HELSINKI — Norway is set to become the next Nordic country, after Finland, to use privatization as a fiscal tool to reduce costs and achieve greater all-round efficiencies in its military organization.
The Norwegian Defense Forces Command (NDFC)
is responding to a government directive, which is included in the recently approved Long Term Defense Plan (LTDP), to find cost savings of $4.62 billion in the defense organization over the next 20 years.
The next-stage in the initiative will result in the NDFC drafting a plan to identify what non-core service areas within the defense organization could benefit from privatization and outsourcing to the private sector.
Military support areas provisionally identified by the NDFC include IT services, personnel training, administration, spare parts and storage.
In the case of Finland, support services with a non-core life cycle outsourced to the private sector include armored vehicle and weapons maintenance, as well as material procurement, storage and distribution of spare parts.
The review, said Norwegian Chief of Defence Haakon Bruun-Hanssen, would explore opportunities for privatization of services in "all areas" connected to defense support and administration.
The NDFC plans to cooperate with service suppliers that have the capacity to deliver in crisis and war situations. Outsourcing solutions, said Bruun-Hanssen, would require "financial savings advantages for the military organization" and the provision of services by private suppliers at a cost level below what the Norwegian Defense Forces can currently deliver.
The $4.62 billion in cost savings sought under the LTDP are linked to a broader government plan to add a total of $19 billion to annual defense budgets over the next 20 years.
Norway’s defense organization has already dipped its feet into the private sector services delivery pool. Wilhelmsen Group, a Norwegian marine industry company, has been contracted to provide logistics services and support to the country’s Home Guard quick mobilization force.
The military officers organization Befalets Fellesorganisasjon (BFO) has cautioned the NDFC against adopting privatization-related decisions and positions on strategy that could reduce the NDF’s crisis and war-readiness capabilities.
BFO director Jens Jahren questioned the need for the NDF to outsource services, even if the scope of the proposed privatization plan is limited to non-core military areas.
"There are signals that services affected may include vehicle maintenance," Jahren said. Such a move, he said, could reduce the defense organization’s expertise in critical areas.
Finland’s Armed Forces Command (AFC) has broadened the terms of its outsourcing arrangement with Millog Oy, its strategic private sector partner company controlled by the state-owned defense group Patria.
Under its expanded agreement, Millog delivers engineering and maintenance services to both the Army and Navy branches. It will also supply material products, such as target acquisition sensors, to the Finnish armed forces.
Millog’s original outsourcing contract with the AFC had focused on the provision of life cycle support and maintenance services to the Army. This covered non-armored and armored vehicles, as well as electronic, missile and weapons systems. The deal is worth between $85-100 million to Millog on an annual basis.
Privatization of military services in Finland was driven by a solid Ministry of Defence view that outsourcing and industrial partnerships offered better, long-term value and cost-efficiency options than investing in the development of the Army’s and Navy’s own in-house equipment servicing and maintenance capabilities.