We reproduce below a short comparison of the cost-effectiveness of selected Western defense procurement organisations to determine whether, and how, they deliver ‘value for money’ to their taxpayers.
In January, Defence Analysis touched, very much in passing, on the issue of whether the UK’s Defence Equipment & Support organisation was one which could say that it provided value for money, especially when compared to counterparts around the World. It was caused by the realisation that Finland was buying amazing amount of equipment, but has a minimal procurement organisation.
This random question was intriguing enough to make Defence Analysis trawl through budgets and MoD websites to try to find the requisite data to perform this analysis: the defence budget; the procurement/support budget; the number of employees involved in procurement and support contracting (though not physical support, spanner turning etc).
Now, the issue is how to establish the best possible comparison between procurement organisations – the budget side is far easier to establish an equivalent baseline to permit comparisons. Some procurement organisations also have the R&D body (Netherlands, France) of that MoD added in. Some (Sweden) have the infrastructure management body inside it, which “warps” analysis.
All too often, it is difficult, if not impossible to work out how large a subsidiary sub-unit is, to allow it to be stripped out so as to allow fair comparison. And such a situation might lead some to say, “well, if you can’t get it to 100% accuracy, there’s no point in doing it!”
But to Defence Analysis’s eyes, it is better to try to see if one can baseline data, to enable at least an imperfect analysis – you never know what one might see!
The "Fs" have it! According to this informal analysis, Finland has the most cost-effective defense procurement oranisation, followed by France; all the other countries get considerably less 'bang for their bucks,' as the saying goes. (Graphic by Defence Analysis)
Methodology & conclusions
• The gross figure is taking the defence budget of a country, and dividing that by the number of people involved in their procurement system (as best as can be calculated).
• The net figure is the procurement/support budget divided by the employees in the procurement system.
• Defence Analysis would say that the size of the US procurement system – 187,000 work directly to/in the Under-Secretary for Acquisition and Support – is probably larger, as some functions are out-sourced. As such, the cost effectiveness of the US procurement system might probably be called into question.
• The initial calculation for FMV came as a surprise: Defence Analysis would have assumed that it is a global leader in procurement effectiveness. But it was rectified by seeing that there are functions such as infrastructure inside FMV which are carried out by different bodies in, say, the UK or France.
• It is still interesting that even removing these extra functions, FMV is still slightly below the group average as regards procurement efficiency, which just feels wrong to Defence Analysis. But the issue is always to follow the data ....
• That France’s DGA is better at its job than DE&S just doesn’t surprise Defence Analysis one jot – it is an outcome that can be shown in so many different ways, and via so many different channels.
• However, it has to be admitted that DE&S’s effectiveness is better than the group average (excluding Finland, which is such an outlier!).
• But this is the issue: somehow, Finland has a minute procurement organisation, but seemingly manages to produce amazing outcomes as regards procurement.Defence Analysis would ponder whether Helsinki actually outsources aspects of its procurement system to, say, Patria, or other industrial entities. If so, might this be something others should consider?
Does any of this “matter”? Well, if you are spending billions on defence equipment/support, wouldn’t you want to know whether you were doing so well? From a UK point of view, isn’t it noteworthy that if DE&S spent as well as the DGA, it could reduce its headcount from 12,500 to 9,750? This would see savings of over £100m per year in pay, minimum. Or skilled personnel could be re-deployed to other functions.
About the author: Francis Tusa is a defence journalist of over 35 years' experience. Starting at the Royal United Services Institute for Defence Studies, he branched out as a freelance writer on a wide range of defence and security matters. He publishes the Defence Analysis monthly.
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