SECURITY SECTOR REFORM AND IMPROVING THE ......Adrian Kendry Senior Defence Economist Political Affairs and Security Policy Division NATO HQ [email protected] 21 November 2007

21 November 200721 November 2007 European Parliament Committee on Foreign European Parliament Committee on Foreign Affairs SEDE, NATO PA and DCAFAffairs SEDE, NATO PA and DCAF

SECURITY SECTOR REFORM SECURITY SECTOR REFORM AND IMPROVING THE AND IMPROVING THE MANAGEMENT OF DEFENCE MANAGEMENT OF DEFENCE AND SECURITY RESOURCES: AND SECURITY RESOURCES: A NATO PERSPECTIVEA NATO PERSPECTIVE

Adrian Adrian KendryKendrySenior Defence EconomistSenior Defence EconomistPolitical Affairs and Security Policy Political Affairs and Security Policy DivisionDivisionNATO HQNATO [email protected]@hq.nato.int


WHAT ARE THE WHAT ARE THE EUROEURO--ATLANTIC CHALLENGES ATLANTIC CHALLENGES IN DEFENCE AND SECURITY?IN DEFENCE AND SECURITY?

nn ECONOMICECONOMIC

nn Economic Integration and Economic Integration and GlobalisationGlobalisation

nn Employment Employment SustainabilitySustainability

nn Aging and DemographyAging and Demographynn Pensions and Health CarePensions and Health Carenn Energy SustainabilityEnergy Sustainabilitynn ResilienceResilience

nn SECURITYSECURITY

nn Globalisation of Globalisation of InsecurityInsecurity

nn TerrorismTerrorismnn Resource ConflictsResource Conflictsnn Nuclear Proliferation Nuclear Proliferation

and CBRNand CBRNnn BordersBordersnn Trafficking of Trafficking of

InstabilityInstability


THE REVOLUTION IN DEFENCE THE REVOLUTION IN DEFENCE RESOURCE MANAGEMENTRESOURCE MANAGEMENT

Transformational

Warfare

Transformational

ManagementDefence

Globalisation

•Doctrine

•C4ISR

•Mobility

•Asymmetrical threats

•Value for money

•Input output analysis

•Lean logistics

•Smart acquisition

•Cost reduction

•Competition

•Consolidation

•Commercialisation

•Cooperation

•International industrial integration (I3)


THE CHANGING DEFENCE AND THE CHANGING DEFENCE AND SECURITY LANDSCAPESECURITY LANDSCAPE

nn The Revolution in Military Affairs and The Revolution in Military Affairs and Changing Threat Perceptions:Changing Threat Perceptions:

–– Network Centric WarfareNetwork Centric Warfare–– Battlefield DigitizationBattlefield Digitization–– Jointness in CJointness in C44ISRISR

nn The Revolution in Industry/Technology The Revolution in Industry/Technology Affairs:Affairs:

–– Platforms, Software and Systems Platforms, Software and Systems IntegrationIntegration

–– Traditional and New Firms entering the Traditional and New Firms entering the Defence Supply ChainDefence Supply Chain

–– Consolidation and Reorganization within Consolidation and Reorganization within the Defence Industrial Basethe Defence Industrial Base


THE CHANGING DEFENCE AND THE CHANGING DEFENCE AND SECURITY LANDSCAPESECURITY LANDSCAPE

nn The Revolution in Business Affairs:The Revolution in Business Affairs:

–– Modernization in AcquisitionModernization in Acquisition–– Competitive SourcingCompetitive Sourcing–– OutsourcingOutsourcing–– PublicPublic--Private Partnerships and PFIPrivate Partnerships and PFI

nn The Revolution in Procurement Affairs:The Revolution in Procurement Affairs:

–– MultiMulti--sourced environmentsourced environment–– Incentives for timely delivery with quality Incentives for timely delivery with quality

assuranceassurance–– Promoting InteroperabilityPromoting Interoperability–– Increasing competitiveness in the supplier Increasing competitiveness in the supplier

basebase


THE PARADOX OF MODERN THE PARADOX OF MODERN DEFENCE AND SECURITYDEFENCE AND SECURITY

nn The paradox of defence and security in the new The paradox of defence and security in the new EuroEuro--Atlantic area.Atlantic area.

