Introduction

i

DEFENSE SYSTEMS MANAGEMENT COLLEGE

A COMPARISON

OF

THE DEFENSE

ACQUISITION SYSTEMS

OF

AUSTRALIA, JAPAN,

SOUTH KOREA,

SINGAPORE AND

THE UNITED STATES

Tony Kausal, Editor

Professor Stefan Markowski

July 2000

PUBLISHED BY THE

DEFENSE SYSTEMS MANAGEMENT COLLEGE PRESS

FORT BELVOIR, VIRGINIA 22060-5565
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

ii

For additional information contact:

Defense Systems Management College Press

(Tel) 703.805.2248

(Fax) 703.805.2917

DSN 655-2248

ISBN 1-893833-01-1
Introduction

iii

TABLE OF CONTENTS

ACKNOWLEDGMENTS .......................................................................................................... vi

INTRODUCTION ................................................................................................................... viii

PART 1 – AUSTRALIA

Chapter 1 Introduction................................................................................................ 1-3

Chapter 2 The Government of Australia .................................................................... 1-7

Chapter 3 Australia’s Strategic Environment ........................................................... 1-15

Chapter 4 Australia’s Defence Organisation ............................................................ 1-20

Chapter 5 Defence Budget and Resource Management ........................................... 1-25

Chapter 6 Defence Reform Program ........................................................................ 1-33

Chapter 7 Defence Acquisition Organisation ........................................................... 1-39

Chapter 8 The Acquisition Process .......................................................................... 1-49

Chapter 9 Defence Industry and Defence Industry Policy ....................................... 1-62

Endnotes ....................................................................................................................... 1-70

PART 2 – JAPAN

Chapter 1 Japan .......................................................................................................... 2-3

Chapter 2 The Government of Japan .......................................................................... 2-5

Chapter 3 The Japanese Self Defense Force ............................................................ 2-13

Chapter 4 JDA Acquisition Organizations ............................................................... 2-17

Chapter 5 Planning, Programing, and Budgeting ..................................................... 2-21

Chapter 6 The Defense Acquisition System ............................................................. 2-25

Chapter 7 Management of Defense Programs.......................................................... 2-31

Chapter 8 Procurement Process................................................................................ 2-33

Chapter 9 Test and Evaluation .................................................................................. 2-37

Chapter 10 International Cooperation and Armament Sales ...................................... 2-40

Chapter 11 The Defense Industrial Base .................................................................... 2-43

Further Readings .......................................................................................................... 2-46

Endnotes ....................................................................................................................... 2-47
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

iv

PART 3 – REPUBLIC OF SOUTH KOREA

Chapter 1 Introduction................................................................................................ 3-3

Chapter 2 The Government of Korea ......................................................................... 3-6

Chapter 3 Ministry of National Defense (MND) ..................................................... 3-13

Chapter 4 Defense Acquisition Structure ................................................................. 3-16

Chapter 5 Defense Reform ....................................................................................... 3-24

Chapter 6 Planning, Programming, Budgeting,

 Execution and Evaluation System ...................................................... 3-26

Chapter 7 The Defense Acquisition System ............................................................. 3-30

Chapter 8 Management of Defense Programs.......................................................... 3-35

Chapter 9 The Procurement Process ........................................................................ 3-39

Chapter 10 Test and Evaluation (T&E) ...................................................................... 3-43

Chapter 11 Cooperative Acquisition and Arms Sales................................................. 3-45

Chapter 12 The Industrial Base .................................................................................. 3-49

Further Readings .......................................................................................................... 3-52

Endnotes ....................................................................................................................... 3-53

PART 4 – REPUBLIC OF SINGAPORE

Chapter 1 History and Traditions ............................................................................... 4-3

Chapter 2 The Government of Singapore ................................................................... 4-5

Chapter 3 The Ministry of Defence (MINDEF)......................................................... 4-9

Chapter 4 The Acquisition Organization .................................................................. 4-13

Chapter 5 Requirements, Planning, and Budgeting ................................................. 4-19

Chapter 6 The Defence Acquisition System ............................................................ 4-21

Chapter 7 Program Management.............................................................................. 4-25

Chapter 8 The Procurement Process ........................................................................ 4-27

Chapter 9 International Cooperation and Arms Sales .............................................. 4-31

Chapter 10 Defence Industrial Base ........................................................................... 4-32

Further Readings .......................................................................................................... 4-35

Endnotes ....................................................................................................................... 4-36
Introduction

v

PART 5 – THE UNITED STATES

Chapter 1 History and Traditions ............................................................................... 5-3

Chapter 2 Congressional Involvement in Acquisition ................................................ 5-9

Chapter 3 The Cabinet.............................................................................................. 5-13

Chapter 4 Department of Defense ............................................................................ 5-15

Chapter 5 Defense Acquisition Structure ................................................................. 5-22

Chapter 6 Service Acquisition Organizations .......................................................... 5-26

Chapter 7 The Defense Acquisition System............................................................. 5-35

Chapter 8 Defense Acquisition and Technology Workforce .................................... 5-46

Chapter 9 Test and Evaluation of Weapon Systems ................................................. 5-50

Chapter 10 Cooperative Acquisition and Foreign Military Sales (FMS) ................... 5-55

Chapter 11 The Industrial Base .................................................................................. 5-60

Further Readings .......................................................................................................... 5-64

Endnotes ....................................................................................................................... 5-65

PART 6 – COMPARATIVE ANALYSIS

Chapter 1 A Comparison of the Acquisition Systems of Australia, Japan,

 South Korea, Singapore and the United States ..................................... 6-3

Endnotes ....................................................................................................................... 6-15

APPENDIXES

Appendix A Armed Forces ........................................................................................ A-3

Appendix B List of Acquisition and Related Organizations..................................... A-4

Appendix C Government-Owned, Government-Operated (GOGO)/

 Government-Owned/Contractor-Operated (GOCO)

 Industrial Facilities ......................................................................... A-22

Appendix D Glossary ............................................................................................... A-25

Appendix E Bibliography ........................................................................................ A-29
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

vi

ACKNOWLEDGMENTS

This book is the work of many people, each of

whom contributed an extraordinary amount of

help in developing the individual country chapters. I am indebted to many people who contributed their ideas and time to this effort. A special thanks to Faye Dufer for her tireless efforts

correcting my grammar and computer errors,

and providing the final editing of my chapters.

All the members of the DSMC Executive Institute—Tom Dolan, Ron Register, Joanne Langston, Frank Swofford, John Wilson, Bill Lukens

—who for over a year responded to my requests

for information and reviewed my drafts, I owe a

debt of gratitude. I also owe a debt of thanks to

Lieutenant Colonel Bob Faulk, USAF, and many

other DSMC faculty who helped provide insight

into areas where they are the real experts. On a

personal note, my wife Mellie spent hours at

home reading my esoteric material and providing me a civilian’s perspective on our complicated acquisition system. And finally, to an old

friend, whose editorial efforts always improve

my work—Bruce Robinson—special thanks!

I also need to thank the many people who contributed their time and efforts to review and provide information on their acquisition systems.

From Korea I want to provide a personnel thanks

to Mr. Kang, Haeng Jung, the Director General,

Analysis and Evaluation Bureau, Dr. Cho, NamHoon, Associate Research Fellow, Dr. Hwang,

Dong Joon, Vice President from the Korean

Institute of Defense Analyses. The help of Colonel William Johnson, Major Michael Finnegan,

Lieutenant Colonel Jiyul Kim from the Joint United States Military Affairs Group (JUSMAG)-

Korea was greatly appreciated, both in reviewing documents, providing inputs and helping to

set up meetings with key Ministry officials.

In 1998, the Australian Defence Forces Academy and the Defense Systems Management

College (DSMC) co-sponsored the First International Acquisition and Procurement Seminar

(IAPS)-Pacific in Canberra, Australia. The second conference was held in 1999 in Seoul, South

Korea, sponsored by DSMC and the Korean

Institute of Defense Analyses (KIDA). The third

seminar will be held in September 2000 in

Singapore hosted by the Ministry of Defence.

This seminar provides a forum for Pacific Rim

Nations to exchange views and discusses problems each nation faces in the acquisition of military equipment. An element of this seminar is a

comparison of the various acquisition systems

of each nation to provide a better understanding

of other nations’ acquisition environment, structure and processes and to share lessons learned

from those involved with international defense

cooperation programs.

IAPS-Pacific parallels the work DSMC has done

with its European Allies. International Defense

Education Arrangement (IDEA) is an arrangement among the “acquisition education” institutions of France, Germany the United Kingdom and the United States. In 1998 the IDEA

nations sponsored an effort to publish a book

which compared the acquisition approaches of

the four IDEA nations. In 1999 DSMC published its first comparison of acquisition systems—A Comparison of the Defense Acquisition Systems of France, Germany, the United

Kingdom and the United States. Building on the

comparison work presented in the first and second IAPS conferences, this volume looks at the

acquisition systems of the five primary participants involved in IAPS—Australia, Japan,

South Korea, Singapore, and the United States.
Introduction

vii

From Japan I want to offer of special thanks to

Mr. Kozo Oikawa, Director General of the

Equipment Bureau and his staff, in particular

Mr. Ichiro Nakayama for their invaluable help

in supporting my efforts. The help of Major

Mitsuru Ohsawa, Mr. Seiichi Igarashi, and Mr.

Taishin Shioyama were greatly appreciated. I

also need to thank the personnel at the Mutual

Defense Assistance Office (MDAO) at the U.S.

Embassy Tokyo, Mr. Noburu Flores, Lieutenant Colonel Edward J. Berghorn, Director, Air

Force Technology Programs and Mr. Rod

Tanaka, Deputy Chief, for their support. A special thanks to Dr. Naruhiko Ueda (Lieutenant

General Retired), Senior Executive Director of

the Japan Defense Research Center, for his wise

counsel.

From Singapore I am indebted to Mr. Tan Pengyam from the Singapore Embassy in Washington,

D.C., and Mr. Chinniah Manohara, Director

of Defence Procurement Division, from the

Defence Science and Technology Agency (DSTA)

for their insight and assistance. I am also thankful to Colonel Bob McAdams, USAF, Chief

Office of Defense Cooperation (ODC), Singapore and Brunei for his insight in Singapore’s

acquisition system and assistance is arranging

discussions with personnel from the Ministry of

Defence.

From Australia, Professor Stefan Markowski and

Professor Peter Hall of the Australian Defence

Force Academy in Canberra and the University

College, the University of New South Wales for

their fine efforts in developing and writing the

Chapter on Australia.

Many more of my colleagues have contributed

their insight into our approach to this book to

make it a useful document to the readers. The

views expressed in this book are those of the

authors, and do not necessarily reflect the

opinions of all those who supported this project.

June 2000

— PROJECT MANAGERS/AUTHORS —

Professor B. A. “Tony” Kausal, Air Force Chair, DSMC

Professor Stefan Markowski, Australian Defence Forces Academy
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

viii

INTRODUCTION

“How do we produce affordable systems to meet our common strategic objectives?...it becomes impractical for each nation to consider independent major weapon system development and/or

production...To stay ahead of the enemy and to counter the new

dimension of threats we will face as coalition partners, we must

develop these new defenses cooperatively.”

— Jacques Ganslser,

Under Secretary of Defense

(Acquisition, Technology and Logistics)1

As we start the new Millennium, it is worthwhile

to look back to the early years of the last century in the Pacific to provide a backdrop for the

security environment in this century. Japan emerged as an international power flexing its military muscle by defeating both China and Russia. Korea, as an independent vassal of China,

became a protectorate of Japan. Australia declared its freedom from Great Britain and became an independent nation in 1905. Singapore,

however, was still an entrepot and remained with

the British Empire. Its independence was more

than a half century away.

As the Century evolved, the Pacific region saw

devastating wars, the disappearance of empires,

revolutions and political changes. But new economic powers arose in the Pacific—Japan with

the second largest economy in the world, a resurgent China, and the economic “Asian Tigers”—

South Korea, Singapore, Thailand, Malaysia and

Indonesia. As we left the Century, the “Asian Tigers” had stumbled, but South Korea, Singapore

and Malaysia seemed to be on the road to recovery. Japan was still struggling to resuscitate

its economy. Political change saw the “winds of

democracy” sweep across the Pacific. Technology—aircraft, telephones and the Internet—

contributed to a changing social and cultural

landscape of these nations.

Much of this can be seen as progress, but peace

has yet to “break out.” The Korean peninsula

still has two armies poised for combat. North

Korea’s actions concern the Japanese. Southeast

Asian conditions—possible political disintegration in Indonesia and the, sometimes contentious, relations with Malaysia—worry Singapore. While Australia has no immediate regional

threats, United Nations efforts in East Timor

stretch their military resources. China has contentious territorial issues in the South China Sea

with its Southeast Asian neighbors and its relationship with Taiwan worries decision-makers

throughout the region. With our “futuristic

glasses” on, it is still difficult to know potential

security threats—intimidation may come from a

variety of sources—missile launches by North

Korean or Iranian terrorist attacks, a nuclear

exchange between India and Pakistan, or cyber

attacks on military organizations.

Each of the nations in this book responds to these

threats in different ways. One constant however,

is the recognition of the need for technologically sophisticated weapon systems to respond
Introduction

ix

to the threats. But, technologically sophisticate

weapon systems are costly. Accordingly, in each

of these nations, domestic needs continually

conflict with the need to maintain an adequate

military capability.

Since the 1970s, cooperative armament projects

have offered the often-unrealized hope of leveraging national resources. For the United States,

international cooperation began with the Atlantic Alliance members. “These (cooperative) programs help strengthen the connective tissue, the

military and industrial relationships that bind our

nations in a strong security relationship. The

political dimension of armaments cooperation

is becoming increasingly important in an uncertain international security environment.”2

 While

international cooperation efforts began in the

Atlantic, our allies in the Pacific have also

become partners in cooperative efforts. Cooperative research and development projects are

being carried out with Japan for the ACES II

ejection seat, with Australia for the Over the

Horizon Radar, and with Korea for the Advanced

Jet Trainer/Light Combat Aircraft.

This is a book about the national armament systems of five nations. It provides an introduction

to the political environment, the acquisition organizations, systems and processes of Australia,

Japan, South Korea, Singapore, and the United

States. These countries were selected for two reasons; they are participants in the annual Pacific

International Acquisition and Procurements Seminar (IAPS) and, because as allies and friends they

are likely participants in future international

armaments cooperative programs.

Armaments cooperation happens for a range of

reasons. Nations anticipate cost savings or desire

access to better technology. The development

of common requirements, common testing approaches and collaboration in development and

production offer each country opportunities for

reducing costs and developing more capable

equipment. In other cases, collaboration is seen

as a method of transfer of technology to their own

defense and commercial industries. While nations, for a variety of reasons agree to cooperate,

having the will to cooperate does not mean managing an international program is an easy task.

National culture and traditions complicate the

job. Different time zones, different currencies,

and different fiscal years add to the difficulty.

Communicating complex issues through the fog

of language, either verbally or in writing, offers a

challenging problem for both the Program Manager and the multinational team members. Changes

in government and conflicts between executive

and legislative branches of government increase

the turmoil faced by Program Managers in each

country’s acquisition organization.

Working effectively in the international environment requires knowledge of the people, organizations and cultures of each country. As its

primary purpose, this book looks at the major

political and military acquisition characteristics

of the five countries, and provides an overview

of their organizations and processes. A useful

starting point for understanding an organization

is to look at its organizational structure. An

organizational structure indicates where activities take place, how the management system

operates, and indicates where authority and

responsibility rest. The managerial system,

which includes the formalized policies and procedures, guides the activities of the acquisition

organizations and provides an understanding of

how the system operates.

This book was written for several audiences. For

the acquisition practitioners, this introduction

should provide a basic understanding of the other

countries’ systems and their approach to armaments development. This basic understanding will

help identify their counterparts and more effectively and efficiently perform their assignment

in the international environment. By comparing

these different systems, a mutual understanding
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

x

should facilitate the establishment of collaborative projects.

There are several secondary purposes. Every

year the United States assigns large numbers of

military personnel overseas to Security Assistance Organizations (SAO). These “SAOs” perform a key role in the interface between the military of our government and the host country. One

of their many tasks is to work with the other

country’s acquisition system. This book will be

a “good read” for them as they attempt to understand and work with these organizations. It

will also provide an introduction to the United

States acquisition system.

In preparation for this book my research of the

literature of comparative politics unearthed very

little research done at the ministerial level of

government—comparing the practices, procedures and organizational approaches to implementing government policies. For students of

comparative politics, governments, and public

administration, this book provides a structured

approach to understanding the organizations and

approaches to managing the acquisition and

development of weapons systems.

“Change has few friends,” goes the old saying.

While change has few friends, the political,

bureaucratic system seems to find change irresistible. Change is a constant feature of the acquisition systems of these countries: new initiatives, new organizations, old and new approaches to solving the complex problems of weapons

development and to compliment the changing

political philosophies of administrations. Even

as this book was being written, the United States,

Korea and Singapore all made major changes

within their organizations and processes. This

book offers another perspective, i.e., a “snapshot

in time,” which will provide future readers a

historical perspective on the acquisition systems

of these countries.

“Looking at another system helps illuminate our

own.”3

 Understanding other countries helps us

to better understand ourselves. Ideally, by comparing countries to one another, we can get a

“feel” for the diversity of approaches to acquisition, understand, in part, how these systems

have evolved; and draw our own conclusions as

to the relative merits and weaknesses of different forms of political, military and bureaucratic

organizations. As we look at the different ways

other countries organize, manage, and develop

weapon systems, we are offered a unique understanding of our own system. Readers should

be guided to look beyond similarities and differences to discern underlying principles and

their political consequences in the different

countries.

In reading this book and evaluating the systems

in these countries, the reader should understand

each country’s historical political environment,

the organizations responsible for acquisition, and

the processes used to develop a system. Their

political systems, defense and security needs,

economic resources, and cultures have all evolved over time. To provide a comparative basis,

the structures, the functions and the processes

are presented in each section of the chapters.

Also, where appropriate, each section is introduced with a short historical background to

provide a setting for the current organization and

its processes.

 “Montesquieu says that at the birth of political

societies, it is the leaders of the republic who

shape the institutions but that afterward it is the

institutions which shape the leaders of the republic.”4

 Organizations mold behavior, but the

organizations were created for a variety of reasons to include ideology, cultural constraints and

history. What is the effect of political and bureaucratic institutions on the acquisition system?

What special problems arise from public accountability and political control? The view of

the acquisition environment shown in this book
Introduction

xi

will provide insight for those interested in understanding how each of these countries systems

operate.

The first five parts are organized around a specific country and cover four general topics—the

political environment, the military and the requirements process, the acquisition system, and

the defense industrial base.

Each Chapter looks at the political environment

to include the legislature, the elected politicians

and the roles they play in controlling and managing the executive branch and the armament

organization. In looking at the acquisition organization and its structure, each chapter tries to

answer these questions: How does the military

part of the organization relate to the acquisition

and modernization enterprise? What is the role

of the military in the development of requirements? What are the military and civilian roles?

What type of education and training do they provide their acquisition personnel? How does each

country manage a major program? What are their

approaches? What are the different budgeting

and planning systems? How is the procurement

process structured? What is the decision-making process in the organization? Who makes the

decisions? What is the role of competition? How

do they approach source selection? What types

of contracts do they use? What type of oversight

do they perform on their contractors? How do

they test new equipment?

Finally, we look at the defense industrial base. How

have each of these nations responded to the need

to build defense equipment? What is the role of

private enterprise? What is the public armory role?

How has the relationship between industry and

government been maintained? What type of

industrial base does each country have?

As the commercial industrial base has become

worldwide, how has the defense industry

responded to the “globalization” challenge?

Chapter 6 provides a comparison of the five

systems.

Throughout this book the term “Revolution in

Military Affairs” is used. Commonly called by

its acronym RMA, it is the banner under which

military departments worldwide are incorporating advanced technology into their fighting doctrines and their war machines. Desert Storm and

Kosovo demonstrated the impact of technology

on the battlefield. Advanced technology allowed

bombs to be delivered with precision, locate

enemy targets and fly without detection. However, technology is expensive and each generation of technology is introduced at a faster pace

than the acquisition cycle can respond. To free

up the money needed for the RMA, a Revolution in Business Affairs (RBA) is necessary. The

business side of defense needs to change—to

become more streamlined, and to develop less

costly weapon systems, that cost less over the

life cycle. RBA is a search for the best organization, the best procedures, and the best practices. Strategies such as evolutionary acquisition (U.S.), a single RFP process (Korea), commercial specifications (Japan), a standing review

board for acquisition programs (Australia) and

a new agency (Singapore) are examples of nations looking for better ways of doing business.

They are striving for a method of achieving

“value for money”—the best weapons systems

at the most affordable cost.

This book can be read several different ways.

For those with an interest in a specific country,

the individual country chapter will provide

insight into how they do business. For those interested in a comparative analysis, Chapter 7

reviews all five countries and compares and

contrasts the approaches to delivery of weapons

system and how the system operates.

Recognizing the limitations of this work, the

authors have added a recommended reading list

to provide further insight into the culture, the
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

xii

political system and the military acquisition

system.

Finally, a caveat in reading this book. The students at the Defense Systems Management College (DSMC) are always looking for “best practices.” What works best? The national chapters

in this book are designed to draw a picture of

how national systems address the complex tasks

of making defence acquisition work. While it

would be nice to have exact comparisons to highlight good practices, this book is designed to

facilitate successful cooperation through an understanding of our differences and similarities.

Our intent is not to provide an analysis of which

system is best, but rather insight into how each

system operates.
Introduction

xiii

ENDNOTES

1. Under Secretary of Defense (Acquisition,

Technology and Logistics), U.S. – Korea

Defense Industrial Cooperation Committee,

Rosslyn, VA, October 15, 1999.

2. Address of Under Secretary of Defense for

Acquisition and Technology, Honorable Paul

G. Kaminski to ComDef ’96 Conference,

Omni Shoreham Hotel, Washington, D.C.,

April 1, 1996.

3. Richard Neustadt, 1980.

4. Jean-Jacques Rousseau, The Social Contract, translated by Maurice Cranstron

(Harmondsworth: Penguin Books, 1968),

p. 87.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

xiv
Part 1 – Australia

1-1

PART 1

AUSTRALIA
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

1-2
Part 1 – Australia

1-3

Chapter 1

INTRODUCTION

invest in defence capability in the absence of an

identifiable threat (see Chapter 3). Consequently, it has been very difficult to sustain national consensus

about the appropriate level

of spending on

defence (Chapter 5 refers).

Military capability, which is provided by the

ADF, is centred on combat and combat support

elements. However, it is but one element of national defence capability, which is shaped and

sustained jointly with other elements of national

power. These other elements include: the Defence Organisation; the machinery of governance; defence contractors and wider industry;

national infrastructure; society at large, its national will and strategic priorities; and the

country’s international alliances and arrangements. In this part, key elements of Australia’s

defence capability are reviewed: the constitutional

framework and the machinery of government

(Chapter 2); Australia’s strategic environment and

priorities (Chapter 3); the Defence Organisation

and governance (Chapter 4); the provision of

resources to fund Australia’s military capability (Chapter 5); the ongoing reform of the

Defence Organisation (Chapter 6); the structure

and operation of the Defence Acquisition

Organisation (Chapter 7); the acquisition of

major capital equipment (Chapter 8); and the

defence industrial base (Chapter 9).

Australia is a geographically large country, with

the world’s longest national coastline to defend.

This part of the volume provides an overview

of defence procurement in Australia in the

broader context of the country’s strategic environment, and of the management and funding

of the defence organisation.It also considers the

constitutional and legal framework within which

the Australian Defence Organisation operates.1

To understand defence procurement in Australia, one must understand the interplay of a number of strategic, economic, legal and institutional

factors. In particular, the apparently endless succession of episodes of “reform” of the (Australian) Defence Acquisition Organisation can only

be understood in the light of the broader context of defence budgeting and governance—and

the commitment of successive governments to

high levels of locally-sourced defence supplies

in line with the doctrine of “self-reliance.”

Overseas observers might be puzzled to learn

that one of the best defence procurement organisations in the world has been regularly subjected

to savage criticism and repeated bouts of restructuring. The same comment could be made about

the Australian Defence Organisation as a whole.

Yet it demonstrated in East Timor in 1999-2000,

that the Australian Defence Force (ADF) is

highly professional, technologically sophisticated and cost-effective. But its management,

command and governance were being called into

question (again) as Australia entered the new

century and, despite its demonstrable successes,

the Defence Organisation was struggling to define its role and make a convincing case for its

share of national resources. It is now an unpalatable but unavoidable fact that Australia faces

a dilemma increasingly apparent to many other

countries: how to structure a defence force and

AUSTRALIA
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

1-4

It has a high per-capita income, though a relatively small economy for its 18 million people.

The continent of Australia and the seas around

it, which account for about 10 percent of the

total surface of the planet, are the areas of direct

military interest to Australia. In view of its remoteness from major military powers and the

inhospitable nature of much of its landmass, a

sudden major military attack on Australia does

not appear to be very probable. However, the

likelihood of the country becoming involved in

a major or minor military contingency is quite

significant, given Australia’s military obligations

to its allies (see Chapter 3) and its support for

international constabulary activities (peacekeeping and enforcement), in particular those

undertaken under the auspices of the United

Nations (UN).

Australia has a relatively small public sector and

is a medium-size defence spender, with a defence

budget of A$18 billion (U.S.$10 billion) in 1999-

2000. This represents about 8 percent of Government budget outlays and, net of the Capital Use

Charge, 1.9 percent of Australia’s Gross Domestic Product (GDP).2

 Some 85 percent of the defence budget is normally spent in Australia and

over 60 percent of it goes to the procurement and

maintenance of capital equipment and the purchase of consumables. On present strategic projections, defence expenditure is not expected to

grow faster than the economy, that is, it is likely

to stay at about 2 percent of GDP (again excluding the Capital Use Charge).

The ratio of military expenditure to GDP is a

standard indicator of the defence burden on the

economy and a reasonable indicator of threat

perception. In comparison with other countries,

Australian military expenditure, as a proportion

of GDP, is on the low side but, in absolute terms,

it puts Australia in the second tier of defence

spenders in the Asia-Pacific region.

Given its small size (about 53,000 uniformed

personnel in 1998-99), the main qualities required of the ADF are high levels of lethality,

mobility, adaptability and flexibility to meet a

very diverse range of potential threats. In part,

this has been achieved through the use of professional military personnel—there is no conscription—and through the use of technologically sophisticated weapons systems as a force

multiplier.3

 Australian policy makers, however,

have long had to balance demands for technological sophistication, based on imports of the

state-of-the-art weapons systems, with selfreliance requirements calling for high local content in procurement of military materiel. Things

have been further complicated by a reluctance

to pay excessive premia for domestically sourced

equipment (see Chapter 4).

Defence funding has declined by over 2 percent

in real terms since the late 1980s (Chapter 5

refers). At the same time, its systems have become more capital and technology intensive.

Staff reductions (military and civilian) in the

1990s totaled some 20 percent (see Chapter 6).

On the other hand, the share of new investment

in capital equipment and facilities in the overall

defence budget has risen from below 20 percent

in the early 1980s to over 25 percent in the late

1990s. Despite the aging of some major platforms

(e.g., F-111 aircraft), the ADF inventory has

become technologically much more sophisticated

and its personnel more technology-oriented.
Part 1 – Australia

1-5

The success of policy involving the acquisition

of technologically advanced equipment during

a period of budgetary restraint has been predicated on the ability of the Defence Organi-sation

to uncover surplus-to-requirement assets (e.g.,

buildings, equipment) and under-utilised resources, which could subsequently be released

from these less-productive uses to pay for new

weapons systems. A significant proportion of

such “savings” was to be achieved through the

shedding of civilian and military personnel resulting from market testing and contracting out

“non-core” activities. But labour costs have been

difficult to cut even when personnel numbers

were being reduced, since the skills and expertise required of personnel were substantially

increasing and employment conditions have had

to compete with those outside Defence in a

healthy, growing economy. Thus, real savings

(resources actually available for redeployment)

have been much smaller than had been hoped

for (see Chapter 6). However, even if further

sources of “slack” within the defence portfolio

can be identified and taken-up, a capital- and

technology-intensive investment strategy is unlikely to be sustainable in the long-run unless

there is an increase in real spending beyond the

current level of 1.9 percent of GDP.

By world standards, the ADF buys relatively

small quantities of technologically advanced

equipment and consumables. By the end of the

1990s, investment in equipment and facilities

accounted for about a quarter of the annual defence budget (about U.S.$1.75 billion), personnel for over a third of it, and operating costs for

about 40 percent of the Budget.4

 Although acquisitions of major capital assets have included

large local content requirements, defence procurement has had a relatively small impact on

the Australian economy as a whole. It is important, though for particular industry sectors and

individual firms (Chapter 9 refers).

For most defence-specific products, the domestic requirement is too small to sustain production

lines capable of achieving significant economies

of scale. Exports and “dual technology” have

been proposed as means of achieving longer

product runs, but, by and large, Australia is an

insignificant exporter of defence equipment and

consumables and defence-related firms have

found it difficult to combine military and civilian outputs within one production facility. In this

respect, Australia’s experience is similar to that

of many other countries.

Historically, defence-related industry sectors in

Australia have tended to contain more producers than domestic demand for defence equipment is strong enough to sustain in peacetime.

Significant consolidation has taken place in recent years (Chapter 9) but the process may well

have a way to go.5

 In the past, many of these

firms have operated with a great deal of spare

capacity and at scales well below those needed

to stay cost competitive. Some of them have been

kept viable by various forms of “demand management.”6

 As observed by the authors of recent

efficiency report, “The Australian defence market is too small to provide continuity of production, let alone sufficient new design and development work for such firms to remain viable

without subsidisation in most areas.”7

Like other parts of this volume, this part also

contains a description of the organisational

structure for defence procurement in Australia

(Chapter 7) and of the procurement process itself (Chapter 8). Both of these are likely to change

by the time this volume appears in print but the

specific nature of changes is difficult to ascertain at the time of writing. It is expected that the

Defence Procurement Organisation, mainly responsible for capital acquisitions, will be combined with Support Command, responsible for

through-life logistic support. The envisaged

merger should consolidate the plethora of asset

acquisition and logistic support tasks into an
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integrated, “cradle-to-grave” capability formation, support and management process. It is also

expected that the new, post-merger acquisition

entity will place greater emphasis on: flexible

forms of contracting (incentive and alliance

contracting); non-adversarial post-contractual

relationships with suppliers (integrated project

teams, partnering arrangements); early involvement of acquisition personnel in requirements

specification; longer-term budgeting (to give

more meaning to life cycle costing); and closer

collaboration with users at all stages in capability

specification, formation and maintenance.

In this part, the authors have put considerable

emphasis on budgetary and management issues

in the Australian Defence Organisation. These

issues are critical to understanding the forces

shaping the broader organisational context

within which the new Defence Procurement

Organisation will operate.
Part 1 – Australia

1-7

Chapter 2

THE GOVERNMENT

OF AUSTRALIA

visited the continent as early as 1520 and the

Dutch were making extensive and accurate maps

a century later. However, they found the land

harsh and inhospitable, and showed no further

interest in exploring and colonising it. In 1768,

James Cook was dispatched to explore the coast

of Terra Australis for Britain. Cook’s ship the

Endeavour arrived at the southeastern tip of the

continent in 1770 and Cook set ashore to claim

it for Great Britain. He named the land “New

South Wales.”

In 1788, the first British settlement—and, thus,

the British Colony of New South Wales—was

established at Port Jackson and the principle of

Terra Nullius was applied to establish the new

system of colonial land rights. Terra Nullius

meant that a “clean slate” approach was taken

to settlement, based on a premise that the Aborigines—the indigenous inhabitants of Australia—were nomadic and therefore had no established (customary or native) rights in land. New

settlers could thus claim the continent and there

was no need to sign a treaty with or obtain some

other form of consent from the Aborigines. In

New South Wales, and later in other British colonies formed on the Australian continent (Tasmania in 1825, Western Australia in 1829, South

Australia in 1837, Victoria in 1850, and

Queensland in 1859), the English legal system

(the English common law) applied.

In 1842, the first Colonial Parliament (Legislature) was created by the British Parliament in

the Colony of New South Wales. The enabling

British law became known as the Australian

The constitutional fabric of modern Australia may

to some be rather confusing. For example, Section 1 of the Australian Federal Constitution provides that “The legislative power of the Commonwealth shall be vested in a Federal Parliament,

which shall consist of the Queen, a Senate, and a

House of Representatives, and which is hereinafter called “The Parliament,” or “The Parliament

of the Commonwealth.” Although Australia is an

independent country, “the Queen” referred to

above means the ruling British Monarch (Queen

Victoria at the time the Federal Constitution was

adopted and Queen Elizabeth II at the time of

writing). She is represented in Australia by the

Governor-General (at the Federal level) and by

State Governors (in each State). Australia has

been a Federation (of States) since 1901. However, substantial constitutional powers remain

vested in each State and the exact nature of the

relationship between the Federal and State Governments is at times rather blurred. These relationships may be better understood with the aid

of a brief history of their origins. This Chapter

draws on O’Connor (1998) and for further details regarding the workings of the Australian

system of government the reader is referred to

that publication.

History

Australia’s name was derived from terra australis (Latin: “southern land”). A great southern

continent appeared on maps from the early

Christian era and by the mid-sixteenth century

it was being identified as Terra Australis

Nondum Cognita. The Portuguese may have
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Constitutions Act (No.1). In 1850, the British Parliament passed the Australian Constitutions Act

(No.2), which allowed the colonial parliaments

to draft and pass their own constitutions. These

constitutions were limited in scope since colonial laws dealing with so-called “controversial

matters” (such as the disposal of Crown land) had

to be scrutinized and approved by the British

Government before they could be granted Royal

Assent (the British Monarch’s consent to their

enactment). Each colony established a bicameral

(two-house) parliament with the upper house (the

Legislative Council) and the Lower House (the

Legislative Assembly).8

By the 1860s, the new Australian Colonies, assisted by the large-scale transportation of British

convicts, were so well established that the British Parliament granted their colonial parliaments

“the power to create laws for the peace, welfare

and good Government of their citizens.”9 In 1865,

the British Parliament passed the Colonial Laws

Validity Act, which allowed colonial laws to apply

even when they were generally different from or

inconsistent with the laws passed by the British

Parliament or with the English common law.

However, a colonial law (an Act of Parliament)

could be made invalid if it was “repugnant to

British law, i.e., if the British Parliament created

a law, which was specifically designed to apply

to a colony, then that colony could not have its

parliament pass a law which was inconsistent with

that British law.”10 Thus, although the Colonial

Laws Validity Act devolved considerable lawmaking powers to the colonial parliaments, the

British Parliament retained the overarching right

to create laws, which directly affected the

Colonies.

The constitutional powers vested in Australian

Colonies continued to be important even after the

latter became States in the New Australian

Federation and the Federal Parliament was

created in 1901 under the Australian Federal

Constitution. The Federal Constitution expressly

preserves the constitutions, legislative powers

and laws of the States (the former Colonies). As

the relationship between the British Parliament

and the Australian Federal Government was defined, the new Australian Constitution neither

contained a Declaration of Independence nor

gave the Australian Federal Parliament the right

to pass laws inconsistent with or repugnant to

British laws. Similar problems were faced by

other ex-British colonies and dominions such

as Canada, New Zealand and South Africa and,

after a series of conferences in the late 1920s,

the countries concerned:

“...resolved that they were independent

and equal nations and that steps needed

to be taken to ensure that they could create laws (through their Parliaments) without fear that such laws could be ruled to

be invalid because they con-flicted with

British laws. The result of these conferences was that, in 1931, the British Parliament passed the Statute of Westminster.

It had three main effects:

(a) the Colonial Laws Validity Act would

not apply to the Federal Government;

(b) no federal law would be invalid

because it was repugnant to the law

of England, or because it was repugnant to an Act of the British

Parliament; and

(c) no Act of the British Parliament

would apply to the operations of the

Federal Government, unless the Federal Government requested such an

Act to be created.”11

In 1942, the provisions of the Statute of

Westminster were accepted by the Federal Government in the (Federal) Statute of Westminster

Adoption Act. While the Statute of Westminster
Part 1 – Australia

1-9

enhanced the independence of the Australian

Federal Parliament, it did not increase the independence of the Australian State Parliaments.

In principle, the British Parliament still had

power to pass laws, which could directly impact on any Australian State, as long as the subject matter of such legislation was not within

the power or authority of the Australian Federal

Government. This anomaly was not rectified

until 1986, when the Federal Parliament passed

the Australia Act, which created independent

State Parliaments similar to the independent

Federal Parliament. Thus, it was not until the

mid 1980s—more than 80 years after the

creation of an “independent and equal” Australian Federation—that all Australian Parliaments became fully independent of the British

Parliament.12

The Three Arms of

the Federal Government

Australia is a constitutional monarchy; that is,

it is a system of government in which the ruling

British Monarch is the Head of State but where

the powers of the Monarch are clearly defined

and severely limited by the Federal Constitution. The first three Chapters of the Constitution define three arms of the Federal Government.

These are:

1. The Executive, comprising the GovernorGeneral (representing the Monarch) and the

Federal Cabinet of Ministers led by the

Prime Minister, which is responsible for setting the policies of the Federal Government,

overseeing the administration of these

policies, and for enforcing Federal laws by

prosecuting people who break them. The

Public Service, controlled by the Federal Ministers, is responsible for the administration

of Government policies;

2. The Parliament, comprising the House of

Representatives and the Senate, enacts

(passes) laws which give effect to the

policies of the Executive; and

3. The Judiciary (or the Judicature), comprising the High Court of Australia and

certain Federal courts, which applies and

interprets the laws enacted by the Parliament.

Because the three arms of Government are dealt

with in different Chapters of the Constitution, it

appears that the doctrine of the separation of

powers has been applied to the activities of the

Federal Government.13 The doctrine requires that

the three arms of

Government operate separately and

independently of

each other so that

decision-making

powers are more

broadly distributed

for the protection

of all Australians.

In principle, this

doctrine should

have also applied

to the pre-Federation Colonial Governments and,

thus, to each present-day State Government. In

practice though, the doctrine is sometimes ignored

at the State level since the constitutions of the

former Colonies do not set out the operations of

each arm of Government in separate chapters.14

Even at the Federal level the doctrine is sometimes ignored or not applied as certain Government operations are occasionally undertaken

or controlled by arms of Government other than

the one defined in the appropriate chapter of the

Federal Constitution (see below).

The Parliament

Chapter 1 of the Constitution gives the Federal

Parliament (the Parliament of the Commonwealth)
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legislative power, the power to pass new laws

(Acts of Parliament) and laws which amend

existing Acts. The Parliament consists of the

Monarch, a Senate (an Upper House) and a

House of Representatives (a Lower House).

Thus, the Federal Parliament is a bicameral

Parliament and the draft laws (Bills) must be

passed by both Houses to become Acts. They

must also receive the formal assent (approval)

from the Governor-General acting on behalf of

the Monarch. Thus, under the Australian Federal Constitution, the Monarch is vested with

some legislative power. This is because any Acts

passed by the Parliament cannot come into

effect until the Monarch’s assent has been obtained and the process of assenting to Acts is

undertaken by the Governor-General as the

Monarch’s representative.15

Members of both Houses of the Parliament are

elected by popular vote. Members of the House

of Representatives are elected for a period of up

to three years and Senators a period of six years

but half the Senators are due for re-election every

three years. Thus, Parliamentary elections must

be held at least once every three years and often

occur well within that span. While prospective

Members of Parliament may stand as independents, nearly all of them belong to one of the

major political parties: the Liberal Party, the Australian Labor Party, the National Party, the Australian Democrats, and the Greens. The political

party, which has won the majority of seats in the

House of Representatives is entitled to form the

Government and its leader to be appointed the

Prime Minister.16 The Constitution prescribes,

inter alia, that the Parliament must sit (meet) at

least once every 12 months. Figure 1-1 provides

further details of both Houses of Parliament and

parliamentary procedure.

The Executive

The Executive comprises both the Prime Minister and his/her Cabinet of Ministers and the

Governor-General, as the Monarch’s representative. Under the Constitution, the executive

power of the Federal Government is vested in

the Federal Executive Council, which advises

the Governor-General in the Government of the

Commonwealth.

The Federal Executive Council comprises the

Prime Minister and the Cabinet of Ministers,

appointed by the political party that holds the

majority of seats in the House of Representatives,

and the Governor-General. As in most other

countries, individual Ministers are responsible for

one or more specific areas of government. For

example, a member of the Cabinet in charge of

the area (portfolio) of “defence” is the Minister

for Defence.

PUBLIC ADMINISTRATION

Ministers are supported by Departments, which

are staffed by public servants who administer the

Minister’s portfolio, provide policy advice and

who are in charge of the delivery of portfolio services. The Ministers are also responsible for administrative rules (Regulations) produced by their

Departments to administer the routine business

of the portfolio and implement the relevant Acts

of Parliament. As Ministers should ultimately be

responsible for the administration of Government’s business, the power of the Executive is

sometimes referred to as administrative power.17

In principle, the passing of Federal Regulations

is the prerogative of the Federal Parliament since

the legislative power is vested in the Parliament

and not the Executive. In practice, the doctrine

of the separation of powers is not applied in this

case as, to reduce its workload, the Parliament

often passes an Act which gives authority to

the Executive to pass Regulations to accompany the Act, so that it may be administered

and effectively implemented.18
Part 1 – Australia

1-11

Figure 1-1. The Australian Parliament

The House of Representatives

The Constitution requires that every member of the Lower House represent roughly the same number

of voters (at present, electorates of about 75,000–80,000 people). The Constitution allows the Parliament

to make laws to determine the number of members in the Lower House. Since Federation, the

membership has increased from 75 members to 148. The Constitution also provides for the election of

a Speaker of the House of Representatives, whose job is to ensure that the business of the House

proceeds in an orderly manner and in accordance with parliamentary rules (standing orders).

The Senate

In debates leading to the Federation of Australian Colonies, the smaller Colonies favoured the concept

of a Senate as an important “house of review” which would have the power to scrutinise and, if need

be, to impede the proposed legislation of the House of Representatives. Consequently, the Federal

Constitution provided that all States would be granted an equal number of Senators regardless of their

population. On the other hand, the inter-state distribution of the membership of the House of

Representatives is entirely dependent upon the distribution of population between the States. Thus, a

larger State (e.g., New South Wales) has a larger representation in the Lower House than a small State

(e.g., Tasmania) but an equal number of Senators in the Upper House. Historically, this was intended to

ensure that the House of Representatives would not pass legislation favouring larger States at the

expense of the smaller ones. This is a source of frustration for governments with a large majority in the

Lower House but no majority in the Senate. The Senate may significantly impede the passing of a

major piece of legislation, when independent or minor party senators tip the balance of power.

Parliamentary Procedure

Most laws of a Government (Federal or State legislation) are contained in Acts of Parliament. As noted,

an Act starts its life as a Bill (a draft Act) and is prepared by a senior Government lawyer (Parliamentary

Draftsman or Parliamentary Counsel). Normally, Bills are introduced by the Government of the day.

Individual members of Parliament may also introduce Bills (Private Member Bills). A Bill may be

introduced in either House of Parliament, although it is usually presented to the House of Representatives.

Money Bills (Appropriation or Supply Bills), which allow the Government to spend money and raise

taxes, may only be introduced in the House of Representatives. However, regardless of where it is first

introduced, both Houses of Parliament must pass a Bill before it becomes an Act.

When the House of Representatives and the Senate cannot agree upon a particular Bill—for example,

when the Government commands a majority in the House of Representatives but not in the Senate—

the Constitution provides that both Houses of Parliament may be dissolved and a Federal election may

be called (double dissolution election). At such an election, all eligible citizens would be required to

vote for the House of Representatives and the full Senate. The double dissolution provision is not

compulsory in the case of deadlock between the Houses, but it is available at the option of the

Government. It is often used as a political threat to opposition parties that may be blocking a bill in one

House—particularly where those opposition parties are not enjoying high public support in opinion.1 If

the same political party has again won a majority of seats in the House of Representatives and formed

a Government after a double dissolution election, the same Bill may again be passed through the

House of Representatives. If the Senate once more rejects or fails to pass the Bill, or passes it with

amendments which the House of Representatives will not approve, then a joint sitting of the two houses

may be called.”

1 O’Connor, 1998.
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In some circumstances, Acts of Parliament or

administrative Regulations may require a board

or tribunal to be established to review decisions

made by public servants in a department. Normally, the review board/tribunal is established as

an element of the Executive power to review an

administrative decision of a department. However, these boards or tribunals have sometimes

been given powers, which are equivalent to those

of a court. This is another example of the breach

of the doctrine of separation of powers, in that

the Executive may be performing a judicial function, which might be regarded as the prerogative

of the Judiciary.19

or operations of the other level of Government.20

Constitutionally, the exclusive powers of the Federal Parliament are confined to passing laws in

respect of the location of the Federal Government;

managing the Federal public service; issue of

currency; and, raising and maintaining a military

force. The latter power is exclusive to the Federal parliament by Section 114 of the Federal

Constitution, which provides that “a State shall

not, without the consent of the Parliament of the

Commonwealth, raise or maintain any naval or

military force.”

The Judiciary

The Federal Constitution creates the third arm

of the Federal Government by providing that:

“The Judicial power of the Commonwealth shall be vested in a Federal Supreme Court, to be called the High Court

of Australia, and in such other federal

courts as the Parliament creates, and in

such other courts as it invests with federal jurisdiction. The High Court shall

consist of a Chief Justice, and so many

other Justices, not less than two, as the

Parliament prescribes.” 21

The High Court is the chief court in Australia. Its

main functions are to: apply the laws of the Federal Government; interpret the meaning of those

laws when the intent or meaning of those laws is

unclear; and hear appeals from decisions regarding civil (disputes) and criminal (law breaking)

matters made by lower Federal, State and Territory courts.22 The High Court may also asked to

clarify the meaning of certain sections of the Federal Constitution or rule on whether the doctrine

of separation of powers has been broken.23

In practice, the High Court is rarely called upon

to make such rulings. And, in fact, the Constitution contains no specific methods by which

the doctrine can be enforced.

FEDERAL GOVERNMENT POWERS

Although the Australian Constitution determines

areas where the Federal Government has express

power to pass laws, many of these powers are

not exclusive to the Federal Government and may

also be exercised by the State Governments. However, when laws are passed by both a State and

Federal Government covering the same subject

matter and the State law is in conflict with the

Federal law, then the Constitution provides that

“the latter shall prevail and the former shall, to

the extent of the inconsistency, be invalid.” Some

concurrent powers are not exercised by the States

and are, thus, de facto limited to the Federal

Government.

Since 1904, under the so-called doctrine of

implied immunity, the High Court has applied a

principle which limits the scope of federal power

by prohibiting one level of Government (be it

State or Federal) from interfering in the business
Part 1 – Australia

1-13

“This is in contrast to the Constitution of

the United States which does create a limited set of checks and balances between

the Executive and Parliamentary arms of

Government....Our Constitution contains

no such system of checks on the exercise

of powers between the Executive and the

Parliament.... Some people may consider

that this is a fault in our Constitution,

however others may argue that this allows a more liberal and realistic application of the doctrine. The latter view may

be the better view, as the United States

system can often result in legislative

gridlock—particularly when the Congress is controlled by one political party,

whilst the President belongs to another

party.” 24

A number of other Federal courts have been created

by the Federal Parliament since Federation.25

PARLIAMENTARY COMMITTEES

Parliamentary Committee System

The purpose of parliamentary committee system

is to perform functions which the Houses themselves are not well equipped to perform, such as

carrying out inquiries, hearing witnesses, examining evidence, discussing matters in detail and

formulating reasoned conclusions. This kind of

work is more effectively carried out by small

groups of Members. By concentrating on specific tasks or subjects, committees offer the benefits of specialisation. Through its committee system, the Parliament obtains information from the

Government and is able to receive advice from

experts on the matters under investigation.26

An important function of committees is to scrutinise government activity. Thus, parliamentary

committees oversee the expenditure of public

money and may call the Government or the public service to account for their actions and explain/

justify particular administrative decisions. Public input is another important dimension of the

committee system. Committee inquiries increase

public awareness of and stimulate debate on matters being considered by the Parliament. Committee meetings provide public fora for the presentation of the various views of individual

citizens and interest groups.

A parliamentary committee consists of a group

of Members or Senators (or both in the case of

joint committees) appointed by one or both

Houses of Parliament. Most Members of Parliament (MPs), except Ministers and some of the

principal office holders, serve on commit-tees.

Committees are normally composed of Members

from the various parties in proportion to the numerical strength of each group in the House. Thus

government members form a majority on each

committee. In practice each committee is chaired

by a government member and has an opposition

member as deputy chair.27

Committees have considerable powers, usually

delegated to them by the House(s) appointing

them. Laws establishing some committees may

also include particular provisions on these

matters. Committee proceedings are “proceedings

in Parliament,” and therefore “privileged.” Members and others participating, such as witnesses

giving evidence, are thereby protected from being

sued or prosecuted for anything they may say

during such proceedings. Written evidence received by a committee is similarly protected.

These powers ensure that committees are able to

get comprehensive and reliable information.

The committee system contributes to better public administration and policy making through

committee reports and recommendations. Committee reports usually recommend government

action, e.g., the introduction of legislation, a

change in administrative procedures or review of

policy. Such action is the responsibility of the

Executive Government. The latter responds to
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such committee reports by way of a prepared

response to the House. The response may accept,

wholly or partially, a committee’s recommendations, and announce its intention to take certain

action. Even though a committee’s recommendations may not be implemented directly, they

may exert some indirect influence as the information collected by the committee and its reasoned conclusions may nevertheless be taken into

account by the Government, and may also have a

wider impact on the community at large.

Joint Standing Committee on Foreign

Affairs, Defence and Trade

Foreign Affairs, Defence and Trade is one of 13

joint committees. It is established by a resolution

of both the House of Representatives and the Senate. Because of the role of the Joint Committee

on Foreign Affairs, Defence and Trade there is

no general purpose standing committee covering

these subject areas. The purpose of this committee is to consider and report on such matters relating to foreign affairs, defence and trade as may

be referred to it by either House of the Parliament; the Minister for Foreign Affairs; the Minister for Defence; or the Minister for Trade. The

Committee may also inquire into matters raised

in annual reports of relevant Commonwealth

government departments and authorities or in

reports of the Commonwealth Auditor-General.28

It is the most important com-mittee dealing with

defence matters. For example, current inquiries

include, inter alia:

• Australia’s relations with the Middle

East, including the Gulf region;

• Australia’s relations with the United Nations in the post Cold War environment;

and

• the suitability of the Australian Army for

peacetime, peacekeeping and war.

The Committee consists of 32 members. Of these,

12 Members of the House of Repre-sentatives are

nominated by the Government Whip, eight

Members of the House of Representatives are

nominated by the Opposition Whip or by any

independent Member. From the Senate, the

Leader of the Government nominates five Senators, the Leader of the Opposition nominates five

Senators and two Senators are nominated by any

minority group or groups, or independent Senators. A Government member is elected as its

Chair.
Part 1 – Australia

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Chapter 3

AUSTRALIA’S STRATEGIC

ENVIRONMENT

Defence came to an end in 1968 with the withdrawal of all British forces east of Suez. The same

year, President Nixon made it clear that the United

States was not prepared to fill the void as Australia’s new imperial protector. This marked a

turning point in Australia’s strategic perceptions:

the strategic dependence approach was no longer

viable and a new policy of self-reliance began to

take shape.

At the heart of the doctrine of self-reliance is a

requirement for the capability to counter credible low level contingencies, which nevertheless

may be very demanding, given the vastness of

Australia’s area of direct military interest. The

policy of self-reliance does not aim to achieve

military self-sufficiency. It merely aims to permit Australia to conduct military operations in

the event of credible low- and medium-level

threats without depending immediately on potentially unreliable sources of military support and

supply. The policy of self-reliance was one of

three pillars of overall strategic policy outlined

in the 1987 White Paper, The Defence of Australia—the remaining two being Australia’s alliance

with the United States and the com-mitment to

devote a certain level of resources to meet planned

objectives.

Like its (1987) predecessor, the 1994 Defence

White Paper, Defending Australia did not identify any specific source of military threat to

Australia. But it acknowledged the growing strategic potential of China, Japan and India and

noted the large-scale force modernization programs being undertaken by many South East

Australia’s International Security and

Strategic Priorities

Since World War II, Australia has faced the

dilemma of how to structure defence policy in

the absence of an identifiable threat. Kim

Beazley, a former Defence Minister in the Hawke

Government of the 1980s, put it this way:

“For most of our history, our efforts to

build a cogent intellectual basis for Australian Defence Policy have foundered

at the very beginning over a quite fundamental uncertainty about what our

Defence Forces are intended to do.” 29

For most of this century, Australia’s solution to

this problem has been to seek protection from

powerful though distant allies. Until the late

1960s, Australian defence policy assumed that

its forces would normally operate in conjunction with allies in areas distant from Australia’s

shores. Strong traditional kinship with Britain

was the lynchpin of policy until the 1950s and

Australian forces were structured primarily for

overseas service (doctrine of forward defence).

In the Cold War, the Soviet Union and later

China were identified as the most likely potential foes of the British Commonwealth in the

Asia-Pacific region.

The alliance with the United States, first forged

in 1942 following the fall of Singapore, rapidly

grew into the main strategic alliance underpinning much of Australia’s defence and foreign

policy in the 1960s and 1970s. The era of Imperial
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Asian countries. It also noted that the end of the

Cold War has brought about important new

uncertainties relating to the future strategic situation in the region and that these could result in a

deteriorating security environment for Australia.

In the circumstances, the 1994 White Paper

regarded the concept of a post-Cold War “peace

dividend,” in the form of defence budgetary cuts,

as somewhat implausible in Australia.

ultimately influence the nature of the major Defence

acquisitions and capability enhancements.

ASP97 reaffirms Australia’s commitment to

maintain and enhance its strategic standing in a

region where the security environment has become both complex and very uncertain. In this

environment, the ADF must have the capacity to

defend Australia’s territorial integrity and interests from armed attack and be able to actively

support U.S. strategic engagement in the region,

while continuing to foster and sustain security

and defence relationships with other countries in

the region. Also, the greater accuracy and lethality of weapon systems available to nations in the

Asia-Pacific region will demand greater resources

devoted to intelligence collection and evaluation,

stealth and self-defence capabilities.

Since the release of ASP97, the complexity of

Australia’s security environment has become

more apparent. True, there is no immediate conventional threat in that the probability of Australia becoming involved in an intensive combat against an invader-state appears to be rather

remote. But Australia, as a U.S. ally, could become involved in a conventional war in the

Korean peninsula or in the China-Taiwan conflict. Australia’s regional security environment

has recently become very unstable. Indonesia is

struggling to retain its territorial integrity, Pacific

island-nations and Papua New Guinea are verging on the brink of ungovernability and the Philippines is still battling separatists and insurgents.

As Professor Paul Dibb, Australia’s best known

strategic analyst, puts it, an “arc of instability” now

surrounds the continent. Only New Zealand is a

truly stable nation in the region.

But threats of conventional warfighting are only

a part of a contemporary security environment. It

is much more likely that Australia will need to

face “unconventional” threats such as those posed

by large-scale illegal immigration and drug

smugglers, terrorist organizations and “cyber

In view of the absence of an identifiable threat,

the key force structure planning tools included

concepts such as “credible contingencies,”

“warning time” and “the expansion base.” Acknowledging the changing distribution of military capability in the region, the 1994 White

Paper introduced the concept of a “short-warning conflict,” which may range from small raids

to larger and protracted operations.

The 1997 Strategic Review, Australia’s Strategic

Policy (ASP97), explains the philosophy behind

ADF capability development at the end of the

1990s and identifies the strategic issues that the

Government will need to address when determining Australia’s defence capabilities to 2020

and beyond. Although events such as the Indonesian crisis of 1999, Australia’s involvement in East

Timor, the 1997-98 East Asian financial crisis,

and the growing political instability of Pacific

island nations have influenced the most recent

strategic thinking. ASP97 offers good insights into

Australia’s defence planners’ perceptions of strategic uncertainties in the Asia-Pacific region and

their concerns with the growing capability of

regional defence forces. It is these concerns that

AYRES ROCK
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vandals” (e.g., computer hackers). Consequently, the ADF is more likely to be deployed in

peace-enforcement and international constabulary tasks or disaster relief than an all-out

warfighting.

At the time of writing, the Government is about

to release a Green Paper on defence, which is to

initiate a process of public debate on Australia’s

strategic defence priorities and their funding. This

is to lead to the publication of the new defence

White Paper at the end of 2000 to map Australia’s

defence strategy and policy for some years to

come.30

“...the issues, if they get a public hearing, will be fascinating. Should Australia

have a defence force merely to defend its

own continent in the air-sea gap? Should

we aim to project power? If so, how far?

To Northeast Asia (into the China-Taiwan

dispute), or to the Indian subcontinent or

to handle emergencies arising from instability near home? Should we seek our

security in collaboration with our Asian

neighbours? Should we try to add value

or a new design to the U.S. alliance?

The truth is that most of these will cost a

lot more money. The bias of the Howard

Government (the Government of the day

at the time of writing) is for a defence

force that can both defend the continent

and project power to some extent. But our

ability to do that at 1.9 percent of GDP is

no longer credible.”31

Defence Strategic Policy Dilemma

While Defence has embraced the rhetoric of

‘new managerialism’ in its mission statements

and strategic planning documents (see the following Chapters), the fundamental strategic

dilemma of Australia’s approach to its national

security provision tends to have been obscured.

As observed by Dr. Alan Dupont, one of

Australia’s preeminent strategic thinkers:

“The only rational basis for making

decisions about equipment, capabilities

and tasks of the ADF is to ensure that

they are consistent with informed judgments about the kinds of threats and

challenges Australia is likely to face....”

Reform of management and the defence

acquisition process, while commendable

objectives, cannot substitute for lucid

thinking about the role and function of

the ADF.” 32

For over two decades, successive governments

have endorsed the strategic argument that the

country’s security lay with the ADF’s ability to

deploy modern and technologically sophisticated

weapons systems so it could lay claim to having

a small but potent defence force that was superior to other defence forces in Australia’s AsiaPacific neighbourhood. The acquisition of weapons systems such as F-111 strike aircraft and F/

A 18 fighters, Collins class submarines and Australian and New Zealand Army Corps (ANZAC)

frigates was also intended to strengthen

Australia’s international alliances by providing

the ADF with long distance interoperability with

the U.S. and other allied forces. As defence

budgets stagnated or declined in real terms, the

only way to fund the technology-based “force

multiplier” was to increase the capital intensity

of national defence by shifting resources away

from personnel to the acquisition of (increasingly

sophisticated) platforms and weapons systems.

An added complication was the determination

of successive governments to have a significant

part of Australia’s investment in new weapons

systems and platforms directed to domestic

industry under a policy of self-reliance and Australian Industry Involvement (see Chapter 9).

This not only resulted in cost penalties incurred

as a result of small volumes of equipment being
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manufactured and supported in-country but also

encouraged industry to invest in defence-specific

assets, such as shipyards or assembly lines, which

subsequently could only be sustained by directing further Defence work to them. As industry

lobby groups pressed for more orders, the distinction between defence new capability formation

and national industry support agendas became

increasingly blurred.

In the 1950s, annual defence spending in Australia averaged some 3.5 percent of GDP. It fell to

2.5 percent in the 1960s and about 2.4 percent in

the 1970s and 1980s. It fell to 2.2 percent in the

first half of the 1990s and to a low of 1.9 percent

from 1996-97 onwards. In the mid-1980s, the

ADF was over 70,000 strong with 40,000 civilians. Even though the impact of resource redirection on personnel numbers has not been as

severe as intended, the numbers have declined to

over 50,000 ADF and 16,000 civilians.

This policy of freezing real defence budgets while

directing the ADF to acquire sophisticated equipment with high local content and to be prepared

to undertake a wide variety of missions, from

high-tech warfighting to international peacekeeping and enforcement, was only possible

given Australia’s benign strategic environment.

Since the ending of the Vietnam War and until

1999, there has been no serious direct threat to

Australia’s interests, let alone a threat to its territorial integrity. Obligations imposed by its status

as a good ally and an international citizen, as evidenced by the ADF participation in the Gulf War

and various UN-led peacekeeping operations,

could be accommodated within the existing budgets without too much pain. Consequently, new

capital acquisitions were embarked upon all to

be funded within the existing budgets. Financial reform programs and market testing of

activities potentially suitable for contracting out

were expected to uncover and redirect enough

organizational “fat” to fund, without increases

in real defence budgets, future capability enhancement and other commitments imposed by

the Government (see Chapter 6).

But the policy of systematic redirection of

resources from personnel and operational costs

in noncombat areas of Defence to the “sharp end”

has not worked as well as anticipated. We shall

return to some of these issues in the following

Chapters. At this point we note that two particular events brought the era of over-ambitious

strategic aspirations combined with the Walter

Mitty-style resource allocation to an end.

First, technical problems associated with the incountry construction of the Collins class submarines have revealed the real cost of undertaking the development of sophisticated modern

weapons systems in a small economy such as

Australia (see Chapter 9). The question is not what

a local industry could possibly do but whether it

is worth doing given the international division of

labour and trade, and considering the changing

nature and pace of defence technology.

Second, the deployment of elements of the ADF

in East Timor, some 5,000 personnel at the peak

of Australia’s involvement in 1999-2000, revealed

the wide divide between Australia’s strategic aspirations and real defence funding.33 Without

supplementary funding and the redirection of

spending priorities away from capital commitments, it was simply impossible to field and sustain Australia’s presence in East Timor.34 It has

become more apparent to the Government—although not as yet to the Australian public—that

peacekeeping and enforcement operations are

very costly, labour-intensive and require a degree

of dedication that cannot be simply subsumed in

general defence expenditures. Further, it has

became painfully obvious that, despite the rhetoric of “shifting resources from tail to teeth,” the

long-term policy of cutting personnel numbers

to fund new equipment is no longer sustainable.
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With constant real budgets, the strategy of investing resources in increasingly technologically

sophisticated, capital-intensive but labour-saving

equipment is fundamentally incompatible with

labour-intensive demands on the ADF in peacetime. Future governments have a choice: either

deflate their expectations with regard to the capabilities of the ADF and, thus, narrow down the

range of strategic commitments, or allow for a

greater proportion of Australia’s GDP to be

diverted to defence. The basic dilemma is simply this: more money for defence or less defence

capability.

International Alliances

Australia is a member of a number of international alliances and defence cooperative arrangements. The most important of these is the Australia, New Zealand, and United States Security

Treaty (ANZUS), essentially the Australian-U.S.

alliance which extends the U.S. deterrence umbrella to include Australia and provides the latter

with access to U.S. training facilities, combined

exercises, intelligence sharing, the procurement

of technologically advanced equipment from the

U.S. and logistic support.35

Another important alliance is the Five-Power

Defence Arrangement (FPDA), which involves

the cooperation between Australia, New Zealand

and the United Kingdom (UK) in the provision

of defence support for Singapore and Malaysia.

The Arrangement involves various forms of military cooperation and the provision of logistic support. Australia is in a rather interesting position

in that its main allies, the U.S. and the UK, are

themselves members of another, and globally

much more important alliance, namely the North

Atlantic Treaty Organization (NATO). Thus, Australia benefits from institutional links with NATO

countries and has access to many NATO-specific

military technologies.

All small countries face some uncertainty about

the determination of their major allies, the U.S.

in particular, to honour their joint defence undertakings. Since Australia cannot take the provision of U.S.-supplied deterrence for granted, it

has little, if any, incentive to underspend on defence on the assumption that the U.S., the senior

alliance partner, will pick up the bill. To the contrary, Australia’s traditional approach has been

that of a good alliance member. To a large extent

that has been the logic

of the doctrine of forward defence. However, there has always

been some debate

about the desirability

of Australia’s dependence on its major allies for strategic supplies. Thus, while Australia has aimed to achieve

a high degree of operational interoperability with

the U.S. and other allies, it has also tried to widen

its portfolio of international suppliers and

maintain a credible, defence-related domestic

industry.

While Australia’s treaty relationship with the

United States continues to be a key element of

its defence policy, since the mid-1990s, Australia has tried to expand regional security

“partnerships” with the Association of SouthEast Asian (ASEAN) countries—in particular

Indonesia, Malaysia and Singapore.

At the global level, Australia has supported international constabulary activities aimed at peacekeeping and enforcement and the provision of

humanitarian aid by multi- and inter-national

agencies, particularly the UN. The 1990s have

already seen significant Australian deployments

in the Gulf, Namibia, Cambodia, Somalia,

Rwanda, East Timor and the South Pacific.
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Chapter 4

AUSTRALIA’S DEFENCE

ORGANISATION

Goverment (Government wearing the

purchaser hat), but (is) also responsible

for ensuring the financial and other

sustainability of Government’s investment

in the business (Government wearing its

owner/shareholder hat). In the words of

the Commonwealth’s Financial Management and Accountability Act, Secretaries

are responsible for managing in a way

which promotes the proper use of Commonwealth resources—i.e., efficient,

effective and ethical.”37

The ADF and the Department of Defence are

collectively referred to as the Defence Organisation or as Defence. The CDF and the Secretary are jointly responsible to the Minister for

Defence—and through him/her to the Government—for the management of Defence. This

joint responsibility is often referred to as the

defence diarchy. The chain of responsibility from

the diarchy to the Government of the day is

sometimes misrepresented, as some people believe that the line of command runs from the

diarchy to the Governor-General. This is fallacious both constitutionally and functionally.38

However, the very nature of diarchy—with executive authority vested in two equals—means

that neither of the two people in charge is solely

responsible for the management of Defence and

a degree of consensus—or synergy and compromise—is needed for the dual leadership to be

effective.

As of January 2000, the Defence Organisation

comprises 14 Functional Groups. While Defence

Defence Organisation and Governance

The Department of Defence is a department of

state established by the Governor General pursuant to Section 64 of the Australian Federal

Constitution. The Minister for Defence is responsible to Parliament for the management of the

Department and, under the Defence Act 1901,

has the general control of and administrative

responsibility for the Australian Defence Force

(ADF). The Act determines powers of command

and administration of the Defence Force.

Subject to the control of the Minister, the Chief

of Defence Force (CDF) commands the ADF.

CDF is responsible for planning and ADF preparedness and for the conduct of military operations. The CDF is also the principal military

adviser to the Minister on matters concerning

military strategy and force development. The

Chiefs of Services command their Services

under the CDF.

The (civilian) Department of Defence is administered/managed by the Secretary. The Secretary’s duties are determined by Defence Act 1901

and other legislation.36 He/she is the principal

civilian adviser to the Minister of Defence on

matters concerning policy, resources and organisation, financial planning, programming, budgeting and control of expenditure. As described

by Dr. Allan Hawke—the incumbent Secretary

at the time of writing—the Secretary is...

“...not only responsible for the delivering the ‘Defence product’ to the
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resources are appropriated on the basis of

Defence Outcome and 22 Defence Outputs (see

Chapter 5), the Department manages its activities through its Functional Groups. This

organisational matrix was introduced in 1997

under the Defence Reform Program (see below)

and was intended to provide a means of more

effective resource management to align the use

of defence resources (inputs) with responsibilities for outputs and outcomes and, by devolving

some authority and responsibility to Group

Managers/Authorities, to stimulate the adoption

of more cost effective delivery processes. Figure 1-2 shows the 1999-2000 Group structure

of Defence.

At the time of writing, the incumbent Secretary

has made it no secret that he is “not a fan of

matrix management.” With regard to Defence’s

organisational structure and governance, he

notes the following:

“The separate acquisition and logistics

organisations are both engaged in procurement. The role of the Service Chiefs

must be clarified—they have essential

responsibilities. The functional split

within Defence Headquarters is not clearly understood by many within it, let alone

those outside whom it is intended to support. The so-called corporate support

groups are not seen by their customers

Figure 1-2. Defence Organisation – 1999-2000 Group Structure

Group Group Authority

Defence Headquarters Deputy Secretary Strategy & Intelligence DEPSEC S&I

Vice Chief of the Defence Force VCDF

Navy Chief of Navy CN

Army Chief of Army CA

Air Force Chief of Air Force CAF

Intelligence Deputy Secretary Strategy & Intelligence DEPSEC S&I

Support Command Commander Support Command Australia COMSPTAS

Joint Education & Training Head, Joint Education and Training HJET

Defence Personnel Executive Head, Defence Personnel Executive HDPE

Defence Acquisition Organisation Under Secretary Defence Acquisition UNDERSEC ACQUSITION

Science and Technology Chief Defence Scientist CDS

Defence Estate Head, Defence Estate HDE

Defence Information Systems Head, Corporate Information HCI

Defence Corporate Support Head, Defence Corporate Support HDCS

Finance & Inspector General First Assistant Secretary, Resource & Financial Programs FASRFP

Source: DPBS, 1999-00.
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as sufficiently responsive to their needs.

More importantly, our top structure is

not consistent with the previous 14 functional groups or with our 22 outputs....

When I asked our senior military and

civilian staff to identify Defence’s

strengths and weaknesses, one of the

most significant areas identified was lack

of clarity in direction; in roles, responsibilities and structures; together with

blurred and poor performance accountability—in other words, accountability,

responsibility and authority are not

aligned.” 39

It is therefore likely that the matrix structure of

the Defence Organisation will soon be radically

streamlined and reshaped. The purpose of these

changes will be to restructure the top management and headquarter roles to align the organisational structure and outputs with the accountability/responsibility chain. At the time of

writing, the Secretary and the CDF are putting

in place a set of commissioning or charter letters clarifying roles and responsibilities, accountabilities, authorities and priorities for the

senior member of the Defence Executive, starting with the Service Chiefs.40 The fundamental

role of the Defence Executive is to be clarified

together with the associated committee structure and the broader framework of corporate

governance. The Defence Acquisition Organisation may also be merged with Support

Command, which is presently responsible for

in-service management of equipment.

Defence Mission and Goals

Four priority areas for the ADF capability

formation have been identified by the 1997

Strategic Review:

• use of information technologies to provide a technology force multiplier (the

knowledge edge);

• capability to defeat any threats in

Australia’s maritime and air approaches;

• maintenance of an effective military

strike capability; and

• capability to defeat any incursion on to

Australian territory.

To meet these ambitious objectives, the small

national defence force must draw on the broader

support of Australian industry and the community at large (a whole of nation approach to

Australia’s defence). The government’s current

philosophy takes a broad view of national

defence capability to engage a wide range of

civil support in peace on the assumption that

such support will surely be needed in war.

“As a part of a broader view of national

defence capabilities, the Government

envisages a national support policy,

which creates an environment where

combat forces, Government agencies,

the civil infrastructure and industry all

act as a seamless continuum of capability....Warning time for unforseen contingencies might be insufficient to source

and put in place the necessary arrangements to meet changed strategic needs.

To this end, Government has directed the

Department of Defence to structure for

war, and adapt for peace.”41

Accordingly, the Defence mission is “to prevent

or defeat the use of armed force against our

country or its interests.”42 The Defence mission

encompasses two key objectives: (a) the formation and maintenance of the capability “to defeat any use or threat of armed force against

Australia or its interest;” and (b) the promotion

of regional and global relations that enhance

“Australia’s security by reducing the likelihood

of armed attack against Australia or its interests.”43

As stated in an earlier Defence document,
Part 1 – Australia

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Australia’s overarching defence objective is to:

develop the force structure to defeat attacks on

Australia and defend its regional interests; maintain forces at a state of preparedness to defeat

any attack which could credibly be mounted

against Australia; contribute actively to defending the country’s regional and global interests;

and contribute to national tasks as directed by

Government.”44

To achieve its mission, Defence has developed

six goals that encompass both the development of Australia’s defence capability and the

evolution of the Australian Defence Organisation:45

Goal 1: more combat-ready capability, with

a key objective of maximising the

numbers in combat-related forces;

Goal 2: stronger future capability, with a key

objective of taking advantage of technological advances that underpin the

“knowledge edge;”

Goal 3: closer alliances and international strategic relationships, in particular with

the United States and New Zealand and

through bi- and multi-lateral defence

relationships with countries in the

Asia-Pacific region, to enhance Australia’s defence capability and influence the strategic environment to make

armed conflicts less likely;

Goal 4: enhanced national support, i.e., the

increased use of support services from

industry and new initiatives to promote

the development of skills and capacities

needed from the civil sector;

Goal 5: growing skills and knowledge, in particular increasing the skills and knowledge of Defence personnel and developing better incentives through

competitive remuneration structures

and rates; and

Goal 6: stronger leadership and better management with a view of improving the

decision-making processes in Defence

and greater focus on outputs and

outcomes of Defence activities.

Australian Defence Force

Under the current Australian doctrine, military

capability

“...refers to the existence and nature of

armed forces (their force structure—

equipment, facilities, workforce, organisation and doctrine) and their preparedness. Preparedness in turn is defined as

the force’s readiness (availability and

sustainability of the force to conduct

specific tasks and operations) and

sustainability (the organic military, national and international arrangements

needed to support and regenerate the

force).” 46

The Australian military capability is centred on

its combat and combat support elements ADF.

In view of the vastness of the geographic area

of direct military significance to the ADF, its

small numbers and Australia’s somewhat uncertain strategic outlook, the main qualities required

of Australia’s defence effort are adaptability and

flexibility to meet diverse and rapidly changing

demands.

As of 30 June 1999, the Royal Australian Navy

(RAN) included three guided missile destroyers, six guided missile frigates, two ANZAC

class frigates, three Collins class and one Oberon

class submarines, two inshore minehunters, one

mine-hunter coastal, one amphibious heavy ship,

five heavy landing craft, 15 Fremantle class patrol boats, two landing platforms amphibious,

one catamaran and a number of auxiliary, survey and support vessels. Naval aviation included

16 Seahawk anti-submarine helicopters, seven

Sea King fleet utility support helicopters and a
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number of training, electronic warfare and utility

helicopters.

As of 30 June 1999, the Australian Army maintained 19 infantry battalions (four regular, two

integrated and 13 general reserve). These provided troops at readiness levels varying from less

than a month for rapid deployment elements to

a year in the case of the least prepared reserve

battalions. Other operational elements included

reconnaissance, armoured, artillery, air defence,

signals and aviation regiments, engineer regiments and workshops, Special Air Service regiment, and so on.47 The Army aviation regiments

included assets such as Black Hawk, Chinook,

Iroquois, Kiowa helicopters. The armoured regiments included Leopard tanks, ASLAV 25 and

M113AI personnel carriers. The artillery regiments operated 155 and 105 mm Howitzers and

air defence regiment maintained Rapier SAM

and RBS-70 SAM. Developments in progress

at the time of writing will add another 3,500

(mostly infantry) troops.

As of 30 June 1999, the Royal Australian Air

Force (RAAF) operated from ten active, two

ground training and two unmanned northern air

bases. The range of assets used by the RAAF

included: F/A-18, F-111C, F-111G, RF-111C,

PC9/A, C-130H and 130E Hercules, DHC-4

Caribou, C47, Macchi MB326, Falcon 900 and

HS 748 aircraft. The radar surveillance unit

operated Over the Horizon Radar.
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Chapter 5

DEFENCE BUDGET AND

RESOURCE MANAGEMENT

The magnitude and complexity of this reform

and the lead-time required to put new corporate

systems in place will inevitably result in an incremental implementation of the new framework.50 This is consistent with the approach being developed by the Department of Finance and

Administration whereby the full requirements

of the new accrual-based output management

framework will not be introduced until 2000-

2001 or later. However, beginning in financial

year 1999-2000, Defence budgets will account

for and report on the outputs it produces, and

identify the contribution its outputs makes to the

achievement of planned outcomes.

Defence Outcome, Outputs and

Performance Indicators

Derived from its mission statement, Defence has

a single Outcome, which is the prevention or

defeat of armed force against Australia or its

interests. This outcome provides the rationale

for the existence of the Australian Defence

Force and therefore the Defence organisation.

Both must be structured and directed towards

achieving this outcome.

To achieve this Outcome, Defence is committed to produce 22 outputs, which are grouped

into four key deliverables:

• the delivery of combat capability (Outputs 1-19), which encompasses the military capabilities formed in peacetime and,

if and when required, the capacity to

deliver combat capabilities to achieve

specific military and strategic goals set

Resource Management Framework

In line with the “whole-of-government” reforms,

Defence is developing a new performance and

resource management framework that builds on

and integrates a number of recent reforms and

initiatives in Defence management. When implemented, the new framework will allow Defence

resource managers to determine the real cost of

providing Defence capabilities, including indirect costs, depreciation and maintenance. More

specifically, it will provide: a better understanding of what Defence is required to achieve; a

clear picture of the full cost of defence capabilities; better information to manage efficiently

the resources of the Department; and better

communication lines to the Government and

Parliament to report on priorities and achievements.

The new framework is based on outcomes and

outputs, and accrual budgeting.48 It focuses on:

• what Defence produces using departmental

expenses (outputs);

• what resources Defence administers on

the Commonwealth’s behalf (administered

items);

• the desired results of outputs and administered items (outcomes); and

• the full cost (accrual measurement).49

Figure 1-3 contains a selection of concepts and

vocabulary associated with the new management

framework.
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Figure 1-3. The New Management Framework: Concepts and Vocabulary

Outcomes are the results, impacts or consequences of actions by the Commonwealth on the Australian

community.

Outputs are the products or services produced by Defence on behalf of government.

Departmental Items are resources directly controlled by Defence, including salaries, allowances,

military equipment and other costs associated, including out-sourced activities funded and controlled

by Defence, with the operation of the Defence Organisation. These resources are used to produce

outputs for government (the Australian community).

Administered Items are resources administered on behalf of the Commonwealth including grants,

subsidies and benefits. Such resources may be used to produce outputs by third party organisations.

The new framework allows for both outputs and administered items to be specified and costed as part

of budgeting, accounting and reporting processes.

Assets are future economic benefits expected to accrue to Defence as a result of past transactions or

other past events. Assets are initially recognised at the cost of acquisition. They are periodically revalued to reflect their written-down current cost and, where appropriate, enhanced value of expected

economic benefits.

Liabilities are future economic benefits foregone due to Defence’s obligations to other entities arising

from past transactions or other past events.

Revenues are inflows or other enhancements, or savings in outflows, of future economic benefits, in

the form of increases in assets or reductions in liabilities of Defence, other than those relating to

contributions by the Commonwealth, that result in an increase in equity during the reporting period.

Expenses are losses of future economic benefits, in the form of reductions in assets or increases in

liabilities of Defence, other than those relating to distributions to the Commonwealth, that result in a

decrease in equity during the reporting period.

Capital Use Charge represents the opportunity cost of capital tied up in assets (i.e., the deemed value

of the best alternative use of this capital). The rationale of this charge is to encourage good asset

management practices by revealing the true costs of producing outputs. The Capital Use Charge is

imposed by multiplying the closing net assets (i.e., total assets minus total liabilities) of Defence by the

“interest” rate (currently 12 percent), based on the long-term bond rate (currently around 6 percent)

plus a margin for risk (currently 6 percent). (The Department of Finance and Administration prescribes

the relevant interest rate.) Defence is provided with supplementary funding based on percentage (currently 12 percent) of the sum of the opening net assets and an agreed equity injection (see below). This

gives the appearance of a substantial increase in Defence funding which is not actually the case.

Equity Injection represents the additional contribution to Defence by the Commonwealth as its “equity

owner.” It is determined on the basis of the amount additional to the Departmental Outcome Appropriation required to fund Defence up to the government-agreed level of global funding. The Equity Injection

is not tied to any specific capital projects and, within the limits of Defence’s resource management

discretion, it can be used for any purpose that increases the net assets of Defence. It is planned to use

these funds for investment in new/replacement capital equipment or facilities.

Source: DPBS, 1999-00; pp. vii-viii.
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out for Defence by the Government of

the day;

• the promotion of a favourable regional

and global security environment (Output 20), which comprises those Defence

activities that enhance regional and global stability and Australia’s standing in

the region (thus, reducing the likelihood/

threat of use of armed force against

Australia or its interests);

• the delivery of services to support the

nation which are possible as a result of

Australia’s military capacity (Output

21), which includes the support provided to the Government and community

in noncombat-related roles, such as search

and rescue operations or civil surveillance;

and

• the provision of strategic military and

defence policy support (Output 22), that

is, the contribution made by the Defence

Organisation to the development of Government policy on strategic, military and

defence issues.

The Defence Outcome also includes the items

administered by the Department of Defence on

behalf of the Commonwealth, such as military

superannuation (pension) schemes, investments

in ADI Ltd. (former government-owned but

recently privatised enterprise—see Chapter 9)

and the Defence Housing Authority.

Figure 1-4 contains a summary of key performance indicators that measure the effectiveness of Defence in achieving its Outcome.

Figure 1-5 lists all 22 Defence outputs and their

“prices” (costs to the taxpayer).

COMBAT CAPABILITY

Preparedness

• The level of preparedness of the ADF meets the standard set in the Chief of the Defence Force’s

Preparedness Directive and subordinate directives against each capability output.

