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<p align="center" class="style17">Table of Contents<br>
25th International Workshop - Rome '08</p>
<p align="center" class="style17">
<a href="/2008book/weissinger-preface.html">Preface- Dr. Roger<br>Weissinger-Baylon<br>Workshop Chairman<br></a>
<a href="/2008book/weissinger-overview.html">Workshop Chairman's Overview - Dr. Roger Weissinger-Baylon</a>
<a href="/2008book/joulwan.html">Opening Dinner Debate - <br>General George Joulwan<br>Former SACEUR</a>
<p>
<p align="center" class="style17">Part One<p>
<p align="center" class="style17">
<a href="/2008book/la-russa.html">Italian Defense Minister<br />
Ignazio La Russa
</a>
<a href="/2008book/browne.html">British Defense Minister<br />
The Rt Hon Des Browne
</a>
<a href="/2008book/gonul.html">Turkish Defense Minister<br />
Vecdi G�n�l
</a>
<a href="/2008book/di-paola.html">NATO Military Committee Chairman<br />
Admiral Giampaolo Di Paola
</a>
<a href="/2008book/zappata.html">Admiral Luciano Zappata<br />
Dep Supreme Allied
Commander Transformation
</a>
<a href="/2008book/camporini.html">Italian Chief of Defense<br />
General Vincenzo Camporini
</a>
<a href="/2008book/zappa.html">Alenia Aeronautica Chairman<br />
Dr. Giorgio Zappa
</a>
<br>Part Two<br>
<p align="center" class="style17">
<a href="/2008book/baramidze.html">Georgian Vice Prime Minister<br />
Giorgi Baramidze
</a>
<a href="/2008book/chizhov.html">Russian Amb to EU<br />
Vladimir Chizhov
</a>
<br>Part Three<br>
<p align="center" class="style17">
<a href="/2008book/eldon.html">British Amb to NATO<br />
Stewart Eldon
</a>
<a href="/2008book/akram.html">Pakistan's Amb to U.N.<br />
Munir Akram
</a>
<a href="/2008book/de-la-sabliere.html">French Amb to Italy<br />
Jean-Marc de la Sabli�re
</a>
<a href="/2008book/tkeshelashvili.html">Georgian Foreign Minister<br />
Eka Tkeshelashvili
</a>
<a href="/2008book/stefanini.html">Italian Amb to NATO<br />
Stefano Stefanini
</a>
<a href="/2008book/buzhinsky.html">Lt Gen Evgeniy Buzhinsky<br />
Russian Min of Defense
</a>
<a href="/2008book/winid.html">Polish Amb to NATO<br />
Boguslaw Winid
</a>
<br>Part Four<br>
<p align="center" class="style17">
<a href="/2008book/tegnelia.html">DTRA Director<br />
Dr. James Tegnelia
</a>
<a href="/2008book/rood.html">U.S. Under Sec of State<br />
John Rood
</a>
<a href="/2008book/joseph.html">Former Under Sec of State<br />
Amb Robert Joseph</a>
<a href="/2008book/berdennikov.html">Russian Amb-at-large<br />
Grigory V. Berdennikov
</a>
<a href="/2008book/benkert.html">U.S. Asst Sec of Defense<br />
Joseph Benkert
</a>
<a href="/2008book/flory.html">NATO Asst Sec Gen<br />
Peter Flory
</a>
<a href="/2008book/sedivy.html">NATO Asst Sec Gen<br />
Jiri Sedivy
</a>
<a href="/2008book/pfirter.html">OPCW Dir Gen<br />
Amb Rogelio Pfirter
</a>
<br>Part Five<br>
<p align="center" class="style17">
<a href="/2008book/lather.html">SHAPE Chief of Staff<br />
General Karl-Heinz Lather
</a>
<a href="/2008book/fitzgerald.html">Admiral Mark. P. Fitzgerald
<br />
Allied Joint Force Command Naples
</a>
<a href="/2008book/ildem.html">Turkish Amb to NATO<br />
Tacan Ildem
</a>
<a href="/2008book/schuwirth.html">Fmr SHAPE Chief of Staff<br />
General Rainer Schuwirth
</a>
<a href="/2008book/acosta.html">Global Impact CEO<br />
Ms. Renee Acosta
</a>
<a href="/2008book/soligan.html">Lt Gen James Soligan<br />
Allied Command-Transformation
</a>
<a href="/2008book/bagnall.html">Former UK Vice Chief of Defense Staff<br />
ACM Sir Anthony Bagnall
</a>
<br>Part Six
<p align="center" class="style17">
<a href="/2008book/volkman.html">U.S. Dir of Internat. Coop.<br />
Alfred Volkman
</a>
<a href="/2008book/tozzi.html">Major General Claudio Tozzi<br />
Italian Defense Ministry
</a>
<a href="/2008book/homberg.html">EADS Senior Vice Pres<br />
Thomas Homberg
</a>
<a href="/2008book/shephard.html">Northrop Grumman VP<br />
Mr. Timothy Shephard
</a>
<a href="/2008book/buckley.html">Thales Senior VP<br />
Dr. Edgar Buckley
</a>
<a href="/2008book/harris.html">Lockheed Martin Global Pres.<br />
Dr. Scott A. Harris
</a>
<a href="/2008book/schneider.html">AFCEA CEO<br />
Kent Schneider
</a>
<a href="/2008book/patterson.html">Mr. David Patterson<br />
Univ of Tennessee
</a>
<p align="center" class="style17">Part Seven
<p align="center" class="style17" style="margin-bottom: 0;">
<a href="/2008book/grimes.html">U.S. Asst Sec of Def<br />
Hon. John G. Grimes
</a>
<a href="/2008book/lentz.html">U.S. Dep Asst Sec of Def<br />
Robert Lentz
</a>
<a href="/2008book/aaviksoo.html">Estonian Defense Minister<br />
Jaak Aaviksoo
</a>
