2014 Global Defense Burden Essay Contest Third-Place Winner, Sponsored by Finmeccanica North America
Along with the entire government of the United States, its Navy is currently facing an unprecedented period of constrained budgets. These tight finances have been largely self-imposed by the Budget Control Act of 2011, followed by the sequestration and government shutdowns as the executive and legislative branches grapple with how to best close the gap in their spending deficit. Tight fiscal times have been experienced in the United States in the past, but the American people now show a new level of commitment by to find better approaches to cost-effective governance, especially in defense spending.
America’s NATO allies and their defense ministries face similarly strong political pressure to reduce their spending and find more cost-effective approaches to defense acquisition. My country, Denmark, in particular is contending with an extremely constrained fiscal environment, and the Royal Danish Navy has had to be very creative in our approach toward surface ship acquisition. The solution has focused on crafting new public-private partnerships that maximize the strengths of both the commercial and government sectors. We believe this method could be valuable for all of our NATO allies, and for all modern democracies committed to a collective defense of the global commons as it is articulated in the U.S. Navy’s Cooperative Strategy for 21st Century Seapower and in concepts such as the global maritime partnership, once known as the 1,000-ship navy. By building and extending our own national public-private partnerships into global networks of cooperation, we can greatly enhance the collective capability of likeminded nations to provide worldwide security at a greatly reduced cost to all.
How Public-Private Partnership Can Work
In the 1980s, the Royal Danish Navy faced a dilemma. Our single-purpose warships, mainly patrol vessels and minesweepers, were obsolete and needed replacement. Money was extremely tight, and it was obvious we were not going to have sufficient resources to meet the many possible mission requirements of a very uncertain future. As the famous New Zealand physicist Ernest Rutherford once said, “Gentlemen, we have run out of money. It's time to start thinking.” In other words, the situation required innovation.
Denmark has been a maritime nation since its inception more than 1,200 years ago, so the Royal Danish Navy decided to look first toward its own successful commercial brethren in the Danish maritime industry, including the A.P. Moller-Maersk Group and their shipbuilder, Odense Steel Shipbuilding. Inspired by the success of the modern shipping container, the Danish Acquisition Logistics Organization teamed with our commercial partners to create the “flexible navy concept.” This allowed a standard vessel platform to be configured for various missions and roles, using standard weapons and sensors modules that could be easily interchanged and shared across the fleet. These became known as the Stanflex system that allowed us reusability of systems taken off decommissioned ships and flexibility in choosing weapons and sensors for specific missions, while greatly enhancing our ability to rapidly upgrade and modernize.
From the start, there was a clear and honest commitment from the Royal Danish Navy and Odense that we would meet our budget schedule and the contract specifications without compromising our core values. We set our sights on the same reliability and low operating costs as those for the commercial ships that Odense built for Maersk. The key tools for our efforts were proven commercial components and a modular design all the way down to the use of readily available and off-the-shelf pumps and valves, common commercial tanks, and similar basic but reliable and well-proven equipment. Odense took these components and combined them with exceptional accuracy in construction using highly skilled labor, an advanced computer-aided design program, and state-of-the-art robotic systems to achieve unparalleled results in cost efficiency and timely delivery of the basic platform.
Once we had this, the Danish Acquisition Logistics Organization took over as the lead systems integrator working with our various combat systems providers to outfit the ship. The common interfaces that had been specified for the private companies providing the equipment greatly simplified the integration process, so much so that the Danish Acquisition Logistics Organization was able to do more than 60 percent of the actual hookup. This again greatly reduced our costs and led to fully outfitted frigates being delivered to the Royal Danish Navy at about a third of the price of similar NATO designs, while providing acceptable profitability to the shipbuilder and systems providers.
Required Principles for Globalized Defense Acquisition
Much can be learned from this example of a public-private partnership that brought one nation a very affordable class of warships. Many Western navies have become resigned to the high price tag of domestic ship construction, but this case proves that it is possible to deliver a very complex weapon system at reasonable cost, allowing sufficient numbers to meet a nation’s security needs without compromising military specifications or requirements. If we apply the same principles across the defense industrial complexes of many like-minded nations, we can share the burden to affordably achieve our national, regional and global security goals. The principles that will make full and best use of the global defense market include networked public-private partnerships that invest in human capital, common basic platforms, standardized and stable specifications, and a common commitment to affordability.
• Human capital: A highly skilled workforce on both sides of a public-private partnership, along with strong leadership, is essential to success. On the public side of the global defense market, governments must commit to investing in the education and training of their military and civilian personnel so that they can either do the work themselves or provide knowledgeable oversight of their private industry partners. This education and training must be kept current and combined with relevant and active on-the-job training and experience. Much can be outsourced to private industry, but an adequate core public workforce, empowered by authority and responsibility, must be sustained to provide accountability in oversight of the process. This authority and responsibility cannot be diluted across the multiple matrices found in many government organizations. There must be clear lines of accountability, along with commitment to the best value for the taxpayers’ investment.On the private industry side of the partnership, there is also great incentive to maintain a highly skilled workforce. Efficiently and effectively achieving specified quality standards reduces costs and in the end increases profitability. However, this principle must be fully applied to subcontractors as well, and contract specifications must clearly delineate that accountability resides with primary contractors.
