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Sponsored Report (for Acquisition Research Program) ; A number of major changes in the international aerospace market continue; they will likely have major impacts on global defense and aerospace commerce. These developments include the following: With the increase in complexity and cost of aerospace systems, it is much more difficult to reconcile the natural size of firms within national borders. Government policy to reconcile the need for affordability of defense goods with national sovereignty leads to increasingly hard choices. The aerospace industry is becoming increasingly globalized. Advances in information technology continue to offer new technical possibilities. Consolidation, and shakeout, of defense industrial firms means only a few potential bidders for projects. Accordingly, both governments and aerospace firms have made or are discussing changes to policies, strategies, and modes of operation to adapt to their changing environment. Our current research investigates the effects of these trends on the European and US defense industrial bases. We consider the following cases: EADS problems with engine software development and other issues associated with the A400M development. The Nordic defense bloc that emerging (or maybe not), and an exploration of the government side of the KC-X procurement saga, the quarrelsome committee, with Allison Model III (governmental politics). Our results, in a nutshell, are as follows: The A400M difficulties are the unsurprising results of curious behavior, with attendant difficulties for participating nations. A pattern of Nordic defense cooperation is in place, but it is not yet clear that a Nordic defense bloc is emerging. The KC-X difficulties demonstrate the limitations of the sovereign monopsonist model of the demand side of defense. In the matter of the KC-X procurement attempts, we conclude Model III works better. ; Naval Postgraduate School Acquisition Research Program ; Approved for public release; distribution is unlimited.

This report continues our efforts to provide useful insights and a partial framework for understanding ongoing developments in the international defense marketplace. Among other things, defense industrial affairs are becoming increasingly global and increasingly complex. In this discussion, we focus more on defense firms--considering the organization of Boeing 787 development and production, the KC-45 aerial tanker competition, and European defense firms' direct investment in the US defense market. In the 787 case, we observe that even experienced companies such as Boeing can run afoul of the complexities of coordinating a multiform venture. The KC-45, at least so far, seems to illustrate a new weakness of defense establishments relative to their suppliers. It is reasonable to suppose the two rival bidders (NG-EADS and Boeing) will continue to have veto powers over source selection--absent some fresh thinking. European defense firms' (BAE, EADS and Finmeccanica) entry into the US defense market through various direct investment strategies results from an increasingly globalized defense market. More importantly, perhaps, it demonstrates their ability to work around obstacles posed by US legislative and regulatory barriers. One major theme is that increased complexity of agile suppliers' methods and relationships poses significant problems for their bureaucratic customers. ; Approved for public release; distribution is unlimited.

Acquisition research (Graduate School of Business & Public Policy) ; This report continues our efforts to provide useful insights and a partial framework for understanding ongoing developments in the international defense marketplace. Among other things, defense industrial affairs are becoming increasingly global and increasingly complex. In this discussion, we focus more on defense firms--considering the organization of Boeing 787 development and production, the KC-45 aerial tanker competition, and European defense firms' direct investment in the US defense market. In the 787 case, we observe that even experienced companies such as Boeing can run afoul of the complexities of coordinating a multiform venture. The KC-45, at least so far, seems to illustrate a new weakness of defense establishments relative to their suppliers. It is reasonable to suppose the two rival bidders (NG-EADS and Boeing) will continue to have veto powers over source selection--absent some fresh thinking. European defense firms' (BAE, EADS and Finmeccanica) entry into the US defense market through various direct investment strategies results from an increasingly globalized defense market. More importantly, perhaps, it demonstrates their ability to work around obstacles posed by US legislative and regulatory barriers. One major theme is that increased complexity of agile suppliers' methods and relationships poses significant problems for their bureaucratic customers.