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Theses and Dissertations 


1. Thesis and Dissertation Collection, all items 


2004-06 

International cooperative research and 
development between the United States and 
France, Germany, and the United Kingdom 

Cavins, Edward M.; Ratsikas, Georgios; Aponte, Orlando R. 

Monterey, California. Naval Postgraduate School 
http://hdl.handle.net/10945/9921 

This publication is a work of the U.S. Government as defined in Title 17, United 
States Code, Section 101. Copyright protection is not available for this work in the 
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Dudley Knox Library / Naval Postgraduate School 
411 Dyer Road / 1 Univefsity Circle 
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NAVAL 

POSTGRADUATE 

SCHOOL 

MONTEREY, CALIFORNIA 


MBA PROFESSIONAL REPORT 


International Cooperative Research and Development 
between the United States and France, Germany, and 

the United Kingdom 


By: Orlando R. Aponte, 

Edward M. Cavins, and 
Georgios Ratsikas 
June 2004 

Advisors: David F. Matthews, 

Raymond E. Franck 


Approved for public release; distribution is unlimited. 






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REPORT DOCUMENTATION PAGE 


Form Approved 0MB No. 0704-0188 


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(0704-0188) Washington DC 20503. 

I. AGENCY USE ONLY (Leave blank) 2 . REPORT DATE 3. REPORT TYPE AND DATES COVERED 

June 2004 MBA Professional Report 

4. TITLE AND SUBTITLE: International Cooperative Research and 5. FUNDING NUMBERS 

Development Between the United State and France, Germany, and 
the United Kingdom 

6. AUTHOR(S) : Orlando R. Aponte, Edward M. Cavins, Georgios 

Ratsikas _ 

7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS (ES) 8. PERFORMING ORGANIZATION 

Naval Postgraduate School REPORT NUMBER 

Monterey, CA 93943-5000 

9. SPONSORING / MONITORING AGENCY NAME(S) AND ADDRESS (ES) 10. SPONSORING / MONITORING 

N/A AGENCY REPORT NUMBER 

II. SUPPLEMENTARY NOTES The views expressed in this report are those of the author(s) and do 
not reflect the official policy or position of the Department of Defense or the U.S. Government. 

12a. DISTRIBUTION / AVAILABILITY STATEMENT 12b. DISTRIBUTION CODE 

Approved for public release; distribution is unlimited 

13. ABSTRACT (maximum 200 words) 

With defense budgets shrinking throughout the world and 
coalition forces facing interoperability issues while 
conducting asymmetric warfare in a post Cold-War environment, 
many nations are seeking ways to acquire economical weapon 
systems that are interoperable with allies and coalition 
members. One method of addressing these concerns is 

International Cooperative Research and Development (ICR&D). 
This MBA Project will evaluate the current ICR&D process and 
make recommendations to enhance the ICR&D process by examining 
ICR&D between the U.S. and NATO Members, France, Germany, and 
the United Kingdom. Case studies were used for comparisons in 
order to determine the advantages and concerns pertaining to 
ICR&D and to recommend appropriate ICR&D strategies. 


14 . SUBJECT TERMS 15. NUMBER OF 

International Cooperative Research and Development, Defense Industrial Base, PAGES 143 
Multiple Launch Rocket System, Medium Extended Air Defense System, Joint 

strike Fighter 16. PRICE CODE 

17. SECURITY 18. SECURITY CLASSIFICATION 19. SECURITY 20. LIMITATION 

CLASSIFICATION OF REPORT OF THIS PAGE CLASSIFICATION OF OF ABSTRACT 

Unclassified Unclassified ABSTRACT 

Unclassified UL 


NSN 7540-01-280-5500 


Standard Form 

298 

(Rev. 

2-89) 



Prescribed by 

ANSI 

Std. 

239-18 


i 
































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11 



Approved for public release; distribution is unlimited 


INTERNATIONAL COOPERATIVE RESEARCH AND DEVELOPMENT BETWEEN 
THE UNITED STATES AND FRANCE, GERMANY, AND THE UNITED 

KINGDOM 

Orlando R. Aponte 

Lieutenant Commander, Venezuelan Navy 


Edward M. Gavins 
Lieutenant, United States Navy 

Georgios Ratsikas 
Major, Hellenic Air Force 

Submitted in partial fulfillment of the requirements for the 

degree of 

MASTER OF BUSINESS ADMINISTRATION 


from the 


NAVAL POSTGRADUATE SCHOOL 
June 2004 


Authors: _ 

Orlando R. Aponte 

Edward M. Gavins 

Georgios Ratsikas 

Approved by: _ 

David F. Matthews 

Raymond E. Franck 

Douglas A. Brook, Dean 

Graduate School of Business and Public Policy 





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IV 



INTERNATIONAL COOPERATIVE RESEARCH AND DEVELOPMENT 
BETWEEN THE UNITED STATES AND FRANCE, GERMANY, AND 

THE UNITED KINGDOM 


ABSTRACT 


With defense budgets shrinking throughout the world 
and coalition forces facing interoperability issues while 
conducting asymmetric warfare in a post Cold-War 
environment, many nations are seeking ways to acquire 
economical weapon systems that are interoperable with 
allies and coalition members. One method of addressing 
these concerns is International Cooperative Research and 
Development (ICR&D). This MBA Project will evaluate the 
current ICR&D process and make recommendations to enhance 
the ICR&D process by examining ICR&D between the U.S. and 
NATO Members, France, Germany, and the United Kingdom. 
Case studies were used for comparisons in order to 
determine the advantages and concerns pertaining to ICR&D 
and to recommend appropriate ICR&D strategies. 


V 



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VI 



TABLE OF CONTENTS 


EXECUTIVE SUMMARY.1 

I. INTRODUCTION.3 

A. GENERAL.3 

B. METHODOLOGY.4 

II. BACKGROUND AND LEGAL CONSIDERATIONS.7 

A. FORMS OF INTERNATIONAL COOPERATION.7 

B. HISTORY AND LEGAL ASPECTS OF THE PROCESS.8 

C. MEMORANDUMS OF UNDERSTANDING.14 

D. LEVELS OF PARTNERSHIPS.16 

E. CURRENT TRENDS.17 

III. DEFENSE INDUSTRIAL BASE CONSIDERATIONS.19 

A. EUROPE IN GENERAL.19 

B. FRANCE.25 

1. Defense Procurement Policy.25 

2. Defense Industrial Base.26 

3. Defense Opportunities.30 

4. Defense Procurement Process.30 

C. GERMANY.31 

1. Defense Procurement Policy.31 

2. Defense Industrial Base.32 

3. Defense Opportunities.34 

4. Defense Procurement Process.34 

D. UNITED KINGDOM (UK).35 

1. Defense Procurement Policy.35 

2. Defense Industrial Base.37 

3. Defense Opportunities.37 

4. Defense Procurement Process.37 

E. UNITED STATES OF AMERICA.38 

1. Defense Procurement Policy.39 

2. Defense Industrial Base.40 

IV. MULTIPLE LAUNCH ROCKET SYSTEM.45 

A. BACKGROUND.45 

1. Program History.45 

2. Extent of International Cooperation.49 

B. PROGRAM ANALYSIS.51 

1. Coordination.52 

2 . Financial.52 

3 . Work Shares.53 

4. Requirements Generation.53 

5. Production Lines.54 

vii 











































6. Use of a Consortium.55 

7. Lack of Qualified Staff Members.55 

8. Technology Disclosure and Export Licensing ...56 

9. Lack of Flexibility.56 

C. CURRENT STATUS.58 

V. MEDIUM EXTENDED AIR DEFENSE SYSTEM.61 

A. BACKGROUND.61 

1. Introduction.61 

2. Origins and Evolution of MEADS.62 

3 . From Corps-SAM to MEADS.64 

4 . NATO Participation in MEADS.67 

a. Germany . 68 

b. Italy . 70 

c. France . 71 

d. Prospective Partners . 71 

5. Domestic Perspectives on MEADS.72 

B. PROGRAM ANALYSIS.75 

1. The Reasons for MEADS.75 

2. U.S. Internal Factors Affected MEADS.76 

3. Initial Funding Dilemma.77 

4. Technology Transfer Concerns.78 

C. CURRENT STATUS.79 

VI. JOINT STRIKE FIGHTER.83 

A. BACKGROUND.83 

1. Program History.83 

2. Program Objectives.86 

3. Extent of International Participation.89 

B. PROGRAM ANALYSIS.93 

1. Technology Transfer.93 

2 . Funding.95 

3. Industrial Base.96 

4. Return-On-Investment (ROI).97 

C. CURRENT STATUS.98 

VII. CONCLUSIONS.99 

A. INTRODUCTION.99 

B. FUNDING.99 

1. Cost Shares.101 

2. Budgeting.102 

C. TECHNOLOGY TRANSFER.103 

1. Industrial Base.104 

2. Work Shares.105 

3 . Policy.105 

D. REQUIREMENTS DETERMINATION.107 

1. Assessment of Threats.108 

2. Partners.109 

viii 















































3 . Culture.109 

E. CONCLUSION.110 

VIII. RECOMMENDATIONS.113 

A. RECOMMENDATIONS.113 

1. General Recommendations.113 

2. Funding.114 

3. Technology Transfer .115 

4. Requirements Determination .116 

B. AREAS FOR FURTHER RESEARCH.116 

LIST OF REFERENCES.119 

INITIAL DISTRIBUTION LIST .125 


IX 














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X 



LIST OF FIGURES 


Figure 1. International Cooperation Building Blocks.7 

Figure 2. Growth in Industry-led International Cooperation ..13 
Figure 3. Cooperative Programs/MOU Foreign Contributions ....13 

Figure 4. Global Military Spending Comparisons, 2002 . 20 

Figure 5. U.S. Military Spending Fiscal Years 1945 to 2008 ..42 
Figure 6. JSF Organizational Chart.92 







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LIST OF TABLES 


Table 1. 
Table 2 . 
Table 3. 
Table 4 . 


Ten Largest U.S. Weapons Program.25 

Ten Largest Military Contractors Fiscal Year 2002 .41 

Latest and Projected Activities for MLRS.58 

JSF Cost Shares.93 


xiii 






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XIV 



ACKNOWLEDGMENTS 


The authors would like to acknowledge and thank those 
who have provided exemplary support for this project. 
Special thanks goes to Colonel David F. Matthews USA (ret.) 
and Dr. Raymond E. Franck for their sound guidance, 
encouragement, and timely and beneficial feedback. Thanks 
to Mr. Joseph Milligan for providing the authors with the 
idea for the research project and to Commander Jeffrey 
Cuskey USN (ret.) for his feedback on a smaller project the 
authors conducted in this arena. Additionally, the authors 
would like to thank the Venezuelan Navy, United States 
Navy, and Hellenic Air Force for the opportunity to attend 
NFS and pursue a graduate degree. The authors, also, want 
to express their gratitude to their classmates for their 
support and friendship. Finally, but most importantly, 
tremendous thanks goes to our families for providing the 
needed time and support to conduct and to record the 
project. 


XV 



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XVI 



EXECUTIVE SUMMARY 


With defense budgets shrinking throughout the world 
and coalition forces facing interoperability issues while 
conducting asymmetric warfare in a post Cold-War 
environment, many nations are seeking ways to acquire 
economical weapon systems that are interoperable with 
allies and coalition members. One method of addressing 
these concerns is International Cooperative Research and 
Development (ICR&D). This MBA Project will evaluate the 
current ICR&D process and make recommendations to enhance 
the ICR&D process by examining ICR&D between the U.S. and 
NATO Members, France, Germany, and the United Kingdom. 
Case studies were used for comparisons in order to 
determine the advantages and concerns pertaining to ICR&D 
and to recommend appropriate ICR&D strategies. 


1 



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2 



INTRODUCTION 


I. 


A. GENERAL 

The fall of the Soviet Union and collapse of the Iron 
Curtain vastly reduced the probability of a large 
conventional war between the major powers. Consequently, 
governments in the North Atlantic Treaty Organization 
(NATO) used this opportunity to decrease their large 
defense budgets. The members of NATO, however, still 
recognized that a threat continues to exist for chemical, 
biological and nuclear attacks from "rogue" nations. 
Additionally, the events of September ll^'^, 2001, reinforced 
a need to maintain a robust military. The European members 
of NATO were presented with two military options. One was 
to maintain a large standing force in order to deter 
potential enemies. The other called for a smaller force 
with technologically superior weapons. In order to 
capitalize on the new "peace dividend" and to address 
domestic issues, members of NATO have decided to focus on 
the latter option. 

Furthermore, NATO Members could decide to develop 
these new technologically superior weapon systems either on 
their own or as part of a partnership with other nations. 
One method for sharing the burden of weapon-system 
development is through International Cooperative Research 
and Development (ICR&D). ICR&D not only shares expenses 
between participating nations but also shares expertise and 
technology. The goal of ICR&D is to provide the most 
economical and advanced weapon systems while sharing risks 
and technological expertise. ICR&D offers the additional 


3 



benefit of minimizing interoperability issues between 
member nations. 

Operations Desert Storm, Enduring Freedom, and Iraqi 
Freedom all highlighted interoperability issues between 
coalition members. Weapon systems that are not 
interoperable can hinder rather than help operations. 
Given shrinking NATO militaries, interoperability between 
coalition members will become even more important in future 
conflicts. Few nations will be able to conduct a war 
individually. Additionally, many future conflicts will be 
based upon enforcing the United Nations' resolutions. 
Naturally, these actions will be multi-national in nature. 
ICR&D, as previously mentioned, helps to minimize 
interoperability issues. 

This project will address issues and concerns 
regarding ICR&D efforts between the U.S., Germany, France, 
and the United Kingdom. For a number of reasons, three 
ICR&D projects were selected. These were Multiple Launch 
Rocket System (MLRS), Medium Extended Air Defense System 
(MEADS), and Joint Strike Fighter (JSF). The lessons 
learned concerning ICR&D either with a particular nation or 
in general are presented. If solutions are available, the 
status and success of each solution is presented. In 
general, this project synthesizes and presents lessons 
learned from the selected programs. 

B. METHODOLOGY 

The documents and news reports regarding each project 
were gathered using both Internet and library resources. 
The problems that were confronted, such as the timeliness 
of material, are highlighted and addressed in the related 
sections of this project. 


4 



The background of the ICR&D program and related U.S. 
laws and regulations are presented as well as an 
industrial-based analysis for Germany, France, the UK, and 
the U.S. Individual weapon-system programs are then 
analyzed. The project report then offers conclusions, 
followed by recommendations. The overall objective of this 
project is to present information regarding the potential 
benefits and liabilities of International Cooperative 
Research and Development (ICR&D) for future weapon-system 
acquisitions. 


5 



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6 



II. BACKGROUND AND LEGAL CONSIDERATIONS 


A. FORMS OF INTERNATIONAL COOPERATION 

At present, seven areas of cooperation fall under the 
rubric of International Armaments Cooperation Programs. 
The range of programs is designed to support U.S. military 
strategy using the building blocks presented in Figure 1 
below. 



CQop&rstm. August 1004 bool^l 0 t. 


Figure 1. International Cooperation Building Blocks 


7 















International cooperative research and development 
refers to: 

A program where the DoD and foreign defense 
ministry, by written agreement, jointly manage a 
RDT&E and/or production effort to satisfy a 
common requirement by sharing work, technology, 
and costs. The purposes of the program are to 
improve current and future defense posture, 
enhance the industrial base, avoid duplicate R&D, 
reduce defense RDT&E costs to each party by 
sharing information, and improve military system 
standardization and interoperability of the U.S. 
and its allies. Since each party contributes 
manpower, data, and funds to the accomplishment 
of the common requirement, it is neither 
necessary nor appropriate to treat the program as 
a procurement of services or articles by one 
party from the other. Thus, funds and property 
may be transferred between the parties for the 
accomplishment of the project without the need 
for a contract or an LOA (Letter of Agreement ).1 

B. HISTORY AND LEGAL ASPECTS OF THE PROCESS 

To a lesser extent, cooperative programs have been in 
existence since the 1940's. It was not until the 1970's 
that serious attempts were made at cooperative research and 
development. During the 1970's. Congress and the 
Department of Defense recognized a lack of standardization 
and interoperability with our allies. They also recognized 
the potential for exploiting the industrial bases of our 
allies for technology acquisitions and cost savings. 
Congress and the Department of Defense took steps to 
promote Rationalization, Standardization, and 
Interoperability (RSI) with our allies. 


1 United States. Department of Defense. Director of International 
Cooperation. International Armaments Cooperation Handbook. June 11, 
1996, pg 1. 



The first attempt to enhance RSI with NATO was the 
Culver-Nunn amendment to the DoD Authorization Act of 1976. 
It established that the policy of the U.S. Government was 
to standardize equipment, or at least have interoperable 
equipment with NATO allies. It also permitted the purchase 
of foreign-made equipment to further RSI goals. 

Legal authority in Title 10, U.S. Code, confers 
authority upon the Service Secretaries to conduct and to 
participate in R&D programs (10 U.S.C. 2358) . However, 
these provisions only authorize R&D programs meeting U.S. 
military requirements. If the DoD component is to contract 
on its own and on the other participant's behalf for the 
cooperative project, obligation authority is created. The 
authority is limited to funds available in the U.S. 
Treasury and/or a commercial bank, which holds the foreign 
partner's funds. Consequently, the Title 10 legal 
authority is generally used for cooperative research and 
development programs in which specific tasks are performed 
by each participant and for which each participant 
contracts and funds its own share. 

In the Quayle Amendment to the International Security 
and Development Cooperation Act of 1985, the Arms Export 
Control Act (AECA) was amended. This permitted the U.S. to 
enter into cooperative research, development and production 
agreements with NATO allies and permitted a limited 
authority for DoD to enter contracts outside of the U.S. 
In 1987, this authorization was extended to include 
Argentina, Australia, Bahrain, Egypt, Israel, Japan, 
Jordan, the Republic of Korea, and New Zealand. 

In the 1986 Defense Authorization Act, the Nunn-Roth- 

Warner Amendment created funding for the Office of the 

9 



Secretary of Defense for the purpose of cooperative 
programs and initiated the NATO Cooperative R&D Program. 
It also authorized cooperative research and development, 
testing, and evaluation of foreign weapons systems, and the 
requirement for a Cooperative Opportunities Document. As 
part of the Amendment, Congress appropriated "Nunn funds." 
The "Nunn funds" were to be appropriated annually and 
placed into sub-accounts for each of the Services and OSD 
to serve as "seed money" for ICR&D programs. 

The Cooperative Opportunities Document is used to 
ensure that opportunities to conduct cooperative research 
and development projects are considered during an early 
stage of the research and development review process. The 
Under Secretary of Defense for Acquisition, Technology, and 
Logistics prepares one document for each new project for 
which a Mission Need Statement is developed. In the 
statement, the Under Secretary must state whether or not 
the proposed project is similar to any weapon system 
currently being developed by U.S. allies or whether a 
current US project can be modified to meet DoD needs. The 
Under Secretary must also discuss the advantages and 
disadvantages of the proposed project with respect to 
program timing, developmental and life cycle costs, 
technology sharing, and RSI. The Under Secretary concludes 
with a recommendation concerning the feasibility and 
desirability of a cooperative research and development 
program. 

In June 1993, Deputy Secretary of Defense William J. 
Perry established the Armaments Cooperation Steering 
Committee (ACSC) . This committee is composed of the Under 
Secretary of Defense (Acquisition, Technology, & 


10 



vice 


Logistics) , Under Secretary of Defense (Policy), 
Chairman of the Joint Chiefs of Staff, and senior 
representatives from each Service. The ACSC was 

established to maintain continual oversight of DoD's 
armaments cooperative activities and to ensure these 
activities receive the proper visibility and conform to 
U.S. national security policy. 

