International Cooperative Opportunities

Proposed Acquisition Teamwork
and
Cycle Time Improvements

National Center for Advanced Technologies
1250 Eye Street, N.W., Suite 1100, Washington, D.C. 20005

30 October 1996

Background

At the request of Dr. Spiros Pallas, an ad hoc team of the Industry Affordability Task Force, under the chairmanship of Mr. Mike Robinson, Rockwell North American, met to discuss potential participation in a USD/AT initiative dealing with International Cooperative Opportunities. Seven companies (ranging in product from ground vehicles to avionics, electronics, engines, and airframes) were represented. All agreed that the end result of this get-together would be the preparation of a draft white paper to be coordinated with the balance of the task force prior to delivery to OSD.

International Cooperative Opportunities is a concept, initiated by the USD/AT, to jointly develop requirements with other nations, with European Allied nations at the outset, and potentially globally. The concept is derived from a US study completed in the Spring of 1996, which indicated that joint requirements activities between the allied nations was "meager". Additionally, while there is good cooperation between governments in international armaments activities, and there are some company-to-company activities, the process of sharing requirements jointly is not very well formulated.

The initial discussions of the group revolved around the reaction of the companies to the fundamental concept of participating with offshore governments and companies in the early identification of mutual armament requirements. A point paper to stimulate the conversation was distributed prior to the gathering (attach 1).

The general sense of the participants was: International Cooperative Opportunities could be fundamentally a good concept, given the imploding state of the nation's defense industry, the rapidly diminishing defense budgets, and the world armament market situation, if the significant barriers can be surmounted. All of the representatives agreed that the environment in which their business is conducted has substantially changed in the recent past, and was very likely to continue to change. Both foreign and U.S companies are competing for greatly shrinking defense investment resources. Because of this, more innovative ways of conducting global commerce, fitting both the defense needs of the US Government and the business needs of US companies, should be investigated. They also agreed that the environment within the DoD is becoming more receptive to industry input and recommendation, with industry becoming more of a partner in the defense decision making process.

Barriers to International Cooperation

The largest impediment to a successful program of international cooperation is the United States defense requirements process itself. Even in today's more cooperative environment, US industry typically does not share in the requirements generating process. While individual programs can be cited that belie the previous statement, industry is told that requirements definition is "the warfighter's domain", and industry need only to be reactive to them. The insight of the members of the ad hoc team into the foreign requirements definition processes-- particularly in Europe-- on the other hand, shows that foreign governments and their industries work closely throughout the requirements process, forming a unified country position from the outset. The impact of attempting a joint government-industry international requirements definition with these divergent philosophies would at best result in:
- the European parties showing up with a solid agenda,
- the U.S. Government with a desire, and
- U.S. Industry attending to find out what is going on.
The result of that situation cannot bode well for U.S. interests. Thus, with those facts in mind, prior to any further pursuit of an international program, the model for industry participation in the US defense requirements process must be redefined.
A second barrier is the potential reluctance of the operator/warfighter to participate in a program that would diminish the technological fighting edge he has enjoyed over the past decades. Convincing the warfighter to share tactical advantage with peers, be they allies, is a consideration that must be addressed before approaching Europe.
Once the domestic requirement process is ironed out, proceeding to the next step of international sharing could be best met by dealing with the Europeans on a multilateral basis rather than a bilateral basis. The rationale behind this idea is simple. In the U.S., multiple companies with similar product lines, have traditionally acted in competition with each other, vying for the global defense market. European companies are usually singular entities within their respective nation, dealing closely with their government, with little or no intra-country competition. Competition in the European scenario is evolving to an inter-country, e.g.. the British Aerospace competing with Dasa or Aerospatiale to become the "kingpin of EU defense". Thus, multi-lateral dealings would place the European industry in a similar competitive position as the U.S. industry, and a level playing field would result.

Concerns

There is a concern within the U.S. industry that the Europeans might gain a significant advantage over their U.S. counterparts if the initiative is pursued without a closer partnership between U.S. industry and U.S government. One member of the group felt the initiative could be a unilateral opening of the U.S market. If in fact this were true, it could be extremely detrimental to the U.S. armament industry. It therefore becomes extremely important for U.S. companies to have a greater role in the requirements process, and in the planning and execution of the ICOG initiative, prior to the initiative gaining momentum.

While technological parity is not a prerequisite for exploring joint requirements, there needs to be a clearer picture of what are the European industries' plans and motives in participating in this initiative. For example, two questions (which equally apply to both sides of the equation) must be answered with regard to the participants. Will the governments be willing to invest significantly increased R&D funds to participate as full partners? Will the companies be willing to take secondary roles if their capabilities are not equal to the task of being the program prime? The answers, however important, are still predicated on the USG and the US Industry operating in a closer relationship.

Potential of Cooperative Opportunities

The potential of increasing markets to US companies is significant enough to pursue this concept to its fullest.

Countries and companies within the EU are tending to focus their activities within the union at the exclusion of the U.S. This initiative could keep the European doors open. However, it must be recognized from the out set that the U.S will become a partner (and not always the senior one) in the new systems that result from the requirements.
The dream of interoperability may become a reality as a result of this process.
Dealing with the Europeans on a multi lateral basis will:
1. Provide the largest market potential for products that will result from their requirements. This is good for both industry and government as increased sales potential while lowering both acquisition and operational support (because of interoperability) costs.
2. Provide room for multiple U.S. companies to participate and compete for the resulting products. This is because U.S. competitors will have multiple industrial teaming opportunities. (e.g. U.S. company A teams with British aerospace while U.S. Company B teams with Germany's Dasa).
3. Be more acceptable to European industry by allaying the fear that either a U.S giant will totally overwhelm them or another European company will gain advantage over them in becoming the EU kingpin.
While there was some concern voiced about technology parity, or technology transferring during the requirements phase, this concern was considered to be not significant, as long as the company had ultimate authority and control over the dissemination of technology (proprietary information). The benefit of technological intelligence would probably gravitate to the US companies, and outweigh any technological intelligence traveling the other way. For the most part, technology transfer typically does not occur early in the requirements phase of weapons systems acquisition. Technology transfer, however, could potentially become significant later on in the acquisition. Therefore, any insight gained by U.S. companies into the U. S. requirements process will be beneficial when dealing with EU industries, in understanding their state-of-the-art, and by providing knowledge and time to protect U.S. competitive edge in the product development phases. Current barriers to US companies trading with offshore governments would have to be addressed. The traditionalists within the DoD would have to be assuaged. (i.e. contracting vehicles, export control, Acquisition Reform, Military Specifications would have to be addressed). On the European side, the capability (and will to increase capability) to become an equal partner will have to be addressed.

Next Steps