02 March 2013

Why Sweden, and Not Us?

No, I am not talking about how they handled their own banking crisis back in the 1990s, I am talking about how they delivered the Gripen fighter on time and on budget:
Aug. 10, 1628: Vasa, first of a new class of ships intended to change the balance of power in Nordic waters, left her Stockholm yard for the first time. As she left the lee of the city, she heeled sharply, flooded and sank. The shipwrights blamed the sailors for demanding too many guns.

This is related to the news that full-scale development of the JAS 39E version of the Saab Gripen will cost 13.1 billion kronor ($2.1 billion) over five years. That is about 1 billion kronor less than Saab 's last major effort, the JAS 39C/D.

The precursor to the JAS 39E, the Gripen Demo program, has just been completed for 60% of its planned budget, company flight test director Ola Rignell told a conference audience at the Aero India show in Bengaluru. And if the JAS 39E program follows the established pattern, it will be executed under fixed-price contracts.

Clearly, this must be stopped. If this behavior was to become universal, it would result in soaring unemployment among executive vice presidents. Armageddocalypse!

………

Sweden was developing multinational programs, teaming with the U.S. and Britain on engines and avionics, while rivals were busting their budgets in pursuit of autarky. From swept wings to real supersonic speed, and automated interception to pulse-Doppler radar, Sweden took third place behind the superpowers, and led the world in networked operations.

Another ingredient in the secret sauce is a small, low-profile group of people who neither bear arms nor cut metal. Not tomtens, the little creatures who guard the farm when everyone is asleep, but the Swedish defense materiel administration, the FMV—which traces its ancestry directly to the Royal Military Board that King Gustavus Adolphus established after the loss of the Vasa .

The FMV is a civilian agency that reports to the Swedish government. The defense ministry and armed forces are its customer, not its boss. In turn, FMV is the industry's customer.

………

FMV's job is not to get the biggest and fastest kit for the services but to make sure that stuff is delivered on time and does what it says on the tin. It is the broker between industry and the military user, ensuring that requirements are achievable with manageable risks, and monitoring industry 's performance.

That is why only Sweden , out of a dozen nations writing fighter requirements in 1980-85, decided that the most important goal was lower operating cost .

Fixed-price is simply how things are done. Says an FMV history of the Gripen (contractors may wish to avert their eyes):

In this large project . . . it was obvious to FMV that it would be very hard for the companies to pay the money back to FMV in case of failure.

The contractors would do WHAT? Indeed, Saab did so when the Gripen C/D program came in under budget , writing the FMV a check for the underrun.

This system will be put to the test again on the JAS 39E, because the minefield of integration and software is the core of the program.

What is new is that the Saab system that ties the avionics together is based on Arinc 651 partition standards that keep mission systems separate from flight-critical functions on the same processors.
To be clear, the Swedes have an option not available to the US defense industry, which is they can credibly threaten to shut down the whole program, and the whole industry, and buy foreign arms.

That being said, they have started their programs with a focus on cost, both acquisition and operational, and they have delivered capabilities that are similar to those of rival programs (here I would say the Typhoon and Rafale) more quickly and more cheaply.

So, for some reason, we cannot follow the Swedish model in either defense of finance, despite the obvious advantages of these strategies.

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