Presidency Events under the Aegis of the National Armaments Director

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1 THE CZECH PRESIDENCY OF THE COUNCIL OF THE EUROPEAN UNION Presidency Events under the Aegis of the National Armaments Director Agenda, Key Findings and Recommendations 1

2 CZ Presidency Agenda under the Aegis of the National Armaments Director At the start of the Presidency of the Czech Republic of the Council of the EU on 1 January 2009, the Presidency in the realm of responsibility of the National Armaments Director was committed to pursue two areas of interest: the centres of excellence and small and medium size enterprises (SMEs), and education in armaments. With regard to the first area, the Czech Republic has aimed to contribute to the implementation of the European Defence Technological and Industrial Base (EDTIB) Strategy by opening the discussion on the overall concept of industrial centres of excellence - their focus, expertise and partnership - and the role that industrial centres of excellence could play in creating a competitive European Defence Equipment Market (EDEM) and a strong EDTIB. A special attention was sought to be devoted to the relation between industrial centres of excellence and SMEs, including security of supply (SoS) issues, thereby advancing the SMEs related agenda pursued by the German, Slovenian and French Presidencies. The second area, the Czech EU Presidency sought to focus on, was education in armaments cooperation and how to establish a common European educational and training platform for both the tactical and strategic level of stakeholders. More specifically, the Czech Republic strived for streamlining the discussion on the overall concept of education in armaments, structural and institutional questions and on fundamental elements of the potential courses in order to find common ground for the establishment of a European armaments co-operation educational and training platform. While the above mentioned topics were the Czech Republic s principal priorities in the realm of the responsibility of the National Armaments Director just at the start of the Presidency, there were other issues and events that coincided with the Presidency and that were eventually included in the Presidency s portfolio. Chief among them was the question of Military Airworthiness Harmonisation, where the Czech Republic contributed to the development of a common set of European Airworthiness Requirements effort. To that end, the Czech Republic, in a close collaboration with the European Defence Agency (EDA) and other important stakeholders, prepared three respective events: Increased Role of SMEs in the European Defence and Security Supply Chain, Olomouc, May 2009; Military Airworthiness Harmonisation Workshop, Olomouc, 4-6 June 2009; and European Education and Training in Armaments Co-operation The Way Ahead, Prague, June 2009.

3 Key Findings and Recommendations of the Czech EU Presidency Events under the Aegis of the National Armaments Director Increased Role of SMEs in the European Defence and Security Supply Chain, Olomouc, May 2009 Organized in cooperation with the EDA, the European Commission, and the Aerospace and Defence Industries Association of Europe (ASD). More than 40 attendees from 14 EU Member States, defence industry and EU Institutions. A point of reference Small and medium enterprises (SMEs) are key players on the European industrial map - they are bearers of flexibility, new and emerging technologies, and guarantors of progress; they are able to fill niche gaps and deliver required services and products on time. Due to their size, however, they are particularly vulnerable to market turbulences and unlevelled competition pressures. The European Commission Small Businesses Act provides a sound political guidance. Steps taken by Member States in the implementation of its recommendations and suggestions are expected with high interest from the European industry. In addition, the Defence Package is expected to have a positive impact on the SMEs business in decreasing cost and encouraging the cross border cooperation and competition. The European Security and Defence Policy (ESDP) remains a major driving force with the impact on Member States s behavior, cross border cooperation and EDTIB forming. Centres of Excellence Grouping SMEs and creating SMEs clusters can be an answer to some of the disadvantages SMEs have. This step can keep them equipped for providing timely and affordable solutions and allow them to maintain innovative edge and flexibility. The creation of centres of excellence gives the SMEs a chance for the long-term outlook. In other words, clustering allows the SMEs to create synergies, to provide a wider portfolio of products, and to be in position to bid for contracts with a higher value. This can help adjust and modify their production plans, as well as the scope of their activities. The adjustment of production plans should allow a wider portfolio of products and customers, in order to reduce vulnerability of the SMEs to the market fluctuation. The scope of activities may broaden because successful SME clusters can be seen as partners on a higher level in the supply chain. At the same time, possibility to offer different products, and to reach other customers, might lead to a more important business track record, which can be used as a good reference for future activities. It might also help them access financing. The creation of SMEs clusters should be industry driven with maximum level of flexibility. In doing so, the industry must follow the market rules. The clusters should include organisations ranging from R&T centres (universities), providing results of elementary research, to final assemblers, providing systems and systems of systems. Specific importance should be attached to R&T SMEs, keeping in mind the common truth that Invention creates Innovation. The clusters should have a broader scope than just the defence products in order to become attractive for the banking sector. Banks have by nature a strong risk 3

