Safety is priceless, but security costs

Defence budget- external conditioning or national need?

Security, as  main condition for the safety of each social activity, of the identity or even of the existence itself, involves resources and actions which demand costs. The efficiency is given by the optimal utilization of the (available) resources and the achievement of the planned/proposed goals and /objectives. All seems easy according to an elementary logic. And the result should be a simple sum of various costs. Primary arithmetic, with simple counting, easily made by everyone. Nevertheless, the discussion about the budget for defence has continued for years, the last NATO summit being eloquent for this matter. That is happening because there is a struggle to balance in a fair way the contributions of the member states to the common security. Almost as a communist principle, considering each country’s possibility. There were discussions/negotiations, and even was unofficially agreed since 2012 (at the unofficial dinner of defence ministers in Chicago) that 2% from GDP- Global Domestic Product, would represent a relevant and correct contribution to ally’s effort. Some of them accepted and actually adopted the solution quickly, especially the ones with a disproportionally capacity comparing to the threats they have to face. Others, better positioned, with a stronger economy, are still abstaining from increasing the costs/are still reserved related to the increase of the costs, which are considered, by their own country’s citizens, as useless. Then, at the end of the Brussels Summit, another number appears, which is 4, again as percentage from the GDP, which would reflect better and more fairly each country’s effort.

The German minister has argued that, for accomplishments, it is more realistic to refer at: capabilities, mission participation, troops and equipment involvement. It is a relevant warning regarding a possible decrease of the engagement in Resolute Support Operation. This was followed by a trickier idea, the issue of nuclear weapons.

In Romania, the problem with the defence budget seems to be solved, through a political agreement, but unvalidated by a legal framework (unlike in Poland), consisting on a 2% from GDP each year, at least until 2026. It is an important step, based on defence planning documents. Or, at least, this is how it should be.

There were very few discussions about specific projects, about how this budget should be spent. They are a lot of declarations about acquisition programs, about contracts with big funding, about the defence industry, offset, strategical investments and jobs. All has seemed clear, easy and coherent. Yet…

First of all, let’s see, very shortly and simplified, which would be the defence costs or wherefrom defence costs result.

The main costs categories; the most important costs are related to the resource.

Firstly, any armed forces have people, human resources. Therefore, the first costs should be on personnel – salaries, bonuses, retirement funds, social aids and compensations. Next, there are the costs for maintenance of the existent infrastructure and equipment. There is also infrastructure and preserved armament, just for war, that need periodical maintenance, too.

For safety reasons, but also because there are rules and standards, some stocks have to be available. These should keep unit’s operational capacity for longer or shorter periods of time. These stocks must be created and refreshed periodically, but also spaces, which also includes costs.

The infrastructure has a defined period of life, as well as the mandatory maintenance that must be done for safety. After a while, some buildings must be demolished, some repaired or upgraded, others built from scratch. Thus, mean another cost. The lack of reparations or constructions on time, for last 10 years, made more important the last issues.

Each military must prepare for his mission, in order to efficiently use the equipment, armament and the structure he is a part of. From shot gun to flying with the plane or sailing, all of these activities involve costs. For each type of mission, according to each forces category’s doctrine, are necessary different training programs, which means associated costs that are cumulating.

The Costs Catalogue, the chance to know the defence price

The Finance Minister was asking me, at the beginning of 2011, how much does a brigade cost. I told him that it has a variable cost, depending on the brigade type, the endowment, training level, type of missions, reaction level. He insisted: “well, how much? How much?”

Seven years ago, I have ordered to be created a “Costs Catalogue”, detailed, in order to identify each element. It was made. Not as well as I wanted, with implicit connection to each planning document, but it was done. With its help we can find out how much does a force structure cost, depending on the established missions, number of people and available equipment. There are, for sure, random factors also, but we are having at least an overview.

The equipment procurement is important, especially when, to the ageing of the armament, we have to add the incompatibility with the allies. The needs are important at all services and difficult to prioritize. Any acquisition involves an operational process which lasts, most of the time, for years. Of course, the acquisitions must take into consideration the entire life cycle, to be monitored from the reception moment until getting it out of function and the cassation or the reselling.

Beside these, there are other costs, that are relieved by the financial documents from the military units, up to the General Financial Directorate of MoD.

Insufficient financing, but ambitious pledges

The insufficient budget implies reducing the expenses. Of course, the activities don’t have another cost and the money is not enough. It is hard to share less and less to the same number of requests. Especially when you cannot decide at what to give up; you cannot allow yourself to give up anything, mainly when there are international obligations you need to comply to. Most of them were hard or even impossible to accomplish from the very beginning, before the promise or engagement, but at that moment the optimism was big, the crisis was not affecting us.

Participating in missions was a priority, and its complexity and risk level asked for supplementary efforts. Let’s remember when in 2017 the mission on The Baltics was performed with MiG-21 LanceR, although the budget has been reduced since 2006, during the training!

The standards could not be modified, so it was decided a reduction of the activities: some revisions were not made anymore, they increased the hours number between the overhauls, there were reduced the number of the exercises, the flight hours, sailings, parachuting and diving, range shootouts, so almost cancelled off the procurement. Completing the stocks became a luxury. The infrastructure projects, building military bases as the ones from NATO’s member states and giving up to barracks which remind us of the soviet period became an unattainable dream. 