• The ADF’s major training/exercise program is met.

Operations

• Any hostile violations of Australia’s sovereignty or interests are deterred or identified and responded

to successfully.

• The ADF’s joint task force performance in major activities meets the required standard.

• Specific Government targets for the delivery of defence capability are achieved.

NONCOMBAT-RELATED TASKS

• Planned noncombat-related defence activities contributing to national security and regional stability

are met.

• Government targets for the delivery of non-combat capability, which contribute to national, regional

and global stability, are achieved.

Source: DPBS 1999-00; p.7.

Figure 1-4. Defence Outcome Performance Indicators
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1-28

Figure 1-5. 1999-2000 Defence Outcome/Output Structure Chart

Source: DPBS 1999-00; p.8.

Defence Outcome

(Resource Cost A$16,541 million)

Output 1

Command of Operations

(Price A$582 million)

Output 3

Major Surface Combatant Operations

(Price A$2,391 million)

Output 5

Submarine Operations

(Price A$905 million)

Output 7

Afloat Support

(Price A$228 million)

Output 9

Amphibious Lift

(Price A$257 million)

Output 11

Land Task Force Operations

(Price A$3,781 million)

Output 15

Ground Based Air Defence

(Price A$75 million)

Output 17

Maritime Patrol Aircraft Operations

(Price A$722 million)

Output 19

Combat Support of Air Operations

(Price A$149 million)

Output 2

Strategic Intelligence

(Price A$331 million)

Output 4

Patrol Boat Operations

(Price A$253 million)

Output 6

Geographic Information

(Price A$205 million)

Output 8

Mine Countermeasures and Mining

(Price A$295 million)

Output 10

Special Forces Operations

(Price A$207 million)

Output 12

Logistic Support of Land Operations

(Price A$401 million)

Output 14

Tactical Fighter Operations

(Price A$1,186 million)

Output 16

Strategic Surveillance

(Price A$362 million)

Output 18

Airlift

(Price A$904 million)

Output 22

Strategic Policy and Direction

(Price A$318 million)

Output 21

Effective Contribution to

National Support Tasks

(Price A$149 million)

Output 20

Effective International Relationships and

Contribution to International Activities

(Price A$275 million)

Output 13

Air Strike/Reconnaissance

(Price A$660 million)
Part 1 – Australia

1-29

Defence Budget

Defence attracts a significant share of Government resources. Under the new accrual-based

budgeting framework (see below), the total Defence budget outlay for 1999-2000 is A$18,042

million (U.S.$10.46 billion).51 This comprises

the funding of ‘Defence Outcome” of A$16,541

million, an Equity Injection of A$1,278 million

and Capital Receipts of A$224 million (see Figures 1-3 and 1-5). The Defence budget accounts

for about 8 percent of Commonwealth Budget

Outlays (CBO) and, excluding the effect of the

Capital Use Charge (see below), for some 1.9

percent of the Gross Domestic Product (GDP).

Financial statements in previous years did not

contain the Capital Use Charge and the Equity

Injection, which are present in accounting reports

for 1999-2000. Thus, it will be difficult to make

comparisons between prior years and future

years under the new accounting system.52 Using a simple comparison it appears that the new

accounting changes will increase the defence

budget but this increase is apparent rather than

real. In simple terms, the Government gives

Defence more money (a larger Budget) but it

then takes this money away in the form of a

Capital Use Charge, which is a payment (interest charge) for the use of taxpayer-owned capital assets by Defence. Thus, Defence is not better off than it was before. For example, Defence

departmental appropriations net of the Capital

Use Charge, which were estimated at A$11.09

billion in 1999-2000, would have amounted to

A$11.01 billion in 1998-99.53

The funding of Defence Outcome comprises two

main elements: the “Price” of the 22 Defence

outputs (A$14,588 million in 1999-2000) and

Items Administered by the Defence Portfolio

(A$1,953 million in 1999-2000). Since 1999-

2000, the “price” of Defence outputs includes a

Capital Use Charge, which was introduced under

the new accrual accounting system. The Capital

Use Charge for 1999-2000 is A$4,643 million.

It was calculated by multiplying Defence’s

“opening” net assets of A$36 billion plus the

equity injection of A$1,278 million by a 12 percent interest charge (a notional interest charge

on the A$ 36 billion of taxpayer-owned capital,

which, over the years, has been given to Defence

to purchase its capital assets, see Figure 1-2).

On 30 June 2000 (end of financial year), Defence is to be charged 12 percent on its closing

net assets. Defence expresses this charge as a

percentage of the value of capital in use. Thus,

if Defence wants to acquire more equipment

it will accumulate more capital and it will pay

“interest” on it.

The Equity Injection (A$1,278 million in 1999-

2000) contributes to capital investment needed

to maintain Defence future capability. It is used

as a funding mechanism needed to “top up”

Defence to the Government-agreed real growth

level (0 percent in 1999-2000).54 It is effectively

a residual or a balancing item. Defence is also

allowed to retain certain Capital Receipts to

purchase additional capital items (A$224 million

in 1999-2000).

The prospect of a real (after price inflation is

taken into account) increase in the Defence Budget over the next few years is uncertain. The

Government is only committed to maintaining

Defence funding in real terms for 2000-03 Forward Estimates. Thus, the total funding of the

Defence Outcome is expected to be A$16,911

million in 2000-01, A$17,336 million in 2001-

2 and A$17,839 million in 2002-03. Figure 1-6

shows the estimated Defence funding for the

financial year 1999-2000 and Forward Estimates

till 2002-03.

The table shows an increase in proposed funding over the Forward Estimates period. This is

because the Capital Use Charge increases with

the increasing net asset base and price (out-turn

prices). On the other hand, the topping up in
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

1-30

the form of Equity Injection decreases over

time as capital investment is increasingly funded

internally from the growing depreciation

charges.

Figure 1-7 shows Defence Appropriations

(equivalent to Defence Function outlays) for

the period 1998-99 to 2002-03. By excluding

Capital Use Charge from Defence Appropriations, the outlay on Defence before and after the

introduction of the new resource management

framework can be compared.

While the projected budget for 1999-2000 is set

to be equal in real terms to that of 1998-99, Defence is also required to absorb some additional

Funding Arrangements 1999-2000 2000-02 2001-2001 2002-2003

A$’000 A$’000 A$’000 A$’000

Price of Departmental Outputs

Appropriation from Government

Before Capital Use Charge 9,814,886 10,132,359 10,501,358 10,727,762

Add Capital use Charge 4,463,092 4,578,760 4,664,413 4,738,393

Revenue from Government

for Departmental Outputs 14,277,978 14,711,119 15,165,771 15,466,155

Add Departmental Revenues

from Independent Sources 309,857 308,708 338,513 395,553

Total Price of Outputs 14,587,835 15,019,827 15,504,284 15,861,708

Add Total Administered Expenses 1,952,874 1,890,677 1,832,202 1,977,334

Total Resourcing of Defence Outcome 16,540,709 16,910,504 17,336,486 17,839,042

Add Capital Funding not included

in the cost of the Defence Outcome

 Equity Injection 1,278,230 1,061,688 914,720 919,860

 Capital Receipts 223,535 198,486 273,244 190,093

Total Defence Funding 18,042,474 18,170,678 18,524,450 18,948,995

Source: DPBS, 1990-00, Table 1.7, p. 18.

Figure 1-6. Estimated Defence Funding for 1999-2000 and the Forward Estimates

Figure 1-7. Departmental Appropriations Net of Capital Use Charge 1998/99-2002/03

Estimated Budget Forward Forward Forward

Outturn Estimate Estimate Estimate Estimate

1998-99 1999-00 2000-01 2001-02 2002-03

(A$ million) (A$ million) (A$ million) (A$ million) (A$ million)

Defence Appropriations 11,010 15,556 15,773 16,080 16,386

Less Capital Use Charge 0 4,463 4,579 4,664 4,738

Net Appropriations 11,010 11,093 11,194 11,416 11,648

 Source: DPBS 1999-00, Table1.10; p.20.
Part 1 – Australia

1-31

expenditure.55 By the time Defence Portfolio

Budget Statements were published, two Government policy changes had already impacted

on the projected allocation of resources within

Defence. First, the budget had to accommodate

the cost of bringing a second Army brigade to

28 days’ notice to move and sustaining that level

of higher preparedness for two years. Second,

the projected pace of draw-down to 50,000 fulltime, uniformed personnel had been changed.

In addition, the budget had to absorb the cost of

peace monitoring in Bougainville and the cost

of Australian participation in Coalition forces

in the Gulf. Transition and implementation costs

of the Defence Reform Program (see below) also

had to be accommodated.

The Budgetary Dilemma

The current budgetary dilemma is closely related

to the strategic dilemma discussed in Chapter

3. In 1981-82, Defence spent 13 percent of its

budget on “capital equipment” and 51 percent

on “personnel.” In the early 1980s, the share of

expenditure capital peaked at 29 percent in 1986-

87 (with 37 percent spent on personnel). By

1997-98, it had declined to 23 percent with

personnel accounting for 38 percent.56 Failure

to decrease personnel further was not the only

reason for an inadequate redirection of resources

to capital acquisitions. Defence has also been

forced to reallocate funding from other areas

to cover the operating costs of high priority

equipment programs, “for which inadequate

allocation has been allowed in forward financial

planning.”57

Throughout 1990s, Defence has allowed commitments for new major capital equipment to

accumulate to a level, which is 160 percent

higher than the corresponding appropriations.58

To fund the current order book for major capital acquisitions of A$46 billion, some additional A$20 billion remain to be paid. In addition, new programs worth around A$5 billion

were approved in the 1999-2000 Budget. “Compared to A$2,275 million allocated to capital

equipment in the current budget, this obligation

represents more than 10 years expenditure—some

indication why Dr. Allan Hawke, Secretary of

the Department, has described its financial

position as ‘parlous’.”59

In 2007 and beyond, the ADF will have to face

massive block obsolescence of its existing equipment. The cost of replacement of these assets is

estimated at between A$88 and A$106 billion

in the period 2007 to 2020. Combined with the

outstanding commitments, Defence would need

to be allocated some A$130 billion of capital

funding until 2020 just to meet its present capital obligations and replace obsolete assets. This

excludes all additional capabilities that the ADF

may wish to acquire over the next 20 years. To

pay for such a program would cost over two and

a half times the current annual funding of major

capital acquisitions.60 Thus,

“...the forthcoming public debate will

have to consider a fundamental reevaluation of the role of military forces in national security. The debate will probably

consider a range of options, from greatly

increased defence spending to a much

reduced role for the ADF.” ...changes to

the ADF’s capabilities over the last quarter century have owed as much to poorly

foreseen financial pressures as they have

to any premeditated decision making. It

is the contention of this paper that the

pressures on defence funding over the next

20 years will be such as to force radical

policy changes, as defence policy on its

current settings is not affordable for more

than a few years.”61

Against this structural background, the cost of

peace enforcement operation in East Timor may

seem to be a temporary source of budgetary

stress (it is expected to cost Defence A$907
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

1-32

million in 1999-2000 and A$3,562 million over

the four-year period of expected Australian involvement). But the Timor deployment has also

exposed some structural problems, namely, the

difficulty of sustaining a significant number of

ADF personnel in peacetime operations and the

impact of the long-term squeeze on operational

cost on the ADF’s readiness.

If Australia is to maintain its strategic commitment to operations that are intended to protect

its long-term national interest, it must be accepted that such activities tend to be labourintensive and, thus, require adequate spending

on people as well as equipment. As a recent

research paper puts it:

“...it will not be possible to fund the desired programs within the Defence Budget if kept at its current size. Defence

labour costs continue to rise. Consequently, throughout 1990s, Defence has

been obliged to find the difference from

other areas of the budget. This happened

again in February 2000, when A$380

million of the proposed 1999-2000

equipment budget had to be diverted to

meet defence labour and other costs.

Indications are that the personnel

component of the Defence budget will

continue to increase over the long

term.”62

Finally, the current funding dilemma has also

made it apparent that the long-term budgetary

framework is fundamental to good defence management. Major defence investments are longlived, expensive to acquire and sustain and the

acquisition cycle itself may take up to 10 years

to complete. The annual Defence budget combined with the three-year rolling plan of Forward Estimates is hardly adequate for sound

financial projections in this sector. Good resource

management practices, such as accrual accounting and cascaded planning, are important for

effective, short-term management of Defence

but, as Woolner puts it, they “are no substitute

for feasible and workable policy.” 63
Part 1 – Australia

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Chapter 6

DEFENCE REFORM

PROGRAM

by the turn of the century. These “savings” were

largely utilised in improving Service and civilian remuneration, e.g., A$340 million, or 75

percent of the FSR-related “savings”, were allocated to pay for an increased remuneration in

Defence.64

1997 Defence Reform Program

In April 1997, the Minister for Defence released

the report of the review, Future Directions for

the Management of Australia’s Defence—the socalled Defence Efficiency Review (DER)—and

announced the Defence Reform Program, based

on the review’s findings and recommendations.

The Defence Reform Program (DRP) has been

hailed as the most significant program of reform

in Defence for nearly 25 years.

“The key principles of the DRP are that

the Defence Organisation is to be structured for war and adapted for peace; and

that the reforms are to act as a catalyst

for substantial cultural change, away

from the present preoccupation with current activities, cash and inputs, and

towards management which addresses

future requirements, priorities and

outputs.” 65

The Government has established a high level

Strategic Management and Reporting Team, including Service and civilian members, to sustain the thrust of the DER as a major driver of

change. The Team’s particular focus is on the

change management strategy. It reports directly

to the Secretary.

Force Structure Review 1991

In the 1950s and 1960s, the Defence Organisation comprised five departments: Defence,

Army, Navy, Air Force, and Supply. In the early

1970s, the five departments were amalgamated

into one Department with the Secretary in charge

of resources and financial management and the

Chief of Defence Force in charge of the ADF.

The late 1980s have seen a further consolidation of capability, the centralisation of Defence

Headquarters and new management structures

and procedures under the heading of Program

Management and Budgeting (PMB). The development of costing systems to support resource

management and enhance the visibility of resources to decision-makers was also initiated in

the late 1980s. There was also a growing determination to privatise Defence’s interests in government factories, in particular shipyards and

aircraft construction facilities. The Commercial Support Program (CSP) was introduced in

1990-91 to encourage market testing and contracting out of non-core defence activities (see

below).

In 1991, following the Force Structure Review

1991 (FSR), Defence embarked on a program

of management reforms and associated efficiencies that were to allow it to produce sufficient

productivity gains to fund its expenditure plans

with real increase in funding. These efficiencies

were to be achieved, inter alia, through staff

reductions and outsourcing of non-core defence

functions. By mid-1996, the FSR-related recurrent savings were estimated at A$450 per year.

They were expected to reach over A$0.5 billion
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

1-34

The DRP objectives are to:

• focus Defence on its fundamental

responsibility to develop and sustain

capabilities to defeat armed aggression

against Australia and support the

Government’s wider objectives;

• improve long-term planning, management and command structures;

• streamline support organisations and

structures within Defence to provide

more efficient services to combat units;

• compete a range of Defence activities

with industry to enhance quality and

achieve more cost-effective service

delivery; and

• redirect resources from enabling services

to combat capabilities to enhance the

overall effectiveness of the ADF.

DRP initiatives include:

• the focusing of Defence administration

on supporting the development and

maintenance of highly capable combat

forces as the key organisational output;

• the downsizing of the Defence Headquarters and reduction in the numbers of committees and senior military and civilian

positions to speed up decision making

and reinforce lines of responsibility and

accountability;

• the establishment of an integrated joint

Defence Headquarters to develop policy

and provide advice to all (Defence)

senior managers with the Service Chiefs

given greater responsibility for the

overarching policy development;

• the amalgamation of operational headquarters to clarify command responsibilities;

• the collocation and reorganisation of

acquisition functions into groups focusing on common industry sectors or equipment types rather than on individual

Service requirements; and

• the consolidation of support and administrative functions to maximise efficiency

and avoid functional duplication.

The basic framework of the restructured organisation was put in place on 1 July 1997. This included a move from an 8 Program (activity

groupings) to a 14 Group (of activities) structure.

Further reforms to processes and organisational

structures are to continue until 2001-02.

The fully implemented DRP was expected to

achieve one-off savings of A$500 million and

recurrent annual savings of some A$900 million. In keeping with the Government’s commitment not to cut defence spending, resources

freed by the DRP were to be redirected to increase capital acquisitions, especially to enhance

combat-related and peacekeeping/peace enforcement capabilities. At maturity, annual major investment expenditure was to increase by

A$139 million or 5 percent of the 1999-2000-

budgeted major capital equipment program of

A$2,750.66 Figure 1-9 shows the projected

reinvestment of DRP resource savings.

DRP Implementation

As noted, most cost efficiencies sought by successive governments involved progressive personnel cuts. In 1981, the ADF stood at over

72,000. Between 1984 and 1990, Defence lost

17,900 positions, of which 80 percent or 14,600

positions were civilian. The 1991 Force Structure Review led to a further loss of over 16,000

ADF and civilian positions. By 1997, the ADF
Part 1 – Australia

1-35

stood at about 56,000, an over 20 percent decline since the early 1980s. Australia embarked

on radical restructuring of its Defence

Organisation well before other nations faced the

consequences of the peace dividend following

the collapse of the Communist Block.

The DRP aimed to reduce the ADF permanent

force to 42,700 personnel (from a baseline of

56,600) through reductions and the results of the

market testing of Service positions.67 This target turned out to be unrealistic and was soon

abandoned. The ADF numbers were to be held

at about 50,000 and the proportion of personnel

in the combat force increased to 65 percent (from

the pre-DRP level of 24,000 to 32,000 in 2001).

The breakdown of the 50,000 military positions

by Service was to be Navy 14,000, Army 23,000

and Air Force 13,000. Figure 1-10 shows personnel estimates provided in the 1999-2000 Defence

Portfolio Budget Statements, that is, before a

further increase in uniformed personnel strength

was authorised by the Government.

With the less than expected drawdown of the

ADF and an increased proportion of personnel

in combat forces, the DRP-projected redirection

of resources from personnel to capital acquisition has turned out to be unrealistic. The retention of substantially higher numbers of Defence

Force personnel has been represented as “the

largest reinvestment of DRP savings.”68 In reality though, it reflect a failure of the DRP to

recognise the non-feasibility of further personnel cuts. Thus, these are the “savings” that could

not and have not been achieved.

Further, as the implications of Australia’s longer

term involvement in East Timor became apparent, the Government agreed to an additional

3,500 Service personnel, costing around A$240

million per annum at 1999-2000 salary levels.69

Defence Reform Program Reinvestments 1999-2000 2000-2001 2001-2002 2002-2003

A$ million A$ million A$ million A$ million

Defence Reform Program Net Ongoing Resources

Available 455 636 686 866

Defence Reform Program One-Off Savings 19 39 110 135

Unallocated A$125m Administrative Savings 0 0 66 117

Total Resources Available for Reinvestment 474 675 862 1,116

Reinvestment Initiative Details:

 New Capital Investment 85 169 139 139

 Amphibious Capabilities 26 17 24 24

 Capability-Related Logistics Costs 120 168 74 74

 New Capabilities – Net Personnel & Operating Costs 68 96 84 66

 Defence Science – Capability Projects 15 23 23 23

 Provision for 50,000 ADF 45 338 434 539

 Pilot Training 5 4 4 4

 Defence Reform Program Transition Costs 82 50 40 30

Total Reinvestment 447 866 822 899

Note: * Table may not add due to rounding Source: DPBS (1999-00), Table 1.4; p.15.

Figure 1-9. DRP Projected Cost Efficiencies and their Reinvestment*
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

1-36

The combined additional personnel cost is

estimated at A$900 million per annum, about

the same as the projected recurrent DRP

“savings.”70

The efficiency programs of the 1990s have not

been able to divert sufficient funds to capital

(equipment) acquisition to fund all the outstanding contractual obligations. Although obscured

by the rhetoric of “new managerialism,” their

failure has been quite apparent. First, the FSRrelated “savings” were not achieved as—in the

words of Admiral Beaumont, the then Chief of

the Defence Force—“we intended to divert funds

into major capital equipment. However, we’ve

had to use a lot of these funds to pay our people

salary increases, and therefore we have not been

to put as much into capital equipment as we

wanted.”71 Second, the DRP-related “savings”

were predicated on Defence achieving a personnel reduction in the ADF down to 42,500.

As the latter target was abandoned, nearly 90

percent of the anticipated recurrent “savings”

of A$730 million was no longer “harvestable.”72

The post-Timor increases in personnel numbers

and other non-capital expenditures have reduced

the scope for harvesting residual “savings” even

further.

Personnel Numbers (Average Strength)

Budget Revised Estimated Budget

Estimate Estimate Actual Estimate

1998-99 1998-99 1998-99 1999-2000

Permanent Forces

• Navy 13,850 13,748 13,666 13,550

• Army 24,400 24,426 24,201 23,200

• Air Force 15,785 15,500 15,130 13,250

Total Permanent Forces 54,035 53,674 52,997 50,000

Reserves(2)

• Navy 1,836 1,803 1,804 1,803

• Army 26,507 26,100 26,100 26,850

• Air Force 1,800 2,063 2,063 2,042

Total Reserves 30,143 29,966 29,967 30,695

Civilian 17,042 16,851 16,730 16,471

Trust Account Staff 89 89 89 89

Total Civilian 17,131 16,940 16,819 16,560

Total Staffing 101,309 100,580 99,783 97,255

Notes:

1. Navy is unable to reach its target strength in 1999-2000 and the Forward Estimates.

Accordingly Army and Air Force have been given higher allocations in the interim.

2. Reserve numbers include Ready Reserve numbers.

Figure 1-10. Summary of 1998-99 and 1999-2000 Personnel Estimates

Source: DPBS (1999-00), Table 1.13; p.23.

(1)
Part 1 – Australia

1-37

Market Testing Initiatives

The Australian market-testing program (the

Commercial Support Program or the CSP) begun in 1990-91 and has been progressively expanded throughout the 1990s. It is a competitive tendering and contracting initiative through

which commercial and in-house bids compete

for the provision of services. CSP contracts are

to be awarded on the “best-value-for-money

basis.”73 Since the mid-1990s, the Commercial

Support Program has become a major agent of

change forcing resource managers to embrace

the new culture of market testing. Recently, the

CSP has been subsumed into the Defence Reform Program. Figure 1-12 provides a summary

of market testing activities as of April 1999.

The market-testing program has been accelerated

under the Defence Reform Program. In 1999-

2000, 28 market testing activities, covering approximately 7,000 positions, are to be decided.

The market testing of base support services (messing, cleaning, guarding services, domestic services, etc.) across Australia is to be completed in

1999-2000. The testing of clerical and administrative support functions across Australia has

commenced and the results of this activity are

to be announced progressively during 1999-

2000.74 Definition/scoping studies have been

under way for the market testing of: F-111 and

C130 aircraft maintenance; medical and dental

supplies; explosive ordnance storage and distribution; and Army laboratory and engineering

support. Other activities under consideration

include physical warehousing distribution and

some regional maintenance activities of Defence

logistics in 26 locations across Australia,

publishing and printing services, and so on.

Several joint agencies have been created with a

view of rationalising the delivery of logistic services. These include the Joint Ammunition and

Logistics Agency, the Joint Fuels and Lubricants

Agency, and the Joint Logistics Systems Agency.

Defence Support Command has commenced a

number of other projects, including a revised

defence supply management chain, the Defence

Inventory and Purchasing Segmentation Framework, which aims to increase vendor-held stock,

direct vendor delivery and forward purchasing

agreements to enable Defence inventory to be

managed better in terms of availability, usage

and value.75

Progress as of April 1999

Evaluation Decisions Made 87

In-House Options 23 (26%)

Commercial Contracts 59 (68%)

Status Quo Retained 5 ( 6%)

Projected Recurring Annual Savings A$206.0m

Savings to April 1999

Mean Projected Rate of Annual Savings 33%

Number of Positions Tested 9,390

Total Value of Commercial Contracts A$2,026.3m

Source: DPBS (1999-00); p.11.

Figure 1-12. Defence Market Testing (The Commercial Support Program)
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

1-38

There may be some long-term benefits in terms

of “change of culture” (greater awareness of the

opportunity cost of resources) but this is yet to

be demonstrated. In the short run, the purpose

of the reform was to identify “fat” (mostly from

reductions and asset sale) and trim it to release

resources for new capital acquisitions. Thus, the

acquisition of billions of dollars worth of capital equipment were approved on the assumption

that the “savings” would materialise in due

course. But, since the cost of personnel has not

been cut (even though the numbers were reduced), the “savings” turned out to be apparent

rather than real. We are now underfunded and

overcommitted in that the capital equipment

commitments exceed budget appropriations by

billions. In the private sector, this situation would

have been referred to as “bankruptcy” and a

receiver would be called in.
Part 1 – Australia

1-39

Chapter 7

DEFENCE ACQUISITION

ORGANISATION

• effectively implement the initiatives of

the Defence Reform Program applicable

to the DAO.

To achieve these goals, the DAO has been tasked

to:

• play a major role in capability development through its participation in the

Defence Capability Committee and

Capability Forum (see Chapter 8);

• provide specialist assistance to sponsors

of major capital equipment projects in

defining capability requirements (i.e.,

functional requirements or technical

specifications), developing schedules,

cash flow projections and cost estimates,

and addressing industry and contracting

issues;

• manage major weapons and systems

projects, including:

– the development of Equipment Acquisition Strategies that determine the

method of procurement, define schedule and decision making authorities

for individual projects, encourage innovative approaches to acquisition, and

comply with Government procurement

policies;

– monitoring of the financial and physical performance of major capital

equipment projects to ensure that they

DAO Mission and Enabling Strategies

The Defence Acquisition Organisation (DAO)

is responsible for the procurement and delivery

into service of the weapons and other major systems and equipment required by the ADF to

preserve and enhance its combat capabilities. It

is also responsible for the maintenance of supply chains from industry to Defence and the

delivery of a range of “Department of State”

functions, for example, the administration of defence exports regulations. DAO’s Strategic Plan

1998-2001 translates these broad objectives into

five strategic policy goals. These are to:

• meet the Government’s priorities for the

development of Australian defence

capabilities through the timely and cost

effective (“to budget and on schedule”)

acquisition and delivery to users of

appropriate equipment and services;

• enhance Australian industry capabilities

that contribute to Defence self-reliance

and national security;

• achieve international leading practice

in the capital acquisition process by

being proactive and innovative while

maintaining a clear focus on clients and

stakeholders;

• ensure that DAO personnel are capable,

motivated and well equipped to achieve

its mission; and
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

1-40

meet capability, acquisition, and

industry involvement objectives;

• management, jointly with the ADF Operational Commanders, Support Command Australia and the Training Commanders, of the transition into service

of major capital equipment;

• implementing and promoting the initiatives contained in the Government’s

1998 Defence Industry Policy Statement

including:

– the definition of Defence’s needs of

industry,

– securing industry input to force development and acquisition processes, so

that wider support issues may be considered when capability requirements

are defined,

– the implementation of the Australian

Industry Involvement Program, defence exports facilitation and material

cooperation initiative, and quality

assurance procedures,

– fostering a Defence procurement environment that encourages best practice in acquisition processes, promotes

the adaptation of best practice models, uses performance benchmarks to

facilitate continuous improvement,

and applies Quality Management

System across the DAO;

• improving management practices and

standards, including:

– contracting professional support to

supplement in-house expertise,

– the development of a more robust corporate memory through a greater

focus on process evaluation and

documentation of lessons learnt,

– communication across the Program

and with stakeholders,

– the rationalisation and improvement

of the DAO’s existing information

technology (IT) applications, systems

and resources,

– the introduction of accrual budgeting,

accounting and reporting to support

more informed decision making,

– the achievement of savings resulting

from reductions in personnel numbers,

especially at the senior officer level,

civilianisation, reductions in the DAO

regional presence, and the efficiencies gained from business process

reengineering; and

• provide a more outcome-oriented

working environment that:

– offers enhanced staff training and

career-development opportunities,

– promotes teamwork and good staff

relations, and

– strengthens the linkages with other

organisations involved in force development and in-service operation and

support.

In 1999-2000, Defence planned investments

(new capital formation) comprising: major capital equipment (A$2,750 million), facilities

(A$428 million), minor capital equipment

(A$247 million), and other assets (A$152 million). Of the total capital investment of A$3,578
Part 1 – Australia

1-41

million (U.S.$2.1 billion), the DAO is primarily responsible for major capital equipment,

which accounted for about 25 percent of the

1999-2000 Defence budget.76 Most of the DAO

acquisition activity takes the form of “projects.”

In 1999-2000 it managed a portfolio of nearly

200 projects, 50 of which cost over A$100

million each.77

Divisional and Branch Structure

The DAO divisional (sub-program) and branch

structure at the beginning of 2000 is shown in

Figure 1-13. The allocation of branch responsibilities is outlined below. This structure was

introduced in the late 1990s as a part of the

Defence Reform Program. In essence, there are

Figure 1-13. DAO Divisional and Branch Structure

Source: DAO (1999).

Systems

Acquisition –

Maritime and

Ground Division

Systems

Acquisition –

Aerospace

Division

Industry &

Procurement

Infrastructure

Division

Systems

Acquisition –

Electronic

Systems Division

• Industry Policy

and Programs

• Exports and

International

Programs

• Contracting

Policy and

Operations

• Acquisition

Management

Systems

• Communications

Systems

• Command and

Support

• Strategic High

Frequency

Systems

• Electronic Warfare

and Radar

Systems

• Undersea Warfare

Systems

• Surface Warfare

Systems A

• Surface Warfare

Systems B

• Ground and

Amphibious

Warfare Systems

• Aerospace

Combat Systems

• Aerospace

Combat Support

• Helicopters and

Guided Weapons

• Aerospace

Surveillance

Systems

• Aerospace Project

Coordination

Under Secretary

Defence Acquisition

(Program Manager)

Capital

Equipment

Program

Division

• Acquisition Planning

• Acquisition Finance

and Reporting

• Acquisition Corporate

Management

• Acquisition Management Projects
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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two policy and support divisions (Capital Equipment Program, and Industry and Procurement Infrastructure) and three technology acquisition

divisions (Electronic Systems, Maritime and

Ground, and Aerospace).

Capital Equipment Program Division

The Capital Equipment Program Division (CEP)

manages the Major Capital Equipment (MCE)

Sub-Program in concert with the Systems Acquisition Divisions (Electronic, Maritime and

Ground and Aerospace). CEP supports the Under Secretary Defence Acquisition in coordinating the resources and management of the acquisition Program. The Division’s mission is “to

equip and support the ADF” by facilitating the

acquisition of major capital equipment.” The

Division is tasked with providing a transparent

and stable (predictable) financial and human

resource environment, corporate systems, and a

sound policy and planning framework.

The CEP branch structure and branch responsibilities78 are as follows:

• Acquisition Planning Branch focuses on

pre-contract stages of MCE projects and

assists development of MCE projects

prior to contract award. It coordinates

divisional advice to the Defence Capability Committee and the Defence

Capability Forum (see below) and

reviews tender and contract documentation and major capital equipment acquisition processes. It also performs the role

of Executive Member of the Defence

Source Selection Board;

• Acquisition Finance and Reporting

Branch focuses on post-contractual

stages of MCE projects. It plans the financial resources of the MCE Sub-Program (the White Book—see Chapter 8)

and develops and implements acquisition and business policy for the MCE

Sub-Program. It also produces The Capital Equipment Procurement Manual

(CEPMAN 1). It is responsible for development and support for new information technology systems for financial and

projects reporting, and for supporting the

Defence Acquisition Review Board;

• Acquisition Corporate Management

Branch provides a transparent and stable

human resource and financial planning

environment for the Acquisition Program. It coordinates the implementation

of Defence Reform Program in DAO

(see below) and undertakes corporate

planning and management activities for

DAO (the Acquisition Program) and

CEP Division. It is responsible for development and delivery of project management and procurement training and

education including the Graduate Acquisition Trainee Program. The Branch also

provides administrative support for CEP

Division and coordinates and manages

administrative activities in DAO and

performs the public relations role for the

Program; and

• Acquisition Management Projects

Branch operates the DAO’s Information

Management Policy and Support Centre (IMPSC) and manages a range of

Portfolio IM/IS initiatives. It also manages the post-sale activities of Australian Defence Industries and other former

government business enterprises (GBEs)

and the sale of the Commonwealth’s

shareholding in the Australian Submarine Corporation (see Chapter 9). The

Branch carries the responsibility for the

Goods and Services Tax (GST) within

DAO.79
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1-43

Industry and Procurement

Infrastructure Division

The Division’s mission is to “contribute to the

acquisition of equipment and systems and to

promote industry support for Australia’s Defence capability.” Its branch structure and branch

responsibilities80 are as follows:

• Industry Policy and Programs Branch

develops and manages Defence policy

for industry, provides advice on industry issues to Defence and communicates

Defence’s needs to industry;

• Exports and International Programs

Branch develops Defence policy on international materiel cooperation and export facilitation and coordinates Defence

involvement in selected major defence

export projects. It also promotes defence

exports and materiel cooperation with

Asia, North America, Europe and emerging markets. The Branch administers

defence and strategic export controls;

• Contracting Policy and Operations

Branch formulates, promulgates and

advises on Defence contracting and procurement policy, procedures, documentation and standards. It also provides a

professional contracting service to the

Defence Organisation; and

• Acquisition Management Systems

(Branch) is responsible for concepts and

policies as well as improvements in processes and systems involved in the acquisition of MCE. Its responsibilities include, inter alia: systems engineering,

earned value performance management,

integrated logistics support, quality assurance, and risk management. The Branch

leads a Business Process Reengineering

Project within DAO in support of the

Defence Reform Program.

Electronic Systems Acquisition Division

(ESAD)

The Division’s mission is to “manage the

acquisition of major and minor electronic capital equipment, which will help deliver the knowledge edge to the ADF.” The major and minor

electronic capital equipment includes systems

that are involved in information transmission,

command, control, communications, radar and

electronic warfare. Many of these systems have

joint service applications. The ESAD branch

structure and branch responsibilities81 are as

follows:

• Communications Systems Branch manages and introduces into service major

and minor communications and related

systems projects. It is also responsible

for the management of DAO corporate

information systems;

• Command and Support Systems Branch

is responsible for the development, acquisition and introduction into service of

command and support systems to meet

Defence’s operational requirements;

• Strategic High Frequency Systems

Branch is responsible for the Jindalee

Operational Radar Network (JORN),82

High Frequency Modernisation (HF

MOD), and the Global Positioning

System (GPS) Navstar Projects; and

• Electronic Warfare and Radar Systems

Branch is responsible for managing the

acquisition of and introducing into service major and minor electronic warfare

and radar systems projects.
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Maritime and Ground Acquisition

Division (MGAD)

The Division’s mission is to acquire “ships, submarines, systems and vehicles for the Navy and

Army of the future.” The MGAD branch structure

and branch responsibilities83 are as follows:

• Undersea Warfare Systems Branch is

responsible for all designated undersea

warfare projects, including submarines;

• Surface Warfare Systems A Branch is

responsible for the management of the

ANZAC (see Chapters 4 and 9) Ship

Project, ANZAC Warfighting Improvement Program, Evolved Sea Sparrow

Project, Principal Representative Maritime and Ground Systems (Victoria), and

Navy Minor Capital Equipment Projects;

• Surface Warfare Systems B Branch is

responsible for the management of approved ship and maritime equipment

acquisition, including ship building,

modernisation and conversion; and

• Ground and Amphibious Warfare Systems Branch is responsible for the acquisition and introduction into service

of new amphibious ships and watercraft,

combat and support vehicles, weapons,

surveillance systems and a broad range

of general equipment systems.

Aerospace Acquisition Division (AAD)

The Division’s mission is to “define and acquire

aerospace systems and support to meet ADF

requirements.” The AAD branch structure and

branch responsibilities84 are as follows:

• Aerospace Combat Systems Branch manages the acquisition and introduction into

service of assigned combat systems;

• Aerospace Combat Support Systems

Branch manages the acquisition and

introduction into service of tactical,

transport and training systems;

• Helicopters and Guided Weapons

Branch manages the acquisition and introduction into service of rotary wing

aircraft and assigned weapons systems;

• Aerospace Surveillance Systems Branch

manages the acquisition and introduction into service of aerospace surveillance

systems; and

• Aerospace Project Coordination Branch

is responsible for project coordination

and support in the AAD. It is also responsible for the overall management of the

Division’s quality management system.

The rationale of the current divisional and branch

structure is discussed below.

Defence Acquisition Review Board

(DARB)

In addition to restructuring the DAO, the Defence Reform Program brought about changes

in the strategic approach to its management. In

the past, Division Heads assisted in the management of the DAO through membership of the

Acquisition Program Executive (APEX), which

operated as a “Board of Management.” This boardtype function is to continue, with the Head of the

Capital Equipment Program Division (FASCEP

—First Assistant Secretary Capital Equipment

Program) acting as a chief of staff within the

DAO. However, post-reform, the five Division

Heads are to be less involved in day-to-day management and will assume increased responsibility for the corporate governance of the DAO.

Authority, responsibility and accountability for

project outcomes should to be delegated as far

as possible to Branches and Project Teams.
Part 1 – Australia

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To focus the DAO executive on the strategic role

of the Acquisition Organisation, Defence has

established the Defence Acquisition Review

Board (DARB). The purpose of this new, internal DAO body is to provide high-level review

and direction on the progress of major projects

post contract.

85 The DARB reviews each of the

more important MCE projects on an annual

basis, monitors the performance of the MCE

Sub-Program as a whole, draws lesson from

relevant experience, and considers important

policy and procedural issues. The DARB is also

a forum for monitoring the performance of

approved MCE projects, providing guidance and

improving processes. The DARB complements

the role of the Defence Capability Committee

(DCC), the Capability Forum (CF) and the Defence Source Selection Board (DSSB), which

focus on the pre-contract phases of new capability formation (see Chapter 8), and the Defence

and Industry Advisory Council (DIAC), which

provides advice to Government on strategic matters related to the provision of industry support

for the ADF (Chapter 9 refers).

The DARB is chaired by the Under Secretary

Defence Acquisition. Other members are: First

Assistant Secretary Capital Equipment Program,

Head Industry and Procurement Infrastructure,

Head Systems Acquisition – Maritime and

Ground, Head Systems Acquisition – Aerospace,

Head Systems Acquisition – Electronic Systems.

Executive Member is Director General Acquisition Finance and Reporting Secretary is Director Acquisition Review. Head, Capability Development, and Head, Capability Program and

Resources Planning are also invited to represent

Defence’s capability development interests.

The DARB provides a forum for:

• monitoring the performance and the

status of approved MCE projects

including:

– schedule, physical, financial and

contractual progress,

– achievement of equipment performance requirements and the agreed

Industry Involvement Program,

– transition of equipment into service,

– risk management arrangements, and

– project management arrangements;

• strategic guidance to the Directors General of the technology-based acquisition

branches in respect of project-specific

acquisition issues;

• monitoring the overall performance of

the MCE Sub-Program;

• reviewing strategic issues and providing

feedback on project management policy

and procedures;

• overseeing the development and implementation of the MCE Sub-Program’s

management information and reporting

systems; and

• promoting organisational environment

and culture that is committed to openness

and transparency.

The review process is primarily focused on the

top 30 projects (determined on the basis of expenditure, risk and sensitivity) spread between

the three technology areas: electronic, maritime

and ground and aerospace systems. However,

the selection of projects for consideration by the

DARB is entirely at the Board’s discretion. In

addition to reviewing the targeted projects, the

Board also considers various acquisition

processes with a view to engendering process

improvement and enhancing corporate learning.
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The Board meets monthly. In the weeks leading

to the consideration of a project by the DARB,

the Acquisition Review (AR) Section, which

provides secretariat services to the Board, will

liaise closely with the relevant project office. The

latter will be tasked to produce a brief paper,

based on data from the ProMIS corporate

reporting tool, which outlines project performance and issues affecting it. The AR Section

will then draft an executive summary/agendum

paper to cover the project brief. These documents will be provided to members via the

DARB database and will form the basis of the

Board’s consideration of the project and the associated processes. The AR Section staff will

also liaise with other Defence (matrix) organisations to help identify issues of common interest concerning the project. Should issues arise

which have not been addressed in the (project

office) brief, a separate paper on the particular

matter of interest may be attached to the agenda

papers.

Conclusions of the DARB are drafted by DARB

staff and e-mailed to members for comment/

agreement. Action items are captured in a log

and addressed at subsequent meetings. Finalised

conclusions are available to members via the

DARB database. Senior executives (one star and

above) in DAO have access to agenda papers

and conclusions in the database. Other DAO staff

have access to selected portions of the papers,

including the lessons learned. Significant lessons learned are also captured in the DAO

Lessons Learned database.86

Defence Acquisition Reform

DAO personnel comprise some 3 percent of the

total Defence Organisation but they are responsible for nearly 25 percent of the Defence budget.

Not surprisingly, the Defence Reform Program

(DRP) paid particular attention to the restructuring of the DAO. As a major part of the Reform

agenda, the DAO was tasked with ensuring that

new MCE: meets performance requirements;

makes optimal use of Australian industry; is

acquired efficiently; and introduced into service

on schedule and within cost estimates. The

Defence Minister has also indicated that he

wants to see fundamental Defence acquisition

reform to ensure that new acquisitions are

delivered faster, better and cheaper.87 The DRP

has also provided the DAO with a more prominent role in the early stages of the force development process for MCE projects, with special

responsibility for developing achievable schedules, cost estimates and cash flows.88 This role

is reinforced by the Under Secretary of Defence

Acquisition’s membership on the Defence

Capability Committee (see Chapter 8). In particular the DAO is seeking to break down arrangements separating acquisition planning

from capability development planning as well

as being more assertive about not accepting

poorly-defined project proposals.89

Three principles identified in the Defence Efficiency Review report (DER, 1997) have guided

the restructuring of the DAO, namely:

• The effectiveness of the DAO is overwhelmingly more important than its

internal efficiency. Given its role as

“facilitator” of new capital formation,

the DAO’s acquisition activity is disproportionately important in Defence. The

capital assets whose acquisition the DAO

facilitates form the backbone of ADF

capability for decades thereafter.90

• The most important common factors between defence acquisition projects are

the suppliers (individual companies), the

supply characteristics, and the technologies involved, not the customers; and

• The core procurement task must be

retained in-house and should include

“smart buyer” skills, as well as the ability
Part 1 – Australia

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and capacity to manage the outsourcing

of other activities. However, some of the

procurement tasks—in areas such as

legal, technical and project management

advice, and provision of support services,

such as quality assurance and engineering evaluation—can be outsourced to

specialists.

Its new structure allows the DAO to more closely

align with suppliers and technologies—rather

than its Service customers as in the past. The

22-branch structure has been based on areas of

commonality (e.g., warfare mission, equipment

development status, customer and industry

specification practices, and design, integration,

construction and test processes). The technology branches are the key delivery mechanism

within the DAO, and are intended to operate as

centres of expertise for particular technologies

(e.g. electronic warfare, undersea warfare, and

so on). The technology branches are to be supported by Policy and Support Centres (PSCs)

from CEP and IPI Divisions (see below). The

Under Secretary of Defence Acquisition is the

employing delegate for all staff in the DAO91

and, ex officio, he/she is responsible for developing and approving cash flows and project cost

estimates for all major post-signature (the socalled White Book) projects (see also Chapter 8).

For all but the larger projects, Integrated Product Teams will in the future be a key feature in

the new DAO structure, with specific business,

finance, industry, contracting, and other areas

of expertise being provided by PSCs. The teams

will examine: alternative products or service

delivery options, including those unique to

Australian circumstances; scope for off-the-shelf

acquisition and international collaboration;

risks associated with different options; and key

cost factors specific to each option. The new

Policy and Support Centres (PSCs) cover functions and disciplines critical to major capital

asset acquisition: contracting, acquisition

planning, industry involvement, quality assurance, finance, and earned value management.

Their job is to provide expert advice and

specialised services to project authorities in the

technology branches as well as give policy guidance and assistance to a wide range of clients

outside the DAO.

As mentioned earlier, Defence has already

announced its intention to merge the DAO and

the Support Command into a single acquisition

and through-life support organisation. At the

time of writing, it is not clear how this will be

achieved and feasibility studies are under way

to assess the practicalities of the intended

merger. Regardless of the final outcome of these

studies, Support Command will have membership on integrated capability and acquisition

teams responsible for the logistics support

aspects of projects, including through-life

considerations.

The DAO has also embarked on a program

reengineering its business processes and changing its organisational culture “to do more with

less.”92 The BPR initiative aims to ensure consistency, improved quality, and the elimination

of unnecessary bottlenecks, duplication and layers of consultation, review and reporting. The

reengineering of the acquisition processes is to

result in greater devolution of decision-making

and delegation of authority instead of centralised

committee-based and top level-driven decision

making. There should be clearer identification

of responsibility and accountability, and a more

tailored approach to project requirements. Considerations of through-life risk management

should drive the acquisition process. The APEX

has acted as the steering group for the implementation of the BPR and other reform initiatives. It reports monthly on progress to the Minister for Defence and has established a small Implementation Team to coordinate and monitor

the progress of Acquisition Reform.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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Improved efficiency and effectiveness will also

be supported by the wider use of a Quality Management System across the DAO, and by the introduction of new IT management information

systems. The collocation of previously dispersed

DAO personnel into an integrated office complex has also provided opportunities for business process efficiencies and team building.93

The DAO is also responsible for providing or

commissioning the provision of functional training in acquisition-related disciplines so that staff

executing different acquisition delegations can

be trained to acquire appropriate competencies

and acquisition-specific career streams can be

developed.

At the time of writing, the Under Secretary of

Defence Acquisition is shifting the emphasis in

contracting away from the use of the fixed price

approach to new strategies to manage risk. The

focus is on greater use of incentives to share

potential efficiencies between the vendor and

Defence; evolutionary acquisition; and costcapped tendering which, when combined with

alliance contracting, allows suppliers/contractors to offer capability trade-offs within the cost

cap. It is also intended to use risk assessment

profiles in the tendering process to identify critical areas of vulnerability among potential suppliers. Company “score cards” and one-on-one

company briefs at the pre-tender stage are to

assist in the contractor selection process. Successful past performance will be used as an indication of a contractor’s capability to perform in

future and score cards and briefs will allow Defence to eliminate potentially non-competitive

bidders earlier in the source selection process.94

The tendering process is to be simplified with

less company-specific information requested

from bidders and streamlined tendering, shortlisting and contract award. Functional rather than

product/technical specifications and systems

engineering approach are to be applied in the

early stages of capability definition and evaluation of supply options. Operational concepts and

logistics support requirements should be finalized and reflected in contracts before signature.

The Replacement Patrol Boats project is envisaged as test case (pilot) of the new approach to

defence acquisition.95
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Chapter 8

THE ACQUISITION PROCESS

This Chapter begins with the generic description

of capital acquisition process for both major and

minor projects. This is followed by a description

of two documents, the so-called Pink and Yellow

Books, which list the proposed (unapproved)

major and planned minor capital projects respectively. The remainder of this Chapter is concerned

with the acquisition of major capital equipment

items.97 The acquisition process is considered in

three phases: the pre-project approval phase; the

approval phases; and the post-project approval

phase. The Chapter concludes with a brief

The Materiel Cycle

The concept of “materiel life cycle” provides a

convenient model for describing an asset’s life

cycle. Figure 1-14 provides an overview of the

materiel cycle in the Australian Defence Organisation based on various planning and resource

management documents.95 Details of the capability planning and capital acquisition are discussed in some detail below. Detailed considerations of in-service deployment and disposal are

beyond the scope of this Chapter.

Figure 1-14. The Defence Materiel Cycle*

Disposal

Through-life Updates

Life-of-type Reviews

Capability Analysis

Capability Option Document

Capability Systems Statement

Equipment

ITR/RFP

PMAP

TEP

RFT

Contract and PostContract Management

Tender Evaluation

IN-SERVICE

MANAGEMENT

(Support Command)

Source Selection

CONCEPTION

(Defence

Headquarters)

REALISATION

(DAO)

Capability Acceptance

(In-Service) Gate

Project Approval

Gate

Acquisition

Strategy

Definition/

Scoping

Studies

Configuration

Management

Production

Trials and

User Acceptance

* These terms are defined and discussed below.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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description of international collaborative

arrangements.

The pre-approval phase is managed primarily

by capability development and program and

resources planning divisions in Defence Headquarters, with the DAO providing industry,

acquisition, cost and schedule inputs and advice.

The post-project approval phase is managed by

the DAO.

CAPITAL EQUIPMENT

ACQUISITION PROCESS

The Concept of Capital Equipment

The (Australian) Capital Equipment Procurment

Manual describes capital equipment in Defence

as comprising:

• major assets such as ships, aircraft, armoured vehicles, weapons, communications systems, electronic systems or other

armaments which are either additions to

the defence inventory, or replacements

for assets in the defence inventory;

• the modernisation, conversion or modification of major assets that will result

in a capability enhancement;

• significant assets such as plant and

machinery, special-to-type test equipment that were either not previously

stocked or are required to replace existing

items but have a significantly enhanced

capability;

• additional quantities of ammunition and

significant assets to meet increased levels

of entitlements and reserves;

• initial supplies of maintenance, test and

support equipment, machinery, spares,

ammunition, training aids and other

items for the requirements identified

above; and

• substantial initial issues of new items of

clothing and other personal equipment

and/or additional items to meet major

increases in the size of the ADF or to

improve the capability of the existing

force.

Major and Minor Capital Equipment

Capital equipment (and systems) is acquired

through:

a. major capital equipment projects; and

b. minor capital equipment projects.

Major capital equipment projects are those

where:

• all one time project costs incurred in

bringing capital equipment (or systems)

into operational service, including the

cost associated with the stock of initial

(three year supply) spares are estimated

to exceed A$20 million; or

• the unit cost of an individual equipment

in a multi-item acquisition is A$1 million

or more; and/or

• there are significant Defence policy or

Joint Service implications.

The Defence Major Capital Equipment (Investment) Program is divided into three categories:

• Approved Equipment – Major Capital

Equipment Sub-Program (The White

Book);
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• Not-Yet-Approved Equipment – New

Major Investment Sub-Program (The

Pink Book); and

• Facilities – Capital Facilities Sub-Program

(The Green Book).

Major capital equipment acquisition projects are

normally managed by the Defence Acquisition

Organisation.

Minor capital equipment projects are defined as

equipment, which falls within the definition of

capital project but does not meet the criteria

described above. By and large, these projects,

cost less than A$20 million to acquire. The Support Command Australia normally manages

minor projects. Exceptions include the Capability and Technology Demonstrator (CTD)

projects and minor projects, which have links

to major projects.

Minor projects are listed in Forward Procurement Plans for the Australian Department of

Defence Minor Capital Equipment Program and

the New Zealand Defence Force Capital

Programme – Minor (The Yellow Book). New

Zealand’s program is included in the (combined)

Yellow Book because for many defence products, especially minor capital equipment, the

Australian and New Zealand contractors are

treated equally as domestic suppliers (see

Chapter 9).

Pre- and Post-Project Approval Phases

The acquisition of capital equipment consists of

pre- and post-“project approval” activities.

Project approval (by Government in the case of

major projects) is the key event, which marks

the shift from the predominantly planning activities of the pre-approval stage to the post-approval stage where the planning is implemented.

The pre-approval phase covers capability

development and materiel definition98 aspects of

acquisition and includes:

• identification of the tasks required of the

Australian Defence Force (ADF) in

meeting strategic guidance;

• considerations of the ADF’s ability to

undertake the tasks with current and

planned capabilities;

• considerations of the options available

to address capability shortfalls;

• development of an Equipment Acquisition Strategy (EAS);99

• development of specifications and capital

and through-life cost estimates;

• assessment of the proposal’s priority and

proposal programming; and

• seeking approval for the proposed

project.

The post-approval (implementation) phase

includes:

• seeking expressions of interest, proposals

and tenders from industry;

• tender evaluation, source (supplier)

selection, and contracting;

• acquisition (project) management and

contract administration; and

• the project’s acceptance into operational

service.
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Defence New Major Capital Equipment

Proposals – The Pink Book

Defence New Major Capital Equipment Proposals or the so-called Pink Book (unclassified) provides a consolidated breakdown of MCE projects, which have developed but have not yet

been approved by Government. Normally, larger

projects consist of a number of self-contained

phases, each phase being proposed, reviewed,

and approved separately by Government. The Pink

Book excludes a number of highly classified

proposals and proposals of particular sensitivity.

Given their unapproved status, most proposals

listed in the Pink Book are subject to further

review. As expenditure for most proposals is

spread over many years, significant slippage,

rescheduling of expenditure and changes in

scope may occur. With regard to the timing and

approximate cost ranges, the program is deliberately “overbid”, i.e., more proposals are included than could be afforded. This built-in

“slack” allows for unexpected changes in

proposal schedules and offers investment planners a degree of flexibility to accommodate

changes in Defence priorities and/or government

strategic and financial planning guidance.

Prime equipment purchases should be viewed

more broadly in the context of full-cost-of-ownership to Defence and in through-life terms.

Thus, the project cost should reflect the total

estimated cost of bringing new equipment into

service and include such elements as Government Furnished Materials, Integrated Logistics

Support (initial stock of spares, training, publications, facilities, and test and support equipment), and administration. These costs usually

represent a very substantial proportion of the

total (life cycle) project cost.

The Defence and Industry Strategic Policy Statement of 1998 committed Defence to expanding

the Pink Book to make MCE proposals more

transparent to industry. Phasing details have been

expanded and, in some cases, they include a

history of the project. Projects are also described

with regard to “Defence needs of Australian

industry,” drawn from the publication of the

same name, to provide an “industry function”

breakdown of anticipated needs. References to

“Australian Industry Involvement” (AII) reflect

expectations that most projects will include substantial Australian content during both acquisition and through-life phases. Also included

in the Pink Book is a reference to “potential

prime contractors,” included to assist domestic

Small and Medium Enterprises (SMEs) in their

discussions with Defence and potential prime

contractors.

“Project schedule highlights” are included in the

Pink Book to provide indicative timings for project milestones. A further indication of Defence’s

current thinking is reflected in a “future phases”

category. The Year of Decision (YOD) for a proposal is the year that first expenditure may occur

providing the project is approved by Government. Contacts with industry generally commence before the YOD as proposal sponsors and

managers prepare the necessary departmental

documentation. A typical structure of a proposal

is shown in Figure 1-15.

Forward Procurement Plans for Minor

Capital Equipment – The Yellow Book

The Forward Procurement Plans for Minor

Capital Equipment (the so-called Yellow Book)

incorporates the Defence procurement plans for

minor capital equipment in Australia and the

New Zealand Capital Programme – Minor. The

Yellow Book is a source of information for industry on Australian and New Zealand future

spending on defence minor projects (up to $A20

million in Australia and $NZ5 million in New

Zealand). As in the case of Pink Book, much of

the information contained in this publication is

only indicative. Individual projects will only
Part 1 – Australia

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Figure 1-15. Example of a Pink Book Proposal: AIR 5401 Phase 1

Year of Decision 1998/99

AIR 5401 Phase 1 - Medium Tactical Air Lift Capability

This Phase of the project will refurbish the existing 12 C-130H aircraft to maintain the ADF’s tactical

air transport capability, through to the planned replacement of the C-130H around 2008. The work

involves limited structural refurbishment and replacement of some avionics and instrumentation, and

is expected to be carried out within the Deeper Maintenance (DM) period, or as part of flight line

operations maintenance and support. Support Command Australia will arrange procurement.

Purchases already underway for this project include:

• Phase 2 (YOD 97/98) covers the Medium Tactical Air Lift Capability (MTAC) simulator for the C130H. This is being procured through Project Air 5369, via a contract change proposal with CAE

(Australia). Project Air 5369 covers the procurement of simulators for RAAF’s Boeing 737 aircraft

and C-130J aircraft being procured under Project Air 5216.

• Phase 3 covers Electronic Warfare Self-Protection for the C-130H. Tenders for this Phase closed in

October 1998.

Defence Needs of Australian Industry

Identified needs, which may relate to this phase, include aircraft structure and avionics.

Australian Industry Involvement

Areas for Australian Industry Involvement include:

• installation of avionics and cockpit design;

• refurbishment of the landing gear, airframe and structure; and,

• Integrated Logistics Support (ILS) for new avionics and other aircraft components as required.

Through-life Support

The C-130H aircraft will be replaced around 2008. Through-life support activities will concentrate on

aircraft DM and ILS out to the planned withdrawal date.

Potential Prime Contractor

Air NZ Engineering Services (at Christchurch or Blenheim) currently undertake DM and flight line

operations maintenance and support. It is likely further activities may also be undertaken by this

company.

Project Schedule Highlights

Timings are yet to be determined for this phase.

Proposed Expenditure

Air 5401 Phase 1 is a category 7 project.

Future Phases

Air 5414 Phase 1 (YOD 03/04) will procure an aircraft to replace the C-130H.

Air 5414 Phase 2 (YOD 03/04) covers upgrade of the C-130H simulator.

Air 5414 Phase 3 (YOD 03/04) covers Electronic Warfare Self-protection for the C-130H replacement.

Point of Contact

CD Div Contact: xxx yyy zzz

Source: Pink Book (Defence New Major Capital Equipment Proposals 1999-2004).
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proceed subject to satisfactory further development and the normal budgetary processes of programming, funding and approval. The priority

afforded each project may be changed to reflect

changing preferences and strategic concerns.

While the two Defence Organisations endeavour to provide industry with an early indication

of their procurement intentions and plans, information contained in the Pink and Yellow

Books does not constitute informal or formal

tender documentation. Thus, any expense or investment decision made by industry on the basis

of data contained in these documents is a matter

for commercial judgement.

Major Capital Equipment Acquisition

Process: The Pre-Project Approval Phase

The pre-approval phase of the MCE acquisition

process comprises capability development and

materiel definition activities.

Capability Development

Capability development refers to the process of

identifying and planning, within strategic and

financial guidance, the acquisition of a capability required for the ADF. Capability development follows from strategic policy development.

The major output of strategic policy is the establishment, through Government decisions, of

strategic priorities for the whole of Defence. This

includes strategic appreciation of ADF capability requirements. This appreciation provides a

basis for capability analyses which, in turn, leads

to sustainable arguments for the equipment procurement. The Capability Staff is responsible for

exploring options to enhance current capabilities

and develop new ones. The Capability Assessment Reports (CARs) and Resource Assessment

Reports (RARs) help to identify and prioritise

deficiencies in the current force, as well as identify desirable capability developments for the

future force.

The Capability Managers are responsible for

bringing to the attention of Vice Chief of Defence Force (VCDF), Deputy Secretary Strategy and Intelligence (DEPSEC S&I) and, if appropriate, the Defence Executive any issues of

concern or suggested improvements to meet

current or future requirements. They should also

ensure that all elements of capability for which

they are responsible have been addressed during the capability development phase.100 They

provide expert advice on current capability to

VCDF and DEPSEC S&I. This includes the

identification of needs and opportunities for

capability improvement; the attendant cost

implications, and, where desirable, the scope

for remedial or development action. They also

provide inputs to the analysis of new capabilities and strategic priorities and the desirability

of new investment in capability relative to the

continuing dependence on the existing ones.

Integrated Project Teams (IPTs) are formed with

representation from all significant stakeholders

internal to Defence, preferably from conception

to in-service, with differing representation and

stakeholder involvement and influence at different stages. These teams may be managed directly by line management or by Project Management Boards comprised of key stakeholders

such as ADHQ, DAO. In the capability definition phase, IPTs are designed to improve the

quality and scope of proposals by drawing on a

diverse range of stakeholders.

Specific major capital investment (capability)

proposals are submitted for inclusion in a

Considerations Paper prepared by capability

development and resources planning divisions

for consideration by the Defence Capability

Committee or the Capability Forum.

The Defence Capability Committee (DCC) is

chaired by DEPSEC S&I, with VCDF and the

Under Secretary for Defence Acquisition as

standing members. It makes key decisions on
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capability development priorities and recommends an annual program of investment that is

consistent with strategic and financial guidance.

The committee considers and endorses the scope

and cost of complex unapproved projects and

resolves cost/capability trade-offs to arrive at a

recommended investment program.

The DCC is supported by the Capability Forum

(CF), whose representation parallels the DCC

with membership at the two-star level. This

forum makes capability development decisions

on issues delegated to them by the DCC. Typically, it provides recommendations to the DCC

on the proposed levels of investment for less

significant or costly projects. The CF also

considers capabilities utilising emerging technologies through a program of Capability and

Technology Demonstrators (CTDs).

The following Capability Development Framework need not apply rigidly to all Capability

Development Proposals, but the general principles of a “whole of capability” perspective,

iterative development of proposals, and early

engagement of all stakeholders should always

apply. The framework and its associated timeline

should be flexible enough to accommodate

opportunities, which emerge at short notice as

well as those very significant proposals which

might be reviewed by committee more than

twice. Figure 1-16 shows the major milestones

and supporting steps in the overall Capability

Development Process.

Once the DCC or CF is satisfied that the capability requirement, operational and in-service

support arrangements are sufficiently well

defined, and that the accompanying cost, schedule and cash flow estimates are realistic, government approval to proceed with the project will

be sought in the context of the annual budget

submission.

Materiel Definition

Materiel definition refers to the process of translating the required capability contained in

capability development documentation into an

accurate, clear description of standards and

performance to ensure suitability for purpose.

Materiel definition also includes the development of an acquisition strategy, which can be

tested against departmental policy and commercial practices. The Defence Source Selection

Board (DSSB) must endorse the latter.

An Equipment Acquisition Strategy (EAS) is

generally developed in parallel with the investment proposal. It explains the method of procurement, provides a schedule of planned events,

identifies officers empowered to act as statutory

authorities to exercise financial approvals, describes how local industry is to be involved,

outlines support aspects and provides overall

management strategies required for the project

(e.g., risk, security implications, and technology transfer). The EAS shifts the focus to a business perspective, and describes all major steps

required for acquisition in sufficient detail to

demonstrate that the overall strategy is feasible

and appropriate.

The strategy and timings developed in the EAS

provide the basis for Project Management and

Acquisition Plan (PMAP). The latter is the primary internal planning document required for a

project and includes the Integrated Logistic Support (ILS), management and schedule plans

needed to achieve the milestones identified in

the EAS. A Risk Management Plan (RMP) must

be prepared for all MCE projects at the preapproval stage for inclusion in the PMAP. The

Acquisition Reform Program (see Chapter 7) has

put a great emphasis on risk identification,

analysis, treatment and review functions. These

functions must be monitored and reviewed

throughout the life of the project.
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Milestones Supporting Steps Sponsors/Initiators

1 Identification of HCS and HC4ISREW in

Desired Capabilities consultation with stakeholders

(Strategy Staff, CM, DAO, SCA,

DPE, DSTO, etc.)

2 Presentation of Capability Development of Capability HCS or HC4ISREW take the lead

Development Statement to Development Statement in preparing the CDS

DCC (CDS)

Executive Authority: VCDF

advised by the DCC

3 First presentation of a Development of COD HCS or HC4ISREW take the

Capability Options Document lead in preparing the COD

(COD) to Committee

Executive Authority: VCDF/HCAO

advised by the DCC/DCSC

Development of a draft HCS/HC4ISREW Executive

Capability Systems Authority: HCS/HC4ISREW, CM

Statement (CSS)

4 Further Presentations of a Refine COD HCS/HC4ISREW lead the further

COD to Committee (if development of the COD

required)

5 Issue Endorsed Cost CAO prepares the CCSS in

Capability Schedule consultation with CS/C4ISREW

Summary (CCSS) and CEP (for major equipment)

6 DCC Programming Inclusion in DCC HMR and HCAO in consultations

Consideration Programming Meeting with CS, C4ISREW, CEP and

Issues paper CMs.

7 Delivery of CCSS & CSS HCS/HC4ISREW in consultation

to implementors with the relevant CM,

UNDERSEC Acquisition, HCAO

For Major Acquisitions:

8 Government Approval for Prepare Cabinet DCC recommends projects for

the project submission (CABSUB) inclusion in the annual budget

submission or other submission.

HCAO prepares draft submission

for DE to agree

9 Initiate Acquisition Following Government

approval, funds transferred

from the Pink to the White

Book

10 Contract Signature The DAO responsible for

approving the contract

Source: A Defence presentation at a management seminar.

Figure 1-16.

Capability Development Process: Major Milestones, Supporting Steps and Actions
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A project manager may start to develop a Statement of Requirements (SOR) which describes

the functional and performance requirements of

the capability being procured. The SOR also

specifies other relevant requirements such as

delivery, quality, management, testing and

installation, and it is attached to the draft Conditions of Contract in the Request for Tender

(RFT).

Major Capital Equipment Acquisition

Process: The Project Approval Phase

As explained in Chapter 5, the Cabinet considers and determines resource guidance for Defence on an annual basis. This guidance is

reflected in the annual Budget and the three-year

Forward Estimates and is expressed in terms of

a percentage change from the allocation for the

previous year, after adjustment for inflation. The

Defence Executive takes the current government

guidance into account in determining funding

allocations to Defence Outputs, including new

capability acquisitions, in the development of

the Five-Year Defence Program (FYDP).

Project approval refers to Government agreement to proceed with a project that has been

developed by Defence and submitted for Government approval and allows the project manager to proceed with the procurement stage. The

approval establishes the scope of a project, sets

financial limits on the various elements within

it and facilitates a transfer of guidance from the

Pink Book to the Approved Major Capital

Equipment Sub-Program—the so-called White

Book—or to the New and Ongoing Facilities

Sub-Program—the so called Green Book.

Project approval can occasionally occur outside

the Budget for very large projects, which warrant closer Cabinet scrutiny or where there is some

urgency in progressing the acquisition. Subsequent changes to the approved scope of a project can require reference back to the original

approving authority. On the other hand, authority to vary approved costs is devolved within

prescribed guidelines to subordinate authorities.

Accordingly, project costs are updated at least

annually and approvals to fund changes are

sought in the Omnibus Submission.

Major Capital Equipment Acquisition

Process: The Post-Project Approval Phase

The post-project approval phase of the MCE

acquisition process consists of a well defined

series of steps to ensure that the equipment to

be procured meets the operational requirement

and performance specifications and is acquired

within the approved cost and schedule. The

following steps are considered below:

• market scoping;

• tendering and source selection process;

• contracting;

• contract management; and

• testing, evaluation and acceptance into

service.

Market Scoping

A project manager can obtain information from

industry and/or alert potential suppliers to the

Commonwealth’s purchasing intentions before

formal tendering action. The two documents

used to achieve this are:

• Invitation to Register Interest (ITR),

which is a brief, formal invitation to industry to express interest in a project

proposal. The content is determined by

the project manager in consultation with

the relevant Policy and Support Centre

(PSC); and
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• Request for Proposal (RFP), which is a

more substantial document seeking information from industry to further define the requirement, assess alternative

equipment options and estimates of

costs. The RFP is issued in similar format to an RFT (i.e., using Defence contracting form DEFPUR 101), but does

not include draft contractual clauses, and

the responses do not form the basis for

proceeding to contract.101

The project manager evaluates responses from

an ITR or RFP, with assistance from specialist

PSCs, and the outcome endorsed by the authority

nominated in the EAS.

Tendering and Source Selection Process

Formal offers from industry to supply goods and

services are sought by the release of a Request

for Tender (RFT). The release of an RFT indicates to industry the advanced stage of the project and the continued intention of the Commonwealth to proceed with the acquisition. Project

approval is required before the release of the

RFT. The DEFPUR 101 and other Defence

contracting forms, which include draft conditions of contract, provide a standard format for

drafting a contract.

A Tender Evaluation Plan (TEP) is next developed by the project manager to determine how

tenderers’ responses are to be evaluated. Normally, the TEP and evaluation criteria are agreed

at the same time that the RFT is approved by

The Under Secretary for Defence Acquisition

(or delegate) for issue to industry. It is also desirable that an industry briefing be held two or

three weeks after release of the RFT to provide

prospective tenderers with the opportunity to be

appraised on aspects of the Department’s

tendering requirements and to answer general

questions regarding the SOR.

The aim of the evaluation process is to select

the tender, which satisfies the requirements of

the RFT and offers best value for money. This is

normally done by a Tender Evaluation Board

(TEB), chaired by Project Manager and consisting of members drawn from specialist functional

areas such as DAO branches for contracting,

business, industry and financial advice, the

project sponsor for operational and capability

aspects, Support Command for logistics support,

and so on. Tender evaluation procedures and

methods are tailored to individual projects, to

evaluate each tenderer’s response against the

tender evaluation criteria in the RFT and to determine the bidder offering “best value for

money” to the Commonwealth. The tendering

and evaluation procedures for sole source or

restricted tenders must be just as rigorous as they

are for open tenders.

The TEB’s recommendation is presented in a

Source Evaluation Report (SER), which is considered by the DSSB. The SER details the results

of the TEB’s evaluation of proposals, provides a

ranking of offers, recommends a preferred tenderer and explains the implications of accepting

the recommended offer. The DSSB performs an

independent function to attest the probity, propriety and thoroughness of the source selection

process. Where the DSSB supports the SER, it

makes a recommendation to the authority nominated in the Equipment Acquisition Strategy

who then approves the source selection.

Contracting

Following selection of the recommended contractor, the project manager develops a Contract

Negotiating Directive with assistance from the

contract adviser and appropriate authorities

within Defence, and finalises the draft contract

in accordance with DSSB directions. The Contract Negotiating Directive is a sensitive document, which sets out the Commonwealth’s

negotiating strategy and bargaining position. The
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Under Secretary for Defence Acquisition (or delegate) is the clearance authority for the Contract

Negotiating Directive and Draft Contract.

Contract negotiations are conducted on behalf

of the Commonwealth by the Defence negotiating team headed by the Defence Negotiator, who

may be the Project Manager. He/she will be

assisted by specialist advisers, including the

contract adviser (and the Project Manager if the

latter is not the Defence Negotiator). The outcome of contract negotiations is an agreed position by the Commonwealth and the tenderer(s)

resulting in the signing of a contract.

Contract Management

The project manager is responsible for contract

management, which may extend over a number

of years. The project manager and the contract

adviser, along with the relevant PSC staff, work

in close consultation and provide each other with

timely advice on matters pertinent to contract

progression. The more important tasks of the

project manager in administering the contract

are to:

• ensure that the contractor meets its obligations under the contract;

• investigate and initiate contract amendment proposals;

• progress contractors’ claims and certify

the claims for payment against the

contract;

• monitor and report (through PROMIS)

financial and production progress under the contract and identify difficulties

which could affect the contracted

requirements;

• ensure that the Commonwealth meets its

obligations under the contract; and

• accept the deliverables from the contractor

on behalf of the Commonwealth.

Testing, Evaluation and Acceptance

Into Service

The project manager is responsible for tasking

appropriate Single Service, DSTO or other agencies to conduct any testing or evaluation of

deliverables. This is achieved through the Test

and Evaluation Master Plan (TEMP) which is

developed at an early stage of the project and

approved by the relevant HSA.

On completion of tests and evaluations, the

delivered equipment is assessed against the

operational requirement to ensure that appropriate logistic and operational arrangements have

been put in place. The equipment is then accepted into operational service by the respective

Service Chief (see below) who then takes on the

responsibility for its management and support.

Three documents—a Transition Plan (may be a

sub-plan of the PMAP); a Transfer Document;

and a Project Completion Report—are required

to formally conclude a MCE project, complete

the programming and funding responsibilities

in the Acquisition Program and transfer responsibility for operational and maintenance costs

to a single Service.

International Collaborative Arrangements

in Major Capital Equipment Acquisition

In Australia, as in other countries, international

collaboration in the development, production

and procurement of defence equipment is an

established way of achieving efficiencies in the

sourcing of equipment, access to technology and

interoperability with allies.102 Examples of

collaborative project include: the ANZAC

Ship—joint requirement with New Zealand (see

Chapter 9); Project Nulka—a collaborative program with the United States for the full scale
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engineering development of a system for defence

against anti-ship missiles; and Barra Sonobuoy

—involving Australian development of the

passive directional sonobuoy used in anti-submarine warfare and UK development of the

onboard processors.

The objectives of international collaboration are

to:

• achieve scale economies at various

stages of the materiel cycle;

• promote the standardisation of military

equipment;

• enhance the AII in major defence development and production programs;

• increase interoperability of equipment

both within Defence and with allied

forces; and

• facilitate the exchange of information and

technology not available in recipient

country.

Given inherent difficulties in matching operational requirements, timing and financial programming of Australian procurements with

those of other countries, the Australian Government has in place a program of government-togovernment arrangements with selected countries which promote the exchange of information

about acquisition plans and intentions and

provide the basis for joint collaborative ventures.

These arrangements enable the comparison of

Australia’s procurement plans with those of

potential collaborative partners. They also allow

other forms of collaboration such as combining

orders for the same equipment or reciprocal

procurement. The establishment of such arrangements may take the form of “umbrella” or “project-specific” Memoranda of Understanding

(MOUs). In some cases, it may be necessary for

industry to be involved in the collaborative

process and to have arrangements that parallel

those negotiated between governments.

For example, MOUs covering Cooperative

Defence Procurement are in place with the

United States (on a case by case basis), Canada,

and Sweden. MOUs facilitate Data Exchange

Agreements (DEAs), Defence Standardisation,

and support the Australia/Britain/Canada/

America (ABCA) Agreement.

Criteria for identifying potential collaborative

projects include:

• military – scope for operational and

logistical benefits from collaboratively

acquired equipment;

• industrial – scope for the development/

sustainment of the Australian defencerelated industry;

• economic – scope for achieving the

economies of scale in production and

maintenance/support of equipment;

• technological – access to technology (intellectual property) and opportunities for

further technological development; and

• timescales – opportunities for coordinating procurements over time.

Typical criteria for potentially successful

collaborative programs include:

• equitable investments by participants;

• international specialisation with no

duplication of activities;

• high technological compatibility;
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• high-level political support in each

participating country; and

• compatible timescales.

The prospects of collaborative development and

production need to be considered early in the

capability planning. After a decision is taken to

purse collaborative arrangements for a project

(often influenced by an existing MOU covering

Cooperative Defence Procurement), bi- or multilateral arrangements are developed to undertake

project planning/scheduling, costing, industry

involvement, and so on. If an MOU already

exists, these negotiated arrangements for the

collaborative project may be determined in an

Annex to the existing MOU.
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Chapter 9

DEFENCE INDUSTRY AND

DEFENCE INDUSTRY POLICY

IT but has accounted for only a small fraction

of total industry sales.

The notion of sustainability for domestic defence

firms in the Australian environment has always

been problematic. Demand from the domestic

Defence buyer is spread widely across specialist areas of supply capability and concentrated

in large and discrete lumps over time. On the

other hand, penetration into exports has always

been limited and the Defence Efficiency Review

concluded in 1997 that Australia “should regard

export orders as windfalls rather than reliable

income sources in most areas.”104 The difficulties engendered by these market characteristics

are likely only to become more acute as the implications of the “Revolution in Military Affairs”

become increasingly obvious. On the one hand,

network centric warfare will call for even more

integration among platforms within battlefield

systems. On the other, there will be less emphasis on possession of newer platforms in themselves and more on stretching their lives. This

implies purchases of fewer units of any specific

platform than in the past and greater emphasis

on larger but better integrated networks. Change,

therefore is inevitable.

In Australia, as elsewhere, there have been major

organisational and structural changes to defence

industry in recent years. Firstly, throughout the

industry there has been substantial consolidation.

In a period of a few years, one group of 18 major

suppliers in electronics, shipbuilding, aerospace

and ordnance has been reduced to five: Tenix

Defence Systems, British Aerospace Australia

(BaeA), Thomson Marconi Systems (new owners

Australian Defence-Related Industry

In recent years, at least 60 percent of the total

Defence budget has been spent on goods and

services. About 60 percent of goods and services

has been sourced from Australian suppliers. Almost all of capital facilities budget was spent in

Australia. The large majority of the logistics and

administrative budget was also spent in country

and just over a half of capital equipment budget

went to domestic suppliers.

The constituents of defence industry in Australia, as elsewhere, can be identified only by

additional reference to how “defence industry”

is defined. A broad definition encompassing all

industry activity involved in supplying Defence

probably casts the net too wide: it includes firms

which only occasionally provide supplies and

firms for whom Defence demand comprises only

a small and lowly valued fraction of all sales. It

also includes Australian firms supplying Defence

with goods and services, which could just as

easily be sourced elsewhere. More specifically,

defence-related industry might be defined as that

part of Australian industry which provides, or is

capable of providing, goods and services

strategically important to Defence.103

On that definition, the more strategically important goods and services are largely supplied from

five industry sectors: information technology,

electronics and communications; shipbuilding

and repair; aerospace; ordnance; and vehicles.

Over recent years Defence has been a dominant

customer only in the shipbuilding and repair and

ordnance sectors. It has sourced large orders in
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of Australian Defence Industries Ltd), Boeing

Australia Ltd, and RLM Holdings (Joint Venture.)105 All these companies can be described

as MCE suppliers. Interestingly, though, the next

three largest suppliers to Defence, Thiess, Lend

Lease and Serco, are service providers rather

than equipment manufacturers.

Secondly, government has proceeded with a

continuing program of corporatisation and

privatisation in the sector. Tenix operates what

were once government shipyards in Melbourne;

Boeing has absorbed part of once governmentowned aircraft manufacturing facilities; Australian Defence Industries Ltd. has been sold into

private ownership (Thomson Marconi Systems).

Under the bilateral Closer Economic Relationship (CER), Australian and New Zealand industries are regarded as a single industrial base when

this is consistent with the objectives of selfreliance. Australian and New Zealand firms are

therefore treated equally under Defence industry policy, except in regard to a small number of

high security or third country collaborative

projects, or in specific circumstances associated

with the use of strategic industry development

policies.106

Defence Industry Policy

The trend towards corporatisation and

privatisation of former publicly-owned industrial facilities reflects a general preoccupation

with attempts to invoke the market as a means

of enhancing efficiency. Commitment to this

approach is outlined explicitly in the Government’s 1998 Defence and Industry Strategic

Policy Statement (DoD, 1998). The statement

reflects on the government’s strategic shift to a

more proactive posture and a declared willingness to deploy the Australian Defence Force

abroad in support of regional interests—a policy

stance, which formed the basis for Australia’s

involvement in Timor.

“For its part,” the Statement says, “industry must

be ready to support ADF elements whenever and

wherever they are sent.... In some circumstances,

this will involve industry supporting deployed

elements directly and will require a cultural shift

by Defence—away from owning and controlling its own resources to utilising assets owned

by the private sector.”107 This shift is viewed in

the Statement as a move towards partnership—

a partnership between Defence and defence

industry firms which it wishes to see as “sustainable,” i.e., not dependent on winning every

defence contract for which it bids.

Recognising the implications of industry

changes outlined earlier, and the importance of

retaining access to overseas equipment innovations, the Government has said it welcomes foreign firm involvement in domestic defence industry but has emphasised that a quid pro quo

must be demonstrate, i.e., a long-term commitment to the Australian economy. Such commitment, it was indicated in the 1998 Statement,

might be shown in the following ways:

• establishing significant local facilities

and plant;

• employing a significant number of

Australian citizens;

• pointing to a track record of performance

in the defence arena, perhaps through

previous involvement with Defence as a

subcontractor;

• performance of significant research and

development (R&D) in Australia and

developing indigenous intellectual

property;

• demonstrating independence of action

from overseas parents, including through

exports from Australia; and
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• nurturing Australian small and medium

enterprises (SMEs).

Irrespective of firms’ ownership characteristics,

Defence announced that its ultimate goal from

its relationship with industry was the achievement of “the best ADF capabilities for Australia’s defence.”108 To pursue that goal, a National

Support Division was formed within Defence

Headquarters (to develop a strategic framework

for engaging the national support base). The NSD

is now working with industry to implement six

key strategies:

• integrate industry into capability development;

• enhance industry’s contribution to the

nation’s capability edge;

• reform procurement;

• establish new ways to involve Australian

industry in Defence business;

• increase Australian exports and material

cooperation; and

• commit to cultural change and improved

communication.

Three of these deserve particular attention. First,

industry integration in capability development

is being enhanced through improved Defenceindustry information flows, demand management to smooth peaks and troughs, and taking a

whole-of-life approach to capability management

and cost estimates. That is,

“To successfully deal with new strategic

and commercial imperatives, Defence

needs to investigate new business practices along with more innovative and

effective industry policies, and acquisition processes. Importantly, this includes

the need to develop a closer Defence and

industry relationship which is crucial to

maintaining Australia’s security.”109

Second, involving Australian industry in Defence business draws on the Australian Industry Involvement (AII) Program—which determines the extent and type of local industry

involvement in defence acquisition. In 1997,

Defence published a document Defence Needs

of Australian Industry providing extensive information on its perceptions of the strategically

important capabilities that it wishes to see in

Australian industry. In almost all areas, maintenance, repair and modification capabilities were

viewed as important. Research, design and development capabilities were thought important

in information security, command support systems, intelligence, electronic warfare, integrated

combat and platform systems in shipbuilding and

submarines, and propulsion systems in submarines. Manufacturing capability was thought

strategically important only in command support systems, communications, electronic warfare,

and ship and submarine structures. With guidance

such as this, local industry now has means of

knowing better where it might invest if it wishes

to see Defence as a market for its products.

