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Buying EW - a how to.

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1 Dozen Radar Warning Receivers 4 Decoy Launchers 2 Threat Generators 1 Threat Library 1 SIGINT Aircraft 3 RF Jammers 2 Stand-off Jammers Source Code? 6 Laser Warners 5 IR Countermeasures Systems

So you've ordered that nifty new fighter aircraft. Or that new fast frigate. Or that new diesel-electric submarine. You can't wait to get it into the field and watch your neighbors turn green with envy. But it turns out buying the platform was the easy part. Now you've got to make a decision on the electronic warfare equipment that will protect or support the platform or even perform the mission itself.

You're a pretty sophisticated customer, you'd like to think. There's no question in your procurement organization about the necessity for a strong EW capability. You all sat around HQ and watched the Gulf War on CNN. It lessons didn't escape you.

But your appreciation of EW maintains a theoretical orbit safely beyond the range of exotic units of measurement and jargon-saturated terminology that is incomprehensible even in its native language. And your military hasn't yet reached the stage of evolution where it can payroll 20,000 bespectacled technonerds.

How, then, do you fill the gap between knowing you want the optimum solution and knowing how to go out and buy it?


The art of buying EW requires accomplishment in a host of disciplines. Sensitivity and shrewdness in the political-economic, cultural and interpersonal spheres can be as important in an EW procurement as technical proficiency. A true guide to buying EW in all its subtleties would fill the pages of a good-sized book. This article will address some of the fundamental considerations the international EW customer should make:

* Know the Threat: Sounds obvious enough...but customers often formulate requirements for new EW systems without having analyzed the specific threats they need to counter. In other words, said industry analyst Art Hepler, "Determine what your actual needs are as opposed to what sounds good in reading JED." States that have purely regional defense concerns and that entertain few notions of power projection must answer the question "Do you really need a machine that's going to cover the word, or do you have a much more localized situation...with a limited threat array?" said Hepler.

Archetypes that come immediately to mind include the Latin American countries and some small South and East Asian countries, where a blend of law-enforcement and military requirements often drive EW procurements as multiagency affairs. Long-standing border disputes with neighbors vie for attention and priority with internal threats from drug lords' private armies, environmental scavengers and political insurrections - notwithstanding, Argentina might add, the occasional throwback blow-up with a former colonial power. Apportioning of EW funds for an airborne surveillance/SIGINT system (like Brazil's $1 billion contract with Raytheon for eight Guardian-architecture aircraft to be used in Amazon surveillance) that can monitor both the external and internal environment may seem a wiser investment than a new F-5 radar jammer for use against a neighbor's air-defense system. Then again, countries like Chile, which have achieved a high degree of political stability and economic growth, may be ready to focus beyond the border.

When the buyer does need the top of the line, the ability to articulate the specific threat lends persuasive credibility to demands that the seller may otherwise be reluctant to fulfill. A case in point is the United Arab Emirates' (UAE's) straggle to outfit its 30 AH-64 Apache attack helicopters (ordered via the Foreign Military Sales [FMS] program through the US Army) with a self-protection suite. Because the UAE had drawn up a detailed operational requirements document for the Apaches that included reconnaissance/surveillance, ground-attack and seaborne missions a much wider role than US versions play - it could pack some punch into its rejection of the initial package of aircraft survivability equipment offered by the US, even though this package is basically the present US helicopter self-protection solution. When the UAE began soliciting offers from European suppliers and even hinted at a cancellation of the entire aircrafts buy, the US quickly came back to the table with an offer to cooperatively integrate its next-generation system, the Advanced Threat Radar Jammer (ATRJ), into the UAE A-model Apaches. "And we told them, 'Please come grow with us, and as we get new [EW equipment] we will allow you to put it on your airplanes,'" said COL Tom Reinkober, former head of the US Army's FMS cell under the PEO-Aviation, before he retired earlier this year. Indeed, as the arrangement stands today, the UAE may field the ATRJ before the US Apache Longbow enters service.

This illustrates a point that every international EW customer should take to heart: it's a buyer's market, and if the customer takes a stand founded on carefully constructed, well-reasoned requirements, it will find the vendor governments can show surprising flexibility. The idea of providing a state-of-the-art EW suite to a non-NATO ally at first caused an uproar in the US Congress, but the Army's ability to present the UAE's particular case helped smooth over the resistance.

