Innovation and Defence R&D:an Evolving Relationship

Six Countries Programme

Workshop

Linking Defence and Security R&D to Innovation: the challenge ahead

Brussels, 19 November 2004

Jordi Molas-Gallart

Senior Fellow

SPRU, University of Sussex

Foreword: Defence Innovation Goes Beyond Changes in Arms Systems

Innovations in military doctrine/operationsInnovations in “military systems”Innovations in military logistics and

supportInnovations in military acquisition and

systems design

Importance of process and organisational change

Issues

The effects of defence R&D investment – the relationship between defence and civilian innovation

Policy challenges– Procurement reform and defence R&D– The role and reform of Defence Government

Research Establishments

The Effect of Defence R&D Investment

An optimistic view of the impact of defence R&D (EC communication towards an EU defence equipment policy, march 2003):

“Defence related research plays a major role in innovation in the US; It benefits the whole of industry, including the civilian sector. This interpenetration of defence and civilian research has benefited both the American arms industry and civilian users in terms of

market access and costs.”

Yet the Effect of Defence R&D is Controversial

Recall 70s and 80s literature on the detrimental effects of defence research and production

In key technological fields defence follows civilian innovation

Defence R&D is mainly D (development)Effects of defence R&D depends on conditions

(institutional structure, R&D management, type of R&D ...)

Main Challenge: Need for Procurement Reform/Institutional Change

“Traditional” defence procurement established a complex set of regulatory and managerial practices and organisational structures

Defence research activities have tended to be carried out separated from other R&D activities

Procurement Reform: Some Goals

Pursues cost savings (while increasing performance)...– …by using capabilities available elsewhere– …by exploiting elsewhere capabilities

developed in defence research and production– …by improving managerial practices

Attempts to change the way complex military systems are defined, developed, produced and maintained

Procurement Reform: the Policies

Seeks to open military markets through:– The application of commercial best practice in

project management and contractual procedures

– The development of “integrated project teams” and partnering agreements

– The substitution of defence standards and military specifications for civilian standards

– ...

Procurement Reform: the Practice

Many reform tools appear as technical (ILS, CALS, continuous acquisition, MILSPEC reform, IPTs..)

These building blocks are tackled (mainly) at national level, and…

…in isolation from each other (functional silos)

Procurement Reform: the Building Blocks are Interrelated

Cost control and improvement technological

capability

Cost control and improvement technological

capabilityLife-cycle approachLife-cycle approach

CALS, ILS(maintenance cost planning)

CALS, ILS(maintenance cost planning)

Integrated Project TeamsIntegrated Project Teams

“Incremental

acquisition”

“Incremental

acquisition”

Use of commercial components

and subsystems (COTS, NDI)

Use of commercial components

and subsystems (COTS, NDI)

MILSPEC and MILSTD reformMILSPEC and

MILSTD reform

Suppliers take on more design and

maintenance responsibilities

Suppliers take on more design and

maintenance responsibilities

Flexible performance definitions

Flexible performance definitions

Closer customer/supplie

r relationship

Closer customer/supplie

r relationship

Modular design, open systems architecture,

obsolescence management

Modular design, open systems architecture,

obsolescence management

Therefore...

Procurement reform is not only about new tools, but about “systemic change”– Changes across all procurement processes and

stages must be implemented in a coordinated manner

– Priorities must change

– R&D activities are also affected

The generation and exploitation of defence-related technological capabilities goes beyond the funding of research activities

The Case of Defence R&D

Specialised defence research facilities have a history of isolation– Security considerations– Special relationship with defence ministries and the military

Technology transfer across military-civilian contexts is likely to require– Organisational change– Change in regulatory and contractual practices– Cultural adjustment

How will this “management of dual-use” work in practice?

The Example of Defence Government Research Establishments

R&D strategies among many defence-related research organisations are “dual-track”, seeking:

The application of commercial technologies to gain savings in military production

The application of military technologies to commercial ventures

The Reform of Defence GREs: Some Challenges

Defence research establishments are engaging in civilian work, but…. – What priority should be given to commercial

work against established defence tasks? – What will the implications of

“commercialisation” be in a defence environment?

– How will the relationship with private firms develop?

– Is there scope for European collaboration?

GDREs: A Summary of Problems

Conflict of interest – Commercial use of data acquired when

discharging functions on behalf of defence ministries)

– Support of private sector partners when providing advice to defence ministries…

New tasks (technology transfer,…) require new priorities and organisational culture

How to introduce international collaboration in highly sensitive areas

Collaboration in European Defence R&D

Only about 2% of European defence R&D has been carried out through joint research programmes (WEAO,…) (not counting joint arms development programmes)

A long history of plans, initiatives, frameworks…– To establish joint research programmes– To co-ordinate research priorities and requirements

… but defence research keeps being regarded as a matter of national strategic importance

The EU and Defence

Article 223 Treaty of Rome (293 Treaty of Amsterdam, III-342 Constitution Treaty) allows

any member state to take

“Such measures as it considers necessary for the protection of the essential interests of its

security which are connected with the production of or trade in arms, munitions and war material”

EU is Trying to Develop Defence Industrial Policies

Communication on the challenges facing the European defence industries (1996)

Communication on “implementing a EU strategy on defence-related industries” (1997), including– Draft common position on framing a European armaments policy– Action plan for the defence-related industry

Communication “towards and EU defence equipment policy” (2003) Establishment of European defence agency (2004) Communication on “security research - the next steps” (2004) Communication towards a programme to advance European security

through research and technology (2004) Green paper on “defence procurement” (2004)

A Long-Term Objective

European Commission "Action Plan" (1997!):

"An integrated European market for defence products must be set up using a combination of all the instruments at the Union's disposal: Community and Common Foreign and Security Policy

legislative and non-legislative instruments"

Yet Very Slow Progress

European countries maintain diverse procurement policies and organisational procedures

Market fragmentation along national lines continues

Summary: The Challenges (1)

Technology transfer across military-civilian applications requires the adaptation of skills and

cultural adjustment . . .

. . . likely to require organisational change

The Challenges (2)

Policy initiatives at different levels may pull in different directions

Diversity of policy contexts and decision levels

Possibility of inconsistent policy outcomes

European integration is a fragile process

The Challenges (3)

Defence research establishments are engaging in civilian work

What priority should be given to commercial work against established defence tasks?

How does one deal with conflicts of interests?

YET