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Policy and Models for R&D Management in Support of

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SCIENCE FOR PEACE AND SECURITY PROGRAMME
SfP-982063 Management of Security Related R&D in

Support of Defence Industrial Transformation
UNIVERSITY OF NATIONAL AND WORLD ECONOMY
Department “National and Regional Security”
Policy and Models for

R&D Management in Support of
Defence Industrial Transformation
28-29 June 2007, Sofia
Avangard Prima
Sofia, 2008
The Conference had been held on 28-29 June 2007 in University of
National and World Economy–Sofia, under the framework of the project
SfP-982063, MANAGEMENT OF SECURITY RELATED R&D IN SUP-
PORT OF DEFENCE INDUSTRIAL TRANSFORMATION, funded by the
NATO Science for Peace and Security Programme.
Five institutions participate to the Project:
• Institute for Techniques of Intelligent Systems,
Federal Armed Forces University, Munich Germany;
• Department National and Regional Security –
University of National and World Economy, Sofia, Bulgaria;
• Institute for Parallel Processing,
Bulgarian Academy of Sciences;
• National Defence College,
Ministry of Defence, Bucharest, Romania;
• Faculty of Social Science,
European University, Skopje, FYROM.
The project is aimed at satisfying a number of economic and social needs
of the defence industrial and security sector transformation and conversion.
The integration of the national defence industries into the NATO Defence
Industrial Base is a vital challenge for Bulgaria, Romania and FYROM. The
main objective of the project is to study and give practical recommendations
for the transformation of security and defence related R&D management.
POLICY AND MODELS FOR R&D MANAGEMENT IN SUPPORT

OF DEFENCE INDUSTRIAL TRANSFORMATION
Tilcho Ivanov and contributors
Editors: Professor Tilcho Ivanov, Ph.D.

Assoc. Prof. Dimitar Dimitrov, Ph.D.
Assist. Prof. Konstantin Poudin
AVANGARD PRIMA
ISBN 978-954-323-364-9
Sofia, 2008
1
TABLE OF CONTENTS
FOREWORD .................................................................................................................................. 5
GREETINGS TO THE CONFERENCE ...................................................................................... 7
Prof. Plamen Mishev, D.Sc.

Vice-Rector of the University of National and World Economy - Sofia ..................... 7
Mr. Simeon Nikolov
Deputy Minister of Defence
Ministry of Defence of The Republic of Bulgaria......................................................... 9
Ms. Ivelina Bahchevanova,
Ministry of Economy and Energy of The Republic of Bulgaria ............................. 11
PART I. PROBLEMS AND POLICIES OF DEFENCE INDUSTRIAL TRANSFORMATION15
ECONOMIC TRANSITION AND DEFENCE INDUSTRIAL TRANSFORMATION:

BULGARIAN CASE ISSUES AND POLICIES................................................................. 15
Prof. Tilcho Ivanov, Ph.D.
Partner country Project Director
Head of Department “National and Regional Security”
University of National and World Economy, Sofia, Bulgaria
POTENTIAL IMPACTS OF NEW EU MARKET REGULATIONS ON THE
MANAGEMENT OF SECURITY RELATED R&D IN SUPPORT OF DEFENCE
INDUSTRIAL TRANSFORMATION ................................................................................. 38
Dr. Heinrich Buch
NATO - country Project Director
JOINT TECHNOLOGICAL INITIATIVES TOWARD THE GLOBAL SIZE OF
FUTURE DEFENCE INDUSTRY....................................................................................... 46
Assoc. Prof. Elena Lacatus, Ph.D., Eng.
Politehnica University of Bucharest, Romania
Assoc. Prof. Iulian Fota, Ph.D.
Project Co-Director
Director of National Defence College of National Defence University
of Bucharest, Romania
PROBLEMS OF R&D POLICY IN DEFENCE INDUSTRIAL TRANSFORMATION .. 57
2 POLICY AND MODELS FOR R&D MANAGEMENT
THE MACEDONIAN DEFENCE MARKET AND TRANSFORMATION ....................... 65

Mr. Elenior Nikolov
Military Academy “General Mihailo Apostolski” - Skopje
Mr. Mitko Bogdanoski, M.Sc.
Macedonian Army, Land Forces
Mr. Robertino Contev, M.Sc.
Department of Planning and Bilateral Cooperation
Ministry of Defence of the Republic of Macedonia
Mr. Zoran Ivanovski, Ph.D.
Faculty of Economy, European University, Skopje
ROMANIAN DEFENCE INDUSTRY TRANSFORMATION EXPLORATION .............. 81
First Lieutenant Liviu-Cristian Matache
Military Equipment and Technologies Research Agency,
Ministry of National Defence, Romania
CONFLICTOGENITY OF THE PUBLIC-PRIVATE PARTNERSHIP ........................... 93
Academician Prof. Dimitar Y. Dimitrov, D.Sc.
Bulgarian Association of the Conflictologists
PART II. CONCEPTS AND MODELS FOR R&D MANAGEMENT .................................... 105
SHAPING BULGARIA’S SECURITY AND DEFENCE R&T POLICY ........................ 105

Prof. Stefan Hadjitodorov, D.Sc.
Scientific Secretary, Bulgarian Academy of Sciences
Director of the Centre for National Security and Defence Research, BAS
Assoc. Prof. Todor Tagarev, Ph.D.
Rakovski Defence and Staff College, Sofia, Bulgaria
Mr. Nikolay Pavlov
Centre for National Security and Defence Research, BAS
INNOVATION BENCHMARKING................................................................................... 112
Assoc. Prof. Stefan Hristov, Ph.D.
PERSPECTIVE FOR DEVELOPMENT OF BULGARIAN MODEL FOR R&D
MANAGEMENT IN SUPPORT OF DEFENCE INDUSTRY
Assoc. Prof. Tsvetan Tsvetkov, Ph.D.
MAZES IN THE DEFENCE RESEARCH AND DEVELOPMENT MANAGEMENT
MODEL ............................................................................................................................... 132
Colonel Venelin Georgiev, PhD, Dipl. Eng.
State Expert in Armaments and Equipment Policy Directorate
Ministry of Defence of the Republic of Bulgaria
TABLE OF CONTENTS 3
COMMAND AND CONTROL INFORMATION SYSTEMS DEVELOPMENT

CHALLENGES ................................................................................................................... 140
Assoc. Prof. Gueorgui Pavlov, Ph.D.
University of National and World Economy
Research Associate Juliana Karakaneva, Ph.D.
Defence Advanced Research Institute – Rakovski Defence Staff College,
Bulgaria
SOA BASED BUSINESS MODELLING .......................................................................... 148
Assoc. Prof. Dimiter Velev, Ph.D.
Department of Informatics
DEFENCE MECHANISMS AGAINST COMPUTER ATTACKS “DISTRIBUTED
DENIAL OF SERVICE” TYPE ......................................................................................... 155
Prof. Nina Siniagina, D.Sc.
Institute for Parallel Processing-Bulgarian Academy of Sciences
Research Associate Stela Ruseva, Ph.D.
THE MANAGERIAL DECISIONS BY DEFENCE INDUSTRIAL
TRANSFORMATION IN THE CONFLICTOLOGICAL CONTEXT ............................. 167
Mr. Ivan Tsanov
PART III. PRACTICES FOR R&D MANAGEMENT ............................................................ 171
PUBLIC-PRIVATE PARTNERSHIP IN BETWEEN EUROPEAN TECHNOLOGY

PLATFORM AND JOINT TECHNOLOGY INITIATIVES ............................................ 171
University of Polytechnics of Bucharest, Romania
PUBLIC/PRIVATE PARTNERSHIP FOR DEFENCE TELECOMMUNICATIONS... 184
Assoc. Prof. Dragomir Pargov, Ph.D.
State University of Library Studies and Information Technologies, Sofia,
Bulgaria
DEVELOPING A RESULTS-ORIENTED MANAGEMENT FOR DEFENCE R&D,
AS A PART OF THE IMPROVEMENT OF BULGARIAN DEFENCE RESOURCE
MANAGEMENT’S TECHNOLOGY.................................................................................. 193
Colonel Dobromir Totev
THE BUSINESS PROCESS OF R&D AND BULGARIAN DEFENCE ACQUISITION

SYSTEM: POTENTIAL FOR IMPROVEMENT.............................................................. 203
Assist. Prof. Georgi Penchev
TRANSNATIONALISATION OF THE INTERNATIONAL ECONOMIC RELATIONS
AS AN ELEMENT OF R&D POLICIES AND MODELS IN THE DEFENCE
INDUSTRY ......................................................................................................................... 221
Ms. Maria Bakalova
Marketing Expert
CONCLUSIONS FOR THE NEW NATO MEMBERS FROM THE UK EXPERIENCE
IN DEFENCE RESEARCH AND DEVELOPMENT....................................................... 228
Mr. Ventsislav Atanassov, MSc in Ec., MCSc
Project Manager, OBS - Bulgaria
R&D IN SUPPORT OF PROFESSIONALIZATION OF THE BULGARIAN ARMED
FORCES.............................................................................................................................. 238
Assist. Prof. Konstantin Poudin, Ph.D. student
DEVELOPMENT OF THE BULGARIAN DEFENCE INDUSTRY DURING THE
PERIOD UNTIL 1989 ........................................................................................................ 249
Mr. Nikolay Stavrev, Ph.D. student
ECONOMIC DEVELOPMENT AND SECURITY POLICIES - CHALLENGES AND
PERSPECTIVES FOR RESEARCH ................................................................................ 262
Mr. Rainer Stenzel
Degreed Economist/Social Economist,
Expert for Cross-Border Business and Economic Cooperation
PART IV. POWER POINT PRESENTATIONS ..................................................................... 273
ELECTRON PROGRESS – AS AN INNOVATIVE PARTNER OF MOD ..................... 273

Mr. Krassimir Pingelov
Executive Director, Electron Progress AD
Mr. Kiril Stoychev
Expert, Electron Progress AD
FOREWORD 5
FOREWORD
In the conditions of globalization of political and economic proc-

esses, the existence of common challenges defines the necessity of
common efforts to address and solve them. The co-operation in all
spheres and at all levels of our political, social and economic life is be-
coming the most effective tool and guarantee for sustainable develop-
ment of the society. As well this co-operation is very important for the
countries in the South Eastern Europe because it is a criterion for fur-
ther integration into the EU and NATO.
This book consists the papers from the International Conference
“Policy and Models for R&D Management in Support of Defence Indus-
trial Transformation” hold on 28-29th June in Sofia. The Conference is a
part from the scientific co-operation in support of defence industrial
transformation between Department “National and Regional Security”,
University of National and World Economy, Sofia; Institute for Tech-
niques and Intelligent Systems, Federal Armed Forces University, Mu-
nich, Germany; Institute for Parallel Processing, Bulgarian Academy of
Sciences; National Defence College of National Defence University, Bu-
charest, Romania, Faculty of Law and Politics, European University,
Skopje, Macedonia in the 3 year project SfP 982063, MANAGEMENT
OF SECURITY RELATED R&D IN SUPPORT OF DEFENCE IN-
DUSTRIAL TRANSFORMATION. The project is funded by NATO Sci-
entific Program “Science for Peace and Security”
The purpose of the project is to study and give practical recom-
mendations for the transformation of security and defence related R&D
management into a more comprehensive and integrated defence indus-
try system in support of new network enabled capabilities needed in the
fight against terrorism and new security threats.
The main four project objectives are:
1. To develop a NATO integrated R&D Concept and Model
(R&DCM) as an incremental tool for the improvement of the national
R&D management system, which includes the following tasks: devel-
opment of a methodology for further scientific analysis and research

on the topic, exploration NATO and developed countries best practices
and regulations, formulation of a Concept for Management of Security
Related R&D in Support of Defence Industrial Transformation, elabo-
ration of a Model for Management of Security Related R&D in Sup-
port of Defence Industrial Transformation etc.
2. To develop and strengthen the common policy framework of in-
ternationally coordinated R&D policy in the defence industry sector as
a prerequisite for steady economic growth and effective security. The
policy framework has to be accepted politically and based on a stable
relationship between Armed Forces and Defence Industry. It has to be
coordinated with the operational requirements, defence industrial ca-
pabilities, and the capacity of R&D management as an instrument for
re-engineering their balance.
3. To elaborate a Defence R&D Management Network for Scien-
tific Cooperation (NfSC) in the South-Eastern European region. Such
network will facilitate the development of further international
agreements, regulations, contracts and partnership in the sphere
within the Atlantic Alliance and the framework of already existing in-
ternational organizations and forums.
4. To establish a Centre of Excellence (CoE) for training and edu-
cating practitioners and young researchers from the participating na-
tions in the use of modern methods, practices and tools in the sphere
of R&D management in support of the defence industrial sector trans-
formation by means of information/information exchange, seminars,
training, modern IT and distance education.
The book is addressed mainly to decision makers and researchers
whose activity is directly connected with R&D management in defence
and security sector. It also could be an interesting reading for all other
specialists working in the defence and security sphere.

Partner-country Project Director
GREETINGS TO THE CONFERENCE 7
GREETINGS TO THE CONFERENCE
UNIVERSITY OF NATIONAL AND WORLD ECONOMY –

SOFIA
Dear Ladies and Gentlemen,

It is a great pleasure and honour to me to welcome you on my be-
half and on behalf of the Academic Council of the University of Na-
tional and World Economy, the participants and guests in the Inter-
national Conference “Policy and Models for R&D Management in
Support of Defence Industrial Transformation”. The Conference is or-
ganised in the framework of the SfP 982063 project, MANAGEMENT
OF SECURITY RELATED R&D IN SUPPORT OF DEFENCE IN-
DUSTRIAL TRANSFORMATION, funded by NATO Science for
Peace and Security (SPS) Program, where our university is presented
by Department National and Regional Security.
Since the middle of 90-s the “knowledge” has been inevitably par-
ticipating in almost all international reports and documents. Their
developments have become a goal and at the same time a tool for in-
crease of competition capacity of the local economies and the econo-
mies of the unions, for improvement of the life of their citizens, for
guarantee of their security. We, as representatives of leading research
and teaching institutions in our countries, have to work to achieve the
ambitious goal formulated by the European leaders in Lisbon in 2000
- Europe must become “the most competitive and dynamic economy
based on the knowledge”. The project of the Department National and
Regional Security, as a part of the international cooperation activity of
our university, demonstrates our common efforts in this direction and
it is a step ahead in the building of a more competitive economy.
This conference is dedicated to an interesting and quite topical
theoretical and practical problem. In the conditions of existing liberal
world markets, dynamic development of information technologies and

transformation of the knowledge into an important production re-
source, the transformation of the defence industry in South-Eastern
Europe needs the implementation of an adequate policy and a model
of R&D management, which have to correspond to NATO and EU re-
quirements. Their elaboration supposes study of the existing national
policy and models, becoming familiar with the experience of the pri-
vate companies and the requirements of the EU and the Alliance. All
these activities put a great challenge before the participants in the
conference and in the project as a whole.
Let me once again to say welcome in the University of National
and World Economy and to wish this scientific forum successful and
useful work.
Prof. Plamen Mishev, D.Sc.

Vice-Rector of the University of National and World Economy
Sofia, Bulgaria
MINISTRY OF DEFENCE OF THE REPUBLIC OF BULGARIA
Dear Generals and Officers,

Dear Guests,
Let me welcome, on behalf of the leadership of the Ministry of De-
fence and personally on my behalf, the organizers and guests at the
conference, the participants and all contributors at the project “Man-
agement of Security Related R&D in Support of Defence Industrial
Transformation” funded by NATO Program “Science for Peace and
Security”, the University of National and World Economy for its sup-
port and demonstrated hospitality.
The present conference could be accepted as a new, higher level of
the long-standing cooperation between the University of National and
World Economy and the Ministry of Defence. Today, this traditional
co-operation and contacts in the national and international scientific
community, gives us the opportunity to bring together well-skilled na-
tional and international experts who can give assistance to matters re-
lated to the scientific support of the defence industrial transformation
and armament modernization.
Something more, these issues could be personally directed to ex-
perts and employee at the NATO scientific organizations, where Bul-
garian scientific community has to find and maintain its positions
The necessity of scientific support for fulfilment and elaboration
of armament modernization is undoubted. However, the realization of
this support is a difficult and a long process, requiring a complex of
strategic, political, organizational, personnel and technical measures.
Such complex of measures has to be organized in orderly policy and
model of defence R&D management which is exactly the topic of the
present conference.
Fulfilment the goals of the conference and the project, the par-
ticipants at the today’s event will contribute to successful elaboration
of the needed armed forces and defence industry capabilities through
defining of:
• Appropriate methods and models for scientific research organiza-
tion in the Ministry of Defence, as well in the defence industry
enterprises;
• Scientific and technological fields where the country has competi-
tive advantages and which fields has to develop;
• Approaches for increase, motivation and retention of the scientific
staff in the important for the defence scientific fields;
• Manners for effective organization of knowledge and technologies
transfer between the private and defence sector in interest of the
economic growth and development of the country.
Today we could show with satisfaction examples of successful de-
velopment of capabilities of our defence industry for international co-
operation and participation at international tender procedures. The
process of defence industry transformation and its rebuilding must be
much more purposeful and the best management practices and ap-
proaches must be applied. I do not have doubts that today and during
the development of the project “Management of Security Related R&D
in Support of Defence Industrial Transformation” these approaches
will be thoroughly studied and analyzed, in order to be adapted in the
Bulgarian reality and used for the successful transformation of the de-
fence industry and its integration into the EU and NATO structures.
In conclusion, once again I would like to welcome all the partici-
pants and guests at the today’s conference and to wish them success-
ful work.
Mr. Simeon Nikolov

Deputy Minister of Defence,
MINISTRY OF ECONOMY AND ENERGY

OF THE REPUBLIC OF BULGARIA

Dear Guests,
It is a great pleasure and honour for on behalf the Ministry of
Economy and Energy and on my behalf to greet the participants at
the international conference dedicated to the issues of “Policy and
Models for R&D Management in Support of Defence Industrial Trans-
formation”.
We know that during the years the traditional conferences organ-
ized by University of National and Word Economy and particularly by
the Department National and Regional Security play an important
role as a link between the Bulgarian society and the government.
These events are yet another proof for the progressive role of the aca-
demic community worldwide. As we can see, this year conference has
attracted the attention of many foreign and Bulgarian specialists in
the field of defence and security issues. Undoubtedly it is due to the
fact that the previous scientific events have been a place for useful
discussions over one of the most topical defence economic issues for
many years. The society has already realized the importance of the de-
fence economic issues and their close relation to national security and
economy. The Bulgarian accession to NATO and EU has increased the
importance and necessity of such events which would contribute to
the processes of integration. And it is one of the goals of this confer-
ence to provide a broad forum for discussion of the implications of the
newest challenges and issues within the defence and security sector
provoked by these processes.
The process of defence industrial transformation is very impor-
tant for the adequate functioning and development of Bulgarian de-
fence enterprises especially in the contemporary tendencies and condi-
tions in the world defence industries.
The defence industrial transformation is considered as an issue of
high priority by the Ministry of Economy and Energy.