<a href="/2008book/bloechl.html">Microsoft, Managing Dir.<br />
Tim Bloechl
</a>
<a href="/2008book/wolf.html">Lt Gen Ulrich Wolf<br />
NATO CIS Service Agency Dir
</a>
<a href="/2008book/monteforte.html">Italian Milrep to NATO<br />
Vice Adm Ferdinando Sanfelice di Monteforte
</a>
<a href="/2008book/lintonen.html">Finnish Amb to UN<br />
Kirsti Lintonen
</a>
<a href="/2008book/silvestri.html">Dr. Stefano Silvestri<br />
Istituto Affari Internazionali
</a>
<a href="/2008book/yousfi.html">Algerian Amb to UN<br />
Youcef Yousfi
</a>
<a href="/2008book/karem.html">Egyptian Amb to EU<br />
Mahmoud Karem
</a>
<a href="/2008book/tarasyuk.html">Former Ukrainian Foreign Minister<br />
Borys Tarasyuk
</a>
</div>
</div>
<div id="content">
<div class="story">
<h2 class="workshop_year">Rome '08 Workshop</h2>
<!-- InstanceBeginEditable name="Main Content" -->
<h1>
How Industry and Government Must
Work Together to Provide Best Value </h1>
<h2 style="margin-bottom: 0;">
Mr. Kent Schneider</h2>
<h2 style="margin-top: 0; margin-bottom: 0;">AFCEA CEO<B> </B></h2>
<p align="center" style="margin-top: 0; margin-bottom: 0;"><img src="images/schneider.jpg" alt="Mr. Kent Schneider" width="114" height="139"></p>
<p style="margin-top: 0;">
AFCEA, the Armed Forces Communications and Electronics Association, does
not compete in this global and transatlantic market but rather has about
1,700 corporate members, including every company at this table, who participate
in that market. Since about one in four members is located in Europe, we
feel as though we have a foot on each side of the Atlantic. </p>
<p>
I would like to give you our total memberships’ perspective. And I’d like
to talk about some of the themes you have heard about already but with
just a little different spin on them. </p>
<h2>SOME STATISTICS ON RESOURCES AND BUDGETS </h2>
<p>
We heard earlier from a number of speakers about dwindling resources and
tightening budgets. Let me give you some numbers so that you can put some
scale to that. In the U.S., in the defense market, we have experienced
34% real growth in the 2001–2008 time frame, and that includes the supplementals
that have been so critical to meeting obligations. However, if you look
at the 2009–2013 budgets, the expectation is, if the budgets hold up, that
we will have a decline in real terms of 3.3% per year. Similar pressures
in Europe are now being experienced, with recent budget reductions on the
defense side in Germany, the U.K., and elsewhere. Of course, compounding
those issues are the facts that the allocation of resources has shifted
and that personal costs and inventory replacement as a result of the persistent
conflict we have been experiencing, and O and M costs are increasing as
a percentage of the budget. So that means that modernization programs and
other efforts to improve capability get pushed even farther back as a result
of those pressures. </p>
<h2>THE NEED FOR GOVERNMENT-INDUSTRY COMMUNICATION </h2>
<p>
To reinforce what Scott Harris was saying, globalization on the industry
side is occurring at an incredible rate. Industry is expanding its market
view. Why? Because budgets are declining everywhere, and as industries
look locally, they do not see enough business to sustain themselves and
so they start looking more broadly. The pace of change is also forcing
industry to get farther ahead of what is going on. There needs to be more
communication between government and industry because, in the absence of
government vision, industry does not know where to go and does not know
where to invest. It tries to get farther ahead, understand requirements,
and invest earlier, and it is teaming because what it hears from government
is that government wants total solutions. Most companies are not able to
single-handedly provide that kind of capability so we are seeing more teaming
and we are seeing teaming on a global basis. </p>
<p>
We are also seeing companies intensify research and development. R&D spending
in industry is going up in real terms every year and that is probably appropriate,
particularly in the government space and the defense market, because government
spending is going to go down. In real terms in the U.S., government R&D
is going to be down 21.7% over the 2009–2013 period, and the only place
where that slack is going to be made up is on the industry side. </p>
<p>
Of course, cross-border M and A activity is at an all-time high. The defense
industrial strategies of the European Union are forcing U.S. companies
to acquire in Europe. Why? Because you say you want to buy local, so U.S.
companies are acquiring local so that they can be viewed as a local player.
