Nr 1  2012


On Buying Off-the-Shelf

Several countries (the UK, Sweden, …) have for the past couple of years applied an acquisition strategy emphasizing what’s known as buying off-the-shelf, procuring what’s already available on the market, and not necessarily from a domestic contractor. The idea is obviously to avoid developmental costs, and benefiting from the economies of scale of products with multiple customers. One striking example of this thinking is when Sweden went for an existing, battle-proven Finnish armored vehicle instead of a technologically more advanced, but less proven Swedish design.

Critics have pointed out several flaws with this concept. Some technologies are coupled to essential national security interests, and must be maintained and developed nationally. Transnational defense contracts, which are supposed to make up for the declining domestic market, typically require that your own nation act as a reference customer. Few defense contractors (in contrast to the civil market) are willing to risk internally funding new programs without a guaranteed customer. Maintenance of existing weapons systems requires that the developmental engineers have something interesting to do (such as new development programs), or they will head for the exits. No commercially available weapons systems will be 100% plug-and-play, but will always require some tinkering with to be operative.

The financial crisis has added yet another argument against buying off-the-shelf from other nations. A nationally placed contract will typically generate 30-40% of the contract value in tax revenue for the nation in question. In times of austerity, such phenomena are hard to neglect for ministers of finance, and disregarding them is difficult to explain to the electorate.

At off-the-record discussions in Brussels, this argument appears to be gaining in strength, and for this reason, and the ones listed above, we can expect there to fairly soon be less focus on buying off-the-shelf.