An integrated approach for supplier selection in military critical application items

DOIhttps://doi.org/10.1108/JOPP-16-01-2016-B004
Published date01 March 2016
Date01 March 2016
Pages83-117
AuthorChristodoulos Nikou,Socrates J. Moschuris
Subject MatterPublic policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 16, ISSUE 1, 83-117 SPRING 2016
AN INTEGRATED APPROACH FOR SUPPLIER SELECTION IN MILITARY
CRITICAL APPLICATION ITEMS
Christodoulos Nikou and Socrates J. Moschuris*
ABSTRACT. Supplier selection for defence procurement is a crucial function
of a Ministry of D efence. The Ministry spends huge amounts of money each
year to procure a vast array of equipment, goods and services. The ongoing
financial crisis demands less subjective and more cost-saving methods for
selecting a supplier. The approach advocated in thi s article integrates
Analytic Hierarchy Process (AHP) with Goal Programming (GP) in order to
combine conflicting criteria to select the best suppliers and allocate
optimum order quantities among them. This paper presents a model close to
real-world situations. Findings demonstrate that cost savings is a feasible
result along with a viable combination of conflicting criteria in the suppliers’
selection area.
INTRODUCTION
Military procurement is an important function of a Ministry of
Defence (MoD), as indicated by several financial data. In general, U.S.
suppliers account for 50 to 80 percent of major items’ value (GAO-98-
87, 1998). Additionally, in fiscal year 2006, the US Army’s purchases
of weapons, goods, and services, comprised 58 per cent of its budget
(RAND Corporation, 2012). Hellenic MoD’s defence budgets for the
years 2014-2017 fluctuate from 2.968 to 2.852 billion (Hellenic
Ministry of Finance, 2013) allocating a significant portion for military
procurement. The MoD is one of three main pylons of the National
------------------------------------
* Christodoulo s Nikou and Socrates J. Mos churis are a Ph.D. Stude nt and
an Associate Professor, respectively, Department of Industrial Management
and Technology, School of Maritime and Industrial Studies, University of
Piraeus, Greece. Mr. Nikou’s research interests are in purchasing and
supply chain management. Mr. Moschuris’s research interests are in
logistics, supply chain management and procurement.
Copyright © 2016 by PrAcademics Press
84 NIKOU & MOSCHURIS
Defence Frame of Greece which, in general, consists of the following
(Hellenic Ministry of Defence, 2014):
- The Permanent Committee of National Defence and Foreign
Affairs of the Parliament.
- The Governmental Council on Foreign Policy and National
Defence, presided over the Prime Minister.
- The Ministry of Defence. A detailed analysis of the departmental
organization of the Hellenic MoD is shown in Appendix B at the
end of the manuscript.
The Hellenic MoD procurement actions take place within the
Greek legal framework on Public Procurement for products and
services, which is separated into two major categories. The category
of our concern is related to defence and security products and
services. It is mainly governed by National Law 3978 of 2011 which
transposed European Directive (ED) 2009/81 into the Hellenic
Legislation and provided the main frame for current military
procurement. The law 3978 (2011) strengthens the transparency of
the defence policy by calling for independent scrutiny and co-
operation of the main organs of the MoD that deal with military
procurement. It also provides rules for supplier selection, offers/bids
evaluation and contract awarding as well as the judicial frame of all
administrative provisions related to the application of review
procedures for the award of public contracts.
In the academic literature of Procurement, the need for
public/private sector cooperation, in order to resolve procurement
issues, has already been highlighted (Choi, 2010). Consequently, the
existence of several sophisticated and popular supplier selection
tools in the private sector allows hopeful thoughts for their use in the
public sector. Towards this direction, Tadelis (2012) argued for the
need to enhance the tools that are currently at the disposal of public
sector procurement offices from the private sector, without limiting
the transparency of the selection/evaluation procedures. Ho, Xiaowei,
and Prasanta (2010) provided a spectrum of the supplier evaluation
and selection methods/models used widely in the private sector,
pointing out that the integrated Analytic Hierarchy Process-Goal
Programming approach is the most popular method. Goal
Programming, a branch of multi-criteria decision-making analysis
(Tamiz, Jones, & Romero, 1998), is useful in real world decision-
INTEGRATED APPROACH FOR SUPPLIER SELECTION IN MILITARY CRITICAL APPLICATION ITEMS 85
making problems involving multiple conflicting objectives and goals
(Ignizio & Romero, 2003). Supplier selection is one of these
problems, requiring trade-offs among multiple criteria that are
tangible and intangible (Cebi & Bayractar, 2003).
Additionally, the ability to evaluate procedures with measurement
tools has been shown to be as of great importance in both defensive
and non-defensive sectors. In a study commissioned by the Center of
Advanced Purchasing Studies (Fearon & Bales, 1997), it was
concluded that enhanced attention and tailored measurement tools
are crucial for the success of a company in its vital areas of
functioning. In the Armed Forces area, a Critical Application Item (CAI)
is an item that is essential to weapon system performance or
operation, or the operating personnel determined by the military
services (USDLAI 3200.4). The mission statements of major military
SCM (Supply Chain Management) agencies such as the US Defence
Logistics Agency, NATO Support Agency and Hellenic Army General
Staff/Ordnance Directorate, refer to the capability of providing high,
added-value integrated logistics in a timely manner. That capability
becomes very important in Aviation CAI cases due to their gravity for
the success of a mission and the safety of the personnel involved.
The objective of this paper is to present a way of modeling article
66 of the law 3978, (2011), (article 47 of the ED 2009/81), that
deals with the evaluation criteria of the supplier to whom a contract
may be awarded, using an integrated AHP-GP approach. This
approach is very common in supplier selection literature of the private
sector (Ho, Xiaowei, & Prasanta, 2010) and provides measurable
results. For the application of the integrated model, an expert team
(ET) was made up of a senior procurement officer that specialized in
CAIs, a procurement manager from the Hellenic Aerospace Industry
(HAI) and a senior procurement member from the Hellenic Purchasing
Institute. The ET determined the criteria to be used in the approach
and performed the calculations of weights/loadings, with the
assistance of the authors. Additionally, the ET made an effort to
enrich the approach by introducing a supplier risk constraint and
presented a real world application.
The main contribution of this paper is focused on the
methodology proposed in the military procurement area under the law
3978, (2011). It is hoped that the current study will enrich the
defence literature by exploring and applying scientific and systematic

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