Vanguard Magazine

www.vanguardcanada.com JUNE/JULY 2018 17 in serViCe sUpport Combat-close PPPs Under conventional procurement, equip- ment is purchased by government, used by regular military force as part of the ca- pability for which the platform is an input, and sustained either by the force itself or by a contractor that may or may not be the OEM. PPP as a contractual relation- ship differs in that equipment is purchased, sustained and operated by a consortium, typically composed of the OEM, a financ- ing arm, the sustainment company and the service provider. The government just purchases the services of the capabil- ity through a long-term contract. In other words, a whole military capability is out- sourced to a prime contractor. This practice is common worldwide in infrastructure and logistics, whether civilian and military, but not in combat-close capabilities. In the 1990s, the UK identified six areas for PPP outsourcing in defence: training, equipment, property and accommodation, support services, utilities, and information technology. The policy later expanded to include some combat-close capabilities. All projects have continued under Labour and Conservative governments alike and financially succeeded, though moderately, as evidenced by successive National Audit Office (NAO) reports. Though, it is not obvious that financial audits have incor- porated the savings in terms of military's preoccupation with non-military tasks of running these capabilities. This article concentrates on a rigorous explanation of how defence combat-close PPPs function and some first evidence on their command and control performance interfacing with the military. A PPP is a nexus of contracts, as seen in the generic chart below, with the private partner being the consortium often called a special purpose vehicle (SPV) specifi- cally built for the PPP. Although contract specifications must be as precise as possible for enforceability, the long-term contracts required for the private sector to commit significant funds inevitably become incom- plete and relational contracting becomes the norm where reputation-building and trust between partners become crucial in- gredients in solving contract implementa- tion issues to parties' satisfaction. More- over, these contracts have to incentivize both cost-reduction as well as service qual- ity. Whereas the former contractual ob- jective is well understood in terms of its corner-cutting trade-off, the latter is criti- cal from command and control perspective in defence as quality materializes in such performance dimensions as timeliness and preparedness that critically determine op- erational availabilities. Finally, for reasons of probity, no government can outsource defence strategy and command, hence, PPPs must be inputs or capabilities. Con- sequently, the decision to outsource a combat-close capability must be subjected to a higher bar than, say, outsourcing de- fence buildings and estates. In this light, the UK has outsourced four combat-close capabilities: the multi-role air tanker capa- bility, the strategic sea lift, the field elec-

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