In our Ministry and in the Internationally Controlled Trade and
Security Directorate we feel that it is our duty and mission to encour-
age and widen the contacts between Bulgarian and international
business dealing in the sphere of defence and security, in an aspect of
a partnership and understanding including the very important area of
R&D activities.
The Ministry has its competencies in defence industry, such as:
• to provide state participation and state control on defence indus-
try companies where the State possesses a majority stake of
shares;
• to provide preparation and implementation of crisis management
plan defining tasks and contracting their implementation by
commercial entities in economy, energy, industry brands as a
whole, as well as in defence industry;
• to develop partnership relations with brands associations, guilds
and trade unions whose members are involving in defence indus-
trial activities.
Internationally Controlled Trade and Security Directorate is in-
volved in the cooperation in the field of defence and security related to
various aspects of economic, industrial and R & T activities within
NATO committees and European security institutions as well.
According to the Ministry of Economy and Energy competencies
we are authorized to present Bulgaria at the level of heads of BG dele-
gations in NATO committees and organizations, as follows:
• the Industrial Planning Committee (IPC);
• the Industrial Advisory Group (NIAG);
• the Economic Committee.
It is worth saying that the defence industrial transformation is-
sues and processes are taken into account and have a place in the ac-
tivity of the above mentioned structures.
That is why the invitation to this conference made us happy to
find our place between you and feel a part of this esteemed commu-
nity again, and I am delighted to tell you that we welcome this event
and we are sure the conference would contribute to exchange experi-
ence and opinions about this topic which will contribute not only to
the theoretical but the practical solutions in Bulgaria as well.
Let me once again congratulate you with the beginning of the
conference and to wish you useful and satisfying work.
Ms. Ivelina Bahchevanova,

Director
Internationally Controlled Trade and Security Directorate
Ministry of Economy and Energy of the Republic of Bulgaria
PROBLEMS AND POLICIES OF DEFENCE INDUSTRIAL TRANSFORMATION 15
Part I.
PROBLEMS AND POLICIES OF DEFENCE
INDUSTRIAL TRANSFORMATION
ECONOMIC TRANSITION
AND DEFENCE INDUSTRIAL TRANSFORMATION:
BULGARIAN CASE ISSUES AND POLICIES

Partner-country Project Director
Introduction
The end of Cold War period created a new environment for tran-
sitional countries defence industries. Faced with market economy and
an inherited from Cold War immense productive overcapacity coun-
tries must consider new dimensions of their defence industrial policy.
The new reality of international security, and new threats complicated
additionally situation. It crop up not only political, economic, social
but also intellectual challenge. The choice of relevant policy is sound
at least from tree important aspects – national security, economic
competitiveness and social environment. In this case the most impor-
tant question is what governments at all, and Bulgaria’s governments
in particular, have to do and what not to do for defence industry. And
if they have to do something, why and how they have to do it? The
forth not less important question is what defence industrial compa-
nies, which are the subject of this policy have to undertake to develop
their business?
The looking for the right answers of these questions is an objec-

tive of the presented material. It will try to defend the thesis that the
sustainable defence industrial policy has to be based on mixture from
relevant coalitional force capabilities, high productive competitive-
ness, and stable social guaranties for involved personnel. It argues
that not national protective activism could help to solve the existing
problems, but focus on the high competitiveness, based on the groov-
ing innovativeness of the companies and labour competence will play
the key role for adaptation of the defence industries.
Inherited and Transitional Economic and Social

Problems
The inherited and new transitional problems of national defence
industrial base are more and less familiar to the experts and the gen-
eral public in the country.1 The Atlantic Council of United States also
supports the structuring of the problems, and their publishing into
NATO countries community.2 There are also a number of publica-
tions, focused on this subject, which illuminates additionally the con-
crete status of the matter.3
• The list of the more complicated inherited problems includes:
• State owned and central managed companies by the state;
• Deep specialization into defence products, reaching about 80-90 %
of the output of the production, and not successful attempt for
partial civilian conversion;
• Product portfolio based on soviet products, without politically
gifted, but no law regulated licenses;
1
Restructuring of Defence Industrial and Technological Base in New and Prospective
NATO Members, Economic Policy Institute, Sofia, 2000.
2
Coward, C. M., J. P. Bialos, The Bulgarian Defence Industry. Strategic Options for
Transformation, Reorientation & NATO Integration, The Atlantic Council of the US,
Policy Paper, July, 2001.
3
See: Privatization and Restructuring of Defence Industries, with a Particular Focus
on the Progress Achieved in South Eastern Europe, EAPS Seminar organized by
NATO Economic Directorate and Economic Policy Institute, Sofia, 25-26 March 2002;
Rachev, V., I. Kolev, Towards a New Defence Industrial Base (p. 279-294), Bulgaria
for NATO 2002, Institute for Regional and International Studies, Sofia, 2002.
• Narrow industrial cooperation for the key product components

for advanced products to the USSR and Russia, and dependence
and denial of supply;
• Sharply narrowing of the old markets;
• Considerable for the country defence industrial overcapacity and
large diversification of the products;
• Limited capacity for national own research and well developed
competence for technological development of the production;
• Extremely high contract obligations to the developed countries
for equipment modernization of the companies.
All these characters has been supplemented and complicated to
the problems, which arises and grew up in transitional period:
• Sensitive delay for the decentralization and market adaptation of
the companies, which brought to the extremely high debts, inter-
related debts and cash flow blockades; outstanding claims, freeze
by government bankruptcy, company’s capital reduction, closing
of the facilities;
• Growth of the social problems, related to the low wages, reduction
of the personnel4; loose of professional employee; blockade of per-
sonnel education, training and development; low motivation and
bad working attitudes;
• More than seven year delay in privatization, combined by the ex-
clusive sold of the companies to existing management deprive the
companies of any outside strategic investors and capital inflow for
transformation;
• Not well law regulated armament and dual use product export
control by the state, brought to the trials for illegal export and
aggravated the good name of the industry and the country at all.
These are not all important problems, but they are enough to
conclude that the Bulgarian Defence Industry has fell into deep crises,
which needs extremely fast and even radical measures for its cure.
4
For the transitional period the Bulgaria’s Defence Industry has been reshaped from
3 holding companies, including about 200 different sized factories with 160 000 em-
ployees to 25 companies with 25 000 employees.
The exit from the situation needed fundamental change of the exist-
ing policy. New decisions and actions have to be considered not only
from the national point of view, but also from the point of the new
tendencies and challenges for European and Global Defence Industrial
Base. We could summarize these challenges using the vast and pro-
found study of the defence industrial future, edited by Ann R. Mar-
kusen and Sean S. Costigan and their practical questions5:
• Should nations continue to keep the available mobilization pro-
duction capacities and “hot lines” as a guaranty for the future se-
curity at considerable costs?
• Should the leading producers US and EU pursue a new innova-
tion in the context of the new global threats for security?
• Is it the mergers among large companies a best way to achieve
the dismantling of excess facilities?
• Should the nations relay on the foreign military production, or
keep their own capacities?
• Should they welcome foreign ownership of domestic facilities?
• Should they further privatize defence related supply and mainte-
nance?
• Should arm exports be encouraged to receive economies of scale
and reduction of production costs?
• Should dual-use production companies be encouraged or not?
All these questions are not easy for answer. Even when the an-
swers are given then new questions arise, beginning with “how”. All
the questions and answers have cultural, political, economic, military
and many other dimensions. From cultural point of view the answers
depend on the specifics of the every country. The Hofstede’s model for
description of national cultures offers number of factors, like: avoid-
ance of insecurity (or masculine or feminine style of the country) and
the level of public stress; power distance in society; time orientation
(readiness to scarify a personnel time); individualism or collectivism,
and others. We have no studies and estimations how this factors in-
5
Arming the Future, A Defence Industry for the 21st Century, Ed. By Ann R. Mar-
kusen and Sean S. Costigan, Council of Foreign Relations press, NJ, 1999.
fluence the security industrial decisions. There are no common ac-

cepted models for economic transition. A variety of concepts for lib-
eral6 state regulated or directly controlled defence industries prevails
in separate period. The social and military estimations and visions are
in change too. In this context and having in mind the capacity of exist-
ing administration we could argue that moderate liberal approach is a
relevant approach to the problems. We will defend the thesis that the
country needs developing, promoting, and implementing defence in-
dustrial policy that ensures well controlled technological backward-
ness of the DIB. We also agree that the appropriate government au-
thorities and program structures have to provide clear responsibilities
of the state to security and defence requirements and development of
private DIB.
Army Demand, Force Goals and Acquisition

As a political instrument of the state, Army has to develop and
keep the relevant to the external risks and alliance committed opera-
tional capabilities. The main interest of this institutional group is to
receive the needed resources for to produce expected by society de-
fence public good. The Army and MoD administrators will tend to
claim for more and more resources in respect of increasing threats.
They will be driven by the coordinated into coalition partners future
force goals and military capabilities. Present analysis of the level of
force goals shows that country succeeds to build only one third of pro-
jected capabilities for participation into expedition operations. The
country offers about 300 people in external operation which is about
tree time less than proposed 4 % of Land Force capacity of the coun-
try (at present about 20 000 people). The dominate part of the forces
are orientated to guarantee territorial defence of the country. The
process of transformation of the forces is delayed by the executed pro-
fessionalisation of the Army. According the plans in the beginning of
2008 all the forces will be fully professional. But they will not be fully
6
Stanchev, K., Historical evidences for impotence of economic policy, “Dnevnik”, 8
May, 2007.
capable to meet the expeditionary mission due to lack of strategic and

even tactical transport capabilities. It is not also guaranteed light and
medium armoured operational capability. Land Forces will not rely on
the modern Ground Combat Vehicles, special equipment for projected
missions and even the personnel protective equipment for the soldiers.
This discrepancy initiated in 2004 the generation of the eleven
priority projects and programs for armament modernization. These
are: equipment with modern automobile technique; acquisition of new
helicopters, and modernization of available Mi-17, and Mi-24; new
multipurpose fighter, and modernization of MiG-29; new transport air
planes; design and building of new multipurpose corvette; new coastal
radar; supply and modernization of second hand ships; battalion
camp-campaign equipment; communication-information equipment;
national program for utilization and liquidation of excess ammuni-
tions; acquisition of the equipment for intelligence, early warning and
monitoring of nuclear, chemical and biological agents. Five of the pro-
ject has been started and partially finished. They have been bought
Daimler Chrysler transport vehicles, Cougar and Panther of Euro cop-
ter7. It has been delivered also a second hand Belgian frigate and con-
tracted 5 cargo planes C-27 from Allenia Aeronoutica. Only for this
first priority projects has been contracted a loan for around 700-800
million Euro, which is available investment resource for 5 years
ahead. For the fighters and corvettes the country will need two times
more of that. Such money is not available in the budget, what means
necessity of new loans, which will consume the budget resource for 15
years ahead. And all if for half of the priority projects and programs.
The conclusion is that future operational capability of the Army is
under the question. There are not defined clear and sustainable force
goals, fully relevant to the security environment, economic capacity,
and social cost of the country. There is even not prospective vision
how to harmonize these controversial realities. Obviously, synthesis of
such vision will be the objective of the initiated by the government
7
The contract price is 358 mil Euro for18 helicopters (or 20 mil Euro for one of them),
which is higher than the middle price of such type of helicopters. This price was ar-
gued with a high portion of direct and indirect offset for the assigner.
work on the new security strategy and actualization of the Plan 2015.
Avoiding of the matter of defence industrial policy in these key politi-
cal documents will be immatureness for the national policy.
Economic Constrains
The state budget for 2007 is 20 billion Euro, which is 41 % from
the GDP. The defence budget is 2.2 % from the GDP and 5.5 % from
national budget.8 The investment part of defence budget is 150 million
Euro It is only 1/20 from the resources, that country needs for to real-
ize above mentioned eleven priority project for modernization of the
forces. Internal purchases will tend to zero within the present product
portfolio of the national companies.
For to execute its weapon modernization plan country will need
to take public loans. They could threaten financial stability and raises
doubts about capacity of the country to joint EURO zone in an accept-
able period of time. They will dissipate the hopes for conversion of na-
tional standard of living and its increase from today’s 1/3 of the mid-
dle for Europe to the more appropriate level.
The active debate for the future of the Defence Industrial Base of
the country emerged in the beginning of the 90-es in a context of eco-
nomic crises accompanying transition from state-planed and con-
trolled to the market economy. Nevertheless of some liberal ideas the
state property of the companies lasted till 1998, when has been organ-
ized managerial privatization of the 70-80 % of the factories. As it has
been mentioned the delay brought to negative effect to the economic
status of the companies and the coming out of the economic crises.
The elites and society needed about ten years to accept the idea that
the intervention of the government is less effective than the market.
At last majority accepted understanding that interventionist measures
penalize the whole economy. They found that unsecured loans, subsi-
dies or trade protection for companies are a direct or indirect tax on
the other activities, which could not be sacrificed for future security.
8
Report of the Minister of Finance to the Budget Design 2007, <government.bg>;
What shell the state do with our money in 2007. „Capital”, 20-27 October, 2006.
But this delay has its own price. It has blocked the economic growth,
destabilizes the bank system and prolonged the economic decline.
The following privatization was a savage, but not a preventive
measure. It has been combined by the sharp cut of the defence budget
and all the orders for companies. They rest with big loans and without
sales. Unattractive status of the companies predetermined a manage-
rial privatization and the resulting lack of capital and competitive
problems. Since the end of 90-es the status is freezing. The number of
40-50 private trade companies has arisen. Within a strong regulation
of the export of the weapons and dual use products the companies fo-
cused their attention to defence imports. Yearly export of traditional
products inclines to 100 million Euro.
Future increasing of the production will depend more on devel-
opment of the external markets, than to government purchases.
Social Frame
Social dimension of the defence industrial transformation is not
less important factor for success. It is related to the social conditions
of the labour force, which have to execute this process. Here we will
not focus our attention to the professional skills and competence of
the available personnel. We could only state that middle salary of the
personnel is 1/10 from the European level, which causes a large out-
flow of the professional workers and specialist. For the all transitional
period country has lost 1.3 million from his near 9 million populations
in 1989. It is around 15 % of the present population. There are no
data what is proportion of high skill emigrants, but the decline of in-
dustrial sector of the country shows that it is prevailing.
The blockage of the educational and training process of the new
specialists has particular negative effect. Companies use to allocate
needed resources for to finance the education of the high and middle
level personnel. From the beginning of 90-es this practice is cancelled.
Not less important effect from this has been mass release of low pro-
fessional workers. Used low level of mental work operations consumes
a lot of workers from the minorities, which historically has been occu-
pied with mental handicraft. For to increase artificial occupation the
governments from Cold War era stimulated the companies to establish

a subsidiary SME in regions with free labour force. This way on prac-
tice the militarization of the industry and economy touches every big,
middle, or small town, and even big village. Release of these workers
sharply changes the occupation. In a crises period unemployment
arises to 20 % in a big cities, but in small villages with domination
minorities it reaches 90 % and more. This tendency is not in hand yet.
The extreme unemployment generates a large process of migration
from small villages to the big cities. Small ghettos from the past be-
came small towns. The extremely low level of literacy in minorities
will deprive the economy and industry from low workers force for
years in the future. It will cause a high social price, which for the 2007
is 4.3 % from GDP, and 11 % from the state budget.
Defence Industrial Challenge

In this shape Defence Industry has not enough space to manoeu-
vre. The Government and Army do not like to buy its products. The
defence budget will be relatively decreasing to the growth of national
budget. The external market for the national products is narrow and
the prognosis for development is not good. Academic capacity for R&D
decreases, as result of evident process of popularization of the higher
education9. Law efficiency of business presses development and keep-
ing of corporate capacity. The companies follow the market tendencies
and they have no active marketing strategies. They could not decide
what kind of product to develop or discontinue, and more of that, they
have not enough resources to do that. Also, from this point of view,
the future probably will be not better than present is. On the other
hand there are not guarantees that international and national secu-
rity will increase. So there are three scenarios to free from this trap.
The first one (Scenario A) is to increase the competitiveness of the
companies and this way to make an overall transformation of the de-
fence industrial base. This alternative is preferable for the defence in-
dustrial companies and their associations. They will support any kind
9
Димитров, Г. Д., Няма празник за висшето образование, „Дневник”, 23 май 2007.
of political decisions and activities, which support this political line,

having in mind that this process is pressed in time, and the delay will
mean failure of the alternative. The second way (Scenario B) is not
prospective for the company’s presentation to the defence market.
Losing their competitiveness for defence products, they have to under-
take withdraw and to convert their productive capacity for civilian
products. The delay here will be fatal. The companies which could not
realize this strategy will lose their actives, like many of them in tran-
sitional period. This is on practice the third scenario (Scenario C) for
company’s future. This alternative does not obligatory mean losses for
the national economy. But from security point of view country have to
relay on the import of armament from allies. In some cases it will
cause additional expenditures and will be ineffective for the country.
In the other cases it might be effective, giving a useful reallocation of
resources for new more prospective owners and business. Different re-
sults will depend on the proportion on the security risk escalations
and risks for reduced investment returns.
We could complicate this simplified model adding the role of the
national and European administration. In national plan administra-
tion increases transaction costs. These costs are the cost of doing
business with another firm. As the defence industrial business is gov-
ernment controlled and even government driven business, contracts
are complicated and the costs of the deals are increased. A special part
of the transaction costs are the corruptive expenditures, which ordi-
narily are divided between political elite and administration. In a na-
tional transitional case these expenditures arises sharply, which is
generating an increasing public intolerance. From European point of
view increasing transaction cost could be compensated from the
enlargement of the market space for the companies. But in practice
this opportunity is different for the particular company. In principle
the bigger ones have a higher chance to win and the smaller to lose
because of competition. But the result depends on concrete micro eco-
nomical factors, which are hardly predictable.
Today nobody could take the responsibility to calculate which of
these scenarios is preferable to the national economy. Nobody could
take a risk to argue the public policies, which support any of these al-
ternatives. Something more, every of these scenarios are different for
the concrete company. Some of them will succeed; the other will fail in
the equal political, economic and social conditions. The overall result
will be sum of partial company’s outcomes.
Internal Driving Economic Interests and Policies

