Data Stories: Supplier or Buyer Beware? Lessons Learned from Collaborative European Defense Programs

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By Jessica DiPaolo, Senior Market Analyst

European defense collaborations have been on the rise since 2013, with countries looking to international partners to help develop joint capabilities and solidify alliances. These defense collaborations can vary in terms of scope and the number of partners involved. While earlier defense collaborations involved multiple countries, more recent efforts have involved just two to three European partners. Arguably, France and Germany are at the forefront of many of these collaborative efforts and will continue to be in the near term. The UK is also a major player in collaborative defense efforts and is seeking partners for its Tempest fighter program as part of its combat air strategy released during the 2018 Farnborough Airshow. Prior to the release of the combat air strategy, the UK government had initiated discussions with potential partners with the hopes of signaling to its European counterparts its strong commitment to future defense collaboration despite the uncertainty of Brexit. But as the UK considers international partners to develop a fighter aircraft, a quick look back on previous European defense programs provides some insight on potential best practices and lessons learned for future collaborations.

Defense Collaboration – What Does the Field Look Like?

Biggest players
Avascent Analytics has identified two types of defense collaboration programs:

Tier 1: What we refer to as ‘Tier 1 Programs’ are direct Euro-Euro cooperation in which partnering nations are involved at all stages in the program. Some examples of Tier 1 programs include the A400M, Eurofighter Typhoon, and NH90.

Tier 2: ‘Tier 2 Programs’ are more focused on multi-country purchases of the same platform such as F-35 or C-130. The acquisition of these Tier 2 programs is largely to fill capability gaps in the wake of developing Tier 1 programs. In the case of the F-35, several European countries are responsible for various components of the aircraft though it remains a US initiative.

Unsurprisingly, the biggest European players for defense collaborations have been the UK, France, and Germany. But with uncertainty surrounding the viability of the UK as a defense partner due to Brexit, Germany and France will become major stakeholders in the European defense collaboration field. Ongoing and future projects include the Franco-German tank development, a maritime airborne warfare system, a MALE unmanned combat aerial system, and a future combat aircraft. From 2018 to 2028, Avascent Analytics estimates that funding for these Franco-German projects will reach $4 billion, representing 6% of all collaborative European defense programs (Tier 1 and Tier 2) during this time. The UK is committing $2.6 billion in R&D funding through 2025 for the Tempest program, which will likely include partnerships with other countries as well. Other collaborative programs have included countries like Norway, Italy, and the Netherlands often partnering with Germany, France, or the UK. Germany and Norway are working on a common missile program together, while France and Italy are developing an anti-missile frigate. The trend for collaborative defense programs is moving away from involving multiple countries, to just focusing on two to three partners at most to develop new capabilities. Remaining programs involving more than three countries include the A400M, NH90 rotorcraft, nEUROn UAV development, the Multi-Role Tanker/Transport (MRTT) aircraft, and various upgrades to the Eurofighter Typhoon.

A400M as a Cautionary Tale
But having multiple countries involved in a project often brings political tension across partnering nations and unrealistic expectations. Of the collaborative European defense programs ongoing, the A400M still remains as one of the largest defense undertakings in the region. From 2013-2028, European countries involved in the A400M program will allocate up to $28 billion for the acquisition of the aircraft. But the project had a rough start, with deliveries falling four years behind schedule with the first aircraft delivered in 2013 rather than 2009. Perhaps one of the larger pitfalls for the A400M development was the varying requirements each member nation wanted to incorporate into the aircraft and the degree to which political tension stymied production. With each member nation looking to benefit from the program, the development of the aircraft quickly became a political hotbed. A prime example is when Airbus sought an off-the-shelf engine for the A400M. But when word got out it would be contracted to Pratt & Whitney in Canada, officials argued that a European aircraft should have a European-built engine installed, leading to the consortium of four competing engine firms to become Europrop International. The result of this was dismal in the beginning – the engines could not pass inspection and faced constant problems.

Mistakes were made on the supplier side as well. Airbus agreed to a firm-fixed price contract which has forced the company to pay approximately $7.7 billion in fines due to its failure to deliver on time, largely caused by the complexity of the aircraft. In February 2018, Airbus came to an agreement with the partnering nations to renegotiate the contract to alleviate some of the burdens of the program. This includes a new delivery schedule and removing some of the more complex capabilities previously required by countries.

Lessons Learned
While the A400M provides a necessary capability for many of these partnering nations and showcases the opportunity to move away from relying on American providers, the demanding requirements and strict deadlines resulted in delays and forced several countries to seek interim solutions in the meantime. Overarching demands from military and political leaders will certainly lead to increased political tension between countries, unworkable timelines, and unyielding cost overruns. When it comes to developing a new platform or capability, the fewer countries involved, the better the chances that the project will be completed on schedule provided all parties have an agreed upon list of realistic requirements prior to development. This will lead to more efficient collaborations compared to the multi-country programs predating 2018.

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