In a memorandum dated 23 March 1997, Secretary of 

Defense William S. Cohen identified cooperative research 
and development as "the Department of Defense Bridge to the 

21®^ Century." He went on to state the U.S. military must 

achieve at a minimum: 

Deployment and support of standardized, or at 
least interoperable, equipment with our potential 
coalition partners and leverage of U.S. resources 
through cost sharing and economies of scale 
afforded by international cooperative research, 
development, production and logistic support 
programs.2 

In order to obtain the objectives above, he directed that: 

We engage Allies in discussions at the earliest 

practicable stages to identify common mission 
problems, and to arrive jointly at acceptable 
mission performance requirements, balancing cost 
as an independent variable (affordability), 
meeting coalition military capability needs, and 
assuring interoperability. The USD (AT&L), in 
coordination with the USD (P) and with the 
recommendation of affected DoD Component, will 
designate appropriate defense acquisition 
programs as international cooperative programs. 

The DoD must be a reliable international partner 
by funding fully the U.S. share of such programs. 
Should circumstances arise which necessitate less 
than full funding for a designated international 

2 Cohen, William S. Memorandum. "DOD International Armaments 

Cooperation Policy." 23 March 1997. 


11 



cooperative program, the Component Acquisition 
Executive shall notify the USD (AT&L), at the 
earliest opportunity, of the Component's intent 
to terminate or substantially reduce funding for 
the program.3 


Secretary of Defense Cohen further reinforces the use 
of ICR&D by placing IRC&D in the 1997 Report of the 
Quadrennial Defense Review (QDR) . In the 1997 QDR, he 
states, 

We as a nation must often act in concert with 
others to create our preferred international 
conditions and secure our basic goals . . . 
Therefore, it is imperative that the United 
States strives to build close, cooperative 
relations with the world's most influential. To 
maintain this superiority, we must achieve a new 
level of proficiency in our ability to conduct 
joint and combined operations. The Revolution in 
Business Affairs includes . . . increasing 
cooperative development programs with allies.4 

Secretary of Defense Cohen recognized that decreasing 
military budgets had steadily declined Government research 
and development expenditures relative to industry (Figure 
2) . In an effort to combat this trend, the Navy attempted 
to increase the ICR&D efforts in the 1990's in order to 
share the cost burdens associated with research and 
development (Figure 3) . 


3 Cohen, William S. Memorandum. "DOD International Armaments 
Cooperation Policy." 23 March 1997. 

4 Cohen, William S. "1997 Report of the Quadrennial Defense 
Review." Report retrieved 12 February 2004 from website 
http:// WWW .defenselink.mil/pubs/qdr/sec3.html. 


12 




Figure 2. Growth in Industry-Led International Cooperation 



Calender Year 


□Joint Program ODoN Collaborative Effort Programs 


Source: From Navy International Program Office (1997) 


Figure 3. Cooperative Programs/MOU Foreign Contributions 


13 







































































Cooperative research and development programs are 
conducted under the terms of some types of international 
agreements. International agreements are either treaties 
or executive agreements under DoD Directive 5530.3. 
Treaties are international agreements approved by a two- 
thirds vote in the Senate and covered under Article II, 
Section 2 of the U.S. Constitution. Executive agreements 
are entered into by an authorized member of the executive 
branch and are based upon legal authority. Executive 
agreements come in the form of a memorandum of 
understanding (MOU), memorandum of agreement (MCA), 
memorandum of arrangements, exchange of notes, exchange of 
letters, technical arrangement, protocol, note verbal, aid 
memo ire, statement of intent, letter of intent, or 
statement of understanding. Contracts made under the 
federal Acquisition Regulation (EAR), foreign Military 
Sales (EMS) Letters of Agreement, EMS Letters of 
Instruction, standardization agreements, and leases are not 
considered international agreements. 

C. MEMORANDUMS OF UNDERSTANDING 

MOU's are generally the most common collaborative 
agreements for ICR&D. The typical timeframe for MOU's, 
from first draft to final signature, is roughly two years. 
In order to ensure a smooth process, each country 
identifies a program representative. These representatives 
form a steering committee to facilitate the process. 
Normally, technical discussions occur prior to the formal 
negotiation process. 


14 



Several key aspects of the program are identified and 
addressed in the MOU. They are the basic structure, 
management structure, finance, contracting, information 
disclosure, and third party sales. 

The basic structure of the MOU addresses the timeframe 
and phase applicability of the MOU. For instance, the MOU 
can be a stand-alone for a particular phase of the program 
or can be a Program MOU (PMOU). A PMOU provides a standard 
framework for the entire life of the program and contains 
supplements for each program phase. In a PMOU, 
negotiations only occur prior to each new phase. This 
minimizes drafting time for the original MOU and permits 
greater flexibility. 

Management structure identifies the voting 
procedures/rights and number of program representatives for 
each participating nation. Configuration management is 
addressed here. Since one of the objectives is 
interoperability, the steering committee sets acceptable 
interoperability levels. 

The finance portion addresses the currency to be used 
for payments, the frequency of payments, and cost shares. 
Payment considerations and changing exchange rates can have 
serious implications for time delays and schedule risk. 
The cost share will define each participating nation's 
cooperative status and privileges. Cost sharing is further 
addressed later in this chapter. 

Contracting refers to addressing the current methods 
of contracting and the contracting vehicles to be used. 
Most international partners are unaware of the most current 
U.S. contracting methods and procedures due to recent DoD 
acquisition reforms. This familiarizes them with the most 


15 



up-to-date procedures. Additionally, discussions occur in 
order to determine the most effective contracting vehicle 
for each phase or country. 

Information disclosure gained during the program is 
normally tied to cost sharing ratios. The standard levels 
of information transfer for each cost-share level will be 
further addressed later in this chapter. The information 
disclosure in the MOU also discusses contractor 
intellectual property rights. Frequently, background 
information is available for all participants in the 
program with the stipulation that the information is not 
releasable outside of the program. 

The third-party sales portion of the MOU addresses 
which countries can sell or buy the weapon system in the 
future. In this section great care is taken, to protect 
intellectual property rights and the national interests of 
participating contractors and nations. 

D. LEVELS OF PARTNERSHIPS 

Upon entering into an international agreement for 
cooperative research and development, funding contributions 
determine the country's category and its associated rights 
in the program. The four categories are full collaborative 
partner, associate partner, informed partner, and Foreign 
Military Sales major participant. 

Full collaborative partners provide at least ten 
percent of the target research and development funding. 
The country participates in the requirements development, 
has positions at the Program Office, and a National Deputy 
at the Director Level. The country also receives a waiver 
for all non-recurring research and development costs. 


16 



Associate partners contribute at least five percent of 
the target research and development funding. The country 
may influence requirements as long as the U.S. perceives 
the results to be mutually beneficial. The country also 
has a few positions in the program office and receives a 
waiver for non-recurring research and development costs. 

Informed partners provide one to two percent of the 
target research and development funding. Foreign Military 
Sales major participants contribute less than one percent. 
Informed partners and FMS major participants have little 
influence on requirements generation and minimal 
representation in the program office. Their main 
attraction is priority order status, such as that received 
by full collaborative partners and associate partners. 

Upon completion of cooperative research and 
development, countries can either contribute funding for 
the Production Demonstration and Deployment Phase or drop 
out of the program. Furthermore, the countries are 
permitted to increase or lower their contribution levels. 
The levels of contribution place the countries into 
categories similar to the research and development phase. 
The categories are Level I, Level II, and Level III. These 
levels are similar to full collaborative partner, associate 
partner and informed partner. 

E. CURRENT TRENDS 

International cooperative research and development has 
started to become more of the norm rather than the 
exception for weapons systems. The previously discussed 
legislation has forced DoD to participate with 
international military forces actively. These initiatives 


17 



have occurred for good reasons. 
Armaments Cooperation Handbook states 


The International 


As U.S. armed forces and those of its allies and 
friends are drawn down, budgets reduced, 
coalition operations increased, and the defense 
industrial base is consolidated and restructured, 
we must examine every opportunity to increase 
effectiveness and efficiency of the armed forces 
and industries of the U.S. and its allies and 
friends. International armaments cooperation is 
a primary means to achieve those goals.5 

The handbook goes on further to identify the 

objectives of cooperation as: 

1) The deployment and support of common, or at least 
interoperable, equipment with U.S. friends and 
allies. 

2) Achieving cost savings through cost sharing and 
economies of scale in jointly managed Research and 
Development (R&D), production, and logistics 
support programs. 

3) Exploiting the best technologies, military or 
civilian, available for equipping the U.S., its 
allies, and other friendly countries. 

4) Supplying the best available defense material to 
the U.S., its allies, and other friendly countries 
in the most timely and cost-effective manner. 

5) Maintaining a strong U.S. and allied industrial 
base.6 


5 United States. Department of Defense. Director of International 
Cooperation. International Armaments Cooperation Handbook. June 11, 
19 9 6, pg 1. 

6 Ibid, pgs 2-3. 


18 



III. DEFENSE INDUSTRIAL BASE CONSIDERATIONS 


A. EUROPE IN GENERAL 

In the past, and more recently, pressure to develop a 
unified European armament procurement policy and related 
industrial base has been increasing, as most nations can no 
longer afford to develop and to procure defense items 
solely from their own domestic companies and sources. 
Consequently, European nations are currently pursuing 
several initiatives to integrate their defense markets. 
They remain committed to cooperative programs, which are at 
the core of cross-border defense cooperation at the 
industry level. However, national sovereignty issues and 
complex ownership structures may prevent European 
consolidation to the extent needed to be competitive. This 
also holds true for cooperative programs between the United 
States and the European nations in the defense industrial 
base arena. 

Similarly to the United States, European countries 
generally purchase major defense equipment from domestic 
companies whenever possible. When domestic options do not 
exist, key European countries vary in their intent to buy 
major U.S. weapon systems. Additionally, the United States 
cannot hope to export major defense items to Europe without 
involving European defense companies in the production of 
those items. Several U.S. defense companies are currently 
nurturing long-term partnerships with European companies to 
develop a defense product line that will meet the 
requirements in both the U.S. and Europe. Among the 
factors contributing to this trend are affordability 
(related to reduced defense budgets), and interoperability 

19 



(related to the need to operate within coalitions in the 
new world geopolitical situation). For instance, defense 
spending as a percentage of GDP in Europe has dropped from 
3.5 percent at the height of the Cold War in the late 
1980s, to about two percent today, barely enough to sustain 
current forces. ^ By contrast, U.S. defense budgets have 
grown nearly ten percent a year for the past three years 
due to the threat-driven quest for leaner and meaner armed 
forces. While the U.S. devotes 24 percent of its budget to 
R&D and 34 percent to personnel, Europe spends 15 percent 
and 61 percent, respectively. Much of Europe's procurement 
is committed to long-term legacy projects such as the 
Eurofighter. furthermore, the United States spends more on 
defense than all of the members of NATO, combined, as seen 
in figure 1.8 



figure 4. Global Military Spending Comparisons, 2002 


Valasek, Tomas. "No Will, No Way on European Defense." Wall 
Street Journal Europe. 02 October 2003. 

8 "Vital Statistics: The U.S. Military." The Defense Monitor, 
Center for Defense Information. Volume XXXII, Number 5, 
November/December 2003. 


20 














The formation of a more unified European defense 
market may be crucial to the survival of European defense 
industries as well as to their country's ability to 
maintain an independent foreign and security policy. 
Individual national markets are too small to support an 
efficient industry. Meanwhile, mergers and consolidations 
of U.S. defense companies pose a challenge to the smaller, 
fragmented European defense industry. To respond, European 
governments have used a variety of organizations such as 
the Western European Union (WEU), the European Union (EU) , 
and the North Atlantic Treaty Organization (NATO). Most 
recently, the EU and NATO have become the preferred 
organizations to address economic and armament policy 
issues. NATO Membership applications from former Warsaw 
Pact countries have increased significantly in recent 
years. 

The European Defense Industry is attempting to 

consolidate and restructure through national and cross- 

border mergers, acquisitions, joint ventures, and 

consortia. In 1997, the United States General Accounting 

Office (GAO) reported to the Secretary of Defense that: 

European government and industry observers have 
noted that the European defense industry is 
reacting to pressures from rapid U.S. defense 
industry consolidation, tighter defense budgets, 
and stronger competition in the global defense 
market. Even under these pressures, other 

observers have noted that European defense 
companies are consolidating at a slower pace than 
U.S. defense companies.9 


9 United States. General Accounting Office, 
to Integrate the Defense Market. GAO/NSIAD-98-6. 


European Initiatives 
October 1997. 


21 



The GAO Report also noted that while economic 
pressures to consolidate exist, according to European 
government and industry officials, European defense 
companies face several obstacles. National governments 
impede defense industrial integration by establishing 
different defense equipment requirements. National 

governments also frequently regard their defense companies 
as sovereign assets. They tend, therefore, to impede 
cross-border consolidation because it could reduce the 
national defense industrial base or make it too 
specialized. furthermore, complex ownership structures 
make cross-border mergers difficult since many of the 
larger European defense companies are state-owned or part 
of larger conglomerates. 

To varying degrees, defense industry restructuring has 
occurred within the borders of major European defense 
material-producing nations, including Erance, Germany, 
Italy, and the United Kingdom. In the late 1990's, several 
mergers occurred in prominent European nations with large 
defense industrial bases. For example, in Italy, 

Finmeccanica had control of about three-quarters of the 
Italian defense industry, including Agusta (the major 
helicopter manufacturer) and Alenia (the major aircraft 
manufacturer ).10 

European countries have long partnered on cooperative 
armament programs to develop and to produce large weapon 
systems in Europe. The trend is to create a central 
management company to manage the relationship between 
partners. For instance, the Eurofighter 2000 program 

10 United States. General Accounting Office. European Initiatives 
to Integrate the Defense Market. GAO/NSIAD-98-6. October 1997. 


22 



created a consortium among major aerospace companies from 
the United Kingdom (British Aerospace), Germany (Daimler- 
Benz Aerospace), Italy (Alenia), and Spain (CASA). The 
same happened with the Joint Strike Fighter (JSF), with the 
United States taking the lead role. So, to some extent, the 
U.S. has recently been more actively partnering on 
cooperative armament programs. Although most cross-border 
industry cooperation is project-specific, European defense 
companies are also acquiring companies or establishing 
joint ventures or cross-share holdings that are not tied to 
a particular program, as has occurred in missiles, defense 
electronics, and space systems. 

Still, individual European governments, including 
Erance, Germany, Italy, the Netherlands, and the United 


Kingdom, try 

to 

retain their 

own 

defense 

procurement 

policies. These 

countries also 

vary 

in their 

willingness 

to purchase 

and 

to collaborate 

on 

major U 

. S. weapons 


systems. Eurthermore, Europe has a large, diverse defense 
industrial base upon which key European countries rely for 
purchases of major defense systems and equipment, 
especially from their own national sources. 

As European nations move toward greater armament 
cooperation, the U.S. Government and defense industry have 
taken steps to improve transatlantic cooperation. The U.S. 
Government continuously seeks opportunities to form 
transatlantic partnerships with its European allies on 
defense equipment research, development, and production. 
The U.S. defense companies are forming industrial 
partnerships and have emphasized ICR&D efforts with 
European companies to sell defense equipment to Europe 
because of the need to increase international sales. 


23 



maintain market access, preserve the domestic industrial 
base, and lower unit procurement costs on sophisticated 
weapons systems. As a matter of survival for both U.S. and 
European defense industrial bases (due to declining defense 
budgets after the Cold War), ICR&D has emerged as a way to 
maintain military technological superiority on both sides 
of the Atlantic Ocean while satisfying national economical 
and industrial goals. 

The Department of Defense realized that the U.S. could 
take advantage of international armaments cooperation to 
leverage U.S. resources through cost-sharing and improving 
standardization and interoperability of defense equipment 
with potential coalition partners. Furthermore, aside from 
the Ballistic Missile Defense Program, the F-35 Joint 
Strike Fighter Program (an international cooperative 
program) is the largest U.S. Weapons Program currently 
underway, as depicted in Table l.n 


Sources: "Vital Statistics: The U.S. Military." The Defense 
Monitor, Center for Defense Information, Volume XXXII, Number 5, 
November/December 2003. "Selected Acquisition Report." United States 
Department of Defense, December 31, 2002. The Full Costs of Ballistic 
Missile Defense, Economists Allied for Arms Reduction and Center for 
Arms Control and Non-Proliferation, January 2003. 



WEAPON 

TYPE 

COST* 

QTY 

Ballistic Missile 

Defense 

Missile Defense 

744.0 


E-35 Joint Strike 
Eighter 

Eighter-Bomber 

163.6 

2,457 

SSN-774 Virginia 
class 

Attack Submarine 

74.1 

30 

E-22 Raptor 

Eighter-Bomber 

73.3 

278 

DDG-51 Arleigh Burke 
class 

Guided Missile 
Destroyer 

68.8 

62 

C-17 Globemaster III 

Transport Plane 

65.1 

180 

E/A-18E/E Super 

Hornet 

Eighter-Bomber 

50.0 

552 

V-22 Osprey 

Transport Aircraft 

4 6.6 

458 

Trident II 

Nuclear Missile 

42.5 

568 

RAH-66 Comanche 

Helicopter 

34.6 

650 


* Total Cost in billions of constant 2003 dollars 

Table 1. Ten Largest U.S. Weapons Program 

B. FRANCE 

The U.S. and France share many trade similarities, 
including their global standing as the top two exporters in 
the defense sector. Overall, France is the tenth-largest 
trading partner of the United States worldwide and the 
third largest in Europe, after the United Kingdom and 
Germany. 

1. Defense Procurement Policy 

The French defense procurement policy primarily aims 
at buying technically sophisticated equipment from French 
sources, then pursuing European cooperative solutions, and 
finally importing a non-European item. Recently, the 
policy has shifted to having European cooperative programs 
as the first alternative due to the costs of developing 
major systems alone. However, the Erench procurement 
policy still attempts to retain its defense industrial base 

and to maintain autonomy in national security matters. 

25 




France has generally purchased major U.S. defense weapon 
systems only when no French or European option is 
available. 

The French defense policy must be analyzed within the 
new strategic context: disappearance of major threats close 
to French borders and the gradual restructuring of Europe. 
With respect to the latter, Erance intends to participate 
in the restructuring and renovation of NATO as a way to 
provide Europe with the means and assets it needs to 
achieve European capabilities. 

Erance has sought to remain a leading military power 
by acquiring a small-scale version of a superpower arsenal 
with an independent nuclear deterrent, a conventional force 
for air and land combat, and a Rapid Action Force and Blue 
Water Navy for intervening in overseas crises of limited 
scope and duration. Consequently, France is giving first 
priority to developing and maintaining its strategic 
nuclear capability, maintaining an autonomous defense- 
industrial base capable of furnishing the full range of 
material required by the French Armed Forces, and procuring 
military systems at affordable cost. 

2. Defense Industrial Base 

The multi-billion dollar defense market in France is 
experiencing profound changes similar to those in the U.S. 
By any measure, the French defense market is large, varied, 
and sophisticated. France produces nearly 90 percent of 
its own armament requirements. The defense industry serves 
a large indigenous force and exports to over 25 countries. 
A clearly defined strategy of forging stronger European 
alliances through increased mergers and acquisitions 


26 



pervades the current rationalization of France's defense 
industrial base. 