4 assessment capability. By grouping and widening product portfolios and at the same time by diversifying customers, the SMEs will be able to mitigate risks of project failure. Should the cluster be composed of the SMEs, a clear goal of the project, distribution of risks, responsibilities and management decisions have to be defined. All actors - the EDA, the European Commission, Member States and the industry should be encouraged to implement measures facilitating both, access to information and networking opportunities. Recommendations Member States should work towards reduction of bureaucracy and regional or national protectionism. Maximum transparency in defence procurement is a key enabler for cross border cooperation. Member States are encouraged to develop environment to support creation of cross border cooperation of their industrial subjects. Governments should also support the newly established SMEs in creating a successful track record. Forming centres of excellence and creating SMEs clusters should be supported by a suitable framework, allowing all interested parties to bid for membership and for accepting their share of responsibilities. It is crucial that the formation of clusters be industry driven and not be limited to a certain region. The EDA should support its Member States in creating a truly European Defence Technological Industrial Base (EDTIB) and forming the European Defence Equipment Market (EDEM). The long term perspective is best served by the EDA continuing its initiatives in the development of EDEM, cooperative R&T/D programmes and cooperative armaments projects. SME clusters are able to provide timely and affordable solutions for capability needs but the bottleneck is financing of activities in clusters. Clustering can be stimulated by taking the specific circumstances, which apply to financing of cluster activities, into consideration when setting the terms and conditions for R&D programmes. Best practices can be mentioned in the Guidelines for SME friendly procurement conditions which are being developed by the EDA. Security of Supply Confidence in security of supply (SoS) is vital for Member States, particularly taking into account the lifetime of complex military equipment. In this longer term context, the risk comes primarily from changes in the business environment. SMEs by their nature face particular difficulties with regard to sustaining military products over the long term. If sustainability can be understood as meeting the needs of today without compromising the ability of future generations to meet their own needs, the SMEs certainly fulfil the task for today. In the long term, prime contractors and governments share their responsibilities. The consolidation of the SoS is not conceivable in today s situation when only government-to-government arrangements are possible. The industrial footprint should be increased. This can be achieved by opening supply chains to competition, and the establishment of transparent environment not only on the government level, but also in the industry area. From the confidence point of view, governments should create measures for sharing such responsibility. Transparent and correct transposition of the Directive for Intracommunity Transfer (ICT) into the national legislations is the first imminent step. 4

5 Building confidence in SoS during whole product lifetime under all conditions should be the objective for the Members States and also for the industry. Taking into account all phases of the life cycle is crucial. Industry should support establishment of common certification procedures for both companies and personnel. The SME clusters and centres of excellence should be able to obtain certification and also to provide certification to the personnel, which can be used by them and by prime contractors. An electronic tool for providing transparency and visibility to all players should become a platform for the SoS. We believe in clusters. The industry needs to combine forces of primes, SMEs, research facilities and schools said Marek Ditz, the Executive Director of Specialized and Institutional Banking, Československá obchodní banka (ČSOB). Recommendations Recognising the opportunity provided by innovation and flexibility of SMEs, it is recommended that the Member States look at the ways to facilitate the SME access and sustainment within the European Defence Equipment Market (EDEM). The industry, represented by prime contractors, is encouraged to contribute to the effort. Such measures could include common certification, the use of partnering agreements and other procurement policies which provide the assurance needed for SMEs to maintain a long term role. Closer cooperation between this sector of industry and defence customers can only lead to mutual benefit and help strengthen the SoS. SMEs will play a key role in the future supply chains and in the SoS. Member States, together with the European Commission and the EDA should seek ways to involve industry in building confidence in the European Security of Supply. In particular, the ICT Directive might be a useful tool to help SMEs overcome obstacles to market access through application of its provisions on General Transfer Licenses and certification of companies. The SoS is primarily the responsibility of governments and governmental organisations. The industry, however, has an important role and we should look for ways to better exploit their knowledge particularly on the cost effective management of risk. The governments on the other hand should create a level playing field for all industrial entities by improving the transparency of their procurement processes. Again, access to information should be available equally to all SMEs and industrial entities. Developing the portal for the defence industry should be a strategic objective, and the EDA should assume the leading role in this effort. The industry s competence to fulfil the future SoS relies on educated and knowledgeable personnel. The EDA is recommended to support Member States and the Industry to increase interest of the European citizens in the defence industry. At the same time, it is recommended that the EDA support the Member States in educating their procurement personnel to be able to run collaborative armaments projects in a competent way. 5

