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Resource Conference – 9 March 2017
Strategic Choices - Balancing Resources and Requirements
Good morning Ladies and Gentlemen,
The topic of my briefing today is Strategic Choices and Balancing resources
and requirements in Long-Term Adaptation. Let me start with the question of
Balancing Resources and Requirements. I think this is an issue which is a
challenge to all NATO nations. There are in fact three balances which we
believe to be very important, and which need to be taken into account during
the planning and resource allocation process.
Next slide please.
a. Firstly, the Balance between requirements and resources. The resource
allocation must be matched to the requirements in order to deliver the
Level of Ambition and to enable fully capable and equipped military
forces for NATO, relevant and ready to meet the challenges the Alliance
may face now and in the future.
The resource requirements have
increased as the changed security situation requires a shift towards
more high-end capabilities and heavier forces. As a result of this, the
forecast requirements in Nations and in NATO have also increased in
the planning period. If resources cannot be allocated accordingly, the
risk in meeting the Level of Ambition increases.
b. Secondly, the Balance across the three Strategic Goals we have on the
military side: Operations, Transformation and Outreach. We must
balance the effects appropriately across these Strategic Goals, while
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preserving our ability to fulfil them equally, if NATO is to succeed in its
three core tasks Collective Defence, Crisis Management, and
Cooperative Security.
c. Thirdly, the Balance of resources between the three Resource Pillars:
Military Budget (MB), NATO Security Investment Programme (NSIP),
and Manpower (MP) which in my opinion is a longer term issue. Changes
are required to reflect the funding relationship between the resource
pillars in respect of individual projects, services and activities to ensure
that the capabilities produced through NSIP and then operated through
the Military Budget with the appropriate Manpower are synchronized to
achieve coherence. It is not optimal use of resources put at NATO’s
discretion to develop a capability and implement CPs which are not
adequately supported by sufficient O&M costs in the Military Budget or
sufficient Manpower.
Next slide please.
I would like to underline the difference between the planning exercise for next
year and the planning for future years. The planning environment and
opportunities for mitigation, if needed, are quite different for year 1 and the
outer years. In Year 1, the confidence and maturity of the planning data is
higher, with resource figures well understood. The opportunities to mitigate or
reduce resources if needed, however, are heavily constrained with issues such
as contract obligation and the inability to effect structural changes thus
preventing some options from being exploited. Conversely in the outer years,
confidence and accuracy of the resource figures are much lower but there are
fewer constraints on mitigating actions that can be taken once the planning
looks out beyond 4-5 years. However, accepting that many of the tasks and
objectives may still be the same in those outer years, which in practical terms
restrains flexibility. This therefore leads to a divergent ‘cone of uncertainty’
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where the resource request for the same output diverges in the outer years due
to the uncertainty of the planning solutions and operating environment – as
shown in in this slide.
Figure 2. Cone of Uncertainty/Opportunity for Flexibility
Many, if not most of you, know that the Military Budget is composed of several
budgets as AOM, NAEW, AGS, etc., but the biggest and most challenging part
is the NCSEP budget. I will now explain briefly the content of the NCSEP
budget, and who the BHs are. The two largest and best known are ACO
(operations focused, 70% of the military yearly budget) and ACT
(transformation dedicated, but also exercises, 23% of the budget). In addition
we have the IMS budget group (7% of the budget) and its 5 stakeholders:
NATO Defence College, Chief Scientist Office, NATO Standardization Office,
C3 Staff POW, and the IMS budget itself.
Next slide please
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Deployable
Forces
5%
2017 NCSEP REQUIREMENTS
AD Systems
17%
NCCB Enterprise
Services
23%
Training & Exercises
6%
Transformation
8%
Outreach
1%
NCS Structure and
Manpower
40%
Figure 1. NCSEP Elements.
As you see from the slide a large portion (40%) of the NCSEP is the NCS
Structure and Manpower. Based on the Functional Assessment of NCS and
the related further work it is very difficult to do something substantial with the
NCS at this stage. Outreach is as little as 1% and as you all know there is, for
good reasons, a lot of political focus on this. The only parts of the budget where
we see some freedom to manoeuvre is within the Transformation, Training and
Exercises and the C2 systems which our NCS is so heavily dependent on.
