Tuesday, 25 November 2014

Germany’s Defence Procurement under Attack


Errors in Defence Management Must be Resolved Quickly
The dismissal of the former Secretary of State in the German Ministry of Defence, Stéphane Beemelmans, as well as the director of the Procurement Department on 20 February 2014 highlights the inherent problems the German Bundeswehr has with realising major defence procurement projects. The process also shows how mismanagement of projects and a lack of transparency lead to a sudden decline in Germany’s reputation and reliability during recent multinational military missions. This situation is not new. Problems with major defence procurement projects in Germany have been known for many years.
Defence Minister Dr. Ursula von der Leyen, successor of Dr. Thomas de Maizière, who had worked since 2011 on developing and implementing one of the biggest reforms to the Bundeswehr and the Ministry of Defence in recent years, received the long awaited report into the state of the German MoD procurement processes on 6 October 2014. The report was commissioned in June 2014 and finalised by a consortium consisting of the independent auditors KPMG, P3 Group, and TaylorWessing.
The report provides a comprehensive inventory and risk analysis of main procurement projects. Nine major ongoing or planned procurement programmes with a total worth of over €50Bn were assessed: PUMA armoured infantry fighting vehicle (AIFV); A400M transport aircraft; Eurofighter multirole fighter; NH90 medium-size helicopter; TIGER combat support helicopter, Type F125 frigate, MEADS medium-range air and missile defence system (also known as TLVS (Taktisches Luftverteidigungssystem); EuroHawk long-range SIGINT system (in German parlance also known as Signalverarbeitende Luftgestützte Weitreichende Überwachung und Aufklärung; abbreviated SLWÜA); Interconnectable Joint-Services Radio Equipment project (known as SVFuA; Streitkräftegemeinsame Verbundfähige Funkgeräte-Ausstattung). The report delineated 140 problems and risks. They have been found to be responsible for serious delivery delays. A striking example is the A400M programme that resulted in a five-year delivery delay, forcing the German Air Force to embark on the fleet of legacy and decrepit C-160 transport aircraft. Some other projects – namely MEADS – did not result in the Bundeswehr taking delivery of ready-to-use systems. Some programmes, however, fell victim to problems associated with the certification process, or because international partners like the US (in the MEADS programme) withdrew from the project. The report states that most of the problems and risks are typical of an arms-purchasing bureaucracy, overworked officials, imprecise contracts, and confused responsibilities. It came to the conclusion that the MoD should review all of the programmes’ contracts to adjust their logistical and maintenance terms to fit the current state of each project. Additionally, the auditors recommend a critical re-evaluation of the EuroHawk programme.
The report comes after a series of embarrassing technical failures with vehicles, aircraft, and ships that have been caused by delays in introducing new equipment and spare parts. For instance, Germany’s first shipment of arms to Iraq’s Kurds in Erbil to help in the fight against the self-designated Islamic State (IS), was delayed when the designated transport aircraft broke down. Also because of shortages of spare parts, only 24 out of the inventory of 43 TRANSALL transport aircraft were declared as operational during the last week of September. The same problems have been identified with the 43 shipboard helicopters in German Navy inventories, of which only four SEA KING Mk41 aircraft were found to be operational on 18 September 2014. At that time, the German Navy was not able to support the EU mission around the Horn of Africa, involving the German Navy frigate “Lübeck” (F 214), by two promised SEA LYNX Mk88 shipboard helicopters. “This failure means a significant incapacitating for the task force and mission accomplishment”, according to the Ministry of Defence in a report to Secretary of State Dr. Katrin Suder on 18 September 2014.

The ability to reform defence procurement procedures will be viewed as a key political test for Defence Minister Dr. Ursula von der Leyen pictured here with Member of Parliament Ingo Gädechens.
(Photo: Courtesy of German Parliament)


The Value in Believing
According to Member of Parliament Ingo Gädechens of the Christian Democratic Union of Germany (CDU), the attacks of the opposition to Minister von der Leyen is baseless: “The responsibility for errors is the result of mistakes and bad planning, which in part has been building up for decades. [The] policy, Ministry, and industry are now required to correct the issues in the defence management quickly.”
Gädechens said the in-depth inventory and risk analysis provided to the Defence Committee “represents a…foundation to correct serious errors in the defence management quickly.” According to him, Minister von der Leyen has done well to clearly analyse the problems in order to remedy the structural weaknesses in the Defence Ministry and subordinate authorities. “It is clear, in order to meet our security policy responsibility and to equip our soldiers with the best [available] material, defence products must be on budget and on time”, he said. The results of the report highlight the problem of the defence management: A systematic risk management in the Ministry and subordinate authorities (BAAINBw; Bundesamt für Ausrüstung, Informationstechnik und Nutzung der Bundeswehr) is not or only insufficiently available. “Risks are either ignored, or the information about it seep in the reporting chain up to the management level. There is a lack of clear roles and responsibilities, as well as an honest reporting.
Furthermore, there are still too many technical mistakes in contract management”, noted Gädechens. “There is still a great need for improvement.”
Money is always a factor. As heard at the ‘Celler Trialog 2014’ in Celle, Germany, on 17 September 2014, Germany’s defence budget, which is currently at 1.3% of its GDP (Gross Domestic Product), has to be increased to the agreed NATO’s 2% target. This figure is fulfilled only by Estonia, Greece, the UK, and the US. The twist to the story is that, in 2013, nearly €1.3Bn of the approximately €4Bn equipment budget went unspent. A figure of roughly €400M has been quoted for 2014. Secretary of State Dr. Suder warned that “we need a defence industry 4.0”. “In conjunction with the report [commissioned by the MoD], key technologies have to be defined and answers to be given for two important questions: What is working well? What does not work?

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