Public sectors in the developed and emerging economies have been witnessing a period of intense change over the past three decades as a result of the development of free-market economy across the globe. In the UK, the public sector in 1970s (that comprised of nationalised industries) was severely criticised for being wasteful, and subject to political intervention, thereby making them inefficient systems for delivering public services. To put matters right, successive governments from the late 1970s embarked on public sector reforms. These reforms centred on increasing the role of private sector in delivering public services. Privatisation, the implementation of accruals-based accounting and application of compulsory competitive tendering in the public sector were some of these reforms. Public-private partnerships, including private finance initiatives (PFIs), introduced in the 1990s, were a continuation of these reforms. In the defence sector, various reforms carried out prior to 1990s failed to completely remove cost and time overruns in defence projects. PFIs were introduced to further rectify the failures of previous reforms in the defence sector because they were purported to provide better value for money. Defence PFIs are long-term agreements whereby the Ministry of Defence, MoD, contracts to purchase quality services on a long-term basis from the private sector (through the special purpose vehicle, SPV) in which the private sector provides all the finance required in constructing the asset that is used to provide the services. Value for money of PFIs is about economy, efficiency and effectiveness. The question, though is whether, Defence PFIs provide value for money as claimed by the MoD? The purpose of this thesis is to evaluate the effectiveness of three categories: 1) accommodation, 2) equipment and 3) training of Defence PFIs by assessing the financial robustness (over a six-year period) of the SPVs engaged in their delivery. This research employs a multi-method methodological approach to gather data. Qualitative research methods were employed in exploring and understanding customer-supplier relationships and included, PPPs, PFIs in general (and Defence PFIs in particular), the public sector reforms that brought about private sector integration, 4 defence reforms, and Defence PFI policies. Quantitative research was used to collect and evaluate financial data on SPVs (used in Defence PFIs). Research analysis provided mixed results regarding the financial robustness of SPVs employed in the delivery of Defence PFIs. The profit margins of SPVs involved in the delivery of Defence PFIs relating to the category of accommodation were the highest. This is followed by SPVs in the category of Defence equipment and then by SPVs in the category of Defence training. Interestingly, the majority of SPVs involved in the delivery of Defence PFIs relating to accommodation have sound financial health. On the other hand, most SPVs relating to the other two categories have serious financial problems and therefore show cause for concern. Based on research findings of this study, a number of important policy recommendations are advanced to raise the effectiveness of PFIs in the defence sector and the wider public sector.

Background: When governments procure fighter jets from international suppliers, offsets frequently occur. In 2009, the European Commission issued Defence and Security Directive 2009/81/EC – a first step to incorporate the defence sector into the European single-market model. The regulation has changed the circumstances on the fighter market by limiting the use of offsets. Whether the fighter market, or the defence sector, is able to adjust to these changes remain unanswered.Purpose: The purpose of this study is to investigate and analyse the role of offsets in procurements of fighter jets, to get a better understanding of the present situation at the fighter market where the EU attempts to ban offset agreements.Research method: This study uses a qualitative method. Seven interviews with employees at Saab Aeronautics were carried through. In addition to the interviews, a literature study was conducted on defence markets, offsets and the European context. The gathered material was thereafter analysed with selected theories of institutional and transaction cost economics, as well as previous research in order to fulfil the purpose of the study.Conclusion: The study concludes that offsets can be seen as a by-product of the existing market imperfections and political transactions, and therefore a natural component in procurements of fighter jets. Certain forms of offset can be used by purchasing governments to neutralize existing market imperfections and lower the transaction costs. However, this is only one dimension to offsets since they may appear in several forms with different purposes and risks attached to them. The institutional change on the European fighter market will produce both winners and losers in the years to come. Whether eliminating offsets will lead to a more open and transparent fighter market remains ambiguous

