Estimating the benefits of managing collaborative armament programmes

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1 Eric Huybrechts OCCAR-EA Deputy Director Estimating the benefits of managing collaborative armament programmes SCAF Workshop Preston, UK, 07/06/11

2 Plan Cooperation: a must Estimating the benefits Conditions OCCAR = best option 2

3 Armaments cooperation: a must US >< EU budgets Crisis Spend together = spend better Benefits 3

4 Benefits of European Armaments Co-operation Economic Benefits: In general: affordability Economies of scale in all phases Sharing R&T costs Sharing development costs Sharing in-service support and upgrade costs Technical Benefits Access to higher level technology (not able to reach on national basis) 4

5 Benefits of European Armaments Co-operation Industrial Benefits Preserve or improve the defence technological and industrial base Influence industrial restructuring Military Operational Benefits Enhance interoperability and standardisation Reduce logistic footprint in operations 5

6 Benefits of European Armaments Co-operation Benefits Reduce overall management overhead Sharing / exchange of knowledge and best practice over long(er) period(s) and between programmes managed by the same organisation, building up excellence International Armaments Organisation: flexibility Political Benefits Strengthening security relationships Enhance the Common Security and Defence Policy 6

7 Reproaches made to Collaborative Programmes Collaborative Defence procurement is: Unnecessarily complex A waste of time and money Unable to deliver the required capability On time On cost And therefore should be avoided as much as possible 7

8 Assessment of these Reproaches Programme Delays: Delay for launching the programme: Setting-up programme arrangements; Harmonising requirements & delivery schedules; Slow decision-making process (differing national procurement procedures) Indeed longer than for National programmes, but Delay during development, production Comparable or better than national programmes for similar equipment Conclusion: Slippage more related to technical complexity than to collaborative approach of the programme 8

9 Assessment of these Reproaches Cost efficiency: Nb Nations Tot R&D Nat Part R&D cost Cost R&D (codev) = Cost R&D (nat) number pn Development cost Inefficient harmonised requirements -> more complex system 1 1 Mio 1 Mio Mio 0.71 Mio 3 1,73 Mio 0.58 Mio 4 2 Mio 0,50 Mio 5 2,24 Mio 0,45 Mio Production cost Economy of scale: 1% raise of quantity generates 0.86% total cost raise Thus generating lesser unit cost Conclusion: Collaborative programmes can provide cost efficiency but. Nb Nations National Quota ( ) Unit Cost ( ) Total Cost ( )

10 Assessment of these Reproaches Often: Collaborative programmes very complex weapon systems Harmonisation = simple addition of National requirements Are compared with National programmes less complex weapon systems National requirements = sufficient minimum to optimise budget Result: Unrealistic expectations concerning capabilities Conclusion: Collaborative programmes can provide needed capabilities but realism is necessary 10

11 Conditions for optimising the benefits Harmonisation Military Operational Requirements (80% solution)/certain degree of Flexibility Clear baseline set (No modification later on in the programme) Maximise Common System configuration (NO National versions) Sufficient high TRL (Technology readiness level) Common timescales for the programme Insist to maintain harmonisation between Nations, but also internally within Nations between services (procurement Log Ops) and levels (BoS Committees PB PC PWG) over time Rational arguments only (emotional arguments lead to higher cost). Be conscious that adding other (political) constraints lead to higher cost 11

12 Conditions for optimising the benefits Through Life Approach MoU + Programme Decision covering at least Development, Production and Common in-service support Definition of Common support strategy very early in the programme life TLMP starting in the preliminary phases Use LCC at each decision point Sufficient Empowerment of International Programme Organisation Reducing of National overheads Simplify decision-making process no µ-management Lean & Mean Organisation (no duplication, staff selection through competition, no flagging) Leave room for flexibility to play 12

13 Conditions for optimising the benefits Integrated Business Framework, Programme best practices Abandon Juste Retour Cost-efficiency and industrial arguments only basis for industrial repartition of work Avoid duplication of production chains consolidated IB Strong Prime Contractor Complementary industrial partners (no competitors club) 13

