Contract strategies in the Armed Forces’ investment projects – compliance with the state project model

According to the long-term plan for the defence sector, there is need for extensive investment in new materials, buildings, and facilities. An important part of the basis for such public sector investment projects is a contract strategy. The contract strategy is a description of, amongst other things, the types of contracts that will be used, the planned compensation scheme for the supplier(s), and the distribution of tasks and responsibilities between the parties involved.
This study investigates how contract strategies in the Norwegian defence sector comply with the state project model. To investigate contract strategy characteristics, we analyse the documentation for the conceptual appraisal phase (konseptvalgutredning – KVU) and the pre-project phase (sentralt styringsdokument – SSD) of a selection of projects that have recently completed their pre-project phase. To investigate how the projects are constrained in which contract strategies they can use, we analyse the mission letters for each phase.
The contract strategies in our sample are in large parts decided before the pre-project phase. Through the analysis of mission letters we identify a number of decisions, the most common being: exemption from the Norwegian law for procurement, the investment being part of an international collaborative project, that procurement should be off-the-shelf, that procurement should be direct from potential suppliers, or that procurement should be carried out through the American Foreign Military Sales program (FMS). The identified decisions are often elaborated upon, but the elaborations are typically very brief.
The state project model requires that at least two alternative contract strategies should be put forward and discussed. We find, however, that most contract strategies in our sample do not have alternative strategies laid out in the SSD. The lack of alternatives is mostly unexplained. There is also a requirement that the structure of the contract, the compensation format, and the distribution of tasks are discussed as part of the contract strategy. Though most of the strategies we studied include descriptions of structure, compensation format, and task distribution, there is generally no discussion and little or no elaboration of why certain structures, compensation formats, and task distributions were chosen. The SSDs in our sample generally lack descriptions and discussions of other requirements under the state project model, such as descriptions of contract type, incentive schemes, the degree of specification and so on.