6 Military Airworthiness Harmonisation Workshop, Olomouc, 4-6 June 2009 Organized jointly with the EDA. More than 60 attendees from 18 EU Member States, European Institutions responsible for military airworthiness, including the European Aviation Safety Agency (EASA), the European Organization for Civil Aviation Equipment (EUROCAE), the European Organization for the Safety of Air Navigation (EUROCONTROL), the Aerospace and Defence Industries Association of Europe (ASD), the Israeli defence Industry and NATO. A point of reference Today, each EU Member State operates an aviation safety system independently from each other; in addition, each country is responsible for the regulation of own aircraft. As a result, all military airworthiness activities are conducted and regulated on national basis, and any harmonisation is only achieved at individual project level. This national approach generates many shortcomings and is the primary cause for delay and additional costs in multinational programmes. There is a unique opportunity to agree on an EU wide harmonisation and unification strategy on military airworthiness to be the benefit of governments and industry, and the overall strength of the EDTIB. EDA s Steering Board in Minister of Defence format has given to the EDA MAWA Airworthiness Forum a strong mandate to develop European Harmonised Airworthiness Requirements (EMARs). By developing and setting up common regulations and thus improving air safety we will reduce the cost and decrease the time required for developing future air systems and as result strengthen the competitiveness of the European Defence Technological and Industrial Base, said Jukka Juusti, EDA s Armaments Director. Recommendations Stakeholder s requirements expressed during the workshop demonstrated that the EU wide Harmonisation of Military Airworthiness is the main interest of national airworthiness authorities. It is expected that a common approach will improve European military aviation safety, reduce the necessary investments and lead time for future multinational air system programmes; being thus the key enabler for cost-effective maintenance services. Addressing further the development of a common set of European Airworthiness Requirements, the participants agreed to focus their future activities on finding how to promote European Military Airworthiness Requirements (EMARs) concept; how to determine when and how to engage with industry and other third parties; and how to decide the level of trust for mutual recognition taking safety into account. Endorsing the premise to seek quick wins based on lessons learned for promotion and collaboration, the participants also acknowledged the need 6

7 to initiate a feasibility study associated with the formation of a European Military Joint Airworthiness Authority; and to develop an equivalent MIL-HDB-516b document that points to the existing military/civil standards; to evaluate the feasibility to link the Military Airworthiness Authority (MAWA) procedures with the US military procedures; and to promote collaboration between the EASA and the EDA and NATO in Civil and Military Airworthiness harmonisation. The workshop noted that Sense and Avoid might become a critical issue with respect to certification and airworthiness and that industry organisational approvals should account for civil organisational approvals where appropriate. Further the workshop recommended EDA/MAWA to consider the possibility to exchange of accident databases between civil and military users for UAS and the exchange of information on accidents and/or occurrences amongst military authorities within pms (all aircraft types). 7

