II. Governments as Customers of Defence Industries

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Notes

¹ See Andrew Chuter, ‘Britain Inks Deal with General Dynamics for Armored Scout Vehicles’, Defense News, 1 July 2010; Andrew Chuter, ‘Sale of UK Repair Company Hits Snag Over Intellectual Property Rights’, Defense News, 29 July 2013.

² Defence Analytic Services Agency (DASA), Defence Statistics 2011, Table 1.3, 28 September 2011. See also: Ministry of Defence, Annual Report and Accounts 2010 –11 (London: The Stationery Office, 2011), pp. 150 –52.

³ See, for instance, B Goodlad, ‘UK MoD Seeks Industry Support for Vehicles’, Jane's Defence Weekly, 27 April 2011.

⁴ Andrew Higginson, ‘Contractor Support to Operations (CSO) – Proactive or Reactive Support?’, RUSI Defence Systems (Vol. 13, No. 2, October 2010), p. 16.

⁵ See MoD, Annual Report and Accounts 2010 –11, p. 47.

⁶ UK House of Commons Defence Committee, ‘Written Evidence from the MoD’, Operations in Afghanistan, Fourth Report of Session 2010 –12 – Volume I, HC 554 (London: The Stationery Office, 2011), pp. 90 –91. It should be stressed that the authors regard these official figures on CSO spending and personnel to be conservative estimates. The authors' interviews with senior CSO experts revealed a general deficit in the government's ability to provide accurate, up-to-date figures on CSO. Therefore, although the existing official figures on CSO, as well as figures provided by analysts and commentators, present a general trend, they should be treated with caution.

⁷ Office of the US Deputy Assistant Secretary of Defense (Program Support), ‘US/UK Force Generation Analysis – Sustainment Strategies: Use of Contractors to Support Operations (Collaborative Element 6)’, 9 October 2012, p. 6, <http://www.acq.osd.mil/log/PS/ocs/multi-national/US-UK_CE6_final_9Oct2012.docx>, accessed 8 October 2013.

⁸ For a critical analysis of this possibility, see RUSI Acquisition Focus Group, ‘The Defence Materiel Strategy and the GOCO Proposal for Abbey Wood’, RUSI Briefing Paper, July 2012.

⁹ See Ministry of Defence, ‘Better Defence Acquisition: Improving How we Procure and Support Defence Equipment’, 7 June 2013, p. 17, <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206032/20130610_WP_Better_Def_Acquisition_screen_final.pdf> accessed 15 October 2013, cited and discussed in Trevor Taylor and John Louth, ‘What the Government Must Do in Defence Procurement’, RUSI Briefing Paper, September 2013, <http://www.rusi.org/downloads/assets/GOCO.pdf> accessed 15 October 2013.

¹⁰ Jacques S Gansler, Democracy's Arsenal: Creating a Twenty-First-Century Defense Industry (Cambridge, MA: MIT Press, 2011), p. 9.

¹¹ John M Blair, Economic Concentration: Structure, Behavior and Public Policy (New York, NY: Harcourt Brace Jovanovich, 1972).

¹² Michael M Dunn, ‘The US Defense Industrial Base: Past, Present and Future Challenges’, paper presented at the US Industrial College of the Armed Forces, 2 June 2005.

¹³ The US dollar values quoted in this section are in 2012 prices.

¹⁴ See Murray Weidenbaum, The Economics of Peacetime Defence (New York, NY: Basic Books, 1974).

¹⁵ Executive Order Number 12656.

¹⁶ BMVg, ‘Customer Product Management (amended): Procedures for Requirement Identification, Procurement, and In-Service Support in the Bundeswehr’, Ref. No. 79-01-01, 12 November 2012.

¹⁷ Ulrich Petersohn, ‘Outsourcing the Big Stick: The Consequences of Using Private Military Companies’, Working Paper Series No. 08-0129, Weatherhead Center for International Affairs, Harvard University, p. 13.

¹⁸ See BMVg, ‘Die Neuausrichtung der Bundeswehr: Nationale Interessen wahren – Internationale Verantwortung übernehmen – Sicherheit gemeinsam gestalten’, Broschüre zur Neuausrichtung, Zweite, vollständig aktualisierte Auflage, March 2013, pp. 92–95.

¹⁹ BMVg, ‘White Paper 2006 on German Security Policy and the Future of the Bundeswehr’, October 2006, pp. 62–63.

²⁰ See, for example, BMVg, ‘White Paper 2006 on German Security Policy and the Future of the Bundeswehr’ and BMVg, ‘Konzeption der Bundeswehr’, 1 July 2013.