The third strategy discussed here relates to enhancing industry’s contribution to the capability edge. In recent years, government itself—

through the Defence Science and Technology

Organisation (DSTO) within Defence—has performed the lion’s share of defence R&D, about

60 percent in both 1992-3 and 1994-5.110 DSTO

has as its overarching goal, the provision of advice

on the application of science and technology best

suited to Australia’s defence and security needs.

To do this, it is tasked to position Australia to

benefit from future developments in defencerelated technology, to enable Australia to be a

“smart buyer” in equipment markets, to develop

new capabilities, and to enhance the operational

performance of existing capabilities.
Part 1 – Australia

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In addition, DSTO is expected to transfer the

results of its research to industry and to provide

access for industry to its research facilities. A

long-running debate has surrounded DSTO’s

relationship with industry but in the 1998 Defence Industry Statement a system of alliances

between the two sides is said to be “essential”

and a more substantial role by industry is called

for. Whether this would shift the balance of

defence R&D into industry’s hands depends on

future funding levels for DSTO.

Industry Involvement in Capability

Development

The thrust of defence industry policy described

in the 1998 Defence and Industry Strategic Policy Statement was to pave the way for a closer

and more interactive relationship between Defence and industry. The Statement also established guidelines to facilitate a collaborative (as

opposed to strictly contractual and adversarial)

relationship with industry. In particular, industry is to be involved in all stages of the capability formation and maintenance, including the

early stages of capability development (see

Chapter 2 and 8 above).

A network of consultative fora has been established to provide an institutional framework for

(defence) industry policy making, to keep

industry informed about Defence’s capital

requirements and investment plans, and to allow

industry more overt influence over the future

directions of defence industry polices and

processes. The key forum is the Defence and

Industry Advisory Council (DIAC), and another

major development is the formation of Defenceindustry Integrated Teams.

Defence and Industry Advisory Council

(DIAC)

The DIAC, established in June 1999, to provide

advice to Government on strategic matters

related to achieving sustainable industrial

support for the ADF. It:

• advises the Minister for Defence, from

a strategic and commercial perspective,

on the role of industry and wider national

support for Defence;

• facilitates communication between

Defence and industry;

• advises the Minister on issues which

might impact on the sustainability of key

industrial support for the ADF;

• oversees the activities of a network of

fora considering capability development,

industry policy, export, contracting and

outsourcing (Commercial Support

Program issues); and

• advises the Minister on key issues in the

defence industry environment.

The Council is chaired by the Minister for

Defence and comprises representatives from

industry, appointed for two years, wider Government and the Australian Defence Organisation.

Industry members are drawn from both the defence and civil sectors. The DIAC Secretariat is

located within the Industry and Procurement Infrastructure Division. The DIAC meets three

times a year and, at the end of each year, the Council approves a program of work for the following

year.

At the time of writing, the key defence industry

policy and acquisition issues to be addressed by

the DIAC have been identified as:

• private financing;

• continuing acquisition reform, including:
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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– shorter tendering and project lead-in

times

– better risk-management, especially when

acquiring fast moving technology

– considerations of the size and complexity of Defence projects while

competing with off-the-shelf products

– flexible processes to accommodate the

pace of technology development

– enhanced flexibility of acquisition

processes to meet specific project

requirements

– capability development processes,

including the identification of critical

capabilities

– the high rate of personnel rotation

– enhanced personnel competencies in

procurement and project management

– procurement processes that encourage

competition between primes and

between SMEs rather than between

primes and SMEs

– less onerous bank guarantees, in

particular for SMEs

– simplified contracting processes to

focus on key clauses while considering different, innovative contracting

models

– in-service support arrangements to be

developed concurrently with MCE

acquisition

– uncertainty in industry investment

decisions arising from Defence’s

budgetary forecasting difficulties and

poor guidance to industry of its future

requirements;

• the adequacy of R&D support, and in

particular:

– declining levels of in-country R&D

and the implications for future industry capability

– extent to which Defence should invest

in in-country R&D to develop local

products

– the role of science and the scientific

community in future ADF planning;

• industry structure and competition,

including:

– future industry interaction in a global

industrial context

– the effect of globalisation on (largely

foreign-owned) Australian industry and

opportunities and threats associated

with globalisation

– the risk of diminishing relevance (political, technical and military) of Australia within the world market and as

a customer for the emerging global

industry giants

– need for in-country industry capability independent of overseas suppliers

– the risk of industry disinvestment and

exit from defence-related production

– competition policy

– partnering charters, strategic alliances

and alliance contracting; and
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• the sustainability of key defence industry

capabilities including;

– ability to adapt and modify assets and

systems through life of type

– potential benefits of using industry to

support ADF operations

– broader Defence-industry interaction,

incorporating all arms of Defence

acquisition, including users

– the role of SMEs in supporting the

ADF during the time of industry rationalisation, including lead time needed

to grow innovative, defence-related

SMEs

– National Support Agenda and national

support issues (i.e., encouraging wider

industry and civilian organisations to

support the national defence effort)

– audit of Defence requirements vs. an

audit of in-country capabilities to

address industry capability gaps.

DIAC Working Groups

Two DIAC Working Groups were established to

consider some of the main policy issues. The

first group, on (Defence) acquisition reform, is

to identify current constraints on the acquisition

process and develop practical measures to improve it. The second group, on private financing, is to liaise with industry and Defence (in

particular Resources and Financial Planning

Division) to investigate opportunities and

develop practical proposals for the application

of private financing in current and future

Defence projects.

Integrated Defence-Industry Teams

Integrated Defence-industry Teams are to become a major means of achieving close collaboration between defence and industry at most

stages of the materiel cycle. Integrated Project

(or Acquisition) Teams (IPTs), to operate during the post-approval, project implementation

phase were described in Chapter 8. Similar concepts may apply at the capability development

phase (Integrated Development Teams) and in

relation to the provision of through-life support

(Integrated Through-life Support Teams).

Industry is to become a key stakeholder and a

full member of such teams. The philosophy underlying industry participation is that of partnering and collaboration. In particular, industry

is to provide expertise on costing and scheduling, technology, transition from functional to

technical specifications, and production capacity. However, at the time of writing, the teaming

arrangements are still in their infancy. The

Defence-Industry Charter with regard to participation in various teams is still under development. The real test of these relationships will be

a function of experience. As projects mature and

the teaming arrangements are tested, a more

realistic framework for partnering and teaming

is likely to emerge. The current enthusiasm for

“teaming” and “partnering”—increasingly apparent in so many countries—may have indeed

have some merits for both Defence and industry but it may be rather naive in the way it glosses

over conflicts of interest and the need to share

liabilities as well as assets.

Lessons from the Submarine Project

Australian Defence industry has not been immune from the sorts of embarrassment which

have afflicted defence industry elsewhere and,

indeed, sensitivity to some of the more recent

problems has been one of the stimuli prompting

ongoing policy change. In particular, there have
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

1-68

been major problems in bringing into service

six new diesel-electric submarines comprising

the Collins class. In a report commissioned to

examine the difficulties,111 the authors Malcolm

McIntosh and John Prescott say the submarines

constitute probably Australia’s most important

strategic asset for the decades starting 2000 and

“the country’s most ambitious and technically

advanced defence industrial project ever.”112 The

submarines are being built in Adelaide by the

Australian Submarine Corporation (ASC), of

which the principal shareholder is the submarine’s designer, Kockums. Kockums was formerly owned by the Swedish Celsius Pacific and

recently acquired by the German Howaldtswerke-Deutsche Werft (HDW). A minority

shareholder (48 percent) is the Australian Government through its Australian Industry Development Corporation. Contracts (AIDC) were

signed in 1987 for delivery at a price of A$4.4

billion. By March 1999, Defence had spent 93

percent of the expected total project costs and

98 percent of the expected total contract price,

“for which there are five boats in the water, but

none performing anywhere near adequately.”113

The report identifies the essential problem with

the submarines as a failure to perform at levels

required for military operations. “The underlying cause is a myriad of design deficiencies....

The most obvious and debilitating consequence

is a very low level of reliability.”114 It finds the

causes of the problem to lie in the following

areas:

• between Navy with an urgent need for

adequate boats, and ASC with no

motivation to provide anything beyond

its interpretation of its contractual

obligations, disputes about overarching

mission objectives not only arose but

sometimes remained unresolved;

• technical competencies and relevant

expertise were imperfectly coordinated

or mobilised, perhaps because of the contract structure, interests of the parties, or

fragmentation of responsibility;

• the fixed-price form of the contract created problems for a project that was

large, complex and new; for which generous up-front payments were made; and

for which a detailed design did not exist.

In a long list of lessons to be learned, the report

includes advice or recommendations that:

• the Government should avoid putting itself on both the buying and selling side

of a contract. (In this case, its says, AIDC

acting for the government on the seller’s

side lacked effectiveness through lack of

knowledge about submarines.);

• Defence should ensure the prime contractor has all the expertise required to

carry out the project and that, for itself,

it has all the expertise to be a smart

buyer;

• contracts should be framed for performance rather than detailing how to

achieve it;

• plenty of provision be made for reviews;

and

• more freedom be created to engage

alternative subcontractors in the event of

problems.

Two other, more general, lessons may also be

learned from the Collins experience. First, it is

naïve to assume that a small country such as

Australia can embark on technologically innovative and complex projects of the size of

Collins--and deliver the final product on time,

within budget and operating at somewhere near

its best. Even the most experienced producers
Part 1 – Australia

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of such complex systems fall short of this ideal

some of the time. Realistically, and considering

its complete lack of prior experience in building submarines, the ASC has performed creditably. If, however, future governments insist on

the in-country production of large, technologically complex and innovative weapons systems,

they should accept that the costs of pioneering

and learning-by-doing are likely to be high. And

for systems that have an expected life of decades,

the initial outlay is likely to be dwarfed by the

through-life cost of maintaining and adapting

the submarines in the face of rapidly evolving

technology.

Second, the Australian defence industry policy

is at the crossroads. Since the early 1990s, Defence has praised the virtues of “competition”

as a means of getting value for money in the

procurement of major capital projects. In a competitive environment suppliers should be selected on the “value for money basis” and the

purchasing agency should avoid “picking winners,” that is it should stay away from “cozy,”

long-term relationships with particular contractors. But in a true competitive environment, most

of the required equipment would have been

sourced from large, international prime and firsttier contractors. While insisting on an effective

and open competition, Defence, under the policy

of Australian Industry Involvement,115 has nevertheless been able to direct a large proportion

of platform building and component manufacture to domestic suppliers. But as ANZAC ships,

the Collins class and minehunters near completion, the era of intensive platform building is

coming to an end. The existing shipyards can

only be kept in business if they secure further

capital orders and/or enough through-life support work. That means picking winners as “them

who have it get it.”

Further, at least for large and long-lasting

projects like this one, the Collins experience

suggests that invoking competitive forces to

bring about high-level performance may be becoming increasingly difficult. Even on a global

basis, there were few suppliers able to undertake work of the complexity and magnitude of

Collins, and this will be true of other projects in

future. Once work was well advanced, moreover,

it was difficult realistically to threaten substitution on the project by another contractor, again

a feature of projects of this kind that will persist

in future. In the effort to build trust and lasting

relationships, Defence is now considering various “partnering” and “strategic alliance” arrangements with contractors. Competition may have

a role in deciding who joins the list of pre-qualified suppliers but once selection of preferred

contractors is complete, the idea is that “partnership” and “alliance” arrangements will prevail. Competition depends on there being a number of technologically credible and commercially viable competitors. At the purely domestic level it is no longer a realistic option for many

projects, and maintaining domestic industry

capability as an essential element of “self-reliance” seems to dictate that Defence enter into

close relationships with international companies

with a view to ensuring that they make the sorts

of investment in Australia envisaged in the

Bishop Rules outlined earlier.
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ENDNOTES

the States, has often resulted in un-necessary (from national point of view) duplication of production facilities and, thus,

made them even more costly to sustain in

the long run.

6. “Demand management” normally refers to

the spreading of demands over time to keep

defence-related producers busy as well as

directing orders to businesses and facilities that are regarded as critical elements

of national industry support.

7. Defense Efficiency Review (DER), 1997.

8 . In 1922, the State of Queensland amended

its constitution to abolish the upper house

and create the unicameral State Parliament.

9. O’Connor, 1998, p. 63.

10. Op. cit.

11. O’Connor, 1998, p. 64.

12. Under the provisions of the Australia Act:

• no acts of the British Parliament were to

apply to the States of Australia;

• the Colonial Laws Validity Act would no

longer apply, no State law would be invalid because it was repugnant to the

English common law or to an Act of the

British Parliament; and the powers of the

Monarch in respect of a State were to be

exercised only by the State Governor.

13. The three arms of the Federal Government

are created by separate chapters of the Australian Constitution: Chapter 1 – The Parliament; Chapter 2 – The Executive Government; and Chapter 3 – The Judicature.

This was borrowed from the Constitution

1. A/Professor Stefan Markowski (Chapters

1–8) and Professor Peter Hall (Chapter 9)

of the Australian Defence Force Academy

in Canberra have written this part. The authors can be reached at the University College, the University of New South Wales,

Australian Defence Force Academy,

Canberra, ACT. 2600, Australia (Tel: +616

268 8094/8098; Fax: +616 268 8450; Email: s.markowski @adfa.edu.au and

p.hall@ adfa.edu.au).

2. This is a significantly larger amount than

in previous years as it is calculated within

the new accrual-based budgeting framework. By subtracting Capital Use Charge

(an asset depreciation charge) from the

total Budget expenditure, the outlay before

and after the introduction of the new

resource management framework can be

compared (see Chapter 5).

3. The technology-based force multiplier is

defined here as the contribution of defence

technology to the effectiveness of the defence force after numbers of personnel and

equipment (labour and capital) are taken

into account, e.g., an increase in combat effectiveness achieved with a given personnel

and equipment numbers when technology

is upgraded.

4 . These figures were estimated under the “old”

(pre-1999-2000) cash-based accounting

framework (see Chapter 5).

5. Under the Australian Federal Constitution

(see Chapter 2), the lobbying and bargaining powers of the State Governments visà-vis the Federal Government are very

considerable. The “spreading around” of defence orders in response to pressures from
Part 1 – Australia

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of the United States, where the functions

of the three arms of the U.S. Federal Government are divided into sepa-rate Articles

of that nation’s Constitution.

14. O’Connor, 1998.

15. Op. cit.

16. At the time of writing, the Government

comprises a coalition of Liberals and

Nationals.

17. O’Connor, 1998.

18. Op. cit.

19. Op. cit.

20. Op. cit.

21. Chapter 3, Section 71.

22. However, until the 1970s, the British Privy

Council could overturn decisions of the

High Court.

23. Op. cit.

24. O’Connor, 1998; p. 58. In the United

States, executive power is vested in the

President, who appoints his own Cabinet,

whilst the legislative power is vested in a

Congress, which consists of a House of Representatives and a Senate. These systems of

checks and balances between the President

and the Congress are critical to the operation of the doctrine of separation of powers

within the U.S. Federal Government.

25. These include: the Federal Court, which

rules on matters involving civil disputes,

which are affected by the laws of the Federal Parliament and/or the ministerial Regulations, and criminal cases concerning

Federal laws; the Family Court, which rules

on matters regarding dissolution of marriages, and disputes over the custody of

children and ownership of family property;

and the Industrial Relations Court, which

rules on matters concerning terms and

conditions of employment and disputes

between employers and employees.

26. This section draws on material contained

in Parliament of Australia (1998), Committees, House of Representatives Factsheet

No. 4, December.

27. For a current list of committees see http://

www.aph.gov.au.

28. Before 1989, the Committee was known

as Foreign Affairs and Defence.

29. Beazley, 1992, p. 3.

30. As one commentator puts it, “the Defence

portfolio is a financial holding pattern, with

spending kept steady ahead of the shakeup that will come after this year’s policy

White Paper” (Robert Garran, The Australian, 10 May 2000). At the time of writing,

the Government is determined to fulfil its

election promise of maintaining defence

spending in real terms with a small, on-off

increase in real defence spending budgeted

for 2000-01.

31. Paul Kelly, The Australian, 23 February

2000.

32. The Australian, 7 March 2000.

33. The message from the East Timor operation was that Defence could not sustain two

battalions in the field for longer periods of

time within its current budget.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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34. This supplementary funding was initially

to be raised through an ad hoc “special” tax

levy but, at the time of writing, it is to be

funded from the windfall revenue from the

sale of the airwaves (spectrum) for telecommunication services provided telephone

companies.

35. Originally a tripartite alliance, signed in

1952, between the U.S., Australia and New

Zealand. Unlike its northern counterpart,

NATO, ANZUS operates a fairly unintegrated structure in which sovereign nations

retain policy independence and discretionary power over military expenditures.

Any action of the Council of Ministers, the

executive body of ANZUS, must be unanimously approved. The Council of Ministers meets very infrequently and is assisted

by a small Secretariat. There is no common

funding of defence expenditures and each

ally determines, without consultation, and

bears its own expenditures.

36. The Financial Management and Accountability Act provides the legal basis for the

appropriation and management of money

and the Public Service ACT governs the

administration of the Department of

Defence.

37. Allan Hawke, What’s the Matter – A Due

Diligence Report, edited version of an address to the Defence Watch Seminar at the

National Press Club, 17 February 2000.

38. Editorial, Defender, Spring 1999.

39. Allan Hawke, op. cit.

40. Allan Hawke, op. cit.

41. DAO, 1998, p. 2-3.

42. DPBS, 1999-00, p. 2.

43. Op. cit.

44. DPBS, 1998-99.

45. DPBS, 1999-00.

46. DAO, 1998, p. 2.

47. For details see DoD (1999) Defence Annual

Report 1998-1999, Appendix A.

48. In previous years, cash-based accounting

was used, that is, “transactions” were only

recognised when cash was paid or received.

This resulted in a mismatch between revenues and expenditures. Accrual accounting

was introduced to address this problem. Transactions are now recognised when the service is rendered or the goods are delivered

(DPBS, 1999-00).

49. DPBS, 1999-00, p. vii.

50. DPBS, 1999-00.

51. The Australian Government’s financial year

runs from 1 July to 30 June.

52. DPBS, 1999-00.

53. DPBS, 1999-00, Table 1.10, p. 20.

54. DPBS, 1999-2000.

55. DPBS, 1999-2000

56. Shephard, 1999, Table 60, p. 173.

57. Woolner, 2000, p. 13.

58. Woolner, 2000, p. 14.

59. Woolner, 2000, p. 4.

60. Op. cit.
Part 1 – Australia

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61. Woolner, 2000, pp. 4-5.

62. Woolner, 2000, p. 4.

63. Op. cit., p. 24.

64. Woolner, 2000, p. 12.

65. DAO, 1998, p. 6.

66. DPBS, 1999-2000, p. 9.

67. The DER foreshadowed civilian staff reductions of around 3,100 positions as well

as some 3,800 military positions removed

from administration and support areas. The

final figure depended on the extent to which

in-house options (internal bids for market

tested activities) could succeed under Defence’s market testing program (the Commercial Support Program). About half the

military positions were to be re-established

in combat and combat-support areas. A further 7,000 military and 5,900 civilian positions were to be market tested through the

expanded and accelerated CSP.

68. DPBS, 1999-00, p. 10.

69. Woolner, 2000.

70. Op. cit.

71. Australian Defence Reporter, August 1995,

p. 14.

72. Woolner, 2000, p. 13.

73. The “value-for-money” approach means

evaluating both benefits and costs and

choosing the offer that maximises the difference between benefit and cost (net benefit). Thus, the best value-for-money offer

need not be, and usually is not, the cheapest offer (or the least cost bid).

74. DPBS, 1999-00.

75. DPBS, 1999-00.

76. Source: Garry Jones, Deputy Secretary

Acquisition, Keynote address at Defence

1999 Procurement Conference.

77. Source: Beyond the Leading Edge, Australian Defence Business Review, 1 June 1999.

78. For more details see website: http://www.

defence.gov.au/dao/cep/

79. GST is a value-added tax introduced in

July 2000. At the time of writing, it is not

clear how the GST may affect Defence

acquisitions. At present, government departments and agencies do not pay sales

tax and, similarly, most of Defence acquisitions, especially capital equipment, will

be GST-exempt. However, since the GST

is a value-added tax levied each time a

product is enhanced/transformed as it

moves along the value-adding chain (i.e.,

each time some value is added to it through

further elaboration). The tax will be paid

by subcontractors and prime contractors

and, thus, it will be included in the purchase price of equipment. Since Defence

is a government department, and hence

GST-exempt, it should be refunded for the

full amount of the GST included in goods

and services it buys from suppliers.

80. For more details see website: http://www.

defence.gov.au/dao/ipi/

81. For more details see website: http://www.

defence.gov.au/dao/esad/

82. An over-the-horizon radar system.

83. For more details see website: http://www.

defence.gov.au/dao/mags/
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84. For more details see website: http://www.

defence.gov.au/dao/aero/

85. This Section draws on DAO (1998) Defence

Reform Program, Implementation in the

Defence Acquisition Organisation, http://

www.dao.defence.gov.au/drp/drp.htm

86. For further details see: http://www.dao.

defence.gov.au/publications/main.htm

87. Moore, 1999.

88. This Section also draws on DAO (1998)

Defence Reform Program, Implementation

in the Defence Acquisition Organisation,

http://www.dao.defence.gov.au/drp/

drp.htm

89. As described by one of DAO Executive

Officers, the DAO was seeking to “play a

stronger role in new investment proposals

before they are approved,” including providing advice to Defence Headquarters

planning staff on systems engineering, technology, acquisition strategies and costing.

“Recent studies in the electronic systems

acquisitions division have revealed that

some 60 per cent of project delays are caused

by poorly defined requirements” (Peter La

Franchi, Shake-up likely for Defence purchasing, The Australian Financial Review,

7 April 2000.

90. However, in this particular context, the distinction between “effectiveness” and “efficiency” is not very clear. In logic, the distinction appears to be spurious. While it is

important that services delivered by the

DAO are effective, in that they generate

benefits for its customers, it is also important that the cost of service delivery, which

depends on the DAO’s efficiency, does not

exceed the benefit.

91. That means that a single reporting chain

now exists throughout the DAO.

92. While, over several years, the DAO is to

lose over 20 per cent of its positions from

the 1997 baseline of 2,300, it is expected

to deliver both greater volume of and higher

quality support to the ADF.

93. As a part of the Reform former Defence

Acquisition Regional Offices (DAROs)

have been abolished and replaced by small

industry shopfronts in each (State) capital

city. This was to be a source of significant

personnel-related savings within the DAO.

94. The content of this paragraph is largely

drawn from an unpublished presentation

produced by the Defence Acquisition Review

Team to brief industry. At the time of writing, the Minister for Defence has yet not

endorsed the specifics of the Acquisition

Reform Program.

95. The Pink Book, a list of projects, which have

not been approved by Government (see

Chapter 8), estimates the cost of Phase One

of the project to be between A$500 and A$1

billion. By Australian standards, it is a large

but not a mega project, such as the Collins

class submarine project (see Chapter 9).

96. Normally, the (Australian) Capital Equipment Procurement Manual (CEPMAN)

provides the best source of information on

capital equipment acquisition in the Australian defence Organisation. However,

with the Defence Procurement Reform

gathering momentum, many sections of the

Manual are out-of-date. In this Chapter we

refer to a number of sources, including,

where possible, CEPMAN. It is therefore

possible that some information referred to

in this Chapter is inaccurate in that some

aspects of the acquisition process may have
Part 1 – Australia

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been changed. In particular, the organisational framework has been evolving rather

rapidly and, at the time of writing, more

changes are anticipated. The interested

reader is directed to the webside of the Australian Defence Procurement Organisation

to search for the latest references: http://

www.dao.defence.gov.au

97. A large part of this Section draws on

Chapter 3 in CEPMAN.

98. Materiel definition means progressive transformation of the initial broad functional

requirements into technical (including

performance) specifications.

99. The EAS explains the method of procurement, provides a schedule of planned

events, identifies officers empowered to act

as statutory authorities to exercise financial

approvals, describes local industry involvement, outlines support aspects and provides

overall management strategies with respect

to risk, security, and technology transfer.

100. In Service vocabulary, force structure

(equipment and formations) and preparedness comprise force capability. Preparedness refers to a force element’s readiness

(i.e., its ability to perform a designated

task) and sustainability (i.e., its ability to

continue to perform the task until its

completion).

101. An ITR or an RFP may be released ahead

of Project Approval, but only with the

agreement of DEPSEC S&I and the approval of The Under Secretary of Defence

Acquisition (or delegate). The Minister is

not normally informed of the intention to

issue an ITR or RFP, unless the project is

judged as being particularly sensitive.

102. This Section is based on CEPMAN, Part

2, Chapter 5.

103. DoD, 1992.

104. DER, 1997, p. 37.

105. Lock, 1999.

106. DAO, 1998.

107. DoD, 1998, p. 1.

108. DoD, 1998, p. 7.

109. A statement by the Hon. John Moore, Minister for Defence at the first meeting of

Defence Industry Council, DAO Media

Release, 9 December 1999.

110. Markowski, Hall and Dessi, 1997, p. 232.

111. DoD, 1999.

112. DoD, 1999, p. 1.

113. DoD, 1999, p. 16.

114. DoD, 1999, pp. 3, 14.

115. Which is just another term to describe “selfreliance” or “local content requirements.”
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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Part 2 – Japan

2-1

PART 2

JAPAN
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-2
Part 2 – Japan

2-3

JAPAN

Chapter 1

JAPAN

Two fishing trawlers plied the waters west of

the island of Honshu in the Sea of Japan near

the Noto Peninsula and Sado Island. Their furtive

movements drew the attention of the Japanese

Coast Guard, the Maritime Safety Agency. On

closer inspection, Safety Agency personnel noticed not only a lack of visible fishing gear, but

uncommon antenna not fitting the needs of a

fishing trawler. Important military bases, possible surveillance targets, are located in nearby

Komatsu—the Japanese Air Self Defense Force

(ASDF) Early Warning Radar stations and the

6th Air Wing.

As the Safety Agency vessel approached, the

ships fled northwards. Despite repeated warnings both ships failed to stop. Maritime Self

Defense Force (MSDF) destroyers and a P-3C

aircraft joined in the chase estimated at 30 knots

for the fleeing ships. Then, for the first time since

1953, a Japanese naval vessel fired “in anger”

at the two intruding foreign ships.

The incursion by two-reputed North Korean “spy

ships” is one of a series of events that have

sparked debate in Japan about the future security

role of the nation. The August 1998 North

Korean launch of a Tae Po Dong ballistic missile

over Japan, and continual reports of North

Korean long-range missile development activities on a Tao Po Dong II with a range of 4,000

nautical miles, have added fuel to the discussion.

For the last 50 years Japan has had a strong

pacifist movement. These events have shaped a

debate by the national leadership on the need

for a “modern military” to respond to these

threats. Theater missile defense, modernization

of the military, new security guidelines for its

defense forces are some of the elements of the

debate. The larger political debate focuses on

revising the 1948 Constitution, in

particular, the “peace” article—

Article 9. Article 9 annunciated the

national principle that Japan

renounces war as a means of

carrying out state policy and,

perhaps more significantly, prohibited

the establishment of

military forces. The

Cold War changed

that. At the insistence of the United States (U.S.), Japan established the Ground, Maritime and Air Self

Defense Forces for defense of the homeland. In

the early 1980s, with U.S. agreement, they

further expanded their security role to include

stability for the East Asia region. Some political

changes, symbolic of changing attitudes toward

the military, have already occurred. The Diet

approved using the Rising Sun National Flag and

the national anthem—“Kimigayo.”

Operating within this background is the Japanese

Defense Agency (JDA), which for the last 45

years has produced a wide variety of vessels,

tanks, and aircraft for the self defense forces

(SDFs). This chapter will provide a look at the

Japanese approach to the development or acquisition of military equipment and weapon systems

to support their self-defense forces.

History and Traditions

The modern era of Japanese government began

in 1868 with the “Meiji Restoration.” After 250
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years of feudal rule by the Tokugawa Shogunate,

a small group of nobles and samurai, mostly

from the south, staged a brief civil war to overthrow the government. It restored the authority

of the Emperor Meiji, although true power was

with a small group of nobles—the genro—who

ruled in the name of the

emperor. This was part

of a long-standing

Japanese tradition in

which the emperor

ruled in name,

while other men,

often referred to as

“Shoguns,” ruled in

actuality. This tradition goes back to the twelfth century when

Minamoto Yoritomo was selected by the emperor as the first “Shogun.” He built his first capital in Kamakura, an hours train ride south of

present day Tokyo.

Under the guidance of the genro and with agreement by the Emperor, the country was transformed from a feudal state into an industrialized

and modern military power. The reforms instituted by the Emperor Meiji were broad based

and included creation of a centralized beauracracy and a conscript modern army. All areas

of society were influenced—economic, legal,

education, social and political.

As a gift, the emperor also gave the country its

first constitution—the Meiji

Constitution of 1890—

used to govern the

country until after

World War II.

While several

European constitutions served

as benchmarks,

the Japanese

modeled theirs

primarily after

the Prussian Constitution. It created a parliament

with two houses

—Peers and Representatives. The members of the Peers were from

the Imperial Family, the nobles, and people who

paid high taxes. While membership to the House

of Representatives was not as restricted, only a

limited number of people could vote. It was not

until the 1925 Electoral Law that universal male

suffrage was adopted. However, the emperor retained sovereignty to include control of the military services and the executive and legislative

branches of government. The Meiji rule lasted

44 year and ended with the death of the Emperor

Meiji in 1912.
Part 2 – Japan

2-5

Chapter 2

THE GOVERNMENT

OF JAPAN

The Japanese Constitution is referred to by some

as the oldest unchanged constitution in the world.

It has not been amended since its promulgation

in 1947. But, for the first time since its creation

the Constitution is under serious review. The

Diet voted last year to establish a panel to “widely and comprehensively” review its post-war

constitution. In typical Japanese tradition, the

panel is not expected to issue its report for five

years thus allowing time to gain consensus with

all parties and the public.

The Emperor

The 125th Japanese Emperor and symbol of the

State is Akihito. In the Japanese tradition, the

Emperor traces his descendants back to the first

emperor, Jimmu Tenno, crowned in 660 B.C.

and is considered a descendant of the Sun goddess—Amaterasu Omikami. While the sovereign power of the state rests with the people of

the nation, the emperor has a symbolic state function and performs the role of “Head of State.”

This consists primarily of state ceremonial tasks

such as meeting visiting heads of states, receiving foreign ambassadors and ministers. The

Constitution gives him various other functions,

such as appointing the Prime Minister, Minister

of State, and Chief Judge of the Supreme Court

(as designated by the Diet). Article 7 provides a

list of other duties, such as promulgating laws,

convoking and dissolving the Diet.

The Emperor has no effective power in government and performs all of these actions with the

advice and approval of the Cabinet and on behalf

of the people.

The current government of Japan is a constitutional monarchy with the Emperor, Akihito,

as the constitutional monarch. The Constitution

makes the emperor a part of the Executive branch

of government, along with the Prime Minister,

as of May 2000, Yoshiro Mori, and the cabinet.

The legislature is bicameral with a Lower House

—the House of Representatives—and an Upper

House—the House of Councillors. The judicial

branch of government consists of the Supreme

Court, the highest court of the land, other lower

courts to include district courts and family

courts. With the exception of the Chief Justice

of the Supreme Court, who is appointed by the

Emperor, the cabinet appoints all other judges.

The Japanese Constitution (kenpô) was enacted

on May 3, 1947, and is noted for Article 9 in

which Japan would “forever renounce war as a

sovereign right of the nation and the threat or

use of force as means of settling international

disputes.” While the Constitution prohibits Japan

from using war for settling international disputes

or maintaining military forces, it was argued,

during the occupation, that a “self defense force”

would not contradict the constitution. Finally in

1954, with U.S. encouragement, the Japanese

Government created a Self Defense Force.

This Constitution was a significant departure

from the first one—the Meiji Constitution. The

1947 Constitution placed the State’s sovereignty

in the people. The Emperor became a symbol

of the unity of the state. The Diet became the

highest organ of the state with the cabinet

responsible to it. Human rights and equal rights

for men and women were also guaranteed.
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Prime Minister

The Prime Minister (PM) is the head of government in Japan. He is a member of the Diet and

is selected by both legislative houses. However,

if both houses cannot agree, then the Lower

House, the House of Representatives, will select

the PM. The PM heads the Cabinet and has the

responsibility for appointing and dismissing cabinet members. He represents the Cabinet with

the Diet. He submits bills and reports on national

and international affairs to the Diet. As head of

government, he exercises control and supervision over the executive branch. For most of

the post-war period, the PM was a member of

the Liberal Democratic Party (LDP). While the

LDP is still the largest party in the Diet, it lost

some power in the 1990s and currently leads a

coalition government with two other parties—

the Komeito and the Jiyuto. The PM is the

Commander in Chief of the Japanese SDF.

Cabinet (Naikaku)

Actual executive power of the state is vested in

the Cabinet. The Cabinet consists of the PM,

who is its head, and other Ministers of State,

such as Foreign Affairs and Defence. All ministers are appointed and may be removed by the

PM and must be civilians. A majority of them

must be members of the Diet and it is traditional

that most are from the House of Representatives.

A key element of the current Constitution is that

the Cabinet, in the performance of their duties,

is responsible to the Diet. The Director General

of the Defense Agency, in keeping with Article

9 of the constitution, lacks ministerial status and

reports through the Office of the Prime Minister.

However, he is the equivalent to a minister of

defense in other countries.

Similar to the British model, the Japanese parliamentary cabinet system of government requires the government to retain the confidence

of the House of Representatives. If the House

passes a non-confidence resolution, or rejects a

confidence resolution, the Cabinet must resign.

The Cabinet has several constitutional responsibilities, specifically conducting affairs of state,

managing foreign affairs, and concluding treaties

(with Diet approval), administering the civil

service, and preparing and submitting the annual

budget. The budget is submitted every year by

Figure 2-1. The Japanese Cabinet

Prime Minister

Minister of Justice

Minister of Foreign Affairs

Minister of Finance

Minister of Education (Dir. Gen. Science and

Technology Agency)

Minister of Health and welfare

Minister of Agriculture, Forestry and Fisheries

Minister of International Trade and Industry

Minister of Transport (Dir. Gen. Hokkaido

Development Agency)

Chief Cabinet Secretary (Okinawa Development

Agency)

Minister of Posts and Telecommunications

Minister of Labor

Minister of Home Affairs

Minister of Construction (Dir. Gen. National Land

Agency)

Dir. Gen. Management and Coordination Agency

Dir. Gen. Defense Agency (Tsutomu Kawara

– as of May 2000)

Dir. Gen Environment Agency

Chairman, Financial Reconstruction Commission
Part 2 – Japan

2-7

the government to the Diet in January. This allows the time to deliberate and to pass a bill by

April 1, the beginning of the Japanese Fiscal

Year. Each minister also performs the normal

duty of managing the departments or ministries, which are included in their portfolio.

While each minister of state has the authority

to sign laws and cabinet orders; the PM is

required to endorse each one. The Japanese

Cabinet is currently composed of 19 Ministers

as shown in Figure 2-1.

Two of the most powerful ministries in the

government, the Ministry of Finance (MOF)

and the Ministry of International Trade and

Industry (MITI), have a significant impact on

the JDA’s investment planning. MOF’s role is

to determine both the budgetary amounts

available to acquisition and to ensure the health

of the economy. They prepare the national

budget with inputs from the various agencies and

ministries. Each agency or ministry participates

in hearings conducted by MOF to justify their

budgets. MOF’s impact on the defense industry

is through its fiscal policies, such as tax incentives, control of interest rates, and determination

of where public investment (through the budget

process) is most effectively spent. Their decisions will determine where industry invests its

capital and resources. MITI also plays a significant role by regulating the production, the

export and import of goods, and promoting

industrial investment in facilities and equipment.

The significance of the impact of both MITI and

MOF will be discussed in later sections.

Security Council

The primary advisory group to the PM is the

Security Council, which was established in

1986. The PM chairs the council, which includes

the foreign and finance minister, the Director

General of the Defense Agency, the chief cabinet

secretary, the chairman of the National Public

Safety Commission, and the Director General

of the Economic Planning Agency. The Chairman of the Joint Staff Council (JSC) and others

may attend. The Security Council agenda includes a wide range of both military and nonmilitary security issues, such as defense policy,

the National Defense Program Outline, industrial production coordination, diplomatic

initiatives and defense operations.

THE LEGISLATURE

The Diet (Kokkai)

The Diet consists of two Houses—The House

of Representatives and the House of Counsellors. The 1947 Constitution made the Diet the

“highest organ of the state power” and the “sole

lawmaking organ of the State.” Unlike many

other bicameral legislatures throughout the

world, both Diet Houses consist of elected

members and represent all of the people.

The Diet meets in ordinary session from January

to May every year. The Cabinet (actually the

Emperor with the advice and approval of the

Cabinet) may also convoke extraordinary sessions of the Diet as necessary. It is usual for one
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or two extraordinary sessions to be convoked

from summer to autumn every year. Besides the

ordinary and extraordinary session of the Diet,

a special session must be convoked after a

general election. In this session the PM will be

chosen. The PM must be designated by Diet

resolution, establishing the principle of legislative supremacy over executive government agencies (Article 67). The term of an extraordinary

session or of a special session is determined by

a concurrent vote of both houses. If there is no

agreement between both houses, then the

decision is up to the House of Representatives.

In addition to passing laws, the Diet has a responsibility for oversight of the government. There

are two mechanisms for accomplishing this role.

First, Diet members will question governmental

actions. To do this, they submit questions to the

Cabinet in writing (or orally for urgent matters)

through the Speaker of the House of Representative or the President of the House of Counsellors.

These questions will then be forwarded to the

Cabinet for a response. Secondly, the Diet will

examine the actions of government agencies,

usually through standing or special committees,

which conduct investigations, calling witnesses

and requiring the furnishing of records.

House of Representatives (Shugi-in)

The 512 members of the House of Representatives are elected for a term of four years or

until the House is dissolved. “Under the revised

Election Law, the old multi-seat, medium-size

constituency system changed to a combination

of single-seat constituencies and proportional

representation, with 300 members elected from

single-seat constituencies and 200 by proportional representation2

 in 11 blocs, with each bloc

returning seven to 33 members. Voters cast two

ballots: one for an individual candidate in the

constituency election and the other for a political

party under the proportional representation

system.”

House of Councillors (Sangi-in)

The 252 members of the House of Councillors

are elected for a term of six years, with one half

of the members being up for election every three

years. One hundred of the Councillors are elected by proportional representation while the

balance (152) are elected from individual prefectures (two to eight members depending on

size). As with the House of Representatives,

voters cast two ballots—one for a political party

(proportional representation) and one for an

individual candidate. When the House of Representatives is dissolved, the House of Councillors

is closed at the same time. Nevertheless, the PM

cannot dissolve House of Councillors with its

fixed term. However, the Cabinet may, in times

of national emergency, convoke the House of

Councillors in emergency session (Article 54).

When this happens, actions taken by the Councillors are provisional. They become null and

void unless the House of Representatives agrees

to the Councillors actions within 10 days after

it goes into session.

The House of Representatives has the greater

power of the two contemporary houses, in contrast to the pre-war system in which the two

houses had equal status. According to Article

59, a bill that is approved by the House of Representatives but turned down by the House of

Councillors returns to the House of Representatives. If the latter passes the bill with a two-thirds

or higher majority on this second ballot, the bill

becomes law. However, there are three important

exceptions—budget approval, adoption of

treaties, and the selection of the PM. In all three

cases, if the upper and lower houses have a

disagreement, that is not resolved by a joint

committee, then after 30 days “the decision of

the House of Representatives shall be the

decision of the Diet” (Articles 60, 61, and 67).

The impotence of the upper house has been

shown on several occasions when in attempts to

modify the budget it was overridden by the

Lower House.
Part 2 – Japan

2-9

The Legislative Process

Every year, the PM, on behalf of the Cabinet,

submits the defense budget to the House of

Representatives in January for the next fiscal

year—April 1. The Speaker will refer the defense budget to the Budget Committee. The

Budget Committee will bring in the PM and

other Ministers of State and question them

regarding the budget. Often these proceedings

will be used as opportunities to criticize the

administration.

In addition to the budget bill, other pieces of

legislation are debated and become law. In the

general legislative process, the cabinet, individual members of both Houses, and standing

or special committees may introduce bills in the

Diet. The government submits most bills. If the

bill is a member initiated bill, it must have the

support of 20 or more members of the House of

Representatives and 10 or more members of the

House of Councillors. If the bill regards the

budget, the member must secure the support of

50 or more members of the House of Representatives and 20 or more members of the House of

Councillors. For a motion to change/amend the

budget by a member, he must obtain the support

of at least 50 members of the House of Representatives or 20 in the House of Councillors. The

annual defense budget submitted by the Cabinet

is rarely changed. When a bill examined by a

committee comes up for consideration, the chairman of the committee will report on both the

deliberations of the committee and the committee’s recommendation. The actual bill will then

be questioned and debated in a Diet session

before it comes up for final vote in the House.

A bill becomes a law on passage by both Houses.

If a bill is passed by the House of Representatives but the House of Councillors does not

agree or does not take timely action, it can still

become law if it is passed a second time by twothirds of the members present in the House of

Representatives. In most cases both houses will

meet with a joint committee to try to resolve

differences. In the case of the budget, if the

House of Councillors does not agree, or does

not act timely, and a joint committee cannot

reach agreement, the decision of the House of

Representatives becomes the decision of the

Diet.

Role of Committees

When a bill, budget or treaty is introduced in

the House of Representatives, the speaker refers

it to the committee under whose jurisdiction it

falls.3

 There are two types of committees—

Standing and Special. Each of the 20 standing

committees has 20-25 members. Those concerned with defense issues are the Budget and

the National Security Committees. To underscore the political sensitivity to defense and

security issues the House did not establish a

security committee until 1991. Special committees are created in both houses to examine

issues that are of major concern, particularly if

they do not fall under the purview of an existing

standing committee. An example in the House

of Representative is the Special Committee on

Guidelines for Japan-U.S. Defense Cooperation.

In the House of Councillors, there are 17 standing committees with each having 10-45 members. Those concerned with defense issues are

the Budget, Foreign Affairs and Defense Committees. Typical of the issues covered by the

committee includes international cooperation

projects, security and national defense issues.

Other committees also play a role in the defense

business such as the Committee on Economy

and Industry, which covers economic planning,

patents and strengthening small and medium

businesses. The Audit Committee also played a

major role in the investigations of the procurement scandal in 1998, which saw the Minister

of Defense resign over the scandal. An example

of a House of Counsellor’s special committee is
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the Special Committee on Financial Issues and

Revitalization of the Economy.

The committee membership reflects the House’s

makeup of parties. It is in these committees that

the detail work of preparing legislation takes

place. Each standing committee has its own

professional staff, which assists the members in

drafting and understanding the details of bills.

It is also in these committees that the fate of a

bill is usually determined. The committee may

amend, shelve or reject a bill. While a committee’s decision does not guarantee the final look

of a bill, the committee does reflect the political

makeup of the Diet and its decisions are usually

the same as the Diets.

The Budget Committee, which has the largest

membership in each House, examines national

revenue and expenditures. To clarify issues and

understanding of the government’s intentions,

they will call the PM and all other ministers of

state to testify at hearings. For important bills,

such as the budget and revenue bills, public

hearings are required. Sometimes these hearings

can make headlines. A recent example was when

Defense Agency Director General Hosei Norota

responded to questions from the House of

Representative Budget Committee members

which revealed that military officers of the

Defense Agency had moved documents showing

complicity of agency personnel in the NEC

overcharging scandal.

Board of Audit

The Board of Audit reviews government expenditures and submits an annual report to the Diet.

This report details unlawful or inappropriate

expenditures and unsuitable management practices, to include review of acquisition decisions

and actions. Its reviews however, are mostly related to monetary efficiency post-award reviews

rather than appropriateness of an acquisition

program. The 1947 Board of Audit Law gives

this body substantial independence from both

cabinet and Diet control. While the Cabinet

appoints the Director, he is chosen by a vote of

the audit commissioners and his selection must

be agreed to by the Diet.

The Role of the Civil Service

The Defense Agency employs 25,000 civilian

workers in a variety of positions from administrative to technical and engineering positions.

Civil Servants are selected to their posts as a

result of passing the Level I Entrance Examination for the National Public Service or the Class

I, II or III Examinations for Defense Agency

Civilian Officials. These civilian officials provide the direction, administration and oversight

for defense policy, accounting and procurement.

The civil service is divided into two categories—

special and regular. The special category appointments are non-competitive political appointees or members of the SDFs. The regular

civil service members, who are recruited through

competitive examinations, make up the bulk of

civil servants. The civil service is further divided

into two categories—junior and upper professional levels—the later becoming the key policy

makers within the ministries and agencies.

The path to becoming a member of the upper

professional levels is difficult. After graduation

from college, preferably from a prestigious

university, such as the University of Tokyo, and

increasingly with graduate-level study, applicants take a series of extremely difficult higher

civil service examinations every year in the January/February time frame. Only a small portions

of applicants—about 6-7 percent—pass the test.

Of those that pass the test only about 10 to 12

percent are hired. The most popular agency for

the applicants is the Ministry of Finance (MOF)

because of its powerful political position. The

examination path is very much based on the

Confucian tradition of the “scholar-official” who
Part 2 – Japan

2-11

must survive a grueling education and testing

process to become one of the leaders of the

country.

Traditionally, it has been worth traveling the

grinding path since, economically and socially.

Civil servants enjoy significant respect and

salaries comparable to what is paid in industry.

They also enjoy challenging and responsible

positions. In the Japanese government there are

very few political appointees. Appointees frequently have tenures less than one year. This

makes it difficult for them to develop the expertise to run the agency and to develop a power

base to make changes. The role of “running”

the agency then falls to the senior civil servants

within the ministry. Generally, in government

ministries, the senior civil servant is the administrative vice minister. The appointment criteria

includes managerial and technical qualifications,

but seniority also plays a significant role in the

selection. In the JDA, other senior civil service

positions often go to personnel from other

agencies. “Many senior officials are seconded

to the JDA from the Ministry of Foreign Affairs

(MoFA), Finance (MOF), and International

Trade and Industry (MITI) in key decision areas

such as policy planning and arms procurement.”4

The institution of early retirement also contributes value to a civil servant job. The popular

phrase “descended from heaven” is often used

to describe the change in job for senior civil

servants as they move from government jobs to

senior industry positions. In this practice, known

in Japanese as “amakuri,” government bureaucrats retire in their 50’s and have “Golden

Parachute” jobs lined up for them to move into

top positions in public corporations and industry.

Recent procurement scandals have led to some

changes to the “amakuri” practice. A “cooling

off” period was introduced for high ranking

personnel. A senior civil servant must now wait

three to five years before going to work with a

company that he did business with during his

career. The need to work after retirement is a

key element of the civil service retirement system. Civil servants (including SDFs) retire at

55 years of age and do not receive a retirement

check, but rather a lump sum buyout. Retirement salaries are not paid until years later

through the social security system, which only

pays an amount equal to 25 percent of one’s

final salary. Also, many former civil servants

move into the political realm and become

politicians. Some have even moved to the top

position in government—PM.

It is perhaps appropriate to discuss decision

making in Japan at this point. Japanese tend to

take a gradual approach to change. They emphasize the need for both organizational and

public agreement or consensus, which in turn

steers the character and speed of implementation. An example of this is the planning process

for defense requirements and the budget. The

JDA works with the MOF, MoFA and MITI

work to achieve consensus on requirements and

the budget. “The method of achieving coordination is characterized not so much by formality

and institutions as by compromise and consensus

building in which nemawashi (“laying the

groundwork”) and ringisei (consultation or

“piling-up system”) are essential concepts. The

former involves talking with the parties concerned so as to prepare them to “accept” a plan;

the latter means that plans drawn up by lowerlevel officials circulate among officials at
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-12

higher levels to win their approval. These are

traditional Japanese concepts emphasizing

harmony, genuine agreement and solidarity

rather than open debate and confrontation

between institutions.”5
Part 2 – Japan

2-13

Chapter 3

THE JAPANESE

SELF DEFENSE FORCE

particulars of its mission was limited to actions

such as, disaster relief, to include fire fighting,

earthquake assistance, search and rescue, and

flood aid. It was restricted from performing any

internal security work. Throughout the post

World War II era there has been a strong, vocal

pacifist movement in Japan. This movement has

acted as a check on the government’s actions in

changing the roles of the SDFs. It was not until

1992 that the National Diet was willing to consider and agreed to legislation to permit the SDF

to participate in United Nations (UN) operations.

Even then participation was limited to noncombat roles, such as medical relief, refugee aid,

transportation, infrastructure repair, election

monitoring, and limited policing operations.

The Japanese government has set an “historical”

limit on the size of the SDF’s budget—1 percent

of the Gross Domestic Product (GDP). Figure

2-2,6 shows the defense budget over the last

seven years. Maintaining the budget at 1 percent

of GDP in 1999 has still allowed Japan to

maintain the second largest defense budget in

the world.7 The fiscal year 2000 budget includes

a new emphasis on unconventional warfare

capabilities, ballistic missile defense research

and procurement reform. The 2000 budget did

include 810 billion yen for procurement, which

is down almost 3 percent from last year. With

the budget tied to economic growth, which in

the 1990s Japan saw mostly in a no-growth

economy. Procurement reform efforts, among

other things, have focused on cutting weapon

system costs with a goal of a 10 percent cut.

They have also set a goal of using more commercial items to cut costs. Its investment budget,

In the late 1940s and early 1950s as the Cold

War heated up throughout the world, the United

States view of the world changed. The Berlin

crises in Germany and, in Asia, the fall of China,

followed quickly by the war on the Korean peninsula jolted policy makers to rethink political

relationships. U.S. foreign policy then evolved

to see Japan as an ally, supplier of military services and materials, and bulwark against the dangers of a communist threat. There was, however,

a legal problem. Article 9 of the constitution,

some thought, created a roadblock for Japanese

participation with allied efforts. It states,

“Aspiring sincerely to an international

peace based on justice and order, the

Japanese people forever renounce war

as a sovereign right of the nation and

the threat or use of force as means of

settling international disputes. 2) In

order to accomplish the aim of the

preceding paragraph, land, sea, and air

forces, as well as other war potential,

will never be maintained. The right of

belligerency of the state will not be

recognized.”

An aggressive military force was not possible,

but every nation has a right to defend itself.

With pressure from the United States, Japan, in

1954 created the SDF. Its mission was designed

to be defensive in nature; that is, to preserve

peace, public order and guarantee Japan’s

independence and safety.

The SDF was formed after the passage of the

“Self Defense Forces Law of 1954.” The
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-14

which has averaged around 20 percent for the

last seven years, is one of the lowest of the

countries in this study.

The Japanese Defense Agency

The Defense Agency is part of the Office of the

PM. It is lead by a Director General, who has

the rank of a Minister of State, although the

agency is not a cabinet level department. As

shown in Figure 2-3, he is assisted by two vice

ministers—one parliamentary and one administrative. The Administrative Vice-Minister is the

senior civil servant in the Defense Agency. The

Internal Bureaus are similar to the OSD staff in

the United States and provides support to the

Director General and his senior personnel. The

Internal Bureaus includes his administrative support secretariat and the Bureaus for Policy, Operations, Personnel and Education, Finance and

Equipment. The Equipment Bureau is the primary staff organization responsible for oversight

and management of the acquisition system.

Direct reporting units are: the Joint Staff Council, the Self Defense Forces (Ground, Maritime,

and Air), the Defense Facilities Administration

Agency, the National Institute for Defense

Studies (NIDS), National Defense Academy and

the two primary field level acquisition organizations, the Central Procurement Office (CPO)

and the Technical Research and Development

Institute (TRDI). The figure indicates two planned changes as a result of acquisition reform.

Current plans are for the Bureau of Finance and

the Bureau of Equipment to merge and the

creation of an independent audit body to provide

oversight of the acquisition process.

The highest figure in the operational command

structure is the PM, who is responsible directly

to the Diet. In a national emergency, the PM is

authorized to order the various components of

the SDF into action, subject to the consent of

the Diet. In times of extreme emergency, afterthe-fact approval may be obtained.

Figure 2-2. Japan’s Defense Budget

*$1 = 111Y

Classification

Defense Budget $

Defense Budget Y*

Investment %

% of GNP

R&D %

1994

42.2b

4.68t

21.3

0.96

2.7

1995

42.5b

4.72t

18.4

0.96

3.0

1996

43.7b

4.85t

18.9

0.98

3.1

1997

44.5b

4.94t

18.9

0.96

3.2

1998

44.4b

4.93t

19.1

0.95

2.6

1999

44.4b

4.93t

19.5

0.99

2.6

2000

44.3b

4.92t

19.0

na

na
Part 2 – Japan

2-15

The internal bureaus—especially the Bureau of

Defense Policy, Bureau of Finance, and the

Bureau of Equipment—are often headed by

officials from other ministries such as MITI

and MOF. These bureaus are the main centers

of power and they are instruments of civilian

control in the Defense Agency.

Self Defense Forces

The SDF consists of three armed organizations,

the Ground Self Defense Force (GSDF), the

Maritime Self Defense Force (MSDF) and the

Air Self Defense Force (ASDF), with the JSC

performing an administrative role of coordination for the Director General. (Appendix B

shows the structure of the individual SDFs.)

Each Service Chief of Staff supports the Minister

as a professional military adviser. The three

SDFs consist of combat units, which perform

operational activities, and support units, which

provide the material support, maintenance and

test and acquisition support. The SDF is a voluntary force and currently has authorizations for

about 267,000 active members with approximately 48,000 reserves. The GSDF has 180,000

personnel authorized, although current plans call

for a reduction of 20,000. The ASDF has about

47,000 authorized personnel, while the MSDF

has approximately 45,000.

The Chairman of the JSC is the senior military

person. This body includes the Chiefs of Staff

of the Ground, Maritime, and Air Self Defense

Forces. The JCS serves as a military advisor to

the Director General and plans and executes joint

service operations. All three services are directly

responsible to the Director General and are coFigure 2-3. Japan Defense Agency (JDA) and Self Defense Forces (SDF)

Director General of the Defense Agency

(Minister of State for Defense)

Parliamentary

Vice Minister

Administrative

Vice Minister

Minister’s Secretariat

Bureau of Defense Policy

Bureau of Operations

Bureau of Personnel

and Education

Bureau of Finance

Bureau of Equipment

Internal Bureaus

Prime Minister

Councilors Defense Facilities

Administration Agency

Joint Staff Council

Defense Force

Ground Self

Defense Force

Maritime Self

Defense Force

Air Self

Defense Force

Third Party

Audit Body

Technical

Research and

Development

Institute

National

Institute

for Defense

Studies

National

Defense

Medical

College

National

Defense

Academy

Central

Procurement

Office
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-16

equal with the JCS. While this structure is

designed to prevent the concentration of power

into any one organization it makes interservice

coordination an issue.

The SDF has a unique military system. The

governing law for the SDF is the Self Defense

Forces Law of 1954, which organized the

defense establishment under the principle of

civilian control (Article 66). All SDF personnel

are civilians including those in uniform. While

they are categorized as special civil servants,

they are subordinate to the ordinary civil servants, who run the Defense Agency. As such,

offenses committed by military personnel (special civil servants) are not covered by “military

law,” but rather are adjudicated through the civil

courts using civil procedures.
Part 2 – Japan

2-17

Chapter 4

JDA ACQUISITION

ORGANIZATIONS

of military systems and equipment. Headquarters TRDI is located in the new JDA compound

in Ichigaya, Tokyo, and employs approximately

1,200 military and civilian personnel engaged

in research and development (R&D) activities.

Of the 1,200 personnel, approximately 800 of

these are engineers, of which 250 of these are

from the SDF. The SDF engineers generally

work in development projects. Its 1999 budget

was 1,200 million yen (U.S. $991 million).

TRDI’s primary expenditures are for contracts

with industry for studies, manufacturing of prototypes and research (70 percent). Approximately 18 percent of their budget is for in-house

research, test and evaluation.

TRDI was originally established in 1952 as the

Technical Research and Development Center as

part of the National Safety Agency. Renamed

the Technical Research and Development Center

with the creation of the JDA in 1954, and finally

received its current name in 1958.

TRDI also has responsibility for tracking technology and identifying civilian technology for

application in the SDFs. (See Figure 2-4 for

organizational structure.) The institute consists

of three administrative departments, four program departments, five research centers and five

test centers. The four departments in charge of

development programs—ground, naval, air, and

guided weapons systems—are headed by Lieutenant General, Vice Admiral or civilian of equivalent rank. These Departments are home to

the program manager for each developmental

system. Each department has responsibility for

planning, designing and developing prototypes.

Internal Bureaus

The Equipment Bureau is the primary staff

organization responsible for oversight and management of the acquisition system. The Director

General of the Bureau of Equipment, currently

Mr. Kozo Oikawa, is the National Armament

Director (NAD) for Japan. The three bureaus

most involved with acquisition are the Bureau

of Defense Policy, the Bureau of Finance and

the Bureau of Equipment. The Bureau of Defense Policy has responsibility for drafting

defense policy and programs, gathering information and data analysis, plus determining dayto-day operational activities of the SDF. The

Bureau of Finance, usually headed by a person

on loan from the MOF, is instrumental in developing the Defense Agency budget and in

establishing spending priorities for the Defense

Agency and the SDF. The Bureau of Equipment,

organized into sub-units for each of the SDFs,

focuses on equipment procurement. Before the

Defense Agency recommends any major purchase to the Diet, it has to be reviewed by each

of these bureaus. They play a very influential

role through their review of plans and budgets,

plus their review and concurrence on the Defense

Technology Intelligence Analysis and Technical Research and Engineering Development

Requests.

Technical Research and Development

Institute

The Technical Research and Development Institute (TRDI) is the sole organization responsible

for research, development, test and evaluation
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-18

There are five test centers and five research

centers located mostly in the Tokyo area. They

perform basic and applied research, and test and

evaluation of prototype products to ensure that

equipment will meet the needs of the SDFs. The

Test Centers and Research Centers and their

responsibilities are:

Defense Test Centers

Sapporo Test Center located in Sapporo City

on the northern island of Hokkaido for prototype

products in cold or muddy areas. In the Higashi

Chitose area a jet propulsion facility for aircraft

and missiles engines is under construction.

Shimokita Test Center located in Higashi-gori

Village, Shimokit County Aomori Prefecture

performs artillery and ammunition testing.

Tsuchiura Test Center, located in Ami Town,

Inashiki County, Ibaragi Prefecture, conducts

environmental test and combustion tests on

rocket engines and performance tests on artillery

and ammunition.

Figure 2-4. Technical Research and Development Institute (TRDI)

MINISTER OF STATE

FOR DEFENSE

Deputy Director

General

TRDI Director General

Technical Advisors

Department of

Ground Systems

Development

Department of

Naval Systems

Development

Department of

Air Systems

Development

Department of

Guided Weapon

Systems Development

Technical

Department

1st Technical

Division

2nd Technical

Division

Plans and Programs

Department

Plans

Division

Programs

Division

Administration

Department

Administrative

Division

Finance

Division

Sapporo Test

Center

Tsuchiura Test

Center

Shimokita Test

Center

Niijima Test

Center

Gifu Test

Center

1st Research

Center

2nd Research

Center

3rd Research

Center

4th Research

Center

5th Research

Center

Iioka

Branch

Iioka

Branch
Part 2 – Japan

2-19

Nijima Test Center located at Nijima Village

in Tokyo tests rockets and missiles by live firing.

Gifu Test Center, located at Kakimigahara City,

Gifu Prefecture, collects data on flight conditions of aircraft and test performance characteristics of aircraft and missiles, e.g., the new

medium-range air-to-air missiles and small

observation helicopters.

Defense Research Centers

The research centers perform the technical studies and research for basic and applied research.

1st Research Center is located in Nakameguro,

Meguro-ku, Tokyo, and has responsibility for

research on firearms, ammunition, armor materials, anti-ballistic structures, human factors

engineering, protection from chemical agents,

as well as naval vessels.

2nd Research Center is located in Ikejiri,

Setagaya-ku, Tokyo, and has responsibility for

research on military electronics technologies

related to radar systems, information processing,

communications, and electro-optics, and test and

evaluation of newly developed military electronics systems and equipment. They have a

branch located in Iioka with responsibility for

researching and testing fundamental characteristics of atmospheric transmission, reflection,

and radiation of radio and optical waves.

3rd Research Center is located in Sakae-cho,

Tachikawa-shi, Tokyo, and is responsible for

research on aircraft, aircraft engines, missiles,

and rocket engines. Research on the Joint

Japanese-U.S. Ducted Rocket Engine Project

was conducted here.

4th Research Center is located near Tokyo at

Fuchinbe, Sagamihara-shi, Kanagawa-ken, and

has responsibility for research on vehicles and

vehicular subsystems, engineers equipment,

such as tracked vehicles and simulator for

tracked vehicles. Research on the Joint JapaneseU.S. Fighting Vehicle Propulsion using Ceramic

Materials Project was conducted here.

5th Research Center is located near Tokyo at

Nagase, Yokosuka-shi, Kanagawa-ken, and has

responsibility for research, test and evaluations

on underwater acoustic systems, underwater

weapons, magnetic equipments and mine sweeping equipment. The Kawasaki Branch performs

research and testing on degaussing for various

ships and on magnetic detection of submarines.

Central Procurement Office (CPO)

The Central Procurement Office (CPO) located

in Ichigaya, Tokyo, purchases on a centralized

basis various equipment and materials required

for the military such as firearms, ammunition,

fuels, guided weapons ship aircraft and vehicles.

It is the largest state procurement institution in

Japan and executes a budget equal to approximately 30 percent of Japans total defense budget.

One of the characteristics of the office is that

work authority is dispersed in order to ensure

fair implementation of its activities with its division horizontally organized so they can check

on each other. (See Chapter 8 on Procurement

for more information on CPO.) Each service is

authorized to procure the defense material and

services for smaller contracts not to exceed 1.5

million-yen (U.S. $12,500) and for emergency;

or special procurements authorized by the

Director General.

Defense Facilities Administration Agency

(DFAA)

The DFAA is a national government executive

agency that performs administrative work related

to defense facilities including acquisition,

property management and construction. It is also

the labor management organization for Japanese

employees that support the U.S. Forces in Japan.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-20

Self Defense Forces

The SDFs are involved throughout the acquisition process (see Figure 2-8). They are involved

in determining requirements, testing and

evaluating the equipment, and management of

the production program. In the ASDF, the Air

Staff Office (ASO), Technical Department and

Plans and Operations Department have responsibility for requirements generation and programming for new equipment. The Logistics

Department is responsible for production program management. The Air Development and

Test Command provides support for equipment

and system testing and is responsible for R&D

is areas such as flight medicine. The Flight

Support Command, the Air Materiel Command,

the Air Combat Command, the Air Support

Command, and the Air Material Command

support the initial operation, test and evaluation

of systems. In the GSDF the Headquarters,

Ground Staff Office (GSO), Plans and Operations Department and the Logistics Department

are responsible for requirement generation, programming, and management of production programs. The Test and Evaluation Command, aviation and other schools, and supply depots are

involved in testing and supporting new equipment. The MSDF Headquarters, Maritime Staff

Office (MSO), Technical Department and Plans

and Operations Department are involved in

requirements generation and programming.

The Fleet Training and Development Command

has responsibility for testing of new vessels,

while the Air Development Squadron 51 tests

new aircraft.
Part 2 – Japan

2-21

Chapter 5

PLANNING, PROGRAMMING,

AND BUDGETING

and the Cabinet approved a revised NDPO. The

new Outline retains the umbrella of the U.S. and

Japanese security agreements and lays out the

force structure to include units and major equipment, and the need for a moderate defense capability to respond to incursions into Japan. The

NDPO defines the need for a “basic and standard

defense capability.” This capability is not built

upon military threats, but rather the need for a

moderate defense capability that does not create

instability in the region. Within this “basic and

standard defense capability” are forces and

equipment necessary to respond to peacetime

needs, such as disasters, and wartime events,

such as small-scale invasions. The new Outline

now provides a more active role for the SDFs in

military peacekeeping missions.

In the R&D area the Outline calls for continued

investment to ensure a state of the art technological defense capability. And, finally, the 1995

NDPO referred to the defense industry for the

first time by asserting that “considerations will

be taken for maintaining defense production and

its technology base.” While this has been the

practice, it did note the need to maintain a strong

defense production and technology base by

promoting domestic production to fulfill the

needs of SDFs.

How does the JDA carry out those goals? The

next step in the process is the Mid-Term Defense

Program (MTDP). The MTDP is decided upon

every five years and covers a five-year period.

The MTDP lays out the military capability to

acquire and provides the implementation and

There are three documents that provide the

policy and implementation for national security

in Japan. They are the National Defense Basic

Policy , the National Defense Program Outline

(NDPO) and the MTDP (see Figure 2-5). The

overarching guidance for the security of Japan

is the National Defense Basic Policy, a one page

document published in 1957. This top-level

policy document provides the principles and

objectives for the Self Defense Forces to prevent

direct and indirect aggression and the need to

develop an effective defense capability to be able

to repel invasions and preserve the independence

of Japan. Further, the Basic Defense Policy

includes support for UN activities, promotion

of international cooperation, the public welfare

and efforts to “enhance the people’s love for

the country, thereby establishing the sound basis

essential to Japan’s security.” The basic policy

operates under the umbrella of the Japan—

U.S. security arrangements. This 1957 policy

statement has remained the bedrock of Japanese

defense policy for 43 years.

To implement the Basic Policy, Japan instituted

a series of “Defense Buildup Plans,” but decided

in 1976, because of non-proliferation issues and

the annual cap on the defense budget of 1 percent, to define the capabilities they need in a

document called the NDPO. The Outline served

as the basis for charting the Defense Agencies

course for the next 19 years, through the Cold

War and its demise.

In November 1995, recognizing the changing

international environment, the Security Council
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-22

pace of development for the JDA. If a capability

is not included in the MTDP, it normally must

wait until the next five-year plan. It also has the

schedules and funds necessary to implement

NDPO. As shown in Figure 2-6, the MTDP for

FY 1996 to FY 2000 listed eight major programs

for the Ground SDF, three for the Maritime SDF

and four for the Air SDF. 9 However in 1997 due

to the critical financial situation, the Security

Council and the Cabinet revised the Plan with a

more modest plan—the MTDP (FY 1996-2000)

Revision. The next MTDP is scheduled for release in August 2000 and will cover the SDF’s

needs for the years 2001-2005. Early indications

show the plan will include requirements for four

large air-capable surface combatant ships to

replace its aging anti-submarine destroyers, a

light anti-tank missile, increased spending for

R&D, and an increase for theater missile defense

to respond to regional concerns of ballistic

missile launches.

What needs to be bought and when it needs to

be bought are included in the Mid-Term plans.

But, what will actually be bought? The annual

budget process in which the JDA competes with

other ministries and agencies determines the

share of the pie the JDA will receive. The Budget

Bureau in the MOF is at the heart of the decision

process for determining what will be bought by

the JDA. They prepare the budgetary guidelines

for the JDA and the national budget. The JDA

then draws up its budgetary request based upon

MOF guidelines at the end of August. It submits

its budget request to the MOF in the SeptemberNovember time frame. It is during this time frame

that the examiners from the Budget Bureau then

conduct detail budgetary hearings.

A draft government budget is prepared by the

MOF and submitted to the Diet in January. The

Diet holds hearings at the committee level and

then passes the budget in an ordinary session in

time for the new fiscal year—April 1 (see Figure

2-7 for budget process). Occasionally, political

issues will prevent a budget from being passed

on time. When this happens, an interim budget

is compiled to finance the most necessary items.

It is worthwhile to note the role of a nongovernmental body, the Liberal Democratic Party

(LDP), Policy Research Council, plays in the

Figure 2-5. Framework of Defense Policy

The Constitution Japan-U.S. Security Treaty United Nations Charter

Basic Policy for National Defense

National Defense Program Outline (NDPO)

Mid-Term Defense Program (1996-2000) (MTDP)

Basic Policies

A. Exclusively defense oriented policy

B. Not becoming a military power

C. Adherence to three non-nuclear principles

D. Securing civilian control
Part 2 – Japan

2-23

Figure 2-6. Mid-Term Defense Program (MTDP)

Figure 2-7. Budget Cycle

Tank

Artillery

Multiple Launch

Rocket System

Armored Vehicle

Surface-to-ship

Missile

AH-1S

CH-47JA

Improved Hawk

Missile

Destroyers

Submarines

SH-60J

F-15DJ

F-2

CH-47J

T-4

FY96 FY97 FY98 FY99 2000 Equipment Quantity

18 18 17

13 10 6

999

23 36 30

44 8

11 1

2 21

0.5 0.5 0.25

12 2

11 1

6 77

11 8 9

4

90

40

45

157

157 launchers

3

9

1.75 groups

7

5

37

4

45

6

9 13 9 54

Maritime

Self Defense

Force

Air Self

Defense

Force

Ground Self

Defense Force

a Diet passes budget late March at the earliest. Often the diet will

miss its schedule and not pass the budget until April-May.

Budget

Submitted

to Diet

Diet

Passes

Budget

Cabinet Sets

Budget Policy &

MOF Guideline

MOF Budget

Hearings

& Budget

Completed

JDA Submits

Budget

Request

July End of August From September to November

March January a April

New

Fiscal

Year
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-24

budget process. The LDP has been the primary

political party in Japan for most of the last 50

years. The Policy Research Council has taken a

role in reviewing the annual defense budget for

policy implications. Normally, the Council’s

Chairman does not recommend changes, although when major political issues are involved,

such as for Theater Missile Defense, he may

make recommendations to the government on

possible changes.
Part 2 – Japan

2-25

Chapter 6

THE DEFENSE

ACQUISITION SYSTEM

from abroad, mostly from the United States.

“Equipment acquisition programs will be effectively implemented with overall consideration

of such factors as speedy emergency resupply,

easier education and training requirement and

cost effectiveness, including future obligatory

expenditures accompanying the introduction of

equipment, and with special attention on developing a procurement and supply mechanism

which helps reduce procurement costs. Attention

will also be given to maintaining defense production and technology foundations through appropriate promotion of domestic productions.”12

The latest NDPO puts additional efforts “...to

enhance technical research and development that

contributes to maintaining and improving the

qualitative level of Japan’s defense capability

to keep up with technological advances.”13

Requirements Process

Organizationally, the necessity for a new weapon

system or military equipment comes from each

SDF or the Joint Chief of Staff. The normal process is for each SDF to propose a new weapon

system or new equipment, or changes to an existing system, which is contained in a document,

called the Operational Requirement Document

(ORD). Using the GSDF as an example, the

initial work of requirements development begins

at the staff colleges and research departments

of the 13 branch schools, such as the engineering

or signal schools, who have conducted operational and materiel studies for the Ground Staff

Office (GSO). Equipment is modernized based

upon trends of future security environment or

The Acquisition Management System consists

of the organizations, discussed above and policies and procedures governing the operations of

the system. JDA Directive 50-48, Technological

Research and Development for Defense Systems, provides the policies and procedures for

development of weapon systems and equipment.

This is implemented by TRDI Instruction 1,

Technological Research and Development for

Defense Systems.10

The Basic Policy for Development and Production of Defense Equipment, which was first

issued in 1970, provides guiding principles for

acquiring weapon systems. These five basic

principles are:

A. The national defense capacity is the nation’s

industrial and technological capacity.

B. Arms procurement from domestic production should be promoted.

C. Maximum use should be made of the developmental and technological capacity of

civilian industry.

D. A long-term perspective provides a basis for

good arms procurement planning.

E. The principle of competition should be

actively introduced.11

Its historical policy on acquisition has been to

favor domestic production, or licensed production of equipment and importation of technology
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-26

technology changes to provide a capability that

is adequate for self-defense. The Headquarters,

Plans and Operations Department will prepare

the ORD, which establishes the military requirement (see Figure 2-814), during the Research

Phase.

In the Concept Phase, a long-term plan (10

years) and a “system of materiel and equipment,”

or architecture of mission areas with appropriate

analysis, will be sent to the GSO Logistics Department for incorporation into an Estimate of

Technical Research and Development Requirements. This will be provided to TRDI and the

Acquisition Review Council. TRDI’s then assesses the availability of technology, cost expectations and technical risks. This feeds into the

GSDF’s ORD. In the future a combined organization, initially to be called, the Research Headquarters, located in Camp Asaka, near Tokyo,

will provide a single central organization to

develop and perform the preliminary studies to

develop GSDF requirements. While this discussion describes the GSDF process, a similar

practice is conducted within the other two SDFs

(see Appendix B).

Research and Development Process

The R&D process follows a rational sequence

of events with four phases to take a weapon

system from the early conceptual stage to the

end of its useful life. The four phases, as shown

in Figure 2-8, are: Phase I–Concept, Phase II–

Research Research, Phase III–Development,

Phase IV–Operation.15 The process in Japan

tends to be sequential with little overlapping

between phases. Japanese schedules also tend

to be rigid and rarely change as is typical in the

United States.

Figure 2-8. Research and Development Process Phases

INTERNAL

BUREAU

Phase of R&D

Council

Plans &

Operations

Department

Logistics

G Department

S

O

/

G

S

D

F

Council Council Council Council

Research

Test (*)

Engineering

Test (*)

Operational

Test (*)

Technical

Research

Requirement

Document

Estimate of

Technical Research

& Development

Requirement

Technical

Development

Requirement

Document

Estimate of

Technical Research

& Development

Implementation

Technical

Research

Implementation

Plan Document

Technical

Research

Implementation

Plan Document

Operational

Requirement

Document

System

of

Materiel

Expected

Performance

Document

Long-Term

Plan

Production &

Deployment

Concept Research Development Operation

TRDI

........

........

............................................................

........................................

.......... Approval/Review

Send/Report

Reflection
Part 2 – Japan

2-27

Concept Phase

In the Concept phase, the SDFs have identified

future operational requirements, some of which

will require technological advances. Again,

using the GSDF, they will develop a long-term

plan (10 years) and a system of materiel and

equipment (an architect of equipment by missions). This will feed into an Estimate of Technical Research and Development Requirement by

the GSDF Logistics Department. Based on

service needs, the GSO estimate will be provided

to the Equipment Review Council (see later

explanation of Council) for guidance.

TRDI will develop an “Estimate of Technical

Research and Development Implementation,”

which defines the projects, which key technologies and components to be researched and

the cost and schedule. The TRDI plan prepared

yearly in January will provide an estimate for

projects over the next five years. It is during this

phase that TRDI will perform technology and

feasibility studies, estimates of the technology

availability, and basic research into solving

technical challenges. The basic question being

asked is—Is there technology available to solve

this military problem?

The SDF will participate with TRDI as they

jointly work these issues. TRDI will be in contact

with industry to gather estimates of cost and

ability to produce. If possible, TRDI will try to

bring competitive forces into play by asking at

least two companies to submit concept proposals

and to participate in the early stages of research.

One difference in Japan and the United States

in this area is the relationship with the national

universities and laboratories. In the U.S., much

research is performed at these national institutions, while in Japan the pacifist attitudes of

these institutions have prevented the SDF from

establishing relationships. Thus, they must rely

upon the major contractors for research during

this phase.

Research Phase

Once the concept phase tasks are completed, the

results are fed back to the defense forces. In the

case of the GSDF, the Plans and Operations Department will prepare an ORD. If newly emerging technology or high technical risks areas

have been identified, the GSO staff offices (Logistics Department) will prepare a “Technical Research Requirement Document.” This document

identifies risk reduction projects necessary to be

completed prior to entering the Development

Phase.

The document is sent to the Equipment Review

Council and to TRDI for information, pending

approval by the Council. Once funds have been

authorized, TRDI’s approach to researching and

testing technology, contained in the “Technical

Research Implementation Plan Document,” is

sent through the Internal Bureau to the Council

for approval. After council approval, TRDI will

perform subsystem research and testing of engineering model prototypes on key technologies.

The results will be provided to the appropriate

service headquarters.

In the case of the GSO, the Plans and Operations

Department will evaluate the test results and then

prepare the “Expected Performance Document”

and forward to the Logistics Department. The

Logistics Department, in turn, will prepare a

“Technical Development Requirements Document” for Council approval, and to start the

Development Phase. TRDI will be tasked to

develop the equipment. In cases where the technology is well in hand this phase may be omitted.

The JDA is also considering making use of more

technology demonstrations to reduce cycle time

and cost. The advantage of technology demos

is early verification of the applicability of advanced technology to a military use and, if

successful, the need for a shorter Development

Phase prior to entering the Production.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-28

Development Phase

It is during this phase that the contractor designs

the system, builds actual prototypes, and then

tests the item to ensure it performs to the contract

specification. TRDI will manage the Development effort through one of it System Development Departments. That Department will have

prepared a “Technical Development Implementation Plan Document” on its plans to conduct

development for Council approval. It is also

during this phase that the SDF will perform

operational test and evaluation on the equipment

to ensure it performs, as it should in combat

environment. If the equipment is successful it is

ready for the next phase—the Production Phase.

The results of the engineering tests will be

provided to the Internal Bureau, and in turn to

the Council for approval. The next step is for

the Council to order the respective SDF to

perform operational testing.

Once money has been budgeted and a program

is committed to, the project moves ahead from

one phase to the next since “...the acquisition

environment in Japan (is one) in which no

failures are ever allowed for even research and

development programs.”16 Thus, concurrency

becomes a real possibility in the JDA acquisition

process. Once the government has committed

to the MTDP, the plan is carried out based on

schedule imperatives, even if testing issues and

problems occur. The F-2 is an example. Production began in 1996 with delivery of the first

unit in the summer of 2000. TRDI was still performing engineering and initial operational testing with the equipment through 2000. Lessons

learned, design fixes and modifications will have

to be budgeted and incorporated into the weapon

system at a later date.

Operation Phase

The Operation Phase is led off by the operational

tests conducted by the SDF on the development

equipment. After these are successful, the results

will be sent to the Internal Bureau and, in turn,

the council will approve awarding the contracts

for production of the equipment and subsequent

deployment of the equipment. Management

responsibility for production now moves to the

respective SDF headquarters. As the equipment

is delivered the SDF will introduce the equipment into the operational forces. Along with the

equipment will come the logistical support

necessary to operate the equipment such as test

equipment, technical, spare parts, and other

equipment as necessary.

In summary, the development of a weapon

system is a methodical, event-driven process,

which can well take over 10-15 years.

Acquisition Reform

The increasing costs of weapon systems and the

tight budget situation in Japan, as a result of the

economic crises, created a need for acquisition

reform efforts. According to the Japan Defense

Research Center Annual Report, September

1999 “...the unit costs of Japanese vehicles are

three to ten times as expensive as those of the

U.S. vehicles...similar price gaps exist between

Japan and England, France, Germany and other

European nations.”17 The Acquisition Reform

Committee, under the leadership of the Director

General of the Bureau of Equipment, issued a

reform plan in 1998, which included a wide

range of recommendations for revising the acquisition system, focusing primarily on reducing

the acquisition and operations costs of equipment. Specific changes were targeted, such as

life-cycle costs reduction, commercial specifications use, and creation of a computerized network to share data. The use of the International

Organization for Standardization (ISO)-9000

standards for improved quality was also stressed.

Reform was given further impetus with a series

of procurement scandals starting in 1997.
Part 2 – Japan

2-29

Scandals included collusion between soon-toretire government personnel in awarding sweetheart contracts; collusion on pricing of contracts

by industry, withholding or destruction of documents, and inappropriate cost charging on contracts by companies. These scandals resulted in

the arrest of the Director and Deputy Director

of the Central Procurement Office, the Parliamentary Vice-Minister and the Chairman and

former Managing Director of Fuji Heavy

Industries.

Responding to the loss of public support, the

Director General of the JDA issued in April 1999

a report—“Concrete Measures for Procurement

Reform”—diagramming changes to the system.

These papers address issues in both the acquisition process and the organization of the CPO.

The general thrust of the reform efforts is to

make the system more transparent and to address

re-employment of SDF personnel. The way

transparency will be achieved is to take advantage of market forces, by increasing competition

and making the method of selecting contractors

more opaque. Specific emphasis will be placed

on the use of commercial products and specifications to take advantage of the commercial

market competition. Sole source selection of

contractors will receive significantly more oversight, at every step of the process by the Contractor Selection Committee. When a sole source

contract is awarded there will be improvements

in costing contracts by obtaining additional cost

data from contractors and finally improved oversight of contractors during performance. Also

positive cost incentives will be provided for contractors who can reduce the cost of weapon

systems.

Organizational changes are also planned.