Public sectors in the developed and emerging economies have been witnessing a period of intense change over the past three decades as a result of the development of free-market economy across the globe. In the UK, the public sector in 1970s (that comprised of nationalised industries) was severely criticised for being wasteful, and subject to political intervention, thereby making them inefficient systems for delivering public services. To put matters right, successive governments from the late 1970s embarked on public sector reforms. These reforms centred on increasing the role of private sector in delivering public services. Privatisation, the implementation of accruals-based accounting and application of compulsory competitive tendering in the public sector were some of these reforms. Public-private partnerships, including private finance initiatives (PFIs), introduced in the 1990s, were a continuation of these reforms. In the defence sector, various reforms carried out prior to 1990s failed to completely remove cost and time overruns in defence projects. PFIs were introduced to further rectify the failures of previous reforms in the defence sector because they were purported to provide better value for money. Defence PFIs are long-term agreements whereby the Ministry of Defence, MoD, contracts to purchase quality services on a long-term basis from the private sector (through the special purpose vehicle, SPV) in which the private sector provides all the finance required in constructing the asset that is used to provide the services. Value for money of PFIs is about economy, efficiency and effectiveness. The question, though is whether, Defence PFIs provide value for money as claimed by the MoD? The purpose of this thesis is to evaluate the effectiveness of three categories: 1) accommodation, 2) equipment and 3) training of Defence PFIs by assessing the financial robustness (over a six-year period) of the SPVs engaged in their delivery. This research employs a multi-method methodological approach to gather data. Qualitative research methods were employed in exploring and understanding customer-supplier relationships and included, PPPs, PFIs in general (and Defence PFIs in particular), the public sector reforms that brought about private sector integration, 4 defence reforms, and Defence PFI policies. Quantitative research was used to collect and evaluate financial data on SPVs (used in Defence PFIs). Research analysis provided mixed results regarding the financial robustness of SPVs employed in the delivery of Defence PFIs. The profit margins of SPVs involved in the delivery of Defence PFIs relating to the category of accommodation were the highest. This is followed by SPVs in the category of Defence equipment and then by SPVs in the category of Defence training. Interestingly, the majority of SPVs involved in the delivery of Defence PFIs relating to accommodation have sound financial health. On the other hand, most SPVs relating to the other two categories have serious financial problems and therefore show cause for concern. Based on research findings of this study, a number of important policy recommendations are advanced to raise the effectiveness of PFIs in the defence sector and the wider public sector. / © Cranfield University, 2014

Major defence projects have a reputation of cost increases, time delays and in some cases not meeting user requirements. The aim of this study was to discover the factors which create the difficulties in UK defence acquisition projects. The dataset used in this research are seventeen, National Audit Office: Value for Money reports of major defence projects. Qualitative Software NVivo 8 was used to organise passages from the reports into categories of factors representing the defence acquisition process. A content analysis method was applied to the categories in order to highlight their quantitative and qualitative significance. A Transaction Cost Economics approach was taken to formulate the research propositions, which were tested using the qualitative content analysis.The fundamental transformation in defence procurement leads to post-contract asset specificity. There is a lack of substitute suppliers in defence procurement due to the high switching costs. There are three reasons given for this development in defence: (1) a legacy of the privatisation policy in the defence industry; (2) ownership transfers of specialised assets under the prime contracting approach and; (3) the transaction-specific investments by the MoD. The prime is able to take advantage of transaction-specific and relation-specific investments in the transaction for future contract tenders, due to the pre-contract asset specificity which results. This sequence of events is identified as the cause of the bilateral dependency condition in defence acquisition.Uncertainty and asset specificity, to a lesser extent, were identified as the major causes of transaction-costs in defence acquisition. These transaction-costs were given as the causes of failures in meeting the value for money criteria of defence projects. The MoD has responded, in recent time, to project failure through a governance trade-off from a traditional market-based transaction towards a bilateral governance approach. A focus of this bilateral governance approach is the application of Smart Acquisition principles and the IPT mechanism (joint MoD-Industry teams). In order to strengthen and support the IPT mechanism it is argued that a relational contracting approach should be taken. Traditional contracting approaches weaken the joint team working, whereas relational contracting applies partnership principles of better communication, cooperation and collaboration.