The goal of national autonomy in defense procurement 
has resulted in the acquisition of nearly all French 
weapons from domestic sources or joint ventures involving 
French companies, even when superior or less expensive 
alternatives were available from aboard. Due to the size 
of the French domestic arms market, concentration at the 
prime-contractor level has led to a group of sole-source 
"national champion" firms that are the national 
repositories of design and manufacturing know-how for 
entire sectors of defense equipment. The French defense 


industry 

also relies 

heavily 

on 

export sales to amortize 

overhead 

costs and 

permit 

the 

economic 

production of 

weapons 

for France' 

s own 

use. 

While 

intra-European 


cooperation is not new, France's change in that direction 
indicates that it no longer intends to develop a wide range 
of weapon programs on their own. 

Since the late 1980's, however, a convergence of 
economic, political, and military factors is forcing a 
major restructuring of French military forces and the 
defense industrial base that supports them. Weapons 
acquisition programs and arms exports are the 
responsibility of the General Delegation for Armaments 
(DGA), a centralized procurement agency within the Ministry 
of Defense. In addition to supplying the armed forces and 
safeguarding the autonomy of the national defense industry, 
the DGA adapts the industry to France's overall industrial 
needs and negotiates collaborative weapon development and 
production programs with other countries. DGA officials 
believe that in the state-dominated defense field. 


27 



administrative controls on quality and cost are superior to 
relying on market mechanisms such as competition. But a 
drawback of the French procurement system is that decisions 
tend to be made in a secretive, top-down manner, with 
limited accountability to either Parliament or the public. 

France's concern for national security and defense 
independence led to the nationalization of the French 
defense industry, as well as its demise. In recent years, 
decreased defense budgets have resulted in a weakened 
domestic defense industry. The needs of France's large 
defense industrial base exceeded those of the French 
military. Consequently, France became a major arms exporter 
with a questionable reputation. Recent reductions in 
export sales, however, have negatively impacted the once- 
powerful stand-alone French defense industrial base. 

Currently, the French defense industry is 
restructuring in response to budget cuts, shrinking export 
sales, and rapid technological advances, many of them 
driven by commercial applications. In an effort to manage 
the transition and to mitigate its adverse effects upon 
employment and regional economies, the DGA is pursuing an 
active defense-industrial policy focused around two 
pillars. The first is preserving and promoting the 
technological competencies of the defense industry by 
converting national arsenals into state-owned companies, 
encouraging defense contractors to diversify into the civil 
sector, investing in defense R&D at the expense of current 
production, urging firms to concentrate on areas of 
excellence to improve their competitive advantage, and 
promoting greater reliance on dual-use technologies. The 
second is enabling French defense firms to play a leading 


28 



role in the restructuring of defense production on the 
European scale, through collaborative research and 
development programs, strategic alliances, acquisitions of 
foreign firms, and cross-border mergers. France could not 
remain an exception to the different and varying degrees 
and extents of defense industry restructuring that has 
occurred within the borders of major European defense 
producing nations. In France, for instance, Thomson CSF 
and Aerospatiale formed a company. Sextant Avionique, which 
regrouped and merged their avionics and flight electronics 
activities. 12 

For the purpose of ICR&D, France and the U.S.'s 
defense industries share some basic similarities. However, 
there are significant differences. First, whereas the U.S. 
defense industry is mainly in private hands and the U.S. 
Government emphasizes market mechanisms, nearly four-fifths 
of the French defense industry is controlled by the state 
and broadly managed by the government. Second, the French 
Parliament has much less power over defense decisions than 
does the U.S. Congress. 

France has had some success in diversifying its 
defense industry into commercial markets, promoting the 
integration of civil and military production, and pursuing 
strategic alliances and other forms of international 
collaboration in defense R&D and procurement. However, 
over-reliance on profits from arms exports to subsidize 
defense research and development has created pressures to 
sell arms under circumstances that have adversely affected 
French foreign policy. Shrinking export markets in recent 

12 United States. General Accounting Office. European Initiatives 
to Integrate the Defense Market. GAO/NSIAD-98-6. October 1997 . 


29 



years have also reduced the ability of French defense 
contractors to remain at the technological leading edge. 

Overall, France has managed defense R&D and 
procurement to preserve a broad-based defense industry for 
the future, but at some cost to its current military 
capabilities. In contrast, the United States has managed 
defense R&D and procurement to maximize its current 
military capability, but at some cost to the future health 
of their defense-industrial base. 

3. Defense Opportunities 

France is continuing to update its major defense 
equipment, including submarines, aircraft carriers, 
helicopters, tanks, and aircraft. Program priorities 
include intelligence gathering, command and control 
systems, troop protection, force mobility, and military 
transport. France is currently a participant in 
multilateral ship propulsion (ICR) and datalink (MIDS) 
cooperative efforts. Industry-to-industry cooperation is 
clearly on the rise as U.S. firms seek opportunities to win 
European defense competitions through partnerships with 
European firms. Eor example, Bath Iron Works and the 
Erench shipbuilding organization. Direction de la 
Construction Navale Internationale (DCNI), are cooperating 
to build ships for the international market. Erance 
targets over 40 projects for multinational cooperative 
development. 

4. Defense Procurement Process 

The Direction Generale de I'Armement (DGA), or General 
Delegation for Armaments, is the official body responsible 
for all armament programs for the three defense services 
and the national police. It controls all research. 


30 



development, and production in collaboration with the Joint 
Chiefs of Staff and the three service Chiefs of Staff. As 
the Ministry of Defense directorate is solely responsible 
for weapons system acquisition, the DGA monitors the 
private and nationalized firms involved in armaments 
research and production, and retains tight control over all 
phases of the acquisition process. It also does all of its 
own research and development (R&D) for the military 
services. The acquisition process in France is 
characterized by centralization and a structure of 
coordination and interaction among the various MOD 
Directorates. Although the responsibility for weapon 
systems acquisition is centralized within the DGA, each of 
the directorates plays a role throughout the acquisition 
process. 

C. GERMANY 

Although Germany does not seek to become self 
sufficient in defense production or have firms solely 
reliant upon arms contracts, domestic firms receive 
approximately 85 percent of defense spending, which 
includes research and development, procurement, and 
maintenance. Virtually all defense contractors in Germany 
are privately owned, but many have stock owned by federal 
states or banks. Competition is allowed for contracts at 
all stages, from program definition to final production. 

1. Defense Procurement Policy 

Germany, to some extent, shares the UK's and France's 
defense procurement policy while providing a unique mix of 
both: to have open competition on most major defense 
equipment purchases, with a commitment to European 


31 



cooperative solutions. This results from significantly 
reduced defense procurement budgets and existing 
commitments to European cooperative projects. 

2. Defense Industrial Base 

Germany could not remain an exception to the different 
and varying degrees and extents of defense industry 
restructuring that has occurred within the borders of major 
European defense-producing nations. In Germany, 
restructuring has primarily occurred in the aerospace 
sector. In 1995, Deutsche Aerospace became Daimler-Benz 
Aerospace, which includes about 80 percent of German 
industrial capabilities in aerospace. In 1999, the German 
firm Daimler-Chrysler Aerospace and the Erench Aerospatiale 
Matra made a major cross-border merger with the subsequent 
inclusion of the Spanish aerospace company Construcciones 
Aeronauticas S.A. (CASA). 

With regard to industry structure, the German 
industrial giant Daimler-Benz acquired the aircraft 
manufacturer MBB. This action became the focal point of 
restructuring the German defense industry, which is one of 
the most technologically advanced in the world. Daimler- 
Benz has also incorporated the aircraft firm Dornier, 
engine manufacturer MTU, and the electronics firm AEG. 
Daimler Benz Aerospace (commonly referred to as DASA), a 
group within Daimler-Benz, has combined the proficiency of 
Dornier, Motoren und Turbinen-Union (MTU), Telefunken 
Systemtechnik (TST), and MBB. These acquisitions have made 
Daimler-Benz the seventh largest defense firm in the world, 
and the third largest in Europe. 

Analysts expect the German defense industry to undergo 
further concentration in an effort to reduce overcapacity. 


32 



Consolidations and mergers of German and European firms 
will generally not achieve the same efficiency as those of 
U.S. firms. Recognizing the difficulties inherent in 
multinational mergers, top officials of Daimler-Benz 
Aerospace now appear to favor a national consolidation of 
Germany's defense industry before looking for structural 
alliances abroad. This is a turnaround from their previous 
position. 13 

Germany has traditionally used Foreign Military Sales 
(FMS) channels when purchasing systems from the U.S. 

Cooperative programs are also gaining increased emphasis 
and interest. With a goal of reducing costs and obtaining 
the best technology available, the U.S. Department of 
Defense has initiated discussions to facilitate longer- 
range bi- and multi-lateral planning, with a goal of 
increased harmonization of future requirements that could 
lead to more cooperative programs. 

Unlike the United States and the United Kingdom, 
Germany's corporate governance structure within the defense 
industry is continental, which also differentiates its 
defense industries when establishing ICR&D programs. 
German public-limited companies still remain tied to 

industrial investment that acts as a stable ownership 

mechanism; hence industry owners play a large role in the 
German ownership scheme. This highlights the strategic 
importance of concentrated ownership by industry and 
government figures in the defense industrial base. 
Ownership concentration has proven decisive in maintaining 

13 United States. Department of Commerce. Bureau of Industry and 
Security. "European Diversification and Defense Market Guide." 
Reported retrieved 10 March 2004 from website 

http://WWW.bxa.doc.gov/DefenseIndustrialBasePrograms/. 


33 



stability in continental European defense companies and, on 
the other hand, the lack of such concentration has provided 
flexibility in the British-American firms. 

3. Defense Opportunities 

The sophisticated German market offers a wide variety 
of defense opportunities in the areas of equipment upgrades 
and new equipment. The combination of budget restraints 
and the limits imposed by export laws, is putting pressure 
on German firms to find cost-sharing partners for both 
research and development and production of defense 
merchandise. U.S. firms can profit, even in the current 
restrictive German spending environment, by joining with 
German firms in efforts to fulfill defense requirements. 

The unification of Germany included the merging of the 
two armed forces and their inventories. Most of the East 
German equipment was supplied by the Soviet Union. The 
German government is retaining some of this inventory. The 
platforms intended to be kept as interim systems include 
the MIG-29 fighter, the AN-2, IL-62, L-410, and TU-154 
transport aircraft, and the MI-2, MI-8, and MI-14 
helicopters. 

4. Defense Procurement Process 

Within Germany, the Services create the requirements 
and submit them to the Armaments Directorate of the 
Ministry of Defense to approve and prioritize the 
requirements within a national plan. If required, 
parliamentary approval is obtained and finally, the 
requirements are turned over to the federal Office of 
Defense Technology and Procurement (Bundesamt fiir 
Wehrtechnik und Beschaffung, or BWB), which will fill the 
Services' requirements. While this is a somewhat 


34 



simplified description, it clarifies the key difference 
from the U.S. system, where the Services are heavily 
involved throughout the entire acquisition process. 

While procedures vary depending upon the nature of the 
award, government tendering in Germany is generally open to 
all qualified suppliers on a competitive, non- 
discriminatory basis. This means that, with few 
exceptions, German government purchasing entities are 
required to award contracts based upon objective criteria 
that, at least in theory, neither directly nor indirectly 
favor domestic German companies over foreign suppliers. 
Technology transfer does not seem to be obstructed by 
official impediments or other barriers. 

D. UNITED KINGDOM (UK) 

Political stability, low rates of direct taxation, 
assured intellectual property rights, a flexible labor 
market, first-class financial markets, and membership in 
the European Union (EU) make the UK an especially 
attractive market for U.S. exporters and investors. Market 
entry for U.S. firms is greatly facilitated by a common 
language and legal environment, and similar business 
institutions and practices. 

1. Defense Procurement Policy 

The UK fosters open competition policies that seek the 
best defense equipment for the best value. As such, the 
UK's defense procurement policy seeks best value for money, 
which usually means taking a commercial approach to 
procurement by using competition. Competition is the 
cornerstone of the Ministry of Defense (MOD) policy. In 
accordance with its open competition policy, the MOD will 
acquire defense equipment from foreign sources when the 


35 



and delivery schedule 


advantages of cost, performance, 
outweigh the benefits of buying the British alternative. 
This policy further enhances the United States-United 
Kingdom approach toward ICR&D. The United States is the 
major supplier of defense imports to the UK. The main 

factors contributing to the U.S. success are the uniqueness 
and technical sophistication of the U.S. defense systems, 
industrial participation offered to local U.S. companies, 
and/or no domestically developed product in the 

competition. However, the UK Government tends to choose a 
domestically-developed product when one exists. In some 
cases, these products contain significant U.S. content. 

Despite severe budgetary pressures, the UK Government 
does not have a formal policy to protect its core defense 
industrial base. The MOD'S "Best Value for Money" 

procurement policy has forced UK defense companies to 
rationalize the industrial base in order to remain 
internationally competitive. Increased emphasis on UK 
"Industrial Participation" in contracts awarded to offshore 
firms is used to bolster strategic economic sectors and to 
maintain quality jobs. 

The United Kingdom simply could not remain an 
exception to the different degrees of defense industry 
restructuring that has occurred within the borders of other 
major European defense-producing nations. In the UK, a 
number of mergers and acquisitions have occurred. For 
example, GKN purchased the helicopter manufacturer Westland 
and GEC purchased the military vehicle and shipbuilder VSEL 
in 1994. In 1999, British Aerospace merged with General 
Electric's Marconi division. 


36 



2. Defense Industrial Base 

The UK defense budget represents about 3.5 percent of 
GDP. The defense industry is largely privatized and is 
dominated by three large contractors (British Aerospace, 
GEC-Marconi, and GKN) and a second tier of smaller, more 
specialized companies. The British defense industry is 
similar to the United States since both are products of a 
market-based system. The UK, with well-developed capital 
markets, relies on equity investments and less on large 
institutional creditors providing greater flexibility and 
adaptability when dealing with ICR&D among international 
partners, especially the United States. Recent reports 
note that the Department of Defense is more comfortable 
dealing with foreign firms that are similar to American 
companies, as is the case with the UK firms. 

3. Defense Opportunities 

The major areas with opportunities for defense 
equipment sales are aircraft and related parts, electronics 
production and test equipment, electronic components, 
airport and ground support equipment, lasers and electro¬ 
optics, and telecommunications equipment. Future upgrade 
opportunities, including service, support, and logistics, 
are found in cruise missile systems, parts for fixed-wing 
aircraft and helicopter maintenance, and aircraft 
replacement programs, and mission systems integration 
technology for various major equipment procurement programs 
(as prime contractor or subcontractor). 

4. Defense Procurement Process 

The NATO nations have Memorandums of Understanding 
(MOU's) that apply to procuring defense equipment. These 
agreements promise that each government will look at its 


37 



partner's military equipment first. Of all U.S. allies, 
the UK enjoys the closest operational relationship with 
U.S. forces. As a result, the UK has procured American, or 
U.S.-compatible defense equipment, a number of times. 

UK defense acquisition programs are driven by 
operational requirements, much as in the United States. 
The Central Staff (land, sea, air, and joint systems) is 
responsible for defining these requirements. Once approved 
for acquisition, the MOD'S procurement executive acts as 
the main executive agent for program competition in the UK. 

The mod's acquisition policy employs competitive "firm 
fixed price" contracting, wherever possible, and the MOD 
will rarely fund development costs for a program. The 
majority of its requirements are focused on "off-the-shelf" 
purchases, often requiring contractor development. The 
mod's policy is to amortize this cost over the production 
run of the system. 

E. UNITED STATES OF AMERICA 

A strong defense industrial base deters aggression, and 
provides the means to wage war and to defeat enemies, if 
deterrence fails. The National Security Strategy of the 
United States specifies that the defense policy since the 
end of World War II has been aimed at deterring aggression 
against both the United States and its allies. This 
deterrence policy is the military strategy against both 
conventional and nuclear aggression. 

Some analysts believe that the current industrial base 
seems incapable of surging production rates in a timely 


38 



fashion.14 Industrial-base surge has been a concern for 
some time. A number of factors have contributed to this 
situation. Military weapons have become so dependent upon 
technology that large quantities are not only difficult to 
produce in a short period, but expeditious startup and 
production are more difficult. Long lead-time contracts 
and increased dependence upon foreign sources for supplies 
and materials have also reduced the potential for rapid 
expansion of defense production. 

The U.S. industrial base, although large and 
technologically diverse, is highly dependent upon foreign 
sources of supply for many critical materials, components, 
and end items. Thus, the U.S. and Europe —challenged to 
meet industrial preparedness demands independently— 
recognize that enhanced integration of their defense 
industrial bases could take advantage of the complementary 
nature of their defense industries to provide both 
increased security and economic gain. is 

1. Defense Procurement Policy 

The United States promotes full and open competition 
policies that seek the best defense equipment for the best 
value. As such, the U.S. procurement policy is to aim for 
the best value at the lowest cost, which means taking a 
commercial approach to competitive procurement. The U.S. 
also emphasizes establishing a strong defense industrial 
base and procurement from its own national sources, hence 
the Buy American Act. The U.S. defense industry is highly 


14 McNichols, Jeffrey R. The Visible Hand: The Government- 
Industrial Relationship and Its Effects on Transatlantic Arms 
Cooperation. Thesis. Naval Postgraduate School. June 2000. 

15 Ibid. 


39 



competitive. Although the industry has consolidated in 
past years, competition still remains a key element of the 
industry. The structure of the defense industry is largely 
driven by the defense policy of the U.S. Government and its 
rules that govern the sales of defense systems and 
equipment. Export controls by the U.S. Government tend to 
limit and to complicate the sale of defense items 
worldwide. At the same time, controls are necessary to 
provide protection against loss of technology to 
unauthorized users. Export controls impact the defense 
trade of the U.S. with its European counterparts due to the 
issues concerning intellectual property and the transfer of 
technology. 

2 . Defense Industrial Base 

Within the defense industrial base three categories of 
firms produce supplies and equipment for the DoD. Eirst, 
the government owns and operates some facilities. These 
facilities produce products that are somewhat specialized 
and for which there is no commercial application. A 
Government-Owned and Contractor-Operated (COCO) facility 
represents a second category of supplier. There are 
relatively few Government-Owned firms, however, as current 
policy dictates that a minimum number of facilities be 
Government-Owned. The third category, the largest supplier 
to the DoD, consists of contractor-owned and operated 
facilities. 

The U.S. defense industry is more diverse (in terms of 
the number of companies) than their European counterparts. 
The overall U.S. Defense Industrial Base (USDIB) 
encompasses more companies than the UK, Erance, and Germany 
combined. However, despite the size and scope of the 


40 



defense industry (in terms of the number of companies and 
their area of expertise) its overall structure and well¬ 
being depends greatly on the viability of the large 


companies at the top of the industry. Only the very large 
corporations (e.g., Lockheed Martin, General Dynamics, 
Boeing) possess the capital necessary to undertake large 
defense projects and many smaller defense-related companies 
are almost entirely dependent upon subcontracts from the 
major corporations. As noted, USDIB is comprised of many 
large and small firms. A range of 8 to 10 major defense 
contractors, as depicted in Table 2 i 6 ^ dominate most large 
defense contracts. 