• Platform commonality: As U.S. Navy Chief of Naval Operations Admiral Jonathan Greenert so eloquently articulated in his U.S. Naval Institute Proceedings article “Payloads over Platforms: Charting a New Course” (July 2012), we have entered a new age where we can no longer afford to invest in completely unique, single-purpose complex weapon systems that could quickly become obsolete because we cannot afford to modernize them rapidly and efficiently in the face of new emerging threats. We must learn from the private sector the advantages of a common platform in greatly reducing costs while stimulating innovation in the payload. Consider the ubiquitous mobile phones, cheaply mass-produced in many locations while a plethora of new and exciting applications are being developed by entrepreneurs around the world. If like-minded nations can commit to a similar common approach to platform designs, this will free their private industry partners to focus on achieving new levels of innovation in payloads that can be easily swapped out or upgraded.
• Standardization: Much has been written about the new globalized economy and the role of standardization in facilitating the movement of goods and services around the globe. The International Organization of Standardization (ISO) in particular has played a central role in this process. As examples, ISO 40- and 20-foot containers have transformed the global marketplace, leading to unprecedented levels of integration and efficiency in manufacturing processes across national borders. Many in Europe and the United States may see shipping containers as only a means to import a wave of cheap Asian products to their store shelves, but in fact these containers allow the movement of raw materials and subcomponents at many different levels between multiple disaggregated assembly points in the global supply chain. A product may have a “Made in Country X” label, but more than likely it was only assembled in that country, with components and subcomponents made and transported from many countries. This kind of standardization can also help us build defense articles more cost-effectively.
Along with common platforms, like-minded nations could agree to extend ISO standards to these platforms’ interface control documents that specify how the payloads connect to the platforms. These standards must also remain stable, because frequent changes in interface control documents often lead to interminable changes in the design and production of complex weapon systems that dramatically extend construction time and drive up costs. As in the Stanflex system, standardized and stable interfaces bring system reusability, mission flexibility, and ease of modernization, all at an affordable price.
Standardized and stable interfaces can allow the defense industrial base to focus on tailoring products in packages that fully account for International Trade in Armaments Regulations. When a weapon system is produced for a foreign customer, a common platform with standardized interfaces can allow the entire system to be easily tailored for compliance with International Trade in Armaments Regulations, while incorporating the appropriate level of complexity for that nation’s technical sophistication and its ability to contribute to regional and global security.Standard interfaces—physical as well as network—also can open the field of competition in national and global defense industrial bases. Given common platforms and standard interfaces, the integration process can be simplified for a larger number of players and expand the number of new startups and entrepreneurs entering the market.
• Networks of Cooperation: To fully leverage the power of a globalized defense market and apply the required principles of effective public-private partnerships worldwide, like-minded nations that endorse the basic precepts of fostering global security must agree to join in formal and informal networks of cooperation and coordination. Public-private partnerships at the national level need to expand beyond their borders, working within regional security agreements or alliances and expanding globally within coalitions when possible. Certainly efforts to standardize within the NATO alliance have been significant, as witnessed by the plethora of NATO Standard Agreements for common procedures and equipment that are essential for interoperability. However, efforts to standardize major weapons platforms such as the NATO Frigate Replacement for the Nineties (NFR-90) have been disappointing, and the follow-on Horizon and Trilateral Frigate Cooperation have only been moderately successful.
Such efforts need to continue, but they must focus on common interfaces, not on which individual national weapons programs to include in the design. With standard interfaces and excess power, cooling, weight, and volume margins in the basic common platform, each nation can be free to include its own choices while achieving savings through economies of scale. The same public-private principles that could guide NATO can be embraced by the European Union, the Association of South East Asian Nations, the Union of South American Nations, and a host of other regional security organization to rationalize their national and regional security requirements.
Many may say this is all too hard. The difficulties in achieving affordable national defense are legion, and they are infinitely more complex when moving beyond national boundaries. However, many also see the possibilities of working together to lighten the burden on individual nations. Admiral Greenert and Rear Admiral Jamie Foggo recently wrote in their compelling Proceedings article “Forging a Global Network of Navies” (May 2014) of meeting increasing maritime threats in an uncertain future. If we want to think of global partnerships and how we could greatly facilitate their interoperability, surely we must consider the value of common platforms with similar capabilities. Investment in human capital, common platforms, and standard and stable interfaces can be expanded exponentially through the power of networks of cooperation to achieve an affordable global security.
As Technical Director of the Danish Navy, Captain (N) Christensen is responsible for all naval ships, weapons, and sensor systems, including all naval programs and projects. His previous assignments included serving as Commodore and Commander of Task Force 150 under U.S. Fifth Fleet command. For more than 15 years he has transferred his operational knowledge to the evolution of the Danish Navy, acting in different roles for the procurement organization.