As every policy, defence industrial policy is also subject of differ-
ent conceptual models, which comes from the past experience and po-
litical theories. We stay on the point that in transitional period, when
the old institutions are destroyed and are not yet developed new capa-
ble institutions so called “institutional model” of policy is not working
one10. Because of not clear decision-making body (government or
market) it is not relevant also the “rational model”, which is focused
on “maximum social gain” against the costs of the policy. “Incre-
mental approach”, which views policy as an incremental continuation
of the past activities is also not appropriate. The governments don’t
like to extract lessons from the past, all the more that the present is
different than the past has been. We argue that the national de-
fence industrial policy is also in transition from “governing
elite preferences” to the “lobbing of group interests”. We un-
derline that the privatization of the industries by previous govern-
ments generates the new shared-attitude groups of interests. They
need to rebalance their interests and to make certain claims upon
other groups in the society. Consolidation of the group interest could
be a key factor for the future public policy. Contending force of the
group interest is capable to reshape the government policy in it fa-
vour. In opposite, the fragmentation of the group interests, will allow
more “elite driven” policy.
On this stage of study we could identify three main group of in-
terest – Army, national defence industry and trading (importing and
exporting) companies. To these core players we could add also the
mixture group of scientific, academic, or “knowledge driven” organi-
10
Dye, T. R, Understanding Public Policy, N J, Prentice Hall, Englewood Cliffs, 1972.
zations, which could play not now, but in future, a separate role for
the policy. All these groups have clear declared interests. They are the
requested side of the political process.
The Army needs more resources to reach its force goals for to
take a promised and deserving place of allied partners. If we lift of a
corner of the curtain we will see comprehensible struggle between
Land, Air Force, and Navy for to receive a bigger portion of the
budget. In this respect no convincing defence economic analysis, nei-
ther external consultations is enough. Well grounded strategy trans-
lated to the clear force priorities and relevant plans and programs is
only solution. At present developed and implemented system ISDRM11
is not guaranteed the rational strategic decisions for resource alloca-
tion, because of discrepancy between system’s and political decisions.
The only exit from this situation is acceptance of parliamentarian ap-
proval of the plans and direct parliamentarian control of their execu-
tion.
National defence industrial companies allied into an Association
of Bulgarian Defence Industry (ABDI) clear declared their common
interest. They insist on acceptance of protective policy, which enlist
number of measures for support of restoration of the companies. Be-
tween the requirements are guarantees for 40 % from external pur-
chases of the armament12 through offset contracts, lightening of the
export control and public procurement procedures and others. A year
and half from the national forum with participation of the Prime Min-
ister Stanishev these proposals are not applied into practice. The only
result of these requests is acceptance of a new regulation for offset
deals. It tries to reshape the focus of the approved contract by chang-
ing the proportion between direct (for armament) and indirect (for de-
fence industry and civilian products) offset. From 100 % direct offset
in the past the government accepted 40 % direct and 60 % indirect off-
11
Георгиев, В., Програмно и проектно управление в отбраната и въоръжените сили,
Изд. “Авангард Прима”, С., 2007.
12
Предварителни материaли и изводи от форума “Политика за развитие на
българската отбранителна индустрия в съвременните условия”, МО, ГЩ на БА,
Сдружение БОИ, 20 февруари 2006.
set for every modernization project. The collection of the potential

projects has been done. The only result of that change is slowing down
the offset deals and likely their potential blockade. It become more
and more clear that the decision of the situation needs development of
New Concept for DIB, which have to declare liberal approach in de-
fence industrial development, based on large implementation of PPP,
Private Finance Initiatives, and enforced industrial cooperation with
leading international and global companies. The focus of such concept
has to be a building up of the effective democratic and uncorrupted
administration of the defence industrial policy.
The capacity of the countries to declare and manage modern de-
fence R&D innovative policy is a precondition for competitiveness and
security of the country. The New Concept for national DIB could be a
part of the New Security Strategy of the country. The Concept have to
build a fundament for the new policy and identify and declare the ba-
sic processes, involved administrative bodies, program instruments
and infrastructures, which could frame the new defence industrial and
innovative policy.
R&D Capability and Transitional Politics

In most of developed countries R&D activities are seen as of one
of the foundations for capabilities of national defence. Their results
are a high performance of defence systems and weapons, which pro-
vides technological advantage for the forces. It is well known that the
big national and transnational corporations are the biggest player in
R&D activities and knowledge management in defence. They invest a
bigger part of resources in arms innovation and are partially sup-
ported by the governments13. Lack of such resources, activities and
advantages for underdeveloped countries, which have to rely on na-
tional and small or even medium size companies means bigger de-
pendency from the global market. So, maintaining of an acceptable
13
According to Science and Engineering Indicators, May 2006, Vol. 1, p. 4-59. UNC-
TAD. World Investment Report 2005, Op. cit., p. 123 transnational companies have
been executed 4/5 from the all industrial research in the USA.
technological backwardness becomes a traditional instrumental objec-

tive of the state and the business. It requires continuing investment in
R&D to produce state-of-art capacity. But the case of transitional
countries is different. R&D policy in those countries is function of the
defence industrial policies (declared or undeclared, liberal or illiberal)
and available resources for their implementation. Analysis of these
policies is quite complicated work. It is possible to use different re-
search approaches and thesis. Here we could launch a thesis and
try to argue that national R&D policy and its defence R&D
part depends from the accepted and implemented political
and economic transitional model of the country. The key fac-
tor will be the globalization of the R&D in defence and spe-
cially the cooperation between national and international
and global companies. And because of instability of the model
some cultural characteristics defines a predictable tenden-
cies, frames and space for changes.
Dynamics of Defence and Civilian R&D Budgets

in 1990-2006
The period 1990-1999 is characterized by the shrinking size of the
national R&D budget in the shape of the GDP of the country (Table 1).
In 1991 expenditures for R&D decreases two times in relation to 1989
and they become 1.3% from GDP. The national budget covers 0.46% in
comparison with 1.0% in 1989. The tendency for two-time reduction of
the expenditures has been saved for the next four year. The share of the
state budget has been stable – a half from the allocated resources. The
economic crises accompanying the transitional period has bringing to
the decline in expenditures, and state R&D budget.
The whole period shows the drift to the little not stable reduction
of the defence budget as a part of GDP. The variations depend on the
separate defence policies of the changing governments.
On contrary there shows a sharp tendency for reduction of de-
fence R&D in the same period. The resources for R&D in year 2000
are symbolic.
Table 1
Civilian R&D Defence Defence R&D
Year Expenditures in GDP Budget in GDP In Defence
(%) Plan/Execution (%) Plan/Execution Budget (%)
1989 2.50 /1.00
1990 3.56 1.40
1991 1.30 /0.46 3.27
1992 2.83
1993 2.71
1994 2.32 1.70
1995 0.60 /0.30 2.89 1.90
1996 /0.20 2.30
1997 /0.19 2.40
1998 /0.18 2.60
1999 /0.19 2.80/2.92 0.50
2000 2.88/2.43 0.40
2001 /2.55 0.33
2002 /2.57 0.21
2003 0.21
2004 0.25
2005 0.25
2006 0.25
Sources: 1. Economic Policy in the Currency Board Conditions, Economic Institute
of the Bulgarian Academy of Science, Fridrich Ebert Stiftung, Sofia,
1997, p. 145,146.
2. Budget Laws 1990-2000, State newspaper, Sofia, 1990-2000.
3. Defence Expenditures and Economic Development, PH “Stopanstvo”,
Sofia, 2006.
The last 16 years of national practice demonstrated how difficult is

to allocate the appropriate portion of the state budget and company re-
sources for civilian and defence R&D. Since the beginning of 90-es and
reduction of the productive capabilities of defence industry follows a de-
crease of company’s R&D personnel. The most of the companies has been
privatized and because of lack of resources they have lost also their R&D
capacity. An outsourcing of extremely reduced R&D activities that use to
be executed in the shape of MoD and state owned companies has been
undertaken. Since 1998 and after liquidation of its own research insti-
tutes, MoD has relay on the outside mostly academic capability. It would
not be a big problem, if the expenditures for defence R&D have been not
reduced to the insufficient 0.25 % from the defence budget. This figures
approved acceptance of liberal model for Defence R&D policy, which
transfers state R&D expenditures to the productive companies, and rely-
ing on the import for the modernization of the arms.
Employment in Defence R&D

In the beginning of 1999 MoD have at its disposal five R&D organiza-
tions with about 500 people. In accordance with the first stage of the re-
form of the Defence and with Decision No 553/30.07.1999 of the Ministe-
rial Council all organizations have been consolidated in one organization,
named Institute for Advanced Defence Studies. The Institute has been re-
directed from accompanying the material research projects to support of
Defence Policy. With the Cabinet’s decision (from October 1999) for re-
duction of research staff the capability of Defence to lead independent ma-
terial research projects have decreased critically. There were plans R&D to
be carried on by the external civilian organizations. In the same time,
MoD has decided to save its capacity to conduct control works, partially
Test Centres and firing grounds. Subordinated to the Supply Agency of
the MoD, they have personnel not more hundred people14.
The Defence Industrial Organizations are keeping a minimal capa-
bility for carrying out mostly technological support of the production. The
only existing in the end of 90-s two specialized R&D organizations: NITI-
Kazanzyk for mechanical and “Electronprogres”-Sofia for R&D studies in
electronics have been transformed. NITI has become a productive small
company, later liquidated. “Electronprogress” after privatization saved
its innovative profile mostly for C3 systems. Only the bigger, like “Arse-
nal” (Kazanlyk), “Arkus” (Liaskovez), VMZ (Sopot) and medium size
companies - “Cherno More” (Varna), OPTICS (Panagurishte) have saved
small R&D bodies for product innovation. All the companies preserved
about 250 people for technological support and innovation of the produc-
14
Plan for organizational building-up of the Ministry of Defence to the 2004, MoD,
1999.
tion, which is around 1% of the available personnel.

Out of these shape rests the R&D capacity of the existing aca-
demic research (Institute for Metalwork, Institute for Space Research,
Institute for Parallel Processing, Centre for National Security and De-
fence Studies of the Bulgarian Academy of Science (BAS)), and re-
search and educational university bodies.
These data show the dramatic decrease of R&D personnel and de-
fence innovative capability of the country. The change of this situa-
tion will depend more from the activity of private companies, than the
government policy.
Organization of Defence R&D

In the Cold War and transitional period Defence R&D works have
been implemented according the Military standard, which was com-
mon for all Warsaw Pact countries. The main principal for organiza-
tional support of that standard was direct control and financing of the
R&D from the state (through the Ministry of Education, Science and
Technology, MoD and other state organizations). Scientific technical
body of the MoD prepares and controls the Plan for scientific technical
support of the Defence. The Ministry of Economy and Ministry of In-
dustry with their Agencies ordered the state companies to fulfil the
Plan. The resources were guaranteed by the State. In the 80-s has
been established a State fund for Structural and Technological Policy.
The Fund started competitive financing of defence projects. In 90-s
Fund is moved from the Ministry of Industry to the Ministry of Edu-
cation, Science and Technology15. By this change MoD receives only
adopting role in the R&D process. Since the beginning of 90-s the de-
fence expenditure have been reduced sharply and has been put the
end of the centralized state financing of defence R&D. The only insuf-
ficient state resources for defence R&D comes from defence budget
and were directed more to the support of defence operational capabili-
ties, than to the defence products development. Now and the future
15
Science-technologic potential and technologic development of Bulgaria, MoEST,
Sofia, 1996.
MoD have to rely on the external national (academic and private), and
international organizations for to execution of the key R&D projects.
State Policy (Dual-use Technologies, Privatization,

Civil-military Integration, National Champions and
Science-Industry Mergers)
In the beginning of 90-es transitional defence R&D State policy
has two main lines. The first one covers the trade control of the ar-
mament and dual-use goods and technologies. The second includes the
reorganization and privatization of the state defence industrial com-
panies. Situational in the past the Government was enforced to sup-
port financially the national defence industrial champions. This often
happens on the eve of the elections.
On the 8 November 1995 National Assembly accept the Law for
control of the external trade with weapon and dual-use goods and
technologies16. According to the law a right for trade has only Trade
Company, which has more than 50% Bulgarian participation. Those
companies have to receive two limited in the time licenses - one for
trading and second for every separate deal. Specialized council near to
the ministerial Council, managed by the Deputy Prime Minister, is
giving the licensees for trade. A Commission for control and permis-
sion of external deals with weapon and dual-use goods and technolo-
gies of the Ministry of Trade (later Ministry of Economy and Energy)
is giving the second licensees.
After big delay, the privatization as a second policy line reached
its objectives. Two third from all about 24 big state defence companies
were sold. The only existing problem is so cold “worker’s-managerial”
stile of privatization. The lack of strategic investors and capital insuf-
ficiency of defence industries raises new risks. The future transforma-
tion is a big challenge for new owners. Important feature is that the
government is not saved the key part or the R&D companies. They
were fully privatized, and practically liquidated as R&D companies.
16
Law for control of the external trade with weapon and dual-use goods and technolo-
gies, State newspaper, No 102, 21 November 1995.
Barriers to Conversion
The not successful trials for conversion have started in the middle
of the 80-s. On this time the state has not enough resources to trans-
form efficiently the militarized structure of the national economy. In
the transitional period such resources absented at all. Obligatory con-
dition for conversion becomes the privatization of the companies. Or-
ganizational restructuring was a precondition for the successful priva-
tization. This way looking for the relevant organizational fragmenta-
tion of the inherited big companies and political will for privatization
have been the biggest barriers to conversion. Now, when more than
two third of the companies are sold, the quality of the privatization is
the biggest challenge to conversion. The difficulties arise from the
“workers-managerial” manner of privatization of the companies. The
new owners also have not resources to invest in civil production and
to convert old military product portfolios and technologies. The state
budget has no resources to finance R&D works and to help companies
to convert their products. Before the privatization there were not suc-
cessful cases for defence conversion. Nevertheless one of the two pri-
vatized old defence R&D companies has managed to survive diversify-
ing its activities towards C3 development activities into defence and
civilian area. After the privatization shrinking and conversion hap-
pened simultaneously. The defence industrial sector shrinks 6 times
and military production shifts from 90 to 25 % from the output. On
practice it happened not state driven but market orientated structural
adaptation of the production. Only worrying fact is that adaptation
doesn’t include satisfying innovation of defence product portfolio.
Defence Mergers and International Arms Industry

Cooperation
In contrast to the reshaping of the defence industries of US and
EU first half of 2000-s is a period not for consolidation, but for decen-
tralization of defence industrial base. Privatization has stimulated
fragmentation of the sector. New established private companies fo-
cused their attention to the stabilization of their traditional produc-
tion. The process has enforced a sharp increase of trade companies,

which accepted the mission to be mediators between productive com-
panies and buyers. Now in the middle of 2007 their number is around
160 licensed traders. Government has left the defence industry to his
own destiny and cut off its managerial control to the companies. Rapid
fragmentation is changing Bulgarian defence industrial base dramati-
cally. On practice it is a clear process of commercialization in the de-
fence sector, which is something new for last 50 years of national his-
tory. The issue is that implications of this new industry structure ten-
dency remain largely unexamined and unpredictable. The main ques-
tion is whether it will increase competitiveness of the companies, or
will decrease it. It is likely that despite of the effort of the companies
to promote commercialization, political and technological trends actu-
ally are moving in the opposite direction.
Alternatives for the Defence Industry Transformation

Policy
The R&D context and basses of the defence industry transforma-
tion policy is unfavourable. We mentioned the not declared character
of the existing policy. The lack of transparency of this policy is not a
result of any kind of secrecy, but from its underdevelopment. From
this point of view the first dimension of the alternative approach is to
make it more open and transparent than it is now. The second dimen-
sion is increasing of involvement of the public authorities in declara-
tion and execution of the policy. It could be realized by firm law regu-
lations, parliamentarian mandates and executive activities and deci-
sions for developing, promoting and implementing defence industrial
policy. The country needs a clear Concept and Strategy for develop-
ment of market oriented DIB. They have to include strong identifica-
tion of the policy priorities that meet current national defence and
emergency preparedness requirements with minimum disruption of
market and commercial activities. The rapid industrial response, high
competitiveness and best value for the taxpayers have to be a basic
criterion for implementation of the policy. Between all important pol-
icy lines as: production licensing, arm and dual use trade control, na-
tional reserve stockpiling; emergency preparedness, national and

NATO standardization and certification, strategic defence and force
planning, acquisition and public defence tendering, offset and PPP re-
ports the R&D policy has its key position. The basic of this policy is
Defence Industrial Capabilities and Technological Assessments of the
DIB. Absence of such priority and activity, and accompanying defence
industry specific surveys will means absence of the essential data for
directing future actions.
The separate dimension of the policy is the re-evaluation of spe-
cific government commitments to policy execution. A number of facts
for insufficiency in involvement, and coordination deficits between au-
thorities have been demonstrated in the past in respect of some of the
partial policies (national reserves stockpiling, offset tendering and
others). Obviously a new arrangement for provision of the policies is
needed. The Ministry of Economy and Energy have to take its bigger
portion of activities and in coordination with MoD and other minis-
tries have to accept a program manner of management for its mission
and objectives. Existing Interdepartmental Council on the Issues of
the Military Industrial Complex and the Mobilization readiness of the
Country will be better to be transformed as a centre for strategic gov-
ernance of the interaction between DIB, Defence and other security
providing ministries. The integrated activity for R&D policy could be a
responsibility of the Council. These and other requirements could be
subject of discussion and decision in the process of development of
New Security Strategy of the country.
Conclusion
The decline of national defence spending after the Cold War pre-
dates the shrinking of defence industrial base in transitional period of
country. The lack of budget resources has broken the relation between
national producers and defence. NATO participation has raised new
transformational goals of the national defence. The efforts have been
directed for increasing of the operational capabilities of the forces. The
limited national resources have been redirected for modernization of
arms and direct supply from external producers. The existing situation
will hold back the transformation of the national industrial base.

