Harmonisation of Military Requirements
28. In our 1998 Report on aspects of defence procurement
and industrial policy we concluded that
... improvements to the demand
side of the market, including harmonisation of operational requirements,
were lagging too far behind moves to rationalise the industry
(ie the supply side). Industry will be more ready to rationalise
if it perceives that markets are open not just to 'national champions'.
Most of the provisions of the Framework Agreement
are concerned with freeing up the supply side of the defence equipment
market, but Article 45 sets out a range of measures directed towards
rationalisation of the demand side of the defence equipment equation.
Its aim is to encourage the signatories to generate common equipment
requirements'an essential prerequisite to better equipment
It envisages the creation of a 'master-plan' of future operational
needs to facilitate earlier collaborative planning of equipment
programmes to meet those requirements.
29. Many of the parties to the Agreement are already
involved in collaborative programmes, but these mainly arise after
equipment requirements have become relatively firm. The MoD told
us that a key aim of the Framework Agreement will be to start
the process earlier through co-operative equipment planning, and
to identify and formulate common military requirements rather
than to attempt to harmonise already mature 'national' requirements.
The MoD explained that there would be two distinct stages in seeking
to harmonise military requirements. First, the aim would be to
share information on equipment planning assumptionsthe
tentative requirements which are generated before being developed
into firm commitments.
This in itself will be a challenge, as the parties have different
planning cycles, and have sometimes been reluctant to share information.
The second, and probably more critical step, will be to produce
harmonised requirements which could be used for requesting proposals
30. The Framework Agreement envisages a separate
organisation to manage the harmonisation of capability requirements.
This is not the first such European initiative. Indeed, the UK
MoD, who will be taking the lead in defining the structure and
the level of detail for the requirements 'database', told us that
its work will be augmented by features drawn from WEU and NATO
A prospective 'European Armaments Agency' (long the subject of
discussion in the WEU) appears to be one of the candidates for
the body now envisaged. The MoD told us that much work remains
to be done before the EAA concept could be implemented, and the
size and diversity of its potential membership raises questions
about its applicability to the Framework Agreement. The MoD favoured
the OCCAR route.
If OCCAR were given the role, arrangements would be required to
allow participation by non-members, or expansion of OCCAR to include
all parties to the Framework Agreement
(at present Spain and Sweden are parties to the Agreement but
not to OCCAR, although the former has now been invited to join
once the A400M aircraft is taken under OCCAR's wing).
More fundamentally, while OCCAR is designed to tackle some of
the major impediments found in past collaborative procurement
it may not be best suited for the central role in harmonising
OCCAR ...has a lot to be
said for it in terms of a European solution, when that is the
solution that has been chosen. A lot of the things which have
made European collaborative projects difficult in the past are
to do with things like very long chains of management for the
project, large project boards which are made up of participants
of all the participating nations, collective rather than individual
responsibility, ... work share issues like that which
make it very slow, very cumbersome to manage [collaborative] projects
... [but] OCCAR is first and foremost an acquisition organisation,
so it is not developing the requirement. It is, if you like, acquiring
the solution for the requirement. Realistically, of course, it
will be involved because in any procurement project requirement
management is a very, very important part of the procurement process.
31. We share the Defence Industries Council's
concern about the risk of duplication and overlap if the Framework
Agreement results in the creation of any new bodies in this already
overcrowded world of European defence requirements harmonisation.
OCCAR appears to be a promising candidate to take on the harmonisation
role, but if it were used care would be needed to insulate its
existing procurement programmes from the inevitably
complex and difficult negotiations that there would be to secure
common requirements for new capabilities. It would be regrettable
if the momentum now achieved for OCCAR in its existing role
were lost because it was required to assume additional new roles.
32. The Preamble of the Agreement envisages the sought-after
competitive and robust industrial base 'contributing to the construction
of a common European security and defence policy'. The DIC sees
in such an aim a risk that the 'fairly simple objectives' of the
initial 1997 six-nation initiative will become part of a more
'complicated political scene', and that as a result the current
initiative might be vulnerable to further delay.
The DMA expressed their concern that the Preamble's wording might
be an indication of a neglect of other collaborative avenues in
NATO and with the US.
Others from industry also expressed general scepticism about the
feasibility of harmonising requirements.
33. We too are sceptical about the Framework Agreement
giving the necessary impetus for harmonising military requirements,
when other initiatives in this area have not been particularly
successful. To minimise the risk that seeking to harmonise military
requirements could prove over-ambitious, and jeopardise the implementation
of the other aspects of the Framework Agreement, caution is needed
in developing this aspect of the Agreement alongside work on its
other themes. The UK must ensure that equipment requirements are
not contrived to support particular national industries rather
than to meet genuine military requirements. Nevertheless,
as we said in our 1998 Report, it does make sense to lower the
barriers to a more efficient defence market by tackling both the
demand side of the equation as well as the supply side. The currently
envisaged effort to harmonise requirements may in the end prove
more successful because restructuring of the industrial and technological
base (on the supply side) could itself play an important part
in encouraging defence ministries to address and define their
(demand side) equipment requirements much more carefully.
Having transnational companies may remove much of the inclination
to define equipment requirements to favour 'national champions'.