²¹ As an illustration, consider NATO's Strategic Airlift Interim Solution (SALIS) agreement. As a member of the SALIS multinational airlift consortium, Germany has access to six Antonov An-124 transport planes for strategic airlift. See NATO, ‘Strategic Airlift Interim Solution’ (SALIS)’, <http://www.nato.int/cps/en/natolive/topics_50106.htm>, accessed 14 October 2013.

²² BMVg, ‘Rahmenvertrag Innovation, Investition und Wirtschaftlichkeit in der Bundeswehr’, 15 December 1999.

²³ LHBw is a joint company owned by Lion Apparel Deutschland and Hellmann Worldwide Logistics, each holding 50 per cent. See BMVg, ‘Wirtschaftlichkeit und Projektmanagement’, Bundesakademie für Wehrverwaltung und Wehrtechnik, Mannheim, Modul 3, A/GT-L:PM/AWP 3 - Kurs 02/12, 8 August 2012, p. 21.

²⁴ See Mariana Mazzucato, The Entrepreneurial State: Debunking Public vs. Private Sector Myths (London: Anthem Press, 2013).

²⁵ See the International Institute of Strategic Studies (IISS), The Military Balance 2011: The Annual Assessment of Global Military Capabilities and Defence Economics (London: Routledge, 2011), pp. 41–51.

²⁶ See, for example, Marion E Bowman, ‘Privatizing while Transforming’, Defense Horizons (No. 57, July 2007), pp. 1–9.

²⁷ See Stephen Daggett and Pat Towell, ‘FY2013 Defense Budget Request: Overview and Context’, Congressional Research Service Report, 20 April 2012, <http://www.fas.org/sgp/crs/natsec/R42489.pdf>, accessed 8 October 2013.

²⁸ See Rupert Smith, The Utility of Force: The Art of War in the Modern World (London: Allen Lane, 2005).

²⁹ Ministry of Defence, National Security Through Technology, Cm 8278 (London: The Stationery Office, 2012), p. 8.

³⁰ BMVg, ‘White Paper 2006 on German Security Policy and the Future of the Bundeswehr’, p. 63.

³¹ ‘Gemeinsame Erklärung des Bundesministeriums der Verteidigung und des Ausschusses Verteidigungswirtschaft im Bundesverband der Deutschen Industrie e.V. zu Nationalen Wehrtechnischen Kernfähigkeiten’, 20 November 2007.

³² See David M Walker, DOD Transformation Challenges and Opportunities (Washington, DC: GAO, November 2007).

³³ See Kate M Manuel, ‘Competition in Federal Contracting: An Overview of the Legal Requirements’, Congressional Research Service Report, 30 June 2011, <http://www.fas.org/sgp/crs/misc/R40516.pdf>, accessed 8 October 2013.

³⁴ United States Office of Management and Budget (OMB), Report on Competitive Sourcing Results, FY 2007 (Washington, DC: OMB, 2008); Gansler, Democracy's Arsenal, p. 282.

³⁵ See Frederic M Scherer, The Weapons Acquisition Process: Economic Incentives (Cambridge, MA: Harvard University Press, 1964).

³⁶ James Richardson and James Roumasset, ‘Sole Sourcing, Competitive Sourcing, Parallel Sourcing: Mechanisms for Supplier Performance’, Managerial and Decision Economics (Vol. 16, No. 1, January/February 1995).

³⁷ Defence Materiel Organisation, Defence Capability Plan 2011, 15 May 2012.

³⁸ ‘Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC with EEA relevance’, Official Journal (L 216, 20 August 2009), pp. 76–136, <http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:216:0076:01:EN:HTML>, accessed 8 October 2013.

³⁹ See DASA, UK Defence Statistics Compendium 2011, Table 1.15, <http://www.dasa.mod.uk/index.php/publications/UK-defence-statistics-compendium/2011>, accessed 8 October 2013; DASA, UK Defence Statistics Compendium 2010, Table 1.15, <http://www.dasa.mod.uk/index.php/publications/UK-defence-statistics-compendium/2010>, accessed 8 October 2013; DASA, UK Defence Statistics Compendium 2009, Table 1.5, <http://www.dasa.mod.uk/index.php/publications/UK-defence-statistics-compendium/2009>, accessed 8 October 2013.

⁴⁰ Two examples demonstrating this are the ammunition contracts signed with BAE Systems in connection with the privatisation of Royal Ordnance and the long-term arrangements for test sites agreed with QinetiQ as part of the break-up of the former Defence Evaluation and Research Agency.

