Some thoughts and questions on the recent EU step to buy 155mm ammunition.
- NATO and the EU have realised that wars are fought and won on land. To be successful ammunition is required in addition to digital C4I technologies.
- The war in Ukraine has focussed on the supply of 155mm ammunition, however there is a lack of stockpiles in EU nations and the UK for all calibres of ammunition.
- The EU defence industrial base has been sized for a capacity that is much lower than is now required and is largely incapable of surging manufacture of 155mm or other calibres, perhaps with the exception of small arms.
- In response the EU is moving forward with a well publicised initiative to procure one million 155mm rounds. These rounds will be used to supply Ukraine and build stockpiles for those nations that have emptied their magazines to supply Ukraine.
- The European industrial base is not capable of supply one million 155mm rounds in the near and probably the medium term.
- There is a risk that the huge wave of funding that accompanies this initiative will be forced through the existing supply chain using a disparate set of contracts with numerous suppliers. The immediate commercial interests of the companies are not necessarily aligned with the outcomes that the nations are seeking.
- This initiative can be used as a lever to reconfigure the European supply chain to not only increase capacity but also build resilience across all calibres. This would be in the interests of the nations and in the longer term the commercial entities involved.
Some specific observations relating to the ‘one million round’ initiative:
- Are there sufficient weapons within the EU nations to utilise one million rounds?
- What natures of ammunition will be procured? All High Explosive?
- How will the procurement address the interface with the different weapons?
- What about qualification?
- Will companies share intellectual property?
- Will (EU/NATO) users align their technical specifications and qualification requirements? There is no single EU or NATO definition of the testing required to demonstrate safety and suitability for service.
- Will (EU/NATO) users align their concepts of operation?
- Can there ever be a joint procurement
- Can it be done without time-consuming Memoranda of Understanding?
- Who will take the lead?
- How will the procurement comply with European Procurement law?
- Can existing platforms like NSPA, OCCAR or EDA be utilised?
- Can contractual terms and conditions like warranty, liability be harmonised?
- What about national requirements on Industrial Participation ?
- Will there be a ‘ buy EU policy only’ or does it include non EU nations such as UK?
- Can there be long term (f.e. 10-15 years) framework agreements giving confidence on return on investment?
- Can there be a shared ownership of stocked ammunition in EU?
- How long will it take to build capacity?
- Where will it be built?
- Who will finance it?
- How will it be sustained?
- How will the manufacture of other calibres be integrated?
- Will funding be available for investment in new technology, for instance guided 155mm?
The Financial Times has reported that EU and UK officials are discussing closer defence and security co-operation¹, which includes ‘defence industrial planning’. This is a positive development, not only because closer EU / UK defence and security co-operation would be mutually beneficial but also because the concept of defence industrial planning is being discussed by buyers. The market for defence systems, services and products is a monopsony, where the risk of the failure to perform is held by the buyer, hence the buyer should be a key agent in designing the supply chain. In addition to supplying materiel to the armed forces of European nations the development of a robust and resilient defence industrial base is an important deterrent to adversaries. The flood of funding via the 155mm procurement is an opportunity to design a defence industrial base that has the following key capabilities:
- Technologically capable
- Sufficient capacity throughout the supply chain to meet significant fluctuations in demand.
- Resilient to shocks by building redundancy.
If this is left to the market there is a risk that the supply chain that emerges will fail to meet one or more of these capabilities. As a practical first step the buyers could drive commonality. Whilst the ideal would be a family of rounds common across Europe that may prove to be a step too far. If that is not feasible then commonality at component or material level would help build volume, which in turn would reduce fragmentation and increase resilience. A robust and resilient industrial base can be achieved via co-operation with industry to deliver an end to end supply chain that balances military and financial outcomes. This is likely to require innovative contracting approaches that go beyond the simple buyer / supplier relationship (confrontation).
This post aims to set out a perspective that may not be fully considered in the urgent activity that is no doubt happening across Europe, where the temptation will be to act in haste to show that something is being done.
EU and UK ramp up talks on defence co-operation – FT 27 March 2023
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