Moving the cost evaluation departments from

the CPO to the Internal Bureau will facilitate

the independence of this function. A new, Central Contract Office (CCO), will be established

under the control and supervision of the Minister

of State for Defense. A third party audit

Figure 2-9. Mid-Term Defense Program (MTDP)

Minister of State for Defense

Internal Bureau

Director of

Central

Procurement

Office

Deputy Director

Cost

Evaluation

Department

Contract

Department

Regional

Organizations

Central Procurement Office

Minister of State for Defense

Third Party Auditing

Director of

Central

Procurement

Office

Deputy Director

Cost

Evaluation

Department

Contract

Department

Regional

Organizations

Internal Bureau

Administration

Bureau

(Present) (After Reform)
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-30

organization will be established to provide an

independent review of CCO. Figure 2-9 shows

the revisions to the Procurement Institutions.

Additional training is planned emphasizing

professional development of acquisition personnel, with an emphasis on ethical guidance.

Finally, the policy statement—“Concrete Measures for Procurement Reform”—recommended

increased restrictions on re-employment of SDF

personnel by industry. While previous policy and

law did provide restriction on the re-employment

of SDF personnel, the government sees the need

for additional restrictions to protect the public

interest.

They have proposed three specific changes to

restore public trust. Develop standards for the

type of work covered—versus the case-by-case

approach currently used. Provide reports to the

Diet on approvals or exceptions by the Minister

of State. And implement an across-the-board

restriction on taking a job with a company an

individual has worked with over the previous

five years. As mentioned earlier in this part the

practice of “amakura” has been ingrained within

the system. These changes go against many of

the traditions and practices that have a deep hold

on the participants in the system. The road for

change will be difficult before changes can really

be implemented.
Part 2 – Japan

2-31

Chapter 7

MANAGEMENT OF

DEFENSE PROGRAMS

involved in managing the production program.

At TRDI, management of a program will be

executed in one of the four Systems Development Departments. Most of the Program Managers at TRDI come from the SDFs. In the

Ground and Air SDF Systems Department 90

percent of the Program Managers are military.

In the Maritime and Missile Systems Departments the percentage of military Program Managers are 50 and 30 percent respectively. The

Program Manager has responsibility for monitoring the health of the program to include project cost, schedule and technical performance.

Generally, the Program Manager positions are

graded out at the 04/05 military level or civilian

equivalent. His support staff is provided on a

matrix basis from other functional departments

such as engineering or logistics on an as-needed

basis.

In cases of a major program, a separate office

may be formed. In the case of the XF-2 fighter

program, a major development program for the

ASDF managed by TRDI, the XF-2 Development Office was established under the Air Systems Development Department. This program

is led by a senior colonel (Japanese equivalent

to a one star) Program Manager, with a small

team of five to seven personnel supporting him.

Once the ERC makes a decision for a program

to go into production, Program Management

responsibility moves from the TRDI to the SDFs.

In the case of the XF-2 it moves to an Air Staff

office—the Logistics Planning Department.

Generally, the Program Manager assigned to

Major Weapon Systems Approval

Major weapon system procurements, as well as

politically sensitive procurements, are approved

at senior levels of government. If it is a major

R&D project, such as an aircraft or ship, then

approval is obtained from the MOF, the Security

Council, the Cabinet and then the Diet. Decisions on major acquisitions are reviewed as part

of the annual defense budget process, which will

be submitted to the Security Council for approval. The Minister of State for Defense (Director

General of the Defense Agency) approves lower

cost weapon system acquisitions and delegates

approval authority to the SDFs for some lower

cost procurements.

Equipment Review Council (ERC)

The senior forum for approving acquisition plans

and strategies is the Equipment Review Council

chaired by the AdministrativeVice-Minister.The

ERC membership includes the directors of the

Finance, Equipment, and Policy Bureaus, the

Councillor for Technology, TRDI, CPO, the

Joint Staff and the Chiefs of Staff of the SDFs.

There is also a working level council of personnel from the Inner Bureau, which generally will

work smaller projects, under 10 billion Yen (U.S.

$100 million).

Program Management

Depending upon the nature of the project, the

acquisition Program Manager will come from either the 

TRDI for R&D or the Headquarters of the SDF
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-32

manage the program will be again be at the major/

lieutenant colonel (04/05) level, supported by a

small staff of six personnel.

Acquisition Education

Training in acquisition is primarily conducted

on-the-job (OJT) with a superior teaching a

subordinate the techniques and methods to do

the work. Military members who will take acquisition jobs will receive a three months training

course in logistics management during their

career. Members who attend the military Staff

College will also receive lectures on acquisition.

The National Institute of Defense Studies, equivalent of the National Defense University in the

United States does offer acquisition and procurement subjects for senior level O-5/6 and

civilian equivalent students. Those in the civil

service follow a rotation process of moving

every two years to different positions. For example an individual will work for the Bureau of

Equipment, then may work at the TRDI and then

at one of the SDFs. This provides a broad based

education experience, but often does not provide

an in-depth knowledge of specific areas.

As a result of the recent procurement scandals,

concerns about the adequacy of training, have

resulted in plans to restructure the training and

education of acquisition personnel. While OJT

will still be the prime means of training, increased ethics training, using case studies methodology will be provided to acquisition personnel.

Additionally, other education efforts will be pursued, such as internships with private industry,

proficiency training and encouragement to apply

for Certification as a Professional Accountant

(CPA).
Part 2 – Japan

2-33

Chapter 8

PROCUREMENT PROCESS

authorized to make local procurements. The

CPO’s major activities include cost evaluation,

awarding contracts, and administration of contracts. They also prepare and evaluate specifications, perform inspection, disburse funds,

review status of businesses, and reconcile

contractor grievances.

How does the process work? The Ground, Air

and Maritime Self Defense Forces and the TRDI

The Central Procurement Office (CPO) (see

Figure 2-10) is the central contracting organization for the Japanese Defense Agency. Currently, CPO employs 1,021 military and civilian

personnel.18 In 1998 they spent 1.24 trillion Yen

(U.S. $11.3 billion) and managed 9,616 contracts. Their acquisitions cover major equipment

buys for tanks, ships, spares and commercial

items. While CPO is the central organization for

buying, the SDFs, as indicated earlier, are

Figure 2-10. The Central Procurement Office (CPO)

Director General

Central Procurement Office

Deputy DG

2nd Procurement

Management

Deputy DG

2nd Procurement

Management

Deputy DG

for 2nd

Cost Evaluation

Deputy DG

for 1st

Evaluation

Deputy DG

for 2nd

Contract

Deputy DG

Administration

& 1st Contract

Administrative

Division

Procurement

Mgt. Div.

Contract

Mgt. Div.

3rd Contract

Division

5th Contract

Division

Liaison

Officers

SDFs

Gun, Ammo,

Communication

Equipment

Commercial, Import,

Missile, Prototype

Communication

Equipment

Ship, Machinery,

Vehicle, Gun Ship, Machinery,

Vehicle, Gun

1st Contract

Division

2nd Contract

Division

4th Contract

Division

Import

Division

Finance

Division

Cost Eval.

& Audit

Mgt. Div.

1st Cost

Evaluation

Division

3rd Cost

Evaluation

Divison

2nd Cost

Evaluation

Divison

4th Cost

Evaluation

Divison

5th Cost

Evaluation

Divison

1st

Procurement

Mgt. Div.

3rd

Procurement

Mgt. Div.

2nd

Procurement

Mgt. Div.

4th

Procurement

Mgt. Div.

Missile Office

Auditor

Regional Organization – District Offices

Nagoya, Yokohama, Osaka, Nagasaki, Tokyo

Ammo, Fuel,

Textile, Etc.

Aircraft

FMS

Communication

Equipment

Ammo, Fuel,

Textile, Etc.

Aircraft

Commercial, Import,

Missile, Prototype

Ship

Machinery, Vehicle,

Fuel, Textile, Etc.

Aircraft

Missile
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-34

provide their procurement requirements to the

CPO. Their procurement request will include

quantity and delivery requirements, plus the

weapon system specification.19 The CPO, based

upon procurement requirements generated by

the Internal Bureau, then prepares a Procurement

Plan. A monetary expenditure schedule is agreed

to and approved by the Bureau of Finance.

There are three approaches to soliciting industry20—open bid, limited bid, and sole source.

Open bid is available to any qualified bidder,

while a limited bid restricts the number of

sources that may submit a proposal. Sole source

is the customary method for major acquisitions.

The Contract Selection Committee, made up of

senior personnel from CPO, verifies a company’s qualifications, and provides a recommendation on type of contract, whether or not it

should be sole source, commercially advertised,

negotiated or a source selection for the approval

by the Direct General CPO.

Until recently competition played a very small

role in the selection of a contractor. In FY 1997,

85.5 percent of the contract value was sole

source, while 10.8 percent was limited competition and the balance was open competition.

In his book Rich Nation, Strong Army Samuels

captures the Japanese perspective on competition when he states, “This need to manage

competition and nurture technological development simultaneously is ubiquitous across

decades of Japanese industrial Policy. It is also

widely embraced by firms...in a free economy,

each firm undertakes its own research and

development, giving birth to duplicated investments and unstarted projects. In order to

avoid the evils associated with R&D by individual firms...government action is of utmost

importance.”21

Bids are then solicited. If it is to be competitive,

the selection will be based upon the cost of the

item and other factors, such as technical or

manufacturing skill, or life cycle costs of the

equipment. If it is to be sole source, then cost

studies will be performed to ensure an understanding of an acceptable price to pay for the

item. They will use two methods to determine

value—market price and cost accounting. The

market price method refers to determining a fair

price based upon what a buyer might be expected

to pay for equipment in an open market. The

cost accounting method refers to analyzing

contractors actual cost estimates, the technical

and manufacturing difficulty of the project, the

quantity, and schedules. Since most large procurements are sole source, the cost accounting

method is most commonly used.

Once the contractor has been selected and a fair

price determined, then a contract is executed.

While they use two types of contracts—fixed

price and cost22—the cost contract is most often

used for major acquisitions. The Director

General CPO is the “Contracting Officer” and

signs for all major contracts. Lower value contracts with a price of 200 million yen or less, or

an estimated unit cost of 1,000 million yen or

less, is delegated to one of three Deputy Director

Generals. To ensure fairness in its contracts, the

Deputy Director General for Administration

reviews contracts in the role of “authentication

officer.”

After the contract is let, the CPO administers

the contract through its various district offices

set up, throughout the country, to inspect contractor performance and to accept delivery of

contracted items. The CPO Disbursing Officer

makes payment according to the terms and

conditions of the contract.

Several laws, the Finance and Accounting Act

and the Government Property Management Act,

govern the submission of purchase requests and

the management of contracts for the CPO. These

acts also give the government equal standing

with industry in the making of contracts. The
Part 2 – Japan

2-35

Japanese Civil Code, based upon the European

civil code, with both English and American

influence, provides the underlying law that

governs the contractual relationship between the

government and their defense contractors.

The Japanese government is also a signatory to

the World Trade Organization (WTO) Agreement on Government Procurements. To comply

with the WTO agreement, the CPO has initiated

changes to make its system a more “open and

transparent tender system.” It is designed to

provide information on future acquisitions and

insight into their decision process. The CPO, to

improve relations with its industry, now is open

to complaints from them.

The CPO must also be concerned about socioeconomic implications of their actions. The

Japanese Diet passed a law—the Law Concerning the Ensuring of Small and Medium Entrepreneurs (SMEs) Receiving Orders from Government and Other Public Agencies (enacted in

1966). CPO’s approach, because of the nature

of their acquisitions, is to provide the SMEs

information on sole source contracts for possible

subcontracting opportunities.

Pre-qualification is required for contractors who

are interested in bidding on JDA acquisitions.

An interested contractor must submit an

application to the CPO to participate on a bid.

They will be evaluated and, if considered

qualified, they will be selected to bid. The

contractor’s plant must also be qualified. The

plant will be appraised based upon the

contractor’s approach to achieving reliability, his

technical ability, and his production capability.

A qualification test will be conducted to prove

that his products are able to meet contract

requirements.

Recent headlines in Japanese papers on procurement scandals—hiding of documents, sweetheart deals, and overcharging by contractors—

have contributed to major initiatives within the

JDA to restructure the procurement organization

and process. The scandals have resulted in

arrests and resignation of top government officials, such as the former Director General of the

JDA, Fukushiro Nukaga. He resigned to take

responsibility for the agency’s role in the scandal. Similarly, the Chairman of NEC, Tadahiro

Sekimoto also stepped down.

As a result of these scandals, JDA is moving to

implement reforms in the procurement system.

It will introduce more open bidding, provide

vendors with more cost cutting incentives and

restructure its contracting bureaucracy—the

CPO. A White Paper prepared by the Defense

Procurement System Research and Review

Council, made up of outside experts and JDA

personnel, recommended that CPO separate its

cost estimation and evaluation functions. This

is scheduled to take place in 2001. Those responsible for evaluation of bids will be integrated

into the Internal Bureau, while the new Central

Contract Office will be responsible for awarding

contacts. Further reforms include eliminating

obsolete military specifications, moving to commercial specifications, as appropriate, and using

cost incentives to motivate contractors for cost

saving ideas. They are also introducing a review

of the contractor accounting systems. Contractors must keep documents for one year after a

contract expires and allow the JDA the right to

audit their records. They can also be sanctioned

for improper business practices and be penalized

for overpayment up to the amount of the overpayment.

The increased use of competition, or market

forces, is a major theme of the reform effort. A

recent example of the change, is the open bidding for a primary trainer, which was originally

planned as a sole source buy for Fuji’s T-7

trainer. It was decided by the JDA to open for

competitive bidding. Competition opportunities

should be increased in the future. The JDA now
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-36

posts both a five–year program list and a list of

programs and products it will acquire in the

following fiscal year to better inform industry

of its intentions. Additionally, the Minister used

to have authority to designate contractors without competition, if the Minister felt it was necessary to maintain and strengthen the industrial

and technology base. Now there will only be

three exceptions for sole or restricted sources.

They are:

1. Contractors are required to get manufacturing licenses under Aircraft Manufacturing

Law or the Armaments Manufacturing Law.

2. Contractors are required to obtain a license

for production from overseas companies.

3. Development and production of aircraft

under the Aircraft Law.

The revised philosophy and relationship with

industry was perhaps highlighted in a recent

article in the Tokyo Daily Yomiuri. The JDA sent

a bill to Mitsubishi Heavy Industries, 11th largest

defense firm in the world, for penalties—1.1

billion yen ($9 million)—for defective machining of rotor hubs. The defective rotor hubs are

alleged to have caused the loss of a Sikorsky

SH-60J. While not the first time the JDA has

taken this type of action, it is indicative of a

shifting relationship.
Part 2 – Japan

2-37

Chapter 9

TEST AND EVALUATION

prototypes have met the contractual requirements. After Trade’s verification, the SDFs have

responsibility to ensure the equipment meets

operational needs and perform the Initial Operational T&E of new systems. Using the F-2 fighter as an example, Figure 2-11 shows the type of

tests, and the responsibility for performing tests

between TRDI and the Services.

Testing can be broken down into two broad

categories—contractor testing and government

testing. During the Prototype Phase, the contractor is responsible for testing. These tests are

Testing and evaluation (T&E) responsibility for

new equipment or weapon systems rests with

several organizations within the JDA—TRDI

and the SDFs. Testing of new equipment, components, and weapon systems is performed by a

variety of organizations and occurs in various

acquisition phases for a variety of purposes.

During the Research Phase TRDI will perform

subsystem testing primarily to reduce risks prior

to going into the Development Phase. In the

Development Phase, TRDI then has performance requirements responsibility for Engineering T&E, to determine whether or not the

Figure 2-11. Contractor and Government Test (Aircraft)

Prototype Phase – TRDI DT & IOT

SDFs

Production Phase

SDFs

Company Test Government Test

Engineering Test

Wind Tunnel Test

Structure Strength Test (Component)

System Functional Test

Verification

Engineering Test

Functional Test

Environment Test

Aircraft Verification Test

Functional Ground Test

(Full Scale Level)

Company Flight Test

Acceptance Test

Flight Test

Follow On Test
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-38

primarily designed to indicate the equipment

meets the functional and environment requirements of the specification. Examples of testing

include wind tunnel, reliability, aircraft verification, functional ground and company flight

tests. These tests are designed to indicate the

system will perform as expected. Testing responsibility then is turned over to the government.

The Chief of Staff of the ASDF will approve a

Test and Evaluation Master Plan for the new

equipment. The responsible test organization, as

shown in Figure 2-12, the GIFU flight test center

would then prepare a more detailed plan for

testing the F-2 fighter. The local commander

approves the plan. Once Design Testing & Initial

Operational Testing (DT&IOT) is completed

they will perform a variety of test such as static

and durability tests, strength tests and finally

flight tests. During the Production Phase, acceptance test of the equipment will be completed.

Follow-on testing (FOT&E) will be continued

by the Air Combat Command.

Testing often raises the problem of the need for

design changes. Because of the rigid budgeting

process any changes that are necessary as a result

of testing will be budgeted for and acquired in

later years.

Each of the SDFs has its own test and evaluation

facilities. The ASDF has the Air Development

and Test Command located in Sayama City,

Saitama Prefecture, that conducts demonstration

tests on a broad range of equipment to be used

by the ASDF. Actual testing is accomplished at

the Air Development Test Wing located in

Kakamihahara City, Gifu Prefecture, where

demonstration on fighters such as the F-15 will

be carried out. They also have an Electronic

Development and Test Group in Sayama City,

and the Aero-medical Laboratory for human

factors testing in Tachikawa City, Tokyo.

Responsibility for T&E within the GSDF rests

with the Test and Evaluation Command, located

in Oyama Town, Shizuoka Prefecture, which

conducts demonstration tests on weapon systems

and equipment. There are other organizations

involved in T&E. For certain specialized equipment, such as aircraft and facilities the branch

Figure 2-12. XF-2 DT&E Organization

Air Defense

Training Wing

Flight Test

Air Defense

Training

Command

Gifu Test

Center

Flight Test

3rd RC

Strength

Test

(Flight Test)

2nd RC

Subsystem

Test

(FCS, EW)

XF-2 DO Planning

& Management

Department of Air Systems

Development

HQ

TRDI JASDF
Part 2 – Japan

2-39

schools, such as aviation and engineering

schools will perform testing and evaluate the

equipment. The supply depots will assess

equipment for their supply and maintenance

characteristics.

The MSDF has the Fleet Training and Development Command located in Yokusuka City, Kanagawa Prefecture, which conducts demonstration

tests for vessels. The Air Development Squadron

51 located in Ayase City, Kanagawa Prefecture,

manages and conducts tests on aircraft on Maritime aircraft, such as the P-3. In cases where

testing cannot be accomplished in Japan, testing

will sometime be done overseas, say in Australia,

and the United States —Eglin Air Force Base,

Florida, and Point Mugu, California.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-40

 Chapter 10

INTERNATIONAL COOPERATION

AND ARMAMENT SALES

“Budget constraints are not new, but trends toward more sophisticated defense systems have made equipping our forces more

costly.... Cooperative R&D programs can contribute by providing

more defense capability for the same collective investment.” 23

the United States It is a five-year program, centered on the analysis and design of an advanced

missile sensor, advanced kinetic warhead,

second stage propulsion and a lightweight nose

cone.24

The forum for guiding discussion and coordination of cooperative projects between the United

States and Japan is the U.S.-Japanese Systems

and Technology Forum. The first forum meeting

was in Washington D.C. in 1980, and has

continued for twenty years, alternating meetings

between Tokyo and Washington. The Forum

A key feature of the Japanese acquisition process

has been involvement in international cooperative programs, primarily with the United States.

Of all U.S. allies, Japan spends most on defense

and operates the most equipment common with

U.S. forces. They see the benefits as promoting

U.S. -Japanese cooperation, sharing risk in R&D

and avoiding duplication of financial investment,

thus making effective use of the resources of

each country. Figure 2-13 is a list of cooperative

projects conducted with the U.S. Recently, Japan

signed a cooperative agreement on R&D for a

theater ballistic missile defense program with

Figure 2-13. Cooperative Research Projects

Ducted Rocket Engine (DRE) MOU 1992

Advanced Steel Technology MOU 1995

Fighting Vehicle Propulsion MOU 1995

 Technology Using Ceramic Materials

Eyesafe Laser Radar MOU 1996

Advanced Hybrid Propulsion Technolgoy MOU 1998

ACES II Cooperative Modification MOU 1998

Shallow Water Acoustic Technology MOU 1999

Ballistic Missile Defense MOU 1999

Low Vulnerability Ammunition MOU 2000
Part 2 – Japan

2-41

provides an opportunity to discuss and facilitate

mutually beneficial areas of cooperation. The

co-chairs of the forum are the Under Secretary

of Defense, Acquisition, Technology and Logistics (USD (AT&L) for the DoD and by the

Director General for the Bureau of Equipment

for the JDA. Topics discussed include defense

research, development, production, procurement, logistics support and to coordinate collaborative programs. The Systems and Technology

forum includes representatives of the DOD

Military Departments and Japan’s SDFs. Working level committees focus on collaboration in

selected mission and platform areas, including

air defense, communications, and aircraft

systems.

Armament Sales

The “Three Principles of Arms Exports” provide

the policy guidance for Japan. In April 1967,

Prime Minister Sato in a statement before the

Diet initiated the policy. Arms export shall not

be permitted for (1) communist block countries,

(2) countries to which the UN prohibits arms

exports, (3) and countries, which are involved

or likely to be involved in international conflicts.

Prime Minister Miki further restrained arms

shipment by including military technologies.

The legal basis for the three principles include

the (1) Foreign Exchange and Foreign Trade

Control Law, (2) Foreign Exchange Control

Order and (3) the Export Trade Control Order.

The Export Trade Control Order makes it mandatory that anyone planning to export goods or

services, designated as obstructive to the maintenance of international peace and security get

prior consent from MITI. Among the designated

goods and services are arms and arms technologies. The term arms is defined as goods listed

in the Export Trade Control Order and used by

military forces and directly employed in combat. Military Technology concerns the design,

production and use of arms. Examples of listed

arms include firearms, ammunition, explosives,

military vehicle, naval vessels, aircraft, and others.

Notwithstanding the Three Principles—the

Japanese government generally has not given

consent to export arms and technology. Over the

years some exceptions were permitted. In 1983,

the U.S. and Japan exchanged notes agreeing

for the transfer of military technology between

the two countries. However, military technology

can be transferred from Japan to the U.S. on a

case-by-case basis and must be requested by the

U.S.

As the role of Peace Keeping Activities under

UN auspices increased it was recognized that

the arms export policy needed to be reevaluated.

In 1996, arms export policy changes necessary

for acquisition activities and cross-servicing

agreements with U.S. was approved. Further

easing of export restrictions occurred in 1997

and 1998—for humanitarian mine clearance and

arms export necessary to evacuate Japanese

citizens overseas from hostile situations.

One final note on export policy. When military

equipment is sold or transferred to the U.S. Japan

requires the U.S. obtain third party approval of

a sale from the Japanese government.

Based upon the Foreign Exchange and Foreign

Trade Control Law of 1948 and Export Trade

Control Law of 1949, the MITI controls the

export of arms.

Japanese corporations might be expected to

market mainly dual-use electronics sub-components, vehicles, and transport and communications equipment offshore or through front

companies and to provide components for missiles and aircraft produced overseas, especially

in the United States. While Japan prohibits the

export of war materials its electronics industry—

computer chips and super conductor marketproducts are part of many Western designed and
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-42

built programs. A recent examples of Japanese

concern with armament sales was the export

controls place on Sony’s PlayStation 2 game

console which because of the high quality of

computer graphics and the systems memory card

could be used for missile-guidance.25
Part 2 – Japan

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Chapter 11

THE DEFENSE

INDUSTRIAL BASE

defense business.27 While defense business is

important, “no sector of the Japanese economy,

besides ammunition and aircraft manufacturing,

depends on the military for more than 5 percent

of its total sales on the JDA.” 28

The history of the reconstruction of the defense

industry is one of government collaboration and

oversight, industrial commitment, and investment—all fueled by the expansion of their commercial industry and the growth of the economy.

Dismantled by occupation authorities after

World War II, armaments production resumed

during the Korean War when the nation’s manufacturers began repairing and maintaining

Japan possesses “...the region’s most powerful

indigenous defense industry in terms of capabilities and sophistication.”26 With over 1300

companies comprising the defense industrial and

technology base, they manufacture a wide range

of products which includes test facilities, propulsion systems, ammunition, propellants, fasteners, couplings, trainers, helicopters, aeronautic

equipment, surface-to-surface missiles, avionics,

telecommunication, satellite equipment and garments. The top four companies, with names recognized worldwide—as indicated in Figure 2-

14—are Mitsubishi Heavy Industries, Kawasaki

Heavy Industries, Mitsubishi Electric and NEC.

They account for nearly 60 percent of the yearly

Figure 2-14. Top 10 Defense Contractors (1998)

Total Sales Contracts

Revenues Awarded

(Billion Y)

1. Mitsubishi Heavy Industries 2,653 272

2. Kawasaki Heavy Industries 1,100 147

3. Mitsubishi Electric 2,812 129

4. NEC 4,076 75

5. Ishikawajima Harima Heavy Industries 874 66

6. Toshiba 3,700 49

7. Marine United 21 38

8. Komatsu 533 34

9. Nissan Motors 3,546 25

10. Japan Electronic Computer 299 25
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-44

equipment for American armed forces operating

in Asia. The creation of the Defense Agency in

1954 provided an internal customer for industry,

which expanded by producing U.S.-designed,

Japanese manufactured equipment for the selfdefense forces.

To understand the defense industry in Japan it

is important to recognize the strong tradition of

governmental involvement in the overall

economy. Perhaps this relationship was best captured by the 1980s term, “Japan. Inc.” to indicate

the close relationship between business and

government. While Japan’s economy has flourished as a result of the private ownership of

industry, the government has played a direct role

in that success. This tradition of governmental

involvement is based upon the Confucianism

philosophy of hierarchy and leadership or authority by the government. It would be expected

of the government to provide guidance to

industry. This ties closely with the Confucian

notion that government and business should

work for the well being of the nation. While

profit is important, the industrial and national

consensus is that it is the duty of all Japanese is

to sacrifice to create an economically potent

nation. This philosophy and approach has led to

a spirit of collaboration, which differs from the

arms length and sometimes more adversarial

nature of relations between the United States

government and its domestic industry.

As indicated earlier, the Japanese industry was

dismantled after the war. The Korean War and

the Cold War changed that. The Japanese government, with U.S. encouragement, spent considerable effort in redeveloping its overall

economy. Initially they targeted industries such

as iron and steel industry, shipbuilding, and

chemicals. The pursuit of economic redevelopment started on the military side and then

switched to commercial side. In the 1960s and

1970s automobiles and nuclear power were seen

as industries to strengthen the economy. Then,

electronic, computers and semiconductors provided the engine that made Japan one of the most

powerful economies in the world. Throughout

this period of commercial economic growth,

both industry and government increased their

efforts in defense research and development.

It has been Japanese policy not only to maintain

a robust defense industrial base, but also to

embed it within the commercial industry. To

enhance their domestic research, development

and production base equipment is manufactured

under licensed agreements with companies,

mostly in the U.S, to obtain the technical

knowledge and manufacturing techniques. In

Japanese, “kokusanka,” or autonomy in defense

production, has led to licensed production as the

primary means of carrying out its policy. Three

unwritten principles of kokusanka—in order of

priority—are:

1. Domestic supply;

2. If domestic supply is not possible, licenses

using domestic manufacture and equipment;

and

3. Equipment with application beyond the project for which purchased. 29

They have been very successful with this policy.

“In the 1970s and 1980s, the United States

transferred more weapons to Japan than to any

other ally except Germany. But these transfers

were not sales of finished products. On the

contrary, Japanese defense contractors licensed

and coproduced twenty-nine major U.S. weapons systems, more than any nation in the world.

In 1990, 89 percent of military aircraft procured

by the Japan Defense Agency (JDA) was

manufactured in Japan.” 30

Today they produce a full range of modern

military equipment from tanks to spare parts.

Very rarely, as shown in Figure 2-15, will they
Part 2 – Japan

2-45

buy equipment overseas. In cases where it is cost

prohibitive or the equipment is extremely complicated, such as the E-2C airborne early warning

aircraft, they will purchase foreign equipment.

As indicted earlier, two ministries—MOF and

MITI—play a strong role in targeting areas for

new industries, helping during economic tough

times and creating an environment for developing, producing and selling overseas. The typical approach used by the Japanese government

includes both tangible and non-tangible methods

—advice, persuasion, loans, tax incentives and

of course, government defense contracts. MITI

and JDA gain leverage in dealing with industry

through two laws that govern the operation of

the defense industry. These laws—the Armament

Manufacturing Act (1952) and the Aircraft Manufacturing Act (1953)—require the licensing of

companies in these markets.

Under the Armament Manufacturing Act, anyone wanting to manufacture or repair armaments

must obtain a license from MITI. Covered by

this are items such as guns, rifles, bullets, bombs,

explosives and the major components of these

items. The Aircraft Manufacturing Law also requires a MITI license and covers the manufacture or repair of aircraft and its major components. This includes fixed and rotary wing aircraft, major components like engines, propellants,

wings, and avionics. The methods of manufacture or repair must also be licensed. The stated

purpose of these laws is to prevent excess

capacity by regulating entry into business.

It is important to mention the role of the

Keidanren, the powerful Federation of Economic

Organizations. Keidanren is an association of

over one thousand of the leading companies in

Japan. Keidanren, in particular its Defense Production Committee (DPC), has been an influential voice in the debates on security and industrial

issues. The DPC’s leadership includes some of

the most influential people in Japan such as

Masuda Nobuyuki, Chairman of Mitsubishi

Heavy Industries, Ltd. Their efforts have helped

preserve an indigenous military R&D and production capability and influenced arms export

policy and competition among the industry.

In summary, the Japanese defense industrial base

has grown and matured as a part of its commercial industry. It provides most of the equipment

needed for the Japanese SDFs. Unlike the U.S.,

which maintains a small arsenal system, the JDA

relies upon its industry for production, R&D,

maintenance, supply and up-grades. While some

changes are in the wind—increased competition,

for example—the government will continue to

play its role in “managing” its industrial base.

Figure 2-15. Domestic versus Foreign Procurement

Year Domestic Foreign Imports Total Domestic %

1990 18,103 2,211 20,313 89.1

1991 17,010 1,893 18,903 90.0

1992 17,676 1,486 19,162 92.2

1993 16,408 2,930 19,338 84.8

1994 17,349 2,251 19,600 88.5

1995 18,131 1,512 19,642 92.3
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

2-46

FURTHER READINGS

CULTURAL

De Mente, Boye Lafayette, The Japanese Have

a Word for It, The Complete Guide to

Japanese Thought and Culture, Passport

Books, 1997.

HISTORICAL

Sansom, George, A History of Japan to 1334, A

History of Japan, 1334-1615, and A History

of Japan, 1614-1867, Three Volumes,

Stanford University Press, 1958.

Samuels, Richard J., Rich Nation, Strong Army:

National Security and the Technological

Transformation of Japan, Cornell University

Press, 1994.

Kim, Paul S., Japan’s Civil Service System: Its

Structure, Personnel and Politics, Greenwood Press, 1988.

CURRENT

Yomiuri Shimbun on line:

http://www.yomiuri.co.jp/index-e.htm

Japan Times on line:

http://www.japantimes.co.jp/
Part 2 – Japan

2-47

1. Prime Minister Yoshiro Mori’s Cabinet,

April 5, 2000.

2. The ruling coalition of the Liberal Democratic Party, Jiyuto and New Komeito

parties have sought to reduce the number

from 200 to 180.

3. In some cases the initiator of a bill may want

to dispense with the committee’s examination and if the speaker agrees then the bill

will be placed before the House for a vote.

4. Ikegami-Anderson, p. 132.

5. Ikegami-Anderson, p. 148.

6. This does not include pensions, some salaries, technology developments and support

of the Maritime Safety Agency. The budget

also includes approximately U.S. $3.3 B for

burden sharing cost of U. S. forces in Japan

(about 105 of the defense budget. The

source for budget figures is Defense of

Japan 1999 and the Aviation Week and

Space Technology, February 21, 2000,

p. 108, for the 2000 budget.

7. Defense Intelligence Organization, Defense

Economic Trends in the Asia Pacific – 1999

at http://www.dod.gov.au/

8. TRDI briefing, September 1999.

9. In addition to the ordinary expenditure

given above, Yen 110 billion is set aside as

adjustment funds to be used when deemed

necessary, such as in dealing with an unpredictable situation and contributing to

the creation of a more stable security

environment.

10. The individual self defense forces have

issued instructions, such as JASDF Instruction 20, Management of Research and

Development.

11. From Gansler, Jacques, Affording Defense,

p. 100.

12. Defense of Japan, 1998, p. 134.

13. From the NDPO policy internet See http:/

/www.jda.go.jp/e/policy/f_work/taikou/

5_e.htm)—NDPO

14. GSO refers to the Ground Staff Office,

Council refers to the Equipment Review

Council.

15. The phases described here are those used

by the Ground Self Defense Force. The

Maritime and the Air Self Defense Forces

both have slightly different phases. The

Maritime Force describes its phases as

Concept, Definition, Production and

Deployment and Improvement (for future

modifications). The Air Defense Force

describes their phases as Concept, Definition, Deployment and Operation. The

general process for approval and the activities that take place are essentially similar

for all three SDFs.

16. Kobayashi, Kasumas, “The United States

Government Acquisition,” in DRC Annual

Report, September 1999, p. 60.

17. Yoshida, Akiji, “Four Factors for Considering the Future Japanese Land Forces,”

in DRC Annual Report, September 1999,

p. 216.

ENDNOTES
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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18. 479 work in Tokyo while 542 work in regions. In Tokyo – Civilian, 410; military, 69.

Regions – 542, while 406 of them are military and primarily function as inspectors.

19. CPO prepares industry and commercial

specifications and standards. The SDFs

staff offices prepare specifications for

aircraft, guided missiles and other major

equipment. TRDI prepares specifications

for ships or newly developed items.

20. In the CPO the solicitation method is

referred to as the “type of contract.”

21. Samuels, p. 53.

22. Their fixed price contracts are of two types

—one where the price is fixed at contract

award and one where the price will be fixed

initially, but a formula will be included in

the contract with the supplemental clause

to predetermine the final price.

23. Report of the Technology Steering Group

Concerning the Purposes, Principles and

Organization of the Systems and Technology Forum, signed by Bruce Bade, DoD

Co-Chairman and Hideo Matsui, JDA CoChairman Technology Steering Group,

January 11, 1999.

24. AW&ST, January 11, p. 425.

25. The Japan Times, Sunday, April 16, 2000,

p. 1.

26. Asian Affairs, “The Emerging Asian

Balance of Power,” 1999, p. 46.

27. Japanese domestic procurement in 1996

was Y1.8131 trillion. Defense equipment

was Y151.2 billion.

28. Samuels, p. 183.

29. Samuels, p. 45.

30. Samuels, p. 46.
Part 3 – Republic of Korea

3-1

PART 3

REPUBLIC OF SOUTH KOREA
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-2
Part 3 – Republic of Korea

3-3

Chapter 1

INTRODUCTION

one of the oldest countries in the world, tracing

its mystical beginnings back

to the god-king Tangun,

founder of bronze age

“Old Chosun” in

2333 B.C. According

to legend, Tangun

was the son of a bear.

The bear turned into

a woman and united

with a divine being.

From this union Tangun was born. In the

history of Western

civilization, the rescue of Helen of Troy in Ancient Greece would not occur until a thousand

years later, and it would be two thousand years

before the Roman Empire came to prominence.

“Old Chosun” had its beginning in the northwest

part of Korea on the Taedong River. Over time

it gradually extended its border to include much

of what is now the Chinese province of Liaoning.

Its growth was checked by the rising power of

the Yen states in China and eventually Old

Chosun was destroyed by the Han dynasty about

100 B.C. The Three Kingdoms Period followed

with the states of Koguryo, Paekje and Shilla

ruling the Korean Peninsula from around 100

B.C. until the late seventh century. Finally, the

Kingdom of Shilla, under the rule of King

T’aijong, unified all three kingdoms into one.

Successive dynasties—Koryo (918-1329) and

Chosun (also referred to as the Yi dynasty)

(1392-1910) kept the people unified despite

repeated incursions by the Japanese and

Chinese.

We watched as a group of North Korean visitors

entered the small pale green building—the site

of face-to-face talks between two Cold War enemies at Pan Mun Jom in the Demilitarized Zone

(DMZ), Korea. In typical tourist fashion, we

took pictures of them visiting this threatening

part of the world, and they took pictures of us.

Yet surrounding these visitors are two armies

prepared, within minutes, to resume what had

been a devastating, bloody war.

In this small village of Pan Mun Jom, the United Nations (UN) Command ceased hostilities

on the Korean peninsula with the signing of an

armistice, not a peace treaty, over 40 years ago

at 10 A.M. on July 27, 1953. The U.S. suffered

more than 157,000 casualties while the rest of

the UN forces sustained casualties of 14,505.

The South Koreans lost 225,714 soldiers, with

more than 700,000 wounded and another

43,000 missing. The North suffered over

600,000 killed, wounded or missing. The country had been decimated as armies ravaged up

and down the land, laying waste to the capitals

of Seoul and Pyongyang.

Today, two armies still face each other across 150

miles of zigzagging ground that runs the entire

width of the country. The DMZ is one of the last

remaining parts of the world that harbors the

vestiges of the Cold War—pitting Communist

North Korea against UN forces.

History and Traditions

Korea has had a tough 20th century filled with

war, the Japanese occupation and the threat of

war. Yet, the “Land of the Morning Calm” is

REPUBLIC

OF

KOREA
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-4

In this early period Korea flourished in the arts

and sciences. During the Koryo dynasty, in 1234,

movable-type printing was developed. The

renowned Korean “Tripitaka,” a collection of

Buddhists texts, was completed. In the military

area, the famous Korean Admiral Yi Sun Sin and

his iron clad “Turtle Ships”1 helped defeat the

Japanese invasions of Toyotomo Hideyoshi in

the late 16th century. The only Korean ruler to

earn the honorific title of “great”, Sejong the

Great introduced a new official Korean alphabet,

Hangul.

Korea’s major political and cultural influence

was China. While the Choson (Yi) dynasty was

able to maintain its independence from China

for much of the Dynasty’s reign it was a tributary

of China. This long period of rule by the Yi

dynasty finally ended after a series of wars—

the Sino-Japanese War (1894) and the RussoJapanese War (1905). The Yi dynasty was a helpless onlooker as Korea was first made a protectorate of Japan, then a colony in 1910. For the

next 30 years, Korea suffered under Japanese

rule as the language was changed to Japanese,

and Koreans were forced to change their names

to Japanese names.

Korea was relatively untouched by the war in

the Pacific. However, fate was not to be on this

nation’s side after the war. In 1945, as the Pacific

War entered its fifth year, the Allies—in particular the United States—envisioned a lengthy

continuation of the war, ending with a bloody

invasion of Japan. Help was needed. At the Yalta

Conference in February of 1945, the U.S. pushed

for an agreement that was to chart the course

for Korea into the 21st Century. President Franklin Roosevelt negotiated an agreement with

Stalin for the Soviet Union to enter the war

against Japan.

It was not until the eleventh hour—in August of

1945—that the Soviets finally entered the Pacific

War by invading northeast Korea. Recognizing

that the end of the war was imminent and fearing

Soviet expansion into all of Korea, the American

government proposed a military demarcation

line at the 38th parallel. Stalin accepted. On

September 22, 1945, Japan signed the surrender

agreement aboard the USS Missouri.

TURTLE SHIP

With the defeat of Japan, the Soviets occupied

the northern half of the Korea peninsula. In the

South, a short-lived Korean People’s Republic

was established September 6, 1945, with Syngman Rhee as President and Yo Un-hyong as Vice

President. On the same day, United States troops

landed at Inchon and quickly proceeded to Seoul

to accept the Japanese surrender. Within a

month, senior U.S. military officer Lieutenant

General John Hodge established an interim

government called the United States Army Military Government in Korea (USAMGIK). The

USAMGIK was envisioned as a short-term

response until elections could be held and the

country united. By 1948 it was obvious to both

the U.S. and the UN that free elections and the

uniting of the country would not happen.

In 1948, the south held UN-sanctioned elections

with Syngman Rhee, an opponent of communist

rule, being elected President of the Republic

of Korea (ROK). Under the Soviet occupation,

communist leader Kim Il-Sung consolidated

his power as the leader of the north by ruthlessly

eliminating non-communist elements.

On June 25, 1950, in a surprise blitzkrieg attack,

the North invaded the South, quickly occupying
Part 3 – Republic of Korea

3-5

most of the peninsula. Thanks to the Soviet

boycott of the UN, the U.S. was able to induce

a UN commitment to repel the North’s invasion.

In one of the great military feats of history, the

U.S. and UN forces landed at Inchon west of

Seoul in September 1950, cutting off the communist military units and wresting back control

of the South. As UN troops pushed north toward

the Yalu River, the Chinese entered the war.

Waves of Chinese troops pushed the UN forces

back to the 38th parallel. In 1953 a cease-fire

between the antagonists resulted in the creation

of a DMZ at the 38th parallel—the dividing line

between North and South Korea. A formal peace

treaty has never been signed.

Syngman Rhee remained President throughout

the 1950s. Disenchantment with his rule ultimately led to countrywide demonstrations by

university students protesting corrupt political

practices. Rhee was forced to resign. Elections

were held in August 1960, and Chang Myon was

elected Prime Minister (PM) under a new constitution that adopted a parliamentary system

of government. By May 1961 dissatisfaction

within the military over the economy and the

chaotic leadership of Chang led to a coup by

Major General Park Chung Hee. Two years later

elections were again held and General Park,

now retired from the military, was elected president. Park is remembered for his contribution

to industrial modernization and economic growth.

He remained in office until his assassination

in October 1979.

Two months later, in December, another military

coup was carried out. This time Major General

Chun Doo Hwan led the coup, and it replaced

the interim government of PM Choi Kyu Ha.

University students reacted to this coup with

more demonstrations, which in turn led to martial law—and one of the “black marks” of Korean

political history—when government troops killed

more than 200 civilians in Kwangju. Major

General Chun “officially” became President in

September 1980.

Chun remained in office until 1988 when more

student demonstrations and allegations of unethical conduct forced a revision of the constitution

enabling direct election of the next President.

At that time Roh Tae-woo, Chun’s handpicked

successor, was elected president. In 1992 Kim

Young Sam succeeded Roh in what some have

identified as the “fairest and cleanest” election

in Korean history.2

 The Seventh Republic was

ushered in with the election of the current

president Kim Dae Jung in 1997.

For the last 50 years, the focus of the Republic

of South Korean foreign and military strategy

has been its relationship with the North. That

focus has shifted in the last decade to becoming

a regional and worldwide player. As its economy

has expanded, so has its peacekeeping role in

the world. They have participated in East Timor,

Georgia, Western Sahara, and India-Pakistan

Border.

The Republic of Korea, established in July 1948

with Seoul as the capital, is slightly larger than

the state of Indiana. The population of Korea is

approximately 44 million, with a homogeneous

people and few ethnic minority groups. Over the

last 40 years, South Korea has seen a significant improvement in its economy and currently

has a Gross Domestic Product (GDP) putting it

in the top five countries of the European Union.

Until the economic crisis of late 1997, Korea

was ranked as the 11th-largest economy in the

world. As Korea enters the new millennium it

appears to have turned its economy around. Significant economic improvement was shown from

a negative growth in 1998 to a positive growth

of 10.2 percent in 1999. Its GDP for 1999 was

$406.9 billion.3

 While there are storm clouds

on the horizon—unemployment and inflation—

current projections of a 6–8 percent increase bodes

well for the year 2000.4 According to the International Institute for Management Development,

Korea has regained its competitive posture and

now ranks at the world’s 12th largest economy.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-6

Chapter 2

THE GOVERNMENT

OF KOREA

Executive. In his role as Head of State, he represents the government in its relations with foreign

states, receives foreign ambassadors and performs many of the ceremonial duties typical of

heads of state. As the Chief Executive, he leads

the executive branch of government.

The president is elected to a single term of five

years by a popular plurality of the citizens.

Article 72 of the constitution makes the President also Commander-in-Chief of the Armed

Forces—with the power to declare war and conclude peace. The Chairman of the Joint Chiefs

of Staff (JCS) exercises actual operational control of the armed forces. The PM is responsible

for the administration of the military. The President is advised on defense policy by the Agency for National Security Planning attached to

his office. The Presidential house or office is

commonly referred to as Chong Wa Dae,5

 or

the “Blue House.”

The President has the power to go directly to

the people on issues he has not been able to resolve with the National Assembly. Article 72 of

the Constitution provides that he “may submit

important policies relating to diplomacy, national defense, unification, and other matters relating

to the national destiny to a national referendum

if he deems it necessary.” Further powers of the

president include the power to conclude and ratify treaties as well as declare war and conclude

peace.6

 The Constitution also gives the President

emergency powers in times of internal and external crises. He can “take...necessary financial

The 1948 constitution created three branches

of government: executive—a President, vicepresi-dent and cabinet; a unicameral legislature

branch —the Constituent Assembly; and a

judicial branch—with a Supreme Court and

local courts. The constitution has been amended

nine times with wide-ranging modifications.

Along the way, the Korean government has

experimented with a short-lived parliamentary

cabinet system (1960-62) and unicameral and

bicameral legislatures. Elections to the legislature have varied from single-member districts,

plural-member systems to proportional representation. In 1988 Korea adopted its current

constitution—keeping the presidential system,

but making it more liberal and more democratic.

Under the current constitution, Korea is a democratic republic with a President, PM, and a

unicameral parliament—the National Assembly. The Judicial power is vested in courts with

the Supreme Court as the highest court. The

nine provinces, called “do,” (Cheju, North and

South Chungchong, North and South Cholla,

Kangwon, Kyunggi, North and South Kyungsang), and six special administrative cities

(Seoul, the capital; Inchon; Kwangju; Pusan;

Taegu; and Taejon) provide the framework for

administering the Republic. The nation has gone

through six republics. The election of Kim Dae

Jung in 1998 established the Seventh Republic.

President

Under the current constitution, President Kim

Dae Jung is both the Head of State and the Chief
Part 3 – Republic of Korea

3-7

and economic actions or issue orders having the

effect of law...for the maintenance of national

security or public peace and order, and there is

no time to await the convocation of the National

Assembly.”

With the consent of the National Assembly,

the President appoints the Chief Justice of the

Supreme Court for a single six-year term.

Prime Minister

The President, with the consent of the National

Assembly, appoints and can remove the PM.

The PM’s job is to assist the President and direct

the Executive Ministries. The PM must be a

civilian, although retired military are also eligible. The National Assembly, by majority vote,

can recommend to the President the removal

of a PM from office.

National Security Council

The highest forum for military matters in Korea

is the National Security Council (NSC). The

NSC was established to advise the President on

the formulation of foreign, military, and domestic policies as they relate to national security

issues. The NSC recommendations would then

influence the deliberations of the State Council.

The President presides over the NSC.

The State Council

The State Council, the Korean cabinet, has the

responsibility for running the government. Cabinet members, currently 17, are recommended

by the PM and appointed by the President. However, the President traditionally plays a strong

role in their selection. The selection process

varies depending upon the particular President

in office. Under Presidents Syngman Rhee and

Park, cabinet members were often selected based

primarily on their loyalty to the President. Kim

Young Sam, the first civilian freely elected

President, drew heavily, for some of his cabinet

selections from leading Universities. “Most of

the Kim appointees were “progressive outsiders”

and “reform-oriented men and women.”7

 The

next president, Kim Dae Jung, formed a coalition

government with the leader of the United Liberal

Democrats (ULD), Kim Jong Pil. In this coalition government, Kim Jong Pil became PM,

and cabinet posts were divided between the coalition partners. In the April 2000 elections, President Kim’s Millennium Democratic Party did

not win a majority and (as this is being written)

is searching, for a coalition partner.

Members of the State Council administer the

individual portfolios in such areas of responsibilities as defense, foreign affairs, education

and culture. Further, ministers may issue ordinances for matters within their areas of responsibility. Active duty military cannot be appointed

to the State Council.

The President chairs the State Council and the

PM serves as its Vice-Chairman. The Council

is involved in decisions regarding declaration

of war, foreign policy matters, significant military issues, changes to the constitution, budgets,

review of contracts, and financial matters. Economic decisions are often at the top of the

agenda for the Council. The Deputy PM, who

doubles as the Minister of Finance and Economy, has a major seat at the table. The results of

deliberation by the Council are conveyed to the

Presidential Secretariat and the Office of the

PM. These two offices have responsibility for the

coordination and oversight of governmental policy agreed to by the Council and implemented by

government organizations.

The State Council currently consists of the

portfolios listed in Figure 3-1.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-8

THE LEGISLATURE

National Assembly

The Korean parliament, the National Assembly

(Kuk Hoe), is a unicameral assembly elected

every four years by popular vote. Legislative

power of the state is vested in the National Assembly, which currently has 2739

 members. Two

hundred and fifty-three members are elected in

single-member districts while 46 members are

elected by proportional representation of the

parties. Currently, the two major parties in Korea

are the opposition party—the Grand National

Party (GNP) and President Kim Dae Jung’s new

Millennium Democratic Party (MDP), formerly

the National Congress for New Politics (NGDP).

“Political parties in Korea are not issue-oriented

parties; rather they form around “party bosses.”10

President Kim’s MDP is the fifth party he has

founded. He has been a member of six others.

Members of the National Assembly may not be

members of the State Council, nor hold any other

governmental office.

The National Assembly performs the typical

functions expected of a legislative assembly—

introducing and passing laws, revising laws,

deliberating budgets, debating national policies

and conducting inspections and investigations

of government affairs. During the first 40 years

of the republic, the National Assembly was not

much more than a rubber stamp for the strong

executive branch. The last decade has seen movement toward a more democratic government

with the National Assembly increasingly taking

a more aggressive role toward the executive

branch of government. The National Assembly

may recommend to the President the removal

from office of the PM or a Cabinet Member. The

National Assembly also has the right to approve

Presidential appointments of the Chief Justice,

the PM, the Chief Adjudicate of the Constitution Court, Justices of the Supreme Court and

the Chairman of the Audit and Inspection Board.

Elected by majority vote, the Speaker and the

two Vice Speakers preside over the chamber.

A regular session of the National Assembly is

convened once every year, although the President, or one-fourth of the members, can convene

extraordinary sessions of the National Assembly.

Regular sessions can last up to 100 days while

extraordinary sessions are limited to 30 days.

Figure 3-1. State Council

The President

Prime Minister

Minister of Finance and Economy

Minister of Foreign Affairs and Trade

Minister of Information and Communication

Minister of Labor

Minister of Unification

Minister of Science and Technology

Minister of National Defense – Cho Seong-Tae 8

Minister of Justice

Minister of Education

Minister of Culture and Tourism

Minister of Agriculture and Forestry

Minister of Commerce, Industry and Energy

Minister of Environment

Minister of Construction and Transportation
Part 3 – Republic of Korea

3-9

Legislation may be introduced by either a member of the National Assembly or by the Executive. For a member to introduce a bill, he must

have 20 cosignatories. Once a bill is submitted to the National Assembly, the Speaker has it

distributed to the Members and reports it to the

Plenary Session. The Speaker then refers it to

the pertinent Standing Committee. For passage,

a bill requires a simple majority of the Members.

Once the National Assembly passes a bill it is

sent to the Executive. The President has 15 days

to sign it or, if he objects to it, to return it to the

National Assembly with a request for reconsideration. The National Assembly, by two-thirds

vote, can pass a bill, overriding the President’s

objections, and thus make it law.

The National Assembly has three general roles

in national defense. It approves the annual

defense budget; keeps a watchful eye on the

ministry as it executes its budget (through the

National Defense Committee); and examines the

ministry’s financial performance (Committee on

Accounts) after completion of the budget year.

The defense budget is included in the national

budget bill, which is prepared by the Executive

and presented to the National Assembly around

the first of October, 90 days prior to the beginning of the next fiscal year (FY) (January 1).

The Executive will present a statement to the

National Assembly, which details the policies

and budget necessary for running the government

during the next fiscal year. The speaker will refer

the budget to the appropriate Standing Committee—the National Defense Committee—for a

preliminary examination. After committee review,

the budget bill is then referred to the Special

Committee on Budget and Accounts for an overall examination. This Committee then transfers

the bill to the Plenary Session for final adoption. After the National Assembly accomplishes

its work—review and deliberation—it then normally passes the budget 30 days before the

beginning of the fiscal year.

In examining the budget bill, the National Assembly may “neither increase the amount of

any item of expenditure nor add any new items

in the budget submitted by the Executive without its consent.”11 This provision of the constitution somewhat limits the ability of the National

Assembly to make significant changes to the

executive’s budget. While the budget bill is

normally passed on time, the Executive has the

authority to use the previous year’s budget to

continue operation of the government for maintenance and operation of government agencies,

to execute mandatory expenditures, and to continue projects previously approved. Figure 3-2

depicts the overall flow of the defense budget.

The National Assembly has the specific responsibility of determining the organization and formation of the Armed Forces. The National Assembly also has the right to consent to the declaration of war, the dispatch of armed forces to foreign states (of particular relevance with the role

of the Korean military in East Timor), and the

stationing of alien forces in the territory of the

Republic of Korea.

The Assembly’s oversight of the executive

branch is accomplished by several means.

Whether in a plenary session or in committee

meetings, the assembly will call upon the PM,

other ministers and senior government executives to provide testimony on bills before the

assembly or actions taken by the individual

departments. With the advent of its second

freely elected president, Kim Dae Jung, the

national assembly committees have taken to

the practice of actually visiting the ministries

for hearings on budgets and other matters to

assert their power over the departments. In

October 1999, the Assembly conducted a 20-

day parliamentary interpellation of the government tackling issues ranging from illegal wiretapping to political reforms.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-10

Role of Committees

The work of the Assembly, examining and deliberating bills, takes place in committees. The National Assembly has established two types of

committees. First are permanent Standing Committees, such as the Finance and Economy Committee and the National Defense Committee.

Then, there are Special Committees initiated for

special purposes such as examining particular

pieces of legislation, or legislation where more

than one committee has jurisdiction. The Special

Committee on Budget and Accounts is established every year to examine the executive

branch’s budget bill before it is submitted to the

plenary session of the National Assembly.

Standing Committees are established corresponding to the jurisdiction of the government

ministries to deliberate bills and other matters

relevant to them. These committees are proportionally structured according to the strength of

each party or group within the assembly.

A “group” is unique to Korea. It consists of any

political party with 20 or more members. In

the case of a political party with less than 20

members, it may form a “group” with other

small political parties. The Speaker of the Assembly will recognize the “group” allowing its

views to be heard. The Committee may adopt a

bill in its original form, make amendments to

it, propose alternatives or decide not to refer a

bill to the Plenary Session. The Standing Committee may request the presence of the PM,

ministers and other representatives of the Executive at their meetings. They can also ask ministries and agencies to submit documents, prepare reports and summon witnesses. When it is

necessary to examine major bills or bills that

may require special expertise, Standing Committees may hold public hearings to obtain the

opinions of interested parties.

The 16 Standing Committees are shown in

Figure 3-3.

Figure 3-2. Typical Flow of Budget

National

Assembly

Deliberates and

Passes Budget

President Approves

Government

Budget

New

Fiscal Year

Begins

MND

Submittal

to Cabinet

President Approves

Draft Budget

and Submits to

National Assembly

Budget

Administration

Review of Budget

May August-September* September-October

January 1 December October-December**

* September 20 by Law

** December 2 by Law
Part 3 – Republic of Korea

3-11

Bureau of Audit and Inspection (BAI)

BAI, a constitutional government agency, is the

supreme Audit and Inspection organization for

the Republic of Korea. BAI works directly for

the President. To help ensure its independence,

however, while the President appoints the Chairman of the BAI, the National Assembly must

consent to his four-year appointment. Somewhat

similar in its mission to the U.S. General

Accounting Office (GAO), the BAI’s job is to

report on the way public monies are spent and

to look into government operations for effective

performance.

The Civil Service

The Ministry of Government Administration has

management authority over the civil service. The

civil service is divided into two categories—

ordinary and higher. The top administrators

come from the higher civil service, which is

further divided into nine career levels. The top

five of these nine career levels requires a

presidential appointment. Recruitment primarily

comes through annual competitive examinations

(a Confucian tradition). Passing the test for the

higher level civil service offers the opportunity

for better jobs and the long-term opportunity

for the top jobs within the government. Three

Seoul universities—Seoul National University,

Yonse University, and Koryo (Korea)

University—provide the bulk of graduates that

go into the higher civil service.

How are decisions made in South Korea? The

foundation of government—decision-making, in

general, and the acquisition process, in particular—owe much to their historical contexts. To

understand the historical threads that run through

the bureaucracy, one needs to look at the philosophies underpinning Korean society. The primary philosophical influences on Korea originated in China—Confucianism and Buddhism.

Historically, Confucianism’s influence starts

prior to the Three-Kingdom Period in the 4th

century B.C. Over the next 1500 years its influence continued to grow. Confucianism reached

its greatest influence during the Yi Dynasty,

when it was the main philosophy in support of

the government. “The effect of Confucianism

on the popular psychology of the Korean people

can be characterized as follows: (1) hierarchical

view of life; (2) authoritarianism on the part of

the ruling class; (3) a corresponding “submisFigure 3-3. Standing Committees

• The House Steering Committee

• Legislation and Judiciary Committee

• Administration Committee

• Finance and Economy Committee

• National Unification and Foreign Affairs

Committee

• Home Affairs Committee

• National Defense Committee

• Education Committee

• Culture, Sports, and Information Committee

• Agriculture, Forestry, and Fisheries

Committee

• Trade, Industry, and Energy Committee

• Telecommunication, Science, and Technology

• Environment and Labor Committee

• Health and Welfare Committee

• Construction and Transportation Committee

• Intelligence Committee
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-12

siveness” on the part of the ruled; and (4) a

“face/or status-oriented consciousness....”12

Buddhism’s influence, part of the overall sinification of Korea, starts in the 4th century B.C.

Its greatest societal impact, or “Golden Age,”

comes 700 years later, when the Kingdom of

Shilla unified the country in the seventh century

AD. One tenet of Buddhism’s that impacts both

society and the bureaucracy is the concept of

mutual codependence. This places the individual not in the center of the world, but existing

as part of and in harmony with the world. This

leads to the individual submissiveness of the

individual to the will of the state as a virtue.

This contrasts with the Western Renaissance

notion that “man is the measure of all things.”

These philosophies/religions provided the ideological superstructure for an hierarchical, authoritarian and centralized bureaucracy. Confucianism in particular lays out a hierarchical level

of society with the “Yangban”—the scholar

official—as the highest achievement, the

highest profession. It is interesting to note that

the traditional Confucian perspective ranks the

military profession as the lowest “rung of the

ladder.” Of course, this traditional structure conflicts with the recent practice whereby military

and retired military have held many key government positions including even the presidency.

As this discussion implies, decision making is

made at the highest levels of government—

often at the presidential level. The role of senior

officials within the military and the Ministry

is to carry out the directions of the most senior

government officials.

Time, western influence, economic affluence

and other factors have modified the Confucian

impact on society. The civil service is still prestigious and draws many of the top students from

universities in Korea. However, recent trends indicate highly paid jobs in industry lure many of

the “best and brightest” away from government

jobs.
Part 3 – Republic of Korea

3-13

Chapter 3

MINISTRY OF

NATIONAL DEFENSE (MND)13

reorganizations over the last 50 years to include

adding a Science and Technology Research

Agency and the creation of the JCS in 1990.

The current organizational structure of the MND

is based upon Presidential Decree No. 16339

issued in May 1999. The current Defense Minister is Cho Seong-Tae. A vice-minister reports

directly to him along with 12 bureaus and offices. The Army, Navy, Air Force and the JCS

report to the Minister for administrative purposes. The Chairman of the JCS is the highestranking active duty military officer in the country. The JCS Chairman exercises operational

In November 1945 under the auspices of the

United States Army Military Government in

South Korea (USAMGIK), the Defense Headquarters of Korea was established. This organization consisted of 25,000 constabulary and a

small Coast Guard of 2,500 men, and constituted

the beginning of the South Korean Army and

Navy. With the establishment of the Republic

of Korea in August 1948 it became the Ministry

of National Defense (MND). Later that year,

the Army and Navy headquarters were established, and in 1949 the Korean Marine Corps

and the Air Force were added. The MND has

gone through a variety of reforms and internal

Figure 3-4. Ministry of National Defense

Planning &

Management

Office

Minister of

National Defense

President

National

Security

Council

Vice-Minister of

National Defense

Defense

Reform

Committee

Chairman of

the Joint Chiefs

of Staff

Policy Office

Assistant

Minister

for Human

Resources &

Mobilization

Chief of

Naval

Operations

Chief of

Staff

Air Force

Army

Chief of

Staff

Operational Control

Defense

Acquisition

Office
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-14

control of the military and in that capacity reports directly to the President and the National

Security Council. See Figures 3-4 and 3-5 for

organization of MND and the JCS. The office

within MND responsible for acquisition is the

Defense Acquisition Office (DAO) headed by

a deputy minister.

With the threat of war always at its doorstep,

the Republic of Korea has traditionally spent a

higher than average percentage of its GDP/

Gross National Product (GNP) on defense. The

Republic of Korea averaged in the 1960s—4.5

percent, in the 1970s —4.8 percent, and in the

1980s—6.6 percent.14 Figure 3-615 depicts the

defence budget over the last decade and its

percentage of GDP, which has decreased from

6 in the 1980s to slightly more than 3.0 percent

of the GDP in the 1990s. The Korean defense

budget in FY 1998 was 14.6 trillion won (3.1

percent of GDP). Because of economic conditions the budget decreased to 13.7 trillion won

in 1999 (3.4 percent of GDP). With a changing

and improving economic environment the defense budget was increased to 14.44 trillion won

(U.S.$12.56 billion) in FY 2000.

The investment part of the budget—the Force

Improvement Program (FIP)16 and the R&D

portion of the budget—has traditionally averaged about 30 percent of the overall budget.

The FY 2000 budget saw the investment portion

heavily “plussed up” to 37 percent of the total

budget. The Economic crises seriously impacted the FIP. As a result fairly significant programs were postponed—Airborne Warning and

Control System (AWACS), Surface to Air

Missile-X (SAM-X), Attack Helicopter-X (AHForce

Analysis

Office

Chairman of

the Joint Chiefs

of Staff

Office of

the Secretary,

Joint Staff Vice Chairman

Office of

the Secretary,

Joint Staff

Central

Directorate

for Intelligence

Central

Directorate

for Operations

Central

Directorate

for Strategic

Planning

Civil Affairs/

Psychological

Warfare

Directorate

Directorate for C3I

Director

Strategic

Planning

Director Force

Power Planning

Figure 3-5. Republic of Korea Joint Chiefs of Staff
Part 3 – Republic of Korea

3-15

X) and Korean Destroyer-X (KDX). The SAMX and AH-X programs have since been turned

on again thanks to the economic turn around.

To provide the manpower necessary for it military needs Korea has compulsory military service.

The current authorized strength of the armed

forces is 660,000 personnel with 548,000 in the

Army, 60,000 in the Navy and 52,000 in the

Air Force, with 4.5 million personnel in the

reserves.

Figure 3-6. Korean Defense Budget

Classification

Defense Budget

($ Billions)

Defense Budget

(Won Trillions)

FIP

% of GNP

R&D %

1994

$8.76

10.1

3.04

3.4

$0.26

1995

$9.63

11.07

3.2

3.3

na

1996

$10.65

12.2

3.43

3.1

$0.33

1997

$11.99

13.8

3.99

3.2

$0.37

1998

$12

14.6

4.08

3.1

$0.42

1999

$11.96

13.7

4.1

3.4

$0.64

2000

$12.56

14.44

5.34

na

na
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-16

Chapter 4

DEFENSE ACQUISITION

STRUCTURE

was placed within one organization—the Program Management Bureau (PMB). Deputy

Minister Moon, Il–Sup, currently heads the DAO.

The DAO currently has overall responsibility

for managing acquisition development and

foreign procurement, examining military

equipment investment plans and budgets, and

executing the R&D and investment budget. The

Deputy Minister has five bureaus reporting to

him as shown in Figure 3-7. These Bureaus are

the PMB, the Analysis and Evaluation Bureau

(AEB), the Acquisition Policy Bureau (APB),

the Logistics Management Bureau (LMB), and

the Military Installation Bureau (MIB). DAO

also provides direction and supervision of the

acquisition work carried out by the Agency for

Defense Development (ADD), Defense Procurement Agency (DPA), and the Defense Quality

Assurance Agency (DQAA). DAO also has oversight of the Services’ program management

groups. Additionally, shown in Figure 3-7 are

three other organizations within MND. These

three organizations work closely with the DAO

in its acquisition efforts. They are the Policy

Planning Office (PPO), the Korean Institute for

Defense Analyses (KIDA), and the Planning and

Management Office (P&MO). The P&MO has

responsibility for preparing the final Mid-Term

Defense Plan (MTDP) and defense budget.

DAO Bureaus

The DAO Bureaus serve as the policy and oversight organizations within the DAO. They have

significant authority and responsibility in

Defense Acquisition Office (DAO)17

The DAO originated within the old MND

Logis-tics Bureau as the Defense Industry

Division. This Division was established in 1972

as the focal point within Headquarters MND to

enable President Park’s initial modernization

efforts and the creation of a defense industry.

Within a year, as MND expanded efforts in

production of mili-tary equipment, the

importance of acquisition increased and the

Defense Industry Division was elevated to a

bureau in its own right—the De-fense Industry

Bureau. Further changes occurred in 1991 when

they were renamed the Acquisition and

Development Bureau. As part of the 7th Republic’s most recent acquisition reform efforts,

it became the Defense Acquisition Office in

April 1999.18

Within the last year and a half there have been

two reorganizations of the DAO. Initially the

Korean government chartered a group of senior

officials—the Defense Reform Committee—

to look at the MND and to make recommendations for streamlining and improving the organization and its processes. One of this committee’s suggestions was to create a new, more

streamlined organization within MND to focus

on R&D and foreign acquisitions. In January

2000 the Acquisition Council further refined

the organizational structure to provide “a more

effective and fair implementation of defense

acquisition tasks” and changed the direction to

focus on “cradle to grave” management of weapon

systems. Program Management responsibility
Part 3 – Republic of Korea

3-17

setting acquisition policy, and implementing

and overseeing acquisition programs. Their

tasks cross the traditional division between line

and staff organizations19 as indicated by the

various tasks they perform, from issuing the

latest Ministry regulation on acquisition to

issuing the Request for Proposal for new systems or equipment. The following sections

provide a more detailed explanation of each

organization’s role in the acquisition process.

Acquisition Policy Bureau (APB)

APB is accountable for the development of

policy, acquisition planning and international

cooperation. The APB develops, maintains, and

updates the main acquisition regulation—MND

Directive 651, Defense Acquisition Management Regulation (DAMR). As a key player in

the planning process portion of the Planning,

Programming, Budgeting, Execution and Evaluation System (PPBEES), APB members develop acquisition plans, to include the MTDP. They

also have responsibility for developing and

controlling the acquisition investment budget.

The Defense Industry Promotion Branch has

responsibility for MND’s oversight of the defense industry. Finally, the International Cooperation Branch is the point of contact for such

efforts as arranging for meetings on armament

Minister

Vice Minister

Policy

Office

Planning &

Management

Office

Korea Institute of

Defense Analysis

(KIDA)

Anaylsis &

Evaluation

Bureau

Logistics

Management

Bureau

Defense Acquisition Office

Deputy Minister

Acquisition

Policy

Bureau

Program

Management

Bureau

Military

Installation

Bureau

President

Agency for

Defense

Development

(ADD)

Defense Quality

Assurance

Agency

(DQAA)

Defense

Procurement

Agency

(DPA)

Service

PMGs

Figure 3-7. Acquisition Development Structure – February 2000
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-18

cooperation with other nations and managing

and negotiating international agreements for

the exchange of basic scientific and technical

information.

Analysis and Evaluation Bureau (AEB)

AEB has the dual responsibility to analyze the

performance and costs of contractor proposals

and to oversee the testing and evaluation of

equipment. AEB is the starting point for the

selection of a contractor and the equipment that

best meets the cost and performance requirements of the MND (see procurement section for

more information). In its cost analysis function,

AEB has oversight of KIDAs’ Cost Analysis

Research Division.

Program Management Bureau (PMB)

As a result of acquisition reform, PMB is exclusively in charge of project management for the

Ministry. It oversees both domestic and foreignintroduced acquisition projects. It is responsible

for defense R&D policies and plans, foreign acquisitions, and type selection including offset

policies and negotiations. In its R&D role, PMB

establishes defense science and technology policies and plans and has management responsibility for the Agency for Defense Development

(ADD). PMB also designates and oversees Program Management Groups (PMG) and Program

Managers in the Services.

Logistics Management Bureau (LMB)

LMB has life cycle responsibility for the system

once that system has been fielded. In this role,

LMB establishes logistics related policies, logistics support plans and combat-use material/

equipment storage plans, acquisition, distribution, operation and maintenance of non-weapon

systems, and Host Nation support. LMB also

oversees and supervises the Defense Procurement Agency (DPA) and the Defense Quality

Assurance Agency (DQAA).

Military Installation Bureau (MIB)

MIB is responsible for establishing policies and

plans for military installation, environmental and

systems R&D as well as new construction.

In January 2000 the Digitization Planning Office

(DPO) was moved from the Acquisition Organization to the Vice-Minister, who was designated

the Chief Information Officer (CIO). Each

Service has appointed its Vice-Chief as its CIO.

This, coupled with the merging of Defence Computer Management and Information Management Center (DCIMC) with the DPO, emphasizes the importance of information technology

to leveraging the Korean “Revolution in Military

Affairs (RMA).”

ACQUISITION AGENCIES

Defense Procurement Agency (DPA)

The DPA is the primary line organization responsible for contracting within the MND. It

buys the weapon systems, military equipment,

and construction needed by the services and by

the MND. It also has responsibility for the standardization and the cataloguing of supplies and

the management of specifications for common

military items. Figure 3-8 shows the organization of the DPA, which is located in Seoul. (See

also Chapter 9, Procurement Process, for more

information on DPA.)

Agency for Defense Development (ADD)

ADD is the primary advanced research organization within the MND. ADD was originally

founded as part of President Park’s first Force

Modernization Plan in 1970. ADD creation

provided MND with a field level, defense research organization responsible for the management of technical data and assistance to the

private sector’s efforts in defense R&D. A key

element of the initial efforts was securing
Part 3 – Republic of Korea

3-19

foreign technology to develop military equipment. ADD has grown over the last 30 years to

include R&D centers for missiles, aircraft,

communication and electronics (1974), and

naval weapons (1976). Test and evaluation

(T&E) centers were added for missiles and

weapon systems in 1978 and for automotive

and naval weapons in 1995.

ADD is lead by a President and is in located in

Teajon about two hours driving time south of

Seoul (see Figure 3-9.) ADD works directly for

the Deputy Minister, although the PMB provides

general direction and operational guidance. A

Board of Directors (BOD) chaired by the Minister of Defense, with membership including the

Deputy Minister of the DAO and the Service chiefs,

also provides policy direction, and reviews and

approves all projects and the budget

With the need to meet a new mission, ADD

reorganized in 1999. It reduced the number of

R&D centers from five to four and renamed

them “system development centers.” The systems development centers concentrate on developing technologies for ground, electronics,

information, communications, naval, missiles

and aircraft systems. Its test centers were reduced from three to one—the Defense Systems

Test Center located at Anheung on the central

western coast of South Korea.20 ADD still maintains the Chang-won Proving Ground the Ground

Systems Development Center, the Naval Test

Range under the Naval Systems Development

Center as well as the Daradae Test Range under

the Defense Systems Test Center. Anheung Proving Ground is also under the Defense Systems

Test Center. The two other centers are the Key

Technology Center which focuses on key applied technologies, and the Dual Use Technology Center, which focuses on the military

application of commercial technology.

Commanding

General

Audit Office Deputy

Planning Office

Standard

Cataloguing

Bureau

Electronic Data

Processing

Office

Specification

Management

Office

Administration

Services

Office

2nd

Equipment

Bureau

Foreign

Procurement

Bureau

Logistics

Service Mission,

Reston, VA

1st

Equipment

Bureau

Procurement

Management

Bureau

Material

Bureau

Construction

Bureau

Figure 3-8. Defense Procurement Agency
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-20

The current mission of ADD is to further the

development of new core technologies needed

by the MND. In that respect, ADD is similar to

U.S. service Laboratories, i.e., Army, Navy and

Air Force Research labs except they are consolidated into a single agency. The concentration

on developing core technologies is a new mission coming out of the defense reform efforts.

According to the Defense Reform White Paper

—“imitative R&D has finally faced its limits....”21

The ADD’s recognition of the role advanced

technology now plays in warfare and the need

to develop know-how internal to the nation has

led them to focus on developing the latest

scientific technologies.

For most purposes ADD’s prior mission, “incremental research,” that is, applied technology and

development for general weapons, has been

transferred for management by the military services. The actual effort in applied technology R&D

will be contracted with the defense commercial

industry. ADD with its technical staff will continue to provide short-term technology and T&E

support to the services, other MND organizations, the defense industry and other public

organizations.

The ADD conducts basic research (theoretical

and experimental activities) through universities

and institutes. There are also five specialized

research centers that perform basic research

under the auspices of ADD. These five centers

are: the Seoul National University, Pohang

University of Science and Technology, the Korea

Advanced Institute of Science and Technology,

and the Advanced Institute of Military Science

and Technology.

Defense Quality Assurance Agency

(DQAA)

Serious quality control deficiencies turned

up early in the history of the Korean defense

Figure 3-9. Agency for Defense Development

MSL/Aircraft

Systems

Development

Center

C3I Systems

Development

Center

Naval Systems

Development

Center

Ground Systems

Development

Center

President

Vice President

Administration

Affairs

Department

Dual Use

Technology

Center

Defense

Systems Test

Center

Key Technology

Research

Center
Part 3 – Republic of Korea

3-21

industry production efforts. The government’s

response in the late 1970s was to create the

Defense Product Assurance Agency, which was

the predecessor of the DQAA. DPAA’s job was

to work with industry to improve the quality of

manufactured items being delivered to the

military. That mission has expanded over the

last 20 years to include research efforts on the

life cycle of military equipment, quality system

certification, and specification documentation.

Lately, DQAA has focused its efforts on

introducing the latest advanced Quality Assurance

(QA) methods and production technologies to the

Korean defense industry.

DQAA is headquartered in Seoul with eight

regional offices located in major cities throughout the nation. It employs 488 personnel at

Headquarters DQAA and oversees 745 suppliers and 108 in-plant personnel at 22

contractor sites (see Figure 3-10.)

Program Management Offices in the

Military Services

In 1997 Program Management responsibility

was moved from the MND to the individual

services. Figure 3-11 depicts the Army Headquarters office—the Weapon Systems Program

Management Group. In the Air Force it rests with

the Aerospace Project Group in the Service

Headquarters.

In the Navy program management responsibility

is with the Naval Sea Systems Command for

ships and with the Deputy Chief of Naval Operations for Command and Communications equipment (see Appendix B for Service Structures).

Korean Institute of Defense Analyses

(KIDA)

KIDA works administratively through the MND

Deputy Minister of Policy (see Figure 3-7). It is a

Figure 3-10. Defense Quality Assurance Agency (DQAA)

Planning &

Management

Division

Project

Integration

Division

Field

Support

Division

System

Program

Division

Technology

Information

Division

Test &

Analysis

Division

Director

Audit Office

Small

Regional

Office

Taejon

Regional

Office

Taegu

Regional

Office

Pusan

Regional

Office

Shipbuilding

Office

Changwon

Regional

Office

Aircraft

Office

Kwangju

Regional

Office

Six Specialized Teams (Artillery/Ammunition,

Tank/Auto, Comm./Elec., General Materiel,

Aircraft, and Shipbuilding)
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-22

research arm of the MND that reviews defenserelated subjects and develops policy alternatives

for senior MND officials. KIDA’s research projects cover the full spectrum of defense issues

—security environment, military strategy, force

development, manpower, resource management

—and such acquisition topics as weapons system acquisition, Command, Control, Communication, Computers and Intelligence (C4I) and

defense simulation.

Figure 3-11. Army Headquarters

DCS

Intelligence/Opns

DCS

Plans Management

Chief of Staff

Army

DCS

Personnel

Weapon System

Program

Management

Group

DCS

C2

DCS

Logistics

Figure 3-12. Korean Institute of Defense Analysis (KIDA)

Modeling &

Simulation

Center

Manpower

Management

Resource

Management

Weapon

System’s

Center

Force

Development

Security &

Strategy

Board of Directors

President

Vice President

Planning & Coordination

Administrative Support

Information Support

Korea Institute of

Military History
Part 3 – Republic of Korea

3-23

KIDA was founded on January 10, 1979 as the

“Defense Management Institute,” an affiliate

of the ADD. KIDA’s mission was primarily resource management. Under the administration

of President Chun Doo Hwan, the DMI was

changed to the KIDA somewhat based upon the

U.S.’s Institute of Defense Analyses (IDA). This

change was part of an effort to strengthen

defense planning and technology. To enhance

the defense policy research effort by attracting

higher paid professionals, in 1987 KIDA became an autonomous, not-for-profit research

organization.

KIDA currently consists of four research directorates and two centers. (See Figure 3-12.) The

four research directorates are responsible for

Security & Strategy, Force Development, Manpower Management, and Resource Management. The Centers for Weapon Systems Studies

and Modeling & Simulation are located in

Seoul. (See Appendix B for detailed information

about the functions of each directorate.)

Of particular interest for those involved in acquisition is the Center for Weapon Systems Studies.

The center’s main research areas are acquisition

and acquisition-related topics. Typical of the research projects they cover for acquisition are

“Acquisition of Early Airborne Warning and

Control System (AWACS) Airplanes,” “Policy

Directions to Save Costs in Acquisition Projects,” and “Technology and Service Evaluation

in Offset Trades.” In 1999, KIDA cooperated

with the United States’ Defense Systems Management College to host the 2nd International

Acquisition/Procurement Seminar—Pacific.

This seminar was designed to improve cooperation among Pacific Rim allies.
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Chapter 5

DEFENSE REFORM

Acquisition reform had three basic objectives:

reduction of procedures and time, economical

acquisition and the establishment of clear lines

of responsibility. These objectives will be accomplished by making the acquisition system

more transparent to the public and to potential

contractors, increasing the professionalism of

the workforce, enhancing responsibility, and

strengthening the domestic defense industry. To

ensure the success of the acquisition reform

efforts, the DAO, was set up in 1999.

Korean acquisition reform is a broad-based

effort. It includes changes to the PPBEES. Reform involved streamlining the decision-making

process by eliminating duplicate functions and

steps. In the procurement area there will be increased competition, the system will be made

more transparent to ensure fairness, and the

connection between quality assurance and

contracting will be strengthened. To strengthen

the T&E process responsibility was moved from

the JCS to the MND.

In the Program Management arena, increased

energy is targeted at ensuring performance, i.e.,

getting what the warfighter needs, at lower costs

(including life cycle costs) with timely delivery.

Competition among vendors and Cost and

Operational Effectiveness Analysis (COEA) are

two tools designed to provide insight into

acquiring the “best value” equipment. Management of weapons and information systems is

integrated. Next, an acquisition reform initiative

introduces into the project management and

contract process the “real name system” to put

more individual responsibility into the system.

With tight defense budgets in 1997 and 1998

caused by the impact of the Asian financial

crisis and a new administration coming into

office in 1997, the Korean MND embarked on

a period of reform, which included acquisition

reform. In April 1998, the newly elected government of President Kim Dae Jung formed the

National Defense Reform Committee, under the

leadership of retired four-star general Lee Joon,

to reshape both the ministry and the defense

business.

According to the Blueprint for Military Reform,

“By the year 2015, the ROK military must be: a

small-sized standing army fully equipped with

advanced defense capability; an informationand-science-reliant army equipped with hightech weapons; and finally, an economical army

managed rationally and efficiently.”22 The overall reform effort called for improving the military structure, improving personnel management and education, modernizing the C4I

system and reform of the MND’s investment

program, which is commonly referred to as the

Force Improvement Plan (FIP). An effort under

the reform blueprint, closely related to acquisition, is the “Revolution in Military Affairs

(RMA).” “The RMA refers to the whole process

of developing new military systems through the

use of advanced military technology, thereby

drastically enhancing combat effectiveness.”23

A small ad hoc sub-panel of 10-15 military and

civilian “PhDs”, the RMA Planning Group,

which will be operational through 2001, was

formed to look out 25 years and identify thrust

areas for the RMA efforts.
Part 3 – Republic of Korea

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Under the “real name system,” individuals will

be required to sign off on any document they

have responsibility for approving. Finally, topnotch employees will be provided incentives for

promotion under these reform efforts.

