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/operations
Innovations in “military systems”
Innovations in military logistics and
support
Innovations 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
Use of
commercial
MILSPEC and
components
MILSTD reform
and subsystems
Cost control and (COTS, NDI)
improvement
technological Flexible performance
capability definitions
Life-cycle
approach
“Incremental
Modular design, open acquisition”
systems architecture,
CALS, ILS
obsolescence management (maintenance cost planning)

Integrated Project Teams

Suppliers take on
more design and
maintenance Closer
responsibilities customer/supplier
relationship
 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)
Diversity of policy contexts and decision levels

Policy initiatives at different levels may pull in different

directions

Possibility of inconsistent policy outcomes

European integration is a fragile process

 The Challenges (3)

Defence research establishments are engaging

in civilian work

YET

What priority should be given to commercial

work against established defence tasks?

How does one deal with conflicts of interests?