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Finland Purchasing Secondhand Equipment to Protect Core Budget

Jan. 28, 2014 - 12:49PM   |  
By GERARD O’DWYER   |   Comments
Used Gear: Finland's acquisition of Leopard tanks from the Netherlands was part of Finnish efforts to control costs. A German Leopard tank is shown here.
Used Gear: Finland's acquisition of Leopard tanks from the Netherlands was part of Finnish efforts to control costs. A German Leopard tank is shown here. (US Army)
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HELSINKI — Higher demands being placed on the Finnish military’s cost-reduction programs are driving the Armed Forces Command (AFC) to emphasize the acquisition of secondhand equipment.

Five years of austerity-driven economic policies have stalled Finland’s defense budget at US $3.82 billion, equivalent to less than 1.5 percent of gross domestic product, one of the lowest ratios of military spending in the European Union.

Moreover, the savings in operating costs sought by the government since 2008 is straining the AFC’s ability to allocate the customary one-third of its budget to procurement. Against this backdrop, the AFC has adjusted its procurement policy to pursue high-quality secondhand equipment.

Prime Minister Jyrki Katainen’s six-party administration will strive to protect spending in the defense budget, said Defense Minister Carl Haglund, but projects targeting new savings and lower operational costs are set to continue.

The spending challenges were flagged in the Defense Ministry’s Finnish Security And Defense Policy report presented to the national parliament, the Eduskunta, in December 2012. The report warned that Finland’s capability to defend its entire territory would suffer unless the annual budget is bolstered after 2016.

“It is important that we maintain a defense capability to repel any armed aggression. Based on our estimates, the need for additional financing required to maintain our defense capability will amount to €50 million [US $68.5 million] in 2016 and by 2020, it will have risen progressively to €150 million a year on top of index-based increases,” Haglund said.

If defense budget levels remain, Haglund said, by the 2020s, the armed forces would no longer be able to defend all of Finland.

The AFC intends to channel savings from secondhand material replacement projects into programs that support the acquisition of more critical, higher-priority defense equipment and systems.

This prioritization was evident in the $274 million deal with the Netherlands, completed on Jan. 16, which included the purchase of 100 secondhand Leopard 2A6 main battle tanks.

The procurement forms part of a running program to upgrade the Army’s armored battlefield units between 2015 and 2019.

The acquisition includes munitions, simulators, training and a 10-year supply of spare parts. The tank fleet already includes about 98 older Leopard 2A4 tanks acquired from Germany between 2002 and 2009.

The decision to opt for quality secondhand tanks rather than buying new equipment reflects the economic realities under which the armed forces operate, and the need to find high-value solutions at the best possible prices, said Col. Jukka Valkeajärvi, head of the Infantry Inspection Unit.

“The 2A6 model was selected based on the good price we negotiated, and because this newer version delivers far superior performance capabilities than the older 2A4 model,” he said.

“We are essentially talking about two completely different tanks. In plain speak, the 2A4 tank can be classified as quite good, but its performance is not quite what it should be to meet today’s tasks. The 2A6 model is a 21st century tank,” Valkeajärvi said.

The Leopard 2A6 tanks being acquired from the Netherlands are armed with the Rheinmetall 120mm L55 smoothbore gun, which is the longer version of the L44 deployed on the Leopard 2A5.

The Dutch Army Leopards are available because the government in 2011 decided to reduce spending by $24.6 billion. Within this cost-cutting framework, the Dutch military was instructed to find $870 million in material and operational savings. As a result, the Army’s entire Leopard 2A6 fleet is being retired.

In a similar but smaller acquisition dating to December, the armed forces purchased M270 multiple launch rocket system (MLRS) launchers from Denmark in a deal valued at $7 million. The MLRS, a self-propelled armored rocket and missile-firing platform with a crew of three, comprises M270 launchers loaded with 12 rockets packaged in two six-rocket pods. The contract includes training.

The Finnish armed forces plan to deploy the M270s in a driver-training role, catering to regular soldiers and conscripts. The acquisition underscores the opportunities, under the framework of Nordic cooperation, to obtain important defense materials in a cost-efficient manner, said Poul Hollman, a Berlin-based political analyst.

“We will see more secondhand equipment acquisitions like the Dutch and Danish deals by Finland’s defense organization as it reduces procurement costs. It seems certain that, in the future, Finland will increasingly engage in big-ticket item purchases as part of multinational programs where cost savings can be guaranteed. Where it can get value, it will buy high-grade secondhand equipment, seeing this as a smarter use of the tighter funds available to defense,” Hollman said.

A series of heavy capital outlays on critical modern systems costing more than $3.5 billion since 2006 is also driving the AFC’s push to procure cheaper secondhand gear, said the Eduskunta’s House Speaker, Eero Heinäluoma.

“We are spending $800 million on the new Norwegian-American NATO standard NASAMS radar surveillance and missile system,” he said. “A further $200 million will be spent on various NATO-standard missiles for the Air Force’s F/A-18 Hornets.

“All these aircraft will have reached the end of their midlife-cycle upgrade in 2015-2016 at a capital cost of $2.3 billion. We are faced with the decision around 2020 on the future of the F/A-18 and what might replace it.”

One cost-efficient option for Finland may be a partnership with Sweden to acquire the next-generation Gripen-E fighter jet, Heinäluoma said.

“Huge savings could be obtained by choosing the Gripen option, especially if we had a Nordic scenario where Sweden, Finland and perhaps even Denmark operated the same type of aircraft and shared in the acquisition and life-cycle maintenance costs,” he said.

Email: godwyer@defensenews.com.

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