The reform efforts in the MND also tie into

national efforts to further the development of

small- and medium-size businesses and the defense industry as a whole. As mentioned earlier,

the defense industry will take on a greater R&D

role in developing general weapons technologies

(formerly done by ADD). By increasing domestic R&D and production, the defense industrial

base should become more vigorous

Why is there a need for acquisition reform? Part

of the rationale goes to the culture prevalent

within the MND. In the past, decision-making

was too often based upon “too” much negotiation, which meant a slow decision process. Pinpointing who actually was making the decision

was difficult. An old Korean saying perhaps captures the popular image of the Korean bureaucracy and the problem in the decision-making

process, “bokji-budong.” Translated into English

this phrase means—“bureaucrats lie on the ground

and do not move.”24 The capacity to make decisions without accountability is considered endemic to decision-making and hinders effective

improvement in the acquisition process. Defense and acquisition reform plans attempt to

move responsibility and authority to lower

levels and to hold responsible those who make

the decisions.

Reform of any system is difficult. Thus the committee’s work is planned to last at least five years.

The committee will work to assist the Minister

by developing implementation plans for overhauling the ministry. In addition to the MND

level committee, working reform committees

were established within each Service.

Under the committee’s reform efforts, the first

step in 2000 was with the establishment of the

Korean National Defense University (KNDU).

This was accomplished by merging the National

Defense University with the Armed Force Staff

College and closing the National Leadership

Institute. Other organizational changes are planned over the next couple of years. A Combined

Service Support Group will be established to

improve efficiency among the services. Other

possible organizational changes include integrating KIDA, the Institute for Defense Information Systems, ADD and DQAA into two institutes focusing on weapon systems development

and policy research. Defense and acquisition

reforms are part of a long-term plan to change

the MND. Changes that have been started or

identified will be indicated for the reader

throughout this part.
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Chapter 6

PLANNING, PROGRAMMING,

BUDGETING, EXECUTION

AND EVALUATION SYSTEM

a variety of sources, to include the Services, agencies, JCS or headquarters MND.25 New military

threats, obsolete equipment, or technological

advances, which offer improved reliability or

increased capability, are usually the origin for

generating a new acquisition requirement.

Ordinarily, each military service proposes a

new weapon system, new equipment, or changes

to an existing system. This proposal is contained

in a document, called the Required Operational

Capability (ROC). The ROC defines the expected weapon system performance, or capability

to achieve an operational capability, such as a

missile with the ability to penetrate underground

targets. Approval for lower value, less complex

new requirements rests with the particular

Service Chief of Staff, specifically, for parts and

material acquisitions, non-major weapon systems and older systems replacement. Within the

agencies, the agency head approves the need for

new equipment.

In the case of a military service requirement for

a new weapon system, replacement for an older

weapon system, or enhancement to an existing

system, then JCS approval is required. The final

group of requirements—which apply to automated information systems, non-weapon systems R&D, foreign leasing and major foreign

purchases—are approved at MND headquarters.

Within the Army the functional office for

requirements is the Army Education Command’s

Schools; in the Navy it is the Headquarters staff,

Force Planning Division; and in the Air Force

In this Chapter we will look at the MND Planning, Programming, Budgeting, Execution and

Evaluation System (PPBEES) and the requirements generation process. PPBEES is a defense

resource management system and was first enacted as MDN Directive No. 253 in 1979. Its

objective is to effectively and efficiently determine requirements and priorities and evaluate

the performance of projects. It has been revised

numerous times, with the last revision in 1997,

to improve efficiency and strengthen responsibility in implementing force improvement

programs (currently MND Directive No. 553).

The PPBEES is implemented through a series

of documents: the Joint Strategic Objective

Plan (Planning), the Defense Acquisition and

Development Plan and the Mid-Term Defense

Plan (Programming), the Defense Budget Document (Budgeting) and the Defense Budget

Allocation Plan (Execution). These documents

provide the framework to operate the MND

acquisition process. Figure 3-13 depicts the entire process—the documents, the office of primary responsibility and its purpose. However,

a key ingredient in the process is the generation

of a military equipment requirement. Before a

weapon system is developed and produced, a

military need or requirement must exist, be

proposed and approved by senior MND officials.

The Requirements Process

Organizationally, the requirements for new

weapon systems or equipment can come from
Part 3 – Republic of Korea

3-27

the functional office for requirements is the

headquarters staff in the Combat Development

Bureau. The DAO also plays a role in the requirements determination process since it has

the responsibility for verifying the appropriateness of a requirement when it prepares the

MTDP and compiles budgets.

Planning

The planning phase really begins with an assessment of the threat, in this case, primarily North

Korea. Out of this assessment and the national

political objectives grows the national defense

goals and strategy. With the national defense

goals and strategy serving as guidelines, each

military service submits a series of planning

documents outlining its military needs to implement the defense policy and strategy. The

primary document in the services during the

planning phase, the Medium-Long Range

Force Requirements Proposal contains the

military need for the equipment. To provide

decision makers an understanding of the significance of the system or equipment, the proposal

also contains a description of how the equipment

will be operationally used, the ROC, and the

logistics support (support equipment, training

equipment, ammunition, facilities) necessary to

deploy the system. Long before the proposal is

written, however, the military services have prepared several documents proposing the force

requirements. To assess military shortcomings,

this planning looks out many years into the

future. The proposals are contained in one document, the Force Requirements Proposal (FRP).

The Force Requirements Proposal is divided into

three sections—the Long Range Force Requirement Proposal, Medium Range Force Requirement Proposal, and Medium-Long Range Force

Phase Document OPR Purpose

Planning Force Requirement Services Defense Goals Threat

Proposal Assessment Defense Policies

 LRFRP

 MRFRP

 MLRFRP

Joint Strategic Objective Consolidates/Coordinates

Plan (JSOP) Service Proposals

Programming Defense Acquisition & DAO/APB Define Systems & Equipment

Development Plan to Implement Defense Goals

MTDP PMO (O&S)

DAO/APB

(Investment)

Budgeting Defense Budget Document DAO/APB Define Money Needed to

(Investment) Implement

PMO (O&S)

Executing Defense Budget Allocation DAO/APB Money Authorized by National

Plan Assembly for Fiscal Year

Evaluation Analyze Completed Project

& Improve System

Figure 3-13. The MND Acquisition Process
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Requirement Proposal. Following are the

detailed features of each proposal type:

Long-Range Force Requirement Proposal

(LRFRP) looks out 8-17 years for equipment

needs. This becomes the basis for conceptual

research or exploratory development.

Medium-Range Force Requirements Proposal (MRFRP) looks out 3 to 7 years. This

proposal becomes the basis for the preparation

of Medium-Long-Range Force Requirements

and the systems the MND is willing to invest

in for systems development.

Medium-Long-Range Force Requirement

Proposal (MLRFRP)26 consolidates the Long

and Medium proposal into one proposal that is

submitted annually in August to the JCS Force

Analysis Office and the APB. This document

contains the ROC for each system.

After the proposals leave the Services, they are

sent to the Central Director for Strategic Planning and the Director for Force Power Planning

at the JCS. These organizations in turn evaluate

the service needs against the National Defense

Basic Policy, the Joint Military Strategy Plan

and a document prepared by ADD—the Defense

Science and Technology Survey Report. The

Defense Science and Technology Survey Report

provides an outline of the state of the art of

technology both domestically and abroad. The

JCS offices can use this document to realistically

assess the likelihood that the technology is on

hand to be usable in a weapon system.

The next step in the process is the preparation

by the JCS of the Joint Strategic Objective

Plan (JSOP). This plan is based the information

provided by the MLRFRP. It is prepared annually in March, serves as both a confirmation of

the military need, and a prioritized list of the

programs. The process for approving the JSOP

starts within the Force Power Planning office,

which reviews the service submittals and provides its analysis by the end of September. The

Central Director for Strategic Planning then

prepares a draft JSOP in early November. The

plan is reviewed, in turn, by the Joint Strategy

Working Council, Joint Strategy Council and

Joint Chief Meeting (see section on Councils)

to evaluate both the needs and priorities of the

proposals. Final approval of the plan is by the

Minister of National Defense.

The JSOP now provides the basis for the MTDP

(also referred to as the FIP) and the Defense

Acquisition and Development Plan (DADP)

and moves us to the programming phase. It

should be noted that a corollary plan, the Joint

Weapon System List, prepared every 3 years

by the Central Director for Strategic Planning

provides a list of the types of equipment and

systems to be acquired from foreign sources

along with their schedule of deployment.

Programming

The programming phase of the system is

captured in two plans—the DADP and the

MTDP. The Acquisition Policy Bureau (APB)

prepares the DADP and the investment portion

of the MTDP. They serve the purpose of defining the equipment requirement, the buying

approach and what will be bought within the

next fiscal year, plus the following year. The

DADP includes the acquisition polices and individual system plans to include the acquisition

method. It is based on the JSOP and the requirements of DAO, the Services and agencies. APB

draws up a draft plan based upon service and

agency inputs, coordinates it through the other

bureaus within the DAO. It then coordinates

the plan through the Policy Council and Acquisition Council and then obtains approval of the

Minister. It is published annually in August.

The MTDP shows concrete requirements—what

projects, numbers, expenses, schedules, and

methods of acquisition. Based on the DADP it
Part 3 – Republic of Korea

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is classified into three sections—R&D, technology introduction and production, and overseas

purchase plans. The Blue House will provide

final approval for the DADP and the MTDP.

Current investment goals reflect a focus on

advance military technology—RMA—which

translates into intensive R&D investments. Specific requirements are laid out for improving

combat readiness with a national defense reconnaissance capability (satellites), large scale attack helicopters and AWACS, tankers aircraft

and an shipbuilding program for an Aegis class

destroyer (KDX-III).

Budgeting

The Defense Budgeting Document (DBD)

captures the budgeting portion of the PPBEES,

that is, the money available for buying new

equipment. This document based upon the

MTDP projects the necessary budget for the

next fiscal year, plus one-year, but also includes

prior year unfunded projects. Project budgets

are divided into domestic and foreign capital.

Of importance for acquisition personnel is the

attempt to provide stability to projects by requesting multiple years budget approval for the

entire project.

How does the budget process work? For the investment budget, it starts with the Acquisition

Policy Bureau preparing draft budget guidelines

and submitting them to the MND’s P&MO

Programming and Budget Bureau in December.

The Programming and Budget Bureau then

incorporates the investment guidelines in the

overall guidelines on budget preparation to all

agencies and services.

The Services and agencies prepare their requests

for investment projects and submit them to the

five DAO bureaus and the JCS in March.

However, for new projects a draft budget

request must be submitted earlier to the APB

and the appropriate project management

bureau—PMB or LMB and AEB by the end of

January.

APB will then prepare a draft Investment Project

Budget Request and submit to the Budget Planning Office by the first part of May. Projects

will be divided into Project categories A, B or C

depending upon the level of approval. (See later

section for in-depth explanation of categories.)

The Budget Planning Office then obtains approval of the draft defense budget from the Minister

of National Defense via a series of political

meetings. Based upon direction from the Minister, the Investment Project Budget is adjusted

by the Chief of the Acquisition Policy Bureau.

The next step in the process is submittal of the

defense budget to the Budget Administration

Office of the President by the end of May. This

is then reviewed by the cabinet and sent to the

National Assembly for its review and approval.

The National Assembly usually passes the budget in December in time for the next fiscal year

beginning on 1 January.

Execution and Evaluation

The Defense Budget Allocation Plan provides

the amount allocated to each element of the

budget and planned for expenditure during the

fiscal year. It will be adjusted as events and priorities change throughout the year. It is during

the execution phase that contracts for R&D and

procurement are awarded and the operation and

maintenance of the forces takes place. What

worked? What did not? The evaluation phase

provides an opportunity to analyze completed

projects and to use the feedback to improve

the system.
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Chapter 7

THE DEFENSE

ACQUISITION SYSTEM

“The cold and bitter winds of the Cold War that blows between our

two countries must be stopped and replaced by warm rays of

sunshine. Let us stop regarding each other as enemies and start

embracing one another as brothers.”27

— Kim Dae Jung

series of efforts to make the nation more selfreliant in defense matters. President Park approved the first of three Force Improvement

Programs (FIP) (Yul-Guk)—the Eight-Year

National Defense Plan (1974-81) in 1974. The

Second FIP under President Chun covered the

years 1982 to 1986. Because modernization was

a low governmental priority less was bought and

the domestic defense R&D and production market began to shrivel. The third program covered

the period from 1987 to 1995. The concept behind all these plans was that imitative development and production of military items would

create and promote a larger defense industry.

These three efforts targeted over 30 billion won,

or more than 32 percent of the total defense

budget towards modernization efforts.

The FIP is carried out through the acquisition

system. The acquisition system consists of the

organizations, DAO, ADD, and others, the

personnel, procedures and policies to develop

and buy new military equipment. The governing

directive, Defense Acquisition Management

Regulation, MND Directive 651, issued January

1, 2000, provides the policies and procedures

necessary for effective operation of the system.

The guiding principles for acquisition are

developed along five lines. They are to:

While the Cold War is gone in Europe, North

Korea still remains a threat and, according to

recent reports,28 continues with strengthening

its war machine and attempting to intimidate

its neighbors. The Republic of Korea’s response,

in concert with its allies, has been to maintain

both a strong economy and a military prepared

to respond to any threat from the North. While

the military budget was severely impacted in

the 1997 and 1998 time frame, the strengthening

economy has allowed the government to revive

their military modernization programs. In October 1999 they announced the relaunching of a

26.4 trillion won ($21.4B), four-year military

modernization program.29 Part of this program

includes efforts to develop an anti-ship missile

system, a portable shoulder–fired anti-aircraft

missile system, and acquisition of blue water

class destroyers (KDX-2) with an estimated

program cost of over $2.5 billion.

Historically, military modernization efforts

began with the announcement of the 1969 Nixon

Doctrine. This doctrine, which called for America’s allies to shoulder much more responsibility

for their own defenses, became a driving force

for Korean modernization, particularly in 1971

as the U.S. began withdrawal of military forces

from the Korean peninsula. Under President Park

Chung Hee, the Ministry of Defense began a
Part 3 – Republic of Korea

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1. Mature a defense development science and

technology capability;

2. Seek cost effective solutions;

3. Secure the performance of the integrated

weapon systems (systems of systems);

4. Promote defense acquisition programs in

connection with the development of national

industry; and

5. Enhance the efficiency, transparency and

professional expertise of the acquisition

system.

The five principles are aimed at the timely

deployment of cost effective equipment and to

secure technological evolution for a self-reliant

development capability.

Methods of Acquisition

Once the military services have identified the

need for new equipment or a weapon system,

the acquisition organization has several options

to meet the military need. They can either initiate

a R&D effort to develop the equipment or buy

existing equipment from a foreign source. The

methods of acquisition fall into three major

categories. They are Technology Introduced Production and Foreign Purchase and are shown in

preferred order in Figure 3-14. In the first category, R&D, Domestic Development is the preferred strategy because it provides the most support to the nation’s desire to boost its R&D capabilities. The approach under this strategy is to

select a local firm to design, develop, manufacture and test either a weapon system, core

technology, or component part. This strategy has

the dual purpose of strengthening the defense

R&D capability and providing a stimulus for

the national industrial technology base. Normally, ADD is the lead organization when a technology has to be developed, particularly if it is a

Government-lead R&D project. In some cases,

however, the task will be an industry-lead R&D

effort under government contract. Finally the

Korean government encourages their defense

industry or suppliers to invest funds in corporate

R&D for defense needs.30

Figure 3-14. Acquisition Methods

Research &

Development

Technology

Introduced

Production

Overseas

Purchase

Domestic Development

International Cooperative

R&D

Licensed Production

Joint Production

Assembly Production

Commercial Purchase

Inter-Governments

(FMS) Purchase
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-32

When domestic development is not feasible,

then consideration is given to an International

Cooperative R&D project with one or more

allies. This can provide the same military capability plus technology transfer from another

nation to Korea. Besides the technology benefit,

cooperative R&D can reduce costs, because all

participants will share the costs of R&D and of

the follow-on production of the system or

equipment.

Over the years, the Korean acquisition policy

has favored the introduction of technology and

manufacturing capability into their defense industry. The next acquisition category is Technology Introduced Production. This approach

started in the 1970s, with Licensed Production

as the preferred strategy. They were relatively

successful, with weapons production of the M16 rifle, F-16 fighter aircraft, the UH-60 helicopter. This technique allowed significant transfer of skills and technical capability to Korean

firms, not only for their military needs, but it

opened the possibility of creating an export

market for defense material.

Joint Production, followed by Assembly Production, are the next two methods. In Joint

Production both countries produce components

and assemblies, while one company constructs

the final product. In Assembly Production, parts

and components are assembled and produced

locally which provides technology introduction

at the part or component level.

The third category, Foreign Purchase, includes

two methods—Foreign Military Sales (FMS)

and Direct Commercial Sales. FMS purchases

are government-to-government agreements, in

which case one government (U.S.) agrees to

contract on behalf of another country (Korea)

for defense equipment. In the case of Direct

Commercial Sales, the MND goes directly to a

commercial company, such as a Lockheed or

Boeing, to buy the equipment needed for the

military. Current policy is heavily weighted in

favor of Direct Commercial Sales. These last two

methods can provide the least amount of technology transferred to Korea. Although, the contract “deal” can include offsets31 where significant technology transfer can occur. There is

one other strategy not shown in Figure 3-14 and

that is leasing of equipment. This strategy offers

an ability to provide for short term needs, such

as the ROK Air Force’s lease of 30 Northrop

Grumman T-38A Talon Advanced Jet Trainers

to provide an interim training aircraft awaiting

the delivery of the new T-5032 Korean advanced

trainer.

Weapon System Research and

Development

The weapon system development process is

designed around a series of life-cycle phases.

They are conceptual research, exploratory development, system development, and production

and operation phases. See Figure 3-15 for depiction of process for R&D and for technology

introduced production.

Conceptual research is a design stage where

systematic technical analysis is performed to

meet long term military needs and to evaluate

development and production of a Korean style

weapon. These efforts are primarily study efforts

looking at the feasibility and evaluation of technology, current technology trends—domestic

and overseas—realistic technical objectives for

the project, and rough estimates of development

and production costs.

The next phase is Exploratory Development.

In this phase, more definitive studies will look

to determine the technical risks. Technical and

engineering analysis will be performed on

subsystems or major components and prototypes

produced to help in risk reduction for the new

system. These efforts are designed to determine

the appropriateness of follow-on development
Part 3 – Republic of Korea

3-33

and prepare the specifications that define the

characteristics of the product and contract

quality, inspection and testing requirements.

The third step in this process is System Development. In this phase, prior efforts come to

fruition. Actual equipment and prototypes are

designed and produced in sufficient quantities

to test the technical performance of the equipment or system. Much effort is spent on ensuring

that the quality requirements of both the system

and the manufacturing process are met. A variety

of other actions occur during this phase—a technical data package (including a production specification) will be developed, spare parts, technical

manuals, and inspection and test equipment will

be bought.

After the system meets its test requirements

the system will enter its next phase—Production

and Operations. The technical results of development and the quality assurance data from the

development phase will be sent to the DQAA

for use during the production phase. In this final

phase, military hardware, such as tanks, howitzers, naval vessels are manufactured by defense

contractors and delivered to the military forces

for their use.

While the process is laid out as a sequential process, systems and equipment may enter the process at any phase. The lead organization for the

conceptual and exploratory development phase,

if it is a government-led R&D project, is ADD.

This changes when the R&D is supplier-led,

then the Services take the lead, although, in a

number of cases, supplier led R&D may be

managed by ADD.

Both the ADD and the services are required to

prepare a Systems Development Plan. This

plan lays out their overall technical and management approach. The plan is submitted to

PMB and the Analysis Evaluation Bureau. If a

contractor is performing the work, then a System Development Agreement with both parties

signing is submitted along with a System Development Management Plan. Final reports

on the accomplishment of each phase are

submitted to the PMB.

Acquisition Execution Plans

A series of plans—the Defense Procurement

Plan, the Expenditure plan and the Treasury

Obligation Plan—lay out the yearly planning for

acquisition projects. These plans are prepared

by services or agencies and submitted to the

Acquisition Policy Bureau in October of the

prior fiscal year. For projects in categories A

and B (see later for explanation), which require

separate execution approval, service components

and agencies submit an individual procurement

plan for each project. The DAO Chief approves

these plans. These plans form the scope of the

work for the DPA for the following year. In

Figure 3-15. ROK Acquisition Process

Systems

Development

Phase

Exploratory

Development

Phase

Conceptual

Research

Phase

Production &

Operation

Phase

Research and Development
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-34

addition to the execution plans, acquisition

projects are implemented and managed through

a series of meetings and council reviews, to

include the Acquisition and Policy Councils.

National projects require discussions with

government offices related to the projects via

negotiations with the Defense Digitization

Subcommittee and the Defense Investment

Program Advancement Committee33 (see

section on councils).
Part 3 – Republic of Korea

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Chapter 8

MANAGEMENT OF

DEFENSE PROGRAMS

2. Projects for conventional weapons and C3I

systems currently in operation;

3. Follow-on projects;

4. Logistics support contracts;

5. Option Exercises;

6. Ammunition and stockpiles;

7. Land purchases required to operate and

maintain facilities, facility repairs, and similar base construction projects; and

8. Establishing, expanding or reorganizing

units equivalent to, or higher than, brigades,

combat battalions or intermediary echelons.

All other projects are subject to approval by

the Chief of Defense Acquisition Office or the

Services.

Program Management Responsibility

The management of a program/project is divided

between the Services and the MND. The decision to breakout a program for service management, versus at the MND level, depends upon

the political nature, the cost, the complexity

and issues involved. Management of a project

is broken out into three categories. Figure 3-16

shows the breakout of responsibility for projects. Those controlled by the MND are designated Project A, those controlled by the Services and Agencies—Project B and those that

Defense programs to develop weapon systems

involve a significant commitment of government

and industrial resources over a long period of time.

To ensure proper oversight and government

commitment to a program, approval of the most

significant individual projects is often at the

highest levels of government. The project approval level, based upon monetary value and

complexity, for acquisition programs are:

Projects subject to Presidential approval:

1. Projects costing 100 billion won (U.S.$85

million) or more;

2. Projects seriously affecting national policies

and diplomacy;

3. Projects requiring cooperation between two

or more government offices;

4. Projects for precision weapons, information

systems development, strategic weapons

with national interests, research efforts with

national interests; and

5. Projects that establish a new unit, or significantly expand or reorganize an existing

unit at a division, wing or flotilla level.

Projects subject to the Minister of National

Defense:

1. Projects costing 50 billion or more but less

than 100 billion won;
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-36

are general projects—Project C which do not

require separate approval. The Defense Investment Program Advancement Committee prior

to being granted approval reviews projects

involving other ministries.

The Project Management Team (PMT)

One thrust of the acquisition reform effort is

the establishment of a Project Management

System both within the MND and the Services.

The concept behind the establishment of teams

is to increase support within the departments

and to provide stability to the team. The PMB

is tasked with providing overall team leadership. Within the services, teams or project

groups will be formed to perform the planning

and provide management of each project. Each

team will include a Project Team Leader with

functional experts from the services and agencies. It is planned that the team will be populated with experienced personnel or, when not

available, by individuals who have received

special training. A Project Team will be created,

depending upon the size of the project, when

the project includes two or more services, close

cooperation with domestic and overseas governments is required, and when complicated

negotiation are expected or special security is

required.

The PMB has responsibility for setting up the

project teams. When it is necessary to have a

team, they will determine the size of members,

range of work, location of team, and the time

of installing and dismissing the Project Team.

The Services or agencies will submit a plan

to PMB for review. PMB will obtain approval

from the Deputy Minister and the MND.

Service and agency project teams shall be

supervised directly by the Chiefs of Staff of

Army and Air Force and the Chief of Naval

Operations and chiefs of agencies. Teams have

been formed for the SAM-X, AHX and KTX-2

projects.

Acquisition Reform in Program

Management

As mentioned earlier, “the real name” system is

being implemented within the MND. More individual responsibility is being demanded. Key

players/decision makers are now required to

indicate their role and recommendations in each

project. The office responsible for supervising

the project will keep an approval register (see

Figure 3-17) containing the date of approval,

opinions from other offices, instructions and

adjustments made after approval at the back of

the document. Each project will keep a history

of all interim information, project managers,

Figure 3-16. Project Management Designation

Management

Designation Description Approval

Project A 10 billion won or greater, intergovernmental, major common MND

military systems, core technology projects, dual use projects

with foreign countries and facility projects

Project B 3-10 billion won and not requiring MND Approval Services/

Agencies

Project C General projects include replenishment spares and small

ADD development projects
Part 3 – Republic of Korea

3-37

and actions taken from the time requirements

are proposed to the termination of projects.

Councils with an Impact on Acquisition

There are six councils and committees that play

a role in acquisition (see Figure 3-18). The primary council concerned with acquisition is the

Acquisition Council which has responsibility

for the draft MTDP (investment programs), the

Annual Budget Plans, and the Defense Acquisition and Development Plan. It also has the

task of approving changes to MND acquisition

regulations. The Deputy Minister for Acquisition chairs the council with senior leaders of

each of the acquisition bureaus, plus DPA and

ADD as well as JCS and Service representation.

An informal working level council chaired by

the PMB will work the preliminary work prior

to AC. These Councils have traditionally had

tremendous influence during the planning,

programming, and budgeting phases, and that

will continue even under the acquisition reform

changes. Their roles, however, have been diminished in the execution phase of a program.

They are only consulted if a major change is

required or anticipated.

Funding

Acquisition professionals are often faced with

budgetary problems—not enough money or

money for production when R&D money is

needed. Once the budget categories—Operations and Maintenance (O&M), R&D, or Procurement—are planned for execution, it must

be executed that year. This includes both obligation and outlay or, in principle, the money

goes back to the treasury. However, exceptions

can be made for unavoidable problems, but it

requires approval both within the Ministry of

Defense and from the Budget Administration

Office. This has become easier in recent years.

Another funding note is that while the defense

budget has a separate portion for R&D and procurement, much of the investment budget is

funded as part of the Service’s budget. As an

example, the new AEGIS class destroyer money

is in the Navy budget.

Figure 3-17. Project Management History Cards

Item Manager Section Bureau Chief Department

Manager (General Manager

(Project Manager)

Manager)

Requirements Proposal

Determination of Requirements

Selection of R&D

Applicable Projects

Test and Evaluation

Negotiation

Selection of Equipment Type

Contract

Deployment Evaluation

Position Grade/Rank/Name

Signature/Date of Signing
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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Acquisition Workforce

The acquisition workforce consists of the personnel that work for the DAO, the Program

Managers within the Services, the procurement

personnel at DPA, and the acquisition personnel at ADD, KIDA and DQAA. Acquisition personnel, military and civilian, on the technical

side will have college and advance degrees.

Those that are classified as administrative positions will have at least high school degrees and,

perhaps, some college. Most training is done onthe-job (OJT), with special short-term courses

available for acquisition personnel. An example

is training for contracting personnel, which is

mostly OJT, with a two-week introduction course

and a four-week acquisition course.

Acquisition reform initiatives target the need

for more experienced and skilled personnel

working in the acquisition. To increase personnel expertise, detailed standards are being established for selection of personnel to acquisition

positions. For both military and civilian acquisition workforce members, efforts are underway to increase promotion opportunities and

to increase the number of technological posts.

Over the long term, a modern, civilian personnel management system will be created to foster professionalism. Modern management methods will be a focus of increased training for

both military and civilian members. This includes

the establishment of a Defense Management

College for military personnel.

Figure 3-18. Councils Concerned with Acquisition

Military Affairs Council is the top decision-making body in MND. Responsible for basic defense

policy and approving the Mid-Term Defense Plan. Chaired by the Minister of Defense and includes

among its membership the JCSC, Service Chiefs and DAO head.

Joint Chief’s Meeting responsible for Joint Military Strategy Plan, JSOP, and approving the Service

Required Operational Capability (ROC) document. Chaired by the CJCS with its membership to

include the Service chiefs.

Joint Strategy Council reviews the Joint Military Strategy Plan, JSOP, and validating the Services

ROCs. Chaired by JCS, Director, Strategic Planning. Members include Directors DIA, Deputy Chief

of Staff of each service and VP of ADD.

Policy Council responsible for Mid-Term Defense Plan, annual budget plan, national projects related

to weapon systems acquisition, and changes to Defense Acquisition Regulations. Vice-Minister

chairs with membership to include the DAO chief, Planning & Management, Defense Policy, DIA,

and others.

Defense Investment Program Advancement Committee is an interagency committee which

deliberates projects with large costs, technological challenges or politically sensitive. Not a decisionmaking body, but can impact acquisition programs. Vice-Minister chairs with membership from the

Budget Administration; Ministries of Commerce, Industry & Energy and Science & Technology;

R&D Adjustment Agency; and MND (Senior Representatives from DAO, P&MO, Defense Policy;

JCS, Services, DPA and ADD).
Part 3 – Republic of Korea

3-39

Chapter 9

THE PROCUREMENT

PROCESS

Now transparency—open and competitive proposals, and open procedures—is the modus

operandi for the Korean procurement system.

An example of the change is the availability to

gather information. Previously, contractors

were shunted off to the DPA General Counsel’s

office for procurement information. Now interested companies can access this type of information on the Internet.34 The ministry is also

making available to foreign contractors the

planning for the next five years of acquisition

equipment.

Acquisitions, particularly large acquisitions,

were mostly restricted to sole source buys from

a pre-selected contractor. While statistically 90

percent of contracts were competed, the 10 percent that were not, were the largest dollar value

contracts. Competition is now the policy. An

example was the open bidding last year to select

a contractor to build three new destroyers for

the Navy. Originally Hyundai Industries was the

planned sole source supplier, but MND reversed

their prior decision and the $1 billion program

was open to all. The purpose behind this policy

change is to strengthen the ROK defense industry. Prior government policies had encouraged

business to build excess defense industrial capacity. This, of course, drives up overhead costs

and makes the industry less competitive. Competition should reduce excess capacity. There

may be exceptions to this policy. It was announced recently by the MND that all contracts

for future aerospace needs would be let to the

newly established Korean Aerospace Industries

(KAI) (see Industry Section).

The Defense Procurement Agency (DPA) is the

central buying organization for the MND. In

1998 it spent over 4 trillion won (U.S.$3.3 billion) to buy weapon systems and military equipment for the MND. DPA operates within the

procurement policy and management of the

Director General of the Acquisition Policy

Bureau. While it is the primary MND buying

organization, other agencies, such as ADD, also

have their own contracting offices.

DPA is tasked with awarding contracts, making

payments, negotiating offsets, and handling

customs, shipping, and follow-on management

of contracts.

The DPA has existed since 1971 under several

names and with different missions, to include

material management, which was returned to the

services in 1997. The need for DPA grew out of

the government’s goal of modernizing the warfighting forces and developing a domestic weapon production capability which was part of the

overall policy of industrial development instituted in the mid-1960s by President Park Chung He.

The hallmark of their current procurement policy

is—transparency, openness and competition.

This is a change from past procurement practices. Previously, many barriers existed for foreign contractors wishing to bid on Korean acquisitions. Restrictive registration, investigation

procedures and safety checks are just a few

examples. Information regarding procurement

activity was difficult to obtain and the process

for selection was obscure. In 1997 the MND

regulation on foreign acquisitions was revised.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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The Korean Civil Code governs all contracts

between the MND and industry. Although it has

been modified and influenced by American legal

practices, the original code was introduced by

the Japanese and was based upon the European

civil code. The civil law is codified, unlike the

more common practice in the United States and

the United Kingdom of judicially created law.

Thus the regulations governing acquisition are

relatively few in numbers and not subject to a

great deal of interpretation.

Historically the DPA has used a variety of

contracts depending upon the type of acquisition.

For general supply competitive buys, such as

typing paper, firm-fixed-priced type contracts

were used. For negotiated contracts, either fixedprice or cost-reimbursement contracts may be

used. In the past when buying defense supplies

domestically, the contracts were based upon

estimated prices at the start of the contract, with

the final price being the actual contract cost.

Domestically, future buys will be firm-fixedprice contracts. For foreign procurements, firmfixed-price contracts are the norm. Future buys

may allow for cost reimbursement contracts as

a possible tool to encourage competition.

The goal of acquisition reform efforts is to have

a fair and equitable process for selecting winners

and to have “even the unsuccessful bidders...

accept the result.”35 These efforts go beyond

just the realm of convincing contractors of the

systems fairness, but are aimed at building the

general publics support and confidence in the

procurement system. As indicated earlier announcements on acquisition and information on

the source selection process has been put on the

web.

How does the process work? There are different

procedures depending upon whether or not the

acquisition is conducted domestically or with a

foreign source. Generally, there are three methods of contracting domestically—full and open

competition, nominated, or limited negotiated

contracting. If the method is full and open competition, then a public notice will be issued in

major newspapers announcing the planned

issuance of an invitation for bid (IFB). Once the

IFB is issued, bids will be received, evaluated

and the successful contractor, based upon lowest

price, will be awarded the contract (see Figure

3-19).

If the bid is limited to several sources, the same

basic procedures will be followed. When the

contract is to be awarded to a sole source contractor, then an RFP will be issued, with negotiations followed by contract award.

If this is to be a foreign acquisition then a different procedure is used. First, foreign companies

wishing to participate in an acquisition program

must register with the DPA to get a Certificate

of Foreign Procurement Registration.36 A public announcement will be released notifying

interested sources of a proposed acquisition.

Figure 3-19. Contracting Process

Bid

Submission

Bid

Evaluation

Successful

Bidder

Selection

Contracting Execution
Part 3 – Republic of Korea

3-41

For those companies interested in participating,

a Request for Pre-Proposal will be issued. Interested companies, which submit a pre-proposal,

if they are considered qualified, will be invited

to a conference. If this is for a major acquisition

then bidding contractors will be determined by

MND.

The procurement process involves many MND

organizations, and responsibility is divided

among them for selection of the “best value”

equipment. The AEB will issue a Request for

Proposal37 to qualified and interested sources.

Offerors have 150 days to prepare a tender offer

on the proposed equipment with performance,

test and logistics support data, contract costs,

and offset/technology transfer offers. Upon

receipt of the proposal, AEB analyzes the data

for the technical performance of the equipment

(T&E) and life cycle cost (cost analyses). In

some cases AEB, with the services, will perform

actual trials of the equipment. As AEB is evaluating the equipment, the DPA conducts negotiation with the contractors to include price,

possible offsets and technology transfer.

Once AEB and DPA have concluded their effort, a COEA will be performed by KIDA. The

next steps are selection of the weapon system

and approval. The AEB and DPA efforts become inputs to the Program Management Bureau and for the Acquisition Council to approve

final selection of the contractor. After approval, the firm (or firms) selected will then face

final negotiations with PMB. The factors that

go into selection of a contractor are price (a

major factor), offsets and O&M impact. It is

anticipated that to strengthen the domestic

defense industrial base, technology transfer and

industrial offsets will play a bigger role in future

selections of contractors.

Once the contract is awarded by DPA,38 they

provide contract administration, payment and

oversight. The DQAA and the end user’s inspection office will perform an inspection prior to

Figure 3-20. Acquisition Procedure of

Foreign-Introduced Weapon Systems

Preparation of Request

for Consolidated Proposal

T&E, Acquisition Price,

Offset, Technology Transfer

Industry Application for

Proposal/Open Meeting/

Distribution of Consolidated

Proposal Request

(within 5 months)

Annoucement of

Acquisition Plan

Annoucement of

Acquisition Plan

(Period: 40 days)

T&E

Evaluation

by Data

Domestic T&E

Overseas T&E

Negotiation

Offset

Technology

Transfer

Acquisition

Price

Receipt/Review of

Preliminary Proposal

Analysis of Cost Effectiveness

Selection of Weapon System

Approval for Execution

Contract Signing

PMO

AEB

Services

DPA

KIDA

ADD

aaaaaaaaaaa aaaaaaaaa

PMO

Services

DPA

KIDA
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-42

acceptance of the equipment. PMB and the Service Program Management Group or Program

Management Team will provide management

and technical oversight of the contractor during

performance.

As part of the openness and acquisition reform

efforts they have an informal, non-judicial forum for dissatisfied contractors to voice their

concerns.

Two other items of interest in the procurement

system are the socio-economic efforts and data

rights policies. Current policy is to increase the

emphasis on contracting with Small-andMedium Industry (SMI). The MND has set an

objective of awarding 20-30 percent of the

procurements to SMIs. Increased participation

in parts supply and technology development

offer an opportunity for awards to SMIs.

The ownership of data rights is always a contentious issue. The basic MND data policy is

that ownership or using rights of part or all of

the technology (including related software)

acquired through the government R&D contracts, belongs to the government. The government will also have ownership or using rights

to technology introduced from foreign countries or acquired through offsets. In some cases

suppliers may keep licensing rights for technology for a specific period for participating in

the R&D.
Part 3 – Republic of Korea

3-43

Chapter 10

TEST AND EVALUATION

(T&E)

test and evaluation will be used. The PMB will

issue a Request for Proposal (RFP). The RFP

will require interested contractors to prepare a

proposal that provides adequate information on

the technical and operational characteristics of

the system as well as the information for negotiations. The MND will have prepared a Test and

Evaluation Plan or in some cases, the Services

if the program is entrusted to them. AEB will

review and approve the Service test plan. After

receipt of proposals, a working group composed

of the MND, the Services and related agencies

will review and evaluate them. The MND will

then execute a T&E of the system and conduct

negotiations in parallel.

The process for conducting test and evaluation

of a foreign procurement is based upon three

possible scenarios. Is there enough data extant—

development background, test reports, records

of military use—to allow an evaluation of both

the warfighting performance (ROC) and the

logistics support of the equipment? If this is

the case, a database T&E will be performed. If

enough information is not available, then a

domestic T&E of the equipment will follow.

An ad hoc team led either by the MND or the

Services will test and evaluate the equipment

for its operational capability and adequacy of

logistics support. “However, domestic T&E

may be considered to be completed by participating in foreign military strength demonstrations, such as the international air shows and

international ship shows held in Korea by

friendly nations.”39 Finally, an overseas T&E

will be performed with a team sent abroad, if

no other method is available.

Test and evaluation of new systems and equipment is the responsibility of the MND and the

Services. This is a recent reform in acquisition

policy since it had been the responsibility of

the JCS.

The T&E approach will depend upon the acquisition method used—R&D or Foreign Procurement. In programs where the decision is to go

the domestic R&D route, the first series of tests

are called Development Test and Evaluation

(DT&E). The DT&E determines whether or not

the prototype equipment meets the specification standards and also the technical levels of

the equipment. Once the equipment has satisfied DT&E requirements, Operational Test and

Evaluation (OT&E) will be conducted on the

system. OT&E will provide verification that the

system meets the ROCs and operational suitabilities of the Services. In some cases, to save

time and money, these tests can be performed

simultaneously.

DT&E is conducted under the direction of the

PMB if it is an ADD effort. If it is supplier

R&D, the supplier conducts the test under the

management of the Services (or, in some cases

ADD). In some cases PMB may have an observer team composed of members of MND, the

Services, ADD and DQAA. OT&E will be performed by the Services under the direction of

the AEB (or, in some cases by AEB). Normally

ad hoc teams will be formed to conduct the

tests.

When the strategy is to acquire the equipment

from foreign sources then a different process for
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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The responsible office within the MND for

T&E is the AEB. The AEB is primarily a policy

office with the services performing the actual

T&E. Execution of T&E may be retained at

the MND level, or delegated to the Services

and agencies. In some cases, where the MND

involvement is still appropriate, i.e., controlled

projects, then AEB will provide direction to the

Services on testing the equipment. This includes

AEB approving the T&E plan. They will also

supervise the tests. MND will also make the

final determination whether or not the equipment meets standards and is suitable for combat

purposes. In cases where MND has delegated

T&E responsibility—entrusted projects—the

T&E plan and report must be submitted to both

AEB and the PMB. The criteria used by MND

to determine test responsibility depends upon

the importance of the weapon system, the

complexity of the system and its role in a joint

battlefield. Also, to be considered is the Services “effectiveness of organizing and operating

a T&E team.”

After completion of the operational test, the

judgement as to whether it is “acceptable” or

“unacceptable” for combat purposes will be

made by the MND for MND controlled projects.

In acquisitions where T&E has been omitted,

then the AEB has made a judgement that it is

acceptable for combat purposes and will notify

both the PMB and the appropriate Service. In

the programs which the Services have test responsibility, the decision as to whether the weapons are “acceptable” or “unacceptable” for

combat purposes (military use) will be made

by the Services. A final test report is provided

to both the PMB and the AEB.
Part 3 – Republic of Korea

3-45

Chapter 11

COOPERATIVE ACQUISITION

AND ARMS SALES

“Countries need to cooperate in these areas of activities as it allows

each country to cut down R&D cost, prevent unnecessary overlapping of technological development among countries and augment and complement existing technology owned by respective

countries.” 40

— Mr. Kang, Haeng Jung,

Director General International Cooperation Bureau

business environment in Korea to attract foreign

investment.

While the current emphasis on R&D cooperation

is new, international cooperation is not new to

Korea. The Korean government has used licensed production as a means to develop their

industry. “Production by adopting foreign

technology that one country lacks is the shortest

and most efficient way to lessen the cost and

risk of independent development.”41 Several

successful production programs with United

States companies were performed, going all the

way back to the 1970s to include the M-16 rifle,

and 500MD helicopter; in the 1980s the F-5E/

F and FA-16 fighter aircraft; and in the 1990s

the UH-60 helicopters, and F-16 fighter aircraft.

There are two benefits to the change in policy

for acquiring new technology—it opens the way

to mesh their skills and the new technology to

develop their industry and it also provides an

opportunity for entry into the market of their

partner. How is this accomplished? Internally

within the acquisition system, when a foreign

procurement is planned, a key element, of the

negotiation will be the offset provisions of the

contract. The current offset policy applies to

Increased international cooperation is a major

theme of defense reform efforts in Korea. From

their policy viewpoint, international cooperation reduces their R&D costs, provides access

to new technology and advances production

methods. It also reduces manufacturing costs

of purchasing new equipment through the

introduction of new technology and manufacturing methods, and helps provide an independent defense capability. There is recognition

within the government that defense industry

mandates “cutting edge technology,” and joint

production helps provide access to that type of

technology. Finally, it contributes to expanded

cooperation on defense matters with their allies.

To expand their international cooperation

efforts, they have increased the number of

countries they are doing business with by

signing new Memo-randums of Understanding

(MOU) (currently 16). In the past, most of their

efforts were with the United States. To increase

future opportuni-ties for cooperation, they now

make available the “Five Year Defense Plan”

which provides information on planned weapon

system needs, budget, and deployment time

frame. As will be discussed in the Industrial

Base section, they have also changed the
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-46

all acquisitions of $10 million or more. What

is an offset? In general terms, it is a condition

of a buy that requests foreign contractors to

offer compensation in exchange for the contract.

In the Korean context, offset policy aims at acquiring state-of-the-art technology through

technology transfer. But, it can also include buyback provisions or other forms of reimbursement. A typical example could include the

acquisition of aircraft with the agreement that

Korean firms receive subcontracts for 30 percent

of the parts or components of the aircraft. Figure

3-21 indicates the amount of offset trade. In the

past, the offset policy goal was that 30 percent

of the contract value was to be performed in

Korea. The East Asian financial crises hit Korea

hard in the 1997-98 time frame. During this

period, the need was to enhance the export of

goods; thus the offset negotiation priority was

changed from favoring transfer of technology

to favoring the export of defense industry parts

and goods.

Korea is primarily an importer of defense equipment, mostly from the U.S. as indicated in Figure

3-22. In the early 1990s the U.S. provided almost

90 percent of the military equipment Korea

bought from overseas. However the U.S. share

has continued to decrease over the decade. Other

countries offers of offsets, U.S. restrictions on

technology transfer and third-party sales have

played a role in the number of buys going to

other countries. One of the issues concerning

senior Korean officials has been the imbalance

of armaments trade between the two countries.

If a comparison is made over the last six years

between Figures 3-22 and 3-23, they show a

difference in sales between Korean and the U.S.,

with the U.S. having a 264 to 1 advantage in

sales—$5.4 billion to Korea’s $21 million.42

Korea ranks 30th in the world for export of

arms with sales of $30 million in 1998.43 In

1999, arms export sales increased climbing to

$200 million.44 They export primarily to Turkey, Malaysia, Indonesia, Thailand, Bangladesh, and the U.S. The two primary areas of

export are ammunition and mobile equipment

(armored vehicles and military vehicles) as well

as, rifles and guns, and telecommunications

equipment. Appendix A shows exports by sector

and by region. A contentious issue between the

Figure 3-21. Korean MND Offset Trade

Countries No. of Basic Contract Agreed Amount Ratio of Off-set

Projects Amount for Off-set Trade Trade (%)

U.S. 185 10,530 3,229 31

UK 31 1,133 495 44

Germany 50 928 328 35

France 15 693 304 44

Italy 23 314 146 46

Holland 18 238 89 37

Others 30 503 231 45

Total 352 14,339 4,892 34
Part 3 – Republic of Korea

3-47

Figure 3-22. Korea’s Purchase of Weapon System (1990-1998) (Unit: Million Dollars)

Year 3rd

FMS Commercial Total Country Total % U.S.

’90 639 763 1,402 90 1,492 94.0

’91 2,709 84 2,793 250 3,043 91.8

’92 263 194 457 285 742 61.6

’93 645 84 729 90 819 89.0

’94 600 194 794 218 1012 78.5

’96 859 393 1,252 362 1,614 77.6

’97 794 226 1,020 1,018 2,038 50.0

’98 373 71 444 81 525 84.6

Total 7,309 2,359 9,698 2,698 12,366 78.2

Figure 3-23. Korean Exports Sold Worldwide (6.6% to U.S.)

U.S.

80

1994

70

60

50

40

30

20

10

0

1995 1996 1997 1998

M$
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-48

U.S. and Korea has been the difficulty in obtaining permission from the United States government to export defence material to other countries. According to the Korean Herald, South

Korea paid 78 percent of the royalties to the

United States from the period of 1994 to

September 1998.

Also, according to South Korean defense companies they have not received a single U.S. government approval to sell weapons to third countries. Prior approval is required by agreements

with the United States.45

The regulatory and legal requirements for arms

exports involve several ministries and laws. The

Ministry of Commerce, Industry and Energy

has responsibility under the “Foreign Trade

Act” for exports. The Ministry of Foreign Affairs and Commerce (MOFAC) is in charge of

establishing policies and proposing direction

for disarmament and reviews the possibility of

any diplomatic issues upon exporting certain

items or to certain countries. However, a Korean

firm gets its export license from the MND for

major defense materials in accordance with the

“Special Act Governing Defense Industry.” The

Director General of the APB is in charge of

control and approval of arms export. They have

the responsibility for international cooperation

in their International Cooperation Branch

including setting up cooperation meetings and

agreements (for example, Data Exchange

Agreements (DEA), MOUs.

Technology Cooperation

The MND has participated in a variety of

International Cooperation projects with the

United States over the years. These projects

range from DEAs (44), Engineer and Scientist

Exchanges (274 Korean and 12 U.S.), co-research

(nine projects since 1996), to commercial

contracts.

The United States and Korea have also created

a framework through the Annual Security

Consultative Meeting at the Ministerial level for

technology and industry cooperation. The

Defense Technology and Industrial Cooperation

Committee (DTICC), which works under the

auspices of the Consultative Meeting, has two

sub-committees working technology and industry. The Technology Cooperation Sub-Committee is co-chaired by the Chief of the Technology Cooperation Department in ADD, and

Office of the Secretary of Defense (OSD), International Program Manager for Korea. This

committee yearly evaluates technology cooperation alternatives, and progress on current programs. For industrial issues, there is the Defense

Industry Cooperation Sub-committee cochaired by the National Defense Industrial

Association (NDIA), a U.S. defense industry

non-profit organization and the Korean Defense

Industrial Association.

Internationally, the MND has looked at increasing cooperation with other countries. ADD has

a Technology Cooperation Agreement with

France, which started in 1993. The Joint Research Committee chaired by the President of

ADD and the French Director of Defense

Support Program at the Delegation General For

Armaments (DGA) look for opportunities for

increased cooperation and research. They have

six working groups focused on the areas of

satellites, communication, shipbuilding, aircraft, missiles, simulation, and chemical and

biology. In 1999, Korea signed a technology

agreement with Turkey for defense industry

cooperation to boost competitiveness of their

defense industry and cooperative on the export

of items. Other countries have signed agreements with Korea including: European countries such as United Kingdom, Germany, Spain,

Russia, and Rumania; Asian countries such as

Malaysia, Thailand, Philippines, Indonesia; and

the Pacific nations of New Zealand and

Australia.
Part 3 – Republic of Korea

3-49

Chapter 12

THE INDUSTRIAL BASE

relatively small with the Ministry of National

Defense depending heavily upon grants from the

United States to acquire U. S.-made equipment.

This started to change in 1969 when Korea was

jolted by a series of events all part of the fallout

of the Vietnam War. First, U.S. policy changes

announced by President Nixon, the “Nixon

Doctrine,” altered the American role in the Pacific from an active role to one which placed increased responsibility on our allies for their own

defense. Nixon’s visit to China heightened concerns in the Park government. Coupled with the

Nixon Doctrine was the decrease of grant assistance, which Korea had relied upon to buy military equipment. Finally, in the late 1970s, President Carter’s announced pull out of troops from

the Korean Peninsula raised concerns about

reliance on the U.S. for both protection of the

country and as a supplier of defense equipment.

In response to American actions, President Park

set in motion specific efforts, which were designed to create an infrastructure for developing

a strong defense industrial base. Heavy, defense

and chemical industries were targeted for

growth. The 1973 Special Act on the Defense

Industry was enacted to regulate the defense

industry. This law (plus decrees and regulations)

still regulates the defense industry today.

Within this changing U.S. /Korean relationship,

began several decades of cooperative programs.

Korea was singled out by the U.S., as one of

only two nations outside of NATO and Europe

to be awarded co-production contracts for the

M-16 rifle in 1971 and 7.62 ammunition contract

in 1972. Throughout the 1980s, the U.S. and

One of the “Tigers” of Asia, the Korea economy

was touted throughout most of the 1980 and 1990s

for its remarkable successes. Companies such as

Samsung, Hyundai, and Deowoo—names now

very familiar to American consumers—led the

expansion of the economy. They created the 12th

largest economy in the world. The Asian financial

crises dealt a severe blow to the economy requiring the government to seek an International Monetary Fund (IMF) bailout. The defense industry

was not immune to the crises. As indicated earlier,

defense modernization efforts were scaled back

in the 1997 and 1998 time frames with several

major programs being delayed. Recent economic

news has painted a rosier picture for industry as a

whole with the economy showing an 8 percent

growth in 1999. Corollary to the economic growth

is the MND announcement of a new, aggressive

four-year modernization program, which will

provide an impetus to continued growth in the

defense industrial base.

From a historical perspective, the Korean War

left the country in shambles. Most of the heavy

industry and electrical power was located in the

North, while the South was primarily light

industry and farming. Real growth of the

economy did not start until the 1960s, under the

leadership of President Park, Chung He. In 1960

the per capita income for a Korean worker was

$85 per year, one of the lowest in the world.

Through a series of government five-year plans,

which set goals and provided incentives to

industry, economic growth and development

started. These incentives also encouraged monopolistic growth of the industry (see Chaebol

discussion on next page). During this early

period the Korean defense industry remained
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-50

Korea collaborated on other successful programs

in which they produced conventional weapons,

such as the F-5E/F aircraft, the 155MM gun and

in the 1990s, the UH-60 helicopter and F-16

fighter.

Korea’s efforts to develop a national defense industry have borne fruit. “By 1992 the ROK was

officially producing 63 percent of its total defence procurement locally; by 1995, this figure had risen to 79 percent.”46 Future plans emphasize continued growth of the defense industrial base. Specifically, they plan to continue

transfer of technology for production and recognizing the value of a strong research capability

plan to strengthen their R&D efforts. Future

defense budgets will show increases for R&D.

A specific target has been set for 2015, which

will increase the R&D share from approximately 5 to 10 percent. Technologies for aerospace,

information, shipbuilding and communication

are the prime target fields.

The Korean defense industry,47 some 120 companies, produces a variety of items ranging from

microelectronic devices, radars, and ammunition

to naval vessels, vehicles and aerospace equipment (including the development of T-50 advanced aircraft trainer). While the defense industry has grown in importance, the real economic and industrial growth has been occurring

in the commercial industry—electronics and

high technology.

The major companies involved in the defense

business are Samsung-Thompson, Korean

Aerospace Industries (KAI), Hyundai, Hanhwa,

Korean Air Lines Co. Ltd., and Daewoo. These

companies are often referred to by the popular

term “Chaebol.” The “chaebol” is a big business,

conglomerate, which is based upon family

ownership. The “chaebol” was the engine that

powered the economic success of Korea. The

four biggest are Hyundai, Samsung, Daewoo,

and LG,48 which account for nearly 60 percent

of the country’s yearly exports. As the chaebols

grew, the small- and medium-size businesses

suffered. To redress this problem, one of the

acquisition reform initiatives has been to

strengthen the SMI role in the defense business

by awarding up to 30 percent of MND contracts

to them. Closely tied to the SMI initiatives is

the MND “Localization Program.” Localization

includes substituting items procured or developed from foreign sources to be produced or

developed locally to bolster the local economy.

The major Korean firms are world-class manufacturers. Their market niche has been the ability

to produce consumer goods at lower costs. To

do this, they bought patents and technology from

foreign sources, which allows them to quickly

bring products to market. A consumer example

is Hyundai’s use of the engine developed by

Japan’s Mitsubishi Company for their cars. As

might be implied, a weakness of this approach

has been to neglect investment in research and

development.

The defense portion of their industry has

followed a similar approach, in this case licensed

production—which has the benefit of developing

a robust defense manufacturing capability.

Unfortunately, this also led to less money being

invested in research. With defense work being

only a small percentage of their business defense

research has been a low priority.

What is the relationship between the government

and industry? The constitution prohibits the

nationalization of private business, except for

national defense or economic emergencies.49

However, the constitution also provides significant authority for the national government to

regulate and coordinate the economy.50 Throughout the history of South Korea, the government’s

hand has pressured and pushed industry thus

playing a major role in the economic growth

of the country. While the constitution prohibits

the nationalization of industry, the government
Part 3 – Republic of Korea

3-51

has still played a major management role in

some industries. It has owned business firms,

primarily for economic reasons. These businesses include Korea Telecom Corporation,

Korean Tobacco and Ginseng Corporation, and

Pohang Iron and Steel. Current deregulation

efforts by the Ministry of Trade, Industry and

Energy; includes transferring to private ownership the three companies just mentioned, plus

eight other companies by 2004.

There has been another significant change in the

relationship between the government and industry. Recently, the Korean government aggressively sought to attract foreign capital by allowing foreigner companies to engage in mergers

and the acquisition of Korean businesses. The

legal basis to increase foreign direct investment

in Korean businesses was set in 1998 by the

passing of the “Foreign Investment Promotion

Act.” This law encourages an inflow of capital

investment, technology and management knowhow. Foreign companies will now be able to

acquire up to 100 percent of a company. The

intent of this law is to increase the competitiveness of Korean industries, to include the

defense industry. An example of this has been

the highly publicized competition for the KAI.

Originally a combinations of teams—Lockheed

Martin/Aerospatiale Matra SA and BAE Systems/Boeing were to bid against each other to

buy 30 percent of KAI. As of the writing of

this book (June 2000) only BAE/Boeing remained in the bidding and negotiations were to

be conducted over the summer to finalize the

investment and working plans. KAI was created,

by government direction, by consolidating

Daewoo Heavy Industries Co., Hyundai Space

and Aircraft Co., and Samsung Techwin Industries Co. This combined company will employ

about 35,000 people with estimated sales of $700

million. To sweeten the pot foreign firms are

eligible for various preferential treatments under

both the “Foreign Investment Promotion Act”

and the “Special Act on Defense Industry.”

In sum, the Korean defense industry is a small

portion of the overall commercial industry. It

has developed a strong manufacturing capability, with armament sales increasing tenfold

from the early 1990s to $200 million dollars in

1999. The defense industry will feel the effects

of globalization with mergers and alliances with

other national companies that manufacture armaments. Future trends indicate increased sales

to the armed forces and efforts by the government

to foster the R&D efforts of industry.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-52

FURTHER READINGS

CULTURAL

De Mente, Boye Lafayett, NTC’s Dictionary of

Korea’s Business and Cultural Code Words:

The Complete Guide to Key Words That

Express How Koreans Think, Communicate

and Behave, Published by NTC Publishing

Group 1998.

HISTORY

Nahm, Andrew C., A History of the Korean

People: Korea Tradition and Transformation, Hollym International Corp, Elizabeth

New Jersey/Seoul, 1996.

Kim, Bun Woon, and Pan Suk Kim, Korean

Public Administration, Hollym

International Corp, Elizabeth New Jersey/

Seoul, 1997.

Oh, John Kie-Chiang, Korean Politics, Cornell

University Press, Ithica and London, 1999.

CURRENT

Korean Herald on the web:

 http://www.koreaherald.co.kr/

Korean Times Homepage:

 http://www.koreatimes.co.kr/times.htm
Part 3 – Republic of Korea

3-53

ENDNOTES

13. MND is used to describe the overall agency

and also to refer to the headquarters organization is a vis-à-vis the services and agencies.

14. Nahm, p. 172.

15. $1=1150 Won: Taken from several sources

—White paper on Defense, Defense Attaches Briefing in February and the Korean

Herald (April 19, 2000 for 2000 budget).

16. Force Improvement Program and MidTerm Defense Plan are often used interchangeably. Sometime also referred to in

newspaper reports as the Five Year Defense

Plan (FYDP).

17. As part of acquisition reform initially was

designated as Defense Acquisition “Agency.” Many documents still refer to it as an

agency, but its current official designation

is “Office.”

18. There been six other Republics: Syngman

Rhee—1st; Chang Myon-2nd; Park Chung

Hee-3rd; Chun Doo Hwan-4th; Roh Tae

Woo-5th; Kim Young Sam-6th.

19. Line and staff organizations are terms used

in military organizations to differentiate

roles. A line organization is one which

carries out an operational mission (a squadron of ships), while a staff organization

generally sets policy (Headquarters Navy).

20. Testing is carried out at other centers such

as the Naval Systems Development

Centers, Naval Systems Test Range,

located at Chin Hae Naval Base.

1. Believed to be the world’s first ironclad.

2. Oh, p. 124.

3. Korean Herald, April 19, 2000, p. 1.

4. Government’s estimate is 6 percent, Finance

Minister estimates 7 percent, Korea Development Institute estimates 7.8 percent.

5. Literal translation “blue roof house.”

6. Constitution, Article 73, (Treaties, Foreign

Affairs).

7. Oh, p. 131.

8. The Korean approach to name sequence is

used throughout this Chapter—last then first

name.

9. In February 2000 the National Assembly

decreased the number of seats from 299

to 273 as part of the national election

reform efforts. These efforts also included

a change to confirming the Prime Minister

and Chief Justice by introducing

confirmation hear-ings. More Korean

women should also be-come part of the

political life since parties are now required

that 30 of their candidates must be women.

10. Oh, p. 183.

11. Constitution, Article 57 (Change of Budget

Bill).

12. Kim, p. 53.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-54

21. Korean National Defense Reform Plan,

Part 4.

22. Korean National Defense Reform Plan,

Part 4.

23. Korean Herald, January 10, 2000 in article

“Defense Ministry Committed to Reforming Military.

24. Kim, p. 110.

25. See MND Directive # 651 for list of approved agencies for requirements generation.

26. Current plans are to change the timeframes

for the mid- and long-term plans to accord

with the presidential term in order to better

reflect the president’s security guidelines.

27. Delivered as a keynote speech at the Forum

for Democratic Leaders in the Asia-Pacific

(FDL-AP) recently.

28. 1999 US Congressional report by a House

advisory group, the North Korea Advisory

Group.

29. Defense News, May 3, 1999, p. 7.

30. Non-weapon systems follow a similar logic

trail.

31. Offsets refers to the practice of buying

equip-ment from one company/country

while requiring a quid pro quo, in terms of

a reciprocal buy or other method of offsetting the contract cost such as transferring

technology.

32. Formerly the KTX-2.

33. Also translated as the Defense Investment

Project Promotion Committee.

34. http://www.dpa.go.kr/english/engmain.

html is the website for DPA which contains

an outline of their procurement procedures.

35. The defense reform White paper.

36. If a company is using an agent he must also

register.

37. For those familiar with the old system, two

RFPs used to be issued. This was change

in 2000 to improve the efficiency of the

system.

38. Most foreign procurement contracts are

signed at the Director General level of the

DPA.

39. MND directive 651.

40. This view was present by Mr. Kang, Haeng

Jung at the 2nd Annual International Acquisition and Procurement Seminar in Seoul

Korea in September 1999, hosted by the

Korean Institute of Defense Analyses.

41. From presentation by Col. Kim Jong-Soo,

R&D Attache at the NDIA Attaches Luncheon Feb. 2000.

42. From presentation by Col. Kim Jong-Soo,

R&D Attache at the NDIA Attaches Luncheon Feb. 2000.

43. SIPRI Arms transfer project—constant

1990 dollars.

44. Korea Herald, February 14, 2000.

45. Korean Herald, 3 November 1998 at

www.koreaherald.co.

46. Janes Information Group, 1998.
Part 3 – Republic of Korea

3-55

47. Must receive a designation from the Minister of Commerce, Industry and Energy.

48. Lucky Goldstar (LG)

49. Constitution, Article 126 (No Socialization).

50. Constitution, Article 119 (Regulation and

Coordination).
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

3-56
Part 4 – Republic of Singapore

4-1

PART 4

REPUBLIC OF SINGAPORE

Singapore Straits of Malacca

Malaysia

Indonesia
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-2
Part 4 – Republic of Singapore

4-3

Chapter 1

HISTORY AND TRADITIONS

“Singapore is no longer the rough-and-ready port of rickshaws,

opium dens, pearl luggers and pirates, but you can still recapture the

colonial era with a gin sling under the languorous ceiling fans at

Raffles Hotel—Victorian relics—east and west and modernity.”

of Singapore continued to grow with a large

influx of Chinese, Indians and Malays searching

for economic opportunities. By 1860, the

Chinese made up

over 60 percent

of the population, while

Malays and

Indians constituted 13 percent and 16 percent

respectively, with Europeans making up the

balance.

The British continued to rule the Straits Settlements and Singapore until the 1960s, except for

a short period of Japanese rule during World War

II. In 1957 Chief Minister Lim Yew Hock asked

Britain for self-government, which was granted

with the first elections in 1959. The People’s

Action Party (PAP), led by Lee Kuan Yew, won

the election. Lee became the first Prime Minister (PM) and Yusof Ishak became the first Head

of State.

However, Singapore remained a colony of Britain. As the PAP leadership entered the 1960s

they continued to push for independence and

a merger with the Federation of Malaya. The

Malaya Federation included peninsular

Malaysia and Sarawak and Sarah on the island

of Borneo. From Singapore’s perspective, the

The Straits of Malacca have been the highway

between East and West for over a millennium.

Through these Straits, traders moved commercial goods such as gold, silk, tea, opium, tobacco,

spices, cotton and weapons. The great religions

of Buddhism, Islam and Christianity also moved

with traders through the Straits into Southeast

Asia, Japan and China. In the 15th Century, the

great Chinese Admiral Zheng He moved his

giant ships westward through the Straits expanding the influence of the Qing emperor into

Southeast Asia, advancing as far as the coast of

Africa.

About 181 years ago, on 28 January 1819, at

the tip of the Malay Peninsula, at the exit from

the Straits, a small trading post was established

by Sir Thomas Stamford Raffles of the British

East India Company. By 1825 the post, named

Singapore,1 had grown to a population of 10,000.

In 1826 Singapore joined with two other towns

on the Malay Peninsula—Penang and Malacca

—to form the Straits Settlements. As increased

trade passed through Singapore, it grew more

prosperous and powerful and became the capital

city of the Straits Settlements.2

The British East India Company ruled the

Settlements until 1858 when responsibility

passed to the British Government. In 1867 the

Settlements came under direct rule of the British

Home Office as a crown colony. The population

SINGAPORE
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-4

merger would open up trade with Malaya by

establishing a common market and would lead

to independence from Britain. The Malays,3

particularly the leader, Tunku Abdul Rahman,

feared a communist takeover of Singapore and

believed a merger would diminish this possibility. The merger occurred on 16 September

1963.

Tunku Abdul Rahman and his Alliance Party

headed the new government, now called the

Federation of Malaysia, which was headquartered in Kuala Lumpur. Each state, including

Singapore, had its own government; held its own

elections; and managed education, finance and

labor. The central government was responsible

for external matters such as defence and foreign

policy.

Unfortunately, the planned common market did

not materialize, Singaporean industry was not

promoted, and the Tunku’s political party, the

Alliance Party, strongly supported their party

members against the PAP in the Singaporean

elections. Rumors of ill treatment of Malays contributed to violent communal riots breaking out

between Chinese and Malays. Additionally, the

Tunku wanted to provide special rights for

Malays in ownership and business, which the

PAP could not support. Lee’s decision to have

the PAP, 80 percent Chinese, compete at the

national level meant his party posed a threat to

the rule of the Tunku’s communal Malay party.

These factors led the Tunku to decide that Singapore must leave the federation. While Singaporean leaders—in particular Lee Kuan Yew—

were reluctant to sever ties, they agreed, and on

9 August 1965, Singapore was separated from

Malaysia and became an independent nation.

The same leadership team, Yusof Ishak as the

President, with Lee Kuan Yew as the first PM

and head of Cabinet, led the new government of

the Republic of Singapore. The legislative

assembly was renamed the Parliament, and two

months later Singapore joined the British Commonwealth. The foremost politician for the remainder of the 20th Century was Lee Kuan Yew,

even now, serving as a senior minister and

advisor to the current PM, Mr. Goh Chok Tong.

Singapore is considered one of the cleanest and

most progressive countries in Asia. It has gone

from an entrepot to a bustling commercial center.

As one of the “Asian Tigers,” it has become an

Asian economic power in the last 50 years. Its

economy has shown annual growth rates as high

as 6–7 percent over the last 10 years. Its per

capita income is one of the best in Asia at

$24,600.4

 From the beginning, the government

has played a key and positive role in all aspects

of society and the economy. Its efforts have

produced a strong manufacturing and technology base. An indication of the strength of the

economy was its success in weathering the

recent East Asian financial crises with only

modest drops in economic indicators.

SINGAPORE
Part 4 – Republic of Singapore

4-5

Chapter 2

THE GOVERNMENT

OF SINGAPORE

EXECUTIVE BRANCH

President

The President, currently S. R. Nathan, is the

Head of State and Commander-in-Chief of the

Singaporean Armed Forces (SAF). This position

has traditionally been ceremonial, primarily

involving the greeting of visiting Heads of State

and the appointing of the PM and other ministers (with the advice of the PM). In 1993 the

method of selecting the President was changed

and he was given additional constitutional

powers. Now the President is elected by direct

popular vote for a term of six years. Additionally, he has the “custodial powers”5

 to veto

legislation, such as the budget, and deny appointments to public office. A part of this new

authority provides the opportunity for the

President to examine the government’s actions

in the areas of internal security, corruption and

religious harmony. However, the President must

obtain the advice and recommendations from a

small group of appointed senior advisors, the

Council of Presidential Advisors, prior to performing these activities. To make his veto final

he must obtain agreement by a majority of the

six member of the Council. “Otherwise, the

Government can overturn the President’s veto

with a two-thirds vote in Parliament.”6

Not everyone in Singapore can run for President.

A Presidential Election Committee must screen

candidates for the requisite experience, reputation, good character and integrity. In 1999 the

government found only one suitable candidate

and appointed (elected) Mr. S. R. Nathan as the

The Republic of Singapore is both a national

and a city government. It collects trash and plans

for the national defence. Its territory is slightly

larger than three and one half times the city of

Washington, D.C. Its current population is estimated at over three and a half million. Three

quarters of the population is Chinese, with

Malays and Indians being the two other major

ethnic groups in the country. Religious issues

are also a major concern for the government with

three primary religions—Buddhism (Chinese),

Muslim (Malays) and Hindu (Indians). Christians, Sikh, Taoist and Confucist make up the

balance of religious groups. There are four

official languages—Chinese, Malay, Tamil and

English. To further complicate the political life

and raise security issues, Singapore is surrounded by more than 180 million Muslims in

Malaysia and Indonesia.

Singapore is a republic within the British

Commonwealth with its constitution dating from

3 June 1959 but amended in 1965 to reflect its

independence from Malaysia. Its governing

structure is modeled on the British parliamentary

system, often referred to as the Westminster

Model. To provide insight into the acquisition

system, we will discuss the executive and legislative branches of government and their role in

defence and acquisition issues. To complete the

governmental structure picture, the judicial

branch consists of the Supreme Court, separate

from the other branches, with subordinate courts.

The Supreme Court has the constitutional responsibility to determine whether or not laws

comply with the constitution. Its legal system is

based on the English common law tradition.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-6

new President for a six-year term. Even with the

new constitutional powers, the position of

President has remained primarily ceremonial.

Prime Minister

The Head of Government and Chief Executive

of the country is the PM, currently, Mr. Goh

Chok Tong. As is typical of British-style governments, the PM leads the cabinet and is

normally the leader of the majority party in the

Parliament. The PM nominates cabinet member

and determines their portfolios, which are then

approved by the President. The PM has the

authority to remove any cabinet member. He also

chairs the Defence Council (DEFCO), the chief

military body in the country. This body advises

the PM on security matters and decides the need

for armament programs with significant political

and economic concerns.

The Cabinet

The Cabinet is the executive and administrative

arm of government. Cabinet ministers are

elected members of the majority party in Parliament. In Singapore, since the founding of the

Republic, the majority party has been the PAP.

The PM heads the cabinet and chairs cabinet

meetings. The Cabinet sets government policy,

and the individual ministers direct the department and ministries within their portfolios. The

cabinet is responsible to Parliament. The Office

of the PM coordinates and monitors the activities of all ministries and government bodies

and also directly supervises the Corrupt Practices Investigation Bureau and the Elections

Department.

The Ministry of Finance (MOF) could be described as the first among equals. This ministry

plays an influential role in the development of

budgets within every agency. Yearly, each

ministry must present a detailed proposal of its

spending needs for the next fiscal year (FY). The

MOF will then provide approval for submittal to

the Cabinet and then the Parliament. Figure 4-1

shows the current cabinet of Singapore.

Prime Minister, Mr. Goh Chok Tong

Senior Minister, Mr. Lee Kuan Yew

Deputy Prime Minister, PM’s Office

Deputy Prime Minister and Minister for Defence,

Tony Tan

Minister for Law and Minister for Foreign Affairs

Minister for Finance

Minister for Information and the Arts and Environment

Minister for Home Affairs

Minister for Communications and Information

Technology

Minister for Trade and Industry

Minister for Manpower

Minister for National Development

Minister without Portfolio

Minister for Health and Second Minister for Finance

Minister for Community Development and Muslim

Affairs

Minister for Education and Second Minister for

Defence

Figure 4-1. Cabinet of Singapore
Part 4 – Republic of Singapore

4-7

LEGISLATIVE BRANCH

Parliament

The legislature of Singapore consists of both the

President and Parliament. Members of Parliament (MPs) are elected by general election every

five years or less, if the legislature is dissolved.

In the last general election of 1997—the PAP

won 81 of 83 seats. While there are over 20

registered political parties in Singapore, the PAP

was the majority party in the Legislative

Assembly (pre-nationhood) and the Parliament

since its inception in 1965. Thus the PAP has

been the only party to form a government since

the beginning of the nation.

Most MPs are elected by universal adult suffrage. However, Parliament has two other categories of members. They are Non-Constituency

MPs (NCMPs) and Nominated MPs (NMPs).

Up to six NCMPs may be appointed from opposition political parties, while NMPs, who

serve a two-year term, are appointed by the

President to provide a wider representation of

views in Parliament.7

Singapore’s approach to the election of MPs is

somewhat different from the traditional British

model. Only nine MPs are elected by direct

election. The remaining 74 members are elected

in teams of four to six, called Group Representation Constituencies (GRCs). In these teams,

at least one member must be from a minority

group—Malay, Indian, or a member of one of

Singapore’s other minorities. The group representation constituencies were introduced in the

1988 general election to ensure the parliament

represented Singapore’s multiracial society.

Further, all debates and discussions in Parliament are conducted in Malay, English,

Mandarin, or Tamil.

The Budget

The defence budget is part of the overall government budget. In February of each year, the

executive branch of government introduces the

budget to the Parliament for passage prior to

the beginning of the fiscal year—April 1.8 The

annual debate on the Budget Statement begins

sometime in late February or early March and

lasts from two to seven days. Debate tends to

be “big picture” primarily focusing on the government’s fiscal policy. This is followed by debate on the Estimate of Expenditures for each

ministry, including defence. Following debate

is the passing of the Supply Bill (budget). Since

adoption of the Supply Bill only requires a

majority vote, the ruling party, in this case the

PAP, is assured it will always pass. Like all other

bills, it goes through the normal legislative process. The government introduces it; it is deliberated in three readings; then passed by majority

vote. Once passed, the bill is sent to the President

for approval.

Because of the multi-racial and multi-religious

nature of the Singaporean society, prior to

presidential approval, laws are sent to the Presidential Council for Minority Rights to determine their impact on the religious or ethnic

communities within the country or its impact

on the fundamental rights of citizens. The Council’s advisory opinions carry significant weight,

since bills must be revised, or passed by twothirds approval of the Parliament to overcome

any problems. The Council, however, has no

power over money bills (the budget), defence

and security issues, or urgent legislation.

Role of Committees

After the second reading of a Bill, the Bill is

sent to a committee for review and changes, if

necessary, and then the final bill is reported out

of committee for its third reading. The Parliament

of Singapore has two types of committees—
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-8

Sessional Committees and Select Committees.

Currently, there are seven Sessional Committees

covering a variety of parliamentary functions.

They are the Committee of Privileges, Committee of Selection, House Committee, Public

Petitions Committee, Standing Orders Committee, the Estimates Committee and the Public

Accounts Committee. The only two that play a

role in defence issues are the Estimates Committee, which examines the government’s budgets, and the Public Accounts Committee, which

examines government expenditures. There are

a several ad hoc committees called Select

Committees, which are created to seek out views

of the general public on legislation. There is a

third type of committee, called the Government

Parliamentary Committee (GPC). These committees, one typically for each ministerial portfolio, such as defence, are designed for two

purposes. First, the committees provide fora for

public discussions on government activities and,

secondly, they provide opportunities for legislative “back-benchers”9

 to gain experience on

issues and obtain visibility with the citizenry.

The Role of the Civil Service

The Singaporean civil service’s contribution to

the nation has been enhanced by its “squeaky

clean” image. Since the founding of the country,

the national leadership has emphasized honesty

and dedication to meeting national needs.

Bolstered by a Confucian and British tradition

of service to the country and aided by high salaries to help avoid temptation, the civil servant

has played an active role in shaping both the

economy and society.

A position in the civil service is a desired job

leading to a successful career and providing an

opportunity to be considered among the elite of

the nation. The general structure of each ministry

is to have a politically appointed Minister with

two assistant secretaries—one political for

parliamentary affairs, and the other, a senior civil

servant for administrative affairs. Organizationally, the senior civil servant in each ministry

is the Permanent Secretary. The Permanent Secretary, not the Minister, is the “accounting

officer” for the ministry and thus has significant

power. “The accounting officer is responsible

for the ministry’s budget and its expenditure, as

well as the proper accounting and management

of public money and assets.”10

More than 60,000 government employees work

in the ministries or quasi-public statutory board

or public enterprises. The civil service, as is

typical of all civil services, provides the institutional continuity and the management of the

ministry. Recruiting from the best local universities is intense with the rewards being special

scholarships for study at home and abroad, and

future jobs that allow those selected to make a

significant impact on the nation. Only those

scoring the highest on very competitive written

exams are selected for the civil service. They

enter one of four hierarchical divisions of the

civil service. In some cases, they may enter

Division I,11 the professional level, which includes the permanent secretaries. The next two

categories, levels II and III, contain the largest

group of civil servants who perform the routine

work of government. Division IV contains those

involved in manual and semi-skilled labor.
Part 4 – Republic of Singapore

4-9

Chapter 3

THE MINISTRY OF DEFENCE

(MINDEF)

According to the Asian Military Review, Singapore has been the top Association of Southeast

Asian Nations (ASEAN) in acquiring defence

capability.13 Overall, the MINDEF receives approximately 25 percent of the total government

spending, which in 1998 was S$7.3 billion,14

equating to 5.1 percent of the Gross Domestic

Product (GDP). By law the military budget can

be as high as 6 percent of the GDP. In 1998 20

percent of the budget, or $775 (U.S.) million was

earmarked for development and acquisition.15 The

FY 99 budget remained stable at S$7.3 billion.16

In FY 2000, the MINDEF budget was increased

slightly to S$7.4 billion (4.5 percent of GDP).

The Minister of Defence and Deputy Prime

Minister is Dr. Tony Tan. As shown in Figure 4-

2 he is currently assisted by two politically appointed personnel, the Second Minister for Defence and a Minister of State for Defence.12

There are two Permanent Secretaries (senior

civil servants), one for Defence (coordinates

defence and security policies) and one for

Defence Development (development, technology and administration). The Chief of the Defence Force reports to the Minister and manages the military component of the Ministry, the

Singaporean Armed Force (SAF).

Figure 4-2. MINDEF Organisation Structure

Minister of State for Defence

Second Minister for Defence

Minister for Defence

Dr. Tony Tan

Permanent Secretary (Defence)

Permanaent Secretary

(Defence Development)

Chief of the Defence Force
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-10

The total “Security and Defence” budget for

Fiscal Year 2000 is S$9.6 —S$7.4 to MINDEF

and the rest—S$2.2 billion—for security related

housing and civil defence type activities.17

Singapore Armed Forces (SAF)

The military component of the MINDEF is the

SAF. The SAF comprises the Army, the Republic of Singapore Navy (RSN) and the Republic

of Singapore Air Force (RSAF). The SAF is

commanded by the Chief of Defence Force

(CDF) assisted by the Joint Staff. The CDF

exercises command over the three Services

Chiefs. The SAF’s 50,000 military members

include both regulars and full-time reserves,

called National Servicemen (NSmen). Over

250,000 reserves are members of the National

Service.

The Joint Staff

The Joint Staff plays a significant role in setting priorities, and planning the training and

operations for the three services. Its principal

components are the Joint Operations and Planning Directorate (JOPD), the Joint Intelligence

Directorate (JID), Headquarters Medical Corps

(HQ MC) and the Singapore Armed Forces

Training Institute (SAFTI) Military Institute.

The SAFTI is an indication of the integrated

efforts of the SAF. The SAFTI is the single military academy for all three services providing a

joint perspective to future young officers. The

Joint Staff also includes personnel in the Manpower Division and the Defence Technology &

Resource Office under the control of the Permanent Secretary (Defence Development) (see

Figure 4-3).

CIVILIAN COMPONENT

The executive arm of the MINDEF is headed

by a Permanent Secretary (Defence PS (D)), who

is assisted by the Permanent Secretary (Defence

Development). The Permanent Secretary Defence Development, Mr. Peter Ho, manages the

Figure 4-3. Singapore Armed Forces (SAF)

Joint

Intelligence

Directorate

Joint

Operations

and Planning

Directorate

Commandant

SAFTI Military

Institute

Director

Manpower

Division

Chief

Medical

Corps

Resource

Planning

Office

Chief of Defence Force

SAF Joint Staff Navy Chief

Army Chief

Air Force Chief
Part 4 – Republic of Singapore

4-11

acquisition system and would be considered the

National Armament Director (NAD) for Singapore.18 Reporting to the Permanent Secretary

(Defence Development) are two Deputy Secretaries for the Defence Administrative Group

(DAG) and the Defence Technology and Resource Office (DTRO). Deputy Secretary Policy

manages the Defence Policy Group (DPG) and

reports to the PS (D). The Chief Defence Scientist also reports to the Permanent Secretary

(Defence Development) and provides scientific

and technical advise on defence technology for

both the MINDEF and the SAF. (See Figure 4-4

for organizational structure.)

Defence Administrative Group (DAG)

DAG is headed by a Deputy Secretary (Administration) who oversees five divisions with responsibility for manpower, personnel, financial

matters such as payment of salaries, suppliers

and contractors, and for planning and administration of the defence budget. They are also

responsible for management development,

training, and legal services.

Defence Policy Group (DPG)

The DPG is headed by the Deputy Secretary

(Policy) who is responsible for matters concerning security, defence relations and information policy. DPG provides top-level policy

guidance. It is also the focal point for export

policy and staff requests for military exports to

the approval authorities, generally at the

Ministers level.

Defence Technology & Resource Office

DTRO is headed by the Deputy Secretary (Technology). DTRO (see Figure 4-5) is the strategic

planner, technology manager and promoter for

Figure 4-4. MINDEF Organizational Structure

Permanent Secretary

(Defence)

Permanent Secretary

(Defence Development)

Deputy Secretary

(Administration)

Deputy Secretary

(Technology)

Chief Defence

Scientist

Deputy Secretary

(Policy)

Executive

Arm

Defence

Administration

Group

Defence

Technology &

Resource Office

Defence

Administration

Group
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-12

the MINDEF. They provide top-level policies,

plans and budgets and coordinate activities with

the Defence Science and Technology Agency.