* Do a Market Survey: Going country by country, the prospective EW buyer should take a survey of EW equipment that has already been purchased and installed on the platform in question. An independent analyst could be hired for the purpose, although the customer could just as easily go straight to the bible every market and intelligence analyst keeps on the bedside table - Jane's. On-line services or databases that allow keyword searches of specialized defense-electronics publications are also invaluable information resources.

Knowing what has been installed in the past can help the customer keep his program costs down. The customer must be wary, however, of equating use of a system with success of a system, or assuming that another military's use of a system is applicable to its own particular mission requirements. Making these fine distinctions moves the customer into the next stage....

* Narrow the Selections to Meet Your Threat: At this point, the customer must ask some hard technical questions: What systems actually cover the threat? Should we devise our own specifications or purchase a non-developmental item? If the military lacks a significant indigenous EW knowledge base, it may find itself in a difficult bind. And asking the wrong questions can prove fatal - quite literally. During Morocco's campaign against guerillas in the western Sahara Desert, for example, the country's fleet of Mirage F-1s became threatened when the insurgents acquired SA-6 surface-to-air missiles. "The Moroccans asked the US Air Force what is the perfect counter to the SA-6. They said the ALQ-119 [a podded ECM system and precursor to the ALQ-184]. The Moroccans bought six of them, hung them on their Mirage F-1s. On the first operation they did, two of them were blown out of the sky. The reason? The -119 is totally incompatible with the electronic system on the Mirage. Nobody thought to check," related a senior analyst at a market forecast firm.

To avoid such disasters, the customer country with limited EW experience must import the necessary technical expertise. In the Middle East, governments have sometimes hired international consulting firms to act as experts for them. Increasingly, countries are also becoming adept at getting the vendors to help them. Basic EW education, be it in the form of seminars, briefings or hands-on equipment demonstrations, is a perk that companies are glad to provide in an increasingly competitive marketplace, since they can benefit in the long run from the name recognition and from a more technically proficient customer base. To truly profit from these programs, the customer must be able to separate the educational content from the blatant sales pitch - "and sales pitches come from government people just as well as companies," said Hepler. The best educational programs will have both engineering and operational flavors, said an industry executive, so that the customer can explore the range of potential uses and adaptability to different platforms of a certain technology. Ultimately, said the executive, the user feedback from such sessions will give the company better insight into the customer's needs and expectations.

For the country that intends to develop a robust EW capability into the future, a gradual weaning from total dependence on foreign provision may be necessary. One avenue may be through local content, or coproduction, stipulations to gain both percentages of the work and long-term in-country maintenance support. Israel, Turkey and Australia have all successfully used such mechanisms to nurture indigenous capability, especially in support areas. This leads to the next concern....

* Identify Your Support Tail, Especially in Terms of Software: An EW sale does not end with the transfer of the system alone. Some of the most important questions the customer must ask in the course of a procurement include "Who's going to keep the system working?" and "Where will I get the spare parts?" Modern, digitally controlled EW systems require frequent software modifications to stay in top form. Users should also expect to make a hardware update about once every 10 years. (For instance, the Class 4 modification of the US Air Force's ALR-69 is a major hardware update above and beyond yearly software improvements.)

Traditionally, one of the greatest advantages of "buying American" has been the port this provides into the US supply pipeline, a guarantee of maintenance, repair and upgrades for the life of the system. Advanced EW systems in the US inventory cannot be used independently of US-government software resources. This may also be true of some noninventory US systems, which has led to some sticky political situations. In the late 1980s, Turkey's commercial purchase of Loral's ALQ-178 Rapport III ECM system came with a promise of software support from the contractor, but not from the US government. The wrangling that ensued among the US Department of Defense (DOD), Loral and the Turkish government left bad feelings on all sides before the DOD agreed to provide the necessary threat library support. US government officials cite this example as a reason not to stray outside of FMS channels for intelligence-dependent EW systems.

The FMS process is indeed reliable, but it is not foolproof, as the present impasse over South Korea's procurement of the Airborne Self-Protection Jammer (ASPJ) illustrates. As JED has reported previously (see "Swiss Hop on ALQ-135 ASPJ Bandwagon" in the December 1994 "EC Monitor," p. 24), Korea and the US Government had signed an FMS agreement for the provision of the ASPJ for the republic's new F-16s before the program flunked a still-disputed operational evaluation (OPEVAL), blocking its entry to US inventory. Since then, the US has arranged export sales of the system to Finland and Switzerland that provide the hardware via commercial sale and software via FMS, but Korea insists, with perfect legitimacy, on obtaining the jammer through the original FMS agreement. Hope for a resolution to the situation rests on the upcoming ASPJ OPEVAL on the US Navy F-14, which, if successful, would make the ASPJ hardware a legal FMS offering.