14 OCCAR OCCAR is an international organisation for the management of collaborative defence equipment programmes OCCAR was created through a Convention, equivalent to an international treaty. Current Member States are: OCCAR-EA is the executive administration of OCCAR 14

15 OCCAR History Dec 93 Dec 95 Feb 96 Jul 96 Nov 96 Jul 97 Sep 98 Jan 01 May 03 Jan 05 Franco-German Declaration Principles of Baden-Baden Franco-German precursor team UK and Italy join precursor team Administrative Arrangement creates OCCAR Early staffing of Central Office Signature of Convention OCCAR Legal Status Accession of Belgium Accession of Spain 15

16 OCCAR Principles Cost-effectiveness Harmonisation (of requirements, methods, technology) Competitive industrial base Renunciation of "Juste Retour (global balance) Open to other European countries 16

OCCAR Convention The OCCAR Convention aims at: Improving efficiency and reduce costs of armaments cooperation; Developing new programme management methods; Making procedures for the granting of

17 OCCAR Convention The OCCAR Convention aims at: Improving efficiency and reduce costs of armaments cooperation; Developing new programme management methods; Making procedures for the granting of contracts more effective; Encouraging the creation of transnational and integrated industrial prime contractors; Co-ordinating long term requirements, as well as a common technology investment programme, based on the principles of complementarity, reciprocity and balance; Improving competitiveness of the European defence technological and industrial base; Contributing to a European security and defence identity. 17

OCCAR-EA Mission, Vision and Values Our mission To facilitate and manage collaborative European armament Programmes through their life cycle and Technology Demonstrator Programmes to the satisfaction

18 OCCAR-EA Mission, Vision and Values Our mission To facilitate and manage collaborative European armament Programmes through their life cycle and Technology Demonstrator Programmes to the satisfaction of our customers. Our vision To be a centre of excellence, and first choice in Europe, in the field of the collaborative acquisition of defence equipment. Our values Belief in Europe s future Professionalism, teamwork, positive attitude towards change Cultural diversity Integrity 18

OCCAR Organisation Board of Supervisors Programme Boards Future Tasks & Policy Committee ISS Committee Finance Committee Security Committee Programme Committees OCCAR Executive Administration Current

19 OCCAR Organisation Board of Supervisors Programme Boards Future Tasks & Policy Committee ISS Committee Finance Committee Security Committee Programme Committees OCCAR Executive Administration Current staff: 232 Bonn Central Office OCCAR-EA Deputy Director Business Development Strategy, Planning & Reporting Office Information Manager Human Resources Division Programme Support Division Corporate Support Division Finance Division Legal Advisor OCCAR-EA Director A400M Programme BOXER Programme COBRA Programme ESSOR Programme FREMM Programme FSAF Programme TIGER Programme Toulouse Bonn Bonn Bonn Paris Rome Paris Bonn 19

Current Programme Overview FSAF TIGER PAAMS FREMM ESSOR COBRA BOXER A400M Development, Production, Initial In-Service Support Development Production In-Service Support (2003 2012)

Military SL Airbus SAS, TAI, FLABEL ARTEC KMW, Rheinmetall LS PDS Alliance Thales Air Systems, Thales UK, EADS-DE a4essor Elektrobit, Saab, Indra, Radmor, Selex, Thales(FR) DCNS

20 Current Programme Overview FSAF TIGER PAAMS FREMM ESSOR COBRA BOXER A400M Development, Production, Initial In-Service Support Development Production In-Service Support ( ) Development & Production Development, Production, Initial In-Service Support Development & Production Development (since Int), Production, In-Service Support ( ) Airbus Military SL Airbus SAS, TAI, FLABEL ARTEC KMW, Rheinmetall LS PDS Alliance Thales Air Systems, Thales UK, EADS-DE a4essor Elektrobit, Saab, Indra, Radmor, Selex, Thales(FR) DCNS Orizzonte Sistemi Navali Fincantieri, Finmeccanica EUROSAM Thales, MBDA(FR), MBDA(IT) UKAMS EUROSAM, MBDA (UK) EUROCOPTER Tiger MTRI MTU, Turbomeca, Rolls Royce, ITP INDRA, SAGEM, EADS-DE

