Tag Archives: Aleksandr Piskunov

Re-Industrializing for Military Modernization

Golts

Golts

It’s been Golts overkill.  Despite the risk of overdosing, he has an article in Ogonek from 25 September which merits attention.

One could do much, much worse than to pick him, if you could read only one commentator.

Golts tries to explain why Russia’s OPK, its defense sector, has failed.

He gives prominent examples of defense industrial shortcomings including the most recent Bulava and Proton-M failures.  Interestingly, he says all serially produced Bulava SLBMs are being returned to Votkinsk for inspection.

Calling the list of failures “endless,” he concludes, “Production standards are falling uncontrollably not only in the space sector.”  He continues:

“The thing is not only particular failures.  Experts from the military economics laboratory of the Gaydar Institute suggest that defense order 2013 will be disrupted just as it was in previous years.  According to their data, defense order 2012 was revised and lowered at least three times.  And still it was unfulfilled by approximately 20 percent.  Accounting Chamber auditor Aleksandr Piskunov was extremely forthright in the Duma hearings:  ‘Almost one hundred percent fulfillment of state defense orders for the last 20 years hasn’t interfered with the failure of all armaments programs, with fulfilling them at 30, 40, 50 percent.'”

You may recall reading Piskunov here at the start of April.

Then, Golts notes, Putin himself cast doubt on the OPK’s ability to fulfill the current GPV.  He recalls the late July meeting when Putin indicated he’d entertain slipping ships and submarines due after 2015 into the next GPV (to 2025), so that there aren’t more “failures.”

Putin said work should be organized so producers’ capabilities coincide with the allocated funding.  Money, he said, shouldn’t be hung up in accounts [and stolen] while we wait for ships.  Golts reads this as Putin recognizing that the state of domestic industry is such that it can’t assimilate the gigantic sums allocated to it.

The defense sector has structural problems that endless calls for mobilization to face an aggressive West can’t resolve (i.e. a workforce that’s almost reached retirement age, continued aging of basic production equipment).

Golts again turns to Piskunov, who said only 20 percent of defense enterprises approach world standards in terms of technical equipment, and nearly half are in such a poor state that resurrecting them is senseless — it would be better to start from a “clean slate.”

But Golts focuses on poor coordination and cooperation among enterprises, government customers, and sub-contractors.  He turns to the familiar case of Bulava — 650 different enterprises reportedly have a hand in turning out this missile.

Most damning, Golts compares today’s “so-called united state corporations” unfavorably to Soviet-era defense industry ministries.  Ineffective and bureaucratized, the latter still managed to manufacture massive numbers of weapons.  And Gosplan matched prices for products and production by fiat.  Today’s goskorporatsii can’t.

There’s another important difference, Golts points out.  All Soviet “civilian” industries also produced arms, or parts for them.  Average citizens buying civilian goods helped finance military production with their purchases.

But the largest part of this permanently mobilized industrial system died in the 1990s and surviving parts retooled for other production.  Many in the latter category no longer wanted part of the defense order which would only make them less competitive in their main business.

Then Golts concludes:

“But it’s impossible to begin serial production of armaments without serial production of components.”

Today’s OPK chiefs don’t have the talents of some of Stalin’s industrial commissars, says Golts.  They are, however, good at blaming ex-Defense Minister Serdyukov for “destroying” the voyenpred system.

Golts really gets to it here:

“In reality producers of complex military equipment have a choice.  They can either make components in final assembly plants in a semi-artisan fashion.  Or they can buy them on the side, risking getting crap made in some tent.  It stands to reason the problem isn’t confined to recreating the military acceptance office in enterprises.  Complex chains of sub-contractors have to be established.  And, we note, even with money — this isn’t a banal task.  We’re really talking about new industrialization, the construction of new enterprises.  But just what kind?”

Golts recommends a policy of targeted and specialized re-industrialization.  Because of the expense, he says build specialized component factories to support production of critical systems where Russia is decades behind developed states — communications, reconnaissance, UAVs, precision weapons.  Russia will have to prioritize and Golts doesn’t see tanks, ships, and heavy ICBMs as priorities.  Those who pick the priorities have to withstand attacks from lobbyists for these weapons.

Golts believes Deputy Prime Minister and OPK tsar Dmitriy Rogozin knows the bind he’s in . . . and that’s why he says put off the beginning of serial production of many armaments until the next armaments program (2016-2025).

Golts concludes:

“Generally, the rearmament of the Russian Army is entering a new cycle.  Without any kind of results.”

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Clean Slate

It took a brave man to tell the State Duma what department chief Aleksandr Piskunov said in the Audit Chamber’s annual legislative report in February.  Voyenno-promyshlennyy kuryer published excerpts of his remarks.

Piskunov’s a government official.  Not a powerful voice, but an authoritative one in his specialty.

Auditor Aleksandr Piskunov

Auditor Aleksandr Piskunov

To say he’s well-equipped for his work is an understatement. 

Sixty-one or 62 years old, Piskunov graduated from the RVSN’s Dzherzhinskiy Military Academy with a radio engineering degree.  He served on active duty to the rank of general-major, spending many years at the Plesetsk cosmodrome.  He later trained in the RF Government’s Financial Academy and a business school in London.  He has a PhD in economics.