Figure 4-5. Defence Technology & Resource Office (DTRO)

Technology

Policy

Technology

Plans

Director

Systems
Part 4 – Republic of Singapore

4-13

Chapter 4

THE ACQUISITION

ORGANIZATION

in 1997 with the creation of the DSO National

Laboratories. This change provides more management flexibility in hiring and retaining personnel and forming strategic alliances with industry and research institutions. Allied to this

change is a re-engineering of the organization

to improve processes and systems to cultivate

an environment conducive to fostering greater

initiative and creativity. The Ministry retains

control over planning and funding.

DEFENCE SCIENCE AND

TECHNOLOGY AGENCY

In 1999 the Parliament of Singapore passed the

Defence Science and Technology Agency Act.

The act created the Defence Science and Technology Agency (DSTA), as a statutory board, to

more efficiently and effectively manage the

acquisition of materials. This is part of the

“corporatizing” efforts that the MINDEF began

Figure 4-6. DSTA Corporate Entities

Human

Resource

Corporate

Services

Internal

Audit

Industry

Development

Systems

Engineering

Plans/

CIO

Defence

Technology Office

International

Relations

Deputy Chief Executive

(Strategic Development)

Deputy Chief Executive

(Operations)

Chief

Executive
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-14

DSTA is an agent of the MINDEF and, as such

it acts for the MINDEF in acquisition matters.

It employs almost 2,400 personnel in the

acquisition of materials, technology and infrastructure necessary to support the needs of the

SAF. It will also manage the implementation of

the science and technology plans of the

MINDEF. DSTA is the successor organization

to the former Defence Technology Group (DTG)

and was formed on 1 April 2000. A Chief Executive, who is supported by two Deputy Chief

Executives, one for Operations and one for

Strategic Development, leads DSTA.

Corporate Structure

The DSTA Corporate Headquarters consists of

eight directorates or offices responsible for

system engineering, planning, information

management, international relations, industry

development audit and administration and

personnel (see Figure 4-6). DSTA also has two

Defence Technology Offices: in Washington,

D.C. in the United States and Paris, France. They

will also provide a technology road map for

DSTA’s research efforts. The two Defence Technology Offices also serve the direct interests of

MINDEF besides DSTA. The Defence Industry

Department has responsibility for the indigenous

defence industry development and sustenance,

to include transfer of technology and know-how

to local industry.

Line Organizations

DSTA consists of seven line Program Management directorates and four Line Development, or productions units (see Figure 4-7). The

philosophy behind the new structure is a “Program Centric Structure” focusing around a core

Figure 4-7. DSTA Organisation Structure – Less Corporate Entities

Defence Info

Systems

Land

Materiel

Naval

Materiel

Air

Materiel

Building &

Infrastructure

Directorate

of R&D Procurement

Deputy Chief

Executive

(Operations)

Deputy Chief Executive

(Strategic Development)

Chief

Executive

CSO

Systems

SCO

DMRI

DSO

National

Labs

Line Programme Management Line Development
Part 4 – Republic of Singapore

4-15

of integrated program management teams.

Closely allied with this theme is the need for a

customer focus. DSTA will designate senior

managers to serve as “Account Managers” to

their customer—MINDEF, the Joint Staff and

the three Services. Three of the Program Management organizations—Air, Land and Naval—

are aligned directly with their service customers within SAF. The Defence Information Systems (DIS) will manage Joint and MINDEF information programs. The three remaining organizations are focused on building and infrastructure construction and management, research and

development (R&D) of new technologies and

Procurement. DSTA’s responsibilities span the

entire spectrum of a weapon system, from research, development and acquisition of new

systems to modification and updating existing

systems. The role of each organization is further described below.

Defence Information Systems (DIS)

Directorate

DIS provides program management for joint and

service command, control, communications,

mission planning, computer and simulation

systems throughout the life cycle of a system.

Line Service Centric Program

Management Organizations

The Air, Naval and Land Materiel Directorates

are the Program Managers for new equipment

or systems acquisitions. They perform market

research, develop the acquisition strategy, evaluate offers, select the contractor and manage the

project once DPD has awarded the contract. Its

multi-disciplined and technically competent

engineers have delivered defence systems such

as the Patrol Vessel, Upgraded F5 Fighter,

FH2000 Artillery Gun, Barak Anti-missile

Missile, and Infantry Fighting Vehicle.

Defence Procurement Directorate (DPD)

DPD is responsible for the procurement of

materials and services for MINDEF. It is also

the central authority for disposal management

for the Ministry (see Procurement section for

more information on DPD).

Directorate of Research and Development

(DRD)

DRD is the R&D manager for the Ministry. DRD

has responsibility for building up critical R&D

capabilities within the country. Their work involves technology and exploratory develop-ment

management to include oversight of technology

and exploratory development projects. This

includes fostering cooperation with both

international and local R&D academic institutions. It plays a role similar to the Defense

Advanced Research Projects Agency (DARPA)

in the United States.

Building and Infrastructure Directorate

(BID)

BID is responsible for the planning, designing,

developing and maintaining of defence facilities.

The have handled a wide range of building

projects to include building the new Changi

Naval Base which can berth aircraft carriers.

Many of these operational facilities are among

the first in this region and are built with protective capability. BID is also the authority for

conducting explosive testing for protective

technologies.

LINE DEVELOPMENT

Line Development includes the Systems and

Computer Organization (SCO) which has

responsibility for Management Information

System (MIS) software development, Command
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-16

Control, Communication, Computer, Intelligence (C4I) software development, the Defence Medical Research Institute (DMRI),

previously part of DAG, and the Defence Science

Organization (DSO) National Laboratories.

DSO National Laboratories

The DSO National Laboratories are an affiliated

company of DSTA. DSO’s 500 engineers handled over 400 projects and generated revenue

of $198 million in FY 1998, conducting R&D

in science and technology to support Singapore’s defence and to contribute to the economic

development of the country. DSO was “corporatized” in 1997 as a not-for-profit company to

enable them to attract employees and provide

better service to the MINDEF and SAF. Currently they provide support for Technology

Development, Exploratory Development and

Full Scale Development. Their research efforts

cover a wide variety of areas, such as aeronautics, signal processing, chemical defence,

computer networks, electro-magnetic, materials

and mechanics. As shown in Figure 4-8, DSO is

led by a Chief Executive Officer (CEO) with a

management team that includes three Directors—Corporate Affairs, Research and Advanced Development. Twelve centers, each

reporting directly to the CEO, are shown below.

The DSO does a significant amount of research

with local industry, universities, and research

institutes, such as Nanyang Technical University

Figure 4-8. DSO National Lab Structure

Director,

Advanced

Development

Director,

Research

Director,

Corporate

Affairs

Chief

Executive

Officer

Communication

Systems

Cent

Centre

Communication

Systems

Centre

Electronic

Warfare

Systems

Centre

Radar

Systems

Centre

Communication

Systems

Cent

Centre

Unmanned

Systems

Centre

Advanced

Systems

Centre

Systems

Engineering

Centre

Chemical

Defence

Centre

Decision

Support

Centre

Eelctromagnetics

Centre

Physical

Sciences

Centre

Information

Systems

Security

Centre

Advanced

Eelctronics &

Signal

Processing

Centre

Centres
Part 4 – Republic of Singapore

4-17

Director (Operations). They have nine technical

divisions which are organized by services needs

and by technical functions that cross service

specific lines, such as dual use systems, simulation systems, and information systems. They

covers all stages of the system development

processes from planning, design, development,

integration and testing to operations and support

engineering.

Defence Medical Research Institute

(DMRI)

DMRI is a medical research institute with responsibility to coordinate and conduct human

science and biomedical research. This is done

with the view of enhancing safety, survivability,

and performance of service personnel. Their

three divisions—Applied Physiology, Human

Factors and Molecular Genetics—follow

worldwide military medical developments.

They also have three research facilities—

Applied Physiology, Human Factors and

Molecular Genetics Laboratories.

DSTA’s Linkage

Figure 4-9 provides a visual depiction of the

relationships between DSTA and the many

organizations involved in acquisition. In this

new operating environment they will seek to

further strengthen their relationships both with

local industry and research organizations,

international partners both governments and

industry.

(NTU) and National University of Singapore

(NUS). They also have established international

partnerships with other countries such as the

United Kingdom—Defence Evaluation and

Research Agency (DERA), France—Délégation

Générale pour l’Armement (DGA) and the

United States—Naval Postgraduate School

(NPS).

Systems and Computer Organization

(SCO) Directorate

The SCO’s more than 400 employees provide

the MINDEF with the capability to develop and

maintain the latest in Information Technology

(IT). They are the planner, architect, system

developer and maintainer of MINDEF information systems. They are also a service provider

managing computer centers for the internet and

email network. The range of their responsibilities includes the Tri-Service Integrated

Logistics Management Information System,

Training Systems, Financial and Accounting

Management and many others MIS systems.

The Command, Control, Communications

& Computer Systems Organisation (CSO)

Directorate

CSO’s 400 engineers provide engineering support for command, control, communications,

mission planning, computer and simulation

systems throughout the life cycle of a system.

CSO is headed by a Director who is assisted by

a Deputy Director (Technology) and a Deputy
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-18

Figure 4-9. DSTA’s Linkages

DSTA

MINDEF/

SAF

Foreign

Governments

Local

Research &

Academic

Institutions

International

Research &

Academic

Institutions

Local

Defence

Industry

International

Defence

Industry Defence

Systems &

Capabilities

Policies,

Plans &

Budgets

Collaboration

Policies

Collaboration &

Procurement

Procurement

Technology

Partnership

Strategic

Alliance

Procurement Strategic

Support

R&D

Collaboration
Part 4 – Republic of Singapore

4-19

Chapter 5

REQUIREMENTS, PLANNING,

AND BUDGETING

Ministry. Originally, the Singaporean defence

approach was termed “Forward Defence,” which

was modeled on the Israeli approach and

envisioned pre-emptive strategy based air superiority, armor and mobility. Today, “Total

Defence” calls for a small, well-equipped military force backed by a large well-trained reserve

force and an extensive civil defence organization to deter or overcome aggression. “Total

Defence” is a broad-based national plan with

the following five key aspect:

• Psychological Defence

• Social Defence

• Economic Defence

• Civil Defence

• Military Defence.

Total defence requires a strong economy, wellprepared military, harmonious societal relations,

emergency response, and commitment to

Singapore.

Within the “Total Defence” concept the armed

forces develop a Long-Term Plan (10 Years) and

a Five-Year Plan which covers the requirement

needs of the armed forces. Yearly, each service

submits its 5-year and 10-year plan in which

requirements are identified and justified in a joint

forum. Priorities are set centrally by the Joint

Staff with the JOPD as the responsible organization. To implement the long-term plans a more

Requirements Generation

The first step in any acquisition is the development of an operational need. This starts on the

military side of the organization—the SAF—

where operational needs and weapon system

requirements are developed within the Service

Headquarters’ Plans Departments.19 Once a need

has been conceptualized, the armed forces will

staff their requirement papers for discussion and

approval to their respective Service Chiefs of

Staff, usually at a staff meeting. An approved

item then goes to the Joint Staff for validating

the military need and prioritization. It then

moves on to senior levels within the MINDEF

for approval as a “project” to garner funds

enabling it to become an acquisition program.

The approval level of the requirement, depending upon dollar value, will be at a committee

meeting of the Committee for Review of Requirements (CRR) chaired by the Deputy Secretary, the Weapon System Committee (WSC)

chaired by the Permanent Secretary or the Headquarters Committee chaired by the Minister.

Once a project is approved, the Specific Operational Requirements (SOR) document will be

submitted to the DTG for acquisition.

Planning and Budgeting

The overall framework for defence planning

includes two related concepts “Diplomacy and

Deterrence,” which have been articulated for more

than 20 years by senior government leaders.

“Total Defence” provides the overarching guidance

for the capital equipment investments of the
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-20

estimates then go to the MINDEF, the Defence

Finance Organisation (DFO) within the DAG,

which in turn submits its estimate to the Finance

Ministry in November. After MOF approval, the

estimate is sent to the cabinet in the DecemberJanuary time period. After cabinet approval, the

budget is submitted in February to Parliament.

Once the Supply Bill (budget) becomes law,

funds are allocated for new investments to the

Ministry and, in turn, to the Services. Thus, each

service, in accordance with the approved plans

has responsibility for spending money based on

its investment needs. The services can make

minor adjustments to allow for unplanned

events. No specific line item exists for R&D.

Rather a project comes with “funds” and then a

determination is made to develop a new item or

buy an existing item.

detailed two-year Procurement Plan is developed

between the Services and DSTA, which identifies the individual projects that will be funded

and acquired. All plans are classified. DSTA then

converts operational needs, as described in the

SOR, into various technical options, including

the acquisition methodology, which in turn is

approved at the appropriate level.

“Many countries determine their defence budget

the conventional way, that is, by basing it on an

assessment of threats. Singapore uses an unconventional method—its defence budget is fixed

at 6 percent of the GDP, the level needed yearly

for sustaining and strengthening its defence

capability.”20 With the 6 percent as a cap, the

yearly budget activities, as depicted in Figure

4-10, begin with the Services preparing their

budget estimates in the May–July time frame

and submitting them to the JCS. The budget

Figure 4-10. MINDEF Planning and Budgeting Process

May–July

July–August

September–October

November–December

December–February

February

Budget Estimate

JCS Review

MINDEF Review

Finance Ministry Review

Cabinet Review & Approval

To Parliament
Part 4 – Republic of Singapore

4-21

Chapter 6

THE DEFENCE

ACQUISITION SYSTEM

primarily aircraft from the United States, are the

second priority. Over the last 10 years the

MINDEF has spent almost $2.5 billion buying

U.S. fighters—F-16, A-4s, F-5s, transport—C130s, reconnaissance and air control—E-2s, and

helicopters—CH-47s, and UH-1s.23 Finally, if

the first two approaches are unable to satisfy

the military requirement, they will embark on a

development program. The Singapore government has shown increasing interest in local

promotion with efforts in the development of

new naval vessels such as the Victory class

corvet, the new Fearless class of patrol vessels,

and the Bedok class Mine Counter-Measure

Vessel (MCMV). Overall sales to the local

defence industry were less than S$500 million

out of a 1998 Defence Budget of S$7.3 billion.

Procedurally, once the Services have provided

their SOR, their operational need, and a prioritization of the project, the DSTA will convert

the operational need into various technical

options. Based upon the available technical

options, an acquisition methodology or approach

(e.g., local development) will be determined and

endorsed at one of the regularly schedule meeting of the Approval of Requirement Forum

(AOR).24 By U. S. norms a unique feature of the

process is the AOR approval of the entire program including a commitment to long-term

budgeting. “Once the Singaporeans authorize a

project you can be sure they are committed to

it.”25 Although the budget still has to be justified

each year, a program that meets its requirements

will not suffer the financial uncertainty that often

exists in other countries.

The Singaporean defence acquisition system has

evolved over the last 35 years from one of a

“smart user” to a “smart buyer” and now moving

into the realm of a “system designer and

integrator.” This requires the development of

policies, procedures, personnel within the

government and nourishment of a defence

industry capable of developing and producing

sophisticated defence equipment and system.

So far, we have described the acquisition organizational structure and the planning and programming necessary for acquisition of new

equipment. Now we will switch to the policies, procedures, management approach and

education of acquisition professionals.

There are three general approaches to finding

the most cost-effective way to acquire a new

capability—upgrade current equipment, buy

new existing equipment, or develop a new item.

The first course of action the MINDEF would

evaluate to enhance their military capability is

to upgrade existing equipment.21 In implementing this policy, concerted efforts have been

made to upgrade aircraft such as the A-4 and F5 fighter upgrades and C-130 tankers and army

tank upgrades for the AMX-13 and M-113

Armored Personnel Carrier. If an upgrade is

impracticable, then the policy is to acquire new

equipment. “Indigenous development programs

must stem from a bona fide military requirement

that cannot be satisfied through import purchases,” said Su Guaning, Deputy Director of

DSTA.22 Equipment purchases, which have been
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-22

Once approved, the DSTA will begin acquisition

of the equipment or weapons system. The acquisition approach for existing items and overseas

purchases are discussed in the Procurement

section.

In those cases where a new development is

required, the equipment or system will take the

following route—planning, design, development, integration and testing, and then operational deployment and support. The first part of

the process—planning, design, development

integration and testing—can take a long period

of time. “Typically, from conceptualization

to...operational deployment, a total cycle time

of 10 years may be required.”26 The Infantry

Fighting Vehicle (IFV) is a good example of this.

In the late 1980s, the Army decided they needed

a new fighting vehicle. The acquisition organization, with the Army, conducted a market

survey of existing platforms. None met the tough

operational needs of the Army. The choice was

to settle for meeting only some of the requirements by upgrading an existing platform or

buying a new one. At the same time local industry—Singapore Technologies Automotive

(STA), on its own initiative and at its own cost,

produced a sample to demonstrate the capability

to meet the SAF requirements. The decision was

made to embark on a development effort to field

a system that would meet the Army’s demanding

parameters. STA and acquisition engineers spent

the next couple of years working on early prototypes of a lightweight, highly mobile, wellprotected IFV. After many trials with these early

prototypes, the MINDEF awarded a contract for

the final prototype and pre-production models

in January 1995 of the IFV, which is now nicknamed the BIONIX. In September 1997, seven

years later, the first article units were rolled off

the production line. After successful trials,

production delivery began in 1999 with the

delivery of 300 units.

While planning, developing, and testing are the

normal activities of acquisition in the MINDEF,

as in other defence acquisition organizations, it

has a “formal” division of acquisition activities

into phases. The four phases are depicted in Figure 4-11. Front-end Planning, Operational Requirements, Engineering, and Program Implementation phases. The first three phases mostly

cover the research and planning necessary to begin the development or acquisition of a system.

The phases are system specific, as each program

will vary based on the amount of time and effort

required for each phase. The following paragraphs

include a discussion and explanation of the

activities that take place during each phase.

Figure 4-11. Acquisition Process

Programme Implementation Phase

Development/Production/Operation

Operational

Requirements

Phase

Front-End

Planning

Engineering

Phase

Decision Point: Approval of Requirement (AOR) Committee
Part 4 – Republic of Singapore

4-23

Front-end Planning

This phase primarily involves the search for

technologies to enhance operational effectiveness. DRD, the Service, and other offices

within DSTA, such as Air Materiel are all

involved during this phase. They will participate

with researchers from industry, from the

National University of Singapore (NUS) and

Nanyang Technological University (NTU) and

others.27 A Joint Fund is created from which the

costs of each project are paid.

The work in this phase is sometimes based upon

military requirements (demand-pull) and sometimes based upon technological opportunity

(technology push). “Currently, MINDEF does

set aside a portion of its R&D funding for the

exploration of future technologies and system

concepts to ensure a good balance between

technology push as well as the demand pull. That

is, what the users want today and what the

technology can offer perhaps tomorrow. This

has been an integral part of MINDEF’s policy

on research and development for many years.”28

It is recognized that the known needs of the

customer must be met, but also that the technologist has a role in identifying and researching improvements that will increase military

capability.

Operational Requirements Phase

It is during this phase that the armed forces

specify their operational requirements in the

SOR. The DSTA will take these requirements

and conduct exploratory studies to flesh out the

requirement and in some cases develop prototypes to demonstrate technical capability. The

DSTA Program Management Office (PMO) in

the Land, Air and Naval Directorates will be

involved in this phase.

Engineering Phase

The design in this phase is solidified. The required engineering specifications are completed,

including technical performance and interface

with other systems. Technical trade-offs and

various technical options are considered. This

is the crucial stage because the selection of the

final contractor is made during this phase. The

PMO will determine the technical worth of industry proposals. Not only will cost be evaluated, but also engineering performance, quality,

and the contractors implementation approach.

The selection of the final contractor is often a

trade-off since existing vehicles usually do not

meet all the requirements needed by the military.

Program Implementation Phase

This is the final phase and entails the expenditure

of significant amounts of work and money. The

appropriate PMO manages the system development or production to ensure project completion

on time and within budget. If it is a C4I system,

DIS is the program manager. Various major activities occur during this phase beginning with

Full Scale Development, test and evaluation of

the equipment and then its production and entry

into service. There are several design and testing

steps that a product must go through. During

Full Scale Development, the Preliminary Design

Review (PDR) and the Critical Design Review

(CDR) are the “go, no-go” points for continuing

with a project. Next acceptance and reliability

tests and installation and integration checks are

conducted to ensure that the system meets its

contract requirements. From that point, the

program will “transition to production.” The next

two key events involving the SAF are the Initial

Operational Capability (IOC) and Full Operational Capability (FOC). IOC is the date when

the system is first introduced into an operational

unit with appropriate training of personnel

completed and logistics support available. With
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-24

final delivery of all equipment to operational

units, the SAF will achieve FOC.

Two final thoughts on acquisition phases. First,

throughout all these phases, the DSTA and the

military user are partners in the process. The

services are a part of the team and involved in

the management of the program ensuring that

the final product meets the services’ operational

needs. Secondly, while development projects are

accomplished within this process, the MINDEF

normal buys “off-the-shelf” items, i.e., they go

from operational need to products available on

the markets to fulfill the need. This significantly

shortens the cycle time to achieving IOC and

FOC.

Test and Evaluation

Singapore is a small country and does not have

a lot of territory for testing of aircraft, munitions,

tanks and other military equipment. This restricts

its ability to perform the extensive operational

testing other nations often conduct. The MINDEF

approach to testing depends upon the type of

equipment they plan to acquire. In general there

are two categories of testing—production and

operational testing. The first is production testing

of equipment, which is conducted by the contractor. After completion of its in-house testing a

contractor will issue a certificate of compliance

and a certificate of conformance to confirm the

item meets the military contract specification.

Often sample testing will be conducted by the

contractor to verify compliance.

The second category of testing concerns how

well the equipment performs under battlefield

conditions—the operational environment. An

operational test team, part of the Program Management team, is formed for each program. In

evaluating the operational effectiveness of an

existing item, MINDEF acquisition and military

personnel will assess the operational envelope—

the limits of the equipment prior to its entry into

the inventory. If the equipment is to be bought

“off-the-shelf” then during the selection process

the team will have access to data that indicates

how the item has been used and the limits of the

equipment. Once the equipment has been acquired it will be tested in operational scenarios

to determine its most effective use. For items

that are developed locally, such as the BIONIX

IFV, the developing contractor (STA) and the

test team, in this case from the Army, will

conduct operational testing locally, if possible.
Part 4 – Republic of Singapore

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Chapter 7

PROGRAM MANAGEMENT

The personnel on the team will have an engineering background and approach the project with a

systems integration engineering approach. The

strength of the team is based upon its ability to

bring together all the necessary players to make

a program successful. The formation of Integrated

Management Teams (IMTs) lends itself to this.

These teams consist of representatives from the

user organizations, the technical and logistics specialist and contract specialist. Figure 4-12 shows

a typical team structure. The Program Manager

has the ability to call upon other organizations

for additional support.

In recent years, the MINDEF has emphasized

the need for cooperation among the various

players in acquisition through “project teams.”

The Defence Technology Prize29 was given last

year to the “BIONIX” product team for their

superior efforts. The BIONIX team included

There is no “official” dollar value designation

for Major Systems, as is traditional in the United

States. The larger the dollar amount and the

complexity of the project require that more

senior-level management is involved; but the

process is handled as part of the normal business

activities of the MINDEF.

Depending upon the nature of the project, the

acquisition Program Manager will come from

one of the Directorates in the program management line part of DSTA. The Program Manager

is responsible for the project cost, schedule and

technical requirements. The Program Manager

is vested with significant authority to manage the

program, as needed, to meet the various requirements of the program. The Program Manager

leads a small team, usually five to seven people,

depending upon the needs of the project.

Figure 4-12. Integrated Management Team Example

Program Manager Operational Manager

Combat

System

Specialist

Procurement

Contract

Specialist

Platform

Specialist

System

Integrator

ILS

Manager
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-26

industry–Singapore Technologies; user representatives–G5 Army and SAF HQ Armour; and

engineers from DSTA. The BIONIX team was

somewhat unusual in the level of senior management interest. Because of its large dollar

investment and high visibility, a senior steering

committee was formed, co-chaired by the Chief

of Staff of the Army and the Deputy Secretary

(Technology), to oversee the program.

Acquisition Education

The Ministry of Defence puts a heavy emphasis

on training personnel overseas. “We have active

programs in which we send people to academies

overseas to interact with our friends and partners....When they come back they join our

defence technology group. They go into research

and development, acquisition management,

engineering and maintenance. This is a strength

for us, because it keeps the lifeblood flowing.”30

The personnel who manage acquisition programs

in the Republic of Singapore enter service with a

degree. They learn the specifics of program

management through OJT, with additional

training at universities locally and overseas and

short-term courses. They award 60 undergraduate

local or overseas scholarships, plus 20 Masters

or PhD scholarships every year under their

Defence Technology Training Award program.

The MINDEF recently instituted a new shortterm training course called the Defence Management Systems Course, which brings together

middle managers for five weeks from the three

services, the civilian component of the MINDEF

and industry. Using the case study method the

Defence Management Systems Course covers a

wide variety of topics from strategic planning,

technology, manpower, finance, and logistics,

to organizational effectiveness.
Part 4 – Republic of Singapore

4-27

Chapter 8

THE PROCUREMENT PROCESS

direction” over the Army, Navy and Air Force

Logistics Departments when they are procuring

items

MINDEF procurement policy and principles

comply with the 1994 World Trade Organizations (WTO) Agreement on Public Procurement.31 To comply with the WTO agreement they

have developed an “open and transparent tender

system” designed to provide information on

future acquisitions and insight into their decision

process. The law governing their procurements

is the Government Contract Act and the Minister

of Finance implements this law with a regulation—the Instructional Manual #3, Stores and

Services.32

The basic policy of the DPD is to get the best

business deal by making all acquisitions competitive. Sole-source contracting is permitted

only for cases involving emergency, public

The Defence Procurement Directorate (DPD) of

DSTA is responsible for setting MINDEF procurement policy. They are also the primary

buying organization within the MINDEF purchasing a wide variety of products from multimillion dollar weapon systems such as vessels,

submarines and IFVs to spare parts and commercial items. They are organized internally into

groups that focus on specific customer needs—

land, air and naval (see Figure 4-13). It is

estimated that they spend approximately S$2

billion per year. Other MINDEF organizations

have limited buying authority, but act under the

policies set by DPD. The other organizations

are the Building and Infrastructure Directorate

for construction, the Systems and Computer

Organisation (SCO) for computer and computerrelated equipment, CSO for C4I systems and

related equipment and services, plus the individual military services for lower value local

purchases. DPD also provides “professional

Figure 4-13. Defence Procurement Division

Director, Defence

Procurement Division

Mr. Chinniah Manohara

Procurement

Division

Disposal Management

Division
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-28

interest, small dollar buys, or when only one

source exists. Senior-level approval, at the

Permanent Secretary level, is required for sole

source acquisitions.

There are two general methods of solicitation—

Invitation-To-Quote (ITQ) and Invitation-ToTenders (ITT). ITQs are used for low-cost

requirements, typically off-the-shelf items. ITTs

are used for higher-value complex items.

There are two types of tenders—Open and

Closed. An Open Tender is widely advertised

in the local newspapers and on the Internet and

it is open to all sources. Closed Tenders restrict

the number of sources that may bid for a variety

of reasons such as classified tenders.

Once the decision has been made to compete

an acquisition, DPD will issue an ITTs to interested sources. The ITT document specifies the

Terms and Conditions of the Contract, Conditions of the Tender and the Specifications. The

next step is for interested companies to submit

a Proposal. Then, DPD, with the PMT, will

evaluate the proposals to achieve the best “Best

Value for Money” with a technique called the

Analytical Hierarchical Process (AHP).33 In this

process, selection of the best offer is evaluated

based upon an analysis of best value characteristics, such as meeting the DPD specifications,

price, past performance and life cycle cost. These

factors will vary depending upon the requirements of each acquisition. In some cases,

samples are submitted as part of the evaluation

process.

Their goal of selecting the “Best Value for

Money,” proposal can include many factors that

add “points” to an offer. For example a “Best

Value for Money” determination could include

the availability of training facilities. With the

lack of air space in Singapore for training, the

availability of training opportunities at overseas

bases adds additional value. With the purchase

of 12 new U.S. F-16s from Lockheed for $350

million (S$585 million) training opportunities

were made available in the United States. LongFigure 4-14. Tender Boards

Chair, Deputy Secretary, Technology

Members: Director of the Naval, Land, or Air Division,

as appropriate; and Director of Finance

Chair, PS (Defence Development)

Members: Deputy Secretaries –

Technology and Policy, DPD

Chair, Minister of Defence

Members: Minister of State for Defence

and PS (Defence Development)

Under $S2m

$S2–10m

Over $S10m

A

B

C
Part 4 – Republic of Singapore

4-29

term training detachments were set up at Luke

Air Force Base in Phoenix, Arizona, and at

Cannon Air Force Base, Clovis, New Mexico.34

After the AHP effort is completed, the most costeffective offer is forwarded to the relevant

Tenders Board for approval.

There are three levels of Tender Boards—A, B

and C. Tender Board A approves tenders below

S$2 million and is chaired by the Deputy Secretary for Technology, with membership from the

Director of Finance and the appropriate DSTA

program director (Land, Naval, or Air). Tender

Board B approves tenders between S$2-10

million and is chaired by the Permanent Secretary (Defence Development), with membership

from the two Deputies—Technology and Policy.

The Ministry of Defence chairs Tender Board C

to evaluate major buys (over S$10 million) for

the SAF. Membership includes Minister of State

for Defence and the Permanent Secretary

(Defence Development) (see Figure 4-14).

Figure 4-15. MINDEF Procurement Process

Sign

Contract

Seek Approval

for Purchase

Clarification/Negotiations

(If Required)

Evaluate

Offer

Purchase Request

(PR)

Prepare Tech

Specifications

Seek Approval of

Requirement (SOR)

Identify

Requirement

Management &

Implementation

Prepare

Tender

SAF PMO/DPD

SAF/PMO*

PMO

DPD/PMO

DPD

PMO

DPD

DPD/PS

DPD/PMO

* Program Management Organization

(e.g., Naval or Land Divisions of DSTA)
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-30

the contractor. The DFO’s Revenue & Payments

Division makes payment. Figure 4-15 depicts the

entire procurement process.

Companies wanting to provide equipment or

services for small purchases to Singapore must

be registered in the MINDEF Internet Procurement System (MIPS). For contractors interested

in larger procurements, they must become a

trading partner and register with the “Head of

Supply” as designated by the Ministry of Finance. In the MINDEF’s case this would be the

Defence Procurement Division. The MINDEF

prefers to deal directly with suppliers, although

it will work with an agent, if prior approval has

been obtained.

There are no formal protest forums, although

informal lines of communication are available

within the Ministry for unhappy bidders to

question contract awards.

Once the Tender Boards have made their decision the contract will be issued to the winner.

Final signature on the contract will vary with

the major contracts signed at the Permanent

Secretary level and lower value contacts being

awarded by the Director Defence Procurement

or lower level. For contracts over S$500,000 the

company is required to furnish a security deposit

of five percent of the contact value. DPD will

administer the contractual aspects of the procurement, while the appropriate PMO in DSTA

does the management and technical oversight of
Part 4 – Republic of Singapore

4-31

Chapter 9

INTERNATIONAL COOPERATION

AND ARMS SALES

to engaging in joint R&D projects. Currently the

DSTA’s R&D Office has collaborative agreements with countries such as the UK, Sweden,

Australia, and the U.S. These agreements cover

technologies such as composite materials, electromagnetic materials and underwater weapon

effects. Another program, the Singapore Defence

Technology Distinguished Fellowship, allows

foreign scientists, engineers and medical researchers to participate in activities in Singapore

such as conducting seminars and workshops,

advising on research project, and exchanging

views on science and technological capabilities.

The DPG is the organization responsible in the

MINDEF for providing top-level policy guidance

on export policies. The Singaporean export policy and industrial policy has been to promote the

sale of locally designed weapons to foreign

countries. DPG is the MINDEF focal point for

staffing requests for military exports to the

approval authorities, generally at the ministerial

level. A government brokerage firm—Unicorn

International—does the marketing for locally

produced products.

Singapore’s arms sales generally comprise small

arms, e.g., mortars and howitzers, but have included small naval vessels. The MINDEF, itself,

doesn’t actively champion the sale of its industry products unlike many other countries.

Singapore was ranked 20th internationally in

arms sales with approximately $90 million in

sales in 1997.36

The Singaporean government and the Ministry

of Defence are committed to increasing interaction and cooperation in a wide variety of

military areas with other countries. In the operational arena they conduct joint training

exercises with friendly nations, such as Malaysia

and Thailand. Singapore has also set up training

arrangements with a variety of other countries,

including training arrangements with the United

States for personnel from the RSAF. In the last

decade more than 100 personnel from the RSAF

have trained at Luke Air Force Base in Arizona.

In addition to strong bilateral relations with other

states, Singapore is also party to the Five Power

Defence Arrangements (FPDA) with Australia

Britain, New Zealand, and Malaysia. Among

other things, this arrangement has led to the

transfer of expertise, and technology among the

member nations.

“Because we are small, there will always be a

limit to what we can afford and what we can do

by ourselves. To overcome this, we need to

source for much of our technology overseas.

This means leveraging on foreign expertise and

seeking greater cooperation in defence technology with other countries.”35 In developing

their national defence capability Singapore has

adopted a “global cooperation strategy” to

leverage foreign expertise and equipment. They

have signed Memorandums of Understanding

(MOUs) with other countries to foster cooperation in R&D. The areas of cooperation range

from exchanging research results and scientists
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-32

Chapter 10

DEFENCE INDUSTRIAL BASE

“The defence industry in Singapore, namely Singapore Technologies (ST), plays an important role in developing weapons systems and equipment for the SAF’s use and also in upgrading and

ensuring the sustainability of those already in the SAF’s orbat.”

— Dr. Tony Tan Keng Yam

The government of Singapore has played a

vigorous role in managing the economy. Its

industrial policy, planning, and nurturance have

created one of the strongest economies in the

Asian region. Its economic approach could be

categorized as a combination of capitalism and

socialism. As other countries in Asia have done,

the 1960s planners in Singapore targeted exports

and manufacturing, and later high technology, as

industries that are critical to the building of a

stronger economy. This requires a free market

economy and free trade. But Singapore’s government’s economic policies have also been broadbased to ensure support from the people by

including a state role in insuring attractive salaries,

reasonable housing and educational opportunities

for all.

The defence industry is a key element of the

overall industrialization policy and a strategic

component of the Singapore Government’s Total

Defence Plan. “The development of our defence

industry has always moved in tandem with the

progress of the SAF. As the needs of the SAF

became more sophisticated, our defence industry

geared itself up correspondingly.”37 A fledgling

defence industry was started in the late 1960s and

grew slowly through the 1970s. During the 1970s

the firms were government-owned corporations

involved in designing, assembling and overhauling small arms, armor, military aircraft and naval

vessels. As an example, Chartered Industries

began licensed production of the M16 assault rifle

(now being replaced by the Singapore Assault

Rifle (SAR) 21, designed and manufactured in

Singapore). A nascent marketing effort was begun

during this period to promote the sale of Singaporean weapons. Not all the defence industry was

Singaporean, however, since a few foreign firms,

such Avimo for optics, Samaero for helicopters

and Sundstrand (various items), manufactured

defence equipment in Singapore to exploit the

high technology base and lower production costs.

The 1980s saw the defence industry expand to

produce a wider variety of equipment and services

to include assembling training aircraft and

depot maintenance for the U.S. C-130. Recent

defence development and production programs,

which include the 155-mm cargo projectile

(Chartered Ammunition Industries) and the

BIONIX IFV (ST Automotive) demonstrate the

technical capabilities of Singapore’s defence

industry.

The defence industry of Singapore is primarily

a holding company called Singapore Technologies—a diversified, S$5.8 billion dollar,38 multinational conglomerate. There are more than

100 companies that make up Singapore Technologies, but the bulk of defence work is performed

by Singapore Technologies Engineering,39 which

comprises 7,500 personnel with 2,000 of them

engineers. This body’s major divisions include—

Aerospace, Automotive, Electronics, Marine,
Part 4 – Republic of Singapore

4-33

and two affiliated companies for Ordnance (Chartered Industries) and Precision Engineering. The

main areas of their defence business are aerospace, ordnance, munitions, semi-conductors,

electronics, marine, precision engineering, and

logistics management.

“Although the government is the majority shareholder in many of these defence companies,

they are essentially private organizations managed and run commercially by their own Board

of Directors. Some of these companies are listed

on the Stock Exchange of Singapore.”40 These

firms employ over 15,000 people in both commercial, industrial (70 percent) and defence

markets (30 percent) (see Figure 4-16 for structure

of ST). Their defence work is not only for the

SAF, but also for other international military

customers such as the United States and Thailand. It also encompasses such work as upgrades

to the Northrop F-5E/F.

Figure 4-16. Singapore Technologies

Other Defence Business Divisions

Technology Business Group

• Electronic Manufacturing

• Semiconductor

• Telemedia

Primary Defence Business Divisions

Engineering Business Group

ST Engineering Aerospace

• Aircraft maintenance/modification, engine

repair, overhauls, materials support and

inventory management

Automotive

• Manufacture, upgrade and rebuild military

vehicles, e.g., IFV (Bionix), AMX-13 tanks,

M311 APCs

Electronics

• C3, electro-optics, microwave, simulation,

transportation, and encryption

Marine

ST Shipbuilding and Engineering Yard

• Shipbuilding and repair

Precision Engineering

• Engine mounts, landing gears,

components

Ordnance

Chartered Industries Affiliated of Singapore

(CIS)

• Ammuniiton and weapon systems, rifles

Infrastructure & Logistics

Business Group

• Infrastructure & Logistics

• Lifestyle

• Information Technology

• Marine Engineering
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-34

government of Singapore plans to continue its

modernization efforts. As part of the total defence concept, the indigenous defence industry

will play a vital role in developing the technologies, manufacturing and maintenance capabilities to support the future technological needs

of the Singapore Armed Forces.

“Economic prosperity depends on a framework

of stability and security. A strong and credible

Singapore Armed Forces deterrent has been a

key element of this framework.... Defence spending must be seen as a long-term investment, not

dependent on the ups and downs of the economy

from year to year,” Finance Minister Hu told

Parliament in February 1999. In the future, the
Part 4 – Republic of Singapore

4-35

FURTHER READINGS

Lee’s Lieutenants : Singapore Old Guard, PengEr Lam(Editor), Kevin YL Tan (Editor).Singapore Story: The: Memoirs of Lee Kuan Yew,

Lee Kuan Yew former Prime Minister of

Singapore.

The Singapore Puzzle, Michael Haas (Editor).

Current look at Singapore.

 CURRENT

Strait Times Interactive:

http://straitstimes. asia1.com.sg/
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-36

ENDNOTES

11. Only university graduates and diploma

holders upon promotion to salary scale of

Division I enter into Division I.

12. The number of ministers at the defence

ministry is not fixed.

13. Asian Military Review, Dec 99/Jan 00, p. 16.

14. Using an exchange rate of 1.7 to 1, S$ 7.3

billion equates to U.S. $4.3 billion.

15. Opall, Barbara, “Singapore To Boost

Defence,” article in Defense News, 9-15

March 1998, p. 4.

16. Asian Military Review, Dec 99/Jan 00, p. 16.

17. March 15 budget debate as reported in the

Parliament’s Hansard Report.

18. The NAD is a general term used to designate the senior acquisition official. The term

is not used officially in Singapore.

19. Requirements can come from any command.

20. Defence of Singapore, 1994-95, p. 63.

21. Most upgrades are accomplished by Singapore Technologies Group.

22. Opall, Barbara, Defense News, One-on-One

interview with Su Guaning, April 1998,

p. 54.

23. McAdams, Robert C., Colonel, USAF,

“Strategic Partnership: The Case for Singapore,” Defense Institute of Security

Assistance Management (DISAM) Journal,

Spring 1999, p. 5.

1. Singapore name is derived from “Singa

Pura”—Lion City—which is the original

name given by a 13th century Malay prince

who was shipwrecked on an unknown

island and supposedly saw a lion—hence

the name “Singa Pura.”

2. The Straits Settlements also included

several other geographical areas such as

Dinding Islands (on the Malayan west

coast), Labuan Island off the coast of Sabah,

Christmas Island, and the Cocos/Keeling

Islands.

3. Refers to a racial grouping of people inhabiting the Malay Peninsula, other parts

of Malaysia, Indonesia and other adjacent

areas, of course in this reference it refers to

the Malays in what is now called Malaysia.

4. CIA Factbook, 1997 est.

5. Custodial powers are “reactive or blocking

powers. The President does not have any

executive powers,” said PM Goh Chok

Tong, 18 August 1999, before parliament.

6. Ibid.

7. Up to nine NMPs may be appointed.

8. While members of Parliament may introduce bills, those that allocate public funds

or provide for the running the government

can only be introduced by the government.

9. A term for junior members of parliament.

10. By PM Goh Chok Tong in speech before

parliament 18 August 1999.
Part 4 – Republic of Singapore

4-37

24. Similar to the DAB in the U.S. in function,

although the AOR conducts most of its

efforts much more informally.

25. U.S. Defense contractor at an NDIA

Attaché luncheon.

26. 1998 speech by Mr. Chinniah Manohara,

DPD Chief at the first IAPS in Australia.

27. MINDEF-NUS and MINDEF-NTU Joint

Applied R&D Co-operation Programme

were formally established on 6 May 1986

and 14 April 1988 to bring together researchers in NUS/NTU with MINDEF engineers

and scientists to conduct research and

undertake development projects.

28. By The Second Minister for Defence,

RADM Teo Chee Hean, March 2000 in

Parliament 15 March.

29. The Defence Technology Prize is given

yearly for the best team and their contribution to their respective fields.

30. Opall, Barbara, One-on-One interview with

Su Guaning in Defense News, April 1998,

p. 54.

31. The WTO guidelines exempt defence procurement activities from the guidelines.

32. There are six manuals governing public

administration in Singapore. They are

Instructional Manual #1, Finance and

Accounting, IM #2, Staff, IM #3 Stores and

Services, IM #4 Office Management, IM #5

Daily R Employees, and IM #6 Government

Marine Craft.

33. Same as the source selection process used

in the United States.

34. Additional long-term training is done at

Grand Prairie, Texas, and Wichita, Kansas,

for KC-135s.

35. Tan, Peng-Yam, Deputy Director, Directorate of Research and Development

MINDEF, “Harnessing Defense Technology—Singapore’s Perspective,” in

DISAM Journal, Spring 1999, p. 9.

36. U.S. Arms Control and Disarmament

Agency—Country Ranks 1997.

37. Dr. Tony Tan, Minister of Defence, as

quoted in a Military Technology, 2/96,

interview.

38. Sales for 1998.

39. 1998 sales S$2.3 billion dollars.

40. Ibid.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

4-38
Part 5 – The United States

5-1

PART 5

THE UNITED STATES
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-2
Part 5 – The United States

5-3

Chapter 11

HISTORY AND TRADITIONS

procurement budget since the Cold War years of

the 1980s, the 2000 budget reflects a slight increase in the procurement and research and development accounts.2

 Currently there are 149,000

military and civil servants involved in this business. There

are over

1,000 large

contractors

and small

businesses

who employ more than

two million

people to provide

the services, equipment and weapon systems

needed by the military. How does this system

operate? Who are the players? What management processes have been devised to efficiently

produce products and services for the DoD? This

Chapter is designed to provide an introduction

for those new to the business of United States

military acquisition.

“Each jammer created a “strobe,” an opaque wedge shape on the

U.S. radar screens, so that they looked like the spokes of a wagon

wheel. Since every such spoke was particular to each of the radar

transmitters, the controllers were able to compare data, triangulate, and plot the position of the jammers. The Tomcats closed in

quickly while the radar-intercept officers in the back seat of each

fighter flipped the Phoenix missile seekers to home-on-jam guidance mode. Instead of depending on the aircraft’s own radar for

guidance the missiles would seek out the noise transmitted from

the badgers.”

(Red Storm Rising, Clancy, p. 642)

It took thousands of years of warfare to move

from stones to cannons. It has taken less than

100 years to move from the first airplane used

in battle to the technologically sophisticated

Tomcats described in Tom Clancy’s Red Storm

Rising. The last 50 years, from the end of World

War II to the present, has seen the development

of weapon systems to meet the needs of the

warfighters on land, at sea, in the air and beyond. It has consumed billions of dollars,

employed millions of people, and led to the

development of technological weapons that use

sound, bits and bytes, and electrons bouncing

around. As weapons have taken on greater complexity, the government’s approach to the development of these systems has evolved its own

complexity. In the terminology of the trade—

acquisition has become a large, complex, multifaceted business. The 2000 fiscal year (FY)

budget for the Department of Defense (DoD) is

over $280 billion, of which $92 billion is for

the research, development and production of

weapon systems. While the prior year—1999—

budget represented a 60 percent decrease in the

THE UNITED STATES
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-4

THE GOVERNMENT OF

THE UNITED STATES

“This budget is dead on arrival,” entombed a

Senate leader with the submittal of the DoD budget by President Ronald Reagan in 1982. In most

other countries, a budget submitted by the president or prime minister may be discussed or debated, but then it is voted upon and approved

with few changes. The United States political

system operates differently. In the FY 1998 budget, the Office of Management and Budget

(OMB) identified a list of 254 programs or

projects not requested by the executive branch

that were added to the defense budget. The opposite is just as normal where programs are zeroed out of the budget. Unlike the parliamentary systems in which the party in power “runs”

the legislature and the governmental agencies,

the American presidential system has inherent

in its constitution a system of political checks

and balances to prevent any one branch of government from gaining too much power. This

balance-of-power mechanism is a key differentiator of the American political model. To

understand the procurement of wea-pon systems

in the United States’ DoD, one must understand

not just the workings of the executive branch of

government, but the workings of the legislative

branch. The following provides an introduction

to the framework and workings of the government to aid in understanding the defense

acquisition business.

It was more than a decade after the first shot

was fired at Concord and Lexington in 1775 before our new democratic form of government

was fully developed. From the Declaration of

Independence in 1776 through the adoption of

the Articles of Confederation in 1779, the ratification of a new Constitution in 1788, and the

ultimate creation of a new government in 1789—

the nation’s leaders grappled with the best way

to govern a country. The first set of rules to operate the country were the Articles of Confederation.

In protecting the unique interests of each state,

the Articles created a weak central government

with neither the ability to levy taxes nor to

provide for the national defense.

In 1785, delegates assembled from the 13

colonies to “fix” the Articles of Confederation.

The result was not a fix, but an entirely new Constitution. Influenced by the ideals of the ancient

Roman Republic; the ideas of the philosophers

like Rousseau, Montesque, and Locke; and in

response to the problems caused by England’s

attempts to govern the colonies, the Constitutional Convention participants developed a federal system of government. In the words of

Thomas Jefferson, “Hear no more of the faith

of men but bind them down with the chains of

the Constitution.” This constitutional “chain”

provided for a structural separation of powers

among three branches of government—executive, legislative, and judicial. This earliest of

written constitutions spelled out the duties and

responsibilities of each branch, with each branch

serving as a check on the powers of other

branches. The Constitution also fixed one of the

problems of the Articles by providing for strong

central government and for the national defense.

The President

Article II of the United States Constitution stipulates that the President is Commander-in-Chief

of the armed forces. He also has the dual role of

being Head of State and head of the government.

As Head of State, the Constitution states, “he

shall receive ambassadors and other public ministers.” Head of State duties are primarily ceremonial, such as those often captured on television news reports. The image of the military

band playing “Hail to the Chief” while the President escorts a world leader to a speaker podium

are typical scenes that the title “Head of State”

evokes in most Americans’ minds. The President is also the Chief Executive; in other words,

he is charged with running the government. The
Part 5 – The United States

5-5

Constitution invests the executive power in the

President. In the modern state, this power is exercised over a wide range of government organizations and programs, such as those dealing with

the environment, military veterans, labor, foreign

affairs, and national defense. To help him in

this capacity, the President nominates and appoints, with the advice and consent of the Senate, 13 Cabinet members and over 2,000 political appointees to work within the departments

and agencies of government.

Although the constitution delegates the power

of Commander in Chief of the military to the

President, the power to declare war rests solely

with the Congress. Further, even though the

President is in “charge” of the military, the power

to determine the size of the armed forces, the

rules that govern the military, and the funding

for the military forces and their equipment are

vested only in the Congress.

As Chief Executive, the President has, at times,

taken specific interest in defense acquisition

problems and issues and directed specific

changes. Examples of this include the following:

• Executive Order (E.O.) 12353, in 1982, which

directed procurement reforms and also created

a Federal Acquisition Regulation (FAR);

• National Security Decision Directive (NSDD)

219, in 1986, which directed implementation of the Packard Commission’s recommendation on management of defense

acquisition; and

• National Security Review (NSR) 11, in

1989, which directed a review of the defense

acquisition business and a report outlining

the changes as a result of the review.

The Legislature

“Congress is so strange. A man gets up to speak

and says nothing. Nobody listens—and then

everybody disagrees.”

– Boris Marshalov, a Russian observer

after visiting the House of Representatives

“To retain respect for sausages and laws, one

must not watch them in the making.”

– Otto Von Bismarck

Contentious, confusing, complicated—the workings of the United States Congress can be a

mystery to foreign visitors and, in many cases,

even to American citizens. During the Constitutional Convention in 1788, the delegates debated

the structure of the Congress. States with large

populations were pitted against states with small

populations. Each was concerned with the fairness of the representation. Proportional representation

would benefit the large

states at the expense of the

small states, thus putting

small states like Rhode

Island at the mercy of

large states like Virginia, which by virtue

of their larger voter

constituency could control

the government. Out of

this concern came the

“Connecticut Compromise” which created a

bicameral legislature, or two-house system—the

Senate with two representatives from each state

and six-year terms; and the House of Representatives with proportional representation and twoyear terms.

Because of the nature of its organization, each

of the two bodies of Congress has its own character. The House of Representatives was designed to “have an immediate dependence on,

and an intimate sympathy with, the people.”3

U.S. CONGRESS
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Elected every two years, House members campaign for re-election almost constantly. They

respond to the constantly changing views of the

electorate and are more contentious in debate.

The Senate, in which members serve six-year

terms, tends to be more collegial and responds

less readily to the popular passion of the

moment.

Congress plays a significant constitutional role

in the management of the DoD. The Constitution gives Congress the general power to “...lay

and collect taxes, duties, imports, and excises,

to pay the debts and provide for the common

defense and general welfare of the United

States....” It also gives Congress other powers,

such as the following:

Clause 11 –

To declare war, grant letters of marque and

reprisal, and make rules concerning captures

on land and water;

Clause 12 –

To raise and support armies, but no appropriation of money to that use shall be for a

longer term than two years;

Clause 13 –

To provide and maintain a navy;

To make rules for the government and

regulation of the land and naval forces.

The writers of the Constitution were very concerned about the concentration of military power

within the executive branch. In the Federalist

Papers written by Alexander Hamilton and

James Madison, the role of the legislative versus the executive branch is clearly spelled out

in the following words: “...the whole power of

raising armies [is] lodged in the LEGISLATURE, not in the EXECUTIVE; ...and...that

clause... forbids the appropriation of money for

the support of an army for any longer period

than two years a precaution which...will appear

to be a great and real security against the keeping

up of troops without evident necessity.”4

The two year restriction for the appropriation

of funds for defense indicates the strong concern the representatives had at the Constitutional

Convention about the role the legislative body

was to play in the management of the military.

“The legislature of the United States will be

OBLIGED...once at least in every two years, to

deliberate upon the propriety of keeping a military force on foot; to come to a new resolution

on the point; and to declare their sense of the

matter, by a formal vote in the face of their constituents. They are not AT LIBERTY to vest in

the executive department permanent funds for

the support of an army....”5

Throughout most of its 200-year history, the

American political system has been a two-party

system—Democrat and Republican. Minor parties have played a very small role. While each

party generally has a unique ideological bent,

they are not ideology parties in the European

sense. Each party includes a wide variety of

political opinion—from liberal to conservative.

Another difference in a typical parliamentary

system is that party loyalty is critical to keeping

the government in power. By contrast, party

loyalty in the United States is very weak. It is

also not uncommon in the U.S. that one or both

houses of Congress are controlled by one party

and another party controls that the White House

(the executive branch). This is the current case

with the Senate and the House controlled the

Republicans while President William J. Clinton,

a Democrat, is in the White House.

Congressional Committees

“Congress on the floor is Congress in exhibition, Congress in Committee is Congress at

work.”

– Woodrow Wilson, 1885
Part 5 – The United States

5-7

There are 535 members of Congress. To efficiently deal with the multiplicity and complexity of the problems of government, Congress has

been organized into a variety of committees that

focus on specific areas of responsibility. It is in

these committees where the work of Congress

takes place. The majority party in each house

controls not only that house and its agenda but

also the committees that run the chamber. Each

committee is chaired by the majority party,

usually a senior member of that party, with the

majority party having a majority of the seats on

the committee. Additionally, each committee

further subdivides the work and assigns it to subcommittees. This is where much of the discussion, hearings, and work takes place in drafting

legislation. The structure of a subcommittee

parallels that of a full committee, with the

majority party chairing the subcommittee and

constituting the majority of its members.

The committees that most influence the DoD

and the defense budget are as follows:

Senate:

Senate Armed Services Committee (SASC)

Subcommittees dealing with defense

issues:

Emerging Threats and Capabilities

Air-Land

Personnel

Readiness and Management Support

Seapower

Strategic

The SASC is responsible for a wide variety of

policy and budgetary issues that impact the

defense acquisition business—aeronautical and

space activities associated with the development

of weapon systems or military operations; department organizational structures; maintenance

and operations of military research and development (R&D); national security aspects of nuclear

energy; pay, promotions, and retirement; and

strategic and critical materials.

Senate Appropriations Committee (SAC)

Subcommittees dealing with defense matters:

Defense

Foreign Operations, Export Financing

 and Related Programs

Military Construction

The SAC provides new spending authority for

defense programs, operations, and military construction. It also writes legislation defining how

the monies it has appropriated can be spent.

House of Representatives:

House Armed Services Committee (HASC)

Subcommittees dealing with defense matters:

Military Installations and Facilities

Military Personnel

Military Procurement

Military Readiness

Military Research and Development

Morale, Welfare and Recreation

Merchant Marine

The HASC has wide-ranging jurisdiction, including scientific R&D in support of the armed

forces and control of the strategic and critical

military material. It also oversees international

arms control. Of particular interest to those involved in acquisition are the Military Procurement, Readiness and R&D subcommittees.

Through its Subcommittee on Military Procurement, the annual authorization for the procurement of military weapon systems, equipment

and nuclear energy is prepared. The Subcommittee on Military Readiness includes authorization for operations and maintenance (O&M),

readiness and preparedness. The HASC’s Subcommittee on Military R&D has jurisdiction over

aeronautical and space activities, military R&D,

the DoD generally, nuclear energy, pay, promotions, and the strategic and critical military

material.
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5-8

House Appropriations Committee (HAC)

Subcommittees dealing with defense

matters:

Military Construction

Defense

The HAC, like the SAC, provides new spending

authority for defense programs, operations, and

military construction. It also writes legislation

on how the monies it has appropriated can be

spent.

There are various other committees, such as the

Budget Committees and the Government Reform

and Oversight Committee, with Subcommittees—National Security, International and Criminal Justice, which have legislative oversight of

defense and government activities which from

time-to-time play a role in crafting acquisition

legislation. Two other organizations of Congress

—the Congressional Budget Office and the General Accounting Office—also play a role in acquisition, which is discussed later.
Part 5 – The United States

5-9

Chapter 2

CONGRESSIONAL INVOLVEMENT

IN ACQUISITION

acquisition system. Figure 5-1 provides a list of

some of the major acts, which have changed the

organizational structures and policies, increased

ethics requirements and mandated education

and training requirements for the acquisition

workforce. In the last five years, several news

laws, such as the Federal Acquisition Streamlining Act (FASA), have been passed to remove

many of the burdensome laws passed by prior

congresses.

As Figure 5-1 indicates, Congress plays a major

role by enacting major legislation for the business of defense acquisition. Also, every year

Congress enacts, through its authorization and

appropriations legislation, changes in the acquisition system. Some of these changes are minor,

but some have included changes that have had a

significant impact on the acquisition business.

Congress and The Budget

“The power of the purse has always resided in

Congress: it represents its ultimate weapon in

dealing with the executive branch.”6

 In February of every year, the administration submits the

President’s budget to Congress. For the DoD,

this budget culminates three years of work to

justify the dollars needed for national defense.

The budget goes to the House and Senate budget committees, which issue a Budget Resolution that provides the top line budget for DoD.

The work of drafting the legislation needed to

authorize and appropriate defense funds begins

in the proper committees and subcommittees.

The subcommittees hold hearings and then

F-14

Congress has always played a significant role

in overseeing the DoD and DoD’s predecessor

organizations. In 1809 Congress issued the first

government-wide procurement statute mandating executive-legislative appointment of what we

today call “contracting officers.” Congress continued to play a significant role in acquisition

throughout the last century, including the methods of procurement—formal advertising, creating advisory boards, and dictating the sizes and

speeds of ships. Throughout World War I and

World War II

for example,

Congress

passed legislation to

prevent unscrupulous

contractors from

overcharging the government. The modern era

of congressional involvement in acquisition began with the Armed Services Procurement Act

of 1947. The purpose of this law was to standardize contracting methods used by all of the

services. As a result, the first joint DoD regulation was created—the Armed Services Procurement Regulation (ASPR). Congress, over

the years, has passed other laws whose purpose

has been to shape the department’s acquisition

policies and organizations. In the last 20 years

the amount of legislation involving the defense

business has increased. Under the Reagan Administration, with the significant increase in the

defense budget, Congressional oversight increased. Almost every two years, major legislation was passed to change some aspect of the
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-10

“markup” the bill and send it to the full committee. The full committee will debate, amend

and report out the bill to the entire House or

Senate for its consideration. After the vote is

taken by both houses, a conference committee

is established to “iron out” any differences. The

bill is then returned to both houses and voted on

a second time. If passed, the bill is sent to the

President for his signature—or, if he disapproves

of the bill, for his veto.

“The exclusive privilege of originating money

bills will belong to the House of Representatives.”7

 The constitution gives the lower house,

the House of Representatives, the authority for

funding bills thus—“All bills for raising revenue

Office of Federal Procurement Policy (OFPP) Act of 1983

Established a central office to define overall government contracting and acquisition policy and

to oversee the system, among other things.

Competition in Contracting Act (CICA) of 1984

Revised government policy to mandate competition and created an advocate for competition,

the Competition Advocate General.

DoD Procurement Reform Act 1985

Defense Procurement Reform Act established a uniform policy for technical data and created a

method for resolving disputes.

Defense Procurement Improvement Act of 1986

Provided policy on the costs contractors submitted to the Government for payment and on

conflicts of interest involving former DoD officials.

Defense Acquisition Improvement Act of 1986

Among other things, created the Under Secretary of Defense (Acquisition, Technology and

Logistics).

DoD Reorganization Act of 1986 (commonly referred to as Goldwater-Nichols Act)

Among other items, revised the Joint Chiefs of Staff role in acquisition and requirements

determination.

Ethics Reform Act of 1989

As a result of the “Ill-wind” procurement scandal Congress mandated more stringent ethics

laws.

Defense Acquisition Workforce Improvement Act (DAWIA) of 1990

Mandated education, training and professional requirements for the defense acquisition corp.

Federal Acquisition Streamlining Act (FASA) of 1994

Repealed earlier laws on acquisition, such as the Brooks Act provisions on computer acquisitions.

Federal Acquisition Reform Act (FARA) of 1996

Revised procurement laws facilitate more efficient competition; included improving debriefings, limiting need for cost/pricing data and emphasizing price versus cost negotiations, among

other items.

Clinger-Cohen Act of 1996

Included changes to competition practices, commercial item acquisition, and included fundamental changes in how information technology equipment is purchased.

Figure 5-1. Major Acquisition Acts
Part 5 – The United States

5-11

shall originate in the House of Representatives;

but the Senate may propose or concur with

amendments as on other bills.”

The Congress has established special budget

approval procedures for approving budgets for

the various departments of government. “Every

committee wants a hand in budget making.

Hence, Congress has a two-step financial procedure: authorization and appropriations. Congress first passes authorization laws that establish federal agencies and programs and recommend funding them at certain levels. Then it

enacts appropriations laws that allow agencies

to spend money. An authorization then is like

an “IOU” (I owe you) that needs to be validated

by an appropriation.”8

 While there are some

exceptions to this procedure, the process of

approving the next years’ budget includes both

appropriation and authorization. The SASC and

HASC committees are the authorizers, while the

HAC and SAC are the appropriators.

This process, from the President’s budget submittal through approval by Congress and the

final signature by the President takes approximately eight months (see Figure 5-2). Debates,

hearings, and the committee processes, aggravated by the controversial nature of the issues,

often delay the passage of bills in Congress. To

ensure the smooth operation of government

under these conditions, Congress may pass

interim legislation, referred to as “continuing

resolutions,” that allows government agencies

to continue all existing programs, at prior-year

amounts. Such interim legislation does not

usually allow for the initiation of any new

programs. The implementation of an interim

budget has become the standard method for

operations since 1979.

Congressional Oversight

The SASC and HASC conduct their “oversight

responsibilities...primarily within the context

of the Committee’s consideration of the annual

defense authorization bill.”9 Every spring, key

administration personnel, such as the Secretary

of Defense and the Secretaries of the Army,

Navy and Air Force, along with the senior

Figure 5-2. Typical Flow of Budget

Both houses pass bills

to appropriate money

to federal agencies

President’s

budget

submission

February April June/July

House and Senate

consider non-binding

budget resolutions

Legislation is

reconciled by

both houses

New

fiscal year

begins

October 1 September July/October

President signs

or

vetoes bills
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-12

military leaders, are called to testify before the

appropriate subcommittees on the President’s

budget. The subcommittees will also have hearings with other key defense acquisition personnel on the budget, acquisition policy and programs. When Congress has a specific interest

or concern, investigative committees will be created. They will have hearings on specific problems or issues which arise, or when Congress is

interested in a department’s implementation of

prior legislation. Again, government acquisition

personnel, along with industry or industryassociation representatives, may be called to

testify.

General Accounting Office (GAO)

For more than 75 years, the GAO has been the

“watch dog” of Congress and a key player involved in overseeing the acquisition system. The

GAO is headed by the Comptroller General of

the United States, who is appointed by the

President and confirmed by the Senate.

As the investigative arm of Congress the GAO

is frequently asked by committee chairpersons,

ranking minority members, and other members

of Congress to review programs or issues of

concern.10 Recent report topics provide an

example of the scope of GAO reviews. They are:

(1) Acquisition Planning for the Army Medium

Trucks; (2) Defense Industry Restructuring and

its savings; (3) Weapons Acquisition Systems

Planning, (4) Army Modernization plans, (5)

Defense Trade Data issues; and (6) international

cooperative programs, such as Medium

Extended Air Defense System (MEADS).

The committees often use the GAO studies and

recommendations as a basis for hearings on

problems in acquisition management and programs. When a committee feels new legislation

is necessary to correct problems in the acquisition system, the GAO may be called upon to

provide legal advice or review proposed legislation. In FY 1998 the GAO prepared 1,573

audits and evaluations for Congress, 1,135 reports to congressional committees, presented

181 formal congressional briefings, and 256

congressional testimonies.

The GAO also has a significant role in the

procurement/contracting process. It is the bid

protest authority for any contractors who may

wish to challenge an agency’s award. In 1997

the GAO received 1,087 bid protests, and ruled

in the protesters’ favor 26 times, sustaining the

department in 97 percent of the cases. It also

provides assistance to other government agencies in interpreting the laws governing the expenditure of public funds and adjudicating

claims for and against the federal government.
Part 5 – The United States

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Chapter 3

THE CABINET

Constitution specifies that, “No senator or representative shall, during the time for which he

was elected, be appointed to any civil office

under the authority of the United States, which

shall have been created, or the emoluments

whereof shall have been increased during such

time; and no person holding any office under

the United States, shall be a member of either

house during his continuance in office.”

The U.S. Cabinet is currently composed of 14

department, as follows:

Department of Agriculture

Department of Commerce

Department of Defense

(Secretary, William S. Cohen)

Department of Education

Department of Energy

Department of Health and Human Services

Department of Veterans Affairs

Department of Housing and Urban

Development

Department of the Interior

Department of Justice

Department of Labor

Department of State

Department of Transportation

Department of Treasury

From time to time, other positions, such as the

White House Chief of Staff to the President, the

Director of the OMB, and the “Drug Czar,” have

been given cabinet-level rank. There are many

other agencies of government, such as the National Air and Space Administration (NASA),

that do not have cabinet rank but nevertheless

carry out important national objectives.

Unlike the roles of the President and the Congress, the roles of the members of the President’s

Cabinet are not created by the Constitution.

(There is no constitutionally created cabinet). The

Constitution recognized the need for ministers

and other government officials. They serve as the

advisors to the President on policy matters. They

also “run” the government by implementing the

programs of the Administration. The Cabinet

members are nominated and appointed by the

President with the approval (advice and consent)

of the Senate. Members of the United States Cabinet, unlike those in other countries, are responsible to the President rather than the legislature.

They serve at the pleasure of the President and

can be removed from their jobs by the President

for any reason.

Traditionally, Cabinet members are from the

same party as the President, although, occasionally, individuals from the other party will be

selected to fill posts. A good example of this is

Secretary of Defense William S. Cohen, who is

a member of the Republican Party and was a

former Republican Senator from Maine. As is

the case in other cabinets around the world,

particularly those with coalition governments,

individuals are selected for Cabinet posts to

satisfy various factions within the President’s

party—to achieve diversity objectives, to ensure

geographic representation, and to reward supporters. In general, however, political appointees

are chosen because they share the same political beliefs the President has and can carry out

his agenda.

Unlike some other countries, the members of

the U.S. Cabinet cannot simultaneously be members of the legislative branch of government. The
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5-14

To assist the politically-appointed Cabinet members, the United States Government has more than

2,800 political appointees. In the United States

government, political appointees fall into three

categories—(1) Presidential Appointments requiring Senate (PAS) Confirmation (650 positions); (2) non-career Senior Executive Service

(SES) positions (restricted to 10 percent of the

SES, currently 650 positions); and (3) Schedule

C appointees (personnel assistants, secretaries,

etc., approximately 1,500).11 In the DoD there are

243 political appointees, of which 48 require senate confirmation.12 They hold key positions: Secretary of Defense; Secretaries of the Army, Navy,

and Air Force; and key acquisition positions such

as the Under Secretary of Defense (Acquisition,

Technology and Logistics) and Assistant Secretary of the Army (Acquisition, Logistics and Technology), Assistant Secretary of the Navy (Research, Development and Acquisition), and

Assistant Secretary of the Air Force (Acquisition).
Part 5 – The United States

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Chapter 4

DEPARTMENT

OF DEFENSE

support role to acquisition, such as the Defense

Contracting Management Agency (DCMA),

which provides

contract administration

for the

department, and

the Defense

Contract Audit Agency (DCAA)

which provides audit support for the services

and defense agencies.

This Chapter will primarily focus on the Office

of the Secretary of Defense (OSD) and the

Services since the primary role of organizing,

training and equipping the military rests with

each Service. Each service is headed by a

political appointee nominated by the President

and approved by Congress. Each Service

Secretary reports directly to the Secretary of

Defense.

OSD is the core staff that provides advice and

support to the Secretary. OSD consists of approximately 2,000 personnel that, through the

Secretary, sets “general policies and programs”

and provides “general direction, authority, and

control” of the military departments and defense

agencies. As shown in Figure 5-4, the Secretary

is supported by a Deputy Secretary as well as

several Under Secretaries that have considerable

influence in acquisition. The person charged with

responsibility for acquisition matters within the

Secretary’s office is the Under Secretary of

For the first 150 years, the United States had

two separate departments, the War Department

and the Department of the Navy, managing the

military business. After the end of World War

II, a variety of factors led many senior civilian

and military leaders to see a need for a more

unified structure. Specific problems during the

war, such as the allocation of resources between

the services, priorities, and command arrangements, were all felt to have had a negative affect

on the war effort. In 1947, a single “unified”

structure was created with the passage of the

National Defense Act of 1947. However, as one

observer noted, “Congressmen have traditionally seen their ability to influence defense policy

enhanced under a decentralized structure and

have feared loss of influence under a more

centralized one...America’s defense establishment has reflected the pluralistic and decentralized nature of America’s national government

system.” Thus, the three services were still left

with a significant amount of authority and

responsibility.

There have been changes since then, most

strengthening the Secretary of Defense and his

office13 with authority over the services.14 For

the purposes of this Chapter, the department can

be divided into two elements—the warfighting

elements and the acquisition and logistics support elements. Figure 5-3 depicts an overall view

of the department with the warfighting elements

being the Unified Commanders for each theater.

The three major organizations involved in

acquisition within the DoD are the Army, Navy

and Air Force. Other defense agencies play a

THE PENTAGON
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5-16

Figure 5-3. Department of Defense Warfighting Elements

Figure 5-4. Office of the Secretary of Defense (as of May 1998)

Chairman,

Joint Chiefs

of Staff

Office of

the Secretary

of Defense

Department

of

the Navy

Department

of

the Army

Department

of

the Air Force

Defense

Agencies

Joint

Staff

Unified

Command

Secretary

of Defense

UNIFIED

Regional Commands Functional Commands

U.S. European Command U.S. Space Command

U.S. Pacific Command U.S. Special Operations Command

U.S. Atlantic Command U.S. Transportation Command

U.S. Southern Command U.S. Strategic Command

Secretary of Defense

Deputy Secretary of Defense

Director,

Operational Test

and Evaluation

USD

(Personnel

and Readiness)

USD

(Comptroller)

Director,

Program Analysis

and Evaluation

Defense Contract

Audit Agency

(DCAA)

USD

(Policy)

ASD

(International

Security Policy)

Defense Security

Cooperation

Agency (DSCA)

ASD

(International

Security Affairs)

USD

(Acquisition

and Technology)

*ASD

(Command, Control,

Communication,

and Intelligence)

DASD,

C3I/Acquisition

for acquisition matters

*Serves as DoD CIO and MDA for major AIS.
Part 5 – The United States

5-17

Defense for Acquisition, Technology and

Logistics (USD (AT&L)).

The Development of

Military Requirements

As the 21st Century begins, the DoD and the military services strive to maintain air and space

superiority, meet rapid mobility requirements,

maintain naval superiority and be a force projection army. The process to determine future

military needs is referred to as the Requirements

Generation Process. All acquisition programs

must be based on identifiable, documented, and

validated mission needs. The Joint Chiefs of

Staff (JCS) is the organization responsible in

DoD for setting requirements policy. For large

dollar programs, referred to as Major Defense

Acquisition Programs (MDAP) or Acquisition

Category (ACAT) I programs, the JCS is the

approval authority for the requirement. For

smaller dollar programs, referred to as ACAT II

and III programs, the individual services develop

their own requirement in coordination with the

other services and defense agencies.

To provide approval of a requirement that could

result in an ACAT I program, i.e., to validate the

mission need, a forum called the Joint Requirement Operational Council (JROC) was created.

The Vice-Chairman of the Joint Chiefs chairs the

council with the Vice-Chiefs of the military services as voting members (see Figure 5-5). For programs that fall under the automated management

information system programs, the JROC reviews

and decides whether to be the validation and approval authority. If the JROC passes, the Assistant

Secretary of Defense (ASD) for Command, Control, Communication and Intelligence (C3I) becomes the approval authority. While the JROC is

primarily involved in requirements approval, it also

participates in the Defense Acquisition Board

(DAB) to ensure that the program is meeting the

military needs. The JROC is a change from the

historical way of the military services deciding

military requirements and the next generation of

weapons. The JROC has also opened the capability for the warfighting, unified commanders to play

in this process. Prior to the JROC meetings, a lower

level board, the JROC Review Board, previews the

requirements documentation to work out concerns

and to frame matters for the JROC.

Figure 5-5. The Joint Requirement Operational Council (JROC)

• Validate and approve ACAT I/ID

• Recommend lead service to DAB

• Validate key performance

parameters in the ORD

• Approve the ORD

• Delegate ORD approval authority

MNS

ORD

Vice Chief of Naval Operations

Army Vice Chief of Staff

Marine Corps Assistant Commandant

Air Force Vice Chief of Staff

MAJCOM Req

Vice Chairman JCS
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-18

The Military Departments

Requirements Processes

To develop a weapon system is expensive. A

major weapon system will require billions of

dollars to develop and field. When the services

look at shortfalls in meeting mission requirements, they first will evaluate changing military

doctrine or tactics (referred to as non-materiel

solutions) as the first choice. If a non-materiel

solution does not work, then buying an existing system commercial or non-developmental

item (NDI) is the preferred solution. By policy,

the last choice for a military service is the

development of a new weapon system.

Prior to beginning the requirements generation

process, the department develops a series of

military planning documents—part of the longterm planning process which provides strategic

military planning guidance. This is captured in

a series of documents beginning with the National Military Strategy (NMS). The development of military requirements, and the Planning,

Programming and Budgeting System (PPBS) all

reflect a direct linkage with this strategic planning process. The Defense Planning Guidance

(DPG), the Chairman of the Joint Chiefs of

Staff’s “Joint Vision Capabilities Plan,” the unified Commanders’ “Commanders-in-Chief

Integrated Priority Lists (CINC IPL),” and other

joint and service long-range plans all provide

the framework for the requirements generation

process to operate. The Services’ long-term technology plans use this guidance for planning their

investment of R&D dollars to maximize their

effectiveness.

The Requirements Generation Process begins in

the services, and each of the military services has

taken a different approach to managing this

process. The Army and Navy have a centralized

process while the Air Force’s process is more decentralized. However, each service determines

mission needs as a result of ongoing assessments

of current and projected capability. Assessment

of identified deficiencies, such as occurred after

Desert Storm, has led to the establishment of

new requirements and new programs. The Joint

Direct Attack Munitions (JDAM) was such a

program. During ideal weather conditions, for

an air war, it was noted that there were still many

days when missions had to be called back because of the lack of a capability to find targets.

The JDAM was required to meet that mission

hole, i.e., provide all weather, accurate, and low

cost capability to attack a broad spectrum of

fixed and relocatable targets. In this case an identified deficiency. Besides establishing new operational capability or improving an existing

warfighting capability, mission needs can also

be used to reduce costs or enhance the logistics performance of systems. Requirement changes can occur in the order of doctrine, training,

leader development, organization, soldiers, and

materials.

The two main documents used to capture

requirements are the Mission Needs Statement

(MNS) and the Operational Requirements Document (ORD). The MNS provides, in broad, nonsystem specific, operational terms, the warfighter’s need. The concept is to provide, in a

brief document (five pages), the user’s need,

which will become the basis for a material solution. Once MNS is validated, it starts the acquisition process looking at possible solutions for

the MNS. The ORD becomes more specific and

provides the operational parameters, such as

speed, durability, reliability and precision among

other items, to include thresholds (minimums)

and objectives (desired outcomes). It is solutionoriented and based upon the best alternative

choices. The ORD is a living document and will

evolve as a program matures. The ORD is the

link between the MNS and the acquisition

process.
Part 5 – The United States

5-19

Service Requirements Organizations

Department of the Army15

In the Army, the Training and Doctrine Command (TRADOC) has the central responsibility

for developing and approving all warfighting

requirements. Within TRADOC, this is accomplished both at the headquarters (HQ) level and

through the various branch schools. Besides

training, the Army’s branch schools have responsibility for doctrine and requirements development. Each school has a combat development

division, staffed by representatives of the proponent branches, such as artillery, infantry or

ordnance. While requirements may evolve from

a variety of organizations, such as major commands, field commanders, TRADOC schools, and

others, the Army branch schools, such as the Air

Defense Artillery School, Fort Bliss, Texas, will

define, document and defend requirements (see

Figure 5-6.) The schools are responsible for

preparing the ORD and the MNS.

The Army uses Integrated Concept Teams (ICT)

to improve development of requirements. The

ICT is made up of members from TRADOC,

Army Materiel Command (AMC), other Army

commands, other military services, academia,

industry, and others. The ICT may be a tier-one

or tier-two ICT. HQ TRADOC tier-one ICTs are

established for requirements documentation

where there are multiple proponents, joint

service impacts or high management interest/

visibility (HQDA, OSD, or Congress).

Tier-two ICTs are established and conducted under the guidance of school commandants or center commanders. These ICTs are used to develop or refine a warfighting concept operation

unique to a single proponent, or to determine

and document branch or function unique mission needs and requirements. The ICTs are responsible for developing the MNS and the ORD

for the branch school. After the ICTs de-velop

the requirements documents (MNS and ORD),

they are approved by the commandant of the

proponent TRADOC school or center and then

forwarded to HQ TRADOC for issue resolution

and approval by the TRADOC Commanding

General.

They are then forwarded to HQs Army, Deputy Chief of Staff for Operations and Plans (DA

Figure 5-6. TRADOC Centers/Schools

Air Defense Artillery Center Air Defense Artillery School

Armor Center Armor School

Aviation Center Aviation School

Aviation Logistics School

Field Artillery Center Field Artillery School

Chemical and Military Police Centers Chemical School

Military Policy School

Infantry Center Infantry School

Ordnance School

Combined Arms Center Combined Arms Center

Transportation Center Transportation School

Signal Center Signal School

Engineer Center Engineer School

Intelligence Center Intelligence School

Quartermaster School
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-20

DCSOPS) for review and evaluation. The Armylevel review will focus on issues raised by other

services, the joint staff and OSD. Changes are

recommended to TRADOC for incorporation.

DCSOPS is also responsible for resourcing the

approved requirement by means of the PPBS,

after which the process is transferred to the materiel developers and the acquisition community

to develop and field the capabilities.

Department of the Navy16

The Navy has centralized the requirements

development process at the HQ level. The Deputy

Chief of Naval Operations (DCNO) for Resources, Warfare Requirements and Assessments

(N8) is responsible for the Requirement Validation Process. He also is the validation and

approval authority for requirements that do not

require JROC approval. Nicknamed N8, the Chief

has several divisions that are the prime organizations responsible for developing the MNS and

ORD for their areas of responsibility. They are

divided into the different missions of the Navy—

Expeditionary Warfare, Surface Warfare, Air

Warfare, Submarine Warfare, and Special Programs Division (limited access programs) (see

Figure 5-7).

Requirements can be generated from a variety

of sources, such as the fleet, the shore establishment, or by one of the Office of the Chief of

Naval Operations (OPNAV) requirement divisions. While the requirement may have come

from somewhere else, the N8 OPNAV divisions

will become sponsors of the requirement and

review/coordinate/develop a MNS. N8 will validate and approve for ACAT II, III and IV MNS.

The warfare divisions also have responsibility

for reviewing, coordinating and preparing the

Figure 5-7. Navy Requirements Organizations

Air Warfare

Division

(N88)

Expeditionary

Warfare Division

(N85)

Fiscal Management

Division

(N82)

Programming

Division

(N80)

Special Programs

Division

(N89)

Surface Warfare

Division

(N86)

CINC Liaison

Division

(N83)

Assessment

Division

(N81)

Submarine

Warfare Division

(N87)

Assistant DCNO

(N8)

Resources, Warfare Requirements

and Assessments

(N8)
Part 5 – The United States

5-21

ORD. The CNO validates and approves delegated

MDAP ORDs. N8 approves all others.17 The warfare divisions are the program advocates and have

a responsibility for providing fiscal sponsorship

of the program. The Requirements Officer (RO)

is the program sponsor and provides the key

interface between OPNAV and the acquisition

management structure. Marine Corps requirements are managed through this process and

funded by appropriate warfare sponsor.

Department of the Air Force

In the Air Force, the requirements process is decentralized with the major operational commands,

such as the Air Combat Command at LangleyAir

Force Base, Virginia, having responsibility for developing requirements (see Figure 5-8). Each command has a Director of Requirements (DR) who,

as part of their modernization reviews and identifies deficiencies, evolving threats, or technological opportunities; and generates requirements.

The operational command’s DR will write the

MNS and the ORD, will prioritize programs, and

then will advocate within the Air Force budgeting

process for money to fulfill their needs.

In the HQ, Air Force, the Deputy Chief of Staff

for Air and Space Operations (AF/XO), and specifically the Directorate of Operational Requirements (AF/XOR), reviews and coordinates MNS

and ORDS. AF/XOR guides those programs requiring approval and validation through the JROC

process. The Chief of Staff is the approval authority for all MNS and ORDs for ACAT II and

III programs.

