Procurement is an integral part of the acquisition process. Procurement refers to the phase during which governments purchase goods and services from external suppliers. Procurement is the technical process of identifying requirements and then procuring relevant services and equipment.[1]
What is Procurement?
Procurement is part of both the process of acquiring new defence and security capabilities and the process of maintaining existing capabilities.[2] In terms of equipment, this includes items intended for military use only, such as weapons systems and ammunition, as well as general commodities, such as food and other supplies. Services refer to all tasks, once performed by the military, such as logistical support, that are now contracted out to external sources.[3]
Why is it important?
Procurement, as one of the final stages of acquisition process, involves the act of exchanging financial resources for equipment and services which, most of the time, implies handling large sums of money. At this point of the process it becomes ever more important that tasks are carried out with integrity so that the final result corresponds to the projected outcomes and scarce public resources are not mismanaged. Building integrity measures must be applied at the organisational, procedural and individual scales of procurement and acquisition. Additionally, oversight and monitoring should be exercised throughout the entire process of acquisition, which must end with an evaluation of the outcomes.
How does it work?
Defence and security procurement is similar to any other type of government procurement: needs are assessed, competitive bids are issued, options are evaluated and a choice of suppliers is made.[4] However, some aspects of defence procurement are quite unique. For instance, as Tom McGuffog points out, true success in defence procurement may be measured by never having to use the most costly items of equipment in war, such as nuclear weapons. Additionally, defence equipment often takes a long time to develop and introduce into service, and then must cope with an ever-changing security environment for decades thereafter.[5] Therefore, long-term planning is required which should take into account the entire life-cost of the project, including development, testing, production and maintenance. Even so, it can be hard to predict costs and success of the project. New weapons systems often involve modern technologies, that require a high rate of investment and, as costs escalate, there is less of a margin for solving problems that arise in the long-term.[6]
Defence procurement and planning in general, have the added difficulty of balancing secrecy regarding technical and operational issues and transparency required for effective oversight and accountability. Furthermore, international environment, its laws, and arms control regulations must be taken into consideration as decisions about weapon systems may raise security concerns in other states.[7]
In order to prevent corruption in procurement, among other things, the following questions should be asked:[8]
- Are operational requirements based on real operational needs?
- Are technical requirements accurate and objective?
- Is the volume of purchased goods justified by real needs?
- Are unplanned purchases justified by urgent needs?
- Is single-source procurement justified?
- Are the evaluation criteria accurate and objective?
- Are conflicts of interest avoided?
- Are there proper quality assurance tests?
- Is the contract accurate and does it respect the MoD’s rights?
- Is the implementation of contract correct and any changes justified?[9]
In order to guarantee transparency in procurement there must be:[10]
- Publicly available and highly visible policy documents that provide clear, consistent and credible guidelines.
- Advanced notification of potential suppliers on forthcoming acquisitions and anticipated requirements.
- Open and competitive bidding is essential.
- The use of life-cycle costs is encouraged. A life-cycle cost perspective looks at the total life-cycle cost of a project, not just the initial procurement cost.[11]
- Rigorous risk assessment and transparent risk management are necessary.
A framework for enhancing integrity in procurement is provided by the international standard ISO 15288.[12] Procurement must be based on procedures of fairness, impartiality, transparency, efficiency and open competition.
Who is involved?
The armed forces, in consultation with the MoD, assess their capabilities and procurement needs; the armed forces also assist the executive with budget proposals and directly handle the procurement of small items and services.
The Ministry of Defence, with the help of the military and other executive bodies, prepares budgets and procurement proposals, negotiates with domestic and foreign actors, grants arms-production licences when required, handles tender processes, and produces annual reports. These tasks usually require the existence of a special unit focused on procurement.
National defence industries participate in procurement by producing military and security-related equipment. Academic and research institutions participate by means of R&D on new technologies. Civil society and the media scrutinise, monitor, and oversee procurement. Whistle-blowers and whistle blower protection mechanisms ensure that corruption is curbed. Foreign suppliers participate by providing goods and services that cannot be covered by national providers. International organisations, alliances, and other bilateral and multilateral engagements participate by imposing standards, rules, and regulations on their affiliates through membership and other mechanisms.
Resources
Centre for Integrity in the Defence Sector (2015) Guides to Good Governance. Professionalism and integrity in the public service.
Centre for Integrity in the Defence Sector. Criteria for good governance in the defence sector. International standards and principles
DCAF (2015) Parliamentary Brief: Building Integrity in Defence.
DCAF (2008) National Security Policy, Backgrounder. See new series here.
DCAF (2006) Parliament’s Role in Defence Budgeting. DCAF Backgrounder. See new series here.
DCAF (2006) Parliament’s Role in Defence Procurement. Backgrounder. See new series here.
Hari Bucur-Marcu, Philipp Fluri, Todor Tagarev (eds.) Defence Management: An Introduction. Security and Defence Management Series No. 1. DCAF (2009).
ISO/IEC/IEEE 15288:2015. Available here.
McGuffog Tom (2011), “Improving value and certainty in defence procurement”, Public Money & Management, 31:6, 427-432
McConville Teri, Holmes Richard (eds.), Defence Management in Uncertain Times. Cranfield Defence Management Series Number 3. Routledge 2011.
NATO-DCAF, (2010). Building Integrity and Reducing Corruption in Defence. A Compendium of Best Practices.
OECD (2002) Best Practices for Budget Transparency.
Transparency International (2010), Policy Position 01: Whistleblowing: an effective tool in the fight against corruption.
Transparency International (2011). Building Integrity and Countering Corruption In Defence and Security. 20 Practical Reforms.
Tysseland E. Bernt, “Life cycle cost based procurement decisions. A case study of Norwegian Defence Procurement projects” International Journal of Project Management, 26, 2008. 366-375.
US Naval War College, Commander Raymond E Sullivan Jr., (ed) Resource Allocation: The formal process. July 2002.
[1] Anthony Lawrence in Hari Bucur-Marcu, Philipp Fluri, Todor Tagarev (eds.) Defence Management: An Introduction. Security and Defence Management Series No1. DCAF (2009)
[2] “Defence Procurement” in NATO-DCAF, (2010). Building Integrity and Reducing Corruption in Defence. A Compendium of Best Practices. p 72.
[3] DCAF (2006) Parliament’s Role in Defence Procurement. Backgrounder. See new series here.
[4] DCAF Backgrounder, Parliament’s Role in defence procurement. 2006. See new series here.
[5] McGuffog Tom (2011), “Improving value and certainty in defence procurement”, Public Money & Management, 31:6, 427-432. Available here.
[6] DCAF (2006) Parliament’s Role in Defence Procurement. Backgrounder. See new series here.
[7] Ibid.
[8] For more questions see: Centre for Integrity in the Defence Sector, Criteria for Good Governance in the Defence Sector. International standards and principles, 2015, p. 41.
[9] “Defence Procurement” in NATO-DCAF, (2010). Building Integrity and Reducing Corruption in Defence. A Compendium of Best Practices. p75.
[10] Ibid. p 76-77.
[11] Tysseland E. Bernt, “Life cycle cost based procurement decisions. A case study of Norwegian Defence Procurement projects” International Journal of Project Management, 26, 2008. 366-375.