Select Committee on Defence Appendices to the Minutes of Evidence

Memorandum submitted by Sir Colin Chandler, Vickers plc on OCCAR (5 August 1999)

  I am grateful indeed for the opportunity to comment on the proposal to establish OCCAR on a treaty basis by Convention. The points we would wish to make initially reflect, and at the end, follow the order of the points of your letter of 20 July.

  We have never been sure of the purpose of OCCAR. Is it to be a precursor of a European DPA into which our own DPA will be subsumed at some point along the road of wider Europeanisation? If that is the case then what will be the relationship between OCCAR and our own DPA in the interim and what role will OCCAR play in, for instance, advising what are presently sovereign processes on the procurement route for any particular project? Will all projects that have a possible European dimension include OCCAR links and, if that is so, how will these be accomplished within the Smart Procurement model of Integrated Project Teams (I am particularly concerned here that the idea of IPTs was to bind project stake holders into a common purpose but this would become very difficult if the IPT had top-heavy contributions from national and European procurement executives). Or is OCCAR to be a supranational executive for the project management of projects to which several EU states are contributing—if so how will our own DPA be involved and to whom will industry be accountable?

  These are fundamental questions arising only from the more pragmatic considerations that industry is forced to face and resolve but some of the broader political architecture is also obscure. HM Government has always exercised the right, and indeed the obligation, to consider internal politico-economic factors when making defence investments—a right which has been exercised judiciously enough for the UK defence industry to be the second largest in the world. We are not clear from the preamble to the Convention how HM Government will maintain these obligations when, under Article 5, it has renounced ". . . the analytical calculation of juste retour on a programme-by-programme basis, and replace(d) it by the pursuit of an overall multi-programme/multi-year balance." It is equally interesting to find the Convention turning its face from the market as a force to rationalise European Defence industry by envisaging OCCAR as the means to "genuine industrial and technological complementarity in the relevant fields . . ."

  Article 6 pre-conditions what has hitherto been a purely competitive business by locking future programmes into developments undertaken by OCCAR. This is likely to present considerable difficulties; how would HM government or, specifically, the MoD resolve the failure of a European programme like SP70 under Article 6—what room would it have for independent action if development under OCCAR so removed the project from its national operational requirement that to proceed would be a criminal waste of money? There is a real risk that, regardless of the continuing relevance or suitability or cost of a project, the desire for a European solution will prolong its life. I must emphasise here that industry is constantly told that the "procurement tail should not wag the operational dog" and OCCAR most certainly should not be seen as the means by which European operational requirements can be harmonised. That, though, is exactly the problem. If OCCAR (the "procurement tail") is not to bring about a common operational purpose, what organisation will?

  Although I do not claim a close reading of the entire Convention, I can find no explicit mention of the transfer or ownership of Intellectual Property in OCCAR business nor can I find adequate provision for the distribution of sales outside OCCAR for equipments developed and manufactured under its aegis. Industries which will be invited to contribute their own IPR to an OCCAR project in development would need to be satisfied by the contractual links between development and production and the mechanisms to be used for external sales. The consideration of IPR and sales is vital to the successful engagement of industry which must be convinced that the management overheads of OCCAR are not amortised in such a way that the unit price of equipment going into production becomes internationally non-competitive.

  To return to your detailed points:

    —  We were not consulted before the Convention was made.

    —  See previous comment—the overall purpose of OCCAR is not clarified and the points about IPR and sales remain unresolved.

    —  Accountability is lost if the scrutiny moves away from the PAC and HCDC; there could be endless obfuscations of responsibility.

    —  The broader OCCAR becomes the less focussed and accountable it will become. It is an inevitable commonplace of commercial experience that the probability of resolving a problem decreases in proportion to the numbers of people offering solutions.

    —  The final point is moot. Creating the bureaucratic mechanism to deliver European collaboration in defence is not a problem and never has been. Although a Convention has not been used before, inter-governmental MOUs have established collaborative project officer and these have functioned effectively where the political will has united behind the project throughout the period of development (Tornado and EFA are examples). OCCAR will not save a project if the political will fails nor can it act in place of a WEU to encourage operational organisation and practice which is an absolute sine qua non to successful equipment collaboration.

  I would summarise by wondering what, exactly, it is that OCCAR is intended to do that hasn't been done before. It cannot hope to create a commercial environment which will condition sovereign industries into more "european" combinations—at least until most of the contributing nations (except the United Kingdom) have either denationalised their own defence industries or stopped the national subventions which keep many of them going. At the same time, it could not improve on the arrangements which have existed for some time to deliver collaborative projects—nor could it "save" a project if the political consensus for it began to break down. It could, though, deliver a large management overhead, loss of focus and breakdown in accountability.

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