21 Current Programme status Overhead 1.3 % Turnover 13 MEUR per employee FSAF TIGER PAAMS FREMM ESSOR COBRA BOXER A400M PD Strength [FTE] Ops Budget 11 [MEUR] Total programme cost [MEUR] Development, Production, Initial In-Service Support Development Production In-Service Support ( ) Development & Production Development, Production, Initial In-Service Support Development & Production Development (since Int), Production, In-Service Support ( ) 21

22 OCCAR-EA Business Model OFFICIAL SERVICES BELGIUM LUXEMBOURG FRANCE GERMANY SPAIN TURKEY UK MALAYSIA GOVERNMENT INDUSTRY OCCAR Executive Administration Observers EXPORT CUSTOMERS Partners and sub-contractors 22

23 OCCAR-EA Basic Programme Division Structure Programme Manager Programme Division Secretary Programme Support element Commercial and Financial Section Systems Engineering Section ILS/ISS Section 23

24 Customer Relationship 24

OCCAR-EA Business Model Decision making theoretically under majority voting rule, in practice under unanimity rule Corporate issues Programmerelated issues Decision making under unanimity rule.

25 OCCAR-EA Business Model Decision making theoretically under majority voting rule, in practice under unanimity rule Corporate issues Programmerelated issues Decision making under unanimity rule. OCCAR Members and non-members treated equally. Board of Supervisors Programme Board OCCAR National Armament Directors Member States: Corporate strategic issues Participating States: Programme-related strategic issues OCCAR-EA Director Programme Committee National Procurement Organisation Programme-related operational issues OCCAR-EA Programme Manager Programme Working Group National Programme Co-ordinators Advisory body Expert Group Suppliers Our customers: Member and Participating States Our product: Programme services 25

26 OCCAR-EA Lean Organisation OCCAR Executive Administration Bonn Central Office Corporate Planning & Reporting Business Development Legal Advice Human Resources Programme Support Commercial Technical Logistics (TLM/ILS/ISS/LCC) Finance Information Technology Security Infrastructure Corporate services Alignment to best practices Expert support XX Programme Division System Analyst Commercial & Finance Officer Domains: HR, Invoicing/Accounting, Quality & performance Mgt, Risk Mgt, Security, ICT, Infrastructure Lean Programme Division containing minimum mix of key competencies required to manage Programme, with CO support; Size & structure of PD to be agreed with Nations; dynamically reflects phase of life cycle; Ramp-up of PD to be agreed with Nations (Job Descriptions, initial recruitment). 26

27 Methods and tools 27

28 OCCAR-EA Business Model OCCAR Programme Division Customer Customer View ISO based continual improvement Processrelated KPIs & PQIs [Change to] Customer requirements Procurement Strategy Contracting Delivery (Certification, Qualification, etc) Finance of risks related to achievement of HLOs Strategic (Performance) management KPIs on Programme Slippage, Predicted System Performance & Programme Cost KPIs on Accuracy of Budgeting & Forecasting Schedule, Cost & System Performance HLOs Deliver 1 st system by dd/mm/yy compliant with specifications S at cost of XXX EUR Programme Risk Sharing Programme Status Reporting HLO KPI PQI = High Level Objective = Key Performance indicator = Process Quality Indicator 28

ISS Capabilities: ISS Guide; Structure Risk Financial, Budget Manpower & Human Factors Analysis RM&T Analysis Software Support Disposal Security (DS) Organisation Update Quality Life Cycle Costing

