Biggest defence procurement project ever is a lesson for the future

Netherlands Court of Audit bundles 20 years of auditing the JSF

Lessons can be learnt from the Dutch government’s involvement in the development and procurement of the F-35 Joint Strike Fighter (JSF). On the eve of a new series of military procurements by the Minister of Defence, the Netherlands Court of Audit, which has been following the process for more than 20 years, has mapped out 11 lessons.

Cover Financiele processen JSF

In its Lessons from the JSF report, the Court of Audit summarises the lessons learnt from its audits of the biggest procurement of defence materiel ever so that they will be of benefit to future decisions. The government already has a lot in the pipeline, including 30 or so projects to procure all manner of materiel, from submarines and frigates to army vehicles, for a capital outlay of between €6 and 17 billion. The Minister of Defence will have to meet the substantial operating costs from the current budget for the deployment of weapons systems and other materiel.

The Court of Audit concludes in Lessons from the JSF that three elements should always be borne in mind when procuring defence materiel. Firstly, the Ministry of Defence’s regulations on the selection of materiel costing more than €25 million, which divides the process into five orderly stages. Secondly, the dynamism inherent in an international programme to develop defence materiel. In the JSF programme, the Court of Audit writes, the Netherlands, as a partner in an international process, could “choose to get on the bus or simply watch it drive past”. Thirdly, political support for the investment and its huge financial demands must be sustained throughout the project’s long lead time.

“Awkward mix”

In the protracted decision-making process for the JSF, these three elements formed “an awkward mix”, according to the Court of Audit. If parliament wishes to retain control over such projects, it must remain “alert from the very beginning and in every step”. If it is taking part in an international project, it is particularly important that parliament always knows “how much room for manoeuvre there is”.
The report considers the various roles the Netherlands played in the development and subsequent procurement of the JSF. In 1996 the first Kok government decided that all F-16s would eventually have to be replaced. In 2002, the second Kok government decided to participate financially with the American Defence Department in Lockheed Martin’s development of a new fighter aircraft: the JSF. The government took the final decision to have the JSF replace the F-16 11 years later in 2013.

“False start”

With a procurement budget of €4.5 billion, the Rutte/Asscher government decided to make the Netherlands’ biggest defence procurement ever. In hindsight, the Court of Audit observes that the process was very drawn out. The Ministry of Defence committed itself financially to the JSF long before it expressed a wish to replace the F-16. The Court of Audit calls this a “false start” in its report. “Avoiding a false start” when procuring weapons and goods is therefore one of the lessons drawn by the Court of Audit. The Minister of Defence is not the only person involved in such a decision. The government and parliament decide what tasks the armed forces must carry out. The outcome of such a political decision, which actively involves the Minister of Foreign Affairs and other ministers, will determine what military materiel is needed.

Weigh up the alternatives

Parliament needs a timely and realistic insight into the financial resources available to procure defence materiel. The Court of Audit also recommends that all alternatives should be carefully weighed up, including the question of whether or not older materiel actually needs to be replaced. The decisions taken on the construction of the Betuwe freight-only railway line from Rotterdam to Germany is relevant in this context: very little thought was given to alternatives such as transport over existing railway lines or by water.

The 11 lessons learnt from participation in the development of the JSF cover a wide range of subjects. They include ways to ensure development projects remain manageable and the importance of controlling budgetary risks arising from exchange rate fluctuations, because “some dollars are worth more than others”.

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