1. Innovation and Defence R&D: an Evolving Relationship Six Countries Programme Workshop Linking Defence and Security R&D to Innovation: the challenge ahead Brussels, 19 November 2004 Jordi Molas-Gallart Senior Fellow SPRU, University of Sussex

2. Foreword: Defence Innovation Goes Beyond Changes in Arms Systems Innovations in military doctrine/operations Innovations in military systems Innovations in military logistics and support Innovations in military acquisition and systems design Importance of process and organisational change

3. Issues The effects of defence R&D investment – the relationship between defence and civilian innovation Policy challenges – Procurement reform and defence R&D – The role and reform of Defence Government Research Establishments

4. The Effect of Defence R&D Investment An optimistic view of the impact of defence R&D (EC communication towards an EU defence equipment policy, march 2003): Defence related research plays a major role in innovation in the US; It benefits the whole of industry, including the civilian sector. This interpenetration of defence and civilian research has benefited both the American arms industry and civilian users in terms of market access and costs.

5. Yet the Effect of Defence R&D is Controversial Recall 70s and 80s literature on the detrimental effects of defence research and production In key technological fields defence follows civilian innovation Defence R&D is mainly D (development) Effects of defence R&D depends on conditions (institutional structure, R&D management, type of R&D...)

6. Main Challenge: Need for Procurement Reform/Institutional Change Traditional defence procurement established a complex set of regulatory and managerial practices and organisational structures Defence research activities have tended to be carried out separated from other R&D activities

7. Procurement Reform: Some Goals Pursues cost savings (while increasing performance)... – …by using capabilities available elsewhere – …by exploiting elsewhere capabilities developed in defence research and production – …by improving managerial practices Attempts to change the way complex military systems are defined, developed, produced and maintained

8. Procurement Reform: the Policies Seeks to open military markets through: – The application of commercial best practice in project management and contractual procedures – The development of integrated project teams and partnering agreements – The substitution of defence standards and military specifications for civilian standards –...

9. Procurement Reform: the Practice Many reform tools appear as technical (ILS, CALS, continuous acquisition, MILSPEC reform, IPTs..) These building blocks are tackled (mainly) at national level, and… …in isolation from each other (functional silos)

10. Procurement Reform: the Building Blocks are Interrelated Cost control and improvement technological capability Life-cycle approach CALS, ILS (maintenance cost planning) Integrated Project Teams Incremental acquisition Use of commercial components and subsystems (COTS, NDI) MILSPEC and MILSTD reform Suppliers take on more design and maintenance responsibilities Flexible performance definitions Closer customer/supplier relationship Modular design, open systems architecture, obsolescence management

11. Therefore... Procurement reform is not only about new tools, but about systemic change – Changes across all procurement processes and stages must be implemented in a coordinated manner – Priorities must change – R&D activities are also affected The generation and exploitation of defence- related technological capabilities goes beyond the funding of research activities

12. The Case of Defence R&D Specialised defence research facilities have a history of isolation – Security considerations – Special relationship with defence ministries and the military Technology transfer across military-civilian contexts is likely to require – Organisational change – Change in regulatory and contractual practices – Cultural adjustment How will this management of dual-use work in practice?

13. The Example of Defence Government Research Establishments R&D strategies among many defence-related research organisations are dual-track, seeking: The application of commercial technologies to gain savings in military production The application of military technologies to commercial ventures

14. The Reform of Defence GREs: Some Challenges Defence research establishments are engaging in civilian work, but…. – What priority should be given to commercial work against established defence tasks? – What will the implications of commercialisation be in a defence environment? – How will the relationship with private firms develop? – Is there scope for European collaboration?

15. GDREs: A Summary of Problems Conflict of interest – Commercial use of data acquired when discharging functions on behalf of defence ministries) – Support of private sector partners when providing advice to defence ministries… New tasks (technology transfer,…) require new priorities and organisational culture How to introduce international collaboration in highly sensitive areas

16. Collaboration in European Defence R&D Only about 2% of European defence R&D has been carried out through joint research programmes (WEAO,…) (not counting joint arms development programmes) A long history of plans, initiatives, frameworks… – To establish joint research programmes – To co-ordinate research priorities and requirements … but defence research keeps being regarded as a matter of national strategic importance

17. The EU and Defence Article 223 Treaty of Rome (293 Treaty of Amsterdam, III-342 Constitution Treaty) allows any member state to take Such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material

18. EU is Trying to Develop Defence Industrial Policies Communication on the challenges facing the European defence industries (1996) Communication on implementing a EU strategy on defence-related industries (1997), including – Draft common position on framing a European armaments policy – Action plan for the defence-related industry Communication towards and EU defence equipment policy (2003) Establishment of European defence agency (2004) Communication on security research - the next steps (2004) Communication towards a programme to advance European security through research and technology (2004) Green paper on defence procurement (2004)

19. A Long-Term Objective

20. Yet Very Slow Progress European countries maintain diverse procurement policies and organisational procedures Market fragmentation along national lines continues

21. Summary: The Challenges (1) Technology transfer across military-civilian applications requires the adaptation of skills and cultural adjustment...... likely to require organisational change

22. The Challenges (2) Policy initiatives at different levels may pull in different directions Diversity of policy contexts and decision levels Possibility of inconsistent policy outcomes European integration is a fragile process

23. The Challenges (3) Defence research establishments are engaging in civilian work What priority should be given to commercial work against established defence tasks? How does one deal with conflicts of interests? YET