COMPANY 

DOD CONTRACT* 

1. Lockheed Martin Corporation 

$17.0 

2 . Boeing Company 

$16.6 

3. Northrop Grumman Corporation 

$8.7 

4. Raytheon Company 

$7.0 

5. General Dynamics Corporation 

$7.0 

6. United Technologies Corporation 

$3.6 

7. Science Applications International Corp. 

$2.1 

8. TRW Inc. 

$2.0 

9. Health Net Inc. 

$1.7 

10. L-3 Communications Holdings, Inc. 

$1.7 

Total of All DOD Contractors 

$170.8 


*Value in Fiscal Year 2002 billions of dollars 
Table 2. Ten Largest Military Contractors Fiscal Year 2002 


In recent years, due to the on-going War on Terrorism, 
and Operations Iraqi Freedom and Enduring Freedom, the 


Sources: "Vital Statistics: The U.S. Military." The Defense 
Monitor, Center for Defense Information, Volume XXXII, Number 5, 
November/December 2003. "100 Companies Receiving the Largest Dollar 
Volume of Prime Contract Awards - Fiscal Year 2002." Director 
Headquarter Services. United States. Department of Defense. Center 
for Responsive Politics. 


41 




total U.S. defense budget has had a marked increase. Since 
2001, the United States has slightly increased its defense 
spending as a percentage of its Gross Domestic Product 
(GDP) from the approximate three percent it was formerly 
spending. However, throughout the 1990s, the United States 
defense budget was in relative decline, as seen in Figure 
2.1'^ Obviously, the increase in defense spending will help 
the U.S. defense industrial base. 



19d5 19S0 19SS 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 


Figure 5. U.S. Military Spending Fiscal Years 1945 to 2008 


l"? "vital Statistics: The U.S. Military." The Defense Monitor, 
Center for Defense Information, Volume XXXII, Number 5, 
November/December 2003. "National Defense Budget Estimates for 
FY2004." Office of the Under Secretary of Defense (Comptroller), March 
2003. "Mid-Session Review, Fiscal Year 2004." July 15, 2003, Office 
of Management and Budget. 


42 




























As previously mentioned, until the end of the Cold 
War, the USDIB faced the prospects of consistently 
declining defense budgets and overcapacity. The capacity 
problem was mitigated by a number of mergers and 

acquisitions among defense companies during the 1990s. The 
merger of actors within the USDIB could create an oligopoly 
of defense suppliers and inhibit DoD's ability to 

competitively award defense contracts to U.S. firms. The 

DoD tends to downplay the impact of defense industry 
mergers on competition and the effects of USDIB 

consolidation. However, it has not always been this way. 
From 1993 to 1998, the DoD advocated defense industry 
mergers and acquisitions as a way to reduce costs for both 
the industry and the government. In 1998, the DoD 
practically changed this direction when it opposed the 
proposed acquisition of Northrop by Lockheed Martin and the 
proposed acquisition of Newport News Shipbuilding by 
General Dynamics. 

Garrettyis noted that the state of industry in the late 
1990s prompted the USDIB to aggressively seek new markets 
for its products. Each venue represents difficulties and 
challenges that indicate that the USDIB must find other 
methods to deal with overcapacity in production and 
declining budgets. ICR&D could just be one such method. 
Other efforts and actions that the USDIB has actively 
pursued in recent years to mitigate the effects of the 
shrinkage in the defense markets include, but are not 
limited to, the following: 

18 Garretty, Eric B. An Economic Analysis of Acquisition 

Opportunities for the United States Department of Defense within the 
Japanese Defense Industrial Base. Thesis. Naval Postgraduate School. 
December 2002 . 


43 



■ Expand the USDIB share of the international arms 
market; although this potential is limited by the tight 
government export controls and restrictions that exist, as 
well as the current limited defense spending capacity 
worldwide. 

■ Seek defense customers in the European Union. 

However, as noted above, European countries tend to 
purchase their defense equipment first from their own 
national sources, second from European sources or European 
cooperative programs, and lastly from U.S. defense 
companies. furthermore, the European defense industrial 
base is also suffering from overcapacity and declining 
budgets. It is unlikely that the European defense 

industrial base can absorb the current USDIB overcapacity, 
and more unlikely since the threat of the Cold War is 
practically gone. 

■ Venture into the commercial marketplace with dual- 
use technology and products. The USDIB has aggressively 
taken steps toward this, especially the aerospace 
companies. 


44 



IV. MULTIPLE LAUNCH ROCKET SYSTEM 


A. BACKGROUND 

1. Program History 

Multiple Launch Rocket System (MLRS) is a mobile 
rocket launcher that can fire the MLRS Family of Munitions 
(MFOM), a variety of surface-to-surface rockets that were 
later supplemented with an evolving series of surface-to- 
surface guided missiles. It was initially a free-flight 
artillery rocket system that greatly improved the 
conventional, indirect fire capability of the field Army. 
The system provides counter battery fire and suppresses 
enemy air defenses, light materiel, and personnel targets. 

MLRS started life as the U.S. Army's General Support 
Rocket System (GSRS) program in the mid-1970's. In 1976, 
Concept Definition Study contracts were let to several 
companies and in 1977, Vought (currently Lockheed Martin) 
and Boeing were selected for competitive development.In 
December 1979, GSRS was renamed MLRS as it became an 
international partnership between the US, UK, France, and 
later Italy. In May 1980, Vought was announced the prime 
contractor for further development and production of the 
MLRS launcher and rockets. MLRS reached Initial 

Operational Capability (IOC) with the U.S. Army in 1983. 
Later in the same year, the Secretary of the Army approved 
both full-scale production of MLRS and type classification 
standard for major MLRS equipment. In February 1984, as a 
result of some MLRS items experiencing higher failure 

19 United States. Department of Defense. Directory of U.S. Military 
Rockets and Missiles, Appendix 4: Undesignated Vehicles, MLRS. Report 
retrieved 13 March 2004 from website http://www.designation- 
systems .net/dursm/app4/mlrs.hmtl. 


45 



rates, the MLRS Project Office Readiness Control Center was 
established to monitor world-wide Self-Propelled Launcher 
Loader (SPLL) status on a daily basis and to take immediate 
action to assure supportability of fielded MLRS units. By 
December 1986, a letter contract was awarded to Ling-Timco- 
Vought Aerospace and Defense (LTVAD) to provide initial 
support for the integration of the Sense and Destroy Armor 
(SADARM) submunitions into MLRS. The MLRS SADARM was a 
derivative of the existing MLRS rocket. It was envisioned 
that the descending submunition, using a dual-mode 
millimeter wave (MMW) and infrared (IR) sensor, would upon 
reaching and detecting a target, fire an explosively-formed 
penetrator (EFP) to impact the target from the top. In 
July 1988, a unit of the Cklahoma National Guard became the 
first National Guard unit to receive the MLRS system. 

In February 1989 —^two years behind schedule -DoD 

approved the system demonstration substage for the MLRS/TGW 
(Terminally Guided Warhead). Conditions for approval were 
that the U.S. Army had to do a Cost and Cperational 
Effectiveness Analysis (CCEA) comparing the MLRS/TGW to 
alternatives for defeating the armored threat, define 
specific actions to improve the ability to manufacture the 
submunition, and prepare a test and evaluation master plan 
defining specific quantitative test goals for entering into 
full-scale development. 

Late in 1989, as part of the evaluation of the 
ablative metal blast panel configuration for the front of 
the MLRS launcher, 60 MLRS practice rockets were 
successfully flight tested in consecutive 12-round ripples. 
The metal blast panel was designed to protect the exposed 
areas of the M270 launcher from the high velocity gases 

46 



resulting from rocket motor operation. The new panels 
would replace the existing neoprene ablative panels that 
only provided protection from burn-through during the 
firing of only 108 rounds. While acceptable in peacetime, 
this limitation imposed severe restraints in battle. The 
design goal of providing protection for up to 540 rockets 
was exceeded during WSMR testing, during which 700 rounds 
were fired with no panel degradation. This effort was 
later accelerated as part of the MLRS Project Office's 
support for Operation Desert Storm. 

Over time, the program slipped and encountered many 
difficulties. During 1990, the internationally funded 
MLRS/TGW competed with a previously classified U.S. 
program, the Brilliant Anti-armor Submunition (BAT) and 
other systems in a U.S Army "neck down" process. In March 
1991, the Army selected the BAT. Congress would not permit 
continued funding of both the MLRS/TGW and BAT. 
Consequently, the United States withdrew from the MLRS/TGW 
program. 

At the end of 1991, the Independent Software 
Integration Test (ISIT), a complex, contractor-operated 
system-level test, was successfully completed at Fort Sill, 
Oklahoma. The test was conducted using the European Heavy 
Army Scenario and performed with tactical equipment. This 
test was the pivotal event that proved the Fire Direction 
Data Manager (FDDM) system hardware and software 
architecture met system design criteria and operated very 
effectively during an intense combat scenario. 

In the summer of 1993, full-scale production of the 
MLRS basic rocket ended. Minimum production of tactical 
warheads continued in order to maintain a warm production 


47 



line. After one year, the remaining tactical fleet of 
basic MLRS was converted to an Army Tactical Missile- 
capable Improved MLRS in the first and second quarters. 
The Terminal Guidance Warhead (TWC) program was terminated 
at the conclusion of the revised System Demonstration 
Substage (SDS). Also, the MLRS SADARM Program was 

terminated because of lack of funding. The MLRS/TGW was 

actually phase three of the multinational MLRS program. 

One year earlier, as a result of Operation Desert 
Storm reviews, the Extended-Range (ER) rocket program, an 
enhanced version of the current rocket fired from the MLRS, 
was established and an Engineering and Manufacturing 
Development (EMD) contract was signed with LVS. The ER 

rocket was expected to have a range of 45 kilometers or 
greater, compared to the fielded rocket's 31.5 kilometers. 

In the summer of 1995, the contract for development of 
the Improved Launcher Mechanical System (ILMS) was awarded. 
This modification of the MLRS M270 launcher would allow 

faster engagement of highly mobile, short dwell time 

targets. In May 1996, approval was given for the ER-MLRS 
program to enter Low Rate Initial Production (LRIP) and a 
contract for the initial quantity of ER-MLRS was awarded. 

The MLRS Program is an ACAT IC Program and until 2000 
the total number of systems produced was 857. The total 
program cost was $2,300 million, and the average cost per 
unit was $2.5 million.20 


20 United States. Department of Defense. Director, Operational 
Test & Evaluation. "Fiscal Year 1999 Annual Report". Report retrieved 
07 March 2004 from website 
http://WWW.globalsecurity.org/military/library/budget/fyl999/dot-e/army 


48 



2. Extent of International Cooperation 

In July of 1979, the governments of the United States, 
Germany, France, and the United Kingdom signed a Memorandum 
of Understanding (MOU) for a joint development and 
production of a General Support Rocket System (GSRS). 
Later, within this year, GSRS was redesignated MLRS in 
order to be compatible with the name already established by 
the European allies. Thus, the GSRS Project Office became 
the MLRS Project Office effective with the redesignation. 

One year later, the United States, the United Kingdom, 
Germany, and France signed a formal declaration of intent 
to participate in the concept definition phase of the 
terminal guidance warhead (TGW) program. The primary 
mission of TGW would be to provide rapid fire, non-nuclear 
capability to destroy a wide spectrum of stationary and 
moving, and medium hard to very hard, armored targets. The 
declaration required that the TGW be jointly developed, 
with active participation by industries of all four 
nations. In September of 1981, the four countries signed a 
supplement to the basic MLRS MOU of July 1979, providing 
for the concept definition phase of the TGW program. The 
United States would fund 40 percent, and each of the 
European allies would fund 20 percent. Three months later, 
concept/international program definition contracts were 
awarded to General Dynamics, Hughes Aircraft Company, 
Martin Marietta, Raytheon, and Great Britain's Hunting 
Engineering for a multinational development of TGW. 

In July of 1982, an MOU supplement authorizing Italy's 
participation in the MLRS program was signed by all 
cooperating nations. By December 1983, the United States, 
France, Germany, and the United Kingdom signed an MOU 


49 



supplement to establish a TGW development program formally. 
At the end of November 1984, a cost-plus-incentive-fee 
contract for the cooperative development of TGW was awarded 
to a consortium of companies consisting of the Martin 
Marietta Corporation of the United States; Thomson Brandt 
Armaments of France; Thorn EMI Electronics, Limited, of the 
United Kingdom; and Diehl GmbH and Company of Germany. The 
remaining participant was MDTT, Incorporated, and a U.S. 
company with a fully integrated U.S.-European staff that 
acted as a management focal point for the joint venture. 
Two years later, in 1989, the European Executive Agency 
awarded the MLRS European production contract to the 
European Production Group of Munich, Germany. 

The European Production Qualification Test (EPQT) 
began at White Sands Missile Range (WSMR) in late 1988 and 
in the following year, the development effort in support of 
the German AT2 warhead program and the European Production 
Qualification Test (EPQT) were successfully completed. 
Also, in the same year, the European Ely-to-Buy (EETB) 
program began at WSMR. By the end of 1991 and after the 
successful performance of MLRS during Operation Desert 
Storm, planning began for development of an ER-MLRS as a 
successor to the Basic M26 rocket then in production. The 
improved rocket would provide the potential to engage 
additional threat systems, improve accuracy, create a safer 
environment for friendly forces, and provide a low-cost 
delivery vehicle for future smart munitions at extended 
ranges. Additionally, the Independent Software Integration 
Test (ISIT), a complex, contractor-operated system level 
test, was successfully completed at Eort Sill, Oklahoma. 
The test was conducted using the European Heavy Army 


50 



Scenario and performed with tactical equipment. This test 
was the pivotal event that proved the FDDM system hardware 
and software architecture met system design criteria and 
operated very effectively during an intense combat 
scenario. 

At the beginning of 1992, the European Production Line 
was successfully certified as an MLRS qualified second 
source. Two months later the United States formally 
notified France, Germany, and the United Kingdom that it 
would not be a full participant in Full-Scale Development 
(FSD) of the MLRS/TGW. As noted above, the Army had 
selected the BAT system and Congress did not permit further 
funding. Finally, by 1994, the TGW program was terminated 
at the conclusion of the Revised System Demonstration 
Substage (SDS). Only the French government continued 
development of the submunition since the other three 
nations cooperating in the program chose not to continue 
the co-development effort. The European Production Line 
completed the delivery of the last European launcher. The 
German government conducted the first MLRS AT2 firing with 
live mines at WSMR. 

B. PROGRAM ANALYSIS 

To date, all operational requirements and capabilities 
have been met and the desired levels for readiness, 
reliability, and maintainability have been reached. 
However, delays in the MOU approval process adversely 
impacted the initiation of the cooperative Guided MLRS 
development phase. Several key problems encountered will 
be discussed below. 


51 



1. Coordination 

Due to the number of partners, required coordination 
slowed the decision-making process. Experts on 
international programs agree that the complexity and 
difficulty of managing a successful international program 
increases by a high coefficient with each additional 
partner.21 The increased complexity in decision-making 
having four partners speaking different languages, having 
different political and acquisition systems, and cultures, 
challenged the MLRS/TGW program and impacted the schedule. 
In a survey, program officials unanimously agreed that two 
or three partners in the MLRS/TGW would have been easier to 
manage and less costly .22 They also believed fewer partners 
would have been more efficient for the program in terms of 
technical performance, program management, decision-making, 
and administrative issues. 

2. Financial 

Financial realignments and currency exchange rate 
fluctuations impacted the funding profile. For example, 
the more partners, the more problems a program will likely 
have in tracking and managing cost shares and work shares, 
which may be critical to ensure fairness in a multinational 
program. In the MLRS/TGW, the 40-20-20-20 cost share was 
tracked and managed in accordance with the MOU. Under the 
agreement, exchange rate fluctuations and inflation in any 
of the countries affected the cost shares and work shares. 


21 D'Agostino, Davi M. "Transatlantic Cooperative Weapons 

Development." Acquisition Quarterly. Fall 1996. 

22 Ibid 


52 



3. 


Work Shares 


The work share expectations proved difficult to 
achieve during development. The program was set up to 
adjust the work share to cost share on the basis of cost in 
order to ensure equal shares. Therefore, if a company were 
performing a development task and began to exceed the 
estimated cost of the work substantially, that task would 
be moved or subcontracted to another company within the 
same nation. Although this was a difficult process to 
implement, some former project officials noted this had a 
side benefit of helping identify companies with technical 
and cost problems and of making adjustments to solve them.23 

4. Requirements Generation 

The program requirements were not well defined. The 
program got underway with only the most general agreement 
on the need for a tank-killing submunition for use behind 
forward lines and the broad technical approach. However, 
the four governments ignored this concern because they 
could not agree on the threat details and moved forward 
instead. Throughout much of the component demonstration 
phase, the four nations continued to debate the specific 
characteristics of the threat. As late as 1992, the U.S. 
Army Operational Requirements Document (ORD) for the 
MLRS/TGW remained in a draft form. 

Many programs during that period were dealing with an 
evolving threat. Two changes in the requirements 

negatively affected the program's already high technical 
risk and ambitious schedule. First, the requirements 
changed due to a newly projected reactive armor threat. 

23 D'Agostino, Davi M. "Transatlantic Cooperative Weapons 

Development." Acquisition Quarterly. Fall 1996. 


53 



Early on, the United States and the United Kingdom believed 
the Future Soviet Tank would require the MLRS/TGW to have a 
more robust lethal capability than did Germany and France. 
This caused the program to switch to a more lethal 
submunition with a dual-shape charge. Hence cost, 

schedule, and technical problems ensued in the program. In 
the end, the U.S. and UK agreed with the French and German 
approach. Second, about halfway through the development 
effort, France and Germany raised a new requirement to 
overcome the effects of highly reflective snow. This new 
requirement forced the program to add a backup seeker with 
Doppler beam sharpening to the development effort.24 This 
backup seeker also caused the team to design and to develop 
another type of signal processor. This increased the 
technical risk and was later considered unnecessary. 

5. Production Lines 

Initially, the partners agreed that all requirements 
would be served from one integration line in the U.S. with 
the components coming from the other three countries' 
facilities. This seemed logical since the U.S. company's 
strength was integration. In 1990, however, the European 
partners insisted on a second, European integration line 
despite the likely quantity reduction in all the partner's 
requirements. On one hand, Europeans might have pressed 
for a second production line because they wanted to make 
third country sales freely, even though that required the 
unanimous prior approval of all the participants in 
conformity with the signed MOU. On the other hand, it 
appeared that U.S. and European partners decided to pursue 

24 D'Agostino, Davi M. "Transatlantic Cooperative Weapons 

Development." Acquisition Quarterly. Fall 1996. 


54 



a full-production capability. If the program had reached 
the production phase, two lines would have obviated any 
unit cost savings during the production phase and would 
have added to all the partners' production costs. 

6. Use of a Consortium 

Rather than assign one company the role of the prime 
contractor, the four companies formed a joint venture 
consortium, named MDTT, Inc., to sign the contract and to 
provide overall management. The governments supported this 
approach mainly for financial reasons. That was a good 
idea because a consortium would avoid the high overhead 
costs of a prime contractor being added to the program. 
However, awarding a cost-plus-incentive fee contract to a 
consortium resulted in delays and technical issues due to 
the lack of a prime contractor. First, little 

accountability existed in the consortium, and decision¬ 
making on work share was hampered by the lack of leadership 
in MDTT. In addition, there was no project management, 
planning, or risk analysis from the companies. If there 
had been a prime contractor, then he would have selected 
the best companies for the development tasks, determined 
work share more on the basis of technological strengths of 
the companies, and better managed the contractor efforts. 

7. Lack of Qualified Staff Members 

MLRS/TGW had an international project office as 
opposed to European liaison officers. They did not 

represent a full complement of "program office level" 
decision-makers from their countries and were not vested 
with decision-making authority. European liaison officers 
made periodic visits to the project office, located at the 
U.S. Army Missile Command, for Technical Working Group 


55 



meetings and other events. Another problem was the serious 
delay in establishing a limited European government balance 
in the international project office. If all the staff had 
been located fulltime in the international project office, 
then a greater team culture would have been established. 
In fact this would have resolved many of the language 
barriers, nationalistic pride issues, and decision-making 
obstacles the program experienced. Periodical visits 
always generate a formal atmosphere and do not generate a 
free-speech environment for problem solving. 