Within the Air Force, a forum similar to the JROC,

the Air Force Requirement Operational Council

(AFROC), reviews MNS, ORD and other requirements documents for joint issues, validity,

interoperability with allies, and other items. The

process is designed to emphasize the capability

needed to meet Air Force needs, versus a specific design solution. To develop effective requirements documents, it is critical to understand

deficiencies across all Air Force mission areas

and to consider Joint Warfighting Mission Areas.

Figure 5-8. Air Force Major Requirements Organizations

Air Combat Command Air Force Special Operations Command

Air Education and Training Air Intelligence Agency

Air Force Inspection Agency Air Mobility Command

Air Force Materiel Command Air National Guard

Air Force Personnel Center Air University

Air Force Recruiting Service Center Army and Air Force Exchange Service

Air Force Rescue Coordination Pacific Air Forces

Air Force Reserve Command U.S. Air Force Academy

Reserve Officer Training Corps U.S. Air Forces in Europe

Air Force Safety Center Air Force Space Command

Air Force Services Agency
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-22

Chapter 5

DEFENSE ACQUISITION

STRUCTURE

chartered the Defense Management Review

which further refined the acquisition structure to

its current arrangement.

Under Secretary of Defense (Acquisition,

Technology and Logistics) (USD (AT&L))

Out of the above efforts, the popularly coined

“acquisition czar” position was created. Officially titled, the Under Secretary of Defense

(Acquisition, Technology and Logistics)19 or

the Defense Acquisition Executive (DAE), the

“acquisition czar” was given overall responsibility for the policy and management of the

acquisition system. Similar positions were created within the Services. To create the “short

lines of command,” the Program Executive

Officer (PEO) structure was created with four

levels of management. The lines of command

between the Service Acquisition Executive

(SAE) and the Program Manager (PM) was

limited to two (see Figure 5-9).

In cases of major defense acquisition programs

or programs involving Command Control and

Intelligence programs the PM reports through

the Head of the Component to USD (AT&L) or

ASD (C3I) respectively. USD (AT&L)’s authority was strengthened when Congress determined

that USD (AT&L) would take precedence over

Service Secretaries in acquisition matters. It also

ranks number three within the DoD hierarchy.

This, along with the ability to have program

funds withheld, provides USD (AT&L) with

significant leverage over the services.

At the beginning of the 1980s, the United States

found itself with what some have termed the

“hollow military.” To correct the situation, the

incoming Reagan Administration had, as one of

its goals, strengthening national security by

increasing the defense budget. As defense budgets increased, so too did Congressional scrutiny. Several scandals, mostly centering on overpaying for spare parts, developing expensive requirements for coffee pots and toilet seats on

aircraft, and buying $450 hammers, created an

impression in the American public’s mind of a

system out of control.

With increased public concern about the weapons development process and wasted taxpayer

dollars, President Reagan tapped former Deputy

Secretary of Defense and founder of HewlittPackard, David Packard, to chair a Blue Ribbon

Commission on Defense Management. The

panel issued their report in June 1986 recommending significant changes within the department in the management of acquisition programs. They called for the department to “establish unambiguous authority for overall acquisition policy, clear accountability for acquisition

execution, and plain lines of command for those

with program management responsibilities.”

Included in those plain lines of command were

to be “short lines of command.” The President

issued National Security Directive 21918 to implement the panel’s recommendations. Congress

followed suit with the passage of the GoldwaterNichols Act, which created changes in the management of the acquisition business. In 1989 the

new Secretary of Defense, Richard B. Cheney,
Part 5 – The United States

5-23

The current USD (AT&L) is the Honorable

Jacques Gansler. In addition to setting acquisition policy he has a large portfolio of responsibilities. These include responsibility for R&D,

advanced technology, T&E, production, logistics, military construction, procurement, international cooperative programs, economic security, and atomic energy. In the international community, he is the equivalent of the Armament

Director and represents the department at the

Four-Power Conference along with other major

international forums. Another important role is

that of the Senior Procurement Executive (SPE),

responsible for management and direction of the

procurement system, including implementation

of unique procurement policies, regulation and

standards.

Office of the Under Secretary of Defense

(USD) (Acquisition, Technology and

Logistics (AT&L))

The staff of the Under Secretary consists of various functional offices which provide advice and

assistance on technology, procurement, testing

and other areas. Figure 5-10 depicts the USD

(AT&L) organization. See Appendix B for a listing of organizational functions. The Assistant

Secretary of Defense for Command, Control,

Communications and Intelligence (C3I) works

with USD (AT&L) on acquisition matters for

information systems. The office of USD (AT&L)

is primarily a policy-making organization with

oversight of the acquisition organizations within

the Services and agencies.

Figure 5-9. Acquisition Program Reporting

Program Manager

(Col/LtCol/Civilian Equivalent)

Service

Acquisition Executive/

Chief Information Officer

(Assistant Secretary or Equivalent)

Program Executive Officer

(General Officer/SES Civilian)

MDA Defense Acquisition

Executive

USD (AT&L)

SAE

PEO

PM

SAE CIO

MDA

DoD Chief

Information

Officer

ASD(C3I)

CIO

Note: Some PMs report direct to SAE.

PEO

PM

ACAT ID

Programs

ACAT IAM

Programs

(see note) (see note)
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-24

Figure 5-10.

Office of the Under Secretary of Defense (Acquisition, Technology and Logistics

(with ASD (C3I))

............................................................

Under Secretary of Defense

(Acquisition, Technology and Logistics)

Principal Deputy

USD (AT&L)

Director,

Special

Programs

Executive

Director

Science Board

Director,

Defense Research

and Engineering

DUSD

Logistics and

Material Readiness

ADUSD

Supply Chair

Integration

DUSD

Acquisition

Reform

DUSD

Industrial

Affairs

DUSD

Installations

Director,

Defense

Procurement

Director,

Acquisition

Resources and

Analysis

Director,

Small and

Disadvantaged

Business Utilization

Director

International

Cooperation

DUSD

Environmental

Security

ADUSD

Maintenance

Policy

ADUSD

Transportation

Policy

Director,

Systems

Engineering

Defense

Logistics

Agency

DUSD

Science and

Technology

DUSD

Advanced Systems

and Concepts

Defense

Advanced Research

Projects Agency

Director,

Strategic and

Tactical Systems

Director,

Logistics

Reinvention Office

Defense Contract

Management

Agency

Ballistic Missile

Defense

Organization

Defense Threat

Reduction

Agency

Director

Interoperability

Acquisition matters

Assistant Secretary

of Defense

Command, Control,

Communications and

Intelligence (C3I)

(As of June 2000)
Part 5 – The United States

5-25

Other OSD organizations involved in acquisition: USD (AT&L) is the primary acquisition

organization within OSD. Several other offices,

however, play critical roles in oversight of acquisition, or provide guidance to USD (AT&L),

or have a key role in determining the resources

available for acquisition programs.

Under Secretary of Defense (Comptroller)

(USD (C)) is the principal advisor and assistant

to the Secretary and Deputy Secretary of Defense

for budgetary and fiscal matters (including budget formulation and execution, and contract audit

administration and organization) and administers

the PPBS. In addition, the USD (C) is the Chief

Financial Officer of the DoD.

Director, Operational Test and Evaluation

(DOT&E) sets the policy and standards for operational testing and analyzes operational test

results. DOT&E has oversight responsibility for

operational testing within the services.

DoD Inspector General (IG) serves as an independent official for conducting audits and investigations relating to programs and operations

of the department. The IG is responsible for identifying problems, deficiencies, fraud and abuse

in the management of programs and identifying

the need for corrective action.

Assistant Secretary of Defense for Command,

Control, Communications and Intelligence

(ASD (C3I)) sets policy for the management of

command, control, communication, intelligence

and information management systems and software for the department. He is the Department’s

Chief Information Officer (CIO) and provides

oversight and policy to govern the development,

acquisition, and operation of information

technology (IT) and information systems. ASD

(C3I) chairs the DAB for Major Automated Information Systems (MAIS).

General Council is the chief legal adviser on

acquisition issues and legislation. Coordinates

on significant legal issues, including litigation

involving the DoD. Acts as lead counsel for the

Department in all international negotiations conducted by OSD organizations. Maintains the central repository for all international agreements

negotiated by DoD personnel.

Defense Logistics Agency (DLA) is a central

combat support agency for the department. DLA

provides worldwide logistics support for the

missions of the military departments and the

Unified Combatant Commands and other Federal agencies, foreign governments, international

organizations, and others as authorized. Provides

materiel commodities and items of supply that

are common to the military services.

The Defense Contract Management Agency

(DCMA) is the single organization responsible

for worldwide contract management.

Defense Contract Audit Agency (DCAA) performs contract audits and provides accounting and

financial advice to DoD procurement organizations and others, such as NASA. These services

are provided in connection with negotiation,

administration, and settlement of contracts and

subcontracts.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-26

Chapter 6

SERVICE ACQUISITION

ORGANIZATIONS

mission needs. The Army and Air Force have

Major Commands, headed by four-star generals,

which have acquisition and logistics responsibilities—Army Materiel Command (AMC) and

Air Force Materiel Command (AFMC). These

commands manage the personnel, resources and

processes involved in acquisition and logistics

support of the operational forces. The Navy

eliminated its Materiel Command in the 1980s

and has four subordinate Naval Systems Commands, two headed by three-star admirals, with

responsibility for the acquisition of systems and

providing logistics support to the fleet.

At the service headquarters level, each Service

has established offices with responsibility for

oversight and direction of the acquisition system, and for providing acquisition and contracting policy, and budget preparation. The role of

IT in weapon system development and management of information within the services is recognized by establishment of CIOs. In the Air

Force the CIO is located within the acquisition

organization; while in the Navy and Army it is

in a separate organization, but works with the

acquisition organization on common issues. The

CIOs have responsibility for information technology policies, procedures, standards, to include software policy and practices, and for the

development, acquisition and fielding of information technology and systems within their

service.

The Services—Army, Navy and Air Force—are

separate departments within DoD, required by

statute to train, organize, and equip their respective military organizations. Thus, a significant

responsibility of each Service is the acquisition

of military equipment to meet the needs of the

warfighter. Closely allied with the structural

division of responsibilities is the department’s

management philosophy. Since the creation of

DoD, the philosophy has been to centralize

policy-making at the OSD and Service headquarters level, with decentralized execution of

programs at field level organizations. As seen

above, OSD is primarily a policy-making organization, although it plays a key role in program

management through the PEO structure for

MDAPs and in its oversight role through the

Defense Acquisition Board (DAB).

All three Services have organized based upon

OSD direction and congressional mandates.

Each Service has a single, full-time SAE, an

“acquisition czar,” at the Assistant Secretary

level.20 The SAE21 has responsibility for making acquisition policy and managing the acquisition system within their respective department.

Each of the Services has created a streamlined

organization required by the 1989 Defense Management Review which includes the PM, the

PEO, and the SAE—although each is managed

slightly differently.

Within this basic structure, each of the services

has organized to meet its management and
Part 5 – The United States

5-27

THE ARMY ACQUISITION

ORGANIZATION

The Army’s22 Acquisition Executive is the Assistant Secretary of the Army, Acquisition, Logistics and Technology (ASA (ALT)). He is responsible for policy and management of both the

acquisition and logistics systems. The headquarters’ organization consists of six major deputies

that provide support and advice to the Assistant

Secretary. They include a Principal Military

Deputy who is also the Deputy for Acquisition

Career Management; Deputies for Logistics;

Research and Technology; Procurement; Plans,

Programs and Policy; Systems Management and

Horizontal Technical Integration; and a Director

for Assessment and Evaluation.

The acquisition workforce education and training responsibility is assigned to the Deputy Director, Acquisition Career Management, who

reports directly to the principle military deputy.

With the recent emphasis on privatization, a

Director for Competitive Sourcing has been

added. The Army’s CIO is separate from the

ASA (ALT). CIO responsibility is vested in the

Director of Information Systems for Command,

Control, Communication and Computers who

reports directly to the Secretary of the Army.

The mission areas of Combat Service Support

and Ammunition are assigned to AMC for management, but the individuals are dual hatted as

the “Deputy for” as part of the ASA (ALT) staff.

Medical Systems are not assigned to the AMC.

They are separately managed by the Army Medical Research and Materiel Command at Fort

Detrick, Maryland. The Deputy Assistant Secretary for Chemical Demilitarization oversees

the U.S. chemical weapons destruction program.

The Army currently has seven PEOs as a line

organization reporting directly to the SAE, covering program areas, such as, missiles, support

systems, aviation and others. The Army’s PEO

organizations range in size from 50 to 100 personnel and are located at the AMC subordinate

commands, such as AMCOM in Huntsville,

Alabama. There is also a PEO for Reserve Component Automated Systems. Three Direct Reporting Program Managers (DRPMs) manage

the Joint Tactical Radio System, Biological Defense, and Chemical Demilitarization, respectively. Figure 5-11 shows the ASA (ALT) organizational structure. Appendix C provides a

functional description of each office.

Army Materiel Command (AMC)

The AMC, a major command, located in Alexandria, Virginia, employs about 65,000 military

and civilian employees and is the Army’s principal materiel developer. AMC provides management of numerous maintenance depots, inventory control points, arsenals, ammunition

plants, laboratories, test facilities, and procurement operations—much of it in general support

of the acquisition mission of the department. In

addition to its logistics and maintenance responsibilities, AMC headquarters has responsibility

for providing the resources for the education and

training of the acquisition workforce, ensuring

manpower support for program offices and

PEOs, and development and maintenance of

acquisition processes. Within the headquarters

of AMC there are three offices primarily involved in acquisition: the Deputy Chief of Staff

for Research, Development, and Acquisition; the

Office for International Programs; and the Deputy Chief of Staff for Security Assistance. AMC

is also the executive agent with responsibility

to acquire all ammunition for the three Services.

AMC has nine sub-organizations with specific

areas of responsibility for acquiring weapon

systems not assigned to the PEOs. In these organizations the Program Offices develop the

acquisition strategies and approaches, select the

contractors to develop or produce the weapon

system and manage the contracts. They are:
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-28

Figure 5-11.

Office of the Assistant Secretary of the Army (Acquisition, Logistics and Technology)

Deputy for

Systems

Management

and Horizontal

Tech Integration

Director,

Program

Assessment

and

Evaluation

Deputy, ASA

Plans,

Programs

and

Policy

Deputy

ASA

Procurement

Deputy

ASA

Research

and

Technology

Command, STAMIS

Control,

and

Communication

Systems

Ground

Combat

Support

Systems

Tactical

Missiles

Director

Competitive

Sourcing

Intelligence,

Electronic

Warfare

and

Sensors

Air and

Missile

Defense

*Reserve Aviation

Component

Auto System

DRPM

Bio

Defense

DRPM

Chemical

Demil

DRPM

Joint Tactical

Radio System

Deputy for

Ammunition

and DCS,

Ammunition,

HQAMC

Deputy for

Combat

Service

Support and

DCS

RD&E,

HQAMC

Deputy for Medical Systems and CDR,

U.S. Army Medical Research and Materiel

Command, Fort Detrick, MD

DISC4/CIO

Deputy Director

Acquisition Career

Management

Assistant Secretary

of the Army (ALT)

Military Deputy ASA (ALT) and

Director, Acquisition Career Management

Program Report

Coordination and Support

Program Executive Officers

.......

..........

..................... (As of June 2000)
Part 5 – The United States

5-29

Aviation and Missile Command/AMCOM,

Huntsville, Alabama

Army Research Laboratory/ARL, Adelphi,

Maryland

Communications – Electronics Command/

CECOM, Ft. Monmouth, New Jersey

Industrial Operations Command/IOC, Rock

Island, Illinois

Soldier & Biological Chemical Command/

SBCCOM, Aberdeen, Maryland

Simulation, Training & Instrumentation

Command/STRICOM, Orlando, Florida

Tank-automotive & Armaments Command/

TACOM, Warren, Michigan

Test and Evaluation Command/TECOM,

Alexandria, Virginia

U.S. Army Security Assistance Command/

USASAC, Alexandria, Virginia

THE NAVY ACQUISITION

ORGANIZATION

The Navy Acquisition Executive is the Assistant Secretary of the Navy for Research, Development and Acquisition (ASN (RD&A)). ASN

(RD&A) sets policy and manages the Navy’s

acquisition system. Six Deputy Assistant Secretaries (covering the program areas of ships,

mine/undersea warfare, air, C4I/electronic warfare/space, theater air defense and expeditionary forces) support him. The Navy’s CIO is a

separate organizations reporting directly to the

Secretary of the Navy. The Navy’s SAE is supported by five functional directors—Acquisition

and Business Management, International Programs, Acquisition Career Management and Acquisition Reform and Planning, Programming

and Resources. The Office of Naval Research is

a line unit that reports directly to the ASN

(RD&A).

Eleven PEOs, with responsibility for major defense programs in areas, such as undersea warfare and mine warfare, report directly to the

SAE. The Navy PEO offices are located at the

Naval Systems Commands and contain about

15-20 personnel per office. The PEO Joint Strike

Fighter (JSF), dual hatted as the PM, manages a

joint Navy/Air Force program. This is an innovative Navy/Air Force management approach

to increasing emphasis on joint program management. The current PM/PEO is a Marine

Corp general officer and reports to the Assistant Secretary of the Air Force (Acquisition). At

the end of his tour, the position will alternate to

an Air Force PM whose reporting official will

be the ASN (RD&A). Two of the PEOs are

actually Direct Reporting PMs (DRPMs) for—

Strategic Systems Programs (SSP) and Advance

Amphibious Assault Programs (AAAP). Figure

5-12 shows the ASN (RD&A) organizational

structure. Appendix C provides a functional

description of each office.

Naval Systems Commands

The next level of major command in Navy

acquisition is the Systems Commands, two of

which are headed by three star admirals. Each

of these commanders has responsibility for programs not managed by the SAE. They also have

the responsibility to implement acquisition initiatives and provide the manpower and logistics

support for the Navy PEOs and DRPMs. The

PEOs and DRPM are collocated with the respective Systems Command. The four major Navy

Systems Commands are:

Naval Air Systems Command (NAVAIR),

Patuxent Naval Air Station, Maryland

Space and Naval Warfare Systems Command (SPAWAR), San Diego, California

Naval Sea Systems Command (NAVSEA),

Washington, D.C.

Marine Corps Systems Command (MARCORSYSCOM), Quantico, Virginia

Within these commands are various subordinate

commands which support the acquisition system.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-30

Figure 5-12.

Office of the Assistant Secretary of the Navy (Research, Development & Acquisition)

Deputies

DASN

C4I/EW/Space

Programs

(Navy CIO)

DASN

Theater

Combat

Systems

DASN

Air

Programs

DASN

Mine/

Undersea

Warfare

DASN

Ship

Programs

DASN

Expeditionary

Force

Programs

Director

Acquisition

Career

Management

Director

International

Programs

Deputy

Acquisition

and Business

Management

Chief of

Naval

Research

Joint

Strike

Fighter*

Acquisition

Reform

Executive

DASN

Planning,

Programming

and Resources

Aircraft

Carriers

Theater Air

Defense/

Surface

Combatants

Expeditionary

Warfare

Air ASW, Assault

and

Special Msn Programs

Advanced Amphibious

Assault

Strategic Systems

Program

Functional Directors Functional Directors

Deputies

Program Executive Officers

Direct Reporting Program Managers

*AF PEO reports to Navy Acquisition Executive.

Assistant Secretary of the Navy

(RD&A)

Principal Deputy

Cruise Missiles and

Joint Unmanned

Aerial Vehicles

Tactical

Aircraft

Programs

Information Submarines

Technology

Surface

Strike

Mine

Warfare

(As of June 2000)
Part 5 – The United States

5-31

For example, NAVAIR has the Naval Air Warfare Center Aircraft Division (NAWC AD), Naval Air Warfare Center Weapons Division

(NAWC WD), Naval Air Warfare Center Training Systems Division (NAWC TSD), and Naval

Inventory Control Point (NAVICP). There are

two other support systems commands: the Navy

Facilities Engineering Command, Washington.

D.C., responsible for construction and facilities

maintenance and the Navy Supply Systems

Command, Mechanicsburg, Pennsylvania,

which provides in-service logistics support.

AIR FORCE ACQUISITION

ORGANIZATION

The Air Force acquisition executive is the Assistant Secretary of the Air Force (Acquisition)—

(ASAF (A)). ASAF (A) has two principal deputies. The Principal Deputy (Acquisition and

Management) oversees the management of Air

Force acquisition programs, acquisition reform,

and acquisition training and education. This individual currently holds the position of chairman of the NATO Airborne Early Warning and

Control Program Management Board of Directors. The Principal Deputy (Acquisition) provides management direction of programs, works

the interface with the user and the Hill. Additionally, he is designated as the Air Force’s CIO.

The support staff consists of mission area

directors and functional directors. The four

Mission Area Directors for Information Dominance, Global Power, Global Reach and Space

and Nuclear Deterrence provide policy, direction, resource allocation (PPBS) (program budgets), and oversight for programs within their

mission areas. The four functional organizations

are Contracting; Special Programs; Science,

Technology and Engineering; and Management

Policy and Program Integration. There is also

the Air Force Acquisition Management Chair

located at the Defense Systems Management

College. Figure 5-13 shows the organizational

structure. Appendix C provides a functional

description of each office.

Air Force Program Executive Officers (AFPEOs)

are responsible for a number of mission-related

programs, which collectively comprise the

PEO’s portfolio. The current six PEOs have portfolios grouped into areas, such as fighters and

bombers, weapons, airlift and trainers, space,

command and control, and logistics information

systems. The PEOs are a field unit, not part of

the headquarters staff, and have small staffs,

consisting of seven personnel for each office. A

typical PEO will have oversight of five or six

programs, each managed by a PM, who is held

responsible for ensuring that cost, schedule and

performance aspects of acquisition programs are

executed within an approved program baseline.

For other than Major and Selected programs

(ACAT IIIs), the commanders of AFMC Product Divisions and Air Logistics Centers perform

a PEO role. In their PEO role they are referred

to as Designated Acquisition Commanders

(DACs). These DACs are also established in a

direct reporting line between their subordinate

PMs and the SAE. In their role as center commanders, they report to the AFMC commander.

Figure 5-14 shows this relationship.

Air Force Materiel Command (AFMC)

The HQ for AFMC, a major Air Force command,

is located at Wright-Patterson Air Force Base,

Ohio, and employs over 100,000 personnel. Its

mission is to manage the Air Force research,

development, test, and acquisition of programs

and to provide logistics support for Air Force

weapons systems. Specifically, they perform scientific research and depot maintenance, provide technical support for existing weapon systems, such as

the F-16, certifying and managing system safety,

integrity and suitability for combat use. They also

provides the manpower and process support to

the PEO structure.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-32

AFMC has management responsibility for Air

Force weapons systems “womb to tomb.” Weapon systems with significant development or

production efforts remaining are managed by

one of four Product Centers. These centers are

primarily responsible for development, acquisition, testing, and fielding of new or modified

weapon systems. The four centers are:

Aeronautical Systems Center, WrightPatterson Air Force Base, Ohio

Space and Missile Systems Center, Los

Angeles Air Force Base, California

Electronic Systems Center, Hanscom Air

Force Base, Massachusetts

Air Armament Center, Eglin Air Force Base,

Florida

Existing weapon systems and military equipment are managed by one of five air logistics

centers. These centers have responsibility for

logistics support and maintenance of weapon

systems and equipment.

Ogden Air Logistic Center, Utah

Oklahoma City Air Logistics Center,

Oklahoma

Figure 5-13.

Office of the Assistant Secretary of the Air Force (Acquisition)

*AF PEO reports to Navy Acquisition Executive.

DAS,

Management

Policy and

Program

Integration

DAS,

Contracting

DAS, Science

Technology and

Engineering

Director,

Special

Programs

• Scientific Advisory Board

• RFP Support Office

• AF Chair – DSMC

Functional Directors

Mission Area Directors

Assistant Secretary of the Air Force

(Acquisition)

(AF SAE and SPE)

Principal Deputy Principal Deputy

(Acquisition & (Acquisition)

Management)

Director,

Space and

Nuclear

Deterrence

Director,

Information

Dominance

Director,

Global

Power

Director,

Global

Reach

Program Executive Officers

Fighters

and

Bombers

Airlift

and

Trainers

Weapons JSF* Command Space

and

Control

Logistics

Information

Systems

(As of April 1999)
Part 5 – The United States

5-33

Figure 5-14. Acquisition Management Structure

Management Support

Technical/Logistics/

Contract Support

Program

Manager

Staff

PEOs

Staff

SAE

USD (AT&L)

Program

Managers

Acquisition

Staff

AF

AFMC

Acquisition, Policy

Support and Processes

DAC Product Centers

Log Centers
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-34

Sacramento Air Logistics Center, California

(scheduled to close 2001)

San Antonio Air Logistics Center, Texas,

(scheduled to close 2001)

Warner–Robbins Air Logistics Center,

Georgia

In support of weapons development, AFMC has

two test Centers—Arnold Engineering Development Center, Tennessee, and Air Force Flight Test

Center at Edwards Air Force Base, California.

AFMC is also home of the Air Force Research

Laboratory (AFRL). The AFRL is the science and

technology organization for the Air Force. They

perform internal research and leverage the

capability of other national scientific organizations, industry, and academia. The Air Force Security Assistance Center is also part of AFMC,

and manages foreign military sales programs

totaling in excess of $20 billion in support of more

than 80 foreign countries.
Part 5 – The United States

5-35

Chapter 7

THE DEFENSE

ACQUISITION SYSTEM

impacts on the ability of the acquisition system

to deliver timely, cost effective systems.

PLANNING, PROGRAMMING, AND

BUDGETING SYSTEM (PPBS)

In 1962 Defense Secretary Robert S. McNamara

and Charles J. Fitch, OSD Comptroller, wanted

to “run government more like a business.” They

developed the PPBS to link strategic planning

activities to the budget. This system, unique to

the DoD, provides the mechanism for development of the Department’s portion of the

President’s Budget.

There are three decision support systems used to

manage the department. They are: (1) the Requirements Generation Process (discussed earlier); (2)

the PPBS, and (3) the Acquisition Management

System. All three systems are designed to assist

senior decision-makers such as the SECDEF,

USD (AT&L) and other senior officials in making critical decisions. The output from these systems provide the money, authority, people and

other resources necessary to execute programs and

deliver a product to the warfighters. Figure 5-15

provides a conceptual look at the systems and the

overlap between the systems. While these systems

interact, they also operate separately, continuously and concurrently. Decisions and issues

overlap from one system to the other; and each

Figure 5-15. Three Decision Making Support Systems

Planning, Programming,

and

Budget System (PPBS)

Requirements

Generation

DRB Review

and

Approval

VC/JCS/Service

Chief

Oversight

Milestone Decision

Authority (MDA)

Oversight

Acquisition

Management

DAB Review and

Approval

ACAT I
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-36

Prior to implementation of the PPBS system, the

military departments “planned, programmed,

and budgeted” a year at a time. PPBS provides

a disciplined process to tie long-term planning,

such as the DPG, to the resources needed to implement the planning and the budgetary dollars

necessary for implementation. Senior leaders

then have the information to make informed

affordability assessments, to prioritize requirements and to make resource allocation decisions

on defense acquisition programs. PPBS is a

cyclic process, looking out five years, with annual reviews of the resources necessary for the

department to operate. In each phase, OSD issues guidance; the Services, defense agencies

and the JCS request resources; and the Defense

Secretary issues a decision. The Deputy Secretary of Defense, with advice from the DRB,

manages the PPBS system.

The planning portion of the PPBS is the responsibility of the USD Policy. Generally, this phase

begins about two years in advance of the FY in

which the budget will be requested. The Services and Joint Staff, with OSD, conduct this

six-month process beginning in the fall and ending in March. The overall framework for planning is provided by the President in his National

Security Strategy and the National Military

Strategy. This phase begins when the JCS issues the Joint Planning Document (JPD) which

proposes long-term strategy and force levels

necessary to achieve national military objectives.

Based on the JPD, OSD issues the DPG document, which provides the strategic mid-rangeplanning framework for developing the Service

Program Objective Memorandum (POM).

The programming phase is next and is the

responsibility of OSD’s Program Analysis and

Evaluation office. The Services respond with

their POM stating requirements for resources,

such as personnel and supplies, and justifying

acquisition programs. The JCS then submits to

OSD the Chairman Program Assessment (CPA)

assessing the capabilities and risks associated

with the proposed forces and programs. A period

of formal discussions (program review cycle)

follows between the Services, OSD, and the JCS.

Once an acceptable level of resources and programs is agreed to, the Secretary of Defense issues the Program Decision Memorandum

(PDM). See Figure 5-16 for the time frames for

conducting the PPBS cycle.

The final phase is the budgeting phase and the

responsibility of the OSD (C). The PDM has

set the resource and acquisition program levels.

These are translated into the Service annual budgets, which are in turn reviewed by OSD. Based

upon OSD comments, the services submit a Budget Estimate Submission (BES) in September.

After resolution of issues caused by the BES

submittal, OSD issues program budget decisions

and the DoD budget is finalized. What survives

is voluminously documented and submitted to

OMB for inclusion in the President’s Budget,

which is submitted to Capitol Hill in February.

The Acquisition Management System

The Acquisition Management System consists

of the policies and procedures governing the

operations of the entire DoD acquisition system.

There are two documents that guide the defense

acquisition business. The first regulation is the

DoD Directive 5000.1, Defense Acquisition,

which identifies the key officials and panels for

managing the system and provides broad policy

and principles for all acquisition programs. Its

sister pamphlet is DoD Regulation 5000.2, Mandatory Procedure for Major Defense Acquisition Programs (MDAPs) and Major Automated

Information System Acquisition Programs

(MAIS). This document provides specific mandatory policies and procedures to guide the development and production of major programs.

There are three general principles governing the

operation of the defense acquisition system:
Part 5 – The United States

5-37

1. Translate operational needs into stable,

affordable programs,

2. Acquire quality products, and

3. Organizing for efficiency and effectiveness.

The acquisition system is designed around a

series of life-cycle phases. It begins with the

conceptualization of a system and extends to

actually developing and fielding a system, and

eventually phasing it out of the inventory. It is

more colorfully described as “womb to tomb.”

The four phases of the DoD acquisition system

are: (1) Concept Exploration (CE), (2) Program

Definition and Risk Reduction (PDRD), (3)

Engineering and Manufacturing Development

(EMD), and (4) Production, Fielding/Deployment, and Operational Support. As a system

moves through its life cycle, it must pass decision points. These points are called Milestone

Decision Points (Milestone 0 to IV). The phases

and milestone decision points are shown in

Figure 5-17.23 At each of these milestones, the

decision-maker, the Milestone Decision Authority (MDA), will make a determination whether

or not the system is programmatically and technologically ready for the next phase. As an

example, an Army personnel carrier entered the

Program Definition and Risk Reduction phase

with two goals—demonstrating certain technology and developing a successful prototype. The

MDA will evaluate how successful the program

performed its goals and what its projected cost,

schedule and technical risks are for the next

phase. If the Phase I goals have been met and

the performance parameters are acceptable, the

MDA will approve the program’s entry to the

next phase—EMD. Of course, if the program

has not met its goals and the risks are perceived

to be too great, the program could be cancelled

or additional technical efforts may be undertaken. For Major programs, the DAB (to be discussed later) is the MDA. This is an event-driven

process and some programs will go through a

phase in one or two years where another may

Figure 5-16. Planning, Programming, and Budgeting Cycle

OSD Review

Program Decision

Memorandum

Year 1

August–September

Program Objective

Memoranda

Services to OSD

Defense Planning

Guidance by JCS,

OSD and Services

Long Range

Investment Plans

by JCS with Services

Year 2

March

Year 2

April

Year 2

April–September

Budget

Estimate

Submission

Year 3

February

OSD Review

Program Budget

Decision (PBD)

Two Year

Defense Budget

OMB Review

President’s

Budget Submitted

to Congress

Year 3

January

Year 2

September–December

Year 2

September

Planning Phase Programming Phase

Budgeting Phase
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-38

take four or five years. The next section provides a description of each of the milestones and

phases.

PHASES AND MILESTONE24

Milestone 0/Phase 0: Concept Exploration25

The Requirements Generation Process has

identified a shortfall in military capability and

turned to the acquisition community. The basic

questions asked by the acquisition community

are “How can I solve this problem? What type

of material solution is possible?” The answer

could be a new aircraft, a remotely-piloted

vehicle, modification of an existing aircraft, or

other possible solutions. During this phase most

of the effort is paper products—studies of various concepts to meet the warfighters needs.

These studies will address the following types

of questions:

• What technical problems must be overcome?

• What technology is available to meet

military needs?

• What are the technical risks?

• What will the program cost and how long to

field?

This “concept” will translate a range of ideas

into a more detailed, but still abstract, description of a possible solution. Generally, this phase

is short lived, possibly several years, and

relatively inexpensive.

Milestone I: Approval to Begin a New

Acquisition Program/Phase I – Program

Definition and Risk Reduction

This is the phase where a program becomes a

program. If it is an ACAT I program, the DAB

Figure 5-17. Milestones and Phases

Milestone

III

Production

or

Fielding/

Deployment

Approval

Milestone

II

Approval

to

Enter

EMD

Milestone

I

Approval

to

Begin New

Acquisition

Program

Milestone

0

Approval

to

Conduct

Concept

Studies

Pre-Phase 0

Activity

Phase 0

Concept

Exploration

Phase I

Program

Definition

and

Risk

Reduction

Phase II

Engineering

and

Manufacturing

Development

Phase III

Production,

Fielding/

Deployment

and

Operational

Support
Part 5 – The United States

5-39

will provide criteria for entering the next phase

of acquisition. During this phase the program

office will look at alternative acquisition strategies and solutions. New technologies will be

evaluated for possible incorporation into the

system. The cost, schedule, and technical risks

will be assessed. Prototypes may be built and

tested to further identify and reduce risks.

Technical factors that drive cost will be evaluated. Estimates of the life-cycle cost of the system will be developed. Other factors, such as

interoperability with other services and allies,

should be pursued and evaluated. As the title to

this phase indicates, the program office is trying

to “flesh out” the item and focus on risk reduction of the system prior to the next decision point.

This phase can be as short as two to three years

or well over five years.

Milestone II: Approval to Enter

Engineering and Manufacturing

Development/Phase II – Engineering

and Manufacturing Development

The purpose of the Milestone II decision point

is to determine if the results of Phase I warrant

continuation of the program, and to approve

entry into EMD. The program is now moving

from the experimental phase into the engineering design phase and it is a significant commitment of government funds. A particular approach—ship, radar, airplane—has been selected and the actual design of the system takes

place. The contractor designs the system, builds

actual products, and then tests the item to ensure it performs to specification. Also during this

phase, operational testing will be accomplished

to ensure that it performs as it should in a combat environment. A limited commitment to production, called Low Rate Initial Production

(LRIP),26 will occur. Depending upon the system and the program risks, the MDA could

approve the LRIP initially or when EMD is completed. This phase often takes three to five years

or longer.

Milestone III: Approval for Production,

Fielding/Deployment, and Operational

Support/Phase III – Production, Fielding/

Deployment, and Operational Support

It works! It has been tested and is ready for production. With the Milestone III production approval by the MDA, this phase brings the equipment to the warfighter. As the equipment is delivered, the military services will introduce the

equipment into the inventory and into actual use.

Along with the equipment will come the technical orders on how to operate and repair the

equipment, the spare parts, the training and training equipment, and test equipment necessary to

operate the equipment.

In summary, the development of a weapon

system is a methodical, event-driven process,

which can well take over 10–15 years. However,

the warfighting environment is dynamic. New

technology makes old technology obsolete. Testing may have identified deficiencies that need

to be corrected. The enemy’s equipment and tactics may change. For these types of reasons,

additional changes to the system, some major,

may occur many years after the system is fielded.

The first B-52 pilot’s grandson, and perhaps

great grandson, may still be flying that aircraft.

Systems such as the B-52, which have been in

the inventory for 50 years, require constant

change to keep up-to-date with emerging threats

and new technology. Some modifications, such

as new avionics, or engines, could be of sufficient cost and complexity that they could qualify

as a new major system program. If this happens,

they will be managed as a “new” major program.

DESIGNATION OF PROGRAMS

The Department assigns a designation to a program to ensure the proper level of management

review. These designations also indicate the

statutory and regulatory policy that the program
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-40

must comply with. The most senior level of

review, OSD (DAB) review, is selected for the

most costly programs—a MDAP, also referred

to as an Acquisition Category I (ACAT I) program. The next level is a Major Program, or Acquisition Category II (ACAT II). For less than

major programs, or ACAT III programs, the level

of review is delegated to the PEO or Systems

Command level. In most cases the cost of a program is used to determine the review level. An

MDAP is based upon the cost for research, development, test and evaluation (RDT&E) of a

weapons system of more than $355 million dollars27 or for production cost of an item for more

than $2.135 billion. The SAE will review a major system (ACAT II) at the Service, versus OSD

level. An ACAT II designation is based upon

RDT&E cost of more than $135 million, or procurement cost of more than $640 million. All

other systems are considered less-than-major

systems (ACAT III). While normally the level

of review is designated by a system’s cost, at

other times, the USD (AT&L) or the SAE will

determine that because of high technical risks

or political issues, a more senior review is

warranted.

For over 20 years the department has provided

oversight of motor automated information

systems under a separate forum. The Major

Automated Information System Acquisition

Review Council (MAISARC) process has

recently been integrated into the DAB process.

A program receives a MAIS Acquisition Program designation at a lower dollar value. A program with costs in any single year in excess of

$30 million dollars, or total program costs in

excess of $120 million, or total life-cycle costs

in excess of $360 million28 will be designated

an ACAT IAM program.

Categories of Acquisition Programs and

Milestone Decision Authorities (MDA)29

Category Management Responsibility/MDA

ACAT ID USD (AT&L)

ACAT IC Generally the Service Acquisition

Executive

ACAT IAM Assistant Secretary of Defense

(C3I)30

ACAT IAC SAE

ACAT II SAE

ACAT III31 Delegated to PEO/PM/acquisition

command

DEFENSE FORUMS

There are several key Boards the DoD uses to

manage decision making in the three decision

systems. These boards allow the Deputy Secretary or the Under Secretary for (AT&L) to have

the benefit of the key players in the system to

provide input and advise him in making his

decision. The DRB is the senior DoD resource

allocation board chaired by the Deputy Secretary of Defense. The DRB advises the Deputy

Secretary on major resource allocation decisions

and authorizes funds. Its membership includes

Chairman and Vice Chairman JCS, Under Secretaries of Defense, Chiefs and Secretaries of

the military Departments. The DRB coordinates

the two decision systems—the PPBS and

Acquisition Management Systems.

The Defense Acquisition Board (DAB)

32

This body has been called the “corporate-level

vice-presidents of DoD weapons acquisition.”

It is the senior DoD acquisition review board

chaired by the USD (AT&L)33 for ACAT I programs. At each milestone the DAB authorizes

program initiation or continuation. Each DAB

review assesses the program’s accomplishment

of its required objectives during the current
Part 5 – The United States

5-41

phase and is it ready for the next acquisition

phase. When the DAB approves continuation, it

provides exit criteria, which must be met to

continue into the next phase.

DAB Members

The principal members are:

• The Vice Chairman of the Joint Chiefs of

Staff (vice chairman of Board);

• Principal Deputy USD (AT&L);

• Under Secretary of Defense (Comptroller);

• Assistant Secretary of Defense (Strategy and

Requirements);

• Director of Operational Test and Evaluation

(DOT&E);

• Director of Program Analysis and Evaluation (PA&E);

• Acquisition Executives of the Army, Navy,

and the Air Force; and

• Cognizant Overarching Integrated Product

Team (OIPT) Leader, PEOs and Program

Managers.

Senior advisors, such as, the Director of Defense

Research and Engineering also routinely support

the DAB Chairman.

As part of the Department’s acquisition reform

efforts, the DAB process has been changed to

use Integrated Product Teams (IPT), in particular the OIPT to improve the quality of information and to speed up the process. A concern of

the senior OSD leaders has been the length of

time and bureaucracy that has crept into the process over the years. The use of the IPT structure,

along with other acquisition reform changes, is

meant to overcome these problems. It should be

noted that in many cases the OIPT could resolve

all major issues, and not require the DAB to

meet in executive session, but rather perform a

“paper” DAB. If the DAB agrees, then the approval document—an Acquisition Decision

Memorandum (ADM)—will be issued.34

INTEGRATED PRODUCT TEAMS (IPT)

Over the last 10-15 years, the concept of IPTs,

as a management approach, has gained favoritism both in government and industry. The IPT

is based upon the concept that having the right

people working together as a team will result in

a better product for the customer. The typical

IPT will have a team of experts from a variety

of acquisition functions, such as, engineering,

contracting, logistics, and the user. At the program office level they work the day-to-day program problems. Many IPTs include contractor

(industry) representatives. As an example, an

airplane program office might have the following

IPTs:

• IPT for engines,

• IPT for simulators, and

• IPT for aircraft.

The IPT began in the program office, but, as the

acquisition community found they worked well,

the concept was expanded as part of the

Department’s Acquisition Reform Program.

There are now three other types currently in use:

(1) the WIPT; (2) the IIPT; and (3) the OIPT.

(See Figure 5-18.)

Working IPTs (WIPT)

The WIPT is the service HQ and OSD action

functional officers’ opportunity for insight into

the program mostly from a functional viewpoint,
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-42

such as, contracting or testing. This group will

formulate/coordinate documents needed in that

functional area, such as the Single Acquisition

Management Plan (SAMP).

Integrating IPTs (IIPT)

The PM will generally lead the IIPT. Membership on the IIPT is generally a senior member

of the functional areas represented in the WIPT.

The IIPT coordinates the WIPT efforts. In doing this they will support the development of

strategies for acquisition and contracts, cost

estimates, evaluation of alternatives, logistics

management, cost-performance trade-offs, and

other efforts.

Figure 5-18. Defense Acquisition Integrated Project Team (IPT) Structure

CONTRACTING

IPT

(Service HQ Staff,

OSD Staff)

Integrating IPTs

Test IPT

(Development and

Operational

Organization

Service HQs and

OSD Testers)

OTHER

IPTs

(as needed)

Contracting IPT

Contracting Officer/

Defense Contract

Management

Command

IPT

Various IPTs

Government

and Contractor

Personnel

(as needed)

Program Office/

Contractor/

Product IPTs

Engine IPT,

Airframe IPT

Program Management IPTs

Milestone Decision Authority

(Defense Acquisition Board)

Overarching

IPTs

Strategic, Tactical, Space, C3I/AIS

Oversight

and

Review

Execution

Working

IPTs
Part 5 – The United States

5-43

Overarching IPTs (OIPT)

The OIPT is the highest organizational level IPT

and is used in managing ACAT level I programs.

An OSD official assigns each program to an

OIPT lead. There are four OIPTs and the officials leading them are:

OIPT OSD Official

Strategic Director of Strategic and Tactical

& Tactical Systems

Space Assistant Deputy Under Secretary

of Defense (Space and Acquisition

Management)

C3I/AIS Deputy Assistant Secretary of

Defense (C3I)

Typical OIPT membership is the PM, PEO, Component staff, Joint Staff, USD (AT&L) staff and

the OSD staff principals or their representatives,

involved in oversight and review of a particular

the program. OIPTs meet as necessary over the

life of a program. The goal is to resolve as many

issues and concerns at the lowest level possible,

and to expeditiously escalate issues that need resolution at a higher level, bringing only the highest

level issues to the MDA for decision.

The indicated above the OIPT plays a significant role in improving the DAB process. The

OIPT will meet two weeks prior to a scheduled

DAB review. The acquisition strategy, the program status, outstanding issues, and criteria for

next phase will be discussed. If the issues and

problems can be worked at the OIPT level, the

OIPT leader, with the SAE, will recommend to

the Chairman of the DAB chairman not having

a formal DAB, but rather a “paper” DAB.

THE PROCUREMENT/CONTRACTING

SYSTEM35

The Department of Defense is the largest buyer

in the world. It spent over $128 billion in FY

1998. The items bought range from developing

major weapon systems, such as the F-22, to buying repair services for copiers. It is a large, complex system with hundreds of buying offices located throughout the world. The basic policy of

the U.S. Government is that products and services will be bought, if possible, competitively.

The original regulation governing procurement

for the DoD was the Armed Services Procurement Regulation, first issued in 1948. This document has evolved over the last 50 years, going

through two name changes—Defense Acquisition Regulation (DAR) in the 1970s to the FAR

in 1984. While competition has always been

the hallmark of the system, it was not until the

passage of the Competition in Contracting Act

(CICA) of 1984, which mandated full and open

competition, that over 50 percent of the dollars

spent were actually competed. CICA instituted

a very structured process for sole source authorization. It requires approval by the local

competition advocate for lower dollar acquisitions. The Senior Procurement Executive must

approve acquisitions over $50 million. In FY

1998, 58 percent of the department’s dollars

were competed, which equates to over $74

billion available for competition.

The Director, Defense Procurement, on the staff

of USD (AT&L), sets policy for procurement

within the department. In turn, each of the Services has a functional organization at the service headquarters level responsible for policy.36

The actual awarding of contracts in the DoD is

decentralized. There are hundreds of contracting organizations located at military posts and

bases throughout the world. In general, they buy

goods and services that are most efficiently procured at local level—maintenance and repair of

facilities, office supplies and food products.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-44

Weapon Systems Contracting is done at centralized agencies, such as the Army’s Communications Electronics Command in New Jersey, the

Navy’s Space and Naval Warfare Systems in

California, and the Air Force’s Aeronautical

Systems Center in Ohio.

There are two general types of contracts used in

DoD contracting—Fixed Price and Cost Reimbursement. Fixed price type contracts, as the

name implies, set the price to be paid to the

contractor on the day the contract is awarded.

This type of contract is used where the item is

well-defined—for example, a jeep or an existing missile. For newly-developed equipment,

where there are many technical and manufacturing risks, a cost-type contract is used to share

the risk between the government and the contractor. In a cost-type contract, the government

reimburses all allowable and reasonable costs,

plus a small fee. To use a fixed-price contract

for R&D over $10 million requires approval by

the USD (AT&L). In general, during the early

phases of R&D through EMD, a program office

will use a cost-type contract. Once the system

moves to production and the design is finalized,

then a fixed-price contract will be used. For a

more thorough discussion of contract types, see

FAR Part 16.

How are contractors competitively selected for

a major acquisition contract? To ensure transparency in the procurement system and a “fair”

chance for each offeror, a highly structured

process of “Source Selection” has developed. A

typical source selection starts with the “Contracting Officer”37 issuing a Commerce Business

Daily (CBD) announcement for a pre-proposal

conference. All interested bidders are invited.

Attendees will be briefed on the military requirement and an approximate schedule of events.

The next event is issuance of a “draft” Request

for Proposal (RFP) looking for industry comments for changes and problems. Finally, all

interested bidders will be provided an RFP.

Interested contractors will submit a proposal. A

source selection evaluation team will evaluate

the proposals. Their assessment will be briefed

to the Source Selection Authority (SSA), a senior

government official, who will make the actual

selection. For large dollar and highly controversial weapon system acquisitions, the Source

Selection Authority could be the Secretary of

the Department or the SAE. Most often it is a

Program Executive Officer or other senior

official.

What happens if you think the process was

unfair? The U.S. Congress has established a protest mechanism. For dissatisfied offerors, protests of award of contracts can be sent to the

agency that awarded the contract or the GAO.

An alternative, but more costly method, is to go

to the U.S. Federal District Court or the U.S.

Court of Federal Claims. Once a contract is

awarded, the DoD has a dispute forum for issues involving contract performance. Unhappy

contractors can go to the Armed Services Board

of Contract Appeals, which is an administrative

forum, designed to be a relatively inexpensive

way to administratively settle disputes. Again

the Federal District Court or the U.S. Court of

Federal Claims offer an alternative venue. An

initiative of the DoD’s acquisition reform movement is the use of a third method—Alternate

Disputes Resolution (ADR). ADR is designed

to be a cost-effective method of using impartial

arbitrators to resolve the dispute.

Once the contract is awarded, the program office

will assign contract administration activities,

such as payment and quality assurance, to the

DCMC. This Command has offices located in

various regions throughout the U.S. Management of the contract, as it relates to key program requirements, will be maintained in the

program office.

The DCAA plays a significant role in supporting program offices with contract audits and
Part 5 – The United States

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accounting and financial advice during the

negotiation, administration, and settlement of

contracts and subcontracts.

The U.S. defense acquisition system is highly

regulated with laws and policies covering every

area of procurement, such as contractor’s financial systems, records keeping, socio-economic

requirements, subcontracting, and ethics. But,

it is also a transparent system designed to ensure fair treatment of vendors with equitable

opportunities to bid on new defense work.

“Color of Money”

“I have the wrong color of money” is a refrain

often heard in program offices. Since all American dollars are green, it is often a confusing

statement to someone new to the acquisition

business. The “color of money” refers to the type

of funds authorized and appropriated by Congress to be spent by the DoD. There are three

basic types of funds most often used in acquisition—RDT&E funds, Procurement funds, and

O&M funds. Congress appropriates each of

these types of funds for a specific purpose.

RDT&E funds may be used only for R&D, and

by policy are spent (obligated) normally in the

year appropriated. This is where the problem

comes in. For example, a program office will

have budgeted in FYs 1&2 for RDT&E funds

and FY 3 for procurement (production) funds.

If the development effort slips, a not uncommon

occurrence, then the program office may need

more RDT&E funds and less production funds

in year 3. Thus, the refrain “I have the wrong

color of money.” The financial management

portion of the DoD business is complicated with

many rules, and there are many variations of the

“color of money” problem. It is usually solved

by a reprogramming action to move money from

one program to another. However, if the total

amount of RDT&E funds needed for the program exceeds $4 million ($10 million for procurement), then Congressional approval is required. So, if you hear the term “color of money,”

be aware that the program office has a money

problem, not always easily solved.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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Chapter 8

DEFENSE ACQUISITION AND

TECHNOLOGY WORKFORCE

more than 35,000 personnel receive training

from DAU.

Typical Career Path

A typical career path in acquisition can been seen

by looking at the program management career

field. When individuals are hired into the workforce they enter at level I. Level I, the first of three

levels of progression, generally requires that an

individual possess an appropriate degree, and

once hired, receive a combination of on-the-job

and formal training. For program management

the formal training is ACQ39 101, the Fundamentals of Systems Acquisition (see Figure 5-19 for

career training). After several years on the job,

an individual will continue to receive on-the-jobtraining plus attend the ACQ 201, Intermediate

Systems Acquisition Course and achieve their

level II certification. With continued successful

performance on the job, and by taking the PMT

302, Advanced Program Management Course at

the DSMC, an individual can achieve level III

certification and be eligible for a critical acquisition job. A critical acquisition job is a senior position—GM/S 1440 for civilians and lieutenant

colonel for military. The final step in the program management career field would be competitive selection to manage a major system program and attendance at the PMT 303, Executive Program Management Course. These three

levels meet the training and experience requirements to become a major systems PM. Similar

types of education and training requirements

exist for all acquisition career fields.

About 149,00038 personnel, military and civilian,

work in the Defense Acquisition and Technology

workforce. In the 1980s a series of scandals raised

questions regarding acquisition policies, organization and the effectiveness of the workforce. The

Packard Commission report which had great impact on restructuring the requirements process and

the acquisition management of the defense programs also played a key role in raising the issue

of training and education of the workforce. Efforts were begun in the services to improve the

training of the workforce and to ensure personnel met minimum standards. Finally, in 1990

Congress passed the Defense Acquisition Workforce Improvement Act (DAWIA). The purpose

of DAWIA was to provide for a workforce to be

fully proficient and knowledgeable in the business of acquisition. Education, training, and experience requirements were established for

each acquisition position based on the level of

complexity of duties required for that position.

To carry out this mission, DAWIA mandated establishment of a Defense Acquisition University

(DAU) structure. Currently the structure acts as a

consortium of schools, which includes the Defense Systems Management College (DSMC),

Ft. Belvoir, Virginia; the Air Force Institute of

Technology (AFIT), Wright-Patterson Air

Force Base, Ohio; the Naval Postgraduate

School (NPS), Monterey, California; and the

Army Logistics Management College (ALMC),

Ft. Lee, Virginia, as the prime consortium members. Through its consortium of schools, DAU

offers 81 courses with over 1,200 offerings covering all acquisition career fields. Every year
Part 5 – The United States

5-47

The Acquisition Corps consists of both military

and civilian members. As can be seen from the

discussion of other areas, the Services, based

upon their traditions and needs have structured

the size of their acquisition workforces slightly

differently. The following are the current estimates of the size of the acquisition workforce

and the breakout between military and civilian

(Figures 5-20 and 5-21).

The Navy has the largest number of acquisition

personnel with over 49,000 personnel. However,

they have the fewest military as part of the

acquisition workforce. The Air Force has traditionally had the most military working in

acquisition. One of the contributing factors for

the military difference is the Navy’s and Army’s

tradition of military personnel spending the first

several tours in an operational environment. It is

not until later in their careers that Army and Navy

personnel move from an operational job, such as

an artillery officer or pilot, into the acqui-sition

workforce. This approach is similar to the Air

Force’s tradition of moving its rated personnel,

pilots and navigators, into the acquisition

workforce, at about the 8-10 year point in their

career. The Air Force also has a significant number of career acquisition military personnel who

begin their career in acquisition. Military officers fill most program management positions,

although one of the features of DAWIA was to

increase the number of program management

positions available for civilians.

As a result of the Department’s Acquisition

Reform efforts, the impact of downsizing the

workforce and budgetary cuts, the DoD and the

Services have instituted several changes from

the original concepts of education and training.

Initially training and education requirements

were strictly functional—training only in one

career field, e.g., contracting. An effort within

Fundamentals of Systems

Acquisition Management

(ACQ 101)

Intermediate Systems

Acquisition Course

(ACQ 201)

Advanced Program

Management Course

(ACQ 301)

Executive Program

Management Course

(ACQ 303)

Career Levels

I

II

III

Years of Service

Career Training

Figure 5-19. The Program Management Education Continuum
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-48

the services has been made to have personnel

qualified in several career fields (multi-career

field qualified). This provides not only a broadening of the workforce’s capabilities, but also

allows management the opportunity to move

personnel to a broader range of positions.

The second effort focuses on continuing education. The department recognizes that the education and training as described above is the

minimum necessary to do the job. “If you look

throughout the commercial world at particularly

successful companies, the focus on continuous

education is something you see consistently

across the board,” said Stan Soloway, Deputy

Under Secretary of Defense for Acquisition Reform. To ensure personnel continue to maintain

or grow their skills and knowledge, the Department has mandated 80 hours of professional

continuing training every two years. This program is designed to keep the workforce current

with acquisition reform changes, functional and

technical advances, and generally to improve the

business knowledge and leadership competencies

of the workforce.

A third effort is to “out-source some of the business education and leadership development

training to universities and other training organizations.” The outsourcing will allow the department to decrease its cost of education and

to bring in a broader perspective in acquisition

education. A fourth effort is the incorporation

of distance education into the delivery methods

used by the schools.

DAU is improving efficiency to train more personnel and to reduce cost. With its consortium

Figure 5-21. Sample Career Field Sizesa

Program Management 17,000

Procurement/Contracting 19,000

Science/Engineering 45,000

a There are many other career fields not included, e.g., logistics, communications, that have acquisition personnel as part of their

 career programs.

Figure 5-20. Acquisiiton and Technology Workforce Breakouta

Military Civilian Total

Army 2,675 39,338 42,013

Navy 3,304 46,379 49,683

Air Force 9,605 23,816 33,421

Other DoDb 754 23,176 23,979

Totals 16,378 132,709 149,087

a Based upon the Jefferson’s Solution revised Packard definition for core acquisition positions – March 1998.

b Includes organizations such as DLA, BMDO, etc.
Part 5 – The United States

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schools, it is developing and designing more

courses to be offered by CD-ROM or on the

internet. Current plans are for 50 percent of the

consortium’s curriculum to be offered through

CD-ROM or internet.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-50

Chapter 9

TEST AND EVALUATION

OF WEAPON SYSTEMS

Responsibility for DT testing rests with the

Director, Test, Systems Engineering & Evaluation (DTSEE). DTSEE reports to the USD

(AT&L), through the Principal Deputy. DTSEE

serves as the advocate for DT for all major

weapon systems and manages all DT activities

and Systems Engineering activities. DTSEE establishes all DoD policy and procedures for DT,

and also oversees all major test ranges in DoD.

These test ranges, which are collectively known

as the Major Range and Test Facility Base

(MRTFB), are shown in Figure 5-23.

SERVICE TEST ORGANIZATIONS

While DTSEE and DOT&E direct T&E activities within OSD, they primarily have a policy

making and oversight role. Actual testing is

sponsored by the military components and is

conducted by contractors or developing agencies (for DT) or by the independent Operational

Test Agencies (for OT). Each military component has a Test Executive, who serves as a focal

point for T&E policy and oversight and manages the T&E process. Each Test Executive

reports directly to the senior military officer

(Chief of Staff or CNO) of that military component. Each military component has an independent Operational Test Agency (OTA). As shown

in Figure 5-22, the OTA commander reports

directly to the service Chief of Staff, and is a

general officer. They are listed below:

“Testing is the conscience of Acquisition,” stated

former Secretary of Defense William J. Perry,

referring to the role DoD’s test organizations

play in acquisition. As the “conscience” of the

system, the DoD test organizations provide

timely information to decision makers on the

health of a weapon system and help to identify

and reduce development risks. The department

divides T&E into two parts: Development Testing (DT) and Operational Testing (OT). DT

refers to the early testing often performed by

the contractor, while OT is “combat testing.”

The current T&E structure is partially due to Congressional concern in the 1970s and early 1980s

about the adequacy and realism of OT. In 1983,

Congress created the Director, Operational Test

and Evaluation (DOT&E) as a safeguard against

billion-dollar weapons being produced with

insufficient operational (“combat”) testing. To

ensure a check and balance to the acquisition organization and to provide a bias-free view of OT to

the decision-makers, the Director reports directly

to SECDEF and DEPSECDEF. DOT&E is responsible for oversight of OT in the department. This

is primarily a policy making and oversight role.

Actual testing is conducted by the individual

services through parallel organizations established

within the Services. See Figure 5-22 for an organizational perspective on T&E in DoD. The

Director is appointed by the President and confirmed by the Senate. DOT&E has the unusual

authority to report directly to Congress without

departmental approval.
Part 5 – The United States

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Figure 5-22. DoD Test and Evaluation Organization ............................

Secretary

of the

Army

Army

Materiel

Command

(AMC)

Marine

Corps

Operational

Test and

Evaluation

Activity

(MCOTEA)

Air

Force

Materiel

Command

(AFMC)

Air Force

Operational

Test and

Evaluation

Center

(AFOTEC)

Operational

Test and

Evaluation

Force

(OPTEVFOR)

Navy

Systems

Commands

SPAWAR

NAVAIR

NAVSEA

Marine

Corps

Systems

Command

(MCSC)

Operational

Test and

Evaluation

Command

(OPTEC)

DTC OTC

AEC

TEMA

Chief of Staff

of the

Air Force

Chief of

Naval

Operations

Commandant

of the

Marine Corps

Chief of Staff

of the

Army

N091 AF/TE

DUSA(OR)

Secretary

of the

Navy

ASA (ALT) ASN

(RD&A)

Secretary

of the

Air Force

ASAF (A)

Director

Operational Test

and Evaluation

Secretary of Defense

Under Secretary

of Defense

(AT&L)

Deputy Director

Research and Engineering

(DDR&E)

Deputy Director

Developmental

Test and Evaluation

Joint Interoperability

Test Command

(JITC)

Assistant

Secretary of

Defense (C3

I)

Defense

Information Systems

Agency
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-52

ARMY: Operational Test & Evaluation

Command (OPTEC) located in Alexandria,

Virginia;

NAVY: Operational Test & Evaluation Force

(OPTEVFOR), located in Norfolk, Virginia;

AIR FORCE: Air Force Operational Test

& Evaluation Center (AFOTEC), located in

Albuquerque, New Mexico; and

MARINE CORPS: Marine Corps Operational Test & Evaluation Activity (MCOTEA),

located at Quantico, Virginia.

Each OTA performs Operational Test & Evaluation to determine effectiveness and suitability of

weapon systems. These tests are independent of

the developing agency, the PM, and the contractor. This provides for an unbiased assessment of

a system’s combat potential. Unlike DT, which

is oriented to verifying contract or specification

compliance, the OT performed by the OTAs is

structured to stress the weapon system as it would

be used in combat, including tactics and countermeasures. The results from this type of testing

give the users and the decision-makers valuable

insights into combat performance. The Test

Executive in each Service provides test policy

Figure 23. Department of Defense Test Ranges

Dugway Proving Ground

Utah Test and Training Range

Aberdeen

Test Center

NAVAIRWARCE

Aircraft Division

Arnold

Engineering

Development

Center

45th Space

Wing

Atlantic

Undersea

T&E Center

Atlantic Fleet Weapons

Training Facility

Air Force

Development

Test Center

46th Test

Group

White Sands

Missile

Range

U.S. Kwajalein

Missile Range

Joint

Interoperability

Test Command

U.S. Army

Electronic

Proving

Ground

Air Force

Flight Test

Center

Yuma Proving

Ground

NAVAIRWARCE

Weapons Div

Point Mugu

30th

Space

Wing

NAVAIRWARCE

Weapons Div

China Lake

Air Warfare Center
Part 5 – The United States

5-53

guidance, approval of ACAT II and III programs

and reviews MDAPs prior to submittal to

DOT&E.

Army

As seen in Figure 5-22, the Test Executive for

the Army is TEMA (Test & Evaluation Management Agency). Army DT is actually conducted by TECOM (Test & Evaluation Command), which is part of the Army Materiel Command (AMC). Army OT is conducted by

TEXCOM (Test and Experimentation Command), which is part of the Operational Test and

Evaluation Command (OPTEC). The Army is

the only Service to have a single activity responsible for evaluation of both DT and OT—the

Operational Evaluation Command (OEC).41

Navy

The Test Executive for the Navy is N091 (Director of Navy Test & Evaluation and Technology

Requirements). Navy DT is conducted by the

cognizant systems command, such as NAVAIR,

and the Operational Test and Evaluation Force

(OPTEVFOR) conduct Navy OT. The Marine

Corps Systems Command (MCSC) is responsible for DT testing, while the Marine Corp Operational Test and Evaluation Agency (MCOTEA)

(independent of MCSC) performs operational

testing.

Air Force

The Air Force Test Executive is AF/TE (Air

Force Test & Evaluation). Air Force DT is conducted by the Air Force Materiel Command

(AFMC) and the Air Force Operational Test and

Evaluation Center (AFOTEC) conduct Air Force

OT.

OBJECTIVES OF DT&E/OT&E42

The primary objective of DT is to measure

technical performance and to verify contract

compliance or specification compliance. DT

programs should be structured to identify and

mitigate technical design risks. This is an iterative process. As the tests are conducted, problems will be encountered and design fixes will

be incorporated. The primary purpose of OT is

to determine “operational effectiveness” and

“operational suitability,” and survivability.

Operational effectiveness refers to the ability of

a system to accomplish the intended mission

when used in realistic combat conditions by

typically trained/skilled operators. Operational

suitability refers to the ability to maintain and

deploy the system, with particular emphasis on

reliability, availability, maintainability, and

training.

DT is the responsibility of the PM or developing agency and is conducted by both the contractor and government test organizations. DT serves

as the essential technical feedback loop of the

engineering development process. OT, on the

other hand, is not the responsibility of the PM

because OT must be accomplished independently of the systems developer.

Once DT testing is complete then the contract

for EMD is complete. The weapon systems then

enters into OT testing which must be successfully completed for approval of LRIP and to

continue into production. The results will be

reported to the Secretary and the Senate and

House Armed Services and Appropriations

Committees.

As part of the Acquisition Reform effort within

the department several changes are being evaluated. The first change is combining DT activities with OT activities where possible, which

should result in more efficient use of test resources and test articles. This can be done using
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-54

IPTs or a Combined Test Force. However, the

need for some totally independent OT still exists. The second change is to have contractors

do more DT and the government less. This

should result in placing more development risk

on the contractor, and seamless testing throughout development. The third change is to have

earlier involvement of the test force (especially

the operational testers) during systems development. This should expose potential problem

areas much sooner, when they can be addressed

more economically. The fourth change is to

increase the use of modeling and simulation

during systems development and T&E activities. Modeling and simulation have great potential for cost/time savings because they can

quickly produce repeatable test events under

many varied environmental conditions. The fifth

change is to combine testing and training whenever possible. The benefits of combining testing/training come from letting users operate

equipment earlier in the design cycle, resulting

in valuable feedback from users and early

insights about combat performance in the field.
Part 5 – The United States

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Chapter 10

COOPERATIVE ACQUISITION

AND FOREIGN MILITARY

SALES (FMS)

in the United States are conducted in two ways:

government to government (referred to as FMS)

or foreign government to a U.S. Contractor (referred to a Direct Commercial Sale). Through FMS,

allies and friendly nations spent an estimated

$23.5 billion in FY 1996.43 See Figure 5-24 for

top 15 U.S. FMS contractors.

Both the executive and legislative branches play

significant roles in Cooperative Acquisition and

Security Assistance. Congress has been an active

participant in foreign policy and security assistance. The legal basis for executive branch actions in security assistance is codified in several

different places, including the Foreign Assistance Act, Foreign Military Sales Act, Arms

Export Control Act, Export Administration Act

(which has expired and not been renewed).

Cooperative projects are covered by Title 10 of

the United States Code.

Besides providing the legal basis for arms sales

and transfers, Congress is involved in several

other ways. As part of its routine procedures,

the department is required to notify Congress

whenever it sells significant military equipment

with a value over $14 million to a foreign

government, or when an international agreement

for a cooperative acquisition project is signed,

or in certain cases, proposed for signature. In

some cases, Congress will pass specific legislation denying a sale of arms. One of the most

famous examples of this type of congressional

involvement was the passing of the “Pressler

“I have determined that International Armament

Cooperation is a key component of the Department of Defense’s bridge to the 21st Century,”

stated Secretary Cohen shortly after he became

Secretary. The pressures of smaller defense budgets, and increasing operational activities with

coalition forces, makes international armaments

cooperation with our allies an attractive proposition. This is nothing new. The U.S. has a history

of successful cooperative programs, such as

efforts beginning in the 1970s to cooperatively

produce systems, such as the NATO Airborne

Warning Aircraft Systems (AWACS) and the

F-16 multi-national production programs. By

sharing development and production costs, each

national partner can buy more military power at

less cost. Standardizing equipment, particularly

with our NATO allies, can also lead to shared

logistics lines, making the fighting forces more

capable, again at less cost. While the department

has participated in successful, and some not so successful, cooperative programs, many more opportunities exist for cooperation. As DoD moves to

the 21st Century and budgets continue to decline,

the department is putting renewed effort into

expanding cooperation with our allies.

Another international defense program—Foreign Military Sales (FMS), is a part of Security

Assistance. This program provides military and

economic assistance to our allies. FMS includes

the sales of military equipment, education and

training of foreign military, and loans or grants

for the purchase of U.S. equipment. Arms sales
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-56

Amendment”44 which restricted the sale of F-16s

to Pakistan. This, however, is extraordinarily

unusual. Normally, the mere threat of legislative restriction will cause the executive department to restructure an arms sale, as was the case

with the F-16 aircraft sale to Saudi Arabia.

In the executive branch, the three primary departments most heavily involved in security assistance and cooperative programs are the Departments of Defense, Commerce and State. The

Department of State (DOS) has the overall responsibility for the continuous supervision and

general direction of the security assistance program. The Secretary of State determines whether

or not there will be a security assistance program, sale, or export for a country. DOS makes

its decisions based upon the foreign policy and

national security implications of a transaction.

Does this transaction protect and promote U.S.

interests throughout the world? What are the political, economic, human, environmental and security impacts of this transaction? In the DOS,

two offices play key roles: The Under Secretary

of State for Arms Control and International Security Affairs which is the principal adviser and

focal point for security assistance matters; and

the Bureau of Political Military Affairs, Office of

Defense Trade Controls which has responsibility

for setting policy for export of FMS items and for

issuing export licenses for military equipment

sales. They also maintain the International Traffic in Arms Regulations (ITARs), which provides

the rules for the registration of, and import and

export licensing or all direct commercial imports

and exports of armament into and out of the

Figure 5-24. Top 15 Contractors 1998

DoD Foreign Military Sales

Total: $6,216,712,000

Rank Parent Company Amount ($000s) Market Share

1 Boeing Co. $ 1,417,288 22.80 %

2 Lockheed Martin Corp. 1,079,327 17.36

3 Raytheon Co. 813,537 13.09

4 United Technologies Corp. 265,131 4.26

5 Textron Inc. 201,337 3.24

6 Science Applications Intl. Corp. 155,007 2.49

7 Northrop Grumman Corp. 148,732 2.39

8 General Electric Co. 139,308 2.24

9 Mobil Corp. 97,655 1.57

10 VSE Corp. 97,298 1.57

11 TRW Inc. 90,329 1.45

12 BDM Corp. 77,001 1.24

13 Rolls Royce PLC 71,976 1.16

14 Booz Allen & Hamilton Inc. 68,098 1.10

15 Rockwell International Corp. 64,333 1.03

Rankings are based on prime contracts of $25,000 or more for military R&D, services and products

sold to non-U.S. governments

Source: Government Executive, August 1999.
Part 5 – The United States

5-57

United States. The ITARs contain the U.S.

Munitions List of military equipment, such as

aircraft, ships and other equipment, subject to

regulation.

The Department of Commerce, Bureau of Export

Administration has responsibility for setting

policy and licensing for export of equip-ment that

has primarily a commercial application but with

military application as well, so-called dual use

items. There are a multitude of other organizations involved in Security Assistance from the

National Security Council, Arms Control and

Disarmament Agency, Defense Threat Reduction

Agency,45 Security Assistance Offices and Offices

of Defense Cooperation in all major foreign capitals and other organizations, which are not to be

discussed here.

Department of Defense

Within DoD, the Under Secretary of Defense for

Policy (USD (P)) is the principal national security and security assistance adviser to the Secretary. Reporting to the USD (P) is the lead agency

within DoD for security assistance—the Defense

Security Cooperation Agency.46 Cooperative acquisition programs have a different reporting

chain of command with responsibility resting

within the office of the USD (AT&L) in the

Deputy Under Secretary of Defense (International

Programs). Figure 5-25 shows the organizational

relationships for security assistance and cooperative acquisition. The senior armaments cooperation policy and oversight body in DoD is the Armaments Cooperation Steering Committee,

which is chaired by USD (AT&L) and includes

the SAEs as members.

Figure 5-25.

Organizational Relationships for Security Assistance and Cooperative Acquisition

Air Force

SAF/IA

Navy

IPO

Army

DUS (IA)

USD (P) USD (AT&L)

DUSD

(I&CP)

Defense Security

and

Cooperation Agency

Armaments

Cooperation

Department

of Defense

Armaments

Cooperation
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-58

Military Services

Each of the Services has approached its management of these two programs—Cooperative

Acquisition & FMS—in a different way.

Army

The Deputy Under Secretary (International Affairs) (DUS (IA)) has responsibility for security

assistance and cooperative programs within

Assistant Secretary of the Army (Acquisition,

Logistics and Technology). Reporting to the

DUS (IA) is, and with executive agent responsibility, the U.S. Army Security Assistance Command (USASAC), a major subordinate command of the AMC. USASAC, created in 1975,

is responsible for worldwide execution of the

Army security assistance program including coproduction of Army materiel with our allies and

international partners. They also develop the

Army position on commercial license applications for the export of munitions, services and

technology.

Within AMC, the Deputy Chief of Staff for

Security Assistance, has responsibility for the

Office for International Programs. This office

sets policy and provides oversight for international cooperative programs, international agreements, and interoperability. They also have several offices located overseas in Australia, Canada, France, Germany and the United Kingdom,

which focus on R&D activities.

Navy

The Navy has centralized international activities into the Navy International Program Office

(IPO). The Navy IPO is part of the ASN (RD&A)

staff. The Navy IPO has responsibility for both

cooperative programs and security assistance.

Air Force

The Deputy Under Secretary of the Air Force for

International Affairs (SAF/IA) is the central office

for policy and oversight of security assistance and

cooperative acquisition. AFMC, Director of International Affairs and its subordinate command,

the Air Force Security Assistance Command

(AFSAC), manage the security assistance program.

Cooperative acquisition program management is

the responsibility of the Assistant Secretary of the

Air Force (Acquisition). Management of cooperative programs is part of the normal acquisition

management system.

Armaments Initiatives

The DoD policy on armaments cooperation is

to “utilize International Armaments Cooperation

to the maximum extent feasible, consistent with

sound business practice and with overall political, economic, technological and national security goals.” This policy goal, while not always

realized, gives clear indication of the priority

placed by DoD on cooperative programs. A

variety of initiatives exists to encourage the

cooperative development of systems. NATO and

non-NATO multilateral and bilateral forums,

Data Exchange Agreements, and Scientific and

Engineering Exchanges are efforts that can lead

to the development of armament cooperation. A

recent initiative by the department is the creation

of the International Cooperative Opportunities

Group (ICOG). The ICOG focuses early in the

acquisition process by looking at the science and

technology programs, Advance Concept Technology Demonstrations, and the early phases of

major systems. By identifying common requirements, complementary technologies, budgets and

strategies, and a potential for industrial teaming, forming a cooperative program stands a much

greater chance of success. Another program, the

Foreign Comparative Testing (FCT) Program, has
Part 5 – The United States

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already shown success with an estimated $3.3

billion saved in the avoidance of costly RDT&E.47

FCT is designed to test for eventual buy of offthe-shelf military equipment developed by other

countries. This program, which has been in existence for 20 years, has tested nearly 380 pieces

of military equipment from missiles to avionics

with procurement of 95 of them.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-60

Chapter 11

THE INDUSTRIAL BASE

for small businesses and domestic producers.

Rather than imperil their commercial divisions

with increasing costs, industry spun-off separate defense divisions. Having a separate manufacturing and technology base increased the cost

of buying military equipment. An early 1990s

study indicated that the defense industry legitimately charged a 20–25 percent premium because of these arcane rules and regulations

mandated by the government.48

Traditionally, the United States has relied on a

privately owned, profit-oriented industrial base

to provide most of the goods and services used

by the military departments. This defense manufacturing and technology base industry can be

characterized as providing high performance,

high quality military equipment at high cost with

low volume of production. Defense is currently

over a $100 billion a year business. This includes

over $80 billion a year for R&D and procurement of systems and equipment. Four firms—

Lockheed Martin, Boeing, Northrop-Grumman

and Raytheon—are the dominant businesses in

defense. Three of the four firms, with Boeing being the exception, rely on defense contracts for

over 90 percent of their business revenue.49

Over the last 50 years, the department has “primed

the pump” of R&D with its investment in many

new technologies. The U.S. Government supported and directed programs that produced the

basic technologies that spawned numerous military and commercial innovations. These innovations, both military and commercial applications,

include mainframe computers, personal computers, stealth technology, avionics for commercial

aircraft and many other technologies. As an

During the early 1940s, the demands of World

War II quickly overcame the capabilities of the

small U.S. peacetime arsenal system. The United

States government turned to its commercial

industry to produce the millions of pieces of

military equipment needed to pursue the war.

At the end of the war, as it has done after every

war, the military demobilized. Its industrial base

—the “Arsenal of Democracy”— demilitarized

and returned to the lucrative pre-war commercial market—producing cars and household

appliances. With the advent of the Korean

“police action,” the United States again called

on its commercial industry to produce military

equipment. But, as we moved from the “hot”

Korean conflict to the “Cold War,” the U.S.

defense budget remained untraditionally high.

With both the United States and the Union of

Soviet Socialist Republics (USSR) continuing

to produce large amounts of military weapons,

each generation more capable than the preceding, the defence industry became “big business.”

During this time period, U.S. industry transmuted into what President Eisenhower called the

“military-industrial complex”—a permanent

defense technological and manufacturing

industry.

As the defense industry grew, the Defense

Department developed its own set of specialized

procurement rules and regulations, system of

technical specifications and standards, Cost

Accounting Standards (CAS), ethics requirements and oversight procedures. Congress, responding to cost overruns and to various special

interest groups, passed legislation imposing many

new requirements on the Defense Department

and its contractors, such as set-asides of work
Part 5 – The United States

5-61

example, in the microelectronics industry, DoD

was once the dominate buyer, with almost 70 percent of the microelectronics industry sales in 1965

and contributing significantly to that industry’s

investment in R&D. Today, defense accounts for

less than one percent of microelectronic sales. In

general, the defense investment over the last 20

years in R&D has been overshadowed by private

sector investment in R&D. In 1997, defense R&D

spending provided 30 percent of the U.S. investment in R&D. This was down from the peak years

of the defense buildup in the mid-1980s when it

was 46 percent of the national investment.

While DoD policy has been to rely on private

sector facilities for the fulfillment of government

contracts, remnants of the government’s earlier

“arsenal system” still remain. These public facilities are used to manufacture and repair aircraft,

ships, ground combat systems, and other military

equipment. They generally fit into two categories.

The first category is government arsenals and

depots where government personnel perform all

the work. The other category is referred to as Government-Owned, Contractor-Operated (GOCO)

facilities. See Appendix E for a listing of arsenals,

depots, and GOCOs currently performing defense

work.50 While it has been a slow process, the military departments have attempted to divest itself

of GOCO plants. As an example, the U.S. Air Force

owned 100 GOCOs in 1950; today, it is down to

seven GOCOs with two additional GOCOs

planned for transfer to the private sector in late

1999. One of the chief causes of delay in the

GOCO divesting process has been the need for

environmental cleanup.

In recent years, several trends have emerged as

a result of declining defense budgets. Businesses

have left the defense market, companies have

merged, and the Department has recognized that

its defense budget could not support its modernization program as well as a separate defense

industrial base. While no hard data exists, significant numbers of companies at the 3rd or 4th

tier vendor level have apparently left the defense

business over the last decade. Large companies,

such as Intel, Motorola and Hewlitt-Packard

have refused to do business with the Department

unless it buys on commercial terms, without the

imposition of expensive and burdensome federal laws and regulations. This was a simple

matter of economics—smaller budgets, the concomitant drop in work orders and the “stretching out” of programs made the defense business

less attractive to commercial vendors.

While many companies had lost interest in the

defense market, the remaining companies still had

too much manufacturing capacity to meet future

defense budgets. In 1993, then Deputy Defense

Secretary Perry had his famous “Last Supper”

meeting with the CEOs of top defense corporations. He is quoted as having admonished them

by commenting that less than 50 percent of them

would be at the next meeting. This led to “merger

mania.” Defense consolidation and mergers

became monthly news. Lockheed and MartinMarietta merged to become Lockheed Martin.

Hughes Aircraft and Raytheon merged as

Raytheon. Northrop and Grumman merged into

Northrop Grumman Corporation, and Boeing and

McDonnell Douglas merged under the Boeing

banner. Other companies like GE, Westinghouse,

and IBM got out of the business completely. As a

result, Lockheed, Boeing, Northrop Grumman,

and Raytheon emerged from the merger mania

period as “the big four.”51 Defense industry went

from five or six manufacturers for major weapons systems to one or two for a military product.

Figure 5-26 shows the top 15 defense contractors for 1998. Figure 5-27 indicates the changes

in the numbers of companies for each market.

“Merger mania” may be over for at least the major

contractors. Recently, the Justice Department, with

OSD concurrence, blocked the Northrop

Grumman and Lockheed merger because it had

the potential of creating a monopoly. One of

the foundations of government procurement is
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5-62

Total Purchases: $117,133,824,000 Fiscal Year 1998 Contract Awards ($000s)

Rank Parent Company Total Air Force Army Navy

1 Lockheed Martin Corp. $12,818,777 $7,006,636 $1,813,054 $3,725,670

2 Boeing Co. 11,240,937 5,921,220 1,095,229 3,959,967

3 Raytheon Co. 6,497,508 1,718,306 2,068,672 2,429,608

4 General Dynamics Corp. 3,703,333 6,207 680,068 2,971,359

5 Northrop Grumman Corp. 2,980,966 1,373,397 550,968 964,814

6 United Technologies Corp. 2,091,243 877,925 465,284 692,308

7 Litton Industries Inc. 1,644,441 258,282 163,466 1,142,425

8 Newport News Shipbuilding 1,538,481 0 0 1,538,481

9 Textron Inc. 1,282,317 180,866 208,005 876,910

10 General Electric Co. 1,221,469 467,145 105,702 534,483

11 Science Applications Intl. Corp. 1,218,182 297,158 478,672 243,380

12 TRW Inc. 1,082,092 629,506 220,751 79,129

13 General Electric Co. PLC 873,850 242,760 77,881 487,311

14 Humana Inc. 867,453 0 0 0

15 GTE Corp. 804,220 290,207 373,548 70,713

Source: Government Executive, August 1999,

Figure 5-27. Changes in Defense Market

Figure 5-26. Top 15 Defense Contractors

Department of Defense Number of Suppliers

Industrial Base Past Current

Aircraft

Bombers 3 1

Fighters 5 2

Helicopters 4 2

Space

Ballistic Missile Defense 6 2

Launch Vehicles 3 2

Satellites 5 2

Rocket Motors 5 2

Shipbuilding

Aircraft Carriers 1 1

Submarines 2 1

Surface Combatants 5 2

Auxiliary/Amphibious 7 3

Shipyards 8 4

Tracked Vehicles

Tanks 1 1

Armored/Personnel Carriers 2 1

Missiles

Strategic 1 1

Tactical 8 3
Part 5 – The United States

5-63

competition. As companies drop out of the defense business or merge, competition disappears

and costs rise. This is particularly worrisome with

the large system integration companies like

Lockheed and Boeing. As the defense business

base continues to decline smaller companies will

probably continue to merge. At the large prime

level the market has probably seen the end of U.S.

company mergers, although mergers or partnerships between international companies are still

probable.