Inevitably, these cases lead back to the issue of indigenous capability that ended the previous section. It is without doubt the most contentious issue in the international EW market today. The general consensus among customer countries is that, for them to truly become EW powers, equipment support must become home-based at some point - "placing a particular emphasis on source code software support," said Col Khalid Bin Abdullah, director of the UAE's Air Force and Air Defense Operations and Training Directorate, at the IDEX '95 conference in Abu Dhabi (see "UAE Official Outlines EW Requirements" in the May 1995 "Middle East Report," p. 21). This will free the customer's desired software changes from the uncertain whims of the supplier. As Colonel Khalid admits, however, the dearth of experienced EW personnel in developing militaries like the UAE's makes this a fairly long-term goal for all but a few nations.

When pursuing an in-country threat-library modification or reprogramming capability, the customer must be careful not to become tied to semantics. First and foremost, the customer must make the distinction between source code and reprogrammability, which are not always the same. The US government will not release system source code that provides access to its classified, laboriously constructed intelligence databases, but, in response to US industry pressure, it is drafting a new policy to allow a customer to reprogram the system himself, with his own threats. (See "Let the Walls Come Tumbling Down?" in March 1995, p. 33, for more discussion of US EW export policy.) Other countries also approach the release of source code with trepidation - particularly when dealing with countries outside their magic circles of military and diplomatic ties.

"The problem is [that] everybody has a different definition of what source code is," explained one US industry official. "In some systems, the source code has access to the threat libraries and therefore...has the potential for release of intelligence databases. In other systems, and probably the more common definition, source code is that very low level of software that controls your hardware....If in fact a country who bought a sophisticated system were to mess with the source code, it would be kind of like you messing with the code that's in your...PC."

But more "obtuse" countries are usually stubborn about buying every last byte associated with the product, he continued: "Any product that they buy they want the source code delivered with it. And you start asking questions like, 'Well, what are you gonna to do with it?' 'Well, it doesn't matter, we want to make sure that we have exactly the same product that everybody else has.' And you say, 'Well, you know, no problem, except my export laws won't allow me to give you source code.'"

The question the customer must ask, then, is "Should I make this sale contingent on source code transfer that really provides no added capability?" And when a different vendor does offer a "no strings attached" threat database, the customer must determine what else might not be attached. Is the database really the same one used by the supplier's air force? Where did the supplier collect the data? If the supplier is a regional Middle Eastern power, its threat files may be of little use to an Asia-Pacific air force, for instance.

If source code is an untrustworthy specification to make in an EW sale, perhaps reprogrammability is a better one. According to the industry analyst, a lot of low-cost systems sold on the market have "hard-wired" libraries. During Operation Desert Storm, he related, "some of the [coalition] aircraft had radar warning systems which were hard wired, and they couldn't be changed without being sent back to the manufacturer to be taken apart and reassembled. Those aircraft were never allowed to fly over Iraqi territory." The war demonstrated, he continued, the need for more capable systems, although not necessarily more sophisticated ones.

In procuring a fully reprogrammable EW system through purely commercial channels, however, the customer must remember that a system is only as good as the intelligence files locked within its black boxes. Having separated from the supplier's software support network, the customer must have his own intelligence-collection capabilities, or at least an alternative supplier. Both Israel and France, for example, manufacture airborne SIGINT-collection systems for the international market. In the spring of last year, South Africa reportedly bought an Israeli SIGINT suite for installation on the 707-based Phalcon airborne early warning aircraft. By the end of this year, South Korea should select a contractor for a classified airborne SIGINT program.

* Read the Bottom Line: The sellers are desperate for your business, and their governments are concerned with keeping their industry bases warm. In the US government, new policies on reprogrammability and source-code release should make US products more appealing to the independent-minded customer. This change comes in response to relaxed policies of source code release (in one form or another) in other nations. At the bottom line resides this fact: if you enter a major platform deal with a supplier country, you have considerable leverage in demanding adequate defensive equipment to keep those expensive aircraft aloft or ships afloat. Don't forget to point that out.