8. Technology Disclosure and Export Licensing 

Related to the lack of a team culture, was the limited 

sharing of "national assets." Countries that had some 
background data on technologies that were critical to 
program success did not broach the data in discussions and 
did not share it in an open and honest environment. If 
such critical data had been shared, many technical problems 
would have been more easily resolved. In order to achieve 
the best possible result, one must exclude national and 
international politics from the program's decision-making 
to the maximum extent possible and focus one's energy and 
efforts on doing what is best for the program's success. 

9. Lack of Flexibility 

MLRS/TGW adopted a consensus decision-making approach, 
with a three-level structure to oversee program execution 
and management. The Joint Steering Committee (JSC) was the 
top level of decision-making and was composed of senior 
national representatives at the 2-star level. It was the 
decision-making body that had the power to redirect the 
program. The next level was the Executive Management 
Committee (EMC) at the Colonel-level, chaired by the U.S., 


56 



which reports to the JSC. EMC performed cost, schedule, 
and performance oversight and met every six months. The 
next level comprised the technical, cost, and test working 
groups. These groups worked through the day-to-day 

challenges of the program. Disputes that could not be 
resolved at the lowest levels were escalated up the 
aforementioned chain. The U.S.-based MLRS/TGW program 
office was the "residence" for liaisons from each country. 
During the implementation of the program, it was observed 
that a response to a single question sometimes took months. 
Furthermore, the U.S. Government personnel and contractors 
found that problems they normally solved in one simple 
meeting frequently took three. Another issue that counted 
more for some partners was the holidays and vacations that 
delayed the process in decision-making. For instance, no 
program activity could be scheduled during the month of 
August, the traditional month of vacations in Europe. 
Another observation was that the European partners often 
united and "out-voted" the U.S.decision-making in MLRS/TGW; 
this was "nominally consensus" but, in reality, it was a 
process based upon threat of veto instead of true vote. 

When the parties could not reach a consensus, then the 
issue became a matter of "who screamed and pounded the 
table loudest." On the other hand, if a partner felt 
strongly about an issue, it might threaten to veto a 
decision, which could stop the program. That approach 
quite often resulted in a negative mode of decision-making 
rather than positive agreement and compromise. 


57 



C. CURRENT STATUS 

The requirements for longer-range rocket artillery 
have led the U.S., France, Germany, Italy, and the UK to 
the cooperative development of Guided Multiple Launch 
Rocket System (GMLRS). GMLRS is a guided rocket with 
significantly increased range and accuracy. 

In late 1998, the GMLRS program entered a four-year 
Systems Development and Demonstration (SDD) phase, and the 
final production qualification tests were successfully 
completed in December 2002. In March 2003, the M30 GMLRS 
rocket was approved for low-rate initial production, and 
Initial Operational Capability is scheduled for 2005. 
Under the LRIP-I contract, 156 GMLRS rockets were to be 
produced. A unitary variant of the GMLRS with a single 
warhead is being developed and Lockheed Martin was awarded 
an SDD contract for the unitary variant in October 2003 
with completion scheduled for 2007. Lockheed Martin has 
recently received $85 million from the U.S. Army to produce 
840 Guided MLRS rockets under Low-Rate Initial Production 
II (LRIP-II) contract. Table 3 depicts the latest and 
projected activities for MLRS.25 


TIME/PERIOD 

ACTIVITY 

3QFY2002 

EMD Critical Design Review 

1QFY2003 

Production Qualification Test Flight Readiness 

2QFY2003 

Product Definition Data Package Completion 

3QFY2003 

Low-Rate I Initial Production Decision 

3QFY2005 

Initial Operational Test 

2QFY2006 

Milestone III Decision - Initial Operational 
Capability 

Table 3 

Latest and Projected Activities for MLRS 


25 From Army Technology website. Report retrieved 09 March 2004 
from http://www.army-technology.com/projects/mlrs.html. 


58 



Lockheed Martin Missiles & Fire Control-Dallas, Diehl 
Munitions Systeme, GmbH & Co. KG, and MBDA (a formation of 
Matra BAE Dynamics, EADS Aerospatiale Matra Missiles and 
Alenia Marconi Systems missile activities) signed MoA's at 
the Paris Air Show in June 2001, in order to establish a 
European Prime Contractor for the production phase of this 
transatlantic cooperation program. Lockheed Martin and 
Diehl agreed to extend their Euro Rocket System (ERS) GmbH 
joint venture to incorporate MBDA as a third partner. ERS 
is a 50-50 joint venture between Lockheed Martin and Diehl, 
under German law, responsible for the area of MLRS business 
in Europe. The extended ERS Company would work with 
EiatAvio to establish an industrial team, representing all 
five cooperating countries. Eurther, broader industrial 
participation in production would be established within 
Europe. 

Lockheed Martin is the Prime Contractor for MLRS/GMLRS 
in the U.S. The European Prime Contractor aims to supply 
GMLRS into a large domestic and third party market 
beginning in 2005. 


59 



THIS PAGE INTENTIONALLY LEET BLANK 


60 



V. MEDIUM EXTENDED AIR DEFENSE SYSTEM 


A. BACKGROUND 

1. Introduction 

In today's world geopolitical environment, the United 
States is increasingly operating as part of a multinational 
coalition deployed outside of NATO Europe, whether as part 
of a NATO-led or NATO-endorsed effort, or part of some 
other internationally sanctioned multi-national operation. 
This has led both U.S. and European policy-makers to 
require that theater missile defense (TMD) systems be able 
to protect deployed joint and combined forces engaged in 
everything from major regional conflicts (MRCs) to 
humanitarian and non-combatant evacuation operations (NEO). 
The nature of future coalition operations demands that TMD 
systems posses a high level of interoperability and be made 
easily and rapidly transportable to any theater of 
operations.26 

Although all NATO members agree on the need for a TMD 
capability, only the United States, Germany, and Italy have 
agreed collectively to develop a TMD system within NATO 
that is capable of meeting both collective defense and 
security challenges. The Medium Extended Air Defense 
System (MEADS) represents this needed TMD system. MEADS is 
an international trilateral TMD program and cooperative 
effort involving the United States, Germany, and Italy, to 
develop an air and missile defense system that is mobile 
and transportable. It will be capable of countering 

26 Rudney, Robert. "The Contribution of the Medium Extended Air 
Defense System (MEADS) to the U.S. Post-Cold War Strategy." Comparative 
Strategy. 1997. 


61 



ballistic missiles and air-breathing threats such as 

aircraft, unmanned aerial vehicles, and cruise missiles. 
MEADS will improve the limited area defense of vital 

assets, both civilian and military, defend troops and fixed 
assets, as well as provide capability to move with and 

protect the maneuver of forces. 

2. Origins and Evolution of MEADS 

The MEADS program originated in 1989 as the Corps 
Surface-to-Air Missile (Corps-SAM), a U.S. Army concept for 
replacing the aging HAWK (Homing All-the-Way Killer) 
Surface-to-Air System (SAM). In order to improve its 
chances for funding, Corps-SAM evolved into a joint program 
between the U.S. Army and U.S. Marine Corps to fill the 

void that would be created by the retiring HAWK system, 
which had a life cycle extension into 2010. 

Erom the beginning, the Corps-SAM concept was 

envisioned as part of a layered air and missile defense 


architecture, filling 

a 

critical layer between 

the man- 

portable 

Stinger 

SAM 

and 

fixed. 

rear-end defense 

provided 

by the 

Patriot 

and 

the 

upper 

tier THAAD (Theater High 


Altitude Air Defense). 27 Corps-SAM, differently from any 
other TMD program, integrated three unique mission 
capabilities into one system: mobility, transportability, 
and target engagement diversity. As such, using the combat 
proven Patriot Advanced Capability-3 (PAC-3) missile, MEADS 
role in ballistic missile defense will be to bridge the gap 
between man-portable systems and the higher levels of the 
Ballistic Missile Defense Systems (HMDS), while providing 


27 Rudney, Robert. "The Contribution of the Medium Extended Air 
Defense System (MEADS) to the U.S. Post-Cold War Strategy." 
Comparative Strategy . 1997. 


62 



continuous coverage for rapidly advancing maneuver forces. 

Additionally, the system was to be mounted on a 
wheeled vehicle to travel on unimproved roads and cross¬ 
country with maneuver forces. For transportability, MEADS 
needed the ability to move using tactical aircraft such as 
the C-130 instead of the large strategic airlift vehicles 
like the C-141, C-17, or C-5. Corps-SAM was to be the only 
air-defense system able to roll off transports with the 
troops and immediately begin operations. 

Because of the diversity of the desired mission 
capabilities and the anticipated advancements in 
technologies needed for a relatively small, mobile, yet 
powerful radar, Corps-SAM evolved into a follow-on to the 
Patriot rather than a mere HAWK replacement. However, the 
high technology involved and the complexity of designing a 
single system capable of providing three different mission 
capabilities implied a very expensive defense system. In 
the early 1990's, with the end of the Cold War, the demise 
of the Soviet threat, the results of the Gulf War, and 
declining domestic defense budgets, it seemed unlikely that 
the U.S. Administration in office at the time would embark 
on such a costly program. Although the Office of the 
Secretary of Defense (OSD) had approved the system concept, 
it also directed that the Army seek and secure allied 
participation before system development approval. Thus, 
the Corps-SAM program survival depended upon finding 
international partners. The Army was successful in finding 
U.S. allies that were interested in jointly acquiring a new 
air and missile defense system. 


63 



3. From Corps-SAM to MEADS 

With the events of the Gulf War, Europe further 
realized the need for a TMD capability to protect forces 
and territory. Four NATO members (France, Germany, Italy, 
and the United Kingdom) had a requirement to replace their 
respective HAWK missiles with a rapidly-deployable system 
that would protect their forces from ballistic missile 
attack, yet each country had different concepts and systems 
in mind. 

The United Kingdom held off committing itself to any 
ongoing TMD effort until it completed a feasibility study 
that examined threats, requirements, and funding 
constraints. In February 1994, the United States 
officially invited and convinced Germany to merge its 
concept system (the TLVS or "Taktisches Luft-Verteidigungs- 
System") with the Corps-SAM in the system's development and 
production. Germany never actually intended to build TLVS 
on its own because of the costs involved. France and Italy 
also joined, after Germany, but without abandoning their 
own HAWK replacement program (the SAMP-T or "Sol Air 
Moyenne Portee-Terre"). In 1995, the United States, 
Germany, France, and Italy signed an initial statement of 
intent to collaborate on a common TMD system based on 
Corps-SAM, dividing costs and development. Corps-SAM's 
name consequently changed to MEADS. 

In May 1996, after delaying the signing of the 
official agreement by five months, France withdrew from the 
multinational effort, citing budgetary reasons and 
asserting that MEADS did not correspond to its strategic 
needs. The United States viewed France's withdrawal as an 
attempt to undermine the trans-Atlantic effort and draw 


64 



Germany into its own SAMP-T program. The same month, 
however, the United States, Germany, and Italy agreed to 
pursue the project definition and validation phase of MEADS 
without France. The burden of costs and development would 
be shared, with the United States bearing 60 percent, 
Germany 25 percent, and Italy 15 percent. 

At the time, MEADS represented an innovative approach 
to trans-Atlantic armaments cooperation that was to set the 
tone for future collaboration on major military programs. 
Since the 1960s, trans-Atlantic arms cooperation projects 
have suffered a 50 percent cancellation rate, while intra- 
European programs have failed less than eight percent of 
the time.28 These statistics depict how recurring 
challenges have complicated U.S.-European arms cooperation. 
First, the major powers have been reluctant to compromise 
on national military requirements. Second, the major 
powers have been afraid to depend on other nations to meet 
fundamental, even strategic, security needs.29 American 
allies are reluctant to join trans-Atlantic programs where 
European countries are junior partners, fearing that the 
United States will ignore their interests. However, if 
both sides share the project evenly or when it is in their 
interest (such as programs enabling European nations to 
benefit from access to U.S. advanced technology), then 
European allies favor cooperation.30 MEADS seemed to be the 
case for the latter. 


28 Grant, Robert. "Transatlantic Armament Relations Under Strain. 

Survival 39. 1997. 

29 Ibid. 

30 Ibid. 


65 



MEADS also benefited from the Department of Defense's new 


leadership in 1993 (the start of the Clinton 
Administration) , which provided political support to 
improve NATO armaments cooperation. Thus, in the two years 
from 1994 to 1996, the number of international programs 
tripled from 40 to 120. However, only three were major 
initiatives: the Multifunction Information Distribution 
System (MIDS), the Joint Strike Fighter (JSF), and MEADS. 
The United States cited several reasons favoring NATO 
European allies to enter the MEADS program. First, the 
U.S. argued its armaments policy shift under the Clinton 
Administration would improve and streamline trans-Atlantic 
cooperation. Second, MEADS would strengthen the U.S.- 
European allies' military and industrial relationship into 
a more binding, long-term security relationship. Third, 
MEADS would represent preparation for coalition operations 
by achieving interoperable equipment requirements and 
common logistics capabilities. Fourth, MEADS would allow 
nations to acquire a critical weapon system when 
constrained defense budgets prohibited pursuing such a 
venture on a unilateral basis.3i 

The MEADS project passes through three phases. The 
participating countries negotiate a Memorandum of 
Understanding (MOU) for each of these phases: Product 
Definition/Validation (PD/V), Design and Development (D&D), 
and Production. MEADS is currently in the first stage, 
PD/V. In 1999, MEADS was restructured to add a Risk 


31 Engelhardt, Robert. The Medium Extended Air Defense System: A 
Renaissance in Trans-Atlantic Armaments Cooperation? Thesis. Naval 
Postgraduate School. March 1999. 


66 



Reduction Effort (RRE) to the PD/V phase. The primary 
objectives of MEADS RRE are to: 

■ Demonstrate an integrated MEADS system concept 

incorporating the PAC-3 missile. 

■ Reduce the overall program's technical, schedule, 
and cost risk. 

■ Develop the international cost and schedule 
consensus for the MEADS program. 

During this phase, a decision was made to incorporate 
the Lockheed Martin PAC-3 missile into the system. The 
German and Italian governments called for a study on 
introducing a second missile into the program in addition 
to the PAC-3. 

In May 1999, the NATO MEADS Management Agency 
(NAMEADSMA), a chartered organization of NATO, selected 
MEADS International, Inc., to develop MEADS. A 

multinational joint venture headquartered in Orlando, 
Elorida, MEADS International's participating companies are 
MBDA Italia, EADS European Aeronautic Defence and Space 
Company and LEK-Lenkflugkorpersysteme (LEK, a subsidiary of 
EADS and MBDA) in Germany, and Lockheed Martin in the 
United States. In October 2002, the OSD approved a 
proposal from the Missile Defense Agency (MDA) to transfer 
management of the MEADS program from MDA to the Army. On 
April 30, 2003 at a meeting of the Defense Acquisition 
Board (DAB) , the DOD approved the Army's plan to pursue a 
combined Patriot and MEADS evolutionary development plan. 

4. NATO Participation in MEADS 

As previously mentioned, the United States invited the 
major European defense-producing nations to join the MEADS 
program. Each had a different reason to join, or not, the 


67 



program and each decision essentially reflected the 
country's political-military history. Germany and Italy 
defense policies have traditionally followed NATO policy, 
while France and the United Kingdom have maintained a more 
independent status. Several factors affected European 
participation in MEADS: the impact of the Gulf War, post- 
Cold War budget constraints, wariness regarding U.S. 
bureaucratic and political practices, and the understanding 
that trans-Atlantic cooperation remains central to each 
nation's security.32 Germany, as the leading partner in the 
MEADS cooperative program, and one of only two countries 
that have joined the program so far, will be the focus of 
NATO participation in MEADS. 

a. Germany 

By 1993, Germany was facing the continuing costs 
associated with reunification, and a high level of 
unemployment. Other national priorities, as mentioned 
above, outweighed any expensive defense program. However, 
the impact of the Gulf War, the proliferation of weapons of 
mass destruction, and the vulnerability to tactical 
ballistic missiles eventually led Germany to accept and 
pursue a TMD system. Reunification was considered a long, 
costly, and dedicated process. Meanwhile, it seemed 
logical for Germany to depend upon the United States by 
working with and relying on the U.S. for a TMD system 
instead of pursuing a more independent program.33 


32 Engelhardt, Robert. The Medium Extended Air Defense System: A 
Renaissance in Trans-Atlantic Armaments Cooperation? Thesis. Naval 
Postgraduate School. March 1999. 

33 Ruble, Hans. "Ballistic Missile Defense: A German View". 
Comparative Strategy . 1993. 


68 



Hence, by early 1995, Germany focused on who 
should build the TMD system, instead of how. The German 
TLVS, originally conceived to contend with Soviet air 
attacks, no longer had the capabilities required in the new 
security environment. Furthermore, defense-spending 
constraints meant that TLVS could only be built through an 
international partnership. This left Germany with three 
options: partner with the United States (Corps-SAM), with 
France and Italy (SAMP-T), or all three. Each option 
involved political, military, and industrial advantages and 
disadvantages. 

From a political standpoint, several reasons 
inclined the balance toward U.S. partnership. First, the 
U.S. counter-proliferation strategy was multi-faceted. 
Second, partnership with the U.S. would remove Germany from 
Congressional criticism. Third, close trans-Atlantic 
cooperation was in Germany's utmost security interests. 
And fourth, European public opinion was very sensitive over 
TMD systems and tactical ballistic missiles (TBMs), as they 
were manufactured on the continent. 

The principal military reason for partnering with 
the U.S. was the German Air Eorce, which had positive and 
close cooperation with the U.S. on air defense systems. It 
believed that MEADS would satisfy NATO requirements for 
interoperability, it favored U.S. technology, and, 
ultimately, it sought U.S. equipment in case a European 
crisis ever emerged again so they would not rely on a 
potential European enemy for military equipment. 

In the industrial arena Germany was more wary, 
knowing that the U.S. financial, industrial, and 
technological dominance would overcast German companies. 


69 



Furthermore, there was also wariness of the internal 
competing interests of the U.S. military and industrial 
sector, as well as the unpredictable executive-legislative 
actions. However, the importance placed on trans-Atlantic 
TMD cooperation outweighed any concern, although compelling 
political reasons favoring cooperation with the French 
existed. Germany favored a U.S.-European effort, but did 
not believe that France would abandon the French-Italian 
SAMP-T for an entirely new system. Although France 
presumably delayed and eventually withdrew from the MEADS 
program in an effort to divert Germany toward its own TMD 
program, the SAMP-T, Germany eventually decided on the 
MEADS system. 


b. Italy 

The reason that Italy, with a small defense 
budget, would pursue two extended air defense systems 
(MEADS and SAMP-T) that appear to possess similar 
capabilities is not clear. As with Germany, the main 
reason for Italy may be pragmatism. Aware of its own 
immediate vulnerability to TBMs and the U.S. dominance in 
BMD programs, Italy would be imprudent not to work with the 
United States on a TMD system.34 furthermore, once the 
Italian Government has approved a multinational project, 
international commitment ensures steady funding from start 
to finish for the Italian Services, which already compete 
for limited funds. Even though Italy recognizes 

international cooperative efforts are more expensive than 
purchasing equipment off-the-shelf, the benefits of access 


34 Engelhardt, Robert. The Medium Extended Air Defense System: A 
Renaissance in Trans-Atlantic Armaments Cooperation? Thesis. Naval 
Postgraduate School. March 1999. 


