Magazine article National Defense

U.S., U.K. Vow Stronger Industrial Cooperation: Trade Reform, Outsourcing Efforts Could Lead to Growing Business Opportunities

Magazine article National Defense

U.S., U.K. Vow Stronger Industrial Cooperation: Trade Reform, Outsourcing Efforts Could Lead to Growing Business Opportunities

Article excerpt

The United States is the largest investor in the economy of the United Kingdom, while the United Kingdom is the biggest foreign customer for the U.S. defense industry. For companies on both sides of the Atlantic, this means partnerships are the order of the day.

At the U.S.-U.K. Defense Industry Seminar, sponsored by the National Defense Industrial Association and the Defense Manufacturers Association, several officials touted the benefits of better coordination and industrial cooperation.

"Getting the best value from the defense industry and partnerships is a big priority in the United Kingdom," said Lord Willy Bach of Lutterworth, U.K. undersecretary of state and minister of defense procurement. "It is a measure of the strength of our relationship to be able to speak frankly about defense industrial relations," said Bach.

U.S. and U.K. officials are nearing completion of a waiver of International Traffic in Arms Regulations (ITAR), which will give both nations preferred status is doing business with one another. A similar waiver has already been granted to Australia. The agreement with the United Kingdom is expected to be in place by 2004.

Discussions at the conference centered around private financing and competitive sourcing initiatives, technology transfer policy and export controls.

Private Financing Initiative

"I absolutely believe in competition as the best form of procurement, said the U.K. chief of defense procurement, Sir Robert Walmsley. "Lessons can be learned from the U.K. Private Financing Initiative."

PFI is a Defense Ministry program, where capital assets used by the government are owned by the contractor. For example, he said, "Sealift services are provided by the shipping company to the MOD, using ships owned, serviced and managed by the sealift operator. It's cultural bias that we have to own everything," he said.

However, Walmsley said it was important to rake into consideration the implications of commercial ownership of defense assets, as well as consider whether contractors need combat skills to do their jobs.

Walmsley explained how the Defense Ministry gets private companies to invest in military support services. "Can we convince a private company to invest in tank transporters? Yes, but there is a lengthy application process, and a lot has to happen before the deal is completed," he said.

First, the ministry assesses the suitability of a project for a PFI. Then, it advertises the requirement in the MOD Defense Contracts Bulletin, a publication that comes our every two weeks. Companies express their interest and the selected ones receive invitations to negotiate and submit bids. Then a protracted decision-making and negotiating process rakes place. The timetable varies, because "Every deal is different. But it rakes about a year, or 11 months to close a deal with a preferred bidder," Walmsley said.

Private financing is being explored more and more by the U.S. government. "We are currently questioning the role of what government does, and wondering how much should be outsourced or competitively sourced," said Deidre Lee, director of defense procurement and acquisition policy at the Defense Department.

Currently, instead of private financing initiatives such as public private partnerships, Lee said the Defense Department was focusing on "e-everything. ... Going electronic is a little bit of a challenge in the procurement area, but e-business is a tool to work for us, nor the other way around."

Technology Transfer

"Many of our policies in place are still mired in the Cold War," said Lisa Bronson, deputy undersecretary of defense for technology security policy and counter-proliferation. "That will have to change, as the president has asked the Defense, State and Commerce Departments for a comprehensive review of the Defense Trade Export Policy," she said.

"We want to increase the pool of countries that can come fight with us," she said. …

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