Initiatives with the US
34. While the Framework Agreement was being formulated,
the UK had also been involved in similar initiatives with the
US. Since May 2000, the two countries have been developing a bi-lateral
'Defence Trade Security Initiative', for example, aimed at loosening
up the procedures for US exports to the UK (once the US authorities
are satisfied with UK controls on export licensing and industrial
There have been reports that it had encountered some difficulties,
although many of these now appear closer to resolution.
In February 2000, the US and UK Defence Secretaries also signed
a 'Declaration of Principles', which is deliberately couched in
terms very similar to those of the Framework Agreement.
Like the Framework Agreement, the Declaration of Principles represents
a structure for more definitive agreements to be negotiated subsequently.
- Harmonisation of military
- Meeting National Defence
effectively dealing with security of supply issues. However, the
provisions are rather more cautiously phrased than the Framework
Agreement 'The participants recognise the potential
for a degree of interdependence of supplies, ... solutions
may include obtaining assurances, some of which may
be legally binding.'
- Export procedures,
seeking the 'greater transparency and efficiency' of US and UK
export procedures, and simplified transfers between them of equipment
for their own use. Very much like the Framework Agreement, the
Declaration envisages 'mutually agreed lists of acceptable export
destinations for jointly-developed and produced military goods
... on a project-by-project basis'.
dealing with protecting classified information by the US or UK
companies (or multinational companies sited in the UK or US).
- Ownership and Corporate
This stipulates that UK companies operating in the US are to be
treated no less favourably than US firms doing business in the
UK. The Declaration
also commits the two countries 'not to place unreasonable or unnecessary
security restrictions on corporate governance'
long an area of complaint by UK firms, who have had to
set up separate US boards of directors with American citizens.
- Research and Development,
which seeks information exchange and harmonised research and development
- Technical Information,
which seeks the removal of 'unnecessary controls on the flow of
technology and technical information'.
- Promoting Defence
which seeks to reduce protectionist procedures and rules. Each
country would 'give full consideration to all qualified sources
in each other's country' in meeting their national requirements.
35. The Declaration of Principles charged its working
groups with developing the necessary measures, and reporting back
to the two Defence Secretaries 'within a year' (by February 2001).
In the meantime, its status is similar to the six nations' Letter
of Intent as it stood in 1998.
If finalised in its current form, however, it may have implications
for the MoD in co-ordinating its approach to its dealings with
Europe and with the US.
The US authorities have not raised objections to the UK's involvement
in the Framework Agreement
and it seems to us that their continued acceptance will hinge
on the UK's continued protection of US technology.
From the UK's perspective, we see much merit in the MoD's approach
of establishing parallel arrangements along the lines of the Framework
Agreement both with our European partners and with the US. In
the end, it may be our European partners who will have more difficulty
accommodating the UK's bi-polar approach to defence collaboration.
73 Cm 4895, Article 28.1 Back
4895, Article 28.4 Back
p2, para10 Back
76 ibid Back
p7, para A12 Back
4895, Article 32 Back
p7, para A12 Back
80 ibid Back
81 Q56 Back
p7, para A12 Back
Conjointe de Cooperation en matière d'Armement Back
4895, Article 33 Back
p7, paras A12 and A13.1-2 Back
juste retour, contracts were allocated to countries in
direct proportion to the number of pieces of equipment each would
4895, Article 34 Back
Report, Session 1999-2000, The OCCAR Convention, HC 69,
para 8 Back
p7, para A13 Back
4895, Article 33 Back
91 Q73 Back
92 Q62 Back
Defence Weekly, 6 September
94 Q59 Back
p6, para A9.2 Back
p2, para 11 Back
4895, Article 37.2 Back
4895, Article 38.2; Ev p3, para A2.1 Back
MoD had emphasised that 'each party should treat the defence industries
of the other Parties as it treats its own industry when considering
the release of Government owned technical information (this was
achieved by Article 37.2)', and that 'ownership of technical information
would be retained by industry and the sequestration of that information
by government would not be a condition of restructuring approval
(this was achieved by Article 38.1)' (Ev p4, para A2.2). Back
4895, Articles 39, 44 Back
102 Q78 Back
4895, Article 42 Back
p2, para A1.1 Back
p38, para 22 Back
p38. Vickers had similar concerns about the safeguarding of industry's
intellectual property (EU p49). Back
p4, para A2.2. Back
p6, para A10.1 Back
Report, Session 1997-98, op cit, para 67 Back
p2, para12 Back
4895, Articles 46.1, 47.1; and Ev p8, para A14 Back
p2, para12 Back
114 Q96 Back
115 QQ96-97 Back
4895, Article 48.2 Back
p8, paraA14 Back
p7, para A11 Back
119 ibid Back
press notice 21/01, 29 January 2001 Back
121 Q90 Back
122 Q89-90 Back
p36, para 9 Back
ratification of the OCCAR Convention treaty, it gained legal status
on 28 January 2001. Back
p35, para 5 Back
eg Perkins Engines (Ev p41) and Vickers Defence Systems (Ev p48) Back
128 Q88 Back
eg Ev p34, para 32 Back
it has been reported, of US insistence that UK rules should prohibit
exports of US-sourced items without US prior approval. Back
Contracts Bulletin, 31 January 2001, p.15 Back
p51, Annex Back
134 ibid Back
136 ibid Back
137 ibid Back
138 ibid Back
p51, Annex Back
141 ibid Back
142 ibid Back
143 ibid Back
144 ibid Back
145 Q113 Back
p36, para 10 Back
147 Q118 Back
148 Q113 Back