70 



to technology, employment in Italian enterprises, and 
strengthened political ties can be more important than 

immediate cost-savings.35 

c. France 

Although France's role in MEADS was brief, from 
1995 to 1996, it depicted the French's own perception of 
its national interests and those of its European neighbors. 
To France, all arms and weapons systems should be developed 
and produced in and by Europe, and to France "Europe" means 
French leadership. France does not want to leave the U.S.- 
dominated world market for medium-range and longer-range 
ground-based air defense systems to the United States 
alone, and it does not want Europe to remain dependent on 
U.S. systems.36 The French have, nonetheless, recognized 
their need to maintain close ties with the United States. 

d. Prospective Partners 

As previously mentioned, the United Kingdom 
withheld participating from the start of the program, 
arguing it required feasibility studies examining existing 
threats, requirements, and budget constraints. To date, 
several studies have been conducted and all seem to 
indicate and conclude that the United Kingdom does not see 
an immediate threat from Europe's southern periphery in the 
near future, the defense budget does not allow a TMD 
program, and because of the nature of current multinational 
missions, it can eventually rely on the U.S. to provide TMD 
for British forces. The studies further suggested that the 

35 Engelhardt, Robert. The Medium Extended Air Defense System: A 
Renaissance in Trans-Atlantic Armaments Cooperation? Thesis. Naval 
Postgraduate School. March 1999. 

36 Mey, Holger. "Extended Air Defense - Germany Between European 
and Transatlantic Orientations." Comparative Strategy. 1995. 


71 



United Kingdom was more interested in naval-based programs 
than ground-based programs due to their location in the 
European continent. 

Since 1998, other HAWK-equipped NATO members have 
been expected to join the MEADS program (the Netherlands, 
Turkey, Greece, among others) , but to date none has done 
so. European participation has been driven by the 

dominating U.S. lead and experience in TMD technologies and 
infrastructure. While recognizing the need to partner for 
effective TMD capability, nonetheless, each side remains 
cautious of each other. Europe because of the U.S. 
bureaucratic interactions, and the U.S. because of 
technology transfer issues in order to maintain their 
position as a super power. 

5. Domestic Perspectives on MEADS 

Eor Germany and Italy, MEADS has always been a top 
priority. Eielding MEADS on schedule is critical because 
neither country currently has a TMD capability sufficient 
for the new security environment. Eor the United States, 
however, while a mobile TMD capability remains a stated 
requirement, other TMD programs like the Patriot PAC-3 and 
THAAD are deemed a higher priority and more urgent than 
MEADS. As such, MEADS has been categorized as a follow-on 
system and consequently lacked the necessary long-term 
dedicated funding. MEADS was even excluded from the 1999- 
2004 Program Objectives Memorandum (POM). 

Eor instance, according to a 1998 General Accounting 
Office (GAO) Report, the Ballistic Missile Defense 
Organization (BMDO) could not provide the $1.4 billion 
needed for fiscal years 2000 through 2005 unless the DoD 
(1) increased BMDO's total obligational authority; (2) 


72 



extended the development and production of programs, such 
as PAC-3, THAAD, and Navy Area systems; or (3) drastically 
reduced BMDO funding earmarked for targets, systems 
integration and test, and management.37 As France had 
predicted, MEADS' weaknesses resulted not from European 
actions, but from internal U.S. politics. By 2004, the 
United States had decreased its funding for MEADS from the 
initial 60 percent to 55 percent. Germany and Italy 
absorbed these costs, increasing burden sharing from 25 to 
28 percent and from 15 to 17 percent, respectively. 

The U.S. Defense Industrial Base (USDIB) regarded 
MEADS as critical due to what its failure might mean to 
trans-Atlantic cooperation and because the European arms 
market might be closed to U.S. defense firms by the 
creation of a "Eortress Europe" mentality. Eurthermore, 
the DoD's handling of MEADS could harm the U.S.'s ability 
to conduct business in Europe. Eventually, Germany, Italy, 
and the USDIB recognized the effects of U.S. political and 
bureaucratic factors in undermining MEADS and consequently 
the future of trans-Atlantic arms cooperation. In the end, 
the U.S.'s credibility as a partner for future cooperative 
armaments ventures has suffered most. 

As for technology transfer, the United States has 
always established procedures for releasing sensitive 
national security-related information to foreign 
governments and companies. These policies aim to preserve 
U.S. military technological advantages. Control policies 
limit the transfer of advanced design and manufacturing 


37 United States. General Accounting Office. Defense Acquisition: 
Decision Nears on Medium Extended Air Defense System. GAO/NSIAD-98- 
145. June, 1998. 


73 



knowledge and information on system characteristics that 
could contribute to the development of countermeasures. 
BMDO's summary statement of intent did not address 
technology transfer issues that continue to trouble the 
MEADS program. Although the statement recognized that 
classified information developed for other missile programs 
would be transferred to the MEADS program, the statement 
did not address whether the programs that owned that 
information had concerns about its release. Also the BMDO 
did not address the impact that a decision to withhold 
critical information could have on executing the program.38 
Technology release policies present special challenges 
for the MEADS program because they involve several 
sensitive technologies critical to preserving the U.S. 
military advantage, especially the PAC-3 missile. These 
policies limit the ability of contractors to leverage the 
use of existing missile system technology and pursue the 
cheapest technical solution. German and Italian defense 

officials and the European contractors involved in the 
MEADS program said that unless they can assess the U.S. 
technology that U.S. contractors are using, they cannot be 
sure the technology is the best or the cheapest available.39 
Eor the international system to be truly interoperable, DoD 
may have to provide information that it has been reluctant 
to share. Eor instance, the United States has been 
reluctant about providing critical technological 
information on the PAC-3 missile developed by the U.S. firm 
Lockheed Martin. The battle-proven PAC-3 missile is the 

38 United States. General Accounting Office. Defense Acquisition: 
Decision Nears on Medium Extended Air Defense System. GAO/NSIAD-98- 
145. June 1998. 

39 Ibid. 

74 



world's 

only fielded 

hit-to-kill, 

kinetic energy 

air 

defense 

missile. 

It 

defeats the 

entire 

threat 

to 

the 

Patriot 

Air Defense 

System: TBMs carrying 

weapons 

of 

mass 


destruction, advanced cruise missiles, and aircraft. Thus, 
the PAC-3 missile represents an important and critical 
technological advantage for the U.S. 

Additionally, when MEADS was designated as a follow-up 
to Patriot, and the PAC-3 missile became the focus of the 
system, Germany and Italy essentially had to adhere to the 
"Buy American Act." However, current U.S. arms controls 
have allowed neither Germany nor Italy to benefit 
extensively from access to U.S. advanced technology. 

B. PROGRAM ANALYSIS 

1. The Reasons for MEADS 

The desire of the United States, Germany, and Italy to 
develop MEADS jointly emerged from the post-Cold War 
reality of reduced defense budgets and the need to share 
the costs of expensive systems. Eor the United States, 
NATO MEADS was the only way to keep its original Corps-SAM 
funded. In order to achieve international support, the 
U.S. —^under the Clinton Administration— promised a new 
approach to armaments cooperation that would ease 
technology sharing and would equitably divide the program's 
development and production work share. A joint cooperative 
effort with U.S. allies was considered the best means of 
acquiring MEADS because it reduced cost, improved political 
ties, and built a more effective coalition force. However, 
the DoD did not fully assess funding and technology 
transfer issues before initiating the international 
program, and thus it may not be able to achieve these 
benefits. 


75 



For Germany and Italy, cooperation with the United 
States was necessary not only for budgetary reasons, but 
because of the dominant lead the U.S. possesses in missile 
defense technologies, research and development, and 
operational experience. At the same time, however, German 
and Italian concerns over the tendency for internal U.S. 
bureaucratic processes to derail international projects was 
set aside because of the promise of a renaissance in 
armaments cooperation.40 

The cancellation of the MEADS program would have 
immediately affected the U.S. Ballistic Missile Defense 
(BMD) , since the ability of other systems to meet MEADS 
requirements is limited. The Navy Area Wide (NAW) system 
may not be capable of protecting the maneuver force because 
its defended area will be limited by the distance from 
which it must stand off shore and the range of its 
interceptor. Ultimately, the NAW system has been cancelled. 
The Theater High Altitude Air Defense (THAAD) and Navy 
Theater Wide (NTW) systems are being designed to engage 
primarily medium-range ballistic missiles, but THAAD cannot 
defend against theater ballistic missiles launched from 
very short ranges, aircraft, or low-altitude cruise 
missiles. 

2. U.S. Internal Factors Affected MEADS 

Domestic U.S. political and bureaucratic factors 
reminiscent of Cold War experiences resurfaced and 
jeopardized the U.S.'s participation in MEADS, almost 
killing the project in the beginning. The United States 


40 Engelhardt, Robert. The Medium Extended Air Defense System: A 
Renaissance in Trans-Atlantic Armaments Cooperation? Thesis. Naval 
Postgraduate School. March 1999. 


76 



was unwilling to risk the stability of higher priority 
domestic TMD systems in order to fund MEADS. Instead, the 
U.S. presented an alternative U.S. concept to Germany and 
Italy that would be more affordable but probably less 
capable than MEADS. Eventually, the PAC-3 alternative was 
accepted and is currently the system underway. The 
Europeans declared that if MEADS failed because of U.S. 
political actions, NATO Europe would exclude U.S. defense 
industries from European markets and turn inward to a 
policy of developing and procuring arms exclusively within 
Europe. 

To date, the United States, Germany, and Italy, have 
compromised on a mutually acceptable solution to MEADS 
because of their shared common interest in preserving a 
strong NATO to ensure continued European stability. This 
compromise, however, does not conceal that MEADS was almost 
cancelled due to U.S. political and bureaucratic reasons. 
Instead, this compromise only increases the concerns of 
NATO European countries over any future effort to cooperate 
with the United States in major trans-Atlantic armaments 
enterprises. 

3. Initial Funding Dilemma 

A compromise on MEADS has not improved the United 
States' credibility as an international armaments partner, 
especially with the unstable and contradictory position 
assumed by Congress and DOD regarding funding for the 
initial years of the program. The multilateral statement 
of intent showed that the partners intended to develop and 
produce MEADS together, but little attention was given to 
MEADS funding needs subsequent to the project's definition 
and design. The summary statement of intent did not 


77 



address the long-term funding needs by fiscal year. 
Instead, it indicated that funding beyond fiscal year 1999 
would be derived from funds budgeted to develop an advanced 
theater missile defense capability. 

BMDO initially was unable to acquire MEADS without 
impacting higher priority missile defense programs unless 
the DoD or the U.S. Army provided additional funds. The 
BMDO's budget plan did not include funding for MEADS after 
fiscal year 1999 because the organization's budget was 
dedicated to missile systems that would be available 
sooner. Over the next six years, up to 2005, for which 
BMDO budgeted, the organization needed $1.4 billion to 
execute the planned MEADS program. Because it had 

difficulty funding MEADS, BMDO considered various program 
options to find a less costly acquisition program, 
including terminating the program that had started as a 
United States' initiative and proposal for international 
cooperative research and development. As noted, the U.S. 
was motivated to make the program economically attractive 
to the possible participants by offering flexible burden 
sharing arrangements and compensating more of the costs 
than the other participants because it was in the U.S. 

Army's interest to secure international funding. However, 
MEADS lacked Congressional political backing and DOD 

economic support from the start. 

4. Technology Transfer Concerns 

The summary statement of intent did not address 

technology transfer issues that continue to trouble the 
MEADS program. The statement recognized that classified 
information developed for other missile programs would be 
transferred to the MEADS program, but it did not address 


78 



whether the programs that owned that information had 
concerns about its release. Unless the European partners 
and their respective contractors can assess the U.S. 
technology that U.S. contractors are using, these partners 
cannot be sure that the technology is the best or the 
cheapest available. For the MEADS program and any 

international cooperative effort to be truly interoperable 
and successful, the DoD must provide information that it 
has traditionally been reluctant to share. Germany has 
contended that the U.S. has not released enough technology 
and knowledge on time for MEADS. 

C. CURRENT STATUS 

In 2003, MEADS International submitted a solicited 
proposal for the Design and Development (D&D) Phase. The 
D&D contract is planned to begin in 2004 and would extend 
the MEADS program, which is currently near the end of a 
Risk Reduction Effort (RRE) contract, for seven years. In 
a contract milestone demonstration in 2003, the system 
demonstrated its ability to acquire, classify, track, and 
destroy simulated aircraft and missile targets in a 
successful System Level Interface Demonstration. 

On September 10, 2003, MEADS International completed a 

successful series of demonstrations and tests of its 
advanced lightweight launcher prototype in Brescia, Italy, 
and released the first photographs of the launcher. The 
MEADS launcher, designed to initialize, self-load, and 
vertically launch up to 12 PAC-3 missiles rapidly, is able 
to roll-on/roll-off C-130 transport aircraft. The launcher 
tests included demonstrations of uploading and offloading 
representative PAC-3 missile canisters using a unique 
system that significantly reduces manpower from that 


79 



required by the current Patriot system. "The tests took 
place in the presence of military observers from the three 
nations co-developing MEADS, " said MEADS International 
Chief Engineer Pietro Ragonese. "Military representatives 
from Germany, Italy, and the United States were all highly 
impressed with the simplicity of operating the launcher and 
its demonstrated unloading-reloading times, which were well 
within requirements stipulated by the three countries. The 
MEADS program remains on track and on budget."4i MEADS 
International developed the launcher with principal 
subcontractors MBDA-Italia, EADS/LEK, Lockheed Martin, 
ATIB, Rampini, and Stewart & Stevenson. 

On March 4, 2004, Lockheed Martin's PAC-3 missile 

successfully intercepted and destroyed an incoming TBM in a 
test at White Sands Missile Range, New Mexico. The PAC-3 
missile is the selected primary interceptor for the multi¬ 
national MEADS.42 Eirst low-rate production missiles were 
delivered to the U.S. Army in October 2001. A contract for 
88 missiles was placed in December 2002 and for another 12 
in March 2003. A total of 220 missiles are planned for 
procurement by 2004, when a decision on full-rate 
production is expected. The missile was first deployed 
during Operation Iraqi freedom in March/April 2003. 

As previously mentioned, MEADS is currently in the 
three-year RRE phase, awarded in July 2001, which is 

41 MEADS International, Inc. "MEADS Advanced Lightweight Missile 

Defense Launcher Completes Acceptance Tests." Press Release by MEADS 
International, Inc. September 10, 2003. Press release retrieved 25 

February 2004 from website http://www.missilesandfirecontrol.com. 

42 Lockheed Martin Corporation. "Lockheed Martin's PAC-3 Missile 

Successfully Intercepts Tactical Ballistic Missile In Test." Press 
release by Lockheed Martin Corporation. March 4, 2004. Press release 

retrieved 10 March 2004 from website 

http:// WWW .missilesandfirecontrol.com. 

80 



investigating measures to reduce development risks and 
costs for critical elements. These efforts include 

assessing technologies identified in the participating 
countries' evolving air defense concepts. RRE is on 
schedule for completion in 2004. Currently, the United 
States, Germany, and Italy are financing the program in 
shares of 55, 28 and 17 percent respectively. MEADS is 

expected to enter service in 2012. 


81 



THIS PAGE INTENTIONALLY LEET BLANK 


82 



VI. JOINT STRIKE FIGHTER 


A. BACKGROUND 

1. Program History 

The Joint Strike Fighter (JSF) program originated in 
the early 1990's by restructuring and integrating several 
DoD tactical aircraft and technology initiatives already 
underway at the time. The DoD's goal was to meet the 
future strike requirements of the U.S. and its Allies using 
a common family of aircraft and the latest technology. 

In 1993, the Defense Advanced Research Projects Agency 
(DARPA) executed a program to develop a supersonic Short 
Take-Off and Vertical Landing (STOVL) aircraft as a 
replacement for the AV-8B Harrier. Additionally, the DoD 
was considering canceling the Navy's Advanced 
Attack/Fighter (A/F-X) that was slated to replace the 
General Dynamics/McDonnell Douglas A-12 Avenger II program 
for the U.S. Navy. 

Senior leadership at the Pentagon suggested a Joint 
Attack Fighter (JAF) instead of the Navy's A/F-X program. 
The JAF would be cheaper than the A/F-X and would be 
designed with a common airframe suitable for the Navy, Air 
Force and Marine Corps. By using a common airframe, 
significant manufacturing and operational savings were 
expected. Many of the concepts associated with the JAF 
program were later incorporated into the Joint Advanced 
Strike Technology (JAST) program. Its single-engine design 
and commonality were among these incorporations. 

The JAST Program was initiated in late 1993 as a 
result of the DoD Bottom-up-Review (BUR). The major 
tactical aviation results of the BUR were to cancel the 

83 



Multi-Role Fighter (MRF) and the A/F-X programs, continue 
the ongoing F-22 and F/A-18E/F programs, reduce F-16 and 
F/A-18C/D procurement, and initiate the JAST Program. 

The JAST program office was established on January 27, 
1994, with the mission of defining and developing aircraft, 
weapon, and sensor technology that would support the future 
development of tactical aircraft. The program subsequently 
moved from a broad, all-encompassing program to one that 
would develop a common family of aircraft to replace 
several aging U.S. and UK aircraft. 

By the end of 1994, the JAST program had absorbed the 
DARPA Common Affordable Lightweight Fighter (CALF) program. 
CALF subsequently became the primary focus of the JAST 
program. Additionally, the JAST program was considering 
modifying the Conventional Take-Off and Landing (CTOL) 
versions of the aircraft to perform in a STOVL role in 
order to meet the needs of the Marine Corps. Consequently, 
Congress mandated the merger of JAST with the DARPA 
Advanced Short Take-Off/Vertical Landing program. The JAST 
Program initially explored a wide range of potential strike 
warfare concepts using six-month Concept Exploration (CE) 
study contracts awarded in May 1994. The findings of the 
CE studies showed that a common family of aircraft was the 
most affordable solution to meet the needs of each Service. 
The family of aircraft would comprise a single basic 
airframe design with three distinct variants: CTOL for the 
U.S. Air Force to complement the F-22 Raptor and replace 
the aging F-16 Fighting Falcon and the A-10 Thunderbolt; 
STOVL for the U.S. Marine Corps to replace both the AV-8B 
Harrier and the F/A-18 C/D Hornet; and a Carrier (CV) 


84 



variant for the U.S. Navy to complement the F/A-18 E/F 
Super Hornet. 

Following numerous trade studies, two critical 
decisions were made: the JAST family of aircraft would be 
single-crew and single-engine. Navy attack/fighter 
aircraft previously possessed two engines due to safety 
concerns. The choice of a single-crew aircraft was 
accepted based on technology maturation and demonstrated 
reliability testing. 

Boeing, Lockheed Martin, McDonnell Douglas, and 
Northrop Grumman were each awarded fifteen-month Concept 
Definition and Design Research (CDDR) contracts in December 
1994. Northrop Grumman and McDonnell Douglas/British 
Aerospace teamed shortly after the CDDR contracts were 
awarded. The contractors refined their Preferred Weapons 
System Concept (PWSC) designs and performed a number of 
risk reduction activities (e.g., wind tunnel tests, 
powered-model STOVL tests, and engineering analyses). 

