CHALLENGES OF DEFENSE PROCUREMENT

Defence procurement deals with products that are highly differentiated and its regulation is extremely complex. The 'defence organisation' a nd 'industry' are the two principal parties involved in procurement tr ansactions. Domestic sourcing of defence materiel has long been encour aged in most countries in the name of 'self-reliance'. Thus, defence p lanners must determine not only their materiel requirements but also d efence-related manufacturing and service capabilities needed in-countr y. But how much 'self-reliance' is feasible and desirable, especially in smaller countries? This paper provides an overview of issues and po licy tools in defence procurement that reflect the experience of a num ber of small and medium size countries. Issues addressed include: chan ging user requirements, make-or-buy decisions, contracting, source sel ection, organisational structure, and international collaboration. The se issues are reviewed against the background of global trends in defe nce spending, industry and trade.