nn Borders and security and the Borders and security and the desirable/undesirable flow of financial desirable/undesirable flow of financial capital,goods and peoplecapital,goods and people

nn Strengthening of defence and security Strengthening of defence and security capabilities without weakening commitment to capabilities without weakening commitment to globalisationglobalisation and democracyand democracy

nn Structural economic and social change: the Structural economic and social change: the decline in traditional economic activity and the decline in traditional economic activity and the growth of the information economygrowth of the information economy


NATO AND ENLARGEMENTNATO AND ENLARGEMENT

nn Membership Action Plan countries (Croatia, Membership Action Plan countries (Croatia, Albania, the former Yugoslav Republic of Albania, the former Yugoslav Republic of MacedoniaMacedonia1 1 may be invited to join the NATO may be invited to join the NATO Alliance in 2008Alliance in 2008

nn Meeting NATOMeeting NATO’’s performances performance--based standards and based standards and contributing to Eurocontributing to Euro--atlanticatlantic security and stability security and stability are critical requirements for membershipare critical requirements for membership

nn Key issues include public support for membership, Key issues include public support for membership, judicial and judicial and defencedefence reformreform

nn 11Turkey Turkey recognisesrecognises the Republic of Macedonia with the Republic of Macedonia with its constitutional nameits constitutional name


NATO VALUES AND PAPNATO VALUES AND PAP--DIBDIB

nn NATONATO’’s values (democracy, the rule of law, s values (democracy, the rule of law, transparent and effective governance) in the transparent and effective governance) in the development and deepening of Eurodevelopment and deepening of Euro--Atlantic Atlantic security and stabilitysecurity and stability

nn NATO supports the vital contributions to be NATO supports the vital contributions to be made by in the building of effective and made by in the building of effective and accountable accountable defencedefence and security institutions and security institutions in the Euroin the Euro--Atlantic area: Atlantic area: the Building Integrity Initiativethe Building Integrity Initiative

nn The Partnership Action Plan on Defence The Partnership Action Plan on Defence Institution Building: Istanbul Summit and Institution Building: Istanbul Summit and BeyondBeyond


THE CHALLENGE OF DEFENCE THE CHALLENGE OF DEFENCE BUDGETS AND DEFENCE BUDGETS AND DEFENCE REFORMREFORMnn Need to redirect savings from restructuring back Need to redirect savings from restructuring back

into investment in transformational capabilitiesinto investment in transformational capabilities

nn Need to Need to stabilisestabilise defencedefence budgets by creating budgets by creating separate funds for operations and developing separate funds for operations and developing defencedefence planning on a multiyear rather than planning on a multiyear rather than yearly cycleyearly cycle

nn Challenges confronting the EuroChallenges confronting the Euro--Atlantic area in Atlantic area in defencedefence procurement and procurement and defencedefence sustainability:sustainability:–– 25% of annual budget directed toward R&D 25% of annual budget directed toward R&D

and procurement?and procurement?–– 40% of budget allocated to personnel?40% of budget allocated to personnel?


DEFENCE MANAGEMENT DEFENCE MANAGEMENT REFORMREFORM

–– Translating security policy, Translating security policy, defence objectivesdefence objectives and longand long--term vision into current activities (budgeting, term vision into current activities (budgeting, procurement, operations, training and exercises, etc.)procurement, operations, training and exercises, etc.)

–– Making decisions on force structure (set of capabilities) Making decisions on force structure (set of capabilities) and resources (primarily money) at the same timeand resources (primarily money) at the same time

–– Searching for and selecting Searching for and selecting ‘‘bestbest’’ set of capabilities to set of capabilities to implement security and defence policy under resource implement security and defence policy under resource constraints constraints

–– Making decisions in a critical point of the defence Making decisions in a critical point of the defence planning processplanning process

–– Overseeing the development of capabilities (i.e., through Overseeing the development of capabilities (i.e., through presentation and assessment of capability levels /as a presentation and assessment of capability levels /as a result of implementation of plans)result of implementation of plans)


DEFENCE PROGRAMMINGDEFENCE PROGRAMMING

nn In a transparent manner, defence programs link:In a transparent manner, defence programs link:–– policy objectives and longpolicy objectives and long--term plans to budgetterm plans to budget–– ““productproduct”” to spending to spending –– requirements and resource constraints requirements and resource constraints

nn Meeting point of competencies, and thus, Meeting point of competencies, and thus, ““focusfocus”” of of all defence and force planning activitiesall defence and force planning activities

nn Serves as a Serves as a ““filterfilter”” of all needs of all needs


THE PPBES PROCESS

Defense BudgetDefense BudgetBudgeting

What military capabilities can we afford in the future 5, 10, 15 years to fulfill the defense

objectives?