<p>The Swedish defence has, during the last couple of years, been under major restructuring that has influenced defence procurements as well. Cost-efficiency has become increasingly important in defence procurement due to higher demand from shrinking defence budgets. The purpose of this study has been to compare the view on cost-efficiency between Swedish Defence Materiel Administration (FMV) and the Swedish Ministry of Defence and to discuss the potential differences. In order to compare the views, the study has looked at what is considered as cost-efficiency in Swedish defence procurement and how it could be achieved. The study has also considered the importance of Swedish defence industry in achieving cost-efficient procurements. For collecting data to make the comparison, focus group interviews were used as data collecting method. The use of focus groups has the advantage of allowing discussion and interaction between the participants. The study includes three focus group interviews, two were made at FMV and the third one was made at the Ministry of Defence.</p><p>When comparing the view on cost-efficiency in Swedish defence procurement between the three groups, there are no clear definition of what cost-efficiency is. However, a definition is suggested that combines the view of the three groups into the following definition; cost-efficient procurements should be good enough in order to satisfy the demand of the Armed Forces throughout the systems entire lifecy-cle. The study also concludes that the objective of becoming more cost-efficient is shared between the Defence Materiel Administration and the Ministry of Defence. However, there are differences on how this objective is to be achieved. The Ministry of Defence wants to use economical measures to make the organization around defence procurement more efficient and thus more cost-efficient procurement. The Defence Materiel Administration on the other hand would like to increase the per-sonnel since that would make it possible to utilize the market in a better way through competitive procurement.</p><p>The role of the Swedish defence industry is considered by all three groups as important for international cooperation and is said to contribute to cost-efficiency in procurements since the defence materiel market is characterised by barter transactions. With the intention of involving the industry in more parts of the system lifecycle through Public Private Partnerships, the importance of the defence industry will in-crease in order to make cost-efficient procurements.</p>

Smart acquisition was the change programme introduced at the end of the twentieth century charged with transforming the effectiveness of defence procurement within the United Kingdom. The initiative was rolled-out as a cornerstone of the Blair government’s strategic defence initiative from 1998 onwards and represents, today, the management philosophy, public sector organisational structures and UK industrial strategy for delivering defence equipment. This research seeks to understand the manner and extent of changes to defence procurement derived from the smart acquisition initiative, viewed as a ‘technology’ through which government exercises power. Accordingly, understanding smart acquisition develops and deepens our knowledge of the nature of government itself. I offer, initially, in chapters 1 and 2 an introduction to smart acquisition, its background and historical antecedence. I discuss the methodology employed for interrogating the phenomenon as an auto/ethnographical study of UK defence practices. Chapter 3 details the factors that drove defence reorganisation, whilst chapter 4 derives smart acquisition as rational and benign managerial change. Chapter 5 critiques this perspective by unveiling smart acquisition as a neoliberal construct through which government procures and cements assemblages of regimes of control and socialisation, legitimised through managerial narratives and governmentalist forms. A revised critical analytical model of smart acquisition embracing governmentalist notions is, consequently, provided in chapter 6. Chapter 7 introduces a specific defence procurement project team and describes its transformation strategy and emerging business model. In chapter 8 the project team is superficially revealed as a rational change agent embedding and embracing management reform. Chapter 9 critiques this, presenting the team as a constructed governmentalist regime, an expression of control, socialisation and surrender of agency. Chapter 10 concludes the research by observing that smart acquisition is a complex set of understandings and a multiplicity of forms and discourses.

The Swedish defence has, during the last couple of years, been under major restructuring that has influenced defence procurements as well. Cost-efficiency has become increasingly important in defence procurement due to higher demand from shrinking defence budgets. The purpose of this study has been to compare the view on cost-efficiency between Swedish Defence Materiel Administration (FMV) and the Swedish Ministry of Defence and to discuss the potential differences. In order to compare the views, the study has looked at what is considered as cost-efficiency in Swedish defence procurement and how it could be achieved. The study has also considered the importance of Swedish defence industry in achieving cost-efficient procurements. For collecting data to make the comparison, focus group interviews were used as data collecting method. The use of focus groups has the advantage of allowing discussion and interaction between the participants. The study includes three focus group interviews, two were made at FMV and the third one was made at the Ministry of Defence. When comparing the view on cost-efficiency in Swedish defence procurement between the three groups, there are no clear definition of what cost-efficiency is. However, a definition is suggested that combines the view of the three groups into the following definition; cost-efficient procurements should be good enough in order to satisfy the demand of the Armed Forces throughout the systems entire lifecy-cle. The study also concludes that the objective of becoming more cost-efficient is shared between the Defence Materiel Administration and the Ministry of Defence. However, there are differences on how this objective is to be achieved. The Ministry of Defence wants to use economical measures to make the organization around defence procurement more efficient and thus more cost-efficient procurement. The Defence Materiel Administration on the other hand would like to increase the per-sonnel since that would make it possible to utilize the market in a better way through competitive procurement. The role of the Swedish defence industry is considered by all three groups as important for international cooperation and is said to contribute to cost-efficiency in procurements since the defence materiel market is characterised by barter transactions. With the intention of involving the industry in more parts of the system lifecycle through Public Private Partnerships, the importance of the defence industry will in-crease in order to make cost-efficient procurements.