In the spring of 1995, all three of the contractor 
teams selected derivatives of the Pratt & Whitney (P&W) 
F119 engine to power their aircraft. Consequently, P&W was 
awarded a contract for a preliminary design of each of the 
primary JSF engine concepts in November 1995. 
Concurrently, the DoD awarded General Electric a contract 
to investigate whether the GE EllO or YE120 could be 
developed into an alternate engine for one or more of the 
JSE variants. In 1996, the YE120 was identified as the 
best solution and GE initiated preliminary design efforts. 

Several Defense Acquisition Board (DAB)-level program 
reviews were conducted in late 1995. The final Requests 
for Proposal (REP) were issued to the contractors in March 


85 



1996. By that time the JAST program name had changed to 
Joint Strike Fighter (JSF). 

In May 1996, JSF was designated an Acquisition 
Category I, DoD acquisition program. In June, the weapon 
system prime contractors submitted their Concept 
Demonstration Phase (CDP) proposals. The Under Secretary 
of Defense (Acquisition & Technology) signed a formal 
Milestone I Acquisition Decision Memorandum on November 15, 
1996, clearing the way for the award of CDP prime contracts 
to Boeing and Lockheed Martin on November 16, 1996. 

On November 16, 1996, the DoD announced that Boeing 
and Lockheed Martin had been chosen to compete in the 
concept development phase. Each contractor was tasked to 
design and flight-test a CTOL and STOVL version of the 
aircraft. On October 26, 2001, the DoD selected Lockheed 
Martin as the prime contractor for the Joint Strike Fighter 
Program. 

2. Program Objectives 

The Joint Strike Fighter program is supposed to be a 
model for future cooperative programs. Consequently, the 
DoD attempted to apply a new approach for cooperative 
research and development of the JSF. JSF is the DoD's most 
expensive aircraft and cooperative program with an 
estimated total cost of over $200 Billion. The goal of the 
JSF program is to develop and to produce an affordable 
next-generation strike fighter weapon system and sustain it 
worldwide. The JSF program is expected to produce over 
2,500 aircraft and replace the U.S. Air Force's F-16 and A- 
10, the U.S. Marine Corps' F/A-18-C/D and AV-8B, the 
British Navy's Sea Harrier, and to complement the U.S. 
Navy's F/A-18E/F. Currently, the program is expected to 


86 



produce 1,763 CTOL versions for the Air Force, 680 CV/STOVL 
versions for the Navy and Marine Corps, and 150 STOVL 
versions for the UK. Additionally, the Joint Strike 
Fighter Program expects to sell over 2,000 aircraft 
worldwide. 

In order for the DoD to make the JSF Program a model 
for future acquisitions, the DoD created the program office 
earlier in the program than normal. This permitted the 
program office to concentrate on the following six areas 
for acquisition improvements. 

1) Service Commonality: Competing contractors were 
encouraged early on to maximize commonality between the 
three variants for the Navy, Air Force, and Marine Corps. 
This would reduce costs by increasing economies of scale 
and would promote interoperability. The contractor's goal 
was to reach a level of 70 to 90 percent commonality in 
airframe, avionics, and engine. 

2) Acquisition Cycle: As mentioned previously, the 
program office was established much earlier than usual for 
a weapons system. This allowed Integrated Product Teams 
(IPT's) composed of the major stakeholders to be formed 
earlier in the research and development phase. 
Additionally, the Concept Exploration and Program 
Definition Risk Reduction phases were combined into a 
single Concept Demonstration Phase. This permitted more 
time to conduct cost/benefit trade-off analysis, technology 
assessment, and requirements definition. 

3) Requirements Determination Process: From 1995 to 
1999, three joint requirements documents were developed 
with the assistance of the stakeholders. While developing 
the requirements documents. Cost As an Independent Variable 


87 



(CAIV) was stressed. Additionally, target prices were 
established for each version with $28 million for the CTOL 
version, $31 to 38 million for the carrier version and $30 
to 35 million for the STOVL version in FY94 dollars. 

4) Technical Risk Reduction: In order to minimize 
risk, the program office identified areas of high risk and 
ways to reduce the risk. The program office was determined 
to use competitive hardware demonstration as a way to 
mitigate risk. For instance, the program office funded a 
$110 million project to develop a multifunctional 
integrated radio frequency system (MIRFS). The MIRFS 
project was awarded to two contractors: Hughes Aircraft and 
Northrop-Grumman. These contractors were encouraged to 
develop lighter, lower-cost, active electronically-scanned 
arrays for fire control radars and demonstrate them. 

5) Extended Design and Subsystem Competition: 
Competition was emphasized at the prime and subsystem 
levels throughout the Concept Definition and Design 
Research Phase. From 1994 to 1995, three prime contractor 
teams competed for the contract. The teams were Boeing, 
Lockheed Martin, and McDonnell Douglas/Northrop 
Grumman/British Aerospace. As previously discussed, the 
competition was then down-selected to Boeing and Lockheed- 
Martin. Additionally, since both potential prime 
contractors decided to use Pratt and Whitney F119 engines, 
the program office awarded an Alternate Engine Program with 
General Electric to design an alternate engine source. 

6) International Participation: Since the program 
office was founded earlier than normal, significant 
international participation was sought during the beginning 
of the design phase. This was something that no U.S. 



fighter developed since World War II had sought to do. The 
British, for instance, as full collaborative partners, were 
able to influence the design phase significantly. 

3. Extent of International Participation 
As previously mentioned, the JSF Program actively 
sought international participation early on in the life of 
the program, including requirement definition. The U.S. 
recognized the need for interoperability from lessons 
learned during Operations Desert Storm and Northern Watch. 
Additionally, the DoD perceived the ability to share costs 
and accessing best value, cutting-edge technology by 
pursuing and incorporating international partners. The 
following illustrates the extent and privileges of each 
international partner. Furthermore, the JSF organizational 
structure is presented in Figure X and the level of 
financial contributions in Figure Y. 
a. Level I Partner: 

1) United Kingdom 

a) National Deputy: at the director level 
reports to the JSF Program Manager 

b) JSF Program Office Staff: ten fully 

integrated staff, including the Deputy 
Director of the Systems Engineering IPT 

c) Data Use Rights: includes use for the 
performance of project activities under 
SDD MOU's and future efforts by the 
United Kingdom (either collaboratively, 
nationally, or under U.S. Foreign 
Military Sales (FMS) arrangements) for 
the design, development, manufacture. 


89 



operation, and support of any JSF 
aircraft 

d) Benefits during Production: delivery 

priority based on level of SDD 

contributions; waiver of all non¬ 
recurring research and development costs; 
levies from sales to non-partners based 
on level of SDD contributions 
b. Level II Partners: 

1) Italy 

a) National Deputy: reports to the JSF 

International Director 

b) JSF Program Office Staff: five integrated 
staff, including a Logistics Manager on 
the Autonomic Logistics IPT 

c) Data Use Rights: Italian Ministry of 
Defense JSF purposes includes use for the 
performance of project activities under 
SDD MOU's and future efforts by the 
Italian Ministry of Defense (either 
collaboratively, nationally, or under 
U.S. Foreign Military Sales arrangements) 
for the design, development, manufacture, 
operation, and support of the JSF CTOL 
and STOVL variants 

d) Benefits during Production: delivery 

priority based on level of SDD 
contributions; waiver of all non¬ 
recurring research and development costs; 
levies from sales to non-partners based 
on level of SDD contributions 


90 



2) Netherlands 

a) National Deputy: reports to the JSF 

International Director 

b) JSF Program Office Staff: three 

integrated staff 

c) Data Use Rights - CTOL purposes includes 
use for the performance of project 
activities under SDD MOU's and future 
efforts by the Netherlands (either 
collaboratively, nationally, or under 
U.S. Foreign Military Sales arrangements) 
for the design, development, manufacture, 
operation, and support of the JSF CTOL 
and F-16 aircraft 

d) Benefits during Production: delivery 

priority based on level of SDD 

contributions; waiver of all non¬ 
recurring research and development costs; 
levies from sales to non-partners based 
on level of SDD contributions 

c. Level III Partners: 

1) Turkey, Australia, Canada, Denmark, and 
Norway 

a) National Deputy: reports to the JSF 

International Director 

b) JSF Program Office Staff: one integrated 
staff, who performs both national deputy 
duties and participates on the C4I IPT 

c) Data Use Rights: includes use for the 
performance of project activities under 
SDD MOU's 


91 



d) Benefits during Production: delivery 

priority based on level of SDD 

contributions; consideration for waiver 
of all non-recurring research and 

development costs; levies from sales to 
non-partners based on level of SDD 
contributions 


Director 
Deputy Director 
Technical Director 


Executive 
Committee (EC) 

1—glK 

—sis 

11= 




MSS 


Systems Engineering 
IPT 


SIS STS 


I 111 


Autonomic Logistics 
IPT 


— StS SiS' 


iiz: 


! Integrated Test ' 
Force f 


Air Vehicle Propulsion 

IPT IPT 


..sis _sfs. 

ii II 

= m 

l«l SIS 


-3lS- 


Senior War Fighters i 
[1/Service] 

(SMO-JSF. DCS(A), 
N-78, International 
Partners) 


iiii=a 

gflMSiSSS 


‘ Contractor ' 

1 Field Site ; 

BFM 

Operations 

Contracting 

Security 


International 

Legal 

Public 

Affairs 

1_ 

j Site 1 

' Directors ’ 

1 1 





gig gig 

StS StS 



StS 


II = 

a m 

hi SIS 


Not co-located with 
main office 


Figure 6. JSF Organizational Chart 


Source: From Joint Strike Fighter website accessed 15 Febraury 2004 at 

http://WWW.j sf.mil. 


92 


























Partner 

Country 

Partner 

Level 

Financial 

contributions 

(in millions) 

Percentage 

of Total 

Costs 

Projected 

Quantities 

Percentage 

of Total 

Quantities 

United Kingdom 

Level I 

$2,056 

6.2 

150 

4.7 

Italy 

Level II 

1, 028 

3.1 

131 

4.1 

Netherlands 

Level II 

800 

2.4 

85 

2.7 

Turkey 

Level III 

175 

0.5 

100 

3.2 

Australia 

Level III 

144 

0.4 

100 

3.2 

Norway 

Level III 

122 

0.4 

48 

1.5 

Denmark 

Level III 

110 

0.3 

48 

1.5 

Canada 

Level III 

100 

0.3 

60 

1.9 

Total Partners 


$4,535 

13.7 

722 

22.8 

United States 


$28,565 

86.3 

2,443 

77.2 


Table 4. JSF Cost Shares 


Source: From GAO-03-1012T 

B. PROGRAM ANALYSIS 

Even though the JSF program office has taken 
significant steps to improve cooperative research and 
development and the acquisition process, the Joint Strike 
Fighter program still faces many challenges to meet the 
objectives of the ICR&D and to address the concerns of all 
the partners. The main issues facing the JSF Program are 
technology transfer, funding, industrial base, and return¬ 
on investment (ROI). Without actively addressing these 
areas, the JSF Program could see schedule slips, cost 
growth or partner withdrawal. 

1. Technology Transfer 

Technology transfer has caused significant problems 
for the JSF program. As of July 2003, Lockheed Martin has 


93 




already received over 400 waivers for technology transfer 
and is expected to receive more than 1,000 waivers prior to 
completing the program. This has caused a severe 
administrative burden for Lockheed Martin and the program 
office. The costs associated with administering the waiver 
program have reduced savings. Additionally, the time 
needed to receive waivers has reduced Lockheed Martin's 
ability to subcontract to foreign contractors. The failure 
to receive timely export waivers has negatively impacted 
subcontracting to foreign companies. This minimizes the 
program's ability to access foreign technology and to 
achieve best value procurements. Furthermore, several 
major subcontractors have avoided awarding work to 
international companies because of the extra administrative 
and cost burden. Failure to involve international 
companies has raised concerns by participating countries 
regarding the maintenance of their industrial base and 
continued support of the program. 

As of July 2003, Lockheed Martin was only forecasting 
three months ahead for export authorization because most 
licensing resources were being used to manage time-critical 
authorizations. Lockheed Martin has failed to complete a 
long-term industrial participation plan that would identify 
areas of future competition and contracts. A long-term 
plan would minimize disruptions by permitting international 
companies to receive export licenses early on. 

As mentioned above, failure of involving international 
companies could result in cost growth and lack of 
international support. In order to mitigate these 


94 



concerns, Lockheed Martin has implemented several 
strategies. A few of these strategies are as follows: 

■ Added additional resources to handle the large 
volume of waivers requests. 

■ Received a global project authorization (GPA). The 
GPA provides an "umbrella" export authorization for over 
200 partner suppliers for transfer of certain technology. 
The GPA is expected to reduce the authorization process to 
five business days. 

■ Appointed a JSF export compliance officers. 

2. Funding 

Continued funding support by international 
participants with respect to cost shares and affordability 
could severely impact cost growth and future sales. JSF 
has already experienced significant cost growth. 
Consequently, cost shares have become distorted over the 
program's life. As discussed in Chapter II of this 
project, percentages are established during the programs 
inception regarding funding contributions necessary for the 
various partnership levels. However, these funding 

objectives are based upon target costs and will not likely 
represent real costs. JSF has gone from estimates of $22.1 
billion to $33.2 billion for research and development. 
Furthermore, estimates for the CTOL version went from $28 
million to $31 million on November 26, 2000. International 

participants are not required or expected to contribute 
additional funding caused by cost increases resulting from 


U.S.-initiated 

scope changes. 

For 

instance. 

the UK 

has 

contributed 6. 

2 percent 

of 

the 

program 

funding 

as 

illustrated in 

Table 4. 

As 

a 

full partner, the 

UK 


95 



originally contributed ten percent. The U.S. is forced to 
fund the additional requirements. Partners could attempt 
to receive additional funds but they are required to go 
through normal procedures. Increased funding, therefore, 
is unlikely if the partner want to maintain participation. 
Consequently, the DoD has reduced order quantities for the 
aircraft to pay the increases. The DoD could attempt to 
recoup the additional costs by reducing levies for partners 
on future sales. 

Affordability also plays a crucial role for continued 
funding by partners. If JSF becomes too expensive, many 
partners may be forced to withdraw from the program and 
seek other options. This even holds true for the DoD. In 
a report to Congress, the Congressional Budget Office (CBO) 
conducted a study of alternatives to JSF. CBO evaluated 
several alternatives to full funding of the JSF for the 
DoD. The first option assumed procuring only the Air Force 
version and increasing procurement of the F/A-18E/F for the 
Navy and Marine Corps. CBO estimated a savings of $2.5 
billion. Another option was purchasing only the Marine 
Corps version. CBO estimated a cost savings of $4.5 
billion. The final option was to purchase only 40 percent 
of the planned Joint Strike Fighters. CBO estimated a 
saving of $5.6 billion by using this option. If Congress 
were to fail to fund JSF fully, unit costs would rise and 
be passed on to all partners. In fact, JSF is about to 
declare a Nunn-McCurdy Breach. 

3. Industrial Base 

Partners expect the use and involvement of foreign 
industrial bases. Failure to include domestic contractors 

could jeopardize future the partner's future program 

96 



participation. Additionally, the partners have expressed 
concerned about having organic logistics capabilities for 
continued support that are only feasible with a robust 
industrial base. In order to maximize cost savings, the 
JSF program has attempted to apply best value procurement 
for subcontracts similar to commercial practices. Instead 
of awarding subcontracts on the basis of contribution share 
ratios of international partners, the program is attempting 
to apply best value while using the Cost as an Independent 
Variable (CAIV) concept. Awarding contracts completely on 
the basis of best value is unlikely. As the program office 
admits, some contracts will likely be awarded to foreign 
contractors in order to maintain the good will of the 
partner country. This will reduce savings associated with 
leveraging the best value technology of participating 
nations, which is one of the goals of cooperative research 
and development. 

In an attempt to mitigate this concern and motivate 
Lockheed Martin to actively pursue foreign companies for 
subcontracting, the award fee structure permits the JSF 
Program office to identify and establish focus criteria for 
each period. The criteria included judging Lockheed 
Martin's ability to provide partners with regular insight 
into subcontracting opportunities, encouraging major 
subcontractors to consider foreign companies on a 
competitive basis, and acquiring the needed export licenses 
in a timely manner to support foreign competition. 

4. Return-On-Investment (ROI) 

Partners expect to receive a considerable ROI by 
investing early on in the JSF Program. Part of the ROI 
refers to receipt of major subcontracting work for their 


97 



industrial bases as described above. Partners expect 
domestic companies to receive an amount of work near the 
value of their investment in the program. Also, technology 
access to improve domestic capabilities falls under ROI's 
expectations. However, the most significant driver of ROI 
corresponds to the anticipated financial gains associated 
with levies collected on future Foreign Military Sales of 
aircraft to non-partner nations. The DoD reported partners 
could earn between $5 and $40 of revenue in return for each 
dollar contributed to the program. Failure to meet these 
expectations could jeopardize the future support and 
participation of the partners. 

C. CURRENT STATUS 

The Joint Strike Fighter Program is scheduled to begin 
Low-Rate Initial Production in 2006 with 22 test aircraft. 
Fourteen will be flight test aircraft and eight will be 
ground test aircraft. Full-Rate Production is scheduled to 
begin in 2008 with Initial Operating Capability in 2010. 


98 



VII. CONCLUSIONS 


A. INTRODUCTION 

Among the common challenges encountered by the three 
programs (MLRS, MEADS, and JSF), there is a factor that 
appears to be key for success in any ICR&D program. This 
factor is stability. Stability refers to a program's 
susceptibility to disruptions in funding, schedule, 
requirements, and political and other support. Stability 
must always be present at any stage or in any process of an 
ICR&D program. A lack of stability leads to the demise of 
the program. 

The programs discussed in this project frequently 
lacked stability in major areas such as funding, technology 
transfer, requirements determination, management approach, 
and government commitment. Greater issues of stability 
such as U.S. or European political or economical stability 
or continuity are beyond the scope of this project, but 
will be briefly mentioned where necessary to support the 
findings. Funding, technology transfer, and requirements 
determination are the key elements for stability and will 
be discussed in further detail. 

B. FUNDING 

The high technology and complexity involved in MLRS, 
MEADS, and JSF imply a very expensive defense system that 
most countries cannot fund on their own. As such, these 
programs, which started as national programs, evolved into 
multi-national ones in order to capture needed funding. 
That meant that these programs suffered a lack of committed 
funding from the start. Funding contributions determine 
the country's category and its associated rights in the 

99 



ICR&D program. Restrictions inherent with categorization 
by funding levels create initial challenges for the 
program. For instance, those countries providing at least 
ten percent of funding, participate in requirements 
development and receive a waiver for all non-recurring 
research and development costs. 

Additionally, countries can either contribute funding 
for the production phase or drop out of the program upon 
completion of the cooperative research and development 
phase. Countries are also permitted to increase or lower 
their contribution levels. Consequently, cost burdens can 
shift at this stage and funding can once again become an 
issue for the remaining countries. 

For instance, the MLRS SADARM program was terminated 
because of a lack of funding and U.S. withdrawal from the 
MLRS/TGW program (to commit to the BAT system) precluded 
that program from entering production. MEADS was 
categorized as a follow-on system and consequently lacked 
the necessary long-term dedicated funding early on. MEADS' 
low priority for the U.S. almost cancelled the program. 

European countries usually commit funding for the 
entire life of the program, which avoids having to 
continually justify its existence to defense decision¬ 
making authorities. On the other hand, the U.S. normally 
commits funds annually to a program and must constantly re¬ 
justify the program to numerous defense decision-making 
authorities, especially Congress. 

In addition, new administrations may require time to 
establish funding priorities and may not agree with the 
funding priorities of past administrations. As such, 
separate national political processes reduce program 


100 



stability, especially in the U.S. because a program must 
repeatedly regain political support for funding. 