The period of market transition of the country imposes reappraisal
on the common approach and the state policy related to the development
of Bulgarian civilian and defence R&D. Conducted important social-
economical changes have diverted attention from the R&D and have di-
rected it to the more critical problems. Now it is a time to re-evaluate
the results, and effects of the real R&D policy on the common life.
Some main policy lines could be helpful for the restoration of the
interaction between government and companies, and enforcing of the
national R&D activities.
First one is related to the involvement of the National Assembly in
approval of the arms modernization plan
The parliamentary approval of the Arm Modernization plan is a
key point in parliamentary oversight of the national security sector.
Acceptance of advanced practices for reviewing and approval of the
major arms procurement projects is giving a base for building up an
interaction between Army and DIB.
The second line affects the development of defence acquisition
system of the country.
The development of national defence acquisition system is a real
intellectual and practical challenge of the defence policy and admini-
stration. It has to be accepted clearly that only prospective policy line
is to integrate national R&D into NATO and EU R&D cooperation
(CNAG, NIAG, NC3B, SNLS, RTO, EDA and so on). It is possible only
with well balanced acquisition system which includes proper working
identification of the required operational capabilities, well specified
list of required equipment, compatible model and relevant process for
management of the R&D activities, and at last, really competitive pro-
cedures for tenders and attraction of innovative direct investments.
The measure of last one is development of PPP based on Private Fi-
nancial Investment for Defence Industry.
The acceptance of the New Allies’ Integrated Concept and Model

for management of defence R&D could be a separate policy line
The key point of innovative transformation of Bulgarian Defence
Industrial Base is its R&D capability to transfer a modern defence and
civilian products and technologies. The country needs national and de-
fence R&D policy which could relate state and private interests on the
base of liberal public private partnership directed to increasing of op-
erational capabilities of the forces. Special point in this policy direc-
tion is decision for increasing of the resources for defence R&D activi-
ties from 0.25 to 1.0 % in 5 years period.
Other line is directed to the enforcement of the international
cooperation of the companies
There are a variety of political tools for to support international
industry cooperation between national producers and leading compa-
nies. At present government chose offset deals, as a main instrument
for that. The practice shows that half direct offset is not effective in-
strument for development of productive capability of the country. It is
not a market, but political instrument, which costs a lots and more of
that bears corruption. More relevant instrument is to reorganize and
activate national presentation in NATO and EU coordinative struc-
tures for defence industrial cooperation. The better organized system
will give opportunity for direct contacts of companies and research
bodies to the leading arms producers. It will promote innovative be-
haviour and new competitive cooperative projects.
These and other policy lines could be included into New Concept
for DIB and to become a part from the New Security Strategy of the
country.
POTENTIAL IMPACTS OF NEW EU MARKET

REGULATIONS ON THE MANAGEMENT OF SECURITY
RELATED R&D IN SUPPORT OF DEFENCE INDUSTRIAL
TRANSFORMATION
Dr. Heinrich Buch

NATO - country Project Director
The Commission of the European Union intends to edit a new Di-

rective on defence procurement, which – in my view - will, or at least
in all probability will, have some impact on the defence industry tran-
sition in Europe, which develops in parallel to the topic of our project.
In its preparatory activities for its planned Directive the EU

Commission tasked a market study on the impact of a potential Direc-
tive on the European defence market and different subjects of this
market. The study was conducted by a Belgian contractor with a
German subcontractor, where I was a member of the study team
throughout all phases of the study. I also would like to mention that a
Bulgarian company „Transconfection”, which produces military cloth-
ing and combat equipment, participated upon request in the final in-
terview phase, and its general manager, Mr. Roland Tougayère, made
a good entry. He was forthcoming and responsive. All interview an-
swers and findings were submitted to the European Union's Director-
ate General for Internal Market and Services.
Certainly, I am not in a position to give you any details, which
would disclose the study, but I think that you should have some in-
formation about where our European market is going to go in our
field of interest. The development of the market will be a part of the
defence industrial transformation in our three partner countries,
whom we want to assist with our SfP-project.
Background
Defence markets cover a broad spectrum of products, ranging
from non-war material, such as office material and catering, to
weapon systems and highly sensitive material, such as encryption
equipment or NBC-protection equipment. The sensitivity of defence
equipment for the security interests of Member States can vary, de-
pending on political and military circumstances. In general, however,
its sensitivity is proportional to its technological complexity and stra-
tegic importance.
According to existing EU law, Directive 2004/18/EC for public
procurement of goods, works and services (the 'Public Procurement
Directive') applies to public contracts awarded by contracting authori-
ties in the field of defence, subject to Article 296 TEC (Treaty on the
European Community). According to paragraph 1 of that Article: “(a)
no Member State shall be obliged to supply information the disclosure
of which it considers contrary to the essential interests of its security;
(b) any Member State may take such measures as it considers neces-
sary for the protection of the essential interests of its security, which
are connected with the production or trade of arms, munitions and
war material; such measures shall not adversely affect the conditions
of competition in the common market regarding products, which are
not intended for specifically military purposes.“
So Article 296 TEC allows Member States to derogate from
Community rules for the procurement of arms, munitions and war
material if this is necessary for the protection of essential security in-
terests of a Member State. In addition, an Interpretative Communica-
tion, adopted by the EU Commission in December 2006, made it clear,
that in accordance with the case-law of the European Court of Justice,
derogation from the Treaty under Article 296 should be circumscribed
to exceptional cases.
However, this may be difficult because current Community Law
applicable to the procurement of defence products (Directive
2004/18/EC, the Public Procurement Directive) is often deemed ill-
suited to the procurement of „arms, munitions and war material“. As
a consequence, Member States have used Article 296 TEC extensively,
and that resulted in a fragmentation of the European defence market

along national lines.
It is commonly recognized, that the high level of fragmentation of
the defence market has hampered the efficiency of procurement proc-
esses and the functioning of the Internal Market. This, in turn, re-
duces competition, and finally, the choice of the procuring agency,
which may ultimately lead to reduced value for money.
As an example, we can analyze, that EU Member States individu-
ally spend overall about one third of the United States for defence, but
due to the defence industrial fragmentation they get only about 10%
of the comparable results – even less so in R&D.
In order to assess the impact of a potential new Directive on de-
fence procurement outside the scope of Article 296 TEC, the relevant
market segments were identified, i.e. defence products not concerning
essential security interests. Within this market segment, case studies
have been made to measure potential impacts on different aspects of
the market: on sales, on production costs, on prices, on the consolida-
tion of companies in a specific market segment and on competitive-
ness.
Research
Four main tasks had to be carried out:
1. Classification of defence equipment; the purpose was to iden-
tify the „grey zone“ where Article 296 TEC may or may not apply.
2. Matching product families with the procurement practices of
Member States;
3. Identification of products to which a defence-specific Directive
could possibly apply;
4. Evaluation of potential cost savings.
The end results of each of the four tasks were:
1. An operational classification for the purpose of the research,
where I was in the lead. It is based on existing classifications, but is
adapted to the specific requirements and the chosen approach. It is
important to note, that it includes services and works. The classifica-
tion covers well above 90% of the total defence procurement items.
Defence equipment has been examined in terms of „products“,
which means: goods, services and works. It is important to note that,
for the purpose of the research, „goods“ means complete systems of
products, i.e. product „types“, including specific maintenance, train-
ing and infrastructure. The focus was thus on the highest levels of the
supply chain and covers sub-systems and components only indirectly.
This limitation was considered unavoidable in order to reduce the
complexity and keep the research operational.
2. The second result was a definition of the „grey zone“, which is
considered as that market segment, where a new defence-specific Di-
rective could mainly impact. The basis for this task was a question-
naire, which was sent out to all Member States in November 2006. In
December 19 of the then still 25 Member States have contributed.
Three types of procurement practices were identified, which de-
lineate three „zones“ for products:
− a „white zone“, where Member States normally use the Commu-
nity Directive for their defence procurement, i.e. competition and
publication in the official journal of the EU (OJEU);
− a „black zone“, where Member states normally use the derogation
from the Treaty under Article 296 TEC and procure defence
products from a single supplier without competition;
− a „grey zone“, where Member States resort to derogation under
Article 296 TEC, yet procure defence products in competition. In
this zone a new Defence Directive could have an impact and could
make exemption no longer necessary.
3. The third result was a sample of products – goods, services and
works – which are representative for the grey zone, and the identifica-
tion of their producers, where the focus was not only on the main
suppliers but also on the smaller companies in the EU.
One of the difficulties encountered here was an objective defini-
tion of „grey“, because what is „black“ in one country can be „white“
in another. Innovation cycles and permanent movement in the sector
added to this difficulty.
4. The fourth result were questionnaire - based interviews face-

to-face and via phone for a sample of different products from different
suppliers within the chosen sample. The results from the interviews
were analyzed and forwarded to the commission.
Of the total sample, 50% have a positive attitude and expect posi-
tive impacts from a Directive which addresses defence procurement,
one fourth are indifferent and one fourth have a rather negative atti-
tude. In this respect neither the size nor the sectors in which the
companies are active are apparently a major factor. The positive or
negative attitudes are linked to the company's strategy: If it is a po-
tentially offensive strategy, which looks for market opportunities, the
attitude will be positive as the company sees the Directive as an op-
portunity to open up markets that are now closed. If it is a defensive
strategy the company will be against as it will fear more competition
in its present market. Remarkable, in my view, were fierce attacks by
one manager against any move of the EC, because he wanted to pro-
tect his turf.
„Positive“ impacts are expected for:
− 14 out of 20 products in the „sales“ sector;
− 6 out of 20 products on the production costs,
− 9 out of 20 products on prize levels (going down);
− 3 out of 20 products on consolidation (indicating industrial con-
centration within the EC)
− 7 out of 20 on competitiveness of their company.
− Potential negative impacts on the level of products are marginal.
If publication of procurement decisions with demands for bids
and a negotiated procedure were part of the new Directive this would
be welcomed by many companies, as this would increase transparency
and market openness.
Arguments
Two major points of scepticism were raised:
− The Commission's „public procurement Directive“ of 2006 and
the European Defence Agency's „code of conduct“ already follow
the same approach;

− Publication and negotiated procedure as such are not sufficient.
There are other barriers for the European defence market that
need to be broken down.
Industry, however, would welcome these two aspects as part of a
new Directive, because they consider that it would be better to have
one common legal base throughout the EU. Even if opinions are
mixed with respect to the Code of Conduct of the EDA, which works
on a voluntary basis and faces some scepticism, a new Directive of the
Commission would be considered as a step forward on both aspects.
A potential limitation of offsets to military offsets is that aspect of
a new Directive that is generating most positive comments from com-
panies, who have a positive attitude to more competition.
Offsets are considered to have more negative effects than positive
effects, and it is considered, that , if the Directive can succeed in limit-
ing the use of offsets, this would be beneficial mainly on the level of
prizes. Offsets are considered to add to the cost and to be inefficient.
Offsets are considered by some companies to be more beneficial to
non-EU suppliers than to EU suppliers. If this assessment is correct, an-
other impact of the Directive would mean, that EU suppliers would bene-
fit more than non-EU suppliers of this change in market conditions.
However, a very small number of EU suppliers consider this fea-
ture as potentially very damaging to EU defence industries.
It is worth mentioning that suppliers contacted in this research
had some difficulties to estimate the impact of a Directive on their
product, their market segment and the defence market as a whole.
The main reasons for this are:
− defence-specific difficulties for any market-forecasts;
− the difficulty to forecast the behaviour of customers vis-à-vis a
new Directive, i.e. to which degree national awarding authorities
will actually apply the new EC rules;
− the difficulty to separate a purely regulatory aspect from all other
trends in the market;
− the very limited information available with respect to the actual
contents of a Directive.
Finally, out of quite a set of wishes discussed by the contacted in-

dustrial suppliers, I will just mention two, which are of interest for
our own project:
1. Attention to R&D and product development.
In the sectors where specific defence technologies are needed, the
general opinion is, that industry cannot take the investment nor the
risks associated with the development costs of systems that are tai-
lored to the needs of the military – only. This is explained by many
factors like the non-recurring costs involved, the specificity of use, the
restriction to sell to third parties and the volatility of governmental
decisions.
2. Security of supply and security of information.
For certain types of „sensitive“ products Member States should
be able to find in the Directive the adequate means to guarantee their
security of supply and information. The defence market is a regulated
market, whereby export licenses are necessary. As long as these na-
tional regulatory systems are not replaced by an EU-wide system, this
aspect will remain critical. Security of supply will continue to form the
basis for Member States to use Article 296 TEC, the derogation
clause.
My personal view is that in the defence sector we not only need a
better European market, but also coordinated R&D-policies, which we
are still missing. The efforts of the European Defence Agency in this
respect are noteworthy and deserve applause. But up to now EDA had
no funds for projects, which could make their convincing arguments
economically attractive. In the EU's new budget plans, however, EDA
will have funds, quite substantial funds by the way, which will make
EDA projects attractive for Member States and for suppliers.
But we still have no coordinated R&D policies – not even between
a few Member States.
Appeal to participants
If the co-directors in our project and relevant representatives
could manage to convince the authorities in the three partner coun-
tries to coordinate their R&D policies and projects this could become a
major step forward. Even without being able to put own money on the
table the partner countries could substantially improve their position
in competing for EU funds and their competitive position within the
European defence market – especially in the qualitative segments.
At the same time partner nations with coordinated R&D would
put themselves into the position to identify specific individual courses
of action with substantiated background.
In summing up my message is clear: we will have a new EU Di-
rective on defence procurement and we need coordinated R&D poli-
cies.
JOINT TECHNOLOGICAL INITIATIVES TOWARD THE

GLOBAL SIZE OF FUTURE DEFENCE INDUSTRY

Politehnica University of Bucharest, Romania
Assoc. Prof. Iulian Fota, Ph.D.

Project Co-Director
Director of National Defence College
of National Defence University of Bucharest, Romania
Globalization: an “Emerging” Reality

The world is going global. Emerging countries – China, India,
and Brazil, Russia among others – are becoming major competitors for
industry, services and agriculture. This is an opportunity and a chal-
lenge for all of us. Yet European economic growth, despite the recent
increase, remains low in countries like Germany, France and Italy,
losing the drive that made them some of the world’s most dynamic
countries. Growth rates in Europe pale in comparison to emerging
country growth rates (China, India, and Russia), which are considered
the high growth markets of the future.
To what extent are these countries, competing on an equal foot-
ing?
In other words, do we all play by the same rules?
As companies from the emerging countries begin to make their
mark on the global stage, Indian, Chinese and Russian companies are
expanding through mergers and acquisitions in the EU and the US.
But these countries also need to play a bigger role in making and en-
forcing multilateral rules.
Multilateral institutions like the WTO, the IMF or the World
Bank need to adapt to the rise of the emerging countries – so that we
can continue to develop multilateral rules for the benefit of all. The
participation of India, China and Brazil (and soon Russia) in the WTO
reflects this global rebalancing. However, global cooperation could be
improved further through a greater recognition of the role of emerging
countries in the global economy and by having the emerging countries
take on greater shared responsibilities for the management of the
global economy.
Multilateral (WTO) Trade Negotiations

WTO Multilateral trade and investment rules17 are vital to estab-
lish fair conditions under which companies can compete on the global
market. Yet, as the WTO Doha Development Agenda negotiations
showed, it is extremely difficult for developed and emerging countries
to come to terms in multilateral negotiations. There are major differ-
ences of views over agriculture, industry and services liberalization.
To reconcile these views, all major players will have to make a signifi-
cant contribution to trade liberalization. But are the main players:
EU, US, India, China, and Brazil ready?
Russia is the last of the big economic powers aiming to join the
WTO. Following a bilateral agreement with the US, Russia could join
by the end of 2007 or early 2008. Supporters of Russia’s accession be-
lieve that Russia can play a key role in the organization in support of
stronger multilateral trade rules and that Russia could benefit from
an investment boom in industrial and services sectors (like
China/India). Sceptics question whether Russia is ready to face tough
international competition and to contribute constructively to WTO
negotiations.
International Cooperation on the Environment

There is no doubt in anyone’s mind that energy and climate
change are key political and economic issues for the next few years. But
cooperation on these issues is proving elusive. The EU-Russia energy
17
Reform to perform: Europe is our Business , European Business Summit , 16 March
2006
dialogue has not achieved its objectives (security of supply and secu-
rity of markets) to the disappointment of both sides. There are also
growing concerns that resource-holder countries are aiming to estab-
lish cartels in the near future to push up the price of energy. Mean-
while, consuming countries are starting to compete for access to en-
ergy resources in non-traditional ways.
Similarly, the international negotiations on climate change (Post-
2012) have not led to a major breakthrough on how each emitting
country will make their tangible contribution on this issue.
European companies have learned to reduce energy consumption
and to adapt to strict EU environmental rules over the past two dec-
ades. Now the focus should be on developing more innovative ap-
proaches to environmental regulations – which sets clear objectives,
but that allows companies the flexibility on the means of reaching
them. Recently, proposals have been made to negotiate an interna-
tional agreement on energy efficiency between major consumers such
as the EU, US, India, China, Japan and Russia.
Globalization and Domestic Reforms

Globalization must serve as a lever for adapting domestic policies
to new competitive pressures. We cannot blame globalization for the
problems generated by inappropriate policies. The EU has suffered for
years with an incredibly high unemployment rate – which is sapping
the willingness to adopt reforms and to take risks. Rather than blam-
ing the EU or globalization, countries with high unemployment rates
can look at the European models to put people back to work in Den-
mark or the UK. The key issue is whether or not they can sustain
strong economic growth with social reforms to share the wealth
among their population. Business has the leading role to play in job
creation – but it needs to be able to operate under the right conditions
to create new and better jobs in a globally competitive environment.
Europe is a Success Story

Since the Treaty of Rome in 1957, the European Union evolved
intensively. From the outside the European project is seen as a suc-
cess story. This is unfortunately not always the case within the EU
notwithstanding the fact that the positive results of the European
construction are obvious:
• Europe has set up a unique framework which facilitates cross-
border activities. The four freedoms laid down in the Rome
Treaty (freedom of goods, services, people and capital) and the
single market, resulting from the Single Act in 1986 led to con-
crete successes. Between 1993 and 2002, approximately 10% of
the annual growth was generated by the internal market. For in-
dividuals, it implies the right to live, work or study in another EU
country. For consumers, it offers a wider choice of quality prod-
ucts and services at lower prices. For business, it means operating
on a common set of rules and having access to a domestic market
of 500 million consumers. For Defence Industries across EU, it
means the urge of reshaping and updating technologies.
• The business world also takes benefit from the liberalization
process currently underway in the network industries (e.g. trans-
port, telecommunications) and from the various Community pro-
grams aiming at fostering industrial and economic activity, such
as the framework programs supporting investment and R&D.
• The EU has brought peace, political stability and legal certainty
and created major trade and investment opportunities.
• By introducing the single currency (not yet in all Member States),
the EU guarantees monetary stability, by removing exchange
rates and keeping inflation and interest rates low. As a result,
prices remained stable for citizens and companies alike.
• Finally, together, the EU Member States are the largest trade
power in the world.
Thanks to Europe and its visionary founders, growth and social-
economic development were created in all the Member States over the
past 50 years. The business world is convinced of the positive scale ef-
fects of the European integration and of the Community approach in

tackling cross-border issues and challenges. But unfortunately these
positive effects of the European construction are not sufficiently un-
derlined.
European Technology Platforms – Developing Lead

Markets?
European Technology Platforms (ETPs) provide stakeholders
(companies, national and EU regulators, researchers, funding organi-
zations, SMEs and end-users) of a certain economic sector with a
chance to define together a medium- and long-term research agenda
for their market. They have been created to align EU research priori-
ties with the priorities of the Lisbon agenda and industry.
Technology Platforms follow three stages of development:
• They agree on a common vision for technological development in
their sector;
• They define a Strategic Research Agenda (medium and long-term)
• They mobilize financial and human resources to implement the
Strategic Research Agenda
• Up to present more than 30 European Technology Platforms have
been created, these should help identify lead markets by specify-
ing what needs to be done in terms of regulation, standardization
and public procurement, but are just one possible approach to
R&D in a global competition.
Joint Technological Initiatives