8 European Education and Training in Armaments Co-operation The Way Ahead, Prague, June 2009 Organized in cooperation with the EDA. More than 65 attendees from 20 EU Member States, Switzerland, the United States, the European Commission, the European Security and Defence College (ESDC), the European Institute for Security Studies (EU ISS), the Aerospace and Defence Industries Association of Europe (ASD), Organisme Conjoint de Coopération en Matière d Armement (OCCAR) and NATO. Training in Armaments Co-operation is a strategic way to increase efficiency of cooperative armaments programmes. A study commissioned by the EDA and conducted by the EU Institute for Security Studies (EU ISS) identified various options for training and education. However, these options are yet to be transformed in concrete policy proposals and, later on, materialized into an open, effective and coherent European system of armaments cooperation education and training. A point of reference The subject of education and training in armaments cooperation enjoys a widespread support from the EDA and its Member States. This support sytems from the recognition, based on empirical evidence provided by the EDA Cooperative Lessons Learned and Best Practice exercise, that most European cooperative armament programmes are hampered by a lack of mutual understanding among different stakeholders. This is mainly due to EU defence resources as a whole remaining heterogeneous and capability, armaments, R&T/D and subsequent procurement process, along with defence industrial policy, still predominantly confined to national borders. But it is also because the EU does not provide the stakeholders engaged in cooperative programmes with a coordinated EU-wide education or training platform where a common understanding of a European approach to armaments cooperation can be promoted and nurtured. European Education and Training in Armaments Co-operation Enhancing mutual understanding of stakeholders engaged in cooperative programmes through the establishment of a common European Education and Promoting dialogue on how to strengthen international ties and how to increase effectiveness of co-operative ventures through enhancing common understanding is a categorical imperative, said Pavel Černý, CZ Deputy NAD. The issues that need to be addressed at this stage include the following: the substance of armaments cooperation education and training at the European level; the availability and the role of armaments co-operation education and training providers both inside and outside the EU; the scope of supervision and coordination of armaments co-operation education and training at the European level; the level of integration of various existing education providers, EU institutions and industry into a coherent European armaments cooperation education and training platform. The Czech EU Presidency conference addressed these issues with the view to help develop a roadmap for consideration by the EDA Steering Boards this autumn on how to make European education and training in armaments cooperation a working reality. 8

9 Recommendations Conference participants from both government and industry widely agreed on the need to collaborate and to establish a common education and training platform in armaments cooperation. Such a platform should be focused on expert (project manager) level and it should be open to non-eu participants. Increasing mutual understanding and intercultural awareness through common education and training was given a top priority. In attaining the establishment of a common European armaments cooperation education and training platform, all relevant institutions, including non-european, if interested, should take part in developing knowledge areas, curricula and common standards. They should also tackle the issue of certification, mutual recognition and an alumni network. In doing so, lessons learned should be shared, and most importantly, a governance structure should be defined. It was generally acknowledged that existing structures and expertise both inside and outside the EU should be exploited to avoid unnecessary duplications and that all academic stakeholders, including the French Centre for Higher Armament Studies (CHEAr), Session Européenne des Responsables d Armement (SERA), the Federal Academy of Defence Administration and Technology (BAkWVT), ESDC, the Swiss Federal Institute of Technology (ETH), and the National Defense University (NDU) have a role to play in common education and training in armaments cooperation by internationalizing their courses. More specifically, the SERA model should be brought under the umbrella of the EDA; the BAkWVT is ready to set up EuroSTAMP (Seminar for Top Armament Management Personnel) for interested participants from other EU Member States; and the ESDC is prepared to include armaments-related agenda in its current courses and modules. It was agreed that European armaments education and training should be further conceptually developed to ensure that the objective of this endeavour is clearly defined and justified. The European Armaments Co-operation (EAC) Framework of skills, understanding and values (as defined in the EDA) should be continuously adapted to meet future challenges and be capable of striking the right balance between the needs of military, industrial and civilian sectors, including R&T/D. 9

10 Conclusion In addressing the three above-mentioned topics, the Czech Republic in general and its National Armaments Director in particular, sought to support the efforts of the EDA and its Member States to improve defence capabilities within the ESDP framework, trying to provide added value of the Presidency to the ongoing EDA s agendas and projects. But without support of the EDA and its Member States, even the best intentioned political impetus might not be enough to achieve the desired result. The Czech Republic has started the ball rolling by setting up a series of meetings, and we hope that the forthcoming Presidencies will keep it rolling. 10

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