Opportunities and Risks with Outsourcing, Privatization and Public-Private Partnerships in Defence

[Author of the text in boxes 9.4, 9.5, and 9.9 is Todor Tagarev]

Many of the same lessons that apply in standard defence procurements to curb corruption also apply in less traditional contracting arrangements such as outsourcing (“market testing” and “competitive sourcing”), privatization and public-private partnerships (PPPs). Two constants are the importance of sustained competition and independent oversight. Applying these two lessons together with a country-specific mix of integrity, transparency and accountability tools can decrease corruption by increasing the expected costs to opportunistic officials of engaging in corrupt behaviour.

Modern Ministries of Defence are concerned with two things:

• Effectiveness – producing the best possible defence forces to satisfy both national and collective security demands; and
• Efficiency – making the best use of limited budgets.

Given the current budget environment, this involves rethinking the way defence does business. The challenge of streamlining government to become more efficient and effective has been answered by looking to the private sector.

NATO members and partners find themselves increasingly relying on the private sector in three ways:

1. To provide weapons and support services (outsourcing);
2. To raise revenues by selling excess property and facilities no longer needed (privatization); and, particularly when budgets are tight,
3. To solicit private sector investment in defence projects and operations (public-private partnerships).

... For the full text of this chapter see the accompanying file below.