USING COMMERCIAL DISCIPLINE TO IMPROVE AUSTRALIAN DEFENCE PROCUREMENT: MISPLACED ENTHUSIASM?

Authors

  • STEFAN MARKOWSKI,

    1. Markowski: School of Business, The University of New South Wales at the Australian Defence Force Academy, Canberra, Australia. Phone +61 2 6268, Fax +61 2 8450, E-mail s.markowski@adfa.edu.au
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  • ROBERT WYLIE

    1. Wylie: School of Business, The University of New South Wales at the Australian Defence Force Academy, Canberra, Australia. Phone +61 2 6268 8909, Fax +61 2 6268 8450, E-mail r.wylie@adfa.edu.au
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    • The authors would like to thank Professor Peter Hall, Dr. Binyam Solomon, and Mr. Aditya Agrawal for many helpful comments and suggestions. The paper was first presented at the 2009 Pacific Rim Conference of the Western Economic Association International, March 24–27, at Ryukoku University, Kyoto, Japan; and, in a different format, at the 13th Annual Conference on Economics & Security—June 24–26, 2009—in Thessalonici, Greece. The authors wish to thank members of both groups of attendees and discussants for comments and suggestions. The responsibility for all errors and misconceptions rests solely with the authors.


Abstract

Australia, like other democracies, has long sought to improve the efficiency and effectiveness of procurement for national defence. A recent review exhorted Defence procurement managers to exert greater “commercial discipline.” Similar calls have been made in other countries. This paper tests such public sector emulation of commercial practice by comparing the relative effectiveness of procurement via in-house arrangements; a public procurement agency detached from Defence; and privatized provision. We show that what matters is not public or private ownership but how ownership and management are integrated and what incentive structures are applied. (JEL H44)

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