1. Cost Shares 

ICR&D allows participating nations to share the burden 
of weapon-system development. Cost shares define each 
participating nation's cooperative status and privileges. 
Information disclosure gained during the program is 
normally tied to cost shares. A multi-national program 
will likely encounter multiple problems in tracking and 
managing cost shares, exchange rate fluctuations, and 
inflation, as demonstrated with MLRS, MEADS, and JSF. 

Cost shares distribution dictate supremacy of one 
nation over the others in the ICR&D effort, which then 
tends to accommodate that nation's interests and 
requirements more closely. All programs, consequently, 
were directed by the country with the highest cost share, 
independent of other factors that may be more important to 
the program's success. Newer ICR&D programs, instead of 
awarding subcontracts based on contribution share ratios of 
international partners, are attempting to apply best value 
while using the Cost As an Independent Variable (CAIV) 
concept. 

Furthermore, continued funding support by 
international participants regarding cost shares and 
affordability could severely increase costs and future 
sales. For instance, the JSF has already experienced 
significant growth in costs. With increased costs, each 
country must fund its equivalent portion according to its 
cost share. Increased costs could lead countries to drop 
out of the programs. However, international participants 
are not required or expected to contribute additional 


101 



funding caused by cost increases resulting from U.S.- 
initiated scope changes. 

In addition, if the JSF becomes too expensive, many 
partners may be forced to withdraw from the program and 
seek other options. As noted, even ICR&D programs suffer 
from the cost overruns experienced by stand-alone defense 
acquisition programs. 

2. Budgeting 

The end of the Cold War represented an opportunity for 
governments in the North Atlantic Treaty Organization 
(NATO) to decrease their defense budgets. Decreasing 
budgets resulted in a steady decline in government research 
and development expenditures relative to industry R&D. 
Increasing ICR&D efforts in the 1990's was required in 
order to share cost burdens associated with research and 
development. 

JSF, the newest program, has applied recent planning, 
programming, and budgeting initiatives. For instance, 
while developing the requirements documents. Cost As an 
Independent Variable (CAIV) was stressed. Additionally, 
target prices were established for each version of the 
aircraft. However, restrictions existent at the budgeting 
level do not allow pursuing more U.S.-European defense 
cooperative programs on major weapons systems. For 

instance, European procurement budgets are small compared 
to the U.S. budget, and the potential that U.S. support for 
a program may change with each annual budget review, may 
cause concerns for European governments. 


102 



C. TECHNOLOGY TRANSFER 

ICR&D's goal is to provide the most economical and 
advanced weapon systems, while sharing risk and 
technological expertise. However, military weapons have 
become so dependent upon technology that large quantities 
are not only difficult to produce in a short period, but 
expeditious startup and production are more difficult. 
Thus, warfare depends now on a few precise high-technology 
maintainable weapons rather than on the mass-produced 
expendable weapons of the past. In today's world, 

technology leads to any military's competitive advantage. 
Consequently, countries are reluctant to share or transfer 
any technology that represents superiority over another 
country's military. This reluctance has impeded, to some 
extent, progress in the ICR&D efforts, as demonstrated in 
JSF and MEADS. 

The three ICR&D programs analyzed suffered, and still 
suffer, from strict arms export controls imposed by the 
U.S. Government, as well as the U.S. policies and 
procedures for releasing sensitive national security- 

related information to foreign governments and companies. 
Admittedly, controls are necessary to provide protection 

against loss of technology to unauthorized users. However, 
export controls undermine defense trade between the U.S. 
and Europe. Critical technologies for the programs' 
success were not disclosed in a timely manner leading to 
both resentment among participating countries and schedule 
delays. Eor any international cooperative effort to be 
truly interoperable and successful, the DoD must provide 
information that it has traditionally been reluctant to 

share. 


103 



1. Industrial Base 

Industrial base restructuring and consolidation has 
increased in recent years since most nations can no longer 
afford to develop and to procure enough defense items from 
their own domestic companies and sources. For instance, 
the European Defense Industry is attempting to consolidate 
and restructure through national and cross-border mergers, 
acquisitions, joint ventures, and consortia. However, the 
size and consolidation of the U.S. defense industrial base 
overpowers and poses a challenge to any initiative or 
effort in the smaller and fragmented European defense 
industry. This creates a barrier for more equally 

distributed and funded ICR&D programs. Thus, European 
nations are currently pursuing several initiatives to 
integrate their defense markets first and then challenge 
the U.S. defense industry in the arms marketplace (e.g. 
Eurofighter vs. USE, SAMP-T vs. MEADS). 

Even with the differences in size, scope, and 
structure between the U.S. and European defense industrial 
bases, ICR&D provides a method to maintain military 
technological superiority on both sides of the Atlantic 
Ocean, while satisfying national political, economical, 
social, and industrial goals. 

Although both the U.S. and the European defense 
industry are restructuring in response to budget cuts, 
shrinking export sales, and rapid technological advances 
(many of them driven by commercial applications), the U.S. 
defense industry is mainly in private hands and market- 
based while the European defense industry remains mainly 
controlled and managed by their governments. 


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2. Work Shares 

The complexity and difficulty of managing a successful 
international program significantly increases with each 
additional partner. The increased complexity of decision¬ 
making with partners places stress on any ICR&D program. 
Consequently, there is a schedule impact due to the 
accountability and management of work shares by all 
participants. Furthermore, work shares are related to cost 
shares, increasing the difficulty in managing tasks. All 
programs studied seemed to be less efficient in terms of 
technical performance, program management, decision-making, 
and administrative issues due to the distribution of work 
shares. A program will likely encounter more problems in 
tracking and managing work shares if it is multi-national. 

National politics drive conflicting desires of each 
participant to minimize expenditures while maximizing the 
local benefit. However, the desire to maximize local 
investment greatly complicates management since balancing 
workloads must be accomplished. Consequently, not only 
must the workload be balanced, but also each partner must 
see the work as meaningful. 

3. Policy 

The United States has made significant policy changes 
since the early 1980s in order to enhance ICR&D. The 
Quayle and Nunn-Roth-Warner Amendments, the Cooperative 
Opportunities Document, the creation of the Armaments 
Cooperation Steering Committee (ACSC), and the 1997 Cohen 
Memorandum on DoD International Armaments Cooperation 
Policy, have all provided a sound foundation to expand 
ICR&D. However, restrictions on foreign investment in the 
U.S. defense market, industrial security regulations. Arms 


105 



export restrictions, and restrictive legislation have 
colluded to prevent complete access to the U.S. market for 
European defense goods. Furthermore, political changes at 
the Federal Government Administration level and U.S. 
foreign policy after the tragic events of September ll^'^, 
have, to an extent, impeded further progress in ICR&D 
efforts. Additionally, it is difficult to maintain 
continual oversight of DoD's armaments cooperative 
activities and ensure these activities receive the proper 
visibility and conform to U.S. national security policy. 

At the same time, there is pressure in Europe to 
develop a unified European armament procurement policy. 
However, national sovereignty issues and complex ownership 
structures are preventing European consolidation to the 
extent needed to be competitive. Consequently, cooperative 
programs between the United States and the European nations 
are struggling for sustainability and stability amidst 
constant policy changes mainly due to the rapidly evolving 
world events and threats. 

Essentially, the formation of a more unified European 
defense market may be crucial to the survival of European 
defense industries as well as to their country's ability to 
maintain an independent foreign and national security 
policy. Consequently, the survival or creation of 
cooperative programs will depend more upon each country's 
policy and position regarding their Armed Forces and 
industrial base, and their need to stay independent in 
these matters. 

Either way, both the U.S. and the European nations 
discussed in this project will remain committed to a 
"common and shared" national defense procurement policy: 


106 



first, buy technically-sophisticated equipment from your 
own sources, then, pursue cooperative solutions, and 
finally, import a non-American or non-European item. 

D. REQUIREMENTS DETERMINATION 

Harmonizing requirements for an ICR&D program is one 
of the most important activities and it is not easy. 
Nations have different interests and priorities. Threat, 
date needed, functions to be performed, characteristics, 
and required operational environments must be harmonized. 
National laws and regulations may conflict. Additionally, 
understanding the needs of a partner is essential to making 
needed compromises. The three programs studied all faced 
challenges determining requirements. 

A capability not needed by one nation will be opposed 
by that nation in an effort to hold down costs. 
Conversely, a capability perceived as important by that 
nation will be vigorously promoted. One manner JSF dealt 
with the issue was the creation of national and/or service 
variants built around a common core capability. However, 
the U.S. and Europe will probably continue to maintain 
similar equipment in the long term. This commonality of 
equipment will create regular opportunities to cooperate on 
acquisition projects. 

A cooperative requirements phase is absolutely 
necessary before beginning development or signing an MOU. 
Additionally, solid Service(s) Mission Needs Statements 
should be established before negotiating cooperative 
requirements. The programs studied generally did not have 
well-defined requirements. Consequently, invaluable time 
was spent determining the exact requirements for each 


107 



participating country. For instance, MLRS started with 
only the most general agreement on the need for a tank¬ 
killing submunition and a broad technical approach. 
Planning must allow enough time for MOU negotiations, as 
well as international program development. Mutually 
acceptable, fully harmonized and rationalized, functional 
performance specifications should be set versus a target 
equipment design. 

In determining requirements, operational and 
acquisition perspectives must be considered in order to 
achieve a program that adequately satisfies common needs, 
but at the same time can be a "doable." Some of the 
overall cost savings of cooperative programs go toward 
delivery of certain requirements that particular nations do 
not need. Understanding the cost impact of specific 
requirements often greatly facilitates resolution of 
differences. 

1. Assessment of Threats 

With the end of the Cold War, countries started 
dealing with evolving and differing threats. Consequently, 
weapons programs needed changes to their initial 
requirements. The requirement changes affected all three 
programs studied. For instance, changes in the MLRS/TGW 
program to address the new threats encountered by each 
participating country, negatively affected cost, schedule, 
and technical risk. In MEADS, incorporating the Lockheed 
Martin PAC-3 missile into the system met U.S. requirements, 
but not German and Italian needs. Consequently, these 
governments have called for a study on bringing a second 
missile into the program that will probably cause schedule 
delays and increase costs. 


108 



2. Partners 

The number of partners has a significant effect on the 
performance of ICR&D programs. Each additional partner 
increases the risks due to the complexity and difficulty 
involved. Having many partners increased the complexity of 
decision-making in all three programs. The diverse 
acquisition and political procedures of each partner placed 
stress on the program managers and eventually impacted 
program schedules. 

Additionally, U.S. allies are reluctant to join trans- 
Atlantic programs where European countries are junior 
partners, fearing that the U.S. will ignore their 
interests. However, if both sides share the project 
"equally" or when it is in their interest, such as programs 
enabling European nations to benefit from access to U.S 
advanced technology, then European allies favor 
cooperation. Most European countries partner with the U.S. 
when the latter occurs, as noted with MEADS and USE. 

3. Culture 

In any ICR&D program, every participating country has 
a unique way of conducting business. The understanding and 
acceptance of another country's culture is extraordinarily 
useful when working in international programs, and improves 
communications and processes. Cultural differences between 
the U.S. and NATO allies have influenced ICR&D programs. 
Program Managers gradually learned that if all the staff 
was located in an international project office, then a 
greater team culture can be established and help resolve 
many of the language barriers, nationalistic issues, and 
decision-making obstacles that they experienced. 


109 



Sharing an office also resolves administrative and 
geographical issues such as the use of paper instead of e- 
mails, and the time dedicated to telephone discussions due 
to the difference in time zones. Another cultural issue, 
for instance, was the time and seasons devoted for holidays 
and vacations. 

As a program advances, new players enter. Each will 
bring unique personal and cultural backgrounds, experience, 
values, assumptions, sense of time, and procedures. As 
noted, differing national cultures and norms of behavior 
affect day-to-day program operations, especially in ICR&D. 
The three programs studied were no exceptions to this. 
Cultural differences are not only challenges for each 
individual, but also for each nation's team. 

E. CONCLUSION 

With International Cooperative Research and 
Development (ICR&D), the DoD and a foreign defense 
ministry, by written agreement, jointly manage a RDT&E 
and/or production effort to satisfy a common requirement by 
sharing work, technology, and costs. The purpose is to 
improve current and future defense posture, enhance the 
industrial base, avoid duplicate R&D, reduce RDT&E costs to 
each party improving standardization and interoperability 
by sharing information and cost burden. 

In light of the increasing role that international 
coalitions have had in recent world events, ICR&D presents 
a viable alternative to traditional Eoreign Military Sales 
for interoperability improvements. ICR&D has become the 
preferred choice for weapon-system development as 
illustrated by the large volumes of studies and literature 
found and researched. 


110 



Every program managed so far under the ICR&D approach 
has faced multiple and recurrent challenges. Although the 
process is improving, the efforts are still hindered by 
some of the same problems encountered in ICR&D's early 
programs dating back to the late 1970's. 

However, as U.S. and Allied Armed Forces are 
downsized, budgets reduced, coalition operations increased, 
and the defense industrial base consolidated and 
restructured, ICR&D should continue as a way to increase 
the effectiveness and efficiency of the U.S. and Allied 
Armed Forces, plus their associated defense industries. 
The United States, France, Germany, and the United Kingdom 
will probably compromise on a mutually acceptable solution 
to any issue in the MLRS, MEADS, or JSF programs because of 
their shared common interest in preserving a strong NATO to 
ensure continued European stability. 


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II2 



VIII. RECOMMENDATIONS 


A. RECOMMENDATIONS 

The analysis and conclusions established in the 
previous chapters lead to the following recommendations in 
order to improve program stability for ICR&D and to reduce 
risk. The recommendations are presented as either general 
in nature or specific to the areas discussed in the 
conclusions chapter. 

1. General Recommendations 

a. Ensure that Lessons Learned so far by the 
United States and the European nations are considered and 
applied when entering into any new cooperative program. 
These lessons include careful consideration of all 
available program information before agreeing to develop a 
weapon system jointly and assurance that funds will be 
available for program execution. 

b. Conduct a cost-benefit analysis prior to 
program inception to determine the appropriate number of 
partners. This mitigates problems regarding program 
management, technology transfer, and administrative and 
financial oversight. The cost-benefit analysis facilitates 
making a managerial decision regarding the appropriate 
number of partners. However, experience indicates that 
ICR&D programs with two to three Level I partners are 
generally easier to manage and less costly. 

c. Emphasize commonality since partners often 
have different requirements. Commonality facilitates 
reduced cost per article while meeting the needs of each 
partner. furthermore, commonality mitigates schedule risk 


113 



associated with trying to meet all requirements in one 


version. 

2. Funding 

a. Establish approximately equal cost shares 
for the participating countries when conducting ICR&D 
programs, if possible. This leads to satisfying 
requirements and interests equally for all parties 
involved. Other cost share arrangements (i.e. MLRS' 
40/20/20/20 or MEADS' 60/25/15) were not very successful. 
Eor instance, the best possible cost arrangements are 50/50 
or 25/25/25/25 share ratio. If equal cost shares are not 
possible, minimize the number of Level I partners. This 
prevents having many low-contributing partners that affect 
the generation of requirements. Therefore, schedule risk 
and cost growth are minimized. 

b. Conduct and emphasize cost analysis during 
program inception. This will improve cost sharing and 
reduce risk. It will also mitigate the risk of 
international participants incurring financial difficulties 
due to cost growth. 

c. Continue to emphasize Cost As an Independent 
Variable (CAIV) from the beginning. Implementation of CAIV 
in the JSE program has proved to be valuable for keeping 
costs under control when compared to other similar ICR&D 
programs. Establishing target goals for weapon systems 
costs permit the contractor to improvise design and save 
money. Additionally, CAIV enables cost/benefit tradeoff 
analyses. 

d. Conduct a cost-benefit study regarding 
utilizing multi-year funding for ICR&D programs on an 
exception basis. Currently, multi-year funding is only 


114 



available from Congress for procurement. Admittedly, using 
multi-year funding for ICR&D would meet resistance. 
However, since multi-year funding improves funding 
stability and reduces the risk of program withdrawal, it 
should be investigated as an option for the future. 
Furthermore, multi-year funding eases the partners' 
concerns regarding program priority and commitment by the 
U. S . 

3. Technology Transfer 

a. Conduct ICR&D with the goal of modular 
designs in order to lesson technology transfer. Modular 
designs permit placing only appropriate technology in 
exported products as listed in the AECA. If designed from 
the beginning with this concept in mind, fewer waivers are 
required and costs associated with waiver approval delays 
are reduced. Additionally, modular designs facilitate 
product improvements to weapons systems as technology 
matures. New technology can be inserted into the platform 
with minimum cost and time. A final benefit of modular 
design occurs in subcontracting and competition. By 
reducing waivers, prime contractors have more time to 
compete subcontracts to international contractors. There 
is a larger cost savings associated with exploiting 
international industrial bases. This also reduces the 
possibility of schedule slips and cost growth. 

b. Conduct a thorough review of the Arms 
Exports Control Act (AECA). The review will permit 
updating regulations to reflect current world geopolitical 
and market conditions more accurately. Extra care must be 
exercised during the review to find ways to streamline the 
ICR&D process. 


115 



c. Receive AECA class waivers early in the 
program. This reduces the paperwork necessary to execute 
the program and facilitates the use of competition for 
systems and subsystems. 

4. Requirements Determination 

a. Choose partners that have similar 
requirements. Having partners with similar needs minimizes 
the number of trade-offs required for the program. This 
mitigates schedule risk and reduces conflicts associated 
with requirements determination. Furthermore, cost growth 
is reduced since partners require less country specific 
weapon systems. 

b. Establish the program office earlier in the 
lifecycle and collocate all members of the team. 
Establishing the program office early facilitates 
stabilizing the design and requirements quickly. This 
mitigates schedule risk and allows more time for tradeoffs. 
Furthermore, this reduces cost growth from changing 
requirements. Additionally, having all team members in one 
location improves teaming and mitigates cultural issues 
associated with international programs. 

B. AREAS FOR FURTHER RESEARCH 

The following recommendations are areas for further 
research in International Cooperative Research and 
Development: 

1. Every individual program considered in this 
project offers further research opportunities. As such, 
further research projects can be conducted and are 
recommended for the Multiple Launch Rocket System (MLRS), 
Medium Extended Air Defense System (MEADS), and Joint 
Strike Fighter (JSF) ICR&D programs studied. 


116 



2. Every issue considered as necessary for the 
success of an ICR&D program is also a further research 
opportunity. As such, every issue by itself leads to more 
extensive and exhaustive research. For instance. Funding, 
Technology Transfer, and Requirements Determination in 
ICR&D programs should be further researched, developed, and 
analyzed beyond the scope presented in this MBA project. 
Other issues available for consideration as ICR&D MBA 
projects could include, but are not limited to. Industrial 
Base, National Security Policy, Returns on Investments, 
Partnerships, Management Approach, Government Commitment, 
Cost and Work Shares, Political Environment, and Economic 
Conditions. 

3. Conduct further research on International 
Cooperative Research and Development (ICR&D) to determine 
cost savings (if any) through cost sharing and economies of 
scale in jointly managed research and development, 
production, and logistics support programs. Programs 
suggested for cost savings research could include the ones 
analyzed in this project: JSF, MEADS, and MLRS. 

4. Conduct further research on the influence of the 
U.S. Arms Export Control Act in technology transfer issues 
regarding ICR&D programs. This study could provide a new 
approach to armaments cooperation that would ease 
technology sharing and equitably divide the program's 
development and production work share. The impact of 
current European technology transfer policies should also 
be studied. 


117 



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118 



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