⁴¹ Gansler, Democracy's Arsenal, pp. 282–84.

⁴² See Bundesministerium der Justiz, ‘Vergabeverordnung für die Bereiche Verteidigung und Sicherheit (VsVgV)’, 12 July 2012, <http://www.gesetze-im-internet.de/vsvgv/>, accessed 8 October 2013; Bundesministerium der Justiz, ‘Verordnung über die Vergabe öffentlicher Aufträge (VgV)’, 9 January 2001, <http://www.gesetze-im-internet.de/vgv_2001/>, accessed 8 October 2013; ‘Bekanntmachung der Vergabe- und Vertragsordnung für Leistungen – Teil A (VOL/A)’, 20 November 2009, <http://www.bmwi.de/BMWi/Redaktion/PDF/Gesetz/verdingungsordnung-fuer-leistungen-vol-a-2009>, accessed 8 October 2013; ‘Vergabe- und Vertragsordnung für Bauleistungen 2012 Teil A (VOB/A)’, 23 August 2012, <http://www.bmvbs.de/SharedDocs/DE/Anlage/BauenUndWohnen/vob_2012_a.pdf>, accessed 8 October 2013; ‘Bekanntmachung der Vergabeordnung für freiberufliche Leistungen (VOF)’, 18 November 2009, <http://www.bmwi.de/BMWi/Redaktion/PDF/Gesetz/vergabeordnung-fuer-freiberufliche-leistungen-vof.pdf>, accessed 8 October 2013.

⁴³ See Bundesministerium für Wirtschaft und Technologie, ‘Bekanntmachung der geltenden EU-Schwellenwerte für Vergaben in den Bereichen Verteidigung und Sicherheit gemäß § 1 Absatz 2 Satz 2 der Vergabeverordnung für die Bereiche Verteidigung und Sicherheit’, Bundesanzeiger, Bekanntmachung, 25 July 2012, p. B2, <http://www.bmwi.de/BMWi/Redaktion/PDF/B/bekanntmachung-geltende-eu-schwellenwerte-fuer-vergaben-bereiche-verteidigung-und-sicherheit.pdf>, accessed 8 October 2013.

⁴⁴ See paragraphs 100 and 100c of the ‘Gesetz gegen Wettbewerbsbeschränkungen (GWB)’, 26 August 1998, <http://www.gesetze-im-internet.de/bundesrecht/gwb/gesamt.pdf>, accessed 28 September 2013, and art. 346, para. 1 of the ‘Treaty of the Functioning of the European Union (TFEU)’, Official Journal of the European Union, 2012/C 326/01.

⁴⁵ Currently published by BIP Solutions. See <http://www.bipsolutions.com/BusinessIntelligence/ContractInformation/MOD_DCB.html>, accessed 10 October 2013.

⁴⁶ Gansler, Democracy's Arsenal, p. 91.

⁴⁷ Greg Grant, ‘Gates Tells Military Services to Prepare for Unconventional Wars’, Government Executive, 22 April 2008.

⁴⁸ Author interview with a US defence official, 30 March 2012.

⁴⁹ See IISS, The Military Balance 2011, p. 43.

⁵⁰ GAO, Defense Acquisitions: Assessment of Selected Weapons Programs, GAO-08-467SP (Washington, DC: GAO, March 2008).

⁵¹ GAO, Defense Acquisitions: Assessment of Selected Weapons Programs, GAO-08-467SP (Washington, DC: GAO, March 2008).

⁵² Over the same time period, the car industry in the US has reduced its product-realisation cycle time from about eight years to two. See Daniel Czelusniak, ‘Defence Science Board Briefing’, 12 June 1998.

⁵³ GAO, Defense Acquisitions: Assessments of Selected Weapons Programs, GAO-07-406SP (Washington, DC: GAO, March 2007).

⁵⁴ R Jeffrey Smith, ‘Obama Vows a Veto in Dispute over F-22s’, Washington Post, 14 July 2009.

⁵⁵ See, for example, Renae Merle, ‘Marines Seek Fuse on Vehicle: General Dynamics Design has Problems’, Washington Post, 17 February 2007.

⁵⁶ By logistics, the authors refer to the ability of a nation to project, sustain and recover combat-ready joint forces through effective functions of transport, supply, maintenance, replenishment and support. See John Louth, ‘Leadership, Industrial Licence and Logistics: The Search for Some New Thinking’, RUSI Defence Systems (Vol. 14, No. 2, Autumn/Winter 2011), pp. 39–42.