Business-to-business relationships within sustained monopolies, such as those within Defence Procurement, have received limited attention by Management Researchers. This is unusual because under these market circumstances typically there appear to be few incentives to achieve mutually beneficial outcomes despite their strategic policy importance. The purpose of this thesis is therefore, to determine the influential relationship factors between the UK Ministry of Defence and its Industrial partners within a predominantly monopolistic Defence Procurement business. The approach adopted for this research project is exploratory and inter-subject area. It uses quantitative and supportive qualitative data to examine the problem through an economic model using Supply Chain Management, Relationship Marketing and Transaction Cost Economics. A self-selected census of 54 business relationships is carried out from both the buyer and supplier perspectives through staff questionnaires and team leader semi-structured interviews. The findings from this research show, contrary to the expectation of the theoretical model, a positive relationship success situation with a spectrum of both positive and negative behavioural factors present. However, a significant adversarial influence is a suite of issues that are endemic to the business in question such as old products, obsolescence, staff and organisational upheavals, poor end-customer visibility and lack of investment in modern procedures and systems. Within the monopoly environment these accentuate managers’ frustrations due to lack of freedom of action. The primary contribution of this research is therefore, an increased understanding of the business-to-business relationship dynamics within long-term, closely coupled, collaborative, business-to-business arrangements as exemplified by UK Defence and the results are likely to be of interest to both academics and managers.

Business-to-business relationships within sustained monopolies, such as those within Defence Procurement, have received limited attention by Management Researchers. This is unusual because under these market circumstances typically there appear to be few incentives to achieve mutually beneficial outcomes despite their strategic policy importance. The purpose of this thesis is therefore, to determine the influential relationship factors between the UK Ministry of Defence and its Industrial partners within a predominantly monopolistic Defence Procurement business. The approach adopted for this research project is exploratory and inter-subject area. It uses quantitative and supportive qualitative data to examine the problem through an economic model using Supply Chain Management, Relationship Marketing and Transaction Cost Economics. A self-selected census of 54 business relationships is carried out from both the buyer and supplier perspectives through staff questionnaires and team leader semi-structured interviews. The findings from this research show, contrary to the expectation of the theoretical model, a positive relationship success situation with a spectrum of both positive and negative behavioural factors present. However, a significant adversarial influence is a suite of issues that are endemic to the business in question such as old products, obsolescence, staff and organisational upheavals, poor end-customer visibility and lack of investment in modern procedures and systems. Within the monopoly environment these accentuate managers’ frustrations due to lack of freedom of action. The primary contribution of this research is therefore, an increased understanding of the business-to-business relationship dynamics within long-term, closely coupled, collaborative, business-to-business arrangements as exemplified by UK Defence and the results are likely to be of interest to both academics and managers.

The aim of this thesis was to find the answers on question how the situation, when the institutionalisation of cooperation among the Member States in the field of armament policy is taking the place, but some of its actor - in the present case Czech Republic - are not respecting the existing rules, is explained by the new institutionalism, one of the middle range theories of European Integration. The defence industries of the Member States of the EU went through deep transformation process in the 1990's in order to be able to meet the government requirements for the military equipment for its armed forces. Suitable military equipment of the European armies is one of the prerequisites for the success of military missions, which take place either within NATO or the European Security and Defence policy. The rise of European cooperation among Member States led to the creation of several organizations, such an as OCCAR or European Defence Agency. The latter is considered by the Member States as an important move on the way towards the creation of European Defence and Equipment Market. Also the role of European Commission has quite changed during last decade. EC is issuing new rules to be obeyed by the Member States, especially in the field of defence procurement. Today the European Commission does not...