Since the 1950s, the U.S. has maintained a separate defense industrial base. This base is no

longer sustainable. The question, then, is how

to merge the defense industrial base with the

U.S. commercial base. Consequently, through

its “acquisition reform” and “revolution in business affairs” initiatives, the DoD has attempted

to change the way it does business. Some

changes have already been implemented. Military specifications and standards are no longer

the preferred method of doing business. Congress, at the DoD’s urging, has passed such legislation as the FASA to remove some of the barriers. These laws made modest changes with

major issues still left to be resolved, such as

eliminating specialized accounting and auditing

systems.

In sum, the U.S. defense industrial base is in a

period of change. Current initiatives are focused

on merging the defense/commercial industrial

base, reducing the cost of doing business, reducing the departments and the defense industry’s

overcapacity, and, at the same time, maintaining

a competitive market.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-64

FURTHER READINGS

Gansler, Jacques S., “Defense Conversion:

Transforming the Arsenal of Democracy,”

Cambridge, MA: MIT Press, 1995.

Gansler, Jacques S., “Affording Defense,”

MIT Press, Cambridge, MA 1989.

Gansler, Jacques S., “The Defense Industry,”

MIT Press, Cambridge, MA, 1980.

Jones, Jr., Wilbur D. “From Packard to Perry,

A Quarter Century of Service to the

Defense Acquisition Community,”

DSMC Press, GPO, Ft. Belvoir, VA, June

1996.

Kausal, Tony, “What a Difference a Century

Makes... Or Does It?, in Contract Management Magazine, October 1989, pp.

24-25.

McNaugher, Thomas L. “New Weapons Old

Politics, America’s Military Procurement Muddle,” The Brooking Institute,

Washington, DC, 1989.

Nagle, James F., “A History of Government

Contracting,” The George Washington

University, Washington, DC, 1992.

Trask, Roger R. and Alfred Goldberg, “The

Department of Defense 1947-1997,

Organization and Leaders,” Historical

Office, Office of the Secretary of

Defense, Washington, DC, 1997.

Congress

Davidson, Roger H. and Oleszek, Walter J.,

“Congress and Its Members,” Third

Edition (Washington: CQ Press, 1990).

Cabinets

Jennings, Ivor, Cabinet Government, 3d ed.

(1969).

Herman, Valentine, and Alt, James E., eds.,

Cabinet Studies (1975).

Mackie, T., and Hogwood, Brian, Unlocking the Cabinet: Cabinet Structures in

Comparative Perspective (1986).

Defense Acquisition Deskbook –

http://www.deskbook.osd.mil

Acquisition

Benson, Lawrence R., “Acquisition Management in the United States Air Force and

Its Predecessors,” Air Force History

Office, 1997.

Ferrara, Joe, “DoD’s 5000 Documents: Evolution and Change in Defense Acquisition Policy,” Acquisition Review Quarterly, Fall 1996, Vol. 3 No. 2, pp. 109-

130.

Fox, J. Ronald with James L. Field, “The

Defense Management Challenge, Weapons Acquisition,” Harvard Business

School Press, 1988.
Part 5 – The United States

5-65

ENDNOTES

12. The rest are Noncareer SES –67 and

Schedule C-128.

13. For clarification purposes, generally, when

“DoD” is used it means the entire department. OSD refers to the Secretary’s office.

14. Trask, Roger R. and Alfred Goldberg, “The

Department of Defense 1947-1997, Organization and Leaders,” Historical Office,

Office of the Secretary of Defense,

Washington, DC, 1997. p. 8.

15. For a fuller explanation of the Army’s

requirements process see Army Regulation

71-9 and TRADOC Pam 71-9: http://wwwtradoc.army.mil/cmdpubs/reqdef.htm

16. The incoming Chief of Naval Operations

(CNO) per “Inside the Pentagon,” June 1,

2000, has indicated a possible organizational change to N8. Requirements would

be split out from N8 and become N9.

17. CNO (N8) may convene a Resources and

Requirements Review Board (R3B) to

perform a DON level review prior to

endorsement or validation and approval.

18. Prior to report.

19. Originally the title was Under Secretary of

Defense (Acquisition). I have used the current title to avoid confusion.

20. By law these political appointees are

required to bring a significant industrial

background.

21. Also referred to as the Component Acquisition Executive (CAE).

1. This is a reprint from A Comparison of the

Defense Acquisition Systems of France,

United Kingdom, Germany and the United

States, Part 4, September 1999, DSMC

Press. Organizational charts have been updated and additional footnotes have been

added to note changes or planned changes.

Chapter 12, entitled “My Crystal Ball,” has

been deleted to make it compatible with the

other parts of this book.

2. U.S. Budget request for FY 2001 included

$98.2 billion for R&D and procurement.

3. Federal Papers 52:327.

4. Federalist Paper #24.

5. Federalist Paper #26.

6. Trask, Roger R. and Alfred Goldberg, “The

Department of Defense 1947-1997, Organization and Leaders,” Historical Office,

Office of the Secretary of Defense,

Washington, DC, 1997, p. 15.

7. Federalist Paper #66.

8. Davidson, Roger H. and Oleszek, Walter

J., Congress and Its Members, Third

Edition (Washington: CQ Press, 1990),

p. 327.

9. Oversight Plan for the 105th Congress,

p. 1.

10. GAO also has specific legislative responsibilities and often undertakes reviews on its

own.

11. Korten, p. 2.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

5-66

22. The departments, DoD agencies (and

others) are collectively referred to as “components.” Each agency has an acquisition

executive; the Component Acquisition

Executive, (CAE).

23. Terminology has changed over time.

24. Currently, the Under Secretary of Defense

for Acquisition, Technology and Logistics

has instituted the coordination process to

revise the acquisition process thrust, which

will result in terminology changes for

Phases and Milestones. Current estimates

are for reissuance of DoD Directive 5000.1

and DoD Instruction 5000.2 this summer.

25. Not every system will begin at concept

development. Some systems may enter at

phase II or III.

26. LRIP is not applicable to ACAT IA programs; however, a limited deployment

phase may be.

27. In fiscal year (FY) 1996 constant.

28. In fiscal year (FY) 1996 constant.

29. MDA is person with authority to approve a

programs entry into the next phase of

acquisition. USD (AT&L) for example is

normally the MDA for ACAT I programs.

30. The “M” refers to Major Automated Information System Review Council.

31. Army and Navy also have category IV

programs.

32. Originally title Defense Systems Acquisition Review Council (DSARC), but revised

in 1987.

33. PDUSD(A&T) may also chair DABs.

34. Note that the DAB review only approves a

program to proceed; it has no direct role in

the resource allocation process.

35. The terms procurement, contracting and

acquisition can often be used somewhat

confusingly even for acquisition professionals. In the U.S., “acquisition” is meant to

be the all-encompassing term, while procurement and contracting are meant to be a

subset of acquisition dealing with the

awarding and management of contracts. To

make it even more confusing, Congress

often passes legislation using all three terms

interchangeably or often with specific

meanings.

36. SAF/AQC is OPR for Air Force contracting; Deputy Acquisition and Business

Management is OPR for Navy contracting;

and DASA Procurement is OPR for Army

contracting.

37. The only person authorized by law to award

or modify contracts

38. There are various measures of the acquisition workforce: 1) DoD Instruction

5000.58, acquisition organizations, 355,299

people; 2) Pub.L. no. 101-50, Defense

Acquisition Workforce Improvement Act,

105,544 people; and 3) Jefferson Solutions

Report, revised Packard Commission,

177,613 people. Current number reflects

March 1998 data.

39. ACQ is an acronym for “acquisition.”

40. GM/S – General Manager or General Scale

and refers to the Program Scale/Rank for

Civil Servants.
Part 5 – The United States

5-67

41. TECOM and OPTEC will be combined into

Army Test & Evaluation Command (ATEC)

effective 1 October 99.

42. Basic T&E policy is summarized in DoD

Regulation 5000.2-R. Each military component publishes policy and procedure

implementing T&E.

43. According to the U.S. Arms Control and

Disarmament Agency (ACDA) the U.S. in

1996 exported approximately $23.5 billion

worth of defense material, which is 55 percent of the world amount of FMS.

44. Named for Senator Larry Pressler, Republican, South Dakota.

45. Formerly Defense Technology Security

Administration.

46. Formerly the Defense Security Assistance

Agency (DSAA).

47. The Defense System Management College,

Ft. Belvoir, Virginia, conducts training for

management of Cooperative Acquisition

programs.

48. Coopers and Lybrand study.

49. The U.S. defense industrial base is somewhat difficult to define, since it relies upon

private companies, who continuously enter and leave the business.

50. Schlesinger, Jr., Weidenbaum, M., Defense

Restructuring and the Future of the U.S.

Defense Industrial Base, CSIS Washington,

DC, March 1998, p. 15.

51. Ibid. Forty some different aerospace companies, in whole or in part, were consolidated into three: Lockheed Martin, Boeing,

and Raytheon.

52. Schlesinger, Jr., Weidenbaum, M., Defense

Restructuring and the Future of the U.S.

Defense Industrial Base, CSIS Washington,

DC, March 1998, p. 15.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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Part 6 – A Comparison of the Acquisition Systems

6-1

PART 6

A COMPARISON OF

THE ACQUISITION SYSTEMS

Japan

Korea

Singapore

Australia

USA
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

6-2
Part 6 – A Comparison of the Acquisition Systems

6-3

Chapter 1

A COMPARISON OF

THE ACQUISITION SYSTEMS

OF AUSTRALIA, JAPAN,

SOUTH KOREA, SINGAPORE

AND THE UNITED STATES1

manufacturing armaments. What are the similarities and difference in acquisition approaches?

What is the best organizational structure? How

does the political environment impact the decision process? What are the levels of the decision makers? How do they approach program

management? What are the military and civilian roles in the decision-making process? Where

does the need for a military requirement come

from? What role does the indigenous industry

play in weapons development?

As we try to answer these questions, we also

explore how states can vary in their perception

of the best way to satisfy national objectives or

in the current vernacular achieve “value for

money.” As is used in this Chapter “value for

money” means the most efficient way of

providing high performance, quality military

equipment at the least cost.

Military capability comes from the men, the

machines, the logistics and the will of the nation. In Desert Storm, the machines caught the

attention of military planners throughout the

world. The phrase—Revolution in Military

Affairs (RMA)—is now part of the lexicon of

military planners when they talk about the advantages of the machines, i.e., the technological edge they provide to a military force. The

Introduction

Flying the vast expanse of the Pacific Ocean—

13 or more hours in the air—is a traveler’s tale

of woe to garner sympathy from the folks back

home. This vast expanse of ocean also symbolizes the vast differences in the history, culture

and governments of the five nations in this study.

Each country has its unique concerns when it

comes to national security issues. Each country

has responded differently to providing military

equipment to meet the threats as perceived by

the political and military leaders. The history

and culture of these nations, their governmental

structures, and political and economic conditions

shaped their national acquisition practices.

As mentioned in the book’s Introduction, “Looking at another system helps illuminate our own.”2

A goal of this book is to facilitate cooperative

projects. By these comparisons, understanding

each other’s system, decision processes, identifying one’s counterparts in government and

industry increase chances for success.

The five preceding Parts provided a description

of national acquisition structures and functions.

From those descriptions, this Chapter attempts

to provide a comparative analysis of the five

nations defense practices in developing and
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

6-4

introduction of advanced technology into the

acquisition process promises increased military

capability. As nations look at their acquisition

systems, they recognize the need for the best

technology; but can they afford it? The search

for advanced technology raises the cost of new

weapon systems at the same time that outside

pressures—end of the Cold War, Asian economic

crises, competing internal national needs—exist

to decrease defense budgets. Furthermore, much

of the research and development (R&D) that leads

to new technology is being performed by the commercial consumer industry. The commercial market has short cycle times contrasted with the

acquisition cycles in the defense business where

weapons development often takes 10-15 years.

How to buy newer technology—better, faster, and

cheaper—is the mantra of acquisition reform

efforts throughout the nations in this study.

Political/Military Environment

A military organization operates in a national

and international milieu that influences the

national will to support a defense establishment.

Each nation sees a need to provide protection

for its people and to develop a capability to respond to external threats. The security threat(s),

as perceived by the national leaders and the

populace, drives the willingness to sacrifice the

state’s resources for security. What are the national security threats for the countries in this

study? For the U.S. during the Cold War, the

threat was easy to define—the Soviet Union. The

DoD’s response was to counter the Soviet’s massive military capability with technologically

sophisticated equipment. The Cold War is gone

and the threat is more elusive—two regional

wars, terrorism, ethnic cleansing, asymmetrical

pressures. The other four countries in the study

see their threats differently. They vary—from

immediate—Korea, to almost none—Australia.

While there are hopeful signs of improvement

in Korea, there is still concern of an imminent

threat of a military attack from North Korea.

Notwithstanding that concern, the Korean political and military focus has shifted in the last

decade to becoming more of a regional and

world-wide player. As its economy has expanded, so has its peacekeeping role in the world.

They have participated in East Timor, Georgia,

Western Sahara, and on the India- Pakistan

Border.

Two larger countries—Malaysia and Indonesia—with large Malay Muslim populations, surround Singapore, a multiracial society, with a

large Chinese population. While no specific

threat is identified, this region’s history of ethnic turmoil against their Chinese populations,

and prior attitudes towards Singapore drives its

defense planning. Diplomacy is a cornerstone

of their security approach. Should diplomacy fail

then having a sufficient deterrent force to discourage any nation from attacking drives their

planning and programming process. Japan is

restricted by its “peace constitution” to maintaining only a defensive force. Its military planning decisions are based on adequate defensive

force and the U.S. defense umbrella. Lately there

are indications of changes. The national debate

on the validity of its “peace constitution,” North

Korean missile launches, possible overseas

patrols by the Maritime Safety Agency in the

Straits of Malacca for hunting pirates indicate a

changed outlook. Australia has no immediate

external threat. But Australia has commitments

as an international player. Through the United

Nations (UN), it is playing a key role in peacekeeping activities in East Timor and through its

alliance with the U.S. it envisions the necessity

to be prepared for potential conflict in Asia, such

as Korea or China-Taiwan.

What is the national commitment to defense?

Asked differently, how much is a nation willing

to spend on defense (see Figure 6-1)? The United

States, in pure money and manpower terms, puts

the most into defense. The U.S. still spends the

largest amount for its military and has the second
Part 6 – A Comparison of the Acquisition Systems

6-5

largest standing military force in the world at

1.4 million active duty military personnel. At

$287.5 billion for Fiscal Year (FY) 2000, its

budget is more than six times larger than the

next country in this study. Japan’s budget, which

has been stagnate for the last five years, is the

next largest at 4.92 trillion yen ($44.3 billion).

After a two-year downturn in defense spending,

Korea increased its defense budget to 14.44

trillion won ($12.6 billion) in FY 2000. The Australian defense budget for FY 2000 is $12.2 billion or 1.8 percent of GDP. The smallest amount

spent on defense is Singapore’s at S$7.4 ($4.4

billion) for FY 2000. But, the perspective on

defense spending changes somewhat when one

looks at Figure 6-23

, which shows the largest percentage of national income invested in defense is

Singapore’s at 5.0 percent. Another approach to

looking at defense budgets is to assess the per

capita cost of defense? Currently, Singapore

spends the most per capita at $1,543 while South

Korea spends the least at $278 per person. Within

those national budgets are the acquisition accounts for R&D, and investment for developing

or buying new equipment. As a percentage the

nations average around 25 to 30 percent, with

Figure 6-1. Defense Budgets

U.S. Japan South Korea Australia Singapore

$287.5b $44.3b $12.6b $12.2b $7.4b

Figure 6-2. Defense Spending Based on Gross Domestic Product and Per Capita

Percent of Gross Domestic Product (GDP)

1985 1997 1998

Australia 3.4 2.3 1.9

Japan 1.0 1.0 1.0

Korea (South) 5.1 3.5 3.1

Singapore 6.7 4.8 5.0

United States 6.5 3.4 3.2

Defense Per Capita in Dollars

Australia 492 462 391

Japan 254 325 293

Korea (South) 218 333 278

Singapore 661 1,525 1,543

United States 1,537 1,031 982
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

6-6

the Japanese and Singaporeans spending the

least—20 percent—on new equipment.

How have these countries approached arming

the military? The methods have varied widely.

Some have put their energy and resources into

developing new weapon systems—primarily the

United States. The U.S. has seen the acquisition

of newly-developed weapons as the way to provide superior capability to its armed forces. Others, such as Korea and Singapore have primarily bought the weapon systems they needed

from overseas sources. Their approach was

based upon the need for weapon systems at the

least cost, and the expense and time necessary

to develop their own defense industry. However,

nascent efforts to build a defense industry have

borne fruit with each of these countries having

developed an internal manufacturing competence. South Korea, Singapore and Australia all

manufacture a wide variety of military hardware

to include many basic items such as ammunition, rifles, guns, armored vehicles, as well as

more sophisticated items, such as tanks, howitzers, fighter aircraft, and ships. Japan prefers to

build its own equipment, initially under licensed

production, and maintains the largest defense

industry in the Pacific, often at great cost.

Can the budget support the need for new equipment? Operating within this political military

environment, the nations in this study try to

balance new requirements with budget reality.

Unfortunately, they are hampered by business

processes designed in prior decades. Thus, one

of the themes prevalent in this book is the search

by each nation for reforms to the acquisition

system. Within often-stagnating defense budgets, restructuring organizations, reducing manpower, and reforming processes become priorities. In the last ten years, the U.S. has significantly reduced its defense budget in real terms

by 60 percent from its Cold War high, and its

manpower, civilian and military, by 387,0004

 and

730,000 respectively. It has reformed its laws,

rules, regulations and processes all with the goal

of cutting costs. Japan has a wide variety of initiatives to reform its system—from reliance on

commercial/industrial specifications to reorganizing the Central Procurement Office and its

headquarters staff to increase transparency and

accountability. South Korea has reorganized its

acquisition organization, twice in the last year.

An advisory group—the Defense Reform Committee—has a five-year charter to oversee reform

efforts and to advise the Minister of its successes

and failures. Singapore has instituted a variety

of changes, one of which is the creation of a

new agency—the Defence Scientific and Technology Agency (DSTA). Australia, after the

Collins submarine class scandals,5

 has reorganized its Defence Acquisition Organisation and

elevated its Chief to the Under Secretary level

and reformed many of it process to include

increased oversight during development and

manufacture of weapons systems. Looking for

better ways of doing business these countries

have tried different business tactics. Australia

has new procurement strategies such as incremental acquisition, integrated project teams,

partnering, arrangements to invovle industry

more directly in capability planning and in the

early stages of requirements development. The

U.S. is using commercial contracting methods,

and Korea has a new Request for Proposal process. The names of the efforts are different—

acquisition reform, procurement reform, defense

reviews—but the intents are all the same, to

streamline and find the best way to achieve

“value for money.”

The Defense Acquisition Systems

Organizational units, processes and procedures,

and policies provide the elements of any acquisition system. While organizations and policies

may differ, the tasks involved in defense procurement have a more generic and enduring

character, i.e., all acquisition organizations need

to perform them in one way or another. What
Part 6 – A Comparison of the Acquisition Systems

6-7

needs to be bought—military requirements—

must be identified and programmed. Requirements are normally derived from consideration

of strategy, doctrine, and threats. The military

needs, which become programs, are prioritized.

Budgets are negotiated internally within defense

organizations, and nationally as they compete

for scarce resources against other public sector

agencies (e.g., health, education). A level of

national commitment is identified when the

political leaders decide the defense budget.

All five countries have identifiable formalized

structures dealing with a weapon system—birth

to burial—or from its conception to its disposal.

Each nation has major project reviews as a weapon system moves from one phase to the next.

If a program is successful in one phase, then it

moves into the next. Failure can result in delays,

and occasionally cancellation. Notwithstanding

failures, it is not unheard of for political and

economic pressures to keep a system moving

from development into production. In all these

countries as a weapon system moves from one

phase to the next, the military organizations turns

to industry to develop and produce the equipment, the essential training, maintenance, spare

parts and other equipment necessary to field an

operating weapon system.

Satisfaction of National Needs

The military is intended to be a warfighting

machine but it serves other state purposes—

economic and social. “Defense procurement can

threaten or advance at least four values of concern to government. Most obviously, governments seek appropriate defense capability often with new equipment or systems to overcome

an enemy threat. Secondly, governments wish

to promote economic growth—defense procurement can have positive or negative effects including employment, the generation of technology,

and foreign exchange earnings through exports.

Thirdly, a related but different economic concern is the government responsibility to provide

a stable currency, which requires keeping public expenditure within limits. Finally, in their

foreign policies governments seek to build and

sustain particular relations with external states

and other bodies. Defense procurement choices

can play a role in all areas.”6

It might be possible to purchase equipment that

satisfies all purposes—military, economic and

social. However, it is rather unusual for a weapon

system that greatly increases defense capability

to be inexpensive, to create jobs and induce technology diffusion, and to allow collaboration with

other nations. Trade-offs are inevitable. “The

U.S. appears more associated with maximizing

defense capability per se from procurement, but

uses defense spending for socio-economic purposes, such as to promote small businesses, companies run by ethnic minorities and other programs. It also normally insists that foreign defense systems sold to the American forces be

manufactured in the U.S.”7

 But this approach is

not limited to the U.S. Each of these countries

has socio-economic concerns with the health of

their defense industry—large-, medium- and

small-sized businesses, with earning currency

through exports or, in Japan’s case, offsetting a

commercial export imbalance with U.S. by buying defense items. Korea, Singapore and Japan

have policies and programs in place to increase

technology transfers to strengthen their defense

industries and, thus, increase jobs and future sales.

Australia has long pursued a policy of Australian

Industry Invovlement (Local Content Optimisation). All the nations in the study have made some

efforts to increase cooperation with their allies.

Again, it comes to a balancing of priorities, program by program, that decision makers must

wrestle with on a year-to-year basis.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

6-8

Decision Making

Who makes the decision on the need for a new

weapons program? Is it the military? Is it a civilian—political appointee, civil servant, or is it

the political leaders? In all the nations in this

study, the military operates under civilian control. The United States, Singapore and Australia have had a long history of strong civilian leadership over the military. This has been true in

Japan since World War II. On the other hand,

during the 1960s, 1970s, and 1980s, the military in Korea played a very powerful role in running the country. “Under the military dictatorships, South Korea’s arms procurement process

was largely dominated by a small group of power

holders. Military security was a top priority....”8

Only in the last decade has the political system

seen an ascendancy of civilian leadership.

While it is common sense for the military forces

to identify and decide on the need for new military

capabilities and equipment, it is not always the case.

In all five states, the armed forces define the military need, but the political and bureaucratic leaders

often make the final decisions. “The military is

not always seen to be best at deciding what generates “value for money” for the nation as a whole.

In the United States, Congress often decides

which systems will have priority....”9 In all these

countries, the legislative bodies, which approve

the budgets, have the “final” say, but it is other

bodies—in the Executive branch of government

—the cabinet, the bureaucracy, or the Chief

executive, who influence, or actually are the “real”

decision authorities. In Japan, the Diet and the

Cabinet have the final decision, but the civil

servants in the Ministry of Finance and the Ministry of International Trade and Industry have

Figure 6-3. Arms Exports and Imports

(Millions of Dollars)

EXPORTS IMPORTS

1996 World Ranking 1996 World Ranking

#1 United States 23,500 #2 Japan 2,400

#11 Australia 280 #9 Australia 1,300

#27 Singapore 40 #10 South Korea 1,100

#32 Japan 20 #11 United States 1,100

#33 South Korea 20 #22 Singapore 430

1997 World Ranking 1997 World Ranking

#1 United States 23,500 #2 Japan 2,600

#20 Singapore 90 #8 United States 1,600

#28 Australia 30 #11 South Korea 1,100

#30 South Korea 20 #13 Australia 925

#37 Japan 20 #28 Singapore 400
Part 6 – A Comparison of the Acquisition Systems

6-9

significant impact on the final outcome. In

Singapore and Australia, it is the Cabinet that

makes the final choice of what equipment will

be bought. In Korea, the Minister and the President are often the final arbiter of all decisions

affecting the acquisition of major weapons.

Arms Exports

According to Arms Control and Disarmament

Agency (ACDA),10 the United States provides

almost 50 percent of arms sales in the world.

While this is true, somewhat paradoxically, as

the U.S. plans its strategies for new weapon systems development, it does not consider Foreign

Military Sales (FMS) in its game plan. Korea,

Singapore and Australia all have a much smaller

share of the arms pie (Figure 6-3, 1997 – $30

million, $90 million and $30 million, respectively) and have policies in place to increase the

sales of defense equipment. It is part of their

strategies for the development of new systems

to consider overseas sales. These policies have

several aims—lowering production costs by

increasing sales, increase foreign exchange by

increasing exports, and less reliance upon outside sources for equipment essential to the

security of their county. An unstated, but conceivable additional reason is the increase in

foreign policy influence. Japan, of course, prohibits the sale of arms, except military technology transfer may be made to the United States.

All parties are supportive of the United Nations

Arms Transparency resolution and the United

States, Japan, South Korea and Australia are

signatories to Wassenaar Arrangement11 on the

sales of arms throughout the world.

Industrial/Government Relations

Who owns the industry? What is the relationship between government and industry? What

role does competition play in these relationships? Since World War II, the United States has

relied upon a competitive privatized industrialmilitary base for its products and services. Yet,

unlike other countries the U.S. has rarely espoused an industrial base policy. “U.S. Defense

Department programs during the Cold War

rarely espoused broad industrial policy objectives...neither the DoD nor its supporters understood even an indirect responsibility to foster

industrial policy. They were using technology

and industry to enhance military capabilities in

order to meet a Soviet threat.”12 The U.S. has

the largest defense industry in the world. As the

defense industry grew out of the Cold War, it

developed a “love-hate” relationship with its

primary customer. Business was arms length and

often adversarial. That picture has changed

somewhat in the last decade through changes in

laws governing industry, acquisition reform efforts to increase openness and to work together

in a partnership and through the use of Integrated Product Teams (IPTs) with industry

members.

Singapore, Korea and Japan are all influenced

by the Confucian tradition of governmental involvement and leadership, and the need for both

to work for the well being of the nation. Japan

has the most powerful defense industry in the

Pacific with over 1,300 companies. While Japan’s

economy has flourished as a result of the private ownership of industry, the government has

played a direct role in that success. It has been

Japanese policy not only to maintain a robust

defense industrial base, but also to embed it

within the commercial industry. Government

agencies, such as MITI, have seen their responsibility as fostering a strong industrial base, both

military and civilian. In both Singapore and

Korea, the defense industry is privately owned.

Although in Singapore the government has fashioned their role, similar to the French, by owning a significant portion of the major defense

manufacturer—Singapore Technologies. Australian industry is mostly privately owned. Over

the last decade the Australian government has

been divesting itself of its government-owned
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

6-10

businesses in order to rely upon the efficiencies

in the private sector to reduce costs.

The perspectives on competition in these countries differ and maintaining a competitive environment is difficult. The U.S. sees competition

as a tool to harness industry’s capabilities for

better products at less expensive prices. At the

other end of the spectrum is Japan, which sees

competition as wasteful, duplicative and leading to squandering of resources. Korea, Australia and Singapore are more in the middle of the

spectrum. Typical of competition efforts in the

last decade, the DoD in 1998 and 1999 competed almost 60 percent of the dollars awarded.

In Japan, only 3.7 percent of the dollars in 1997

were open for competition, while another 10.8

percent was available for limited competition.13

In Japan most large acquisitions are awarded on

a sole source basis. Even when a competition is

held, often the losers will share in producing the

items. Singapore, Australia and Korea have policies to encourage competition. In Korea while

efforts have been taken to increase competition,

other conflicting actions, such as setting aside

all future aerospace contracts for the new established Korean Aerospace Industries (KAI),

raises the question of what role competition will

really play. Australia has emphasized privatization of industry and made competition one of

the key features of their acquisition reform

efforts in an “attempts to invoke the market as a

means of enhancing efficiency.”14

While the attitudes on competition may differ,

maintaining or growing a defense industry is

difficult. The next major system buy—tank, aircraft, vessel—could be the last for a decade.

Losing a competition can force a company to

abandon a product line. The complexity of new

systems, and advances in technology may make

the reentry cost prohibitive. As dollars decrease,

industry interest declines. The U.S. defense industrial base is changing and this change has top

DoD leaders worried about future competition.

In the last 10 years, 50 U.S. defense related companies have consolidated to three: Boeing, Lockheed Martin, and Raytheon (see Figure 6-4 for

example). These three companies along with

General Dynamics and Northrop Grumman in

fourth and fifth place account for total DoD sales

of $37.2 billion, or 32 percent of the $117 billion spent by DoD in 1998. Maintaining a competitive environment is getting more difficult.

DoD came out against a proposed merger of

Northrop Grumman and Lockheed Martin due

to fears of a lack of future sources for competition. Dusting off an old technique previously

used may foreshadow a new trend to keep competitive sources alive. In the past the DoD has

held competitions where the winner receives the

largest share of the buy, while the losing contractor still receives an order adequate to keep

them in the business. For many years the Air

Force used this type of competition for it aircraft engines bought from General Electric and

Pratt & Whitney. Recent deliberations on the

Joint Strike Fighter (JSF) and the DD-21

destroyer to split production between two companies may presage future trends to maintain at

least a semblance of competition.

International Acquisition Cooperation

(Collaboration)

The development of any weapon system involves

a significant expenditure of the taxpayer’s

money. As Dr. Jacques Gansler, Under Secretary of Defense (Acquisition, Technology and

Logistics) indicates “To stay ahead of the enemy and to counter the new dimension of threats

we will face as coalition partners, we must

develop these new defenses cooperatively.”15 All

the countries in this study indicate a desire for,

and have policies in place for collaboration with

other governments. Those readers familiar with

cooperative efforts in Europe will find fewer

projects in the Pacific, although efforts have

picked up in the last 20 years. Japan works collaboration endeavors exclusively with the U.S,
Part 6 – A Comparison of the Acquisition Systems

6-11

through the U.S.-Japanese Systems and Technology Forum. The U.S. and Japan have cooperated on a variety of basic and applied research

programs over the last 40 years, such as the

Ducted Rocket Engine and the ACES II Ejection Seat. Korea’s primary cooperative partner

has been the U.S. Besides the Annual Security

Consultative Meeting with the U.S. and the sub

forums that emanate from that meeting, they

have expanded their cooperative outreaches to

include a formal effort with France and a variety of other countries, such as United Kingdom,

Germany, Rumania, and New Zealand and Australia. Both Korea and Japan are interested in

the cost savings, but also interested in access to

the latest technology and manufacturing technologies. Singapore’s “global cooperation strategy” is aimed at leveraging foreign expertise.

They have several R&D agreements with the

United Kingdom, Sweden, Australia, and the

United States. Australia has agreements in place

with the United States, Britain, Canada, and

Sweden, as a means of “achieving efficiencies

in the sourcing of equipment, access to technology and interoperability with allies.”16 They have

had a range of cooperative efforts with New Zealand (the ANZAC Ships), with the U.S. (Project

Nulka) and with the UK (Barra Sonobuoy).

Figure 6-4. Defense Industry Consolidations – Lockheed Martin

Honeywell-Electro-Optics

Fairchild Weston System

Goodyear Aerospace

Xerox-Defense/Aerospace Division

Narda Microwave

Loral

Hycor

Ford Aerospace

Librascope

LTV-Missile Business

IBM-Federal Systems

Unisys Defense

General Dynamics, Ft. Worth

Sanders Associates

Lockheed

Martin Marietta

Gould Ocean System Division

General Electric-Aerospace

General Dynamics Space Business

Northrop

LTV Aircraft Operations

Grumman

Westinghouse ESG

Lockheed Martin
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

6-12

Organizational Military/Civilian Roles

In comparing the managerial approach and

organizational structures of the five nations, one

notes a significant difference between the U.S.

and the other four countries. The U.S. is highly

decentralized both organizationally and geographically. The Military Departments, operating under the general policy guidelines of the

Office of the Secretary of Defense (OSD), carry

out the acquisition of military equipment. In

Japan, Singapore and Australia the acquisition

activities are centralised within a single (defence) agency and largely co-located. Korea’s

acquisition organization is centralized within the

Deputy Minister’s Office, but dispersed throughout the country.

Democratic governments must decide the

defense roles most appropriately filled by military personnel and those best undertaken by civil

servants or the private sector. Each of these nations has developed its own practice regarding

the appropriate role for its military and civilian

officials. In all these nations, the military define

requirements. In Singapore and Australia the

acquisition organisations are primarily civilian

organisations. Even in these, there are differences.

Australia has very few military members assigned

to its Defence Acquisition Organisation, while in

Singapore, military members hold many key

positions. In the United States, the Military Departments—Army, Navy, and Air Force—have

specific budgets and authority to train and equip

their fighting forces. The services have their own

contracting organizations for the procurement of

equipment. Such organizations, of course, make

extensive use of civilian and contractor personnel. While civilian control is provided through

politically appointed government officials, military members play key roles in all facets of

acquisition. In Japan on the other hand the politically appointed senior personnel provide broad

oversight, while many of the actual decisions

are made, or at least influenced by, senior civil

servants. Central procurement and R&D organizations manned with many military personnel do

the actual buying and management of development programs. In Japan, at the Internal Bureau,

the civilian officials play a significant role in setting policy and in overseeing the implementation

of acquisition actions. Military officials at the operational, or field-level organizations hold key

positions in managing the performance of the

acquisition system. In Korea, civilian control is

provided by politically-appointed personnel who

play key roles in deciding what should be bought.

In its central acquisition organization, military

personnel hold many of the senior positions.

Best Practices

What are best practices? One reason for a comparison is to observe best practices for possible

application in ones own country. Often, however, a best practice may not be workable in

another country. One example is the role and

value of competition. Does it get the best deal,

or does it waste resources? We have seen earlier

that these countries approach competition from

a different perspective. Would a partnership approach be better? Developing trust and cooperation between companies and government

might possibly produce better products at a reasonable price, and employ its citizenry in technology skill developing jobs. In Japan, Korea

and Singapore with a Confucian tradition, partnerships and close government relations, not

competition is a best practice. In the United

States, this would be antithetical to its traditions

and violate many of its laws.

The United States has a separate military

industrial complex, while the other four countries military industries are heavily embedded

in the commercial market. This would seem to

be a best practice, since it takes advantage of

the advances in technology taking place in the

commercial market and offers the potential for

lowering costs through single production lines.
Part 6 – A Comparison of the Acquisition Systems

6-13

But, will these products provide the advantages

in technology the military warfighter needs? Will

government budgets and time frames be able to

keep pace with the commercial market?

The U.S.’s acquisition reform effort, going back

a decade, has made significant uses of the IPT

concept to improve management of programs

and relationships between industry and government, with the goal of lowering costs and improving performance of its weapon systems. Most

of the countries in this study have conceptually

agreed with the concept of IPTs and mention it

in their reform efforts. Each has implemented it

differently. While it is too early to determine the

true effect of IPTs, it is interesting to note that

every country still has concerns about projects

failing to meet performance, schedule and cost

targets. In Australia, there are also concerns

about the anti-competitive nature of defenceindustry “teaming” arrangements, especially

during the early stages of the materiel cycle.

Searching for best practices—IPTs, single RFP

process, reorganization, or buying commercial

items—is difficult. With the differences in each

country—population, geographical size, culture

and economic resources—what may work in

one, may not work in another. What a search for

best practices does do is to shine a light on differences and perhaps cause a rethinking of ones

own practices.

The Impact of National Political Systems

One political pundit described politics as “art

of the possible.” Each acquisition system we

have described in this book operates within a

broader system, the national political system.

Figure 6-5 notionally depicts the many variables

and players involved in supporting the level of

military investment necessary to make an

acquisition program viable. This environment

shapes and constrains the acquisition system’s

ability to deliver equipment. There are both

Figure 6-5. The Acquisition System Environment

Politics

NATION

Government

Department

Priorities

Other

Ministries

Personnel

Funding

Budget

Legislature

Industry

Systems &

Equipment

for Warfighters

National

Security

ARMY

NAVY

AF

International

Issues

Socioeconomic

National

Will Industry

Doctrine

Personnel

At a

Lower

Cost

Press

Better

Faster

AO
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

6-14

structural features and value features, which impact the system. The structural features are easy

to see—balance of power between legislative and

executive branches. Value features, such as a

pacifist sentiment in the population, are more

difficult to see, but every bit as important in

determining the amount of resources available.

The constitutions in all these countries lay out

the duties and responsibilities of each of the

major branches of government. In Australia,

Japan, Korea, and Singapore, the legislatures

generally review the top line details of the budget, debate the broad political outlines, and then

approve the budget as submitted by the cabinets. In Singapore the legislature can only approve or reject the government’s overall budget

and has very little insight into the budget at the

program level. In Korea, the legislature has constitutional restriction on the amount of changes

it can make, plus it traditionally has been dominated by a strong president. In the last decade,

its role has expanded, although it still rarely

makes changes to the executive budget. The U.S.

Congress is noted for its impact on the defense

budget. “In contrast the U.S. Congress has

developed a culture reflecting the terms of the

constitution in which it sees itself as having a

major say as to what the armed forces should

have. Famously, it has regularly made money

available for C-130 purchases that the U.S. Air

Force (USAF) has not requested. Responding

to the practices of Congress, the U.S. services

present to Congress lists of items they would

like to have if more money were made available. There are many suspicions that U.S. congressional representatives support some projects

more for the consequences for their electorate’s

prosperity and employment than for the impact

on U.S. defense capability. The phrase “pork

barrel” politics is often associated with defense

projects.”17 Legislatures tend to be particularly

sensitive to employment issues. In each case,

the government was motivated by jobs, technology and defense industrial capability factors. All

the legislatures perform an after the fact review

of government actions, with legislative members

questioning governmental actions.

The impact of the legislation on procurement

can also be significant. Again the separation of

powers imbedded in the U.S. Constitution

coupled with Congress’s reluctance to commit

money for more than one year makes the U.S. a

difficult partner for cooperation with its allies.

The other countries in this study, because of the

structural relationships between the executive and

legislative branch of government, are able to

commit to long-term program efforts.

Conclusion

The purpose of this book is to provide a description of the defense acquisition systems of five

countries, which are possible collaborative partners. This part of the book looks at similarities

and differences in how each nation satisfies it

national needs. Acquisition factors—competition, technology transfer, military need, and local

manufacturing—all interact with the political

system to color the choices made by decisionmakers. As we look to the first decade of the

21st millennium, military threats exist in the

Pacific; defense budgets are still constrained; and

any war is likely to be a coalition endeavor. Thus,

it is vital to consider developing and producing

the next generation of military equipment as

partners. As has been shown in the West, cooperation with allies is a difficult job for those

assigned to carry out the task. At the program

office level, acquisition members must be willing to work together, not only with an understanding of their own system, but with an

understanding of the difficulties and issues for

each of the participants. Technology transfer,

export controls, financial problems, industrial

offsets, and cost issues all need to be weighed

and worked. As the picture has changed in the

Pacific—economic crises to economic rebound

—opportunities exist for cooperation and should

continue to exist in the future.
Part 6 – A Comparison of the Acquisition Systems

6-15

ENDNOTES

1. I am greatly indebted to the original work

done by Professor Trevor Taylor of the Royal

Military College of Science (RMCS) on the

comparison chapter in our earlier work—A

Comparison of the Defense Acquisition Systems of France, United Kingdom, Germany

and the United States. DSMC Press, September 1999.

2. Richard Neustadt, 1980.

3. “The Military Balance 1999/2000,” International Institute for Security Studies (IISS).

4. DoD Database for civilian personnel: http:/

/web1.whs.osd.mil/mmid/civilian/civtop.

htm

5. See Part 1, Chapter 9, p. 5-5.

6. A Comparison of the Defense Acquisition

Systems of France, United Kingdom, Germany and the United States. DSMC Press,

September 1999, Chapter 5, p. 5-6.

7. Ibid., p. 5-7.

8. Lee, Seok Soo, abstract from “The Dynamics of the decision-making process for arms

procurement,” SIPRI Arms Procurement Decision Making Project, Working paper no.

43 (1995) in Singh’s book, p. 304.

9. Ibid., p. 5-5.

10. ACDA was merged with the State Department in accordance with the Foreign Affairs

Agencies Consolidation Act of 1998 in April

1999. ACDA data for “arms sales” reflect

commercial items that the U.S. would

consider “dual use” items, but that Japan

classifies as commercial.

11. There are two primary international agreements that try to limit the sales of arms—

UN and Wassenaar Agreement.

12. MIT Professor Richard J. Samuels, Rich

Nation, Strong Army, National Security and

the Technology Transformation of Japan,

p. 11.

13. Limited Competition refers to practice of

limiting the number of contractors that are

allowed to bid on an acquisition program.

14. Chapter 1, pp. 1-63.

15. Under Secretary of Defense (Acquisition,

Technology and Logistics), U.S.-Korea Defense Industrial Cooperation Committee,

Rosslyn, VA, October 15, 1999.

16. This Section is based on CEPMAN, Part 2,

Chapter 5.

17. Ibid., pp. 5-13.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

6-16
Appendixes

A-1

APPENDIXES

Japan

Korea

Singapore

Australia

USA
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-2
Appendixes

A-3

Appendix A

ARMED FORCES

Australia Japan

Army: 26,000 Ground SDF: 172,866

Navy: 14,700 Maritime SDF: 45,752

Air Force: 17,100 Air SDF: 47,236

Total: 57,800 Joint Staff: 1,426

Total: 267,280

Civilians: 24,421

Reserves: 49,480 Reserves: 47,900

Ready Reserves: 3,379

Defense Budget (FY 2000): $12.2B Defense Budget (FY 2000): $44.3B

South Korea Singapore

Army: 548,000 Army: 45,000

Navy: 60,000 Navy: 2,900

Air Force: 52,000 Air Force: 6,000

Total: 660,000 Total: 53,900

Reserves: 4,500,000 Reserves: 250,000

Defense Budget (FY 2000): $12.6B Defense Budget (FY 2000): $4.4B

United States

Army: 495,000

Navy: 426,700

Air Force: 388,200

Marines: 173,900

Coast Guard: 37,300

Total: 1,483,800

Reserves: 1,880,600

Civilians: 790,000

Defense Budget (FY 2000): $287.5B
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-4

Appendix B

LIST OF ACQUISITION AND

RELATED ORGANIZATIONS

AUSTRALIA

Minister of Defence

Defence Organisation

• Department of Defence

• Australian Defence Force (ADF)

Defense Acquisition Organisation (DAO)

Chief Defence Scientist

Australian Defence Forces Academy

JAPAN

Japanese Defense Agency (JDA)

Internal Bureaus

• Bureau of Finance

• Bureau of Equipment

– Ship and Weapons Division

Office of Materials

– Aircraft Division

Office of Guided Missiles

– Research and Development Planning Division

– Coordination Division

Office of Communication and Electronic Systems

Office of Procurement and Supply

Central Procurement Office (CPO)
Appendixes

A-5

Technical Research and Development Institute (TRDI)

• 1st Research Center

• 2nd Research Center

– Ioka Branch

• 3rd Research Center

• 4th Research Center

• 5th Research Center

– Kawasaki Branch

• Sapporo Test Center

• Shimokita Test Center

• Tsuchiura Test Center

• Niijima Test Center

• Gifu Test Center

Ground Self Defense Force (GSDF)

Maritime Self Defense Force (MSDF)

Air Self Defense Force (ASDF)

REPUBLIC OF KOREA

Ministry of National Defense (MND)

Deputy Minister Defense Acquisition Office (DAO)

Defense Acquisition Office (DAO)

• Program Management Bureau (PMB)

• Analysis and Evaluation Bureau (AEB)

• Acquisition Policy Bureau (APB)

• Logistics Management Bureau (LMB)

• Military Installation Bureau (MIB)

Defense Procurement Agency (DPA)

Agency for Defense Development (ADD)

• Ground Systems Development Center

– Changwon Proving Ground

• Naval Systems Development Center

– Naval Test Range

• Missile/Aircraft Systems Development Center
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-6

• C3I Systems Development Center

• Defense Systems Test Center

– Anheung Proving Ground

– Daradae Test Range

• Dual Use Technology Center

• Key Technology Research Center

Defense Quality Assurance Agency (DQAA)

Service Program Management Offices/Groups

Korean Institute of Defense Analyses (KIDA)

REPUBLIC OF SINGAPORE

Ministry of Defence (MINDEF)

Permanent Secretary (Defence Development)

Deputy Secretary Technology

Defence Technology & Resource Office (DTRO)

Defence Science and Technology Agency (DSTA)

DSO National Laboratories

UNITED STATES

DOD ACQUISITION ORGANIZATIONS

Under Secretary of Defense (Acquisition, Technology and Logistics) (USD (AT&L))

Army:

Assistant Secretary of the Army (Research, Development and Acquisition) (ASA (RD&A))

Army Materiel Command (AMC)

Army Program Executive Officers/Direct Reporting Program Managers
Appendixes

A-7

Navy:

Assistant Secretary of the Navy (Research, Development and Acquisition) (ASN (RD&A))

Naval Sea Systems Command (NAVSEA)

Naval Air Systems Command (NAVAIR)

Naval Supply Systems Command (NAVSUP)

Space and Naval Warfare Systems Command (SPAWAR)

Office of the Chief of Naval Research (ONR)

Navy Program Executive Officers/Direct Reporting Program Managers

USMC Systems Command

Air Force

Assistant Secretary of the Air Force (Acquisition) (ASAF (A))

Air Force Materiel Command (AFMC)

Air Force Program Executive Officers (AFPEOs)

Defense Logistics Agency (DLA)

Ballistic Missile Defense Organization (BMDO)

Defense Systems Management College (DSMC)

Special Operations Command

DOD ACQUISITION ORGANIZATIONAL FUNCTIONS

OFFICE OF THE UNDER SECRETARY OF DEFENSE

FOR ACQUISITION, TECHNOLOGY AND LOGISTICS

(USD (AT&L))

Principal Deputy USD (AT&L)

Second in command with responsibility for the following offices besides oversight of Defense

Logistics Agency:

Director of Defense Procurement (DDP)

Sets procurement policy for the department covering areas such as contract administration,

cost, pricing, finance, and foreign contracting.

Director, International Cooperation

Establishes policies for economic reinvestment, dual use technology programs, international

cooperation, and Defense Export Loan Guarantees.

Deputy USD, Logistics (DUSD (L))

Sets logistic, maintenance, and transportation policy and provides oversight, and technical

development of logistics systems.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-8

Deputy USD, Acquisition Reform (DUSD (AR))

Responsible for implementation of acquisition reform within DoD and acquisition education

through the Defense Acquisition University.

Deputy USD, Environmental Security (DUSD (ES))

Sets policy and provides oversight of defense acquisition environmental issues to include

technology development, cleanup and pollution prevention.

Deputy USD, Industrial Affairs

 Responsible for defense industrial policy.

Deputy USD, Installations

Responsible for defense infrastructure policy.

Director Acquisition Resources and Analysis

Responsible for legislative issues, and planning, programming and budgeting for USD (AT&L).

Director, Interoperability

The focal point for weapon systems interoperability.

Director, Defense Research and Engineering (DDR&E)

Oversees the Science and Technology Program and nuclear, chemical and biological matters.

DDR&E has direct line authority over the Defense Advanced Research Project Agency (DARPA).

Director Strategic and Tactical Systems

Technical reviews, evaluation, treaty compliance and oversight of acquisition programs for

missile defense, tactical and strategic aircraft, tactical land and naval systems, munitions,

electronic warfare programs, and deep strike systems.

Deputy USD, Advanced Systems and Concepts

Oversight and management of the Advanced Concept Technology Demonstration (ACTDs)

efforts.

Deputy USD, Science and Technology

Responsible for DoD science and technology planning to include international science and

technology programs.

Deputy USD, Logistics and Materiel Readiness

Responsible for supply, maintenance, transportation and systems engineering. Supported by

Deputy’s for each of these functional areas. Also has direct line authority over the Defense

Logistics Agency.
Appendixes

A-9

OFFICE OF THE ASSISTANT SECRETARY OF THE ARMY

(ACQUISITION, LOGISTICS AND TECHNOLOGY)

(ASA (AL&T))

Deputy for Logistics

Sets supply, maintenance, and transportation policy and provides oversight and technical

development of logistics systems.

Deputy Assistant Secretary Army for Research and Technology

Formulates Army-wide technology base strategy, policy, guidance and planning, and establishes

and validates the Army’s technology base priorities throughout the PPBEES.

Deputy Assistant Secretary for Procurement

Provides management and oversight of all Army procurement functions and organizations,

acquisition reform, and the industrial base.

Deputy Assistant Secretary for Plans, Programs and Policy

Develops the Army’s acquisition policy and procedures and insures that Congressionally-mandated

laws and DoD policy are appropriately promulgated in Army regulations. Also responsible for

formulating the Army’s acquisition, logistics and technology long-range plans and budgets.

Deputy Assistant Secretary for Chemical Demilitarization

Oversees the U.S. chemical weapons destruction program.

Deputy for Systems Management and Horizontal Technology Integration

Responsible for executive program management and implementation of acquisition policy for

all Army ACAT I-IV programs. Serves as direct link between the Army SAE and PEOs (ACAT

I &II). Also serves as Army lead for inserting new technology into existing programs, and

technical and programmatic guidance for Army international cooperative materiel programs.

Director for Assessment and Evaluation

Provides independent management oversight, technical advice, policy guidance, vulnerability

assessment and reporting related to the Army’s major acquisition programs. Oversees the administrative responsibilities associated with decision reviews of Major Defense Acquisition Programs.

Deputy for Combat Services Support

Responsible for oversight and management of combat services.

Deputy for Ammunition

Responsible for executive management and implementation of DoD ammunition programs to

include missiles, bombs, etc.

Deputy for Medical Systems

Responsible for executive management and implementation of Army medical systems programs

for Army hospitals, etc.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-10

OFFICE OF THE ASSISTANT SECRETARY OF THE NAVY

(RESEARCH, DEVELOPMENT AND ACQUISITION)

(ASN (RD&A))

Deputy Assistant Secretary of the Navy (DASN) Ship Programs

Monitors ships programs managed by Naval Sea Systems Command and the PEOs for Ship

Defense and Submarines and DRPMs for AEGIS and Strategic Systems Programs. Analyzes

shipbuilding industry capability and capacity.

DASN Mine/Undersea Warfare

Monitors technology and business opportunities and provides program and policy guidance for

mine and undersea warfare programs.

DASN Air Programs

Monitors PEO and Naval Air Systems Command programs for aircraft, anti-submarine warfare,

cruise missiles, unmanned aerial vehicles and programs. Analyzes the aircraft industry for

capability for production and repair of aircraft.

DASN C4I/EW/Space Programs

Monitors PEO, Space and Naval Warfare Systems Command’s Communications and Sensors

programs. Serves as the Navy Chief Information Officer.

DASN Expeditionary Force Programs

Monitors Marine Corps Systems Command and the DRPM for Advanced Amphibious Assault

program(s).

DASN Theater Combat Systems

Monitors Navy PEO and Systems Command programs related to theater missile defense.

DASN Planning, Programming & Resources

Performs long range ALT planning, legislative liaison, manages the management information

system and works budgeting (PPBS) issues.

Chief of Naval Research (CNR)

CNR provides policy, oversight and management of the Navy’s science and technology program.

Has direct line authority over the Office of Naval Research, Office of Naval Technology, and

Office of Advanced Technology Transition.

Deputy Acquisition and Business Management

Responsibilities include setting acquisition policy, procurement, ethics, reliability, manufacturing,

and value engineering.

Director International Programs

Responsible for cooperative research and development, foreign military sales, technology

transfer, export control, security assistance, foreign comparative testing, data exchange, and

other international matters.
Appendixes

A-11

Director Acquisition Career Management (DACM)

Responsible for the management of the accession, education, training and career development

of the civilian and military members of the acquisition workforce. Can be described as the

career manager for all acquisition workforce members.

Acquisition Reform Executive (ARE)

The Acquisition Reform Office facilitates implementation of the department’s acquisition reform

efforts to include changing business process. Has responsibility for reduction of total ownership

cost, cycle time, and the Navy’s Specifications and Standards Program.

OFFICE OF THE ASSISTANT SECRETARY OF THE AIR FORCE (ACQUISITION)

(ASAF (A))

Deputy Assistant Secretary Contacting

Plans, develops, and implements Air Force-wide contracting policies and procedures. Oversight

of worldwide Air Force contracting field activities.

Deputy Assistant Secretary Management Policy and Program Integration

Responsible for budgeting, programming, acquisition reform, contractor advisory service,

federally-funded research and development centers, acquisition pollution prevention, workforce

education, training and development. Develops acquisition policy. Integrates all programs

individually managed by other SAF/AQ Directorates to achieve the best acquisition program

mix. Insures acquisition programs reflect requirements needed to support the Reserve

Component.

Deputy Assistant Secretary Science, Technology and Engineering

Develops policy for and oversees the Air Force’s Science and Technology program. Serves as

the chief engineer for the Air Force with responsibility for manufacturing management, software

management, standardization, non-developmental items advocacy, and military specifications

and standards.

Mission Area Director (MAD) Global Power

Plans, programs, oversees and provides program direction for tactical systems such as fighter

aircraft and combat weapons. The individuals specifically assigned to each MAD program to

work the issues regarding a program are referred to as Program Element Monitors (PEMs).

Mission Area Director (MAD) Space & Nuclear Deterrence

Plans, programs, oversees and provides program direction for surveillance, communications,

navigation and weather satellites, space launch systems, information warfare capabilities, groundbased strategic systems.

Mission Area Director (MAD) Global Reach

Plans, programs, oversees and provides program direction for airlift, training and special

operations aircraft programs.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-12

Mission Area Director (MAD) Information Dominance

Plans, programs, oversees and provides program direction for command and control, information

systems, airborne command and control and radar systems, reconnaissance systems, and systems

integration.

JAPAN

Maritime Self Defense Force (MSDF)

and Air Self Defense Force (ASDF)

 Acquisition Process Charts

In both the MSDF and the ASDF they have slightly different acquisition phases and processes. The

two figures illustrate the generic process for each SDF.

ASDF Technical Research & Development Process

INTERNAL

BUREAU

Phase of R&D

Council

Plans &

Operations

Department

Technical

Department

A

S

O

/

A

S

D

F

Council Council Council Council

Research

Test (*)

Engineering

Test (*)

Operational

Test (*)

Technical

Research

Requirement

Document

Estimate of

Technical Research

& Development

Requirement

Technical

Development

Requirement

Document

Estimate of

Technical Research

& Development

Implementation

Technical

Research

Implementation

Plan Document

Technical

Research

Implementation

Plan Document

Operational

Concept

Document

Operational

Requirement

Document

Long Term

Plan

Production &

Deployment

Concept Definition Deployment Operation

TRDI

........

........

............................................................

........................................

Fundamental

Performance

Document

Required

Performance

Document

.......... Approval/Review

Send/Report

Reflection

Research Test/Engineering Test/Operational Test

Have Test and Evaluation Master Plan
Appendixes

A-13

Maritime Technical Research & Development Process

INTERNAL

BUREAU

Phase of R&D

Council

Plans &

Operations

Department

Technical

Department

M

S

O

/

M

S

D

F

Council Council Council Council

Research

Test (*)

Engineering

Test (*)

Operational

Test (*)

Technical

Research

Requirement

Document

Estimate of

Technical Research

& Development

Requirement

Technical

Development

Requirement

Document

Estimate of

Technical Research

& Development

Implementation

Technical

Research

Implementation

Plan Document

Technical

Research

Implementation

Plan Document

System

of

Materiel

Operational

Requirement

Document

Long Term

Plan

Production &

Deployment

Concept Definition Production & Deployment Improvement

TRDI

........

........

............................................................

........................................

Technical

Research &

Analysis

.......... Approval/Review

Send/Report

Reflection

Research Test/Engineering Test/Operational Test

Have Test and Evaluation Master Plan

Expected

Performance

Document
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-14

JAPAN SELF DEFENSE FORCES

Maritime Self Defense Force

Director General of the Defense Agency

(Minister of State for Defense)

Fleet Escort Force

Fleet Air Force

Fleet Submarine Force

Fleet Training &

Development Comand

(Yokosuka)

Fleet Intelligence

Command

(Yokosuka)

Others

Oceanographic Command

(Yokosuka)

Central Communication

Command (Ichigaya)

Training Squadron

(Kure)

Other Units & Organs

Air Training Command

(Shimousa)

Maritime Staff Office

Chief of Staff MSDF

Self Defense Fleet
Appendixes

A-15

Air Self Defense Force

Director General of the Defense Agency

(Minister of State for Defense)

Air Material

Command

Headquarters

(Jujo)

Aero Medical Laboratory

(Tachikawa)

Electronics Development

and Test Group

(Iruma)

Others

Air Development

and Test Wing

(Gifu)

Air Staff Office

Chief of Staff ASDF

Air Defense Command

Air Support Command

Air Training Command

Air Development and

Test Command

Northern Air

Defense Force

Central Air

Defense Force

Western Air

Defense Force

Southwestern

Composite Air

Division

Others

Other Units

& Organs
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-16

Ground Self Defense Force

Director General of the Defense Agency

(Minister of State for Defense)

Ground Staff Office

Chief of Staff GSDF

Northern Army

Northeastern Army

Eastern Army

Middle Army

Western Army

1st Helicopter Brigade

(Kisarazu)

Signal Brigade

(Ichigaya)

Fuji School Brigade

(Fuji)

Ground Material Control Center

(Jujo)

Other Units and Organs
Appendixes

A-17

REPUBLIC OF KOREA

Korean Air Force

Air Force Headquarters

Air Force

Operations

Command

Air Force

Logistics

Command

Air Force

Command

Air Force

Academy

Air Force

University KARMA*

* KARMA – Korean Aerospace Risk Management Agency

Korean Navy

Operations

Command

Logistics

Command

Education &

Training

Command

Marine

Corps

Headquarters

ROK Navy Headquarters

3 Fleet

Command

3 Marine Corps

Divisions/

Brigades
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-18

KOREAN INSTITUTE OF DEFENSE ANLYSES FUNCTIONS

Security & Strategy Directorate conducts research on domestic and international security environment and supports the MND’s strategic assessments and policymaking. This directorate sponsors a variety of year seminars on cooperation acquisition issues. An example is the 1999 2nd Northeast Asia Defense Forum, 2nd KIDA-INSS Security Workshop and the 4th ROK-China Defense

Forum.

Force Development Directorate develops policy alternatives and accumulates quantified data to

support policymakers in the MND and JCS. Main areas of research include force development and

military operations, military strategy and doctrine, force structure, evaluation and requirements,

and counter proliferation of WMDs. The directorate operates three divisions to concentrate on

these areas.

The Military Strategy Division does research on military theories and evaluation on security environment are accentuated. Military theory studies include military concepts and

history. Security environment research includes analysis on military relationships of surrounding states, changes in military science and technologies, and potential threats in the

future.

Manpower Management Directorate’s main research foci include manpower policy, leadership,

education, welfare, morale, draft administration and mobilization systems, civil-military relations,

and military culture. Based on such research, the directorate suggests mid- and long-term policy

alternatives to the MND. The directorate currently operates three divisions.

Resource Management Directorate provides policy alternatives on overall defense resource management through systematic research on resource planning and management systems, defense

management, and logistics policy and defense CALS systems. It currently operates four divisions

that focus on each area.

Resource Planning and Management System Division

At macro level, this division aims at analyzing the economic aspects of defense activities

including optimal allocation of the defense budget, defense costs, and impacts of defense

expenditures on the national economy. Also studied are military economic relationships

between ROK and its allies. At micro level, studies are aimed to provide efficient resource

management policy options, focusing on the improvement of various management systems

such as PPBEE and overall evaluation of defense resource management.

Defense Management Analysis Division This division focuses on analyzing and evaluating operational efficiencies of the command system, organization, and task procedures across

various functional units. By running consultative task force teams, the division evaluates

logistics support units such as military depots and hospitals as well as staff organizations of

each branch of service.
Appendixes

A-19

Logistics Policy Studies Division

Research is aimed at developing concepts, doctrines and systems of logistics support, and

the management system of logistics support functions, e.g., requirement, procurement, supply,

etc. Main fields of studies include evaluation of logistics support requirement and capabilities in both wartime and peacetime, logistics MIS, industrial mobilization, and development

of logistics wargames and support.

Defense CALS System Division

This division was established in 1998 to execute the following missions: first, settling the

basis for the Defense Continuous Acquisition and Life-Cycle Support System (CALS);

second, conducting research on the Integrated Defense Information System; and third,

developing, maintaining and evaluating logistics information systems including the

Ammunition Information System, Supply Information System, Equipment/Maintenance

System, and others.

Major Research Projects in 1998:

1. How to Determine Logistics Support Requirement Most Efficiently

2. How to Support Composition of the System & Subsystem Specification of the Equipment/

Maintenance Information System

3. Improvement of Defense Management Accounting System

4. Improvement of Defense Management System and Defense Organization

5. Methods to Strengthen Materiel Mobilization Capability in Wartime

Center for Weapon Systems Studies

The center’s main research areas include acquisition, C4I, defense industrial policies, and costeffectiveness analysis. Based on such research, the center supports the ROK MND’s force

improvement programs. Currently, four divisions make up the center.

Acquisition System Evaluation and Analysis Division. The division supports the

implementation of acquisition policies through its cost analysis and investigation on the

required operational capabilities of each type of weapons system in the three services.

Military Information Policy Division. Main research focus in this division includes MTR,

C4I, information and communication (I&C) system, information security system,

standardization, and system acquisition procedures. Based on such research, the division

supports computerization of the ROK Armed Forces’ decision-making processes.
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-20

Defense Industrial Technology Division

The division establishes basic plans on the defense industry through its research on defense

industrial policies, defense science and technology policies, and on technological

development and management of the industry. The division’s main research areas also include

specialization and categorization, expediting domestic production, and international

cooperation.

Cost Analysis Division

Procurement management, contract and cost evaluation, and procurement systems are the

three research areas of the division. The division also creates acquisition/utilization systems

on price- and cost-related information, and based on such systems, it establishes price and

cost databases.

Major Research Projects in 1998 covered topics such as the Acquisition and Operation of

Strategic Information Collection Systems, Acquisition of Early Airborne Warning and Control

Airplanes, Policy Directions to Save Costs in Acquisition Projects, and Technology and

Service Evaluation in Offset Trades. They hosted with the United States’ Defense Systems

Management College the 2nd International Acquisition/Procurement Seminar—Pacific in

Seoul, Korea, which is designed to improve the cooperation between Pacific Rim nations.

Modeling & Simulation Center

The center was established in October 1998 with the mission of establishing a comprehensive

support system of defense modeling and simulation (DM&S). The center focuses on establishing

DM&S systems, developing wargame models for scientific force evaluation and military training,

and supporting military operation methods.
Appendixes

A-21

KOREAN EXPORTS

Exports by Sector (US$M)

Sector 1990 1991 1992 1993 1994 1995 1996 1997

 Total 78.0 91.0 26.5 58.90 59.9 76.9 31.90 69.4

Guns 7.7 5.7 4.7 5.90 4.5 12.2 5.50 5.3

Ammuniiton 12.4 26.7 15.6 25.30 25.6 13.9 21.30 38.3

Mobil Equipment 22.5 38.6 0.1 24.70 15.7 46.4 2.00 1.2

Communication/Electronics –0 –0 2.0 –00 3.4 2.1 1.30 –0

Vessels 12.8 2.9 –0 –00 –0 1.4 1.50 22.8

Parts for Aircraft 0.8 0.2 1.1 0.08 0.2 0.5 0.02 1.4

Equipment/Service 12.1 1.7 1.3 3.00 10.5 0.4 0.30 0.4

Other 9.7 15.2 1.7 –00 –0 –0 –00 –0

Exports by Region (US$M)

Sector 1990 1991 1992 1993 1994 1995 1996 1997

 Total 78.0 91.0 26.5 58.90 59.9 76.9 31.90 69.4

Southeast Asia 26.8 10.6 12.9 40.90 38.4 51.5 9.80 33.3

Middle East 29.0 64.8 0.6 0.50 0.8 1.0 1.80 1.7

Americas 11.9 8.7 3.1 6.70 8.8 2.2 5.10 4.1

Europe 6.7 4.0 8.8 7.10 11.7 21.9 14.80 30.2

Africa 3.6 2.9 1.1 3.70 0.2 0.3 0.40 0.1
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

A-22

Appendix C

DOD GOVERNMENT-OWNED,

GOVERNMENT-OPERATED (GOGO)/

GOVERNMENT-OWNED, CONTRACTOR-OPERATED

(GOCO) INDUSTRIAL FACILITIES

ARMY GOGO/GOCO

Arsenals/Depots/Ammunition Plants (GOGO)

Anniston Army Depot, Anniston, Alabama

Blue Grass Army Depot, Richmond, Kentucky

Corpus Christi Army Depot, Corpus Christi,

Texas

Crane Army Ammunition Activity, Crane,

Indiana

Letterkenny Army Depot, Chambersburg,

Pennsylvania

McAlester Army Ammunition Plant.

McAlester, Oklahoma

Pine Bluff Arsenal, Pine Bluff, Arkansas

Red River Army Depot, Texarkana, Texas

Redstone Arsenal, Redstone Arsenal, Alabama

Sierra Army Depot, Herlong, California

Tobyhanna Army Depot, Tobyhanna,

Pennsylvania

Tooele Army Depot, Tooele, Utah

Savanna Depot Activity, Savanna, Illinois

(BRAC 95 Closure)

Seneca Depot Activity, Romulus, New York

(BRAC 95 Closure)

Watervliet Arsenal, Watervliet, New York

Picatinny Arsenal, Dover, New Jersey

Ft Wingate Depot Activity, Gallup, New

Mexico (BRAC 89 Closure)

Pueblo Deport Activity, Pueblo, Colorado

Umatilla Depot Activity, Umatilla, Oregon

Rock Island Arsenal, Rock Island, Illinois

Army GOCO Active Facilities

Hawthorne Depot, Hawthorne, Nevada

Holston Army Ammunition Plant, Kingsport,

Tennessee

Iowa Army Ammunition Plant, Middletown,

Iowa

Lake City Army Ammunition Plant,

Independence, Missouri

Lone Star Army Ammunition Plant,

Texarkana, Texas

Milan Army Ammunition Plant, Milan,

Tennessee

Radford Army Ammunition Plant, Radford,

Virginia

Lima Army Tank Plant, Lima, Ohio
Appendixes

A-23

Army GOCO Inactive Facilities

Indiana Army Ammunition Plant,

Charlestown, Indiana (excess)

Volunteer Army Ammunition Plant,

Chattanooga, Tennessee (excess)

Scranton Army Ammunition Plant, Scranton,

Pennsylvania

Kansas Army Ammunition Plant, Parsons,

Kansas (excess)

Longhorn Army Ammunition Plant, Marshall,

Texas (excess)

Joliet Army Ammunition Plant, Joliet, Illinois

(excess)

Cornhusker Army Ammunition Plant, Grand

Island, Nebraska (excess)

Mississippi Army Ammunition Plant, Stennis

Space Center, Mississippi

Sunflower Army Ammunition Plant, DeSoto,

Kansas (excess)

Riverbank Army Ammunition Plant,

Riverbank, California

Badger Army Ammunition Plant, Baraboo,

Wisconsin (excess)

Ravenna Army Ammunition Plant, Ravenna,

Ohio (excess)

AIR FORCE DEPOTS/GOCO

Depots

San Antonio Air Logistics Center, Texas

(Scheduled to close in 2001)

Sacramento Air Logistics Center, California

(Scheduled to close in 2001)

Warner-Robbins Air Logistics Center, Georgia

Oklahoma City Air Logistics Center,

Oklahoma

Ogden Air Logistics Center, Utah

Air Force GOCO

Plant 4, Lockheed Martin, Ft. Worth, Texas

Plant 6, Lockheed Martin, Marietta, Georgia

Plant 44, Raytheon, Tucson, Arizona

Plant PJKS, Lockheed Martin, Denver,

Colorado

Plant 42, Site 1 Boeing, Palmdale, California

Plant 3, City of Tulsa, Oklahoma,

(in process of transfer)

Plant 59, Johnson City, New York

(in process of transfer)
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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NAVY DEPOTS/SHIPYARDS/WEAPONS CENTERS

Naval Shipyards – GOGO

Puget Sound Naval Shipyard, Bremerton,

Washington

Pearl Harbor Naval Shipyard, Pearl Harbor,

Hawaii

Portsmouth Naval Shipyard, Portsmouth, New

Hampshire

Norfolk Naval Shipyard, Norfolk, Virginia

Naval Ordnance Weapons Centers – GOGO

Naval Ordnance Weapons Center, Seal Beach,

California

Naval Ordnance Weapons Center, Yorktown,

Virginia

Naval Ordnance Weapons Center, Earle, New

Jersey

Naval Ordnance Weapons Center, Indian

Head, Maryland

Naval Ordnance Weapons Center, Concord,

California

Navy Inventory Control Points – GOGO

Mechanicsburg, Pennsylvania Philadelphia, Pennsylvania

Naval Aviation Depots – GOGO

Cherry Point, North Carolina North Island, California

Jacksonville, Florida

Naval Aviation Weapons Centers – GOGO

China Lake, California Lake Hurst, New Jersey

Orlando, Florida Patuxant River, Maryland

Supervisors of Shipbuilding – GOGO

Pearl Harbor, Hawaii New Orleans, Louisiana

Bath, Maine Newport News, Virginia

Pascagula, Michigan Puget Sound, Washington

Jacksonville, Florida San Diego, California
Appendixes

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Appendix D

GLOSSARY

Acquisition – The conceptualization, initiation, design, development, test, contracting, production,

deployment, logistic support (LS), modification, and disposal of weapons and other systems,

supplies, or services (including construction) to satisfy DoD needs, intended for use in or in

support of military missions.

Acquisition Executive – The individual, within the Department and Services, charged with overall

acquisition management responsibilities within his or her respective organization.

Acquisition Life Cycle – The life of an acquisition program consists of phases; each proceeded by

a milestone or other decision point, during which a system goes through research, development,

test and evaluation, and production. Currently, the four phases are: (1) Concept Exploration

(CE) (Phase 0); Program Definition and Risk Reduction (PDRR) (Phase I); (3) Engineering and

Manufacturing Development (EMD) (Phase II); and (4) Production, Fielding/Deployment, and

Operational Support (PF/DOS) (Phase III).

Acquisition Management – Management of all or any of the activities within the broad spectrum

of “acquisition,” as defined above. Also includes training of defense acquisition workforce, and

activities in support of planning, programming, and budget system (PPBS) for defense acquisition

systems/programs. For acquisition programs this term is synonymous with program management.

Appropriation – An authorization by an act of Congress that permits federal agencies to incur

obligations and make payment from the treasury. An appropriation act is the most common

means of providing budget authority.

Authorization – An act of Congress which permits a federal program or activity to begin or continue

from year to year. It sets limits on funds that can be appropriated, but does not grant funding

which must be provided by a separate congressional appropriation.

Buy-American Act – Provides that the U.S. government generally gives preference to domestic

end products. (Title 10 U.S.C. & 41 A-D). This preference is accorded during the price evaluation

process by applying punitive evaluation factors to most foreign products. Subsequently modified

(relaxed) by Culver-Nunn Amendment (1977) and other 1979 trade agreements for dealing

with North Atlantic Treaty Organization (NATO) allies.

Combat Developer – Command or agency that formulates doctrine, concepts, organization, materiel

requirements, and objectives. May be used generically to represent the user community role in

the materiel acquisition process. (Army and Marine Corps)
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Contract, Cost Reimbursement Type – A type of contract that provides for payment to the

contractor of allowable costs incurred in the performance of the contract. This type of contract

establishes an estimate of total cost for the purpose of obligating funds and establishing a ceiling

that the contract may not exceed, except with prior approval of the contracting officer.

Contract, Fixed-Price Type – A type of contract, which provides for a firm price to the government,

or in appropriate cases, an adjustable price.

Depot – A centrally located installation for the storage, repair, or distribution of military equipment

and materials.

DoD Component Acquisition Executive (CAE) – A single official within a DoD Component who

is responsible for all acquisition functions within that Component. This includes Service

Acquisition Executives (SAEs) for the military departments and acquisition executives in other

DoD Components, such as the U.S. Special Operations Command (USSOCOM) and Defense

Logistics Agency (DLA), who have acquisition management responsibilities.

Foreign Comparative Testing (FCT) – A DoD test and evaluation program that is prescribed in

Title 10 U.S.C. &2350a(g), and is centrally managed by the Director, Test, Systems Engineering

and Evaluation (DTSE&E). It provides funding for U.S. T&E of selected equipment items and

technologies developed by allied countries when such items and technologies are identified as

having good potential to satisfy valid DoD requirements.

Foreign Military Sales (FMS) – That portion of U.S. security assistance authorized by the Foreign

Assistance Act of 1961, and the Arms Export Control Act. The recipient provides reimbursement

for defense articles and services transferred from the U.S. that includes cash sales from stocks

(inventories, services, and training) by the DoD.

Government-Owned, Contractor-Operated (GOCO) – A manufacturing plant that is owned by

the government and operated by a contractual civilian organization.

Government-Owned, Government-Operated (GOGO) – A manufacturing plant that is both owned

and operated by the government.

Industrial Base – That part of the total private and government owned industrial production and

depot level equipment and maintenance capacity in the United States and its territories and

possessions, and Canada. It is or shall be made available in an emergency for the manufacture

of items required by the U.S. military services and selected allies.

Industry – The defense industry (private sector contractors) includes large and small organizations

providing goods and services to DoD. Their perspective is to represent interests of the owners

or stockholders.
Appendixes

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International Agreement – An agreement concluded with one or more foreign governments or an

international organization that is signed or agreed to by any DoD component personnel. Signifies

the intent of the parties to be bound by international law. Denominated as an international

agreement or an memorandum of understanding (MOU), memorandum of agreement (MOA),

exchange of notes or letters, technical arrangement, protocol, note, verbal aide, memoir,

arrangement, or any other name connoting a similar legal consequences.

Low-Rate Initial Production (LRIP) – The minimum number of systems (other than ships and

satellites) needed to provide production representative articles for operational test and evaluation

(OT&E), to establish an initial production base, and to permit an orderly increase in the production

rate sufficient. The goal is to lead to full-rate production upon successful completion of

operational testing. For major defense acquisition programs (MDAPs), LRIP quantities in excess

of 10 percent of the acquisition objective must be reported in the selected acquisition report

(SAR). For ships and satellites LRIP is the minimum quantity and rate that preserves mobilization.

Milestone Decision Authority (MDA) – The individual designated in accordance with criteria

established by USD (AT&L) or by ASD (C3I) to approve entry of an acquisition program into

the next phase.

Military Assistance Program – The U.S. program for providing military assistance under the

Foreign Assistance Act of 1961, as amended by the Foreign Military Sales (FMS) act of 1968.

Program Executive Office (PEO) – A military or civilian official who has primary responsibility

for directing several acquisition categories (ACAT) I programs and for assigned ACAT II and

III programs. A PEO has no other command or staff responsibilities within the Component, and

only reports to and receives guidance and direction from the DoD Component Acquisition

Executive (CAE).

Program Manager (PM) – A military or civilian official who is responsible for managing, through

integrated product teams (IPTs), an acquisition program.

Program Objectives Memorandum (POM) – An annual memorandum, in prescribed format

submitted to the Secretary of Defense (SECDEF) by the DoD component heads, which

recommends the total resource requirements and programs within the parameters of SECDEF’s

fiscal guidance. A major document in the planning, programming, and budgeting system (PPBS)

is the basis for the budget. The POM is the principal programming document which details how

a component proposes to respond to assignments in the defense planning guidance (DPG) and

satisfy its assigned functions of the future years defense program (FYDP). The POM shows

programmed needs for five or six years hence (i.e., in fiscal year (FY) 94, POM 1996-2001 was

submitted; in FY 95, POM 1997-01 was submitted), and includes manpower, force levels,

procurement, facilities, and research and development (R&D).
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Senior Procurement Executive (SPE) – The senior official responsible for management and

direction of the Service procurement system, including implementation of unique procurement policies, regulations, and standards (see Title 41 U.S.C. & 414, “Executive Agency

Responsibilities”).

System Program Office (SPO) – The office of the Program Manager (PM) and the single point of

contact (POC) with industry, government agencies, and other activities participating in the

system acquisition process.

Test and Evaluation (T&E) – Process by which a system or components provide information

regarding risk and risk mitigation and empirical data to validate models and simulations. T&E

permits, as assessment of the attainment of technical performance, specifications and system

maturity to determine whether systems are operationally effective, suitable and survivable for

intended use. There are two types of T&E – Development (DT&E) and Operational (OT&E).
Appendixes

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Appendix E

BIBLIOGRAPHY

GENERAL

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Key to the Asian Miracle: Making Shared

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KOREA

Choi, Jong Chul, “South Korea,” in Arms

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De Mente, Boye Lafayette, NTC’s Dictionary

of Korea’s Business and Cultural Code

Words: The Complete Guide to Key Words

That Express How Koreans Think, Communicate and Behave, published by NTC

Publishing Group, 1998.

Nahm, Andrew C., A History of the Korean

People: Korea Tradition and Transformation, Hollym International Corp., Elizabeth,

New Jersey/Seoul, 1996.

Nolan, Janne E., Military Industry in Taiwan and

South Korea, St. Martin’s Press, New York,

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Kim, Bun Woon, and Pan Suk Kim, Korean

Public Administration, Hollym International

Corp., Elizabeth, New Jersey/Seoul, 1997.

Lee, Yong Hak, Major ROK Army, “Defense

Industry and its Impacts on Economic

Growth in Korea,” Masters Thesis, Navy

Post Graduate School, 1992.

Oh, John Kie-Chiang, Korean Politics, Cornell

University Press, Ithica and London, 1999.

Sengupta, Prasun K., “Market Condition

Threaten Korean KTX-2 Trainer,” Asian

Defense Journal, September 1999, pp. 64-

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Shin, Roy W. and Alfred Ho, “The Role of

Science and Technology in Creating Korea’s

Electronics Industry,” in Asian Affairs, 1996,

pp. 235-251.

Janes Sentinel: China and Northeast Asia, Korea,

United Kingdom, 1998.

Defense Acquisition Management Regulation,

Ministry of National Defense (MND)

Directive 610, January 2, 1999.
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Web Sites:

JDA: http://www.jda.go.jp/e/index_.htm

TRDI: http://www.jda-trdi.go.jp/index.html

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China, India, Israel, Japan, South Korea and

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Japan, United Kingdom, 1998.
Appendixes

A-31

SINGAPORE

Lepoer, Barbara Leitch, Editor, “Singapore, a

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to Power 1950-1968,” Masters Thesis, San

Diego State University, 1976.

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Defence, MINDEF (Public Affairs), 1994.

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Ministry of Defence, January 2000.

Web Sites:

DSTA: http://www.dsta.gov.sg/

Ministry of Defence: http://www.mindef.gov.sg/

Singapore Government: http://www.gov.sg/istana/

DSO National Labs: http://www.dso.org.sg/index-flash.htm

Singapore Straits Times: http://straitstimes.asia1.com/singapore/sin/

House of Parliament: http://www.gov.sg/parliament/main.htm

Singapore Technologies: http://us.st.com/stonline/company/identity/index.htm

Law of Singapore: http://www.lib.nus.edu.sg/llb/internet/spore.html
A Comparison of the Defense Acquisition Systems of Australia, Japan, South Korea, Singapore and the United States

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UNITED STATES

Benson, Lawrence R., Acquisition Manage-ment

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Defense Management Challenge,” Weapons

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Gansler, Jacques S., Defense Conversion:

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Cambridge, MA: MIT Press, 1995.

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Quarterly, Summer 1994, Vol 1. No. 3, pp.

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Horton, Peter, “Converting the MilitaryIndustrial Complex: Why it’s Difficult,” in

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Web Sites:

OSD Acquisition: http://www.acq.osd.mil/acqweb/index.html

Army Acquisition: http://www.sarda.army.mil/default_nscape.htm

Navy Acquisition: http://www.hq.navy.mil/RDA/

Air Force Acquisition: http://www.safaq.hq.af.mil/