Piskunov served in both the RSFSR Supreme Soviet and State Duma in the early 1990s, and was deputy chairman of the Defense Committee for each body.  He also chaired the Defense Ministry’s Military-Technical Policy Committee.  In the mid-1990s, he moved to the staff (apparat) of the RF Government and was deputy chairman of its Committee on Military-Industrial Issues.

He returned to the Duma briefly in 1999, and became deputy chairman of its “Regions of Russia” faction.

He went to the Audit Chamber in 2001, and is currently in his third term of service.

Piskunov thinks Russia can’t produce new, better, or more weapons and military equipment without modernizing its badly neglected defense industrial base.  But he has pretty much nothing but scorn for the current management of the state defense order.  And he sees little but failure in the GPV over the last 20 years.  In particular, Piskunov calls for incorporating life cycle costs into the GPV.  Ultimately, however, he says auditors and accountants can’t fix the GOZ or GPV, but lawmakers could.

Enough preamble.  Here’s VPK’s excerpt of Piskunov’s remarks.

“STRICT CONTROL OF FULFILLING THE ARMAMENTS PROGRAM IS NEEDED”

“I represent a department that performs strategic audits in the Audit Chamber.  We’ve done a lot of work in evaluating the condition of practically all 1,350 enterprises of the defense-industrial complex, their financial stability and real contribution to equipping the Armed Forces.”

“We looked at how balanced the program of defense-industrial complex modernization and State Program of Armaments were.  A gap of 700 billion rubles was observed.  At the same time, 1 trillion 200 billion is built into the budget to guarantee compensation to enterprise directors who go to commercial banks for credits.”

“Similar credit practices are leading to the growth of OPK enterprises with an unstable financial situation.  More than 30 percent are like this.  Only 20 percent come close to world standards in technical equipping.  More than half are in a condition where their restoration is already senseless — it would be better to build from a clean slate.”

“In preparing the law on the state defense order we tried to correct this situation.”

“From my point of view, our system of administering the state defense order is uncompetitive.  The adopted law preserved the situation under which  management amounts to a lag in the state defense order.”

“The deputy prime minister, responsible for the defense-industrial complex, reported that the state defense order was fulfilled by 99 percent as in past years.  But almost one hundred percent fulfillment of state defense orders over the last 20 years has not prevented the failure of all arms programs or fulfilling them at 30, 40, 50 percent.”

“Dmitriy Rogozin himself noted that fulfillment happened because of the appearance of realization.  During the execution of the arms program 7,200 changes were introduced into it, that is the real result is being slanted to agree with this fact.”

“Meanwhile Rogozin recognized that the arms program has gotten old.  The task of preparing a new State Program of Armaments stands before him.  So the problem of forming a legislative basis and management of the State Program of Armaments is more acute than ever.”

“Our opponents in government, having considered it inexpedient to include the management of the acquisition program life cycle in the GOZ law, said it was necessary to include this management in the law on the State Program of Armaments.”

“To me it seems necessary in this instance to hold them to their word — to propose that the government prepare a draft law on the State Program of Armaments.  It’s possible this will allow us to compensate for not realizing it in the GOZ law, and meet the president’s demand to create essential management of the life cycle of weapons systems.  But today the state of affairs is seriously complicated by the fact that the life cycle is really torn into several parts in the Defense Ministry itself.”

“Those who’ve served understand:  you can’t modernize armaments without the experience of using them.  Who really tracks all this life cycle?  It would be logical if Rosoboronpostavka were occupied with this, but it is located at the junction of the functional orderer — a service of the Armed Forces and a contracting firm.  It would be more appropriate to subordinate this department to the government.  It’s perfectly clear that the main risks are connected not to corruption, but to the low qualifications of the orderer.  Someone needs to “hang” over the orderer from the point of view of its responsibility for how both the program and the contract as a unitary whole are being executed.  Juridical responsibility is not rebuilt only through the contract.”

“The level of project management in our ‘defense sector,’ unfortunately, is also very low, especially the quality management system.  We are all witness to what is happening now in space.”

“It’s frightening that it’s impossible to create new equipment without metrics.  We lost the project management culture and stopped training specialists in military academies and schools.  The very best on this plane is OOO ‘KB Sukhoy’ and it used the American experience-plan for metrics on developmental aircraft.  The Americans seized and simply closed the issue — this project is no longer being supported.  To rewrite project documentation now in some kind of domestic variant is complex, therefore the development of these systems is essential.”

“The participation of commercial banks in providing credit for the state defense order is an important question.  Now in the government they are discussing how these 23 trillion will go — through commercial banks, for free or for money?  It’s understood that banks simply don’t work that way.  There is a precedent — the government resolution on the Mariinka, the Bolshoy [theaters], the M-4 [highway].  If you calculate it, then 20 percent received from 23 trillion over these years, it’s necessary to take an additional amount from the taxpayers or cut the defense order by this sum.”

“Not less sensitive is the issue of intermediaries.  If the Defense Ministry and government don’t put transactions under the strictest control, then there are all the calculations on the defense order, life cycle and cooperation levels, we will mess up this program of armaments also.  This, undoubtedly, is one of the most dangerous questions for the Defense Ministry — too large lobbyist forces participating, too large sums going.”

“Questions of managing the life cycle and control of finances are the most fundamental.  The treasury is incapable of resolving this task.”