{"id":86964,"date":"2024-05-15T08:09:46","date_gmt":"2024-05-14T22:09:46","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=86964"},"modified":"2024-05-20T17:23:08","modified_gmt":"2024-05-20T07:23:08","slug":"defence-industry-and-the-illusion-of-control","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/defence-industry-and-the-illusion-of-control\/","title":{"rendered":"Defence industry and the illusion of control"},"content":{"rendered":"
<\/figure>\n

A well-worn yarn in defence industry circles is the tale of the apocalyptic Last Supper<\/span><\/a> of 1993. Then-US defense secretary Les Aspin called chief executives from the major prime contractors to a secret dinner at the Pentagon. He told them that times were about to change. The Cold War was over. Falling defence budgets meant the acquisition enterprise could no longer support such a wide range of capability providers. They must consolidate or die.<\/span>\u00a0<\/span><\/p>\n

In the years that followed, the US defense industry did <\/span>just that<\/span><\/a>. Spending <\/span>fell by more than 18 percent<\/span><\/a> in real terms between 1993 and 1998. The number of aerospace and defense prime contractors fell from 51 then to just five today. The DoD is suffering from the <\/span>consequences<\/span><\/a> of that decision.<\/span>\u00a0<\/span><\/p>\n

Hogwash.<\/span>\u00a0<\/span><\/p>\n

As Australia debates its new defence industry strategy and appropriate mechanisms to support it under the AUKUS framework, we must be careful to distinguish fact from fiction. One of the most pernicious mistakes in devising industrial policy is <\/span>overestimating<\/span><\/a> our ability to dictate outcomes. People are bad at translating strategy into practice.<\/span><\/p>\n

Yes, the US defence budget fell in the years immediately following that epochal dinner. But as soon as 1999 it was on its way back up. The attacks of 2001 put the recovery into high gear. By 2010, the budget would be more than 50 percent larger than it was in 1993. The trend towards industry consolidation continued throughout.<\/span>\u00a0<\/span><\/p>\n

Increasing levels of concentration have been observed across a range of industries. <\/span>One study<\/span><\/a> estimates that more than 75 percent of US industries have grown more concentrated over the past several decades. We are all familiar with the phenomenon as it relates to the <\/span>global tech giants<\/span><\/a>. So, clearly there are forces at play going far beyond the defence sector.<\/span><\/p>\n

Those forces are not the focus here. Rather, the view offered of the US defence industry\u2014and how it is perceived by senior leaders across the public and private sectors\u2014is informative when examining the problems Australia faces in the same domain.<\/span><\/p>\n

Senior public servants would like to think they command the resources of a nation, and industry titans that they serve the forces of virtue and democracy through the pursuit of material wealth. Both worldviews are not without value.<\/span>\u00a0<\/span><\/p>\n

But they become a problem when they create an illusion of control, when they make everyone forget that operative forces arise not from grand visions and sweeping decrees but from the regulatory frameworks and organisational incentives directing day-to-day behaviors of millions of front-line employees.<\/span>\u00a0<\/span><\/p>\n

In a recent <\/span>report<\/span><\/a>, ASPI examines the problem from the perspective of those front-line employees. We reached out to hundreds of them, distributing surveys, conducting interviews, holding workshops and attending conferences and seminars. We talked with small- and medium-sized enterprises all the way up to prime contractors. We asked about what is holding them back, and what must be fixed if the AUKUS security partnership is to achieve its goals.<\/span>\u00a0<\/span><\/p>\n

The stories we heard are illuminating. Time and again, businesspeople hear the <\/span>rhetoric<\/span><\/a> and turn to their public-sector partners only to discover that, whatever the official guidance, nothing has percolated down so far as to affect daily decisions.<\/span>\u00a0<\/span><\/p>\n

An Australian SME was awarded a contract to supply a hypersonic test drone. The launch will require collaboration with the US Wallops Island Flight Facility and New Zealand\u2019s Rocket Lab, among others. The company faces obstacle after obstacle as it tries to integrate its technology with systems operating on different technical standards. Rocket Lab, falling under a separate regulatory framework that New Zealand aligned long ago with that of the US, faces fewer such hurdles.<\/span>\u00a0<\/span><\/p>\n

Another Australian business, a small one, sought export-control approval to sell its product abroad. Directed to the self-service portal of the Defence Export Controls Branch<\/span> office (DEC<\/span>O<\/span>), the company was advised through the tool that no license was required. More than two years later, it received two separate violation letters from the Australian Border Force related to the sale.<\/span>\u00a0<\/span><\/p>\n

The company took the letters to DECO, which admitted that the online guidance was open to misinterpretation. But it placed responsibility with the ABF. The ABF refused to retract the letters unless DECO told it to do so. Despite agreement from officials on both sides that the company was treated unfairly, everyone pointed the finger elsewhere and refused to retract the violation letters on their own authority. If it gets one more such letter, the company will be prohibited from exporting.<\/span>\u00a0<\/span><\/p>\n

Prime contractors face challenges of a different sort. One hiring manager we spoke to, anticipating the turbulent environment ahead, was working on bringing in expertise in export-control regulation.<\/span>\u00a0<\/span><\/p>\n

Much of the <\/span>debate<\/span><\/a> over AUKUS-centered amendments to Australia\u2019s Defence Trade Control Act 2012 focuses on funding: significant investment will be needed to establish and maintain compliance with the new rules. The Australian defence industry is composed largely of SMEs lacking the resources for such efforts. Who will fund the shift?<\/span>\u00a0<\/span><\/p>\n

But even businesses possessing resources to support such efforts\u2014businesses out there trying to hire\u2014tell us that the discussion about funding is immaterial. Adequate expertise does not exist in the Australian economy.<\/span>\u00a0<\/span><\/p>\n

ASPI asked the Office of Defence Industry Support for the referral list it had provide to SMEs seeking help in navigating export control regulations. The list contained four boutique consultancies and a link to general guidance published by the Australian Industry Group. The Australian Bureau of Statistics <\/span>estimates<\/span><\/a> the size of the defence industry at $10.6 billion.<\/span><\/p>\n

The success of AUKUS does not depend on the visionary leadership of defence ministers and cabinet secretaries. We\u2019ve all heard about the vision. What matters now is their ability to marshal resources and guide bureaucracies toward solutions to everyday problems like these. It depends on stuff that isn\u2019t any fun and doesn\u2019t win votes, stuff down in the weeds of regulatory codes and organisational incentives.<\/span>\u00a0<\/span><\/p>\n

The single biggest obstacle to the AUKUS effort will be the illusion that grand vision is sufficient to steer the ship.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

A well-worn yarn in defence industry circles is the tale of the apocalyptic Last Supper of 1993. 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