Memorandum submitted by the Defence Industries
Council on OCCAR (4 October 1999)
OCCAR
The Committee invited industry to comment on
the Convention to establish OCCAR which was presented to Parliament
on 18 June. This memorandum expresses views on behalf of the Defence
Industries Council and addresses the questions which the Committee
posed specifically in its request as well as some other issues
which the DIC believes to be relevant.
HAS OCCAR BEEN
FUNCTIONING SUCCESSFULLY
SO FAR?
The work which OCCAR is able to take on, without
having legal status, is limited to the management of some existing
projects, mainly Franco-German programmes. So far as the DIC is
aware, there has been no significant UK industrial involvement.
There is also little evidence of change in those programmes as
a result of OCCAR's management. There would seem therefore to
be no meaningful track record on which to base any assessment
of OCCAR's performance to date. However, there is a concern on
the part of UK industry that on the basis of existing programmes,
there is no sign of efficiency gains through the dismantling of
national project managements. From industry's viewpoint, if the
national governments allow OCCAR management to be imposed on top
of the existing national project offices then administrative overheads
will increase rather than be reduced. To its credit, the UK MoD
has made it clear on a number of occasions that it has no intention
of putting projects under OCCAR management and also retaining
UK national project management offices. Industry strongly supports
this attitude.
WAS THE
DIC CONSULTED BEFORE
THE CONVENTION
WAS MADE?
The UK MoD asked the DIC to provide comments
on a draft of the Convention in July 1998. Comments were provided
later that month from DIC and several companies.
DOES THE
CONVENTION OMIT
OR INCLUDE
ANY PROVISIONS
LIKELY TO
HELP OR
HINDER THE
DEVELOPMENT OF
EUROPEAN COLLABORATION
IN DEFENCE
PROCUREMENT?
Industry has taken the view that the creation
of effective armaments co-operation between France, Germany, Italy
and the UK, as proposed in the preamble to the Convention by the
four nations, would be of significant benefit to the development
of European collaboration in defence procurement, and, potentially,
to the restructuring of the European industry. It was on this
basis that industry supported the Secretary of State's signature
of the Convention at Farnborough in 1998.
Whether significant benefit is realised will
depend, in particular, on the success of OCCAR in implementing
the principles set out in Chapter II Article 5 (renouncing "juste
retour"), and in Chapter VI on procurement principles. These
principles look forward to much more open and competitive defence
procurement, particularly for sub-contractors, than exists in
most of Europe currently, and HMG deserves credit for having ensured
that the Convention incorporates such provisions.
The commitment to replace "juste retour"
is welcome. Industry is concerned, however, as to whether the
proposed replacement, a multi-programme/multi-year balance, will
prove feasible. UK industry believes that only by picking the
best available supplier will efficient procurement and a competitive
European industry develop.
As regards Chapter VI, the UK MoD has recently
undertaken a major review of its procurement principles and practices
and is in the process of reforming them under the banner of the
Smart Procurement Initiative. Other European governments have
also been undertaking reforms and it would be misleading to suggest
that the UK is the repository of all wisdom on procurement, but
there is a danger that the need for four governments to agree
on the procurement rules will lead to the lowest common denominator,
rather than best practice. UK industry believes it is essential
that OCCAR procurement is benchmarked against the highest international
standards. Industry is concerned that practice will live up to
the promise of Article 24, paragraph 5 of the Convention, and
discussions held with OCCAR staff to date have not removed this
pessimistic view.
As far as omissions are concerned the UK industry
would like to have seen the Convention include a formal commitment
to dialogue with industry on the development of OCCAR's procurement
policies. Such a dialogue has been a successful aspect of MoD's
Smart Procurement Initiative, and industry believes OCCAR would
benefit from a similar approach. The absence of such a provision
questions the extent to which the four governments wish to see
the development of a genuinely European dialogue on procurement,
as opposed to one driven by national concerns and controlled by
national governments. If this approach is carried through to the
management of projects, and OCCAR is not allowed to take decisions
based on the best interests of the project as a whole, then the
potential benefit of a multi-national agency will not be realised.
WILL THE
PROPOSED STRUCTURE
AND LEGAL
BASIS OF
OCCAR PROVIDE SUFFICIENT
GUARANTEES OF
ACCOUNTABILITY?
Industry has no way of judging the effectiveness
of the accountability mechanisms contained in the Convention,
in particular how well the arrangements to involve national accounting
bodies, such as the National Audit Office in the UK, will work
in practice. Much will depend on the approach of the national
governments which are parties to the Convention and the operation
of the Board of Supervisors they have put in place. Industry would
like to see very clear lines of responsibility for projects, of
the kind MoD is seeking to introduce by empowering Integrated
Project Team leaders. Industry would also like to be assured that
governments are prepared to make visible their full commitment
to projects being run by OCCAR ie that a company signing a contract
with OCCAR can be assured that the governments will fully fund
the programme concerned and will not allow political factors to
interfere with its progress.
SHOULD THE
MEMBERSHIP OF
OCCAR BE BROADENED?
Industry understands that arrangements for the
Netherlands to join OCCAR are well advanced: their involvement
is welcome. More generally, industry would encourage the current
OCCAR member countries to accept other European countries as members
once OCCAR has demonstrated its effectiveness and value added
through managing projects well by international standards, and
by showing accompanying efficiency savings can be achieved at
the national level. Until these advantages can be shown there
would seem to be some risks in broadening the membership.
IN THE
LIGHT OF
THE PROPOSALS
TO MERGE
THE WEU INTO
THE EU, AND
THE CONSEQUENT
LOSS OF
THE WEU'S
CO-ORDINATING
ROLE AND
FUNCTION IN
PAVING THE
WAY TOWARDS
A EUROPEAN
ARMAMENTS AGENCY,
DOES THE
PROPOSED STRUCTURE
OF OCCAR REPRESENT
A SENSIBLE
APPROACH TO
THE RATIONALISATION
OF EUROPEAN
COLLABORATION ON
DEFENCE PROCUREMENT?
OCCAR's potential value is as a mechanism to
implement a more unified European armaments policy. It is only
likely to be successful if the European governments develop a
wider framework of co-operation. Industry is not best placed to
propose what institutions are needed to implement such a framework,
but it is concerned that there should be positive steps towards
a simpler and more comprehensible structure which engages industry
in the development of its policies. An agreed, effective strategy
to produce this structure still seems to be lacking. Six European
governments have responded to industry's concerns that further
policy changes are needed to develop the European defence market
by launching the Letter of Intent process, which is intended to
develop policy in six areas which have been identified as critical
to industrial restructuring. Industry fully supports this process,
but remains to be convinced that it will lead to fundamental changes
in the way collaboration in Europe is developing, and the process
of industrial restructuring.
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