The other European future ‘mighty tool’ designed to support the
fast evolving R&D environment is Joint Technological Initiative as a
measure of flexible shipshape of the next Innovative Europe.
Presently, European Innovation is commonly held to be lagging
behind in innovation compared to other regions of the world. Eco-
nomic globalization has changed the world economic order, bringing
new opportunities and new challenges.
Despite strong policy focus in Europe on innovation, deficiencies
(in innovative resources and capabilities, in the incentives for innova-

tion and in the interaction between innovation actors) have not been
sufficiently tackled and Europe’s economy has not yet become the
comprehensively innovative economy that it needs to be.
However, Europe has begun to shift toward approaches that ad-
dress the broader qualities required for favourable innovation envi-
ronments in the global economy. A large amount of energy is now fo-
cused on strategic approaches aimed at creating these innovation-
friendly environments where knowledge is converted into innovative
products and services.
Joint Technological Initiatives are among these EU R&D
strategic tools of putting knowledge into practice18. With this the EU
Commission outlined the way to accompany industry-led innovation
with public policies as a core element of the renewed Lisbon strategy
for growth and jobs.
It also attempted to put efforts in a broader context, seeking to
stimulate both the supply and the demand side of innovation. The
Commission viewed this communication as responding to the recom-
mendations of the Aho Report. The communication identified ten pri-
ority areas for action at both the national and the European levels:
education; the European Institute of Technology (EIT); the European
labour market for researchers; knowledge transfer between public re-
search and industry; using cohesion funds policy to drive innovation
in new member states; the rules for state aid for R&D / Tax incen-
tives in favour of R&D; protecting intellectual property; digital prod-
ucts, services and business models; developing innovation friendly
lead markets, and; using procurement as a driver to stimulate innova-
tion.
The clearest result of the Innovation Policy is the integrated In-
novation Policy Initiative outlined at the December Competitiveness
Council meeting. With this initiative the EU Council set a number of
strategic priorities for stimulating innovation at the EU level in a va-
riety of areas:
18
http://ec.europa.eu/enterprise/innovation/doc/com_2006_502_en.pdf, 13th September
2006
• Intellectual Property Rights (IPR);

• Creating a pro-active standard-setting policy;
• Making public procurement work for innovation;
• Launching Joint Technology Initiatives (JTIs);
• Boosting innovation and growth in lead markets;
• Enhancing closer co-operation between higher education, re-
search and business;
• Helping innovation in regions;
• Developing a policy approach to innovation in services and to
non-technological innovation;
• Risk capital markets.
A list of pro-innovation policy actions was established under each
of these headings, and equally importantly, a timetable for these ac-
tions was also outlined for the coming 12 – 16 month period.
Examples of proposed European Joint Technological Ini-
tiatives can fuel other future alike R&D partnership or even enlarge
the presented ones:
A. Clean skies JTI

The proposed 'Clean Skies' Joint Technology Initiative (JTI) for
greener aviation was presented by European Research Commissioner
Janez Potocnik during the International Paris Air Show on 20-th of
June. The goal of the initiative is to improve the environmental per-
formance and competitiveness of Europe's aeronautics industry. Con-
cretely, its objectives are to reduce carbon dioxide (CO2) emissions by
40%, nitrogen oxide (NOx) by 60% and noise by 50%. It is hoped that
these advances will be made in time for a major fleet renewal in 2015.
The project is a public-private partnership, bringing together over
100 organisations including all the major aeronautical players in
Europe as well as SMEs (small to medium sized enterprises), research
centres and universities. The European Commission will provide €800
million in funding from the Seventh Framework Programme (FP7),
and industry is expected to match this amount.
Within the proposed JTI groups called Integrated Technology
Demonstrators (ITDs) will carry out preliminary studies and then

large-scale demonstrations in six key areas in order to develop innova-
tive technologies to the level where they can be applied to the next
generation of aircraft.
The SMART fixed wing aircraft ITD will develop active wing
technologies that sense airflow and adapt their shape as needed, while
the Green Regional Aircraft ITD will focus on low-weight configura-
tions and technologies, as well as the integration of technology devel-
oped in other ITDs.
Developing innovative rotor blades and decreasing airframe drag
are among the priorities for the Green Rotorcraft ITD. Meanwhile,
the Sustainable and Green Engine ITD will work on technologies
aimed at lowering noise levels, decreasing NOx emissions and improv-
ing efficiency.
The Systems for Green Operations ITD will focus on aircraft
equipment and systems architectures, capabilities for 'green' trajecto-
ries and improved ground operations. Finally the Eco-Design ITD will
address the full life cycle of material and components, with an empha-
sis on optimising the use of raw materials, and decreasing the usage of
natural resources and energy.
A technology evaluator will be responsible for assessing the con-
tribution of the six ITDs to the overall environmental objectives of the
project.
The Clean Skies JTI will be overseen by an executive board and
an executive office. The board will be made up of representatives of
the Commission and founding members of the JTI, such as leading
players in the aeronautics industry and research centres.
B. Hydrogen JTI
Some 48 companies involved in the European Hydrogen and Fuel
Cell Technology Platform (HFP) signed a declaration on creating a
Joint Technology Initiative on the eve of the Platform's annual con-
ference.
As JTIs are long-term public-private partnerships intended to
boost technology in specific fields, and will receive funding from the
European Commission and the European Investment Bank (EIB),

only a limited number of JTIs will be created.
The Implementation Plan identifies the total budget for the JTI
to be €6.7 billion for 2007 to 2015, which should be provided by both
the public and private sectors.
According to a statement from the HFP, “This industrial backing
could result in more than €5 billion being invested in hydrogen re-
search over the next 10 years. The statement continues: “The part-
ners anticipate that the level of investment from industry will proba-
bly continue and increase beyond 2016. Subject to ongoing negotia-
tions and the expected overall increase in FP7 budgets, the EC will in-
crease the FP6 investment of €75m/year.”
Priority actions outlined in the Implementation Plan include:
• developing vehicle and infrastructure technologies to kick-start
commercialisation by 2015 or earlier with particular emphasis on
cost reductions and infrastructure build-up;
• supplying 10-20% of hydrogen energy demand with CO2-free or
lean technologies by 2015;
• fuel cells for combined heat and power - having more than 1 gi-
gawatt (GW) capacity in operation by 2015;
• bringing thousands of fuel cell products to the market by 2010
C. Finland’s embedded systems technology program

The Finnish National Technology Agency, Tekes, has launched
new EURO 294 million program on ubiquitous computing, which it
expects will greatly increase its country's contribution to the potential
EU Joint Technology Initiative ARTEMIS.
Dubbed Ubicom - which stands for ubiquitous computing - the
program will develop and pilot technology embedded systems solu-
tions designed to make everyday life easier by functioning inconspicu-
ously in the background. Areas which are likely to benefit from the
new applications include healthcare, entertainment and the environ-
ment.
Tekes expects the program to improve Finland's international
competitiveness by helping the information and communication tech-
nologies (ICT) industry to speed up the commercialization of new

technologies, and increase the level of research carried out in the field.
Strong signals from various sources indicate that Ubicom is be-
coming a strategic technology trend worldwide. For example, Japan
and Korea are implementing a national policy in which Ubicom will
play a central role in the coming years.
Ubiquitous computing or embedded systems have also been cited
as a priority by the European Union. European industry's research in-
vestment in this field is estimated at between €15 and €20 billion per
year. Today nearly 50% of the 100 biggest European companies invest
in embedded systems research, and most of the top 25 European re-
search spenders rely on embedded systems for their products and ser-
vices. To maintain this lead, the European Commission launches of
ARTEMIS (Advanced Research and Technology for Embedded Intelli-
gence and Systems) Joint Technology Initiative that is intended to
promote the coordinated development of embedded information tech-
nology applications across Europe. Finland has already signalled its
support for ARTEMIS, and with the Ubicom program, and Finnish
companies will be better prepared to contribute to and benefit from
participating in the JTI.
D. ENIAC -Nanoelectronics JTI

Nanoelectronics are the subject of the latest Joint Technology Ini-
tiative to be put forward by the European Commission. The new JTI
paves the way for new products and services in a range of areas, in-
cluding consumer electronics, the automotive industry, healthcare and
environmental management.
Called ENIAC (European Nanoelectronics Initiative Advisory
Council), the initiative has a budget of €3 billion, 60% of which is ex-
pected to come from industry, with the remainder coming from the
European Commission and countries involved in the project.
Semiconductor chips are found in many of the products we use in
our daily lives, including mobile phones, televisions, medical devices
and cars. Over the years, advances in technology have enabled the
electronics industry to integrate circuitry into ever smaller silicon
chips. For a long time, these components could be measured in mi-

crons (hence the term 'microelectronics'), but now researchers are able
to create circuits whose features can be measured in nanometres,
leading to the use of the term 'nanoelectronics'.
At these minute scales, substances have different properties. This
means that electronics researchers are faced with the challenge of ex-
ploiting these new properties to create smaller, cheaper and faster de-
vices, while minimizing any unwanted side-effects. Meeting these
challenges will require vast amounts of research to develop new mate-
rials, processes and equipment.
Nanoelectronics are expected to have an impact in many areas of
our lives, as more and more functions are integrated into everyday
products. For example, in an 'intelligent home', nanoelectronic devices
could be used to regulate energy use, while in cars additional built-in
electronics could allow for more assisted driving. In the medical field,
new systems could enable patients to be monitored and even treated
at home. In the environmental management sector, networks of small,
cheap devices could be used to monitor pollution and other environ-
mental risks.
However, for Europe to get ahead in this emerging field, it is vital
that researchers, businesses, small and medium sized enterprises
(SMEs) and other stakeholders work together to pool resources and
work towards common goals. The goal of the JTIs is to make these
large-scale, Europe-wide public-private partnerships easier and to cre-
ate incentives for businesses to fund research and development.
The ENIAC JTI will be run by a Joint Undertaking, the indus-
trial partners being represented by AENEAS, a non-profit association
which is open to industries, businesses, research institutes and asso-
ciations active in the nanoelectronics field.
PROBLEMS OF R&D POLICY IN DEFENCE INDUSTRIAL

TRANSFORMATION

Integration of national defence industries into the NATO Defence

Industrial Base is a vital challenge for the national roles in the context
of common security concepts. The issue needs comparative analyses,
assessment and study of the key factors for the present status and fu-
ture modernization of the national defence industrial capacity. In ad-
dition, the defence industry transition process differs from the strate-
gic framework of the defence transformation. The specific objective of
the transformation needs specific expert knowledge. Lack of expertise
hinders the discussion and public acceptance of this topic.
The main objective of our SfP project is to study and give practi-
cal recommendations for the transformation of security and defence
related R&D management into a more comprehensive and integrated
defence industry system in support of new network enabled capabili-
ties needed in the fight against terrorism and new security threats.
The project is aimed at satisfying a number of economic and social
needs of the security sector transformation. One of the specific objec-
tives is to develop and strengthen the common policy framework of in-
ternationally coordinated R&D policy in the defence industry sector as
a prerequisite for steady economic growth and effective security. The
policy framework has to be accepted politically and based on a stable
relationship between Armed Forces and Defence Industry. It has to be
coordinated with the operational requirements, defence industrial ca-
pabilities and the capacity of R&D management as an instrument for
re-engineering their balance.
The national and regional defence industries are isolated and a
new level of regional cooperation as well as international cooperation

is needed. The R&D, superiority in sectors of technology and intellec-
tual property are important assets of the Defence Industry. Their
management and further improvement are inevitable prerequisites
for future success. The management of R&D activities is comprehen-
sive and has to be steered within a strategic framework which is based
on security needs and economic prospects. Ad-hoc employment state
support has to be reoriented toward a strategy for support and build-
ing of specific R&D advantages. Therefore the setting-up of require-
ments for new R&D activities in the participating nations will be
based on the respective national capabilities assessment and will im-
prove the relations between the nations and between their admini-
stration and business.
The current project will significantly improve cooperation and in-
terdependence in advanced technology sectors. We hope that it will
improve regional security at the level of relevant governmental and
industrial institutions and actors. It will enhance their capabilities
and contribution both within the NATO Defence Industrial Base and
the SEE and Black Sea Region. Besides, bringing together academics,
administrators and practitioners and their collaborative work will en-
hance the confidence and the common understanding of the topic
among countries of the Balkan Region in the very sensitive matters of
Arms Control, Arms Trade and Arms Production.
The successful transformation and coordination of the participat-
ing nations' defence industries and security related R&D – which will
be initiated by this project and is intended to lead to negotiated defini-
tions of areas of further national specialization – will give essential
impulses to the cooperation, modernization and specialization of their
defence industries and R&D. It will strengthen their good political re-
lationship and lead to more politico-military-industrial coordination
and interdependence. It will improve their defence industrial bases
and the prospects for future NATO-interoperable defence postures as
well as increasingly more reliable regional military stability and secu-
rity as a whole. In addition, this NATO-project will bring together and
network relevant specialized personnel – academics, managers and po-
litical decision makers - who will continue this cooperation also after
the expiration of this project.
Management of security related R&D is an area of active research
worldwide. In NATO and in several NATO nations exists a long last-
ing tradition in research on this topic. R&D activities are accepted as
an important element of the defence acquisition system.
It is related with the security policy, and then, at low level, the
defence industrial policy. Many state institutions in Bulgaria are par-
ticipating in the process of formulating of these policies – the Presi-
dent, The National Assembly, the Council of Ministers, ministries,
agencies and committees. Here is the place of many different organi-
zations of defence industry associations, employers and trade unions,
NGOs and local governments. These are extremely broad circle of
complex structures, which gives a hint for coordination of efforts in
this area. In NATO countries this process could be observed very
clearly, as it is accompanied with sufficient information for all inter-
ested parties and for the whole society. Prior to discuss how to use
better our resources, it is necessary to know what are the needs of de-
fence and security in the long run. These needs are contained in a set
of strategic documents as concepts, doctrines, strategies, plans and
programs for modernization, strategic reviews, as well as documents
for reforms and development in narrow sector of security and defence.
Here is not the place and the moment to discuss these documents,
which lay down the strategic needs of security and defence. There are
some specific points, which are indisputable for the Bulgarian experts
and they should be noted – necessity of more often updating of the
whole system of strategic documents; eliminating the closed narrow
institutional approach to their formulation and acceptance; transpar-
ency, openness and public debate during the acceptance procedures;
adequate participation of the National Assembly in these processes,
thus guaranteeing the sustainability of these documents; taking in
consideration the coalition arrangements of Bulgaria in regard to
NATO, EU and bilateral cooperation; and the last but not least, Bul-
garia have to plan such strategic efforts in security and defence, which
are consistent with its real resource potential. The last is simply obvi-
ous in the presence of long standing postponement of already ap-

proved at high level defence modernization projects or their reduction.
Bad planning can not bring us to efficient use of resources. Also the
shortages of the strategic planning reflect to other directions, related
with the implementation of PPP in security and defence.
There are established institutions, regulations and experience on
several activities, normally existing in security related R&D manage-
ment systems in developed countries. However, some other crucial
tasks are not covered by serious written procedures neither there ex-
ists enough experience – such as defence requirements generation,
systems integration and system demonstration.
Usually the realization of defence and security projects takes a
long time for preparation. The ambiguity and/or non-transparency in
regard of strategic security and defence needs of the state excludes a
priori many companies from the acquisition process. It includes the
necessity of knowing the customer and some preliminary work with
him, including permission to work with classified information. If the
companies are not well informed in advance, they would not start
such preliminary investigations and investments with high risk for re-
turn. There are cases of realization of ad hoc supply contracts, not in-
cluded in the strategic documents – for example second hand frigates,
some presents of foreign armaments, which interferes the acquisition
system. It is not a violation of the finance and budget discipline, but
does not provide time for preparation, thus not helping for resource
optimization of the private companies, as well as the available public
resources. There is a necessity of different approach in preparation
and execution of acquisition projects in security and defence. At first
place, we need stable R&D potential, able to embrace the framework
of future acquisition projects, including the opportunities of PPP im-
plementation. The interesting point here is that potential might not
be MoD subordinated, as other independent R&D structures could be
used, with stability in their relations with MoD. At the next place we
need establishment of system of integrated product or project teams,
with certain hierarchy, with specialist from industry and other insti-
tutions. This is related with requirements of implementing of certain
legislation in this field, including more authority, given to the inte-

grated teams, with wider access to information and according training
of these specialists. The next requirement is the necessity of coordi-
nation of these teams in MoD as well as at national level. Possibly it
might be done in specialised structure of Council of Ministers admini-
stration. Establishment of integrated teams at the moment or looking
for specialists and researcher ad hoc usually does not provide good re-
sults. In NATO countries, especially in USA, these processes are well
regulated and with satisfactory end results. As well in these countries
there is a unified approach and regulations in regard of PPP imple-
mentation and this is not only for security and defence, but for other
public sectors. It gives opportunity to use accumulated experience in
different areas and, as a result of this, efficiency.
The following issues have been felt to be crucial to deal with: The
need of delineating on the part of the Government, the strategic ori-
entation of the R&D activity and improving the processes for the
utilization of the R&D activity results; National and international col-
laboration; Further development of working methods and networks
for R&D co-operation; Collaboration between the military and civil de-
fence in terms of joint R&D areas; R&D activity supporting adaptabil-
ity. In a situation with a substantial uncertainty as to what future one
has to deal with, the task of the R&D activity is firstly to create the
most complete possible picture of conceivable future developments,
secondly, to contribute towards developing the different means that is
needed in order to manage alternative developments of events.
This predominantly comprises the military defence R&D activity
and demonstrators for the purpose of indicating future optional lines
of action. An enlarged security concept, internationalization, adapta-
bility and more extensively focusing on the utilization of civil technol-
ogy and civil resources thus constitute some of the basic elements of
the future governmental reorientation.
The participants in the project have sufficient potential for suc-
cessful research.
The Department of National and Regional Security (DNRS) has
accumulated long years lasting experience in research on the project’s
topic. In the early 90-s members of the DNRS took part in research on
Bulgarian defence industry conversion issues.
Defence acquisition is another area of DNRS research. Both gen-
eral aspects and specific issues were covered, among them analysis
and concept for defence acquisition in Bulgaria, public-private part-
nership policy based on private investment activity, methodology for
technical and economic evaluation of armament modernisation pro-
jects.
The Institute for Parallel Processing (IPP) has a leading position
among the scientific institutions in Bulgaria in the fields of computer
science and scientific computations. It performs research, consulta-
tions, projects and high quality education. The activities of IPP are
oriented mainly to the creation and usage of advanced mathematical
and computer technologies. The IPP fundamental results are moti-
vated by the developed new methods, algorithms and software as well
as by introduced advanced information technologies and computer fa-
cilities.
The Romanian National Defence College (NDC) provides general
and specialized training in the field of defence and national security in
the benefit of military and civilian personnel of the national security
system, in the benefit of Romania. Besides the other national higher
education institutions NDC is asked to contribute to the formation of
the future military and civilian leaders responsible for Romania's na-
tional security. In order to fulfil its task, the National Defence College
is closely co-operating with the Supreme Council for the country's de-
fence, specialized committees of the Parliament, the Ministry of For-
eign Affairs, the Ministry of Administration and Interior, the Roma-
nian Intelligence Service, the Foreign Intelligence Service as well as
other ministries' agencies or public and local authorities manifesting
openness for co-operation with the Civil Society.
The European University in Skopje is a pioneer in the area of pri-
vate educational institutions in this country, which reflects a com-
pletely new and different approach towards students and towards the
acquiring of knowledge.
At the beginning of the research on Objective our initial plan for
the project includes a stock taking study of the environment of secu-

rity related R&D. It is based on case-studies on best NATO practices.
The following aspects will be studied:
1. Strategic orientation on defence industrial transformation:
• Lack or presence of strategic documents, devoted to defence in-
dustrial transformation. Such documents could be concepts, doc-
trines, programs, strategies, incl. conversion strategies and plans,
any kind of ‘papers’, ‘books’, reports, where strategic objectives
for development of defence industry are expressed, how they are
accepted, for what period, how they are monitored and discussed,
who is responsible for that.
2. Strategic orientation of the R&D system:
• Lack or presence of strategic documents, devoted to R&D in gen-
eral and R&D in security and defence. Such documents could be
concepts, doctrines, programs, strategies, any kind of ‘papers’,
‘books’, reports, where strategic objectives for development of
R&D are expressed, how they are accepted, for what period, how
they are monitored and discussed, who is responsible for that.
3. Role and place of security related R&D in the national system
of R&D.
• overview of the national R&D potential
• share of security related R&D
• type of security related R&D organizations – private, state, busi-
ness, university, institutes, MoD or government owned, etc.
• Comparison of the situation in the national R&D system
4. Security related R&D potential:
• overview of main research organizations – institutes, centres,
academia, universities, corporations
• R&D personnel;
• R&D security and defence related expenditures (in absolute terms
and as percentage)
• source of funding;
• educational institutions.
5. Role of the state institutions in the formulation and execution

of R&D policy:
• at national level – who is responsible for what;
• in the area of security and defence - who is responsible for what,
who and how is setting priorities for R&D in general and in secu-
rity related R&D.
6. International cooperation in the area of security related R&D:
• participation in international R&D projects;
• participation in EU and NATO funded R&D projects.
7. State support and relations of security R&D in regard of (if
relevant):
• Standardization:
• Codification;
• Metrology;
• quality assurance and quality control;
• certification;
• Preparedness, etc.
8. Perspectives and ideas for change of the R&D policies for the
explored countries.
The transition from defence against invasion into rapid-reaction
defence presupposes adaptability, which in turn builds on future ori-
ented R&D efforts being made for the purpose of facilitating future
changes. Without target-oriented and powerful concentration on R&D
this is not possible.
THE MACEDONIAN DEFENCE MARKET

AND TRANSFORMATION
Mr. Elenior Nikolov

Military Academy “General Mihailo Apostolski” - Skopje
Mr. Mitko Bogdanoski, M.Sc.