When we analyse the increases in the requirements for the next five years,
more or less all of the increases are within the C2 area. However, I would like
to remind you that this is due to new systems being implemented or which are
planned to be implemented in the next five years, and which all have been
approved by you, the Nations, in the NAC.
Now that I have tried to give you some situational awareness, what do we do?
Lately there has, for good reasons, been a lot of focus on the need to have a
thorough look at NCS in the current security situation. Be aware that this is not
only a question of having the right structures and the right number of personnel.
It is also a question of having the right CIS-systems and not the least of being
resourced with sufficient funding. I would therefore argue that you should
resource the NCS so it is fit for purpose. Many, if not most of the Nations sitting
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here have to increase their defence budgets to reach the 2% goal, and I would
encourage you to use some of these increases in resources on the NCS.
In the current situation, where resources are limited, prioritization is becoming
more and more important. However, the differing nature of the NMAs missions
makes military judgement across such diverse outputs as operations, future
capability and partnerships problematic, particularly as time horizons differ.
Next slide please.
The prioritization on the Military side is, of course, informed by higher level
political decisions and guidance such as Summit Decisions, the Strategic
Concept, Political Guidance and other political documents. Experience has
shown that it is challenging to translate these documents into a line-by-line
requirement prioritization. We are all aware that there is ongoing work in the
DPRC to come up with a document giving priorities as tasked by the Heads of
States and Governments in Warsaw last summer. We on the military side look
forward to receiving this product, hoping that this document will remain at a
political and strategic level without delving too much in the military priorities,
which is the remit of the Military Committee.
In prioritizing the requirements identified in the CNIS 2017, the NMAs have
used the NMA Strategic Priorities and Objectives (SPOs), agreed in 2007, but
have taken into consideration the current security environment and Political
Guidance 2015. For all practical purposes it is the priorities in the Different
Political documents that have been the basis for our prioritization. While this
approach has provided the best balance of priorities that was achievable with
the current reference documents, the NMAs have stressed that, in order to
better support future resource planning cycles, the process to update SPOs
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must be started urgently in order to better optimize the future resource planning
cycles.
As it stands now, the SPOs is a well-structured document, but it is very old and
does not at all reflect the drastically changes in the security environment.
Nations have postponed the update of the SPOs several times for many
reasons such as the new Strategic Concept development, new Summit
decisions, new political guidance, decisions like RAP etc. Lately, the Nations
have decided that the SPOs cannot be updated without first updating the MC
400, which is on track. The intent is to have the MC 400 finalised by May and
start working on the update of the SPOs which we very much look forward to.
In addition to this, in 2017, the NMAs have introduced High, Medium and Low
requirements to avoid “all or nothing impact statements”. This was not an easy
task because the definition of H/M/L is hard to define. On what criteria should
H/M/L be defined? Who has the authority to decide on that and how can the
same criteria be applied across all Strategic Goals?
However, in 2017 the Medium and low requirements together with the
Housekeeping and efficiency measures allowed the NMAs to absorb an
acceptable level of risk. If the resources to be provided will be lower than that,
the risk in meeting the LoA increases accordingly.
Another issue the NMAs have faced in the MB, is that we are not allowed to
include inflation and increases in civilian salaries in our estimates, thereby
absorbing their effect. Is this fair? Is this correct seen from a professional point
of view? There should be a common NATO policy on how the Alliance handles
inflation and increases in civilian salaries in the resource planning process to
mitigate their effect on future Military Budgets. Some of your nations have, for
the last two years, asked for efficiencies in the MB and some are complaining
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that there is only 5% of the budget with low or medium impacts. My question to
all of you is: how do you think the BHs have absorbed the Civilian Wage
Increases and Inflation in the last few years? That has of course been achieved
by finding efficiency measures, taking out activities with low and medium
impact, and other offsets within the military Budget.
