Defence Procurement and Budget – Assessing Needs, Increasing Transparency
Datuk Dr. Anis Yusal Yusoff (Deputy Director General, National Centre for Governance, Integrity & Anticorruption (GIACC), Prime Minister’s Department
There is a general perception across the board that defence procurement is corrupted, often perceived to be driven by politics and personal interests. Thus, the functionality and purpose of defence procurement is perceived to be led by ‘interests’—interests of governments, arms manufacturers and producers. Given the apparent opaqueness of the governance agenda, the procurement as well as its budgeting in defence are often a debated issue.
This paper discusses the need to have checks and balances with proper consideration of relevant factors being taken into account in decisions made in defence procurement and its budgeting.
The First Steps To Anti-Corruption Responses
A poignant starting point for any procurement is the recognition that the development of pro-integrity policies must be based on the best possible understanding of the problems and challenges that exist. Simply put—it has to be evidence-based. Effective anti-corruption responses cannot be designed devoid of a thorough assessment of the problem—an area the Ministry of Defence (MINDEF) needs to ascertain before it implements any anti-corruption policies and plans.
The purpose of the needs analyses is two-fold:
- To identify factors that currently cause or create risks of corruption/ unethical behaviour in the defence sector; and
- To inform the designing of future projects and policies to address the identified risk factors.
Conundrums in Procurement – Acquisition, Authority and Approvals Processes
The remits of procurement involve acquisition, maintenance, and employment. They range from full combat capabilities across air-land, maritime, cyber, and space environments, to the simple maintenance of domestic forces, or even to no defence forces at all. Governments and capability planners need to take a very long-term view when deciding which ones to build and sustain, and which ones to eliminate. Furthermore, it is also imperative to distinguish between two major activities in procurement:
- determining what capability and/or equipment will be acquired; and
- the acquisition process itself.
Although these two elements often run concurrently, and frequently overlap, they are, in fact, distinct processes involving different considerations. Much of the public debate tends to surround the first activity, challenging the basic requirement in the context of other national priorities, debating cost estimates, or challenging the selected solution. Though pertinent, this is not where the real systemic problems are to be found. Systematic issues are found in its acquisition as much as in the capability to ascertain the requirements for the needs being considered.
Crucial also in this equation is – who the person(s) ultimately responsible for deciding what equipment will be obtained and then issued to the Malaysian Armed Forces (land, air and sea) are, must be clearly articulated in the Armed Forces Act 1972 (Act 77) and Arms Act 1960 (Act 206). Does the Minister or the Prime Minister have the exclusive authority to define the requirement, and is the approval authority for the technical and operational aspects of a given procurement?
What needs clarity is also government-decision mechanisms for major acquisitions and the process of the final decision on what equipment to buy. The role of the Cabinet in this process is also something to be considered. What is also in need of determination is, what is a major, what is a substantial and what is a normative acquisition, and what is its process of approval.
The needs of defence procurement can be summarized as follows:
* Policy-driven procurement is generally deliberately planned with full consultation whilst Operations-driven procurement, particularly undertaken to meet immediate mission support needs, is different. These procurement decisions are separated and driven by time factors. The needs and procurement process for both will differ and the checks and balances may also differ.
Loopholes and breakdown of governance in procurement often emerge in the following scenarios:
- decisions related to high-profile, politically sensitive, policy-driven procurements; and
- operationally urgent purchases.
Added challenges to defence procurement are:
- The technological complexity of many defence systems and the consequent cost and difficulty of developing, producing and operating them.
- Defence procurement is done across highly diverse marketplaces. Complex weapons, such as combat aircraft, are developed and produced in relatively small numbers by a very few suppliers because of the large and sustained technology investments required. Hence the question of tender and single sourcing becomes a point of contention in such an instance. Again, remits of assessment needs to be made clear.
To circumvent some of the loopholes of corruption – public advertising of tendering opportunities; the use of a separate (from the end user) equipment procurement organisation; open competition (as opposed to single source procurement) as the normal procedure; independent tender assessments; separate financial and commercial delegations; independent project approval; parliamentary and public scrutiny; simultaneous document release to all tenderers; and debrief to all tenderers on the award of the contract outlining assessed scores are some areas to strengthen governance in defence procurement. This said, defence procurement needs different approaches to meeting different requirements in different situations.
Multi-Ministry Procurement Process
The multiplicity of Ministerial points of authority complicates process, and it inherently disperses accountability. Some areas that need synchronizing are as follows:
- Standards/guidelines/benchmarks regarding impartiality and accountability in the defence sector;
- The extent to which these standards, etc., are institutionalized in the countries in question;
- Major gaps (between the normative standards and their actual extent of institutionalization) and possible measures to address them.
Recommended system of checks and balances that needs to be in place is as follows:
- Parliamentary oversight
- Anti-corruption policies
- Specialised anti-corruption bodies
- Arrangements for handling conflicts of interests
- Arrangements for transparency/freedom of access to information
- Arrangements for external and internal audit, inspection arrangements
- Ombudsman institutions
Human Resource Management
MINDEF is often one of the largest ministries in terms of number of staff. Human resources is central to the quality of performance of defence sector bodies. Recruitment patterns therefore need robustness to alleviate issues of dysfunctional dependency relationships between managers and employees which can easily result in the latter losing their professional independence, and which may in turn translate into corruptive/unethical behaviour
Instituting parliamentary oversight is vital to building integrity for several reasons:
- Parliamentary oversight is one of the key democratic means of holding the government to account for its actions.
- Since MINDEF utilizes a substantial share of the state’s budget, it remains essential that parliament monitor the use of the state’s scarce resources both effectively and efficiently.
- The Oversight may prevent concentration and abuse of executive power.
Freedom of access to information
Clarity of information promotes integrity by:
- Reducing the possibilities for corruption and other forms of maladministration;
- Allowing the public to have well-founded opinions on the authorities that govern them; and
- Strengthening citizens’ control over government decisions and promoting democracy.
A transparent and detailed budget that is available to the public is key to holding governments accountable to their citizens. There is a growing awareness among members of regional organisations that stability and security can be enhanced through increased disclosure of defence-related information.
Ombudsman for Integrity
In addition to oversights by bodies highlighted above, ombudsman institutions should be empowered to investigate citizens’ complaints about government decisions and recommend their rectification. Ombudsman has the power to investigate and criticise but not to reverse administrative actions. The ombudsman is an independent arbiter between the government and the citizens. The record of military ombudsmen shows that this institution may be a powerful tool in enhancing public confidence in the defence sector. In addition, the military ombudsman provides essential protection to individual servicemen and women against abusive treatment within the military
In conclusion we need to distinguish between five aspects of independence:
- Decision-making autonomy – the extent to which the government/ministries may influence the state body’s decisions,
- Managerial autonomy – the extent to which it may make decisions concerning the use of inputs (mainly personnel, finance, technical infrastructure) in the design of its internal organisation; and
- Organisational autonomy – the extent to which a state body is shielded from influence by the government/ ministries through organisational arrangements and arrangements regarding the appointment of the agency leadership.
- Financial autonomy – the extent to which the agency depends on governmental funding or own revenues for its financial resources.
- Legal foundations of autonomy –- the extent to which the agency’s legal status or the nature of the legal framework regulating the body prevents the government/ministries from altering the allocation of competencies or makes such changes more difficult.
Disclaimer: The opinions expressed in this article are the author's own and do not represent GIACC.