On the other side of the Atlantic, the motivation is a little bit different.
With the change and exchange rates, U.S. companies are selling at bargain
rates—the number three acquirer of public sector IT companies last year
in the U.S. was QinetiQ North America, a U.S.-based company. However, the
players at this table from Europe, EADS, and Thales have also been major
acquirers along with BAE, VT, and a number of others. </p>
<h2>PROVIDING BEST VALUE </h2>
<p>
Let me shift to the notion of best value. We have been talking about capabilities
and optimizing capabilities and I will return the favor to Edgar Buckley
and say that, yes, we in the U.S. believe that European industry needs
to be strong and to have capability, and we need to team to provide best
value. I think it is important to realize—and here I go back to Scott Harris’s
point—that with globalization, industry provider choices are no longer
continental. Today, it is inappropriate to think that we want to buy European
or we want to buy U.S. or we want to buy Asian. That is because all companies
are globalizing, and even if you do not buy from a global company, the
likelihood is that you are going to buy from a global team, because we
are going to team across the Atlantic or across the Pacific in order to
provide total capability. </p>
<p>
I would argue that purchasing decisions should be made on best value. The
dilemma there is figuring out what best value is—best value, like politics,
is local and should be comprehensive, but it should be on the table at
the beginning of an acquisition. Previously, in referring to the Northrop
Grumman-EADS/Boeing tanker procurement, someone mentioned that the problem
is one of process. Well, the problem with the process was that the Government
Accountability Office determined that the rules changed in the middle of
the procurement, so best value was defined in the RFP and then defined
differently in the final evaluation. I do not know whether that is right
or wrong. History will tell when the process is done. The point is that
this is not the first time that criteria have been applied that were not
on the table at the beginning of a procurement. So it seems to me that
you want to encourage global teaming, you want to get the best capability—we
need the best capability for our warfighters—but we also have to define
and make known at the outset what best value means for a particular procurement.
It should be holistic and it should be open so that industry can make good
decisions about where to engage. </p>
<h2>CREATING A LONG-RANGE STRATEGY </h2>
<p>
We should not be reluctant to put all the criteria on the table. Those
of you who have been doing business in Europe for some time will remember
when Geoff Hoon was the Secretary of State for Defense in the U.K. and
published what is known as Hoon’s Rules. Hoon’s Rules basically said that
we are interested in quality capabilities but there are other things that
interest us: We want to preserve intellectual property for the U.K., we
want to grow jobs in the U.K., we want to advance the U.K. economy as part
of this process. Well, all that is perfectly fair and everybody does that.
The problem is that they don’t all put it on the table. If you look at
U.K. defense industrial strategy, you will see that many of Hoon’s Rules
are now embedded in that strategy—maybe not in exactly the same words,
but the point is that it is about more than just an individual procurement,
it is about long-range national strategy. I would argue that whether you
talk about a national strategy or a coalition strategy for NATO, the same
issue applies. And we need to put it on the table at the beginning and
keep it stable through the acquisition. </p>
<p>
We all need to move together to remove obstacles. ITAR has already been
mentioned, and clearly ITAR can be a huge problem. When I was at Northrop
Grumman, we won the contract in the U.K. to sustain and modernize the AWACS
fleet and we teamed with a company called AAR in the United States to do
supply chain. What we found was that every time we sent a major item back
to the U.S. to be repaired, it had to be re-exported, because we had added
value even though it came back exactly the way it looked before; we added
value because when we sent it back it was broken and when it was returned
to us it wasn’t. So they said we had to re-export it, and then we could
not meet the contract requirements. We ended up moving that operation for
major repairs to the Netherlands. </p>
<p>
What was the impact on the United States? It lost jobs. What was the impact
on Europe? It gained jobs. And all this was because of an export policy
that made no sense in the context in which we used it. We are all in favor
of controlling the export of militarily sensitive items to make sure that
they don’t get in the hands of players we do not want involved. But we
have to be realistic about what we control and how we do it. </p>
<p>
Risk sharing is also an issue. It has been mentioned here, but a tendency
of government when programs do not go well is to shift the risk to industry.
When you do that, industry will raise the price to hedge the risk and,
in the end, nobody will get best value. In the beginning, it is a good
idea to talk about how you are going to handle risk. A procurement policy,
of course, needs to be open and honest. </p>
<h2>CONCLUDING REMARKS </h2>
<p>
To close, what does industry need from government? First, it needs vision,
because if we do not understand where government is going and we cannot
position industry to support it, whether in Europe or in the U.S., we need
government to define requirements and keep them stable. Most programs that
fail do so because requirements drift over the course of the program and
expectations are different at the end than they were in the beginning. </p>
<p>
We also need short acquisition cycles—they are much too long. It is a lot
easier to maintain requirements over months rather than years, and this
is particularly acute in the IT environment, as I am sure General Wolf
and his panel will talk about. </p>
<p>
We also need to share risk appropriately and portray the playing field
honestly, based on best value. We must put it all out there up front and
keep it stable through to the end. </p>
<p>
</p>
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