⁵⁷ US expenditure on logistics in a given year can be in excess of $172 billion, with an actively managed inventory worth $94 billion being carried on the DoD balance sheet. Over 18 million parts are ordered and delivered each year across all operating theatres, with upwards of 5 million equipment reference-code numbers held within the US inventory. Moreover, the military's logistics system comprises over 1 million military and civilian government personnel, matched by as many contractors from industry. It is an enormous and complicated undertaking. See Lou Kratz, ‘Defining the Future of DoD Logistics’, Lockheed Martin, Washington, DC, 2008.

⁵⁸ Gansler, Democracy's Arsenal, pp. 217–19.

⁵⁹ Author interview with a US defence official, 30 March 2012.

⁶⁰ MoD Defence Equipment and Support, ‘Contractor Support to Operations (CSO): Policy Overview, Joint Service Publication 567, 5th edition’, Defence Council, 2009; MoD, ‘Contractors on Deployed Operations (CONDO) – Processes and Requirements, Defence Standard 05-129, Issue 4’, 12 March 2010; MoD, ‘Contractors on Deployed Operations, DEFCON 697, Edition 12/10’, 2010.

⁶¹ Office of the US Deputy Assistant Secretary of Defense (Program Support), ‘Synchronized Predeployment and Operational Tracker – Enterprise Suite’, information sheet, <http://www.acq.osd.mil/log/PS/SPOT/Definition_SPOT_ES_InfoSheet.pdf>, accessed 10 October 2013; see Office of the US Deputy Assistant Secretary of Defense (Program Support), ‘US/UK Force Generation Analysis’, p. 7.

⁶² Commission on Wartime Contracting in Iraq and Afghanistan, ‘At What Risk?’, Second Interim Report to Congress, 2011, pp. 1–5.

⁶³ Robert M Gates, ‘A Balanced Strategy: Reprogramming the Pentagon for a New Age’, Foreign Affairs (January/February 2009).

⁶⁴ Ashton B Carter, ‘Better Buying Power in Defense Spending’, statement before the Commission on Wartime Contracting, Washington, DC, 28 March 2011, p. 39, <http://www.wartimecontracting.gov/docs/hearing2011-03-28_transcript.pdf>, accessed 10 October 2013.

⁶⁵ In 2010, the DoD updated its ‘Policy and Procedures for Determining Workforce Mix’, which addressed contractor personnel as part of the total force, and in 2011 released a major update to the DoD instruction ‘Operational Contract Support’, which established roles and responsibilities for managing operational contract support. In 2012, the DoD updated its joint planning and execution policy to include operational contract support in many non-logistical functional areas, such as intelligence, personnel and engineering, and one year later developed standards for using private security contractors.

⁶⁶ See Moshe Schwartz and Jennifer Church, ‘Department of Defense's Use of Contractors to Support Military Operations: Background, Analysis, and Issues for Congress’, Congressional Research Service Report, 17 May 2013, p. 16, <http://www.fas.org/sgp/crs/natsec/R43074.pdf>, accessed 15 October 2013.

⁶⁷ See Moshe Schwartz and Jennifer Church, ‘Department of Defense's Use of Contractors to Support Military Operations: Background, Analysis, and Issues for Congress’, Congressional Research Service Report, 17 May 2013, p. 16, <http://www.fas.org/sgp/crs/natsec/R43074.pdf>, accessed 15 October 2013.

⁶⁸ See Congressional Budget Office, ‘Contractors’ Support of US Operations in Iraq’, August 2008, pp. 16–17, <http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/96xx/doc9688/08-12-iraqcontractors.pdf>, accessed 15 October 2013.

⁶⁹ Author interview with senior government officials.

⁷⁰ Kurt Helmut Schiebold, ‘Aspekte ziviler logistischer Unterstützung für die Einsatzlogistik des Heeres’, position paper, Bundeswehr, May 2008.

⁷¹ Arbeitskreis Logistik Bundeswehr und Wirtschaft, ‘Leitfaden für die Kooperation der deutschen Industrie und der gewerblichen Wirtschaft mit der Bundeswehr im Zusammenhang mit Einsätzen und Übungen außerhalb der Bundesrepublik Deutschland’, 22 April 2004.

⁷² See Jan Stöber, Battlefield Contracting – Die USA, Großbritannien, Frankreich und Deutschland im Vergliech (Wiesdbade: Springer US, 2012), pp. 129–58.

⁷³ Ministry of Defence, Better Defence Acquisition: Improving How We Procure and Support Defence Equipment, Cm 8626 (London: The Stationery Office, June 2013), para. 38, <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206032/20130610_WP_Better_Def_Acquisition_screen_final.pdf>, accessed 10 October 2013.