A Reply
| Author | KEITH HARTLEY |
| Date | 01 December 1974 |
| DOI | http://doi.org/10.1111/j.1467-9299.1974.tb00198.x |
| Published date | 01 December 1974 |
CORRESPONDENCE
A
Reply
Mr.Goble’s comments raise
a
number of controversial issues in the political
economy of decision-making in defence. These will be considered in two
groups.
I.
Competition
and
Defence
‘The absence of rival suppliers of defence in the British market
. .
.
means
that comparative cost data are unavailable’ (Hartley, p. 56). Goble: ‘It is
not true to say there are no yardsticks for defence procurement
.
.
.’
A
distinction has to be made between procurement policy concerned
with the acquisition of weapons and the provision of defence ‘output’
supplied by the armed forces. The article recognized that there are oppor-
tunities for
‘.
.
.
experimenting with the extended use of private markets’
(p.
71).
However, British aircraft procurement policy is not the best
example of competition. Too often, policy-makers have supported the
non-competitive
and higher-cost domestic aircraft industry.’ The recent
emphasis on fixed price and incentive contracts is welcome but fixed price
contracts are only
a
necessary
and not a
sufient
condition for a competitive
procurement policy.
A
competitive solution requires choice between
potential suppliers with fixed price contracts enabling the buyer to rank
bidders on
a
price basis. Competition for
U.K.
defence contracts could
be
provided by British and foreign firms both within and outside the
aircraft industry.
The point of comparing defence and cars was to emphasize that there
is an absence of both
a
market price for defence ‘output’ (cf. price of cars)
and rival armies, air forces and navies in the
U.K.
(cf. Ford, British
Leyland, General Motors)
so
that there are no comparative cost data on
force
units.
Even if Phantoms are the cheapest buy (with British engines
and equipment?) there remain the questions of the ‘appropriate’ amount
of air defence (what is society’s valuation (price) of air defence?) and
whether the
RAF
is providing this efficiently (does it have any incentives
to do
so?).
2.
Decision-Making
Programme budgets
‘.
. .
in their published form present information
which reflects the
results
of past decisions’. (p. 63).
I
don’t disagree that
some decisions (e.g.
R
and D) contain ‘forward thinking’; indeed the
functional costing system used by the Ministry of Defence extends over
a
ten year planning horizon. However, by the time the functional budget
reaches Parliament all the relevant numbers have been placed in ‘boxes’
or budget categories,
‘.
. .
so
effectively by-passing the main problems
of just how and why the expenditure decisions were made’ (p. 63). In this
context, it is incorrect to say
(as
the comment suggests) that the article
‘Keith
Hartley,
A
Market
fm
Aircraft,
Institute
of
Economic
Affairs,
Hobart
Paper
57
‘974.
457
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