Environmental Impact Planning & Reporting Security (PD) Information ST&E System Engineering History & Lessons Process Maintenance General Support of PD Safety General Programme Activities Contract &

29 ISS Capabilities: ISS Guide; Structure Risk Financial, Budget Manpower & Human Factors Analysis RM&T Analysis Software Support Disposal Security (DS) Organisation Update Quality Life Cycle Costing Contract & Legal Support Facilities & Infra Configuration Supply Support Technical Support Obsolescence Services Technical Info & Training Support Data Services Services Concept & Doctrine Review Environmental Impact Planning & Reporting Security (PD) Information ST&E System Engineering History & Lessons Process Maintenance General Support of PD Safety General Programme Activities Contract & Legal Information Risk Support Financial, Budget Facilities & Infra ST&E Life Cycle Costing Manpower & Human Configuration Factors Analysis RM&T Maintenance Analysis Supply Support Software Support Technical Support Obsolescence Main ISS Activities Services Disposal Technical Info & Training Support Data Services Services Security (DS) Safety Organisation System Update Concept & Doctrine Review Environmental Engineering Impact ILS related and Domain Specific Activities General Support of PD Quality History & Lessons Planning & Reporting Process Security (PD) General Programme Activities ILS related and Domain Specific Activities Main ISS Activities General Programme Activities Financial, Budget Manpower & Human Factors Analysis RM&T Analysis Software Support Risk Disposal Security (DS) Organisation Update Quality Life Cycle Costing Concept & Doctrine Review Planning & Reporting Contract & Legal Support Technical Support Services Facilities & Infra Supply Support Technical Info & Data Services Environmental Impact ILS related and Domain Specific Activities Security (PD) Obsolescence Information ST&E Configuration Training Support Services System Engineering History & Lessons Process Maintenance Main ISS Activities General Support of PD Safety OCCAR-EA ISS Guide OCCAR Managing OCCAR Programmes during the In Service Support Phase General Programme Activities Contract & Information Risk Legal Support Financial, Facilities & Budget Infra ST&E Life Cycle Costing Manpower & Configuration Human Factors Analysis RM&T Maintenance Analysis Supply Support Software Support Technical Support Obsolescence Main ISS Activities Services Disposal Technical Training Security Info & Data Support Services Services Safety (DS) Organisation Update Concept & System Environmental Doctrine Engineering Impact Review ILS related and Domain Specific Activities General Quality Support of PD History & Planning & Lessons Reporting Security Process (PD) Configuration 29

Other OCCAR-EA Differentiators Legal framework allowing several options (and consequently a certain degree of flexibility) for contracts letting and programme funding arrangements Flexible geometry,

30 Other OCCAR-EA Differentiators Legal framework allowing several options (and consequently a certain degree of flexibility) for contracts letting and programme funding arrangements Flexible geometry, both in terms of participants and programme integration stage Ability to accommodate the need for national eyes-only information on national variants within the same programme Flexibility in terms of financial facilities opportunities for private financing 30

31 OCCAR-EA s place in the European defence framework EDA EDA-OCCAR Interface informally defined. GAERC Declaration 10/11/08 leading to EDA-OCCAR AA No duplication No exclusivity OCCAR-NAMSO MoU signed National or common logistic organisations Industry Other agencies Capability development process 31

32 EDA OCCAR relations Practical Cooperation EDA Categorie B Collaborative Programmes: Future possibilities: Bio EDEP BIRD AEJPT FUAS Future Transport Helicopter 32

33 Conclusion OCCAR is a lean & agile European Organisation, customer-oriented offering through-life leading edge programme management & corporate governance practice. 33

BoS Meeting, Bonn 28 November 2008

BoS Meeting, Bonn 28 November 2008 2 Business Plan 2009 CONTENTS 1. Foreword by OCCAR-EA Director 4 2. OCCAR at a glance 6 2.1 Mission 6 2.2 Vision 6 2.3 Values 6 2.4 Strategic Aims 7 2.5 Business Model