RELATED ARTICLE: Looking From the Inside Out

Ask around US industry today, and you might find the ebullience about the international EW marketplace of a few years ago has worn away. It's turning out to be "a little bit of a disappointment," said one industry executive. "The international market has been looked at by many US contractors as a bridge between the good ole times of DOD business and the future good times...with the international market filling that gap. I think that many of the contractors, ourselves included, are finding that that's a very long and tenuous bridge. Although there's lots of opportunity out there, the contractors involved in actually making sales are unpredictable. Countries will say they want a certain capability and they will have a time frame for it, but then their politics and their budgets influence it in such a way that it begins to slip to the right in yearly increments."

How many increments? "There are countries that we've been marketing to that we've actually got negotiated contracts - but unsigned contracts with - that have been in process for seven or eight years," he added.

The time required to close a sale is indeed the most frustrating part of doing international business, agreed another official. In the US, he explained, it is almost guaranteed that an RFP document will have money behind it. In the developing world, this is not a given, since money is often held at very high levels, by a very small group of officials, and not pushed over to the procurement personnel who are running the programs and asking for the proposals. Cash flow problems mean money does not move very well. "They sometimes start things earlier than they have to, and then they get it all done, they put it on the shelf until they're ready. Try explaining that to your average chairman of the board," he said ruefully.

And then, there is always the political instability in customer countries. The Korean ASPJ problem was not helped, for instance, by the replacement of 33 out of 35 cabinet members last year.

In terms of procedural frustrations, industry commonly grumbles about customers' stubborn attachment to strict specifications derived from technical literature. "My main problem dealing with customers they get caught up in the 'reading spec sheets' approach....A lot of times you get guys specifying fine-grained parameters....What do they want that for? Well, the only reason they want it is that somebody did it before, or they read a catalog and that was the box that they copied the specs on. They have no use for it, probably will never use it, but it becomes a part of the spec, and then there's no way to change it," said the official. "These are the specs that start out: 'the purpose of this system is to provide ground-based EW against airborne threats....And the sensitivity shall be -55 and the pulse range has to be X'...and my God - what a transition!"

In some cultures, mistakes cannot factor in to the process. Once the spec reaches a certain level of the bureacracy, it's basically set in concrete. "So you can't approach these projects with the idea that we'll bid what we want and come back later and change it, because it doesn't happen. Because once [a spec] gets into a contract, it's extremely hard to get it out of a contract," said the official. The openness of the US procurement process to industry feedback and revision on at least one draft of the RFP is rarely encountered overseas, he added. "The best you can hope for is that you were in there before the RFP...came out, and if you gave them a white paper, then they based the spec on your white paper." - Z. Lum

RELATED ARTICLE: Financing the Purchase of Defense Equipment and Services

A primary distinction between the US government and other arms-exporting nations has been in the form and content of official export credit support. To date, the prevailing statute governing arms export transactions (the Arms Export Control Act) has been interpreted by successive administrations as precluding any official export credit apart from that provided directly in the form of grant or concessional financial support through the Foreign Assistance Act of 1961, administered by the US Defense Department.

Nations with as disparate economic and financial circumstances as the UK, France, Sweden, Israel, Italy and Turkey have, on the other hand, provided a wide variety of export credit assistance to their arms exporters. In this respect, most arms exporters treat the provision of export credit assistance for defense products parallel to that of other industrial products. The high levels of credit exposure by some of the European arms exporters in selected markets has led to significant retrenchment. The loss of the American political base in the US Congress for the foreign assistance program has led to a substantial contraction in this source of official financial assistance to exporters as well. The former Soviet bloc practice of soft loans for defense exports has become passe; instead, "fire sale" prices of their existing inventories are offered as alternatives to export credit support.

These difficult circumstances in the export credit arena have substantially narrowed the scope of financial support for defense exports, making the market increasingly dependent on limited supplier credits and the narrow base of commercial financing arrangements and countertrade.

Global Credit Crunch

National restrictions on official export credit have combined with a shrinkage in supplier credits, a variety of global banking problems and cash-flow difficulties in the major arms-importing nations to produce a severe credit crunch in the defense export market. Modernization requirements to accommodate local threats (e.g., the introduction of theater missile defense to cope with regional missile proliferation) or address force-structure reductions (e.g., the Japanese requirement to reduce its force structure following the August report of the Advisory Group to the Prime Minister) far outstrip rigid annual budgets and the cash-flow profiles associated with those budgets.

These circumstances have stimulated a search for alternative sources of finance as well as techniques that would enable purchasers to better match their cash/budget profiles to the payment stream required to acquire modem equipment. This has produced a new pattern of financial innovation that ranges from countertrade to private placements.