Macedonian Army, Land Forces
Mr. Robertino Contev, M.Sc.

Department of Planning and Bilateral Cooperation
Ministry of Defence of the Republic of Macedonia
Mr. Zoran Ivanovski, Ph.D.

Project Co-Director
Faculty of Economy
European University, Skopje
Summary
Macedonia’s accession to the North Atlantic Treaty Organization
(NATO) requires restructuring as well as modernization of the Mace-
donian Armed Forces in compliance with the NATO standards. Along
with the outlined plan for the modernization of the Armed Forces
within a timeframe that spans from 2004-2013 there is also a separate
Strategic Defence Review (SDR). Its main task is to perform a thor-
ough reassessment of the state of the armed forces and to outline the
guidelines for their long-term development in conformity with the
new security environment and the available defence resources.
The upgrading of the communication/information systems will be
one of the main focuses of the campaign, as well as strengthening the
operative capabilities of the deployable forces. The modernization of

the armament/equipment of the Army and Aviation WING, Develop-
ment of Command, Control, Communications, Computers, Intelli-
gence, Surveillance and Reconnaissance Systems (C4ISR) is another
priority.
For the sake of development of the structure and capabilities, de-
fence assumptions should be adopted most urgently, which relate to
operational capability, readiness, scale of effort and concurrency for
operations. The development of the structure of forces and capabili-
ties should be in accordance with the requirements and structure of
forces and capabilities established in this political framework, espe-
cially the priorities, missions of defence and tasks of Macedonian
army. This process is to include planning for the capabilities and
training of the reserve component of the Macedonian army and the ci-
vilian defence.
By the end of 2004, strategy is adopted for the management of de-
fence at all levels of decision making, as well as in the areas that re-
late to personnel (including also education of civilian experts), its pro-
fessionalisation, qualifications, career with equal opportunities for all,
as well as adequate ethnic representation in the Macedonian army,
training and education, including the civilian personnel in the minis-
try of defence, interoperability, modernization and procurement, lo-
gistics, standardization, as well as development of strategies for im-
provement and interoperability of the intelligence capabilities and cri-
sis management.
Besides these, in the remaining parts of the Strategy there are
guidance and positions concerning certain specific areas.
Revision, changes and supplements to the Strategic Defence Re-
view in procedure, manner and activity as it is done now are and
should be carried out every year. The changes and amendments are
submitted for adoption to the Parliament of the Republic of Mace-
donia.
Both American and European major defence industry companies
are already on the list of strategic partners of the Macedonian Minis-
try of Defence (MoD). Other positive developments determining their
successful performance on the Macedonian market are the availability

of qualified specialists to support their operations and the lack of re-
strictions, tariff/ non-tariff barriers in importing defence industry
commodities and dual use commodities in the country.
1. Marketing Highlights and Best Prospects

For the execution of the armament and equipment modernization
strategy the Macedonian government plans a steady defence budget
within 2.1-2.4% of the national GDP to be disbursed by 2007. The al-
location of resources, and thus the planning of the structure of forces
and capabilities, should be conducted in such a manner that by 2007
the expenses related to personnel, including food, clothing and similar
expenses for maintenance of equipment and infrastructure should be
brought down to between 65-70% of the available budget. Of this the
total expenses for personnel should be around 50% of the available
budget. For training and exercises, readiness, operations and opera-
tional capabilities, equipment and modernization, quality of life, re-
search and development of equipment and infrastructure and provi-
sion of realization of the competencies of the ministry of defence the
allocation should be 30-35% of the available budget and up to 1.5% for
science and research.
19%
30%
51%
Personnel expenditures Operations and maintenance Equipping

MoD Budget for 2006

At the latest by the end of this year, the assessment of the tasks
of the ARM, the structure of forces and equipment and the desired ca-
pabilities should be completed. At the latest by 2004 all the activities
for full implementation of the system for multi-year planning, pro-
gramming and budgeting and planning for forces, funds and capabili-
ties on a 5 and 10 year basis are completed. This should develop ca-
pacities for analysis and prioritization according to the circumstances
and the environment of RM. According to this plans should be pro-
duced and implemented for procurement (by establishing standards
for thorough analysis of expenses in relation to the benefits-
achievements and the alternatives), equipment, personnel, interop-
erability, structure and capabilities, maintenance (whole life cycle),
ability to regenerate forces and levels of training. In 2004 financial
means started to be directed towards future forces and capabilities ac-
cording to the new plans. Financing is planned on all activities re-
lated to those areas of activities, infrastructure, equipment and weap-
ons, which according to the current and future plans are to be re-
moved from the defence and the Macedonian army;
With the signing of the protocols in the future (we hoping during
2008) for Macedonia’s accession to NATO, the issue of armament and
equipment modernization and compliance with the NATO standards
becomes increasingly important. A detailed plan, covering the period
2004 - 2013, was developed to achieve the main priorities of the mod-
ernization of the Armed Forces of Republic of Macedonia. An assess-
ment of the defence industry capabilities and a joint Macedonian-
American Force Modernization Study were completed in the course of
the preparation of the plan.
These two studies outlined the interconnection among the na-
tional strategy, the national security concept and the military doc-
trine. They served as a backbone for determining the required opera-
tional capabilities (ROC). The ROC’s determine the concept vision of
the capabilities that a type of service or unit should possess in order to
fulfil the assigned military tasks resulting from the mission and goals
of the unit per the National Military Strategy. The main ROC’s are
defined as follows:
ROC.1: The creation of fully equipped, highly mobile, combat
ready, sustainable, NATO interoperable units and formations for
rapid deployment in multinational peace support operations.
ROC.3: The creation of fully equipped, interoperable sustainable
forces to assist civil authorities during natural or man-made disasters
and to conduct humanitarian operations and actions for prevention
and neutralization of terrorist threats.
ROC.4: The creation of fully equipped, interoperable, sustainable
combat ready Forces capable of executing the spectrum of national
missions and tasks in peacetime and international conflict to include
war.
The main projects are divided into three time periods and four
main goals according to the requirements for the completion of the
operational needs of the Armed Forces.
The time periods are as follows:
• Current period: 2007
• Mid-term period: 2004-2007
• Long-term period: 2008 –2013
The above-mentioned time frame and terms of references are un-
dergoing a Strategic Defence Review (SDR). An updated program will
be announced shortly after the completion of the SDR in 2004. The
preparation of the SDR was called for by the need for thorough reas-
sessment of the defence and armed forces state. The SDR sets the
guidelines for their long-term development in conformity with the
new security environment and the available defence resources.
Main goals (spread throughout the current timeframe):
• Modernization of the Land Force.
• Modernization of the Aviation WING
• Modernization of the logistic system.
• Development of command, control, communications, computers,
intelligence, surveillance and reconnaissance systems.
Modernization of the Land Forces (LF)

The main focus of the Land Forces modernization process is the
modernization of the Deployable Forces. The Deployable Forces in-
clude Peacekeeping Forces under the auspices of NATO. The key re-
sponsibility of the Deployable Forces is to react immediately and pro-
vide the Macedonian national contribution to the Multinational
Peacekeeping forces for South-east Europe (MPFSEE).
Three categories of modernization are emphasized within the
framework of these formations:
• Reorganization of headquarters on all levels;
• Upgrade of technology: This includes mainly communication and
information systems for command and control FICIS (Field Inte-
grated Communications Information System);
• Education: The education of these formations will be based on
Western staff procedures and skills. Priorities include deciphering
NATO maps and radio/telephone procedures, understanding the
basic objectives of the NATO supported mission and acquiring of
English fluency.
Modernization of the Aviation WING
The main priority for the Air Force modernization is the height-
ening of the operative capabilities. The goal is to achieve operative
compatibility with NATO. This includes:
• Modernization of the deployable forces intended to participate in
the joint operations under the auspice of NATO. The deployable
forces consist of 1 aviation WING (Мi-17s, Mi8s, UH-40 and Мi-
24s);
• Modernization of the Мi-17s, and Мi-24s;
• Modernization of the communication/information systems and
navigation systems at airports (ASOC – Air Surveillance Opera-
tional Centre).
Development of the Command, Control, Communications, Com-
puters, Intelligence, Surveillance, and Reconnaissance Systems
(C4ISR)
• Development of policy and strategy towards building C4I systems;
• Development of information systems for security types in the

MoD and Macedonian Army (MA);
• Development of information systems for the MoD, General Staff,
and Aviation wing’s administrations as well as for the archive
modernization;
• Development of an automated information system for the Mace-
donian Army;
• Development of the automated system for human resource man-
agement;
• Development of an information system "Logistics";
• Development of an information system for planning, program-
ming and budgeting;
• Development of Internet information sites for the MA.
Modernization of the Logistic System
The main priority for the modernization of the Logistic System is
to achieve the NATO standards of conserving and supplying POL on
the basis of single fuel at location of warfare.
2. Competitive Analysis
2.1. Bodies and their functions in the MoD/General Staff
that are managing R&D/innovation process
Bodies in the MoD/General Staff which are managing
R&D/innovation process are: The Military Academy and Section for
R&D of the production of weapons and military equipment in the
frame of the Sector for Logistic in the MoD
The Military academy “General Mihailo Apostolski”
− Status
The Military Academy of the Republic of Macedonia was estab-
lished by Law which is in accordance with the Law on Higher Educa-
tion and The Law on Research Work in the Republic of Macedonia.
The Military Academy was verified by the Ministry of Education and
Science as tertiary level educational and research institution, which
gives it the same status as other faculties and makes it part of the
educational system of the Republic of Macedonia. The degrees issued

by the Military Academy are valid in the country and they give offi-
cers an equal education status as other graduates from civilian uni-
versities.
− Mission
The Military Academy is the only tertiary-level military educa-
tional institution in the Republic of Macedonia. Its main task is to
educate, train and provide further development for officer personnel
for ARM and to engage them in research in the field of defence in ac-
cordance with the law.
− The scientific and research work
The scientific and research work at the Military Academy is or-
ganized and carried out within the scientific - educational disciplines
that are taught at the Academy in accordance with the annual and
long-term scientific research programs.
The scientific and research work is essential for the improvement
of education and teacher’s professional development.
The teaching staffs of the Academy, the associates and a certain
number of cadets who are particularly talented and motivated in their
fields participate in scientific research projects.
The Military Academy is engaged in research projects for its own
needs, for the needs of the Ministry of Defence, the General Staff of
the Army and others. The scientific and research work is carried out
in the following fields: military history, military strategy and tactics,
military geography and topography; logistics: ballistics; computer sci-
ence, operational research and other technical and military fields.
Master's and Doctoral theses written by the teaching staff and associ-
ate staff are also considered as research projects of the Academy.
Section for R&D of the production of weapons and military
equipment in the frame of the Sector for Logistic in the MoD.
Its function is: informative support to the leading authorities in
the MoD in the creating of the policy for equipping of the MoD by
weapon and military equipment from the domestic industrial re-
sources, cooperation with the Sector for Special Production in the
Ministry of Economy by overseeing the situation of the domestic in-
dustrial capacities and preparation of the relevant legal documents,

preparing the regular analyses for technical – technological capacities
and regular analyses for the personal management capacities of the
production subjects that are dealing with R&D of the production of
weapons and military equipment
SDR 2 Phase, 2004. The R&D issue is only generally considered
within the 5th part of the SDR - Equipment and Modernization Plan.
2.2. Domestic Production and Privatization

In order to implement the ambitious reform objectives, the MoD
has introduced a modern defence planning and management system
that will ensure continuous force development and efficiency in the
use of the taxpayer’s money. In that direction, the high priority has
been and will be the continuing of the implementation and improve-
ment of a multi-year planning, programming, budgeting and execu-
tion system, providing appropriate development of strategy and forces
with optimal use of the budget.
According to the Production and Turnover of Armament and
Military Equipment Law (published on 15 July, 2002), articles 9 and
10, R&D of new armament and military equipment technologies is
committed under the base of a R&D program which is adopted by the
Government of the Republic of Macedonia on the proposal of the Min-
istry of Economy in cooperation with the Ministries of Defence and
Interior. The R&D of the new armament and military equipment can
be committed by public science institutions, enterprises producing
armament and military equipment and other science institutions that
are dealing with science – research activities, in accordance to the ex-
isting laws. The program is financed from the budget of the Republic
of Macedonia. The MoD does not possess science – research and pro-
ducing capacities. Therefore for its own needs it is contracting prod-
ucts and services with the factories that are part of the economy sys-
tem, eligible and verified for this purpose. Within the Ministry of
Economy a Sector for Special Production exists that is the pillar body
for coordination of R&D activities. In the budget of MoD/Sector for
Logistic – Section for R&D of the weapons and military equipment is
planned an amount of €50 000 per year for R&D. The R&D issue is
only generally considered within the 5th part of the SDR – Equipment
and Modernization Plan.
The Republic of Macedonia is not “giant” manufacturer of arma-
ment and military equipment and therefore the Republic of Mace-
donia is not a big exporter of defence technologies. There are only two
factories producing some military equipment and armament (“Suve-
nir” – producing munitions and repair of small weapons and “Euro-
composit”- producing equipment for personal protection as helmets
and bullet-proof personal equipment) and one factory for repairing
and maintenance of the military equipment and armament factory -
“MZT Specijalni vozila” (factory that repairs the artillery armament
and light combat vehicles). At the beginning of 2005 the factory “Su-
venir” was bought by “Olympicos Industry”. The restarting of the
production is expected followed by extending of the small ammunition
production program - appropriate to NATO standards. In the next pe-
riod the factory “Eurocomposit” should be sold and its privatization is
to be expected in the near future. According the factual situation
there is no strict and designed concept for defence industry transfor-
mation.
According to the SDR (April 2004) the Macedonian defence indus-
try will maintain expertise in the following production areas:
• Ammunitions and parts for light armaments (pistols, light ma-
chine guns, submachine guns, howitzer), towed and anti-
armoured systems, modifications on armoured vehicles, and mili-
tary electronic equipment;
• Dual use articles and commodities such as radio equipment,
communication systems, radars, optic mechanical and optic elec-
tronic devices;
• Military apparel, protection devices, tents, gas masks, etc.
Defence products’ overhaul, maintenance devices, and spare
parts.
The involvement of the domestic industry will be encouraged
wherever there is an economic rationale for that. Equipping from ex-
ternal sources needs to be connected to the compensation requirement
(offset programs) wherever there is an economic rationale and legal

possibility.
The modernization and procurement of new equipment is one of
the most important thing for the new capabilities and capacities of the
Macedonian army. The equipment must fit the desired capabilities
and capacities of the Macedonian army, to be NATO compatible and
to provide for unification and standardization and to be procured
transparently and in accordance with the budget projections given in
this Strategy.
The equipment plans should be based exclusively on our budget
funds. Should the allies and the partners help us speedier achieve-
ment of the desired level of equipment will be possible? The equip-
ment should be carried out in accordance with the priorities and dy-
namics, which provide primarily equipment of the declared units by
2007, then the Special Forces unit and the remaining of the Macedo-
nian army for which the equipment process will last until 2013. In
this, it is very important to stop immediately the funding of the
equipment which is rear marked for disposal.
Defence Acquisition System Policy, December 2005. The imple-
mentation of the Policy will be regulated with Acquisition Rulebook
and Instructions for certain functional areas in acquisition. This pol-
icy formulates vision for the method of ensuring the materiel needs in
defence, defines the basic principles and guidelines in the area of
equipping and procurement of material and services, establishes basis
for definition of procedures and methodologies for Defence Acquisition
System (DAS) of MoD, provides latitude for inclusion of the domestic
economy in the acquisition process thus assuring more stable support
to the equipment and technology transfer in the future and promotes
cooperation with allied countries and organizations in the field of co-
operative logistics.
Regulation (instruction manual) for acquisition of the materials
(equipment – armament and military equipment, material – muni-
tions, spare parts and small inventory) for the needs of the defence
system of Republic of Macedonia, 2006, formulates the multidiscipli-
nary system of measures, postulates and procedures that are to be
planed and performed by the responsible subjects and bodies in the

MoD within the process of the defence system material acquirement.
The detailed and individual plans and programs which refer to
equipment with all details contained in the elaborated documents of
the second stage of the SDR are adopted by the end of 2004 by the
President of the Republic of Macedonia in the capacity of Supreme
Commander and the Minister of Defence.
The total survey of equipment procurement is defined, which is
the result of the detailed document of the second stage of the SDR by
categories of equipment and values expressed in Euro, as follows:
Equipment that is to be procured

for ARM purposes in the period 2004-2013
MOTOR VEHICLES
ARMOURED AND COMBAT
VEHICLES
40 000 000
COMMUNICATION ASSETS
35 000 000 AMMUNITION, MINES AND
EXPLOSIVE ASSETS
30 000 000 AIRCRAFT EQUIPMENT
ASSETS FOR MILITARY POLICE
25 000 000 AND INTELLIGENCE (G2)
REAL ESTATE, TRAINING
20 000 000 GROUNDS, TRAINING FACILITIES
WEAPONS AND WEAPON
15 000 000 SYSTEMS
FIRE CONTROL ASSETS
10 000 000 NUCLEAR-BIOLOGICAL-CHEMICAL
ASSETS
5 000 000 MACHINES AND EQUIPMENT FOR
ENGINNER WORK
0 QUARTERMASTER EQIPMENT
AIRCRAFT
OTHER
The privatization process of the defence sector is being conducted

by the Macedonian Privatization Agency in association with the Min-
istry of Economy and the Ministry of Defence. Working groups of ex-
perts are assigned to each specific privatization project. Some of the
main companies from the defence sector that are being prepared for
privatization at this point of time are: “Samokov”- Makedonski Brod
and “Eurokompozit”- Prilep.
2.3. Third Country Imports

