Managing defence procurement and budgets

The Russian delegation was led by Lyoubov Kondratievna Kudelina, Head of the Economics and Finance Department of the Russian Ministry of Defence.

The seminar was organized under the auspices of the NATO-Russia Council (NRC) Working Group on Defence and Cooperation. It was the latest in a series of workshops aimed at examining and exchanging experience among NRC countries on various macro-economic, financial and budgetary issues related to defence reform.

Participants discussed the pros and cons of different forms of involving the private sector in defence tasks, such as outsourcing, public-private partnerships and private finance initiatives. Developing strategic alliances with the private sector in defence procurement is increasingly important due to the high rate of technical change, the important upfront costs and the uncertainty about total costs over the full life-cycle of defence projects. Discussions also focused on the importance of encouraging competition during the procurement process, for example, by offering incentives in contracts, to try to get the best value for money.

The discussion on defence resource allocation and the optimal management of financial flows looked at various decision-making software tools that can help factor in unforeseeable events, such as developments in crisis management operations. Another issues addressed included how to integrate financial risk management and allow for inflation, which tends to be higher in the defence sector due to the technological complexity of projects, small-scale production, limited competition and high production costs.

A number of presentations were also made on how to ensure transparency, accountability and democratic control of defence spending to ensure that taxpayers' money is spent effectively. Key points raised were the importance of embracing a clear set of public service values and managing for results to ensure responsible spending.