Select Committee on Defence Appendices to the Minutes of Evidence

Memorandum submitted by Racal Electronics plc on OCCAR


  COBRA (Counter Battery Radar) is the main project through which Racal has direct involvement in OCCAR. The experience to date, on which to make a meaningful judgement of the success, or otherwise, of OCCAR is somewhat limited, due to the relatively recent transfer of the COBRA project to OCCAR—only some eight months ago. Despite transfer to OCCAR, the formal contractual relationship remains between EuroArt (the joint venture company, in which Racal is a shareholder) as the prime contractor for COBRA and BWB (the German Procurement Agency).

  To date the transfer from the tri-national Project Office to a single Project Director in OCCAR has had little impact on the way the project is run. Decisions are still dependent on a consensus amongst the three participating nations and no real decisions are taken without their consent.

  During the period since the transfer of COBRA to OCCAR, the most noticeable change has been the growth in the size of national contingents being sent to the regular project meetings. This may, of course, be purely coincidental.


  We are now aware of any consultation prior to the Convention being made. The COBRA project was already well advanced by that time and was transferred to OCCAR some time after the launch of the Convention.


  We fully recognise the potential benefits of OCCAR from a Government procurement perspective. Taking a narrow view of OCCAR as being only a management body for collaborative programmes then there is little scope for hindrance and, perhaps, some potential for help.

  If, however, OCCAR procedures for project approval, contracting and funding become onerous then these could jeopardise the formation of European teamings. Indeed, it is possible to envisage the situation in which the designation of a new programme within OCCAR could be a serious hindrance to the formation of a European team. On the other hand it could, perhaps, be argued that had the Common New Generation Frigate project been designated as an OCCAR programme, at its inception, considerable time and effort might have been saved, producing a different end result.

  In the long run the real test will be the willingness of the participating nations to genuinely empower OCCAR to manage collaborative programmes and their ability to reconcile national procurement policies with the move towards true competitive tendering independent of the national financial contribution to the project.

  At present, the extent to which the UK Smart Procurement Initiative can be reconciled with the interests of other Member States in supporting their national industries must be questioned.

  Whilst OCCAR may succeed in its aim of furthering European collaboration it will be important to ensure that programmes with this designation are not disadvantaged when seeking to sell to non-OCCAR states. Such a penalty could easily outweight any of the perceived benefits of participation in designated projects.

  Aside from the Convention, European collaboration is increasing as a result of the consolidation of the European, and world, defence industry. Mergers/acquisitions, teamings and joint ventures are becoming commonplace in order to provide complementary skills, reduce escalating research and development costs and, in many cases, give access to wider geographic markets. In this context, OCCAR may have a part to play in influencing the constituent make-up of such industrial ventures, however wider commercial issues are likely to figure more prominently. In the medium to long run it may well be that the rationalisation of the defence industry makes OCCAR redundant, as the only competent contractors with sufficient resources to develop the major projects become trans or multi-national enterprises.


  In general, it may be expected that OCCAR will remain toothless until it has formal legal status. As it is to be accountable to the Member States the roles Board of Supervisors and the Executive Administration appear to provide the required safeguards and degree of accountability.


  Whilst membership is restricted to the present four members this, in effect, precludes multi-national programmes in which other nations are involved. The fact that, we believe, there have been expressions of interests for some such projects to be designated as OCCAR programmes could be taken as a demonstration of the apparent attractiveness of the Convention to other non-Member States. In broadening the membership it will be important to ensure that this does not result in ever more delay and attempted preservation of national interest. One might question the extent to which national interest has been a motivating factor in the expressions of interest already received.


  Many of the WEU collaborative armament programme issues addressed through WEAG were small projects, firmly rooted in the principle of work share equals cost share. There do not appear to be any obvious benefits of incorporating this type of small project into OCCAR and such a move would probably result in widening membership to the whole of the WEAG—14 in total.

  At this stage, until OCCAR has a formal legal status and had the time in which to demonstrate its effectiveness, it would be premature to view it as the panacea for all collaborative projects. There is considerable sense in vesting control of major programmes in OCCAR in order to assess its ability to deliver the benefits of improved efficiency and cost reduction as set out in the Convention. The transfer of a multitude of smaller projects to OCCAR, and the consequent significant widening of membership, would have the potential to produce more complications than benefits. Without experience of OCCAR working with a fully endorsed legal status, there is no compelling reason to change the conventions and principles under which such "minor" programmes are presently managed by transferring them to a new organisation which operates with very different terms of reference.

  Whilst, in principle, OCCAR is a sensible solution to meeting the needs of the Member States to achieve affordable procurement of complex major programmes its eventual effectiveness will be determined by significant factors outside of its control, but within the control of the Member States. OCCAR will only become truly effective when the Member States recognise the need to have a common requirement for defence systems. This could imply a European solution to defence needs as opposed to the existing individual national requirements, the rights to which are protected in the Treaty of Rome. Many past and present European multi-national defence projects have encountered difficulties due to differing requirements by the participating states in terms of timescale, role, performance, cost etc. Until such conflicts of interest are resolved it is difficult to see how OCCAR will be able to demonstrate fully its ability to deliver the benefits envisaged at the outset. Only then will it be possible to judge its suitability to become the preferred vehicle for the rationalisation of European procurement.

  As previously indicated, this political initiative to rationalise procurement may well be overtaken by the growing commercial pressures for cross-border rationalisation of the defence industry.

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Prepared 6 December 1999