Defense Procurement — The Ultimate Guide of 2023

Challenges of Defense Procurement

Defense procurement has a bad reputation in a lot of countries, especially in the UK as it is filled with lots of difficulties. 

The National Audit Office (NAO) has been monitoring and evaluating the performance of the defense procurement programs. It has done the assessment to identify the reasons behind the inadequate performance of defense programs. 

The National Audit Office has worked with RAND Europe on these matters to know the underlying causes of defense and equipment procurement. 

The following are the key findings of NAO and RAND that cause problems in the equipment and defense procurement process:

1. Industrial and MOD capabilities

• The overly ambitious capability requirements can set the scene for poor performance down the track. 
• Production efficiencies are hard to achieve which hinders the ability of the industry to drive learning economies and maximize ROI. 
• A lack of the right skills can undermine effective delivery.

2. Contracting and supplier performance

• The assumptions underpinning the capability delivery plan must be shared by both the MOD and the industry. 
• Understanding the sources of risk in defense procurement is lacking. 

3. Program management approach

• Usual adjustments to program delivery damage overall effectiveness.
• Budgeting sufficient contingency for risk is not implemented in practice.

4. Cross-cutting issues

• A culture of optimism distorts assumptions and planning outcomes in defense procurement. 
• The UK defense acquisition system is prone to moral hazards. 
• Lack of institutional memory means that no one has learned from the past.

The Following are the recommendations of NAO and RAND in tackling these key findings:

• The buying country must establish and embed effective challenge, inspection, and red-teaming processes.
• Insert clear processes to capture and share the lessons learned in the past and present. 
• Enable program management and cost assurance functions
• Focus on risk management and understanding. 

 Procurement Defense Models

1. Individual armed services

In many countries, the individual armed services are responsible for procuring weapon systems and military equipment they require. In addition, they operate their own procurement processes. 

Typically, the procurement actions of the individual armed services are supervised by the country’s defense department. Also, the defense department often develops and manages the defense procurement policies and regulations used by the armed services. 

This model allows the individual armed services to have great control over their respective procurement defense actions. The USA is one of the countries that use this model. 

2. Defense departments

In some countries, the defense departments have the overall responsibility for acquiring weapon systems and military equipment. With this in mind, the defense department’s functions often include the following:

• Administer the procurement processes, policies, budgets, and other sources
• Manage individual defense procurement projects
• Negotiate contracts with potential suppliers
• Collaborate with the industry
• Oversee all stages involved in the purchase and delivery of the equipment for the armed forces.

The activities above are commonly handled through a material, procurement, or contracting unit within the defense department. Due to this, the department works closely in cooperation with the armed forces. 

Examples of countries that utilized this model are India, Mexico, and New Zealand. 

3. Centralized defense organizations

Some countries have established centralized defense organizations to handle their defense procurement processes. 

The organizations are responsible for procuring all of the weapon systems and military equipment required by the armed forces. 

Although they are generally independent, they operate within the scope of the defense department. Countries that use this model are Australia, France, Germany, and the United Kingdom. 

4. Separate government organizations

Some countries utilize a single government department or agency that is independent of the defense department. These organizations are handled by civilian authorities and they have their own chain of command and budget. 

The countries that use this model are Pakistan, South Korea, Singapore, and Turkey. 

5. Independent civilian corporations

For this model, the responsibility of defense procurement is contracted to civilian organizations. These organizations are either state-owned or part of the private sector. 

The countries that use this model are South Africa, Sweden, and Switzerland. 

Besides these five models, there is one country that uses a unique defense procurement process which is Canada. Canada’s defense procurement is a complex process that involves numerous federal departments and agencies. 

This multi-departmental approach to defense procurement where each department and agencies have its unique responsibilities is unique to Canada.