What military capabilities can we afford in the future 5, 10, 15 years to fulfill the defense

objectives?

What capabilities should we program in the next 6 years

to achieve our defense

objectives?

What capabilities should we program in the next 6 years

to achieve our defense

objectives?

How much money do we need next

year to pay for the first year of the

approved program?

How much money do we need next

year to pay for the first year of the

approved program?

• Program Development • Program Review • Program Development • Program Review

• National Security Strategy • Defence White Paper • Long term plans • Defence Planning Guidance • PPBES Instructions

PlanningStudies and Analyses

Programming

Execution / EvaluationAre we achieving our established goals and objectives?

Execution / EvaluationAre we achieving our established goals and objectives?


TOOLSTOOLS

PARP (Planning and Review Process) PARP (Planning and Review Process) and the MAP (Membership Action and the MAP (Membership Action

Plan)Plan)–– GuidanceGuidance–– Objective SettingObjective Setting–– Measure attainmentMeasure attainment–– NATO Recommendations and NATO Recommendations and

AdviceAdvice

REALITY IN DEFENCE REALITY IN DEFENCE PLANNINGPLANNING

SDRSDR

PARPASSESSMENT

PARPASSESSMENT

MAPReportMAP

Report

MEFMEF



PROBLEM AREASPROBLEM AREASnn Deployable vs. territorial defenceDeployable vs. territorial defencenn Previous MentalityPrevious Mentalitynn Predictability of GDP Growth Predictability of GDP Growth nn Accuracy of Accuracy of costingscostingsnn Are resources matched to requirements?Are resources matched to requirements?nn Changes in Government and PrioritiesChanges in Government and Priorities

€ € €



WHAT HAPPENED ?WHAT HAPPENED ?

nn Plans and Aspirations of new NATO membersPlans and Aspirations of new NATO membersnn Higher GDP growth than projectedHigher GDP growth than projectednn Costs of drawing down existing forces, Costs of drawing down existing forces,

improving deployability, professionalisation improving deployability, professionalisation and modernisation higher than estimatedand modernisation higher than estimated

nn Increased operational costs Increased operational costs nn Changed Political PrioritiesChanged Political Priorities

€


TRANSPARENCYTRANSPARENCY

nn ScenariosScenariosnn Capability levelsCapability levelsnn Planning risksPlanning risksnn BudgetBudgetnn Effective Defence Resource ManagementEffective Defence Resource Managementnn Defence objectives (missions and ambitions)Defence objectives (missions and ambitions)nn Regular involvement of ParliamentsRegular involvement of Parliaments

–– SRD, White papers, etc.SRD, White papers, etc.–– In the Budget cycleIn the Budget cycle–– Accounts and defence audit reportsAccounts and defence audit reports


THE FINANCING OF THE FINANCING OF PERSONNELPERSONNEL

–– Incentives for military recruitmentIncentives for military recruitment

–– Contract forces and competitive wagesContract forces and competitive wages

–– Funding the reduction and reFunding the reduction and re--organisation organisation of military personnelof military personnel

–– Realistic assessment of the funding of Realistic assessment of the funding of personnel in the context of the overall personnel in the context of the overall

budgetbudget


FINANCING OPERATIONS AND FINANCING OPERATIONS AND MAINTENANCEMAINTENANCE

–– Improving the supply chainsImproving the supply chains

–– National and transNational and trans--national national consolidation of industryconsolidation of industry

–– Improving the armaments regulatory Improving the armaments regulatory frameworkframework

–– Continuous improvement strategy for Continuous improvement strategy for ensuring that the ensuring that the ““tailtail”” does not does not

undermine the undermine the ““teethteeth””