The military equipment overhauls, the only reason of The Romanian defence industry’s existence

The paradox is that keeping operational the old equipment involves costs, the life in old barracks, ugly and inadequate for the XXI century means also expenses. Meanwhile, the funds for overhauls went to almost zero, the “technical unemployment” was invented as a temporary solution. At the last review of the Economy Ministry, keeping the same solution of paying for no-work was shown as an accomplishment! With the hope of eventually orders, sometime.

In 2012, during the annual evaluation for the 2011 activity of MoD, was mentioned the risk and the difficulty to keep operational the existent equipment, as old as it was (mostly, the same as the present one!). In the middle of 2012, the situation became so critical that was reported to the NDSC (National Defence Supreme Council). Next year, was approved the plan which involved the gradual increase of defence financing, so since 2015, 2% from GDP should have been allocated. This was the reason why the main demand the armed forces had, at the beginning of 2015, to the new president was to obtain that promised budget. 

At a first sight, an increasing in the financing seems to solve everything. But it is not enough. It needs time and good planning. I insist that an accurate radiography is a must, a real picture of what we have. Mostly, this assessment already exists, but needs to be updated with objectivity and pragmatism, without any fear. And there is something more: the political decision regarding the size, structure, locations (geographical distribution), readiness level and the missions for which the armed forces must be prepared. Depending on that or in complementarity with that are also defining the participations on projects, which means common capabilities, especially at strategic level, which we cannot unilaterally afford.

Defence budget is easy to spend, but at the end of the story, what matters is what we get after that, with consequences for the future. The investments do not mean only equipment procurements, which could rust in the unity after some time, but also having the necessary infrastructure for parking and maintaining these, the personnel facilities, training of the personnel, instructors and expert’s qualification and certification, as well as other related costs, as the overhauls, which imply a technologic process and logistical support.

Military equipment acquisitions - strategic investments

The endowment program contains armed force’s needs, as were evaluated, negotiated and approved. On another occasion, I will talk also about how these acquisitions can be prioritized.

As the military equipment acquisitions are seen as “sensitive”, the European Directive regarding procurements also sees it as a different subject. These can be made through special procedures or through govern to govern agreements. For each major acquirement, must be considered: which is the modification (the article, provisions/paragraph) from the bilateral treaty which guarantees more security or/and which is the economic advantage of the acquisition. Usually, the one who sells has the obligation to contribute through his own investments or through attracting investments for the creation of some “funds generators”. This means industrial production facilities, for goods which have the outlet guaranteed by the brand, or the outlet of some products from state’s economy which buys on seller’s markets. At an acquisition of one billion Euro, the compensation in investments must allow the acquisition without any financial efforts, meaning a compensation which can overcome even the double of the equipment’s price.

To solve the corvettes acquisition with the argumentation (conditioning) of an offset, which consists in overhauls and the frigates upgrading, it seems to be a joke, a misunderstanding or even more. Also, to think about the modernization of a plane with only our capacity, without the necessary technology or any perspective to sell it, is not a solid solution.

Becoming NATO member, we got the access to high military technique, mostly produced in the US. But there are also European equipment development programs, some even materialized in tested and validated products (http://www.occar.int/). Last year, we support the PESCO initiative and it was officially approved. What does that mean, you will see in other materials. A result of this idea is the common financing of some projects in defence domain. That means a national supplementary contribution to European funds. There is also an eligibility mechanism to take benefit of these funds. We will try to explain it on other occasion. For now, we offer, not take!

All in all, too confident in our innovate capacity, and with some companies, which caught the “opportunity”, we are trying to invent something never seen before, an armored vehicle with the highest protection, able to float and, who knows, even to fly! Where is the money actually going?

The objectives are established and adjusted considering the possibilities. Do we have sustainable objectives?

To assume or to take new missions or new objectives, when is not so clear if the approved budget is enough for the running programs, could lead to unbalance the budget on long term. The ambitions should be built slowly, starting from finalizing the previously established objectives.

The sustainability calculation should be the first condition in validating any activity with medium and long-term impact. A temporary effort should be made considering the situation, but a permanent or on long term effort means introducing costs in planning, costs balancing, cuts or realistic increases of the budget.

The established objectives through the National Defence Strategy are ambitious, but can these be accomplished? Did somebody evaluate the costs?

The new ideas, with an impact on the defence budget, should be validated, according to law, at least by the NDSC. As some exceed or are not explicitly established in doctrines which details the missions from Constitution, the decision regarding the changes on the armed forces structure should be taken by the Parliament. As, during time, for various reasons and in different circumstances were brought many updates of the actual force structure, its revision should be necessary. The revision involves assessment, projection and decision. The actual structure may be confirmed or another one can be established. According to mission’s needs, but also sustainable.

Each social activity involves certain expenses or a series of actions which need resources, whose quantification means, after all, funds. Direct or not, easy or not to identify and add up, these costs finally show the necessaire effort to accomplish this activity.

When everything is quantified, defence has its own cost, accepted and politically assumed, transparent and fair. Alliance’s honesty and reliability seem to be founded more on the accuracy of the accountant’s papers.