The MoD will use an integrated management structure in the De-
fence Acquisition System characterized by clearly defined roles and
responsibilities, lines of responsibility, authority and accountability.
The Republic of Macedonia will be the immediate responsible decision
maker for the acquisition process. The MoD will provide a highly
skilled personnel in management, technical and business disciplines.
To ensure this, the MoD will establish education, training and experi-
ence standards for each acquisition position based on the level of com-
plexity of duties carried out in that position.
The MoD has cooperation with the global defence electronics
company ELBIT systems from Israel. It has been purchased equip-
ment for night vision for helicopters and is negotiating for other simi-
lar equipment for Aviation WING, ASOC, UAV (Unmanned Air Vehi-
cles). There is possibility for investment in Macedonia by this com-
pany.
The major European defence industry companies (such as Asalsan
- Turkey, Crypto age – Switzerland, EADS and Siemens) are active on
the Macedonian market. Together with the major US defence industry
companies they are included in the list of strategic partners of the
Ministry of Defence.
2.4. US Market Position and Share
US defence firms such as Johnson Controls, Lockheed Martin,
Raytheon, General Dynamics, Avaya, Motorola and Harris are well
presented on the Macedonian market. Some of them have signed
framework memorandums with the Macedonian Ministry of Defence
for cooperation, exchange of information, establishment of working
groups, strategic partnering arrangements, etc.
Furthermore, American IT firms such as Lucent Technologies,
Cisco Systems, Oracle, IBM, Hewlett Packard, and Dell are playing
active roles in lobbying for US defence sector firms.
3. Market Access
The Macedonian Public Procurement Act contains a clause that
enables the Government of Macedonia to bypass the normal public
tender process for major acquisitions deemed to be of a critical and
strategic nature. Essentially is enabled the Ministry of Defence to se-
lect a preferred vendor and to negotiate with them directly.
3.1. Import Climate
There are no restrictions, tariff and non-tariff barriers on import-
ing defence industry commodities. The defence industry commodities
are subject to duty free import regime regardless of the country of ori-
gin. Their trade is stimulated by the Law on the Control of Foreign
Trade Activity in Arms and Dual-Use Commodities and Technologies.
One exception is applied to exports of dual use commodities from
Macedonia. These commodities and the export firms are subject to li-
censing by the Ministry of Economy through the interagency state
commission consisting of representatives of the Ministry of Economy,
Ministry of Defence, Ministry of Interior and Ministry of Foreign Af-
fairs.
With the introduction and progress of the offset operations con-
cerning the defence industry cooperation it is expected that the Mace-
donian government may consider introduction of other import bene-
fits. These benefits include:
• Exemption from VAT for investment equipment, weapons, and
special products that are imported by foreign investors, import-
ers, and local partners. A value added tax (VAT) of 18 % is cur-
rently assessed at the time of customs clearance on all imports of
defence sector products and commodities;
• Application of relieves in the regulation for the classified informa-
tion in order to relief the investments in the defence industry.
3.2. Distribution/Business Practices
The suppliers of defence sector and dual use equipment should
consider the long-term development of the defence market in Mace-
donia and armed forces restructuring reform process in general. Prac-
tice has shown that successful distribution of defence sector equip-

ment in Macedonia is done through a representative agent or distribu-
tor, preferably someone with extensive experience, good knowledge of
the market/ defence sector and contacts within the Ministry of De-
fence. Another prerequisite is good understanding of the licensing
procedures as far as dual use commodities are concerned.
A positive booster for the defence sector market development in
Macedonia is the available human resources. There are many young
military specialists who are familiar with the latest high-tech devel-
opments. Also, there are laid off military officers undergoing prequali-
fication programs as part of the overall armed forces modernization
program.
3.3. Financing
The financial sources for modernization of the armed forces will
be allocated from:
• The Ministry of Defence budget;
• The National budget;
• Financial resources from international cooperation programs
such as Partnership for Peace Trust Fund – CNAD (Conference of
National Armaments Directors), NAMSA (NATO Maintenance
and Supply Agency), RTO (Research and Technology Organiza-
tion, NATO Science Committee, EU-WEAG (Western European
Armaments Group), other regional organizations (OCCAR, LOI,
etc.), bilateral cooperation, and regional cooperation in South
Eastern Europe.
• Indirect subsidy through implementation of energy-saving heat-
ing sources – installation of gas-transfer lines to reduce the cur-
rent expenditures for electric power, fuel and coal, sale of excess
military infrastructure and partial allocation of the funds for in-
frastructure modernization.
3.4. Useful web sites
Ministry of Defence: www.morm.gov.mk
Ministry of Economy: www.economy.gov.mk
Macedonian Government:
www.vlada.mk; www.investinmacedonia.com
11 Oktomvri-Eurokompozit: www.eurokompozit.com.mk
Brako Veles: www.brako.com.mk
References
1. The White Paper on Defence, Ministry of Defence, R. Macedonia,
October 2005
2. Strategic Defence Review, Ministry of Defence, R. Macedonia, Oc-
tober 2003
3. National Security and Defence Concept of The Republic of Mace-
donia, Ministry of Defence, R. Macedonia, April 2003
ROMANIAN DEFENCE INDUSTRY TRANSFORMATION

EXPLORATION
First Lieutenant Liviu-Cristian Matache

Military Equipment and Technologies Research Agency,
Ministry of National Defence, Romania
Summary
The pace of reform in Romanian related to the defence industry
picked up speed beginning in 2001, when the government introduced
steps to radically restructure the defence industry. The Government
of Romania /GOR/ initiated a long-term, comprehensive privatization
program coupled with the modernization of the existing production
facilities in order to manufacture equipment that meets NATO stan-
dards.
In terms of modernization the following have been outlined as
goals:
• Re-sizing the sector according to the actual needs of internal and
external market;
• Conversion to the civilian production;
• Privatization of state owned defence industry companies;
• Development of strategic partnerships with notorious Western
companies;
• Modernization and upgrade of production facilities in order to en-
sure production of military equipment at NATO standards.
GOR expenditures on the defence sector were between 2.3% and
2.6% of GDP in 2004. As Romania steps up its efforts to meet NATO
operability, between 35-40% of the defence budget will be allocated to
upgrades and modernization during the 2005 and 2006 timeframe.
This trend is likely to continue into the foreseeable future.
1. Market Demand
By the time Romania’s Communist regime came to an end in
1989, the defence industry employed over 200,000 people with the ca-
pacity to produce a number of complex systems (including fighter air-
craft and helicopters) for export. The collapse of both the domestic
and foreign markets in the 1990s resulted in a corresponding dramatic
reduction in the size of Romania’s defence industry. Over the course
of the following 15 years of post-Communist transition, Romania’s de-
fence industry underwent a slow transition, eventually becoming a
NATO member in March 2004. In a concerted effort to rejuvenate
Romania’s Armed Forces and make them interoperable with NATO
forces, the Romanian military embarked a long-term modernization
program expected to be completed in 2010. In 2005, Romania’s total
active Armed Forces numbered 90,000 of which the vast majority
68,000 (75.56%) is Army, 15,000 (16.66%) Air Force and 7,000 (7.78%)
Navy. Romania will continue downsizing and modernizing its Armed
Forces with the goal of achieving an active force of 75,000 by 2007.
The enormous task of reducing large, antiquated forces, a hold over
from the Warsaw Pact days, and modernizing them to meet NATO re-
quirements does not come without a price tag for Romania’s economy.
In 2003 Romania spent 2.4% of its total GDP on defence, which was
above NATO’s guidelines of 2%. As a result of current downsizing,
personnel costs represent a disproportionate amount of the defence
budget, as the Romanian Armed Forces must offer unemployment
counselling, retraining and support for obsolete military personnel.
Despite the enormous financial pressure that personnel reduction
has placed on the Romanian defence budget, a genuine willingness to
modernize equipment remains. Romania’s military expenditure is
likely to increase. In 2004, about 35% of the defence budget (estimated
to be USD 403 million) was allocated to the modernization of equip-
ment. The restructuring of the Armed Forces and the modernization
of Romania’s defence industry will result in increase in budget from
approximately USD 710 million to USD 1,190 billion in 2007.
The Romanian defence industry will continue with its restructur-
ing and privatization program. The long planned privatization ap-
pears to be well underway and the Romanian Ministry of Economy

and Commerce is receiving offers for the privatization of the RO-
MARM group of companies. The Romanian defence industry continue
to become more dynamic and streamlined as the larger established
manufacturers seek to form joint ventures with foreign and multina-
tional companies, as was the case with the Eurocopter Romania pro-
ject.
2. Market Data
Romania’s defence sector maturation process encompasses the
following goals established for the 2005 – 2007 period:
• Re-sizing defence production facilities in accordance with the ac-
tual needs of the Romanian Armed Forces and Romania’s inte-
gration in the Euro-Atlantic structure;
• Implementing the necessary procedures to allow Romanian com-
panies to participate in NATO acquisition programs;
• Concluding the privatization process;
• Long-term extension of alliances and partnerships with the goal
of facilitating access to cutting edge technologies, know-how
transfers and participation in NATO’s top-level programs.
Based on history and potential, Romania’s defence industry
represents a complex and dynamic economy, which continues to be at-
tractive for foreign and national investors.
Table 1 - Defence Industry Market*

USD million
2003 2004 2005
Total Market Size 184.0 202.8 244.3
Total Local Production 107.5 88.75 125.0
Total Exports 36.0 19.2 36.0
Total Imports 112.5 133.25 155.3
Imports from the US 10.1 12.0 15.8
*Statistics are unofficial estimates based on data provided by National Companies
ROMARM SA and ROMTEHNICA SA.
Imports are likely to increase as Romania seeks to make the

Armed Forces more efficient through the procurement of new systems
such as the C-130 Hercules. At the same time, exports will also in-
crease as Romania attempts to return to its position of being an im-
portant player in the international market. The export the IAR-330
Puma will re-establish Romania’s position in the international export
market with a major product. The development of the new Armoured
Personnel Carrier Zimbru 2000 is expected to give ROMARM impor-
tant boost interims of international sales.
Exports are forecast to rise in the long term as Romanian indus-
try benefits from privatization and international involvement.
3. Key Suppliers
3.1. Principal Local Suppliers
Currently Romania’s defence industry encompasses 38 compa-
nies, with 23 of them being state owned (including 16 companies of
CN ROMARM SA and other 7 commercial companies) and 15 com-
mercial private companies. The others 7 states owned are independent
companies put on the privatization list. The last 11 companies are pri-
vate under the jurisdiction of Ministry of Economy and Finance.
• The National Company ROMARM S.A. is manufacturing
marketing a large variety of speciality products, such as: ar-
moured vehicles on wheels and on tracks, air defence systems, in-
fantry weapons and ammunition, artillery systems, missiles sys-
tems and rockets, powders, explosives and prosperous.
• IAR SA Brasov is the sole manufacturer of helicopters, for both
military and commercial customers. In 2002 IAR Brasov and
Eurocopter created a joint venture to produce the PUMA, a troop
carrier and a tactical support helicopter. IAR and Elbit Systems of
Israel created a joint venture to produce SOCAT - the upgraded
line of PUMA, with a new integrated mission management sys-
tem, a glass cockpit and improved avionics, advanced sensors and
weapon systems.
• AEROSTAR Bacau specializes in aircraft repair and moderniza-
tion for the Romanian Armed Forces, set-up a joint venture with
Stork Fokker Aesp of the Netherlands to develop and produce
aircraft mechanical components. The firm is also expanding into
ground and artillery defence systems.
• MFA Mizil specializes in the maintenance, upgrade and repair of
chain-track armoured vehicles, but also focuses on heat and
thermo-chemical treatment of steel. The Romanian Ministry of
Defence awarded MFA Mizil a contract to upgrade its 180 MLI-
84M infantry fighting vehicles (IFVs), which will be assigned as
part of Romania’s contingency to the NATO Rapid Reaction
Force.
• ROMAERO, the Bucharest-based aircraft manufacturer and Re-
pair Company, was selected as the C- 130s Maintenance and Re-
pair National Centre. It has ongoing contracts with large aero-
space and defence companies including: Lockheed Martin, Boeing
and BAe Systems.
• ROMTEHNICA SA, a state-owned firm, is a major local player
worth mentioning. ROMTEHNICA is under the auspices of the
Ministry of National Defence and serves as the principal supplier
of consultancy and trading services. The firm has the legal au-
thority to commercial activities with foreign partners. ROM-
TEHNICA handles approximately 90% of the defence industry
equipment procurements. Currently, Romanian defence industry
manufacturers are capable of producing artillery, avionic equip-
ment, helicopters, small calibre arms, communications systems,
electro-optics and explosives. All the companies belonging to the
defence sector, together with an additional 20 private companies
that can produce equipment or perform services relating to the
defence industry, are members of the non-governmental Associa-
tion of Romanian Defence Producers (PATROMIL).
3.2. Foreign Suppliers
Privatization of the defence industry has attracted important for-
eign and multinational manufacturers. The following international
companies have a presence in Romanian Defence Industry:
Canada
• INTELCAN TECHNOSYSTEMS:
− Technical Ground Assistance System for Air Navigation
Program
France
• SFIM/ODS:
− Romanian Upgraded Tank TR-85M1 Program
− Infantry Fighting Vehicle MLI-84M Program
• THALES:
− Identification Friend or FOE System Program
− STAR-RADIO Tactical Communication System Program
• L'HOTELLIER:
• GIAT Industries:
− Helicopter IAR-330 Upgraded with SOCAT System Pro-
gram
• THORN:
Program
• EUROCOPTER România, which holds 51% of the shares held
by IAR, produces the PUMA helicopter, repairs and overhauls
older Eurocopter product lines and maintains the Romanian
Armed Forces helicopter fleet
Germany
• EADS SYSTEMS & DEFENCE ELECTRONICS SAGEM:
• KRAUSS MAFFEI WEGMANN:
− 35 mm Air Defence Self Propelled System Program
• KOLLMORGEN:
Israel
• RAFAEL:
gram
• Israel Military Industry (IMI):
− Multi Launcher Rocket System Program (LAROM-
ACCS SYSTEM)
− Helicopter IAR-330 Upgraded with SOCAT System
Program
• ELBIT SYSTEMS Ltd:
− Multi Launcher Rocket System Program (LAROM-
ACCS SYSTEM)
− IAR-99 SOIM Program
gram
− Helicopter IAR-330 Upgraded for Naval Missions Program
• EL-OP:
• ELISRA:
gram
Italy
• LITTON:
• AIRSYS:
Program
• MARCONI MOBILE Sp.A:
− RTP/STAR Program
Switzerland
• OERLIKON CONTRAVES:
− formed a joint venture with the Romanian company Ar-
senalul Armatei to market a short range air defence sys-

tem (SHORAD)
− 35 mm Air Defence Towed System
UK
• CATERPILLAR PERKINS:
• BAe:
gram
• RACAL (THALES):
Program
USA
• AAI Corporation:
− UAV System Shadow-600 Program
• ALLIED SIGNAL:
• HARRIS:
− STAR-RADIO Tactical Communication System Program
• HONEYWELL:
gram
• ITT:
Program
• LOCKHEED MARTIN:
− Gap Filler Program
− National Air Command and Control System Program
• MASON:
• PARK AIR SYSTEMS:

Program
• TRIMBLE:
4. Prospective Buyers
The principal end-users of defence industry equipment, which are
driving the market, are the Romanian Armed Forces and state-owned
defence enterprises. The medium and long-term development strate-
gies of the Romanian Land, Air and Naval Forces will generate future
market opportunities. The following principles have been considered
in the elaboration of the Romanian Military endowment:
• the endowment of the military with performing weapon systems
meeting the NATO requirements concerning precision, mobility,
flexibility and interoperability allowing for the carrying out of de-
fence policy goals;
• the refurbishing and modernization of existing combat equipment
to prolong the life duration of the weapon systems and to increase
their performance;
• the stimulation of internal production to ensure the minimum of
independence from external suppliers, by adapting the existing
capabilities of the domestic defence industry to the NATO re-
quirements;
• the maintaining of a military research component within the Minis-
try of Defence to act as a scientific advisory source of the military;
• international cooperation in the realization of the weapon sys-
tems.
The objectives of the endowment of the Romanian Military in-
clude:
Land Forces
• the equipment with a new generation of armoured and not ar-
moured vehicles, as well as multipurpose vehicles to provide an
increased protection of the personnel;

• the accomplishment of combat support capabilities (155 and 105
mm calibre self-propelled mortars);
• the equipment of the combatant with modern communications
and individual and collective protection means;
• the provision of the ROL-2 medical capabilities;
• the provision of operational structures tactical field control capa-
bilities;
• the equipment of forces with various kinds of armaments and
ammunition complying with the NATO standards;
• the implementation of electronic warfare capabilities.
Air Forces
• the realization of the national air space control and command sys-
tem, the automation of the process in the operational command
centre and the joint work within the NATINEADS system;
• the modernization of air bases with ground technical assistance
systems of air navigation (GHIDUL);
• the modernization of three-dimensional radiolocation search
means, Gap Filler and FPS 117;
• the provision of equipment necessary to meet the "Search, rescue
and evacuation" requirement combat included;
• the modernization of exiting strategic transport air carriers;
• the purchasing of short/medium courier air carriers;
• the modernization of ground-to-air defence systems (HAWK XXI);
• the purchase of H/SAM ground-to-air missile systems with me-
dium and wide range, and of SHORAD and V/SHORAD systems;
• the equipment with performant multipurpose combat aircrafts,
with superior combat capabilities as well as modern combat heli-
copters;
• the continuation of the modernization of the transport helicopters.
Naval Forces
• the modernization of "T 22" frigates by purchasing munitions and
embarked helicopters;
• the modernization of the counter-mine capabilities by purchasing
the mine sweepers with performing possibilities to discover and

destroy mines;
• the modernization of the anti-submarine capabilities by the pur-
chasing of multipurpose corvettes with rapid reaction and counter
submarine capabilities in Romania's interest zone in the Black
Sea;
• the accomplishment of the surveillance and control system at the
Black Sea "SCOMAR";
• the modernization of the Naval Forces integrated communica-
tions and information system.
Common Defence Services objectives
• the re-sizing of the national Network of Military Communications
(RNMC) and of the Strategic Operational Radio Network
(RRONS), secured in accordance with the restructuring process of
the military;
• the implementation of the National Military Command Centre
(NMCC);
• the implementation of the centre for communications within the
NATO General Purpose Communications System centre and the
interconnection with the above mentioned system through RNMC
of all peace time locations of the NATO operational structures;
• the implementation of the logistic information system AILS;
• the implementation of the allied deployment and movement sys-
tem - ADAMS;
• the beginning of the implementation of C4ISR systems at NATO
operational units;
• the accomplishment of systems for meteorological and hydrologi-
cal data crop, dissemination and monitoring;
• the provision of container, fuels and materiel transport platforms;
• the provision of container, pallets and packaging means;
• the modernization of depots infrastructure, of military bases and
the accomplishment of modern military facilities.
For any kind of procurement end-users are required to hold a
public tenders, according to the Public Procurement Law 337/2006.
The main government bodies authorized to organize public tenders

are:
• Ministry of National Defence, Armaments Department;
• Ministry of National Defence, through ROMTEHNICA SA
• Ministry of Economy and Finance, Defence Industry Department.
Web Reference
1. http://www.vgtu.lt/upload/agai_asktc/20f05b16.pdf
2. http://www.dpa.ro/documente/instructiuni/
ConceptiaInzestrare.pdf
CONFLICTOGENITY OF THE PUBLIC-PRIVATE

PARTNERSHIP
Academician Prof. Dimitar Y. Dimitrov, D.Sc.