In order to improve the prioritization process, the NMAs have decided to adopt
a Multi Criteria Decision Analysis (MCDA). This is an Operational Research
discipline, specifically developed to deal with complex problems of
stakeholders with differing objectives, which could include the use of a software
analytical tool that would facilitate the identification of options and potential
trade-offs over varying periods of time. It is vital that the NMA Resource
Planning Process prioritization methodology remains coherent with parallel
ongoing deliberations regarding prioritization across the Alliance (e.g. NCS
Functional Assessment, work on Strategic Planning in the DPRC, MC-0400/3
and NMA SPOs).
Next slide please.
The prioritization methodology to be adopted by the NMAs needs to be
credible, robust and durable. Consequently the following overarching principles
will need to be applied:
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Decision Making. The process must support decision makers faced with
complex decisions and competing missions and objectives.
•
Military Judgement. The process and any supporting tools must facilitate
the application of military judgment and decision making, not replace it.
•
Consensus. The process must support the achievement of consensus
among all participants.
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Equanimity. Within the process, all participants’ inputs and judgments
must be considered in a fair and balanced manner.
•
Coverage. The process should strive to deliver the development of a
prioritised list of programmes, functions and activities across the full
breadth of the BHs responsibilities, without breaking the cohesion
between interdependencies.
•
Ease of Use. The process must be easily implementable and should
allow participants to enter data and make military judgments with the
minimum of effort, pre-employment staff training and/or external
facilitation. The process must also be accessible and understandable to
the National Representatives Staffs at HQ NATO, from Staff Officer to
FOGO level, with a minimum of training.
•
Sensitivity Analysis (Cost, Time, Scope). The process and supporting
tools must enable sensitivity analysis to be undertaken to support the
development of a range of options.
•
Transparency. All elements of the process must be fully transparent to all
stakeholders.
•
Auditability. The process and any supporting tools must provide and
maintain an audit trail to higher level goals and objectives and to previous
decisions.
In adopting such a methodology the overall prioritization must remain at the
strategic level and be applied top-down. This means that the Nations will be
able to guide the BHs to establish the relative priority of goals and objectives.
Let me now move to the Strategic Choices. Let me start with underlining that
the most important Strategic Choice for NATO and Nations is that all Nations
fulfil the 2% pledge. If this would be met by all nations, this would be the most
obvious measure to mitigate our deficiencies, not only in the NCS but also the
deficiencies that we have in different capability areas.
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The resource requirements have, as already mentioned, increased. As a result
of this, the difference between the increased requirements and the available
resources is too large to be solved with the prioritization exercise as I have just
described, even mitigated with acceptable risks criteria. For this reason the
NMAs were tasked and have identified a number of Strategic Choices which
should be taken into consideration. The proposed strategic options include the
following topics:
Next slide please.
1. NATO Common Funded vs Multinational/National capabilities.
2. Budget and planning process approach.
3. NCIA Customer Funding Framework Review.
4. NATO Enterprise Approach Implementation.
5. Improving the C3 Capability Delivery Process.
6. Provision of Functional Services by Allies.
7. ACCS
8. Military Training and Exercise Programme (MTEP).
9. Utilization of industry for Transformation.
Subject to NAC agreement, these choices could form the basis of guidance to
the BHs on how to address any delta between the proposed resource
requirement and the planning figures provided in the Medium Term Resource
Plan (MTRP). However there should not be an expectation that these Strategic
Choices will serve as silver bullets and fix everything. Most of them are difficult
to describe and have many uncertainties. This is why further assessment of
the Strategic Choices from the NMAs is quite difficult without further direction
and guidance from the Council, which we have not yet received. In the end it
will all depend on Nations’ perceptions and thus political guidance is needed.
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Some of the aspects of the strategic choices have already been addressed by
the military side, for example the “Budget and planning process approach” and
the “Military Training and Exercise Programme (MTEP)”.
I would like to conclude my briefing by confirming that I truly believe that the
Resource Planning process in NATO could be more efficient, less expensive
and could take less effort to be developed. The NMAs have taken a first step
by recommending improvements in the military contribution to the Resource
Planning process in order to make it more efficient and effective.
Ladies and gentlemen, this concludes my briefing on how we are balancing
resources and requirements through prioritization and strategic choices. I stand
ready to answer any questions you might have.