Supplier Government Financing Programs

Budget Constraints: The financial difficulties among certain major purchasing nations (e.g., the recent decision by French authorities to tighten financial terms on French defense purchases by Saudi Arabia) have served to discourage several nations whose defense export credit schemes have been driven more by national defense industrial-base requirements than economic analysis. In addition, intense competition for national funds within national budgets for domestic industrial modernization, especially in Europe, has diminished the readiness of many nations to retain their former postures of generosity in defense export credit support.

Market Selectivity: Buyers, facing financing difficulties themselves, are increasingly reluctant to accept financing on onerous terms. In addition, linkage/interoperability with major allies has become an increasingly important factor in defense purchases. This characteristic is forcing several peripheral states with ambitions to become defense exporters out of the market (e.g., Brazil, Egypt and to an increasing degree South Korea).

US Foreign Assistance "Trials and Tribulations": The political base within the Congress for foreign assistance, including security assistance, has largely vanished. The security assistance element of the foreign assistance program in the future appears likely to focus primarily on the delivery of specialized training services and other forms of support the US government is uniquely well prepared to provide.

The foreign assistance program may, however, become the vehicle for a mutation of official export credit support of the type widely practiced outside of the United States. If the Clinton administration's Conventional Arms Transfer policy does not include provisions for an export credit arrangement for defense sales abroad, it appears likely that Congress will impose arrangements that will depend on shared government/private sector responsibility for the costs of an export-credit program. Such a program is likely to include vendor/buyer responsibility for the credit subsidy contained in the program, while the government will sponsor the associated loan guarantees.

How to Finance Defense Purchases

Buyer/Seller Dilemma: The most difficult aspect of financing the purchase is accomplishing the objective of matching the budget profile of the buyer with the supplier's required payment schedule. The supplier usually needs a down payment and progress payments, with the last payment due upon delivery or program acceptance. The buyer's goal is to not make payments for the procurement until after the operational or acceptance date, and then to stretch the payments over 2-10 years, depending upon the size of the purchase and the projected budget constraint. How do we resolve this dilemma?

Matching the Budget Profile Constraint: The key ingredient to matching the projected budget profile is the bringing in of an outside funding institution that will pay the supplier the required down payment and progress payments, and then have the buyer pay the funder over an agreed period of time. This financing can be structured usually either as a so-called buyer credit or as a supplier credit. Most suppliers do not have captive funding vehicles and therefore must rely on external funding sources.

Sources of Funds: Because of the unique nature of the defense market and the products involved, the funding choices are therefore drastically limited as compared to the financing of a civilian program like a commercial jet aircraft or a petrochemical project. There are a limited number of financial institutions in the United States and in Europe willing to finance defense sales. There are a few more scattered around the world.

Satisfying Ministry of Defense and Ministry of Finance/Central Bank Objectives: It is the job of the financial engineer to bridge not only the gap between the buyer and supplier but also between the ministry of defense (usually the buyer) and the buying government's finance ministry and/or central bank. The buyer has the procurement and budgetary authority, but those responsible for the management of the buying government's financial resources have their own criteria determining which financing technique is acceptable.

Creative Techniques: Quite often, depending on the products being purchased, a lease financing technique is an attractive solution for all parties. The supplier is paid as he expects; the buyer can match the budget profile; the periodic lease payments can be provided for out-of-operating expense (O&M) funds; and the lease is classified as "off balance sheet' financing. Another financial-engineering technique is the financing of the acquisition through the use of a series of promissory notes issued by either the ministry of defense or ministry of finance to either the supplier or directly to a funding financial institution. These notes would cover the agreed-to period of repayment. Another unique technique is for the buyer to issue certain types of long-term letters of credit that act to fund the particular program.

In conclusion, although the financing of the purchase of defense equipment and services is a very unique aspect of the global financing marketplace, through the use of innovative financial engineering a viable solution is available to ensure the supplier and buyer are happy with the payment conditions. - Stephen Sohn

Stephen Sohn is president of Schneider-Sohn & Associates, Inc., a consulting advisory group to advanced technology organizations in aerospace defense, electronics and other industries. He is a former president and chief operating officer of Bankers Trust International Trading Co.
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Title Annotation:includes related articles; electronic warfare equipment
Author:Lum, Zachary
Publication:Journal of Electronic Defense
Article Type:Cover Story
Date:Jul 1, 1995
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