The world is complicated. One need only scan the headlines to understand that events around the globe have brought significant uncertainty and disruption to traditional alliances and geopolitical assumptions. Major power conflict is again being discussed as a possibility. Countries throughout the world remain on guard for asymmetrical terrorist threats. And the significance of cyberspace threats has never been greater. In the midst of this uncertainty, countries are seeking to ensure they are well positioned to deter aggression and protect their interests.
One result of this complicated landscape is that global defence and security procurement spending rose to its highest level since the Cold War, increasing 1.1 per cent to reach an estimated US$1.739 billion over the prior year, according to the Stockholm International Peace Research Institute. The values of some of these defence procurements are staggering: US$50 billion for submarines in Australia, US$10 billion for armoured vehicles in Saudi Arabia, US$17.6 billion for additional United States nuclear attack submarines, US$2.3 billion for attack helicopters in the United Kingdom and a potential US$25 billion deal for new fighter jets in India. Nor does it appear that this trend will abate in the near future.
Of course, defence and security spending is not distributed evenly throughout the world, and threat perception is not the only factor at play in this complicated market. Economic factors play a significant role in defence procurement decisions – for example, declining oil prices have resulted in lower defence spending in parts of North Africa and South America. Political factors, of course, also play an outsize role – in the United States, for example, changes in the Executive and Legislative Branches of the US government have resulted in dramatically increased defence spending.
As defence budgets change, a common practice is to look internationally. But international expansion is not for the faint of heart or the ill-prepared. It requires long-term strategic planning, substantial due diligence and expert insight into the national procurement system of the target market. For many nations, defence and security spending is one of the largest portions of government procurement expenditures. These procurements directly impact a nation’s ability to defend its people and maintain its sovereignty. As a result, they can frequently be controversial, both for the country making the procurement and for the country providing the goods and services. Companies in the defence and security sector must also diligently mitigate the risk of corruption. Companies frequently miscalculate the cost, duration and complexity of international procurements.
In many countries, the rules for defence and security procurements are significantly different from those for commercial transactions and may differ even from the rules applicable to the rest of the government procurement system. The procurement systems in each of the countries in this book are very different. Conducting due diligence can be difficult and expensive; where do you start and who can you trust?
Defence and security contractors need an initial reference to understand the basics of what it will take to complete a deal for a defence and security procurement in various jurisdictions. To this end, we present the third annual edition of Getting the Deal Through – Defence & Security Procurement.