There should be little difference between public expenditure management
in general and public expenditure management in the defence sector. Defence
procurement should accordingly adhere to the same principles that guide
public sector procurement in non-defence areas: fairness, impartiality,
transparency, cost-effectiveness/efficiency, openness to competition. Additionally,
it is essential that there be high-level consultation and evaluation of
all major procurement projects for all forms of public sector procurement.
| The Generic Procurement Process |
A generic procurement process involves:
- A clear definition of the requirement;
- Clear technical quality specifications and standards;
- An open request for proposals and tenders;
- Tender adjudication according to set criteria;
- Selection of preferred bidder;
- Drawing up of a contract;
- Placing the contract/order;
- Monitoring progress;
- Reception of goods;
- Quality assurance checks on goods received;
- Acceptance of goods or rejection of goods not up to specifications;
- Payment
- Distribution of goods.
Source: Len LeRoux, South African defence planning specialist
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At the same time, with the exception of procurement of works and commodities
(such as construction, clothing, food, fuel, office equipment, general vehicles
and consultancy services), defence procurement does exhibit some distinctive
characteristics. These relate to: 1) the relative importance of cost in
determining which bid is accepted; 2) confidentiality related to national
security considerations; 3) time frame for major weapons procurement; 4)
complexity of defence procurement; and 5) the existence of international
arms control treaty regimes and national legislation governing arms procurement.
These distinctive characteristics are deviations in scale rather than principle.
As explained above, adequate levels of confidentiality can be maintained
without violating basic public expenditure management principles. There
certainly should be skepticism about any claims that procurement of relatively
standard works, services, and commodities for defence should be subject
to different rules.
- Cost considerations in bidding. While standard procurement
practice in non-defence sectors is giving increasing emphasis to value-for-money
considerations, defence analysts argue that cost considerations are
more frequently not the major factor in accepting a bid for weapons
procurement projects than for projects in non-defence sectors. They
point out, however, that national legislation can play an important
role in regulating the role that cost plays in procurement processes
in the defence sector. In South Africa, for example, the Defence Review
(www.mil.za/Articles&Papers/Frame/Frame.htm, click on ?Defence Review
?98?) and the White Paper on Defence Related Industries (education.pwv.gov.za/
Legislation/White_Papers/Defence.htm) spell out which technologies are
considered ?strategically essential capabilities? and thus exempt from
lowest-cost considerations. The South African Parliament has approved
both policy documents.
- Confidentiality. Transparency in defence procurement
must be limited by national security interests. Confidentiality clauses
will be required in the defence procurement process. This too can be
regulated by national legislation. The South African Defence Review
lists a number of reasons for confidentiality in defence procurement.
These include: the protection of third party commercial information,
the national security of South Africa, harm to South Africa?s ability
to conduct international relations, and the protection of South Africa?s
economic interests and commercial activities of government bodies.
- Time frame for major weapons procurement. From inception
to final acceptance of product, procurement of major weapon systems
may take as much as 15 years. Some flexibility needs to be built into
the procurement process to take account of contingencies such as fluctuations
in currency exchange rates. This long time frame also makes quality
control throughout the procurement process essential, rather than when
the product is ready for delivery. Defence procurement projects should
also take into account full life-cycle support to and cost of the acquired
systems. The long time frame also makes it essential to attempt to forecast
spending farther into the future than in non-defence sectors. The UK,
for example, has a 10-year ?Long Term Costing? system for defence.
- Complexity of defence procurement. Due to the complexity
of defence procurement, sound management of the defence procurement
process requires interdisciplinary project teams. Such teams should
contain expertise on engineering, resource management, contracting,
quality assurance and design assurance. Additionally, because of the
complexity of the procurement process for major weapon systems, which
involves a substantial number of subcontractors, opportunities for corruption
are particularly great. These projects therefore require the highest
level of management and scrutiny by governmental accountability mechanisms.
South Africa has three levels of approval for major arms acquisition
projects within the South African Department of Defence. For major projects,
parliamentary approval may also be required.
- Existence of international arms control treaty regimes and
national legislation governing arms procurement. General government
procurement is not subject to this sort of international and national
legislation. Some defence budgeting specialists suggest that such national
and international regulation increases transparency due to associated
oversight mechanisms.
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This discussion draws on information provided by defence planning specialist
Len LeRoux and defence management specialist Tony.
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