The need for interoperability, the globalization of the supply chain, regulatory reform, multinational programmes and common requirements are just some of the reasons for industrial cooperation. According to Minister of Defence Anne-Grete Strøm-Erichsen, “The Government wants to establish a long-term strategy to ensure that defence acquisitions, operations and maintenance can be sourced from Norwegian industry without violating competition requirements in the defence acquisition regulations. This entails that the Ministry of Defence will emphasize acquisitions from Norwegian suppliers – provided that these are competitive with regards to both price and quality.”
The background of this strategy of industry cooperation (IC) is based on the Norwegian Government 2006 White Paper (St.meld. nr. 38 (2006-2007), entitled “The Armed Forces and industry – strategic partners”, laying the groundwork for closer cooperation between the Armed Forces and Norwegian industry. Formalized IC has been in practice in Norway since 1982, the goals being to increase the return on investment and to stimulate a higher level of ongoing cooperation between the Norwegian Defence Industry and its international counterparts.
It was in 1992 that the Norwegian Parliament approved comprehensive guidelines, setting a threshold limit of NOK 50 million (approximately EUR 6 million), and focusing on specific areas of technology. These guidelines in updated format exist today and aim to facilitate leading-edge technological prowess in such areas as IT and communication, navigation systems, underwater technology, composite technology, crypto logical technology and other core-area defence activities.
The IC programme has had a profoundly positive effect within Norway as well, not only to Norwegian Defence, but to a wide range of companies such as Nammo, Volvo Aero Norge and Kongsberg Defence – with the latter using nearly 1,300 sub-suppliers for its various projects, programmes and products. Another positive side effect of this industrial cooperation process is that it in fact allows and facilitates a higher level of effectiveness through life-cycle agreements and more effective planning both in the short and long-terms.
Success in Practice
There have been a number of important projects and initiatives conducted over the years as part of the Norwegian Ministry of Defence’s IC programme, and one of the best examples of success was a project led by Colonel Tore Kvalvik related to the delivery of frigates to the Norwegian Navy from the Spanish company Navantia. According to Colonel Kvalvik, “The original offset obligation in the year amounted to 10.6 billion Norwegian crowns, and by 2007 all obligations were fulfilled – in fact have exceeded 100% of the obligation.” All obligations have been satisfied, and the project has set the stage for a closer cooperation on the long-term between Norway and Spain.
This project has had a ripple effect having not only a positive influence related to the long-term support of the frigate programme, but on a wide range of subcontractors both in Spain as well as in Norway. According to Colonel Kvalvik, “All together, more than 100 Spanish companies where involved in offset purchase contracts with some 250 Norwegian companies.” Approximately 30% of the total frigate contract amount was awarded to the Norwegian shipyard industry, with companies such as Bergen Mekaniske Verksted, Mjellem & Karlsen, Aker Yards Florø and others benefiting from the IC agreements.
Working together for the Long-Term
In the Defence Industry, where transparency and consistency is of the utmost importance, there is the need for such cooperation. From this perspective, industrial cooperation is the key phrase as part of suppliers’ marketing strategy and approach, the goal being that suppliers see it as a tool for business. As in the frigate project, the synergies of success result in long-lasting cooperative efforts that are a ‘win-win’ situation for those involved. Such industrial cooperation will open closed doors, emphasizing the concept of technology cooperation, and often involve, the private sector as well as R&D to facilitate the best possible results from transfer of technology.
According to Jon Gunnheim, Assistant Director General of the Norwegian Ministry of Defence, there are multiple goals that are achieved through industrial cooperation, “Much is achieved through industrial cooperation, including the establishment and development of customer relations and functioning as a vehicle of business development and commercial cooperation. In addition, the nature of IC lends itself to facilitating expansion of business opportunities, building strategic alliances within the national defence industry, and allowing the correct strategies to gain a competitive edge in a ‘closed’ market.”
The Future Looks Bright
The future looks bright for the Norwegian IC initiative, with a number of current projects in the works that include replacing the aging U.S.-made F-16 aircraft.The positive effects of the Ministry of Defence IC programme are continuing to evolve as potential collaborative projects are being identified at an earlier point in time, ensuring that not only does Norwegian Defence acquire “best-value” defence equipment, but cooperation is facilitated between the Norwegian Defence, the R&D community and industry in Norway and beyond – to the benefit of all parties.