Validation of the policy document 'In the Interests of the Netherlands'

At the request of the Minister of Finance, the Court of Audit has validated the vision of the armed forces of the future presented by the Minister of Defence in the policy document, 'In the Interests of the Netherlands'. We looked at the financial underpinning of the measures described in the policy document. In our opinion, it offers the best possible financial approximation to take decisions on the choices presented in the document based on the available information. The financial underpinning provides a framework but has only limited applicability to each choice and the applicability differs from one choice to another.

Conclusions

Financial uncertainty on the successor to the F-16 expressed in budget

The policy document better expresses the financial uncertainty about the successor to the F-16 in terms of available budgets than in the past. On the basis of current information, we think the financial compatibility of the decision to use budgets for the procurement and operation of 37 JSF aircraft (including the two test aircraft already procured) is fully justified. This positive development, however, provides no assurance that the Ministry of Defence will be able to keep all expenditure within the financial restraints from year to year. This uncertainty applies both to the procurement and operation of the JSF and to the policy document as a whole.

Favourable cost developments should not automatically lead to more JSF

We welcome the inclusion of a risk reserve in the budget for the replacement of the F-16. The Minister of Defence assumes in the policy document that favourable developments in the cost of the JSF could lead to the release of the reserve and perhaps the procurement of more aircraft. If fewer than 37 aircraft can be procured, the minister writes, the entire project will be reconsidered. In our opinion, favourable cost developments should also lead to a reconsideration of the project, and not automatically to the procurement of more aircraft.

Deployment of the armed forces

To make the armed forces financially and operationally sustainable, the Minister of Defence has lowered the deployment objectives and taken measures for each branch of the armed forces so that they can achieve their deployment objectives. We, too, think the ambitions for the armed forces and the capabilities to realise them have been brought closer together, but they are not yet in balance and compromises will also have to be made in the future in either the performance of operations or in personnel training. At the beginning of the JSF project, the ministry assumed that the squadrons it deployed would count more than 50 aircraft. In the policy document, it assumes that the procurement of 37 JSFs – there are currently 68 F-16s in service – will enable it to deploy four aircraft permanently on international missions. Its deployment calculations, however, are not complete. Not all training hours have been taken into account and the calculations are optimistic in other areas. It is therefore doubtful whether four fighter aircraft could be deployed without compromising training or other tasks.

The choices made in the policy document also restrict the deployability of other branches of the armed forces:

  • a reduction in the training of Chinook helicopter crews will reduce deployment of the army's Air Manoeuvre Brigade,
  • the minister's decision not to take the Joint Support Ship into service lowers the ambitions for the navy and cuts operational costs,
  • the policy document does not include a comprehensive business case for the infrastructure proposal (including newbuild at Flushing), based on a stable and sound estimate of the property requirement.

Recommendations

To make the armed forces financially and operationally sustainable, a more critical look should be taken at the relationship between ambitions on the one hand and money, people, resources and time on the other. We believe it is both possible and necessary for the Minister of Defence, but not only her, to continue future-proofing both the framework and the various choices. Both the Minister of Defence and the Minister of Finance and, in a number of cases, the government should take near-term measures to address the risks we identified. There are risks in, for example: 

  • the horizons of multiyear estimates are too short for true life cycle costing,
  • risk management is inappropriate for the risk reserves,
  • it is also uncertain when decisions must be taken by a ministry or by the government as a whole.

We recommend that the Minister of Defence and the Minister of Finance make proposals in the foreseeable future to resolve these matters. Stronger control of defence expenditure still requires structural measures from all concerned, including the Court of Audit itself.

Response

The Ministers of Defence and of Finance responded jointly to the draft of our report on 13 Septebmer 2013. They wrote that the Minister of Defence's policy document provided the best possible financial underpinning at the moment and that it would be strenghened in the years ahead. To ensure that the armed forces could still be deployed at all levels of conflict and in all strategic operations, the ministers have opted for smaller armed forces with the JSF.

The ministers did not refer to the fundamental problem of having to balance the ambitions and capabilities of the armed forces. Certain problems are not adddressed by the policy document, such as the transport helicopters and the reduction in the number of 37 JSF aircraft owing to peacetimes losses.

See also