FINANCING R&D AND DEFENCE FINANCING R&D AND DEFENCE TRANSFORMATIONTRANSFORMATION

SELFSELF--SUFFICIENCYSUFFICIENCY

IndigenousIndigenousResearch,Research,

Development,Development,

ProductionProduction

COLLABORATIONCOLLABORATION

Joint Research,Joint Research,

DevelopmentDevelopmentandand

ProductionProduction

LICENSED LICENSED PRODUCTION /PRODUCTION /COCO--OPERATIONOPERATION

No Indigenous No Indigenous R&DR&D

Indigenous Indigenous ManufactureManufacture

OFFOFF--THETHE--SHELFSHELF

No Indigenous No Indigenous DevelopmentDevelopmentor Productionor Production


NATONATO’’s RESOURCE s RESOURCE REQUIREMENTSREQUIREMENTS

nn For Crisis Response OperationsFor Crisis Response Operations

nn For Capabilities necessary to meet objectives and For Capabilities necessary to meet objectives and prioritiespriorities

nn For operating and maintaining civil and military For operating and maintaining civil and military headquartersheadquarters

nn For sustaining its activities and For sustaining its activities and programmesprogrammes(partnership for peace, research and development, (partnership for peace, research and development, science, education and training)science, education and training)


THE FUNDING OF NATOTHE FUNDING OF NATO

nn Resources of the Alliance come from nationsResources of the Alliance come from nations

nn 95% or more of national 95% or more of national defencedefence budgets budgets remain under remain under exclusive exclusive national controlnational control

nn National spending is the norm: NATO is not a National spending is the norm: NATO is not a supranational supranational organisationorganisation

nn Multinational forms of allocating Multinational forms of allocating defencedefenceresources remain the resources remain the exception and not the ruleexception and not the rule


CONCLUSIONSCONCLUSIONSNeed realistic plans tied to unbiased, Need realistic plans tied to unbiased, conservative projections of available conservative projections of available

resourcesresourcesnn Budget realities must restrain decision Budget realities must restrain decision

makers and planners at all levelsmakers and planners at all levelsnn Seek and use advice and experiences of Seek and use advice and experiences of

AlliesAlliesnn Strive for continuity in defence Strive for continuity in defence

planning as political leadership changesplanning as political leadership changes

REALITY IN DEFENCE PLANNINGREALITY IN DEFENCE PLANNING


TYPES OF NATO FUNDINGTYPES OF NATO FUNDINGnn Multinational FundingMultinational Funding

–– Bilateral/Multilateral arrangements substantially Bilateral/Multilateral arrangements substantially under national controlunder national control

nn Joint FundingJoint Funding–– Structured form of multinational funding within Structured form of multinational funding within

terms of agreed NATO Charter and with NATO terms of agreed NATO Charter and with NATO oversightoversight

nn Common FundingCommon Funding–– Allies provide the funding and NATO authorities Allies provide the funding and NATO authorities

determine priorities and requirements for the Civil determine priorities and requirements for the Civil (181 mill. Euros) Military (954 mil. Euros) and NATO (181 mill. Euros) Military (954 mil. Euros) and NATO Security Investment Security Investment programmeprogramme (640.5 (640.5 mill.eurosmill.euros) ) budgetsbudgets

–– NSIP has a main elements: Air C2, NATONSIP has a main elements: Air C2, NATO--wide C3 wide C3 support, support, DeployabilityDeployability/mobility and Sustainability/mobility and Sustainability


LESSONS LEARNEDLESSONS LEARNED

nn Mistakes:Mistakes:–– lack of coordinationlack of coordination–– overoptimistic planningoveroptimistic planning–– low/no correlation between low/no correlation between

resources and objectivesresources and objectives

nn Corrections:Corrections:–– Clear responsibilitiesClear responsibilities–– Clear list of prioritiesClear list of priorities–– Quality vs. quantityQuality vs. quantity–– CapabilityCapability--focused planningfocused planning

Documents

SECURITY SECTOR REFORM AND IMPROVING THE ......Adrian Kendry Senior Defence Economist Political Affairs and Security Policy Division NATO HQ [email protected] 21 November 2007