer segments work”. to deliver a value proposition”. Cost Structure Revenue Streams “All costs incurred to operate a business model”. “The cash a company generates from each customer segment”.
Public Procurement Business Models • Her Majesty’s Treasury view on Business Models: • Service provision contract • Outsourcing • Contracting out • Public Private Partnership (PPPs) • Private Finance Initiative (PFI) • Franchise • Concession • Joint Venture • Regeneration partnership
HMT’s view and the BM Canvas Key Partnerships Service provision contract Outsourcing Contracting out PPP / PFI Franchise Concession Joint Venture Regeneration partnership
A PPBM for Defence Acquisition Key Key Activities Value Propositions Customer Customer Public buyer or private Equipment: Partnerships Relationships Segments Existing – Standard (OTS) – supplier responsibility, as Spectrum of Spectrum of degree of Section or Adaptation – Foreign well as Transfers (T) of compliance with – degree of Public department within Development – Domestic buyer – Private responsibility, for activities opposition to the user the Armed Forces such as: Design (D), Development supplier requirements: Permanent Joint Finance (F), Buy (B) / Rent Cooperation (PPC) Colleague, Procurer, Headquarters (R) / Lease (L), Construct Support: Challenger (PJHQ) or the Traditional – Contractor (C) / Build (B), Develop (D), Process for Front Line Logistics Support (CLS) – Own (O), Operate (O), selection of Command (FLC) Manage (M), and Maintain Contract-for-Availability (CfA) partner Or – Contract-for-Capability (CfC) (M) for products (equipment) Service within the and services (support). Identity of partner Armed Forces Influence on other Defence- Or Key Resources Channels Lines-of-Development Network of Branch, Corps, Overseas supply chain (DLoDs): Training (T), suppliers Regiment, or NOT included in the (operations) Equipment (E), Personnel (P), Military unit within reported research Overseas support chain Information (I), Concepts and the services (operations) Doctrine (D), Organisation Domestic supply chain (O), Infrastructure (I), Logistics (training and exercises) (L) Domestic support chain (training and exercises) Cost Structure Revenue Streams Only different forms of the external costs (i.e. FFP, FPI, CPIF, CPFF, PBC) have been explicitly included. NOT included in the reported research Internal costs are NOT included in this thesis
A Model for Analysis of Performance Goals Strengths Weaknesses Ops Availability target T&E Ops Reduced delivery time T&E Effectiveness Ops Reduced delivery cost T&E Ops Increased delivery quality T&E Ops Efficiency Monetary resources T&E
A Model for Analysis of Risk Sources of supply chain risks and uncertainties External Internal Ops: Overseas operations T&E: Domestic Training and Network risks Environmental Organisational Exercises Supply Demand risks risks risks risks Ops Operational accidents T&E Type and consequence Ops Operational of supply catastrophes T&E chain risks and uncertainties Strategic Ops uncertainties T&E
Research Methodology Research Research Data Data Dissemi- framework design collection analysis nation R esearch Unit of Team based Team based Case quality paradigm analysis approach approach R eflection R esearch Case selection R esearcher Narratives R esults and purpose S ite selection role Transcription conclusions R esearch R ules of Case context Organising raw Limitations problem conduct Triangulation data and future R esearch R esearch (data) R educing raw research themes instrument F ield notes data E nfolding R esearch R esearch J ournal Triangulation literature questions protocol R ecord (method) R esearch Case study keeping Within-case approach database E mergent analysis E xisting themes Cross-case theory Changes of analysis framework Alternative Changes of interpretations design P roject review Chain of evidence
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