December 17, 2014

Of Launchers and Ledgers

Every now and then, people take the opportunity to voice critical views on decisions made on national defence. The critique tends to boil down to two main accusations: the force structure is wrong, and we buy wrong things at the wrong time. Almost invariably, though, these posts manifest remarkable ignorance of defence management in general, and of defence economics in particular. Thus, a short excursion into the borderland between dreams and reality, between possible and impossible, is in order.

Every now and then, people take the opportunity to voice critical views on decisions made on national defence. The critique tends to boil down to two main accusations: the force structure is wrong, and we buy wrong things at the wrong time. Almost invariably, though, these posts manifest remarkable ignorance of defence management in general, and of defence economics in particular. Thus, a short excursion into the borderland between dreams and reality, between possible and impossible, is in order.

First, a word about structures. The Minister of Defence and senior military officials make their decisions within a framework of many objective and subjective limitations. The principal subjective limitation is what we think we know about our potential adversary, its objectives, available forces, their most probable uses and current state. Equally subjective would be the commander’s decisions about the use of time, space and forces to achieve the desired end state. That is why imposing one’s will on the adversary is called the art of war. And as we are talking about finding subjective solutions to a subjectively defined problem, more than one solution is always possible. The selected solution may depend on the doctrinal framework applied, the education, previous experience and ability of the decision maker to grasp complex situations, and a thousand more subtleties, but there is no way to objectively prove that one unexecuted concept of operations is better than another. Even if we knew all (usually classified) planning assumptions—a condition clearly not met by commentators within the public domain—we would only be capable of judging whether a certain plan can be executed under certain conditions. Naturally, different concepts of operations call for different forces to execute them. The fact that a concept of operations underlying a certain force structure is different from the one favoured by the commentator does not automatically make that structure wrong. Thus, arguing in public that one force structure driven by one concept of operations is superior to another force structure driven by a different concept of operations is as pointless as arguing that one writer is more “writerly” than another.
The size, composition, and requirements for the readiness of forces are, then, driven by inherently subjective considerations, and any doctrinally correct and internally consistent alternative is as valid as any other. These considerations form a basis for decisions about the number and structure of manned, trained, equipped, sustainable and usable units. It should be underscored here that sustainability and usability are the most critical parameters. Military capabilities that we cannot use are—borrowing terms from financial accounting—not an asset but a liability. In other words, they consume scarce resources without contributing to national security.
Force generation driven by subjective considerations is, however, a process subjected to objective limitations.
The first of the main limiters is policy. Ratified treaties, strategic guidance, laws and regulations and functional policies determine the framework within which decisions are executed. The attempts of a small allied country to maintain two parallel armies—one for NATO and another for carrying out combat operations in some other context—waste resources and lead to a situation when neither is combat-capable due to underfunding. In addition, a force component not interoperable with NATO is operationally useless from the viewpoint of collective defence.
Now, let’s examine acquisition and procurements. Another — and more important but often overlooked — limiter is available money. Recalling few basics of defence budgeting seems to be in order.
First, only events that have an approved budget can take place. Any other ideas occurring outside of budget routine will not be implemented. Using fiscal year coinciding with calendar year as an example: if the idea occurs in March, there is a possibility to include it in next year’s budget; if it occurs in September when the budget process is already out of the planner’s reach, the implementation is pushed back for at least a year. Attempts to ignore this rule and reallocate resources within the current fiscal year tend to lead to serious setbacks to overall performance of defence forces: money to implement new ideas has to be taken from another, preplanned activity. (Crisis management is an exception, but in most countries it is funded from government reserves, not from the running defence budget.)
Second, budget and its future projections are always finite and will not increase at the will of a defence planner. Whether a percentage of GDP allocated for defence transforms into one or another budget figure is a function of the macroeconomic well-being of the national economy, but that figure is still finite. Hence, all of the flexibility needed to respond to changes in security environment can only come from changes in resource allocations approved earlier. A subheading under this same topic is the strong recommendation to keep major spending categories—personnel, operations and maintenance, and investments—in rough balance: one third for people, one third for things, and one third for the future. Sustained deviation from this rule leads to loss of combat capability; there are ample examples of this both inside and outside of NATO. .
Third, the budget and its projections are already spent. In other words, the budget is to execute preplanned activity and run the existing equipment. Acquiring new equipment and/or building new infrastructure inevitably requires adding their future running costs to the existing expenditure. Since the budget does not get bigger, adding something new means that something old must go. Not grasping this problem is common for most militaries in Central and Eastern Europe. Time and again, we can see otherwise well-planned acquisitions, where the intended increase in operational capability is nullified by ignoring the future running costs. Simply put: people buy things but do not allocate funds to run them. The result, as can be expected, is that after a few years, the system becomes unusable due to poor (or altogether missing) maintenance.
Fourth, any major change in force makeup—restructuring or fielding a new weapon system—inevitably also brings about changes in at least two supporting sub-systems: training and logistics. In order to use the new equipment, operators must be recruited and trained, and the logistics tail adjusted to enable proper maintenance. This, in turn, requires enabling changes in personnel, operations and maintenance budgets approved earlier. These changes often also require additional investments into training and/or maintenance infrastructure. Here is another shortfall common for Central and Eastern European militaries: if in the case of about half of major acquisition programs the life cycle costs of the weapon system itself are captured reasonably well, the related costs of adjusting training and logistics structures go largely unnoticed. The result is, again, as expected—two or three years into the programme, the managers discover an urgent need for additional investments to keep the new system operational. While these calculations were missing from the original programme, funds must be obtained by sacrificing something unplanned.
In light of the above, let us ask some questions to determine the fate of any major acquisition:
What is my preferred concept of operations based on what I think I know about the potential adversary, its objectives, its available forces, most likely use and current state?
Does this concept of operations imply acquisition of a new weapon system?
What is the projected availability of financial resources through the life cycle of that new system (25-30 years)?
What is the life cycle cost of the new system?
What are the related costs of adjusting the training and logistics to enable operating the new system?
Does the total cost fit my financial projections?
What existing capabilities or planned upgrades do I have to sacrifice to free up resources for the new system?
The list of questions on the table of a real defence planner is longer and more detailed, but the trend should be visible. Defence of a small state is first and foremost a macroeconomic and only then an operational problem. The defence capability of a small state is determined not by personal bravery of a single soldier or tactical brilliance of a field commander, but by the resources society is willing to invest. The main instrument in the toolbox of a Chief of Defence is not a missile launcher, but an Excel spreadsheet.

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