Introduction
The policy in support of the change in the defence industry in-
volves together with working out a conceptions and management
models, as well and working out the conflictological problems of the
partnership.
In several consecutive forums organized by Department National
and Regional Security at the UNWE, we presented our view about dif-
ferent sides of the problem for the partnership in conflictological con-
text.
Regardless of the stages and phases of the life cycle of scientific
product its object transformation is accomplished with interaction of
different physical and juridical subjects. The behaviour of these sub-
jects is defined from regulated standards and technologies for the con-
crete activity. However, according with that, the motives for the be-
haviour- interests, values, preferences of the participants remain
opened.
It is well known that individual and group interests can play as
positive as destructive role in the complicated innovative process. De-
veloping the contradictions into destructive conflicts is able to embar-
rass and in separate cases to stop the creative process and turn the
participants’ energy in undesired direction.
The science of the social conflicts – the conflictology has devel-
oped as the theory of the social conflict as the technology of its man-
agement.
The program and the project, part of which is the topic of the pre-
sent conference suppose participation of alliances, state structures,
and widely public-private partnership.

It demands to be put in order of the day the study of the problems
of the change, among with crucial place has the problem of conflicto-
genity of the partnership.
The conflictological vulnerability (in the process of the partner-
ship) demands the jointly activity to render an account of the charac-
terization of the project and with regard to this the characteristics of
the management’s types of the partners firm, its firm’s profile and
firm’s expectations.
1. Type of Projects and Conflictogenity of the

Partnership’s Firm Multipurpose and multiversion
project
Foreseeing availability of great number of weakly identified aims
and decision making variants. Part of the aims and variants for devel-
opment of the events could lose its attractiveness for the partner.
Other aims and variants for actions, in principle unimportant and not
evaluated by the partner like threats, could increase their own weight
or to gain in partners’ eyes negative meaning. As a result of such re-
evaluation in the partner’s position could occur change by the project
interaction – including diametrical contrary alteration. The joint pro-
ject is able to stop its entry in the accepted partner’s framework with
aims and projects, appears to him useless, wandering his resources,
and in particular cases – threatening the development of its own activ-
ity.
In this instance we are speaking not for the ways of realization
the joint project, not for specifying the separate project’s parameters,
and not for separate clauses of the join contract. The question is in
general for the participation in the joint project, the question is for
cardinal change in the initial intentions and taken partners’ obliga-
tions. Such cardinal change hides risk to strain the relations between
the partners by the unforeseen conflicts and conflict situations.
Project stretched in its realization period

In the course of time in the partner’s mental picture for his own
aims, tasks, the ways of their achieving are changing. In himself
comes into sight new opportunities, or he loses these which were im-
plemented earlier. Because of it the partner is able to find very likely
and admissible to change his positions by the joint project.
In this kind of project there is in principle new moment – the
ways for achieving his’ own aims. Right and well-timed actions to get
over delays in the project implementation process are able to prevent
failing into conflict situation and further escalation. Changing the
ways for aims achieving and tasks working out are able to prevent in-
tensifying the uncertainties regarding the correctness of the chosen
aims.
Project which presupposes considerable vastly specific
gravity of the partner in the process of decision making
of cardinal questions in the project situation.
This is the most unsuccessful type of project from the point of
view of its reliability by the factor defects in the partner’s firm man-
agement.
Even though those property relations and their respective re-
sponsibilities are formally legal fixed in the contract between the
partners – the management relations are opened. Often the property
relations and the management relations are not clearly delimit. What
is more - the main aim of the owner is the profit, but the manager
ones are the effective management and security which are not ex-
hausted only with the profit.
The difference in the interests and aims are potentially a source
of contradictions and conflicts, as inside in the firm, as between the
firms. Often this management defect is hidden and comes into view in
concrete situation which reflects in the interest and aims.
Project which presupposes implementation of unique

functions by the partner.
Unique partner’s function means unique. The lack of concrete
experience in the partner’s firm and insufficient potential for creative
approach in unique situation hides risk of poor quality implementa-
tion of its assigned and accepted tasks. Laid in such situation the
partner may be tempted and trying to transfer the implementation of
the unique function on the rest of the partners. In this way there is an
opportunity one conflict situation to be created and complicated, as
well for an unpredictable conflictological development.
In this case there are two risks. First, it is a possible absence in
the partner of an accurate system of actions, which may have an ad-
verse effect on the quality of assigned tasks implementation. Second,
we must not discount partner’s propensity to blackmail.
2. Types of Management and Conflictogenity of the

Partner’ Firm
Situational management (today this type of management is the
most diffused in the area of manufacture). At this type of management
the firm does not have any preliminary and defined, clearly fixed aims
and landmarks. The management is fulfilled under the influence of an
aggregate of factures of external environment and presents reaction of
the creating concrete situation. Special feature of the situational firm is
its reliability, and the impossibility to prognosticate the behaviour by the
force of multiplicity, diversity and unpredictability of outer factures’ ac-
tions. On such kind of partner you are able to rely in short-term projects,
insuring with others more reliable partners, demonstrative (hard) moni-
toring on the partner. In complicated cases of service help the insurance
of third person’ (guarantors) support, which means in case of sustaining
a considerable loss by the guarantors if project failed.
The conflict features are pawned in the characteristics of the
situational management. The contradictions and conflicts are pro-
voked mainly by the impossibility for adequate reaction of external
environment influences. This imposes controlling and fast reaction on
the changing situations – operation ability and fast decision making.

The frequent change creates insecurity and fear from responsibility.
The conflicts are transformed from interim into intergroup and inter-
personal conflicts.
Goals management. The partner’s firm defines the concrete
aim in short-term perspective and exerts maximum efforts to their
achievement. Together with that the partner is able to hide its’ own
aims under all manner of motives. The short-lived firms are not ad-
justed for realization of long-term projects, which suppose some stages
for partners’ development. Such partner is able to retract in case of
more attractive idea.
Short-term aims are directed to survival and fast achievement of
financial results. Thinking is focused in fort-coming time horizon. The
firm is able to be found not ready for the challenges in strategic point
of view. The character of the contradictions and conflicts from joint
projects point of view which are directed to implementation of the
change demands prognostic conflictological study.
We must have in mind that analysis of partners’ firm and ac-
cepted methods for aims achieving and also the criterion for evalua-
tion of activities’ result, in particular –by the project cooperation, they
are the most esteemed information for project “riskography”.
Program-purpose management. Partner’s firm has accurately
formulated aims for activities and development, there are aims pro-
grams developed for achieving the aims, their implementation is or-
ganized, the necessary resources are available, working groups for im-
plementation and management of the programs and the firm realizes
personal control in the process of program’s implementation on behalf
of the high level management.
The steppe of formalization of the programs depends on the pos-
sibilities of the firm and may be the most variegated types. In the
process of solving cardinal questions in the area of project partnership
the meaning of program-purpose management helps realistic progno-
sis for the situation developments to be done, which minimize the
risks of the partnership.
From the conflictological point of view is very important to be ex-
plored contradictions and conflicts during the process of developing

the system for program-purpose management of the partner’s firm.
The results will reveal us the weak and strength points, the mistakes
that have been made and the ways for their overcoming. The received
conflictological information is able to preserve from mistakes reitera-
tion and to reduce the risk in the process in decision making.
Strategic management. The partner’s firm uses the strategic
planning and management, has own conception for development, a strat-
egy for achieving the aims on different levels. In place only of counterac-
tion to the external conditions circumstances the firm actively forms
them fulfil monitoring on its’ own activity rendering an account of its
perspective eyesight for the development. If the joint project “work“ for
the strategic goals of the partner, the firm may goes to tactical conces-
sions related with additional expenditures. This may be used for gaining
extra profit. The main reason for undertaking the expenditures from the
partner is its strategic interests. The waste of such strategic partner may
turn out far bigger loss than the profit which is not received.
Here we have to mention two cases – the first, when in the joint pro-
ject the purpose to strategic goals is shared by the partner and the second
when the different goals are chased. In the first case we have proximity in
the way of thinking and the approach. The differences can reveal in the
process of rendering of account on the changed conditions during the im-
plementation of the joint project- i.e. the behaviour in the new situation.
In the second case there is opportunity to be received differences between
the strategic and operational approaches - in this case the thinking is de-
termining. It is very important to remember, that a dispatcher with diffi-
culty can go into strategist and vice versa not every strategist can be good
dispatcher. In this connection comes into being the question about ob-
serving the requirements about the work in team and the potential con-
tradictions and conflicts in this work.
3. Firm Style and Conflictogenity of the Partner’s Firm.

The firm style is combination of ways and means (graphi-
cal, colours, plastic, linguistic) which secure entity of all articles and
services of the firm which is perceived by the observers (not only the
potential customers), who compare firm’s articles with the competi-

tors ones. In the firm style originality of the firm’s work is the reflec-
tion, the firm technical and trade policy, its internal organization,
firm culture etc. With the help of the firm style the firm turns to face
existing and potential customers.
The availability of firm style indirectly guarantee high
quality of the articles and services, also bespeak, that the firm
does not want to hide itself behind the anonymity of the low quality of
the firm production. The firms develop their own style to create their
remembering image and to separate themselves through their produc-
tion and services from the common aggregation of manufacturers. The
components of the style are included: a trade mark, brand and logo,
firm blanks, firm colour (colours), firm letters set.
The firm style is able to say a lot about the partner. It has
to be analyzed from the psychology position. The point is that inspect-
ing and evaluating the proposed to one person graphical variants of
future trade marks, business cards and blanks, that one at the back of
his mind choose that which in the biggest degree comes up to his na-
ture. Basic objects of the analysis of the firm style are: the bearer ma-
terial which makes the articles, representing the style of the firm, the
program for creating the style of the firm, steppe (level) of developing
the style of the firm, the expenditures about its creation.
The most valuable characteristic of the firm style from
the point of view of the firm security is the motive for firm
style creation. Misinformation is dangerous motive for the real
situation in the partner’s firm. To the motives that are unusual for
aggressive behaviour, but which signalize for possible risks in the
partner, we are able to sift out: a) Surplus or luck of resources for
creation of the firm style, b) Unmeasured activity of the soon created
marketing and advertisement department, c) Exceptive self expres-
sion of the manager, who has the habit of impose his view to every-
body, d) Being in the fashion.
The symptoms referred to may give signals of presence of sub-
stantial risks, related with the internal organization, finance planning
and control, one-sided philosophy for firm development, psychological
characteristics of the manager (incapacity for independent thinking,

routine, escape from personal responsibility, reticence for new ideas
etc.), and potential conflictogenity.
The study of the firm style allows evaluate the expendi-
tures of firm for it, which are related with the inspiration to make
an impression. The contradiction between these expenditures and the
main activity of the firm and its current financial condition is signal
for danger. If a small trade firm has many and varied accessories –
this is an alarming signal. The lack of developed program for firm
style of a big corporation also has to be occasion for thinking.
The serious programs for creation the firm style foresee detailed
analytical studies of customers’ perceptions, analyses of the nearest
competitors etc.
The conflictogenety of the partner’s firm, related with the style, is
able to play a practical joke during the joint project. The surprises can be
searched in the contradictions and conflicts during the outflanking defin-
ing, forming and defining the expenditures for joint project creation.
These questions are underestimating, perceived and evaluate in
different way. One of the reasons is that the used approaches are ama-
teurish, the appropriate specialists are not attracted and the conflic-
tological aspect is missing. The process of taking part in the conflict is
able to show itself on different levels and forms, it would be have in
mind by everyone. The most important is the underestimation in that
attitude not to be underestimates.
4. Firm Expectations and Conflictogenity of the Partner’s

Firm
The firm expectations are partners’ notions for the re-
sults and the perspectives from the joint activities.
Key role here plays “the firm sub consciousness”, which is formed
on the base of members’ opinions (the group), the deferent interper-
sonal mechanisms, and individual characteristics and stereotypes of
managers’ activity. In spite of achieving contracts and signed agree-
ments the firm-partner always in higher steppe is oriented on the base
of its own expectations, not so on the actual correspondence on the
participants’ behaviour in the project with the aims which are in ac-
cordance. The assessment of the conformity of the objective reality
with these expectations is happen outside the sphere of the rational
psyche and control. The lack of correspondence in the activities of the
project participants in relation to firm’s expectations are accepted by
the partners very unhealthy.
The most spreading firm’s expectations can be unite in a few
groups:
Receiving of funding. The word is for the main activity of the
partner or for the parallel activity. The risk for parallel activity of the
partner springs up particularly often when the project is not related
with the main activity of the partner’s firm and the partner starts
work which is not typical for him.
Diversification expectation. The expectations are typical pre-
dominantly for the small and medium sized business. Rendering an
account of the foreign firms – during widening and reorienting of the
sphere of activity the expectations are different: long term important
contract, creation of joint venture, opening a branch or office of a for-
eign firm, creation of associated firm abroad etc.
Structure reorganization. There are some typical expectations
for not viable enterprises. The partner is expected to make concrete
decisions for recovery of the firm firs of all.
Reducing of the taxes. Creation of schemes for reducing and
avoiding tax payment, devolutions of parts forming firm’s assets in
duty-free zones and offshore.
Functional problems’ decision. Adopting of high technologies,
effective use of intellectual property, competitiveness rising.
Increase the level of business security. It is related with the
desire to avoid a criminal competition. It is typical in the process of in-
teraction with firms which have big security systems and relations
with state organs and structures.
Increasing of the profit. The firm sees in the partner only as-
signer, for this firm the project is related only with gaining profit.
Lobbing for the firm’s own interest ahead of the state. Such
expectation springs up when the project interaction is realized in the
frame work of the state program, when the partner has own unrealiz-
able big projects, with wide close relations with the state authorities.
In the firm expectations are hidden big disappointing, psychologi-
cal and conflictological force with unpredictable economic conse-
quences- some times catastrophic.
The study of the expectations of the partner is necessary for the
prevention of the risk, the possible partner’s disappointments and
grumbles, and rising of hidden contradictions and conflicts.
The enumerated firm’s expectations are not an ultimate list; their
marking is sooner consecutive reminder that there is discovered a so-
phisticated problem.
Conclusion
On the base of the ontology of the fundamental elements of the
conflictogenity like a system and base of epistemology and praxiology
and when we observe the imperatives of the conflictology of the
change we gave a principle algorithm for PPP study.
It is naturally the conflictological studies to take its place in the
pretentious program “Science for peace and security”. Without this
structural component one system study will loss its. We think that it
is not necessary to prove this reminder.
References
1. Димитров, Д. Й. Конфликтология, С., 2-ро доп. изд., УИ
“Стопанство”, 2004.
2. Димитров, Д. Й. Конфликтология и политика за публично-
частно партньорство в сектора за сигурност и отбрана (доклад).
Ежегоден международен семинар по икономика на сигурността
и отбраната: Частни инвестиционни инициативи за модерниза-
ция на въоръженията, УНСС, София, 23-24.06.2005 г.
3. Димитров, Д. Й. Конфликтознание. Велико Търново, Фабер, 2007.
4. Одинцов, А. А., В. И. Илюхин. Справочник по защите
предпринимательства и экономической безопасности. М.,
Класика плюс, 1999.
Apendix
Aims and tasks
Аnalysis
Feed-back
Type of projects
and conflictogenity
Types of management
and conflictogenity
Firm style and conflictogenity
Firm’s expectations
and conflictogenity
General assessment:
Synthesis
conclusions and recommendations
Algorithm for a study of the conflictogenity in PPP

CONCEPTS AND MODELS FOR R&D MANAGEMENT 105
Part II.
CONCEPTS AND MODELS FOR R&D

MANAGEMENT
SHAPING BULGARIA’S SECURITY

AND DEFENCE R&T POLICY
Prof. Stefan Hadjitodorov, D.Sc.

Scientific Secretary, Bulgarian Academy of Sciences
Director of the Centre for National Security and Defence Research, BAS
Assoc. Prof. Todor Tagarev, Ph.D.

Rakovski Defence and Staff College, Sofia, Bulgaria
Mr. Nikolay Pavlov

Centre for National Security and Defence Research, BAS19
The main goal of this paper is to formulate fundamental princi-

ples in shaping an efficient security and defence R&T policy of the
Republic of Bulgaria. Presently, due to a variety of reasons, there is no
comprehensive, well-focused and sustainable security and defence
19
Centre for National Security and Defence Research – Bulgarian Academy of Sciences.
This publication is supported by NATO Scientific Division in the framework of Sci-
ence for Peace Project SfP 981149 “Operations Research Support to Force and Op-
erations Planning in the New Security Environment” (details on this project are
available at www.gcmarshall.bg/sfp981149). The opinions expressed in this paper are
solely those of the authors and cannot be attributed to any governmental organiza-
tion.
defence R&T policy of the country that is clearly linked to its security
and defence objectives. We see this as an important drawback in both
the formulation and the implementation of the overall Bulgarian
security policy.
The underlying premise of this study is that R&T policy has to be
examined much more broadly than is currently the case. It is readily
admitted that R&T policy ought to support the achievement of secu-
rity objectives (although even in such case adequate management
mechanisms are not readily available). On the other hand, and this is
rarely understood, research can potentially support the formulation of
an effective and efficient security and defence policy.
In support of the formulation of security policy, scientists analyze
the security environment and support the definition of capability re-
quirements, identification of capability gaps and possible solutions,
accounting for novel threats and disruptive effects of emerging tech-
nologies. Analysts further support security and defence planning
through generation and analysis of alternative solutions, assessment
of costs and benefits, assessment of planning risks and support to risk
management.
In support of the implementation of security policy scientists pro-
vide alternative solutions, emphasizing capability development plans,
concept development and experimentation (CDE), operations and
maintenance, as well as the utilization of surplus and/or obsolete
equipment and infrastructure.
Main Principles of Security R&T Policy

First, we need to define properly the scope of security and defence
R&T programs. Most important in this regard is to examine:
• Capability orientation of security and defence R&T;
• The relationship among end product, systems, and enabling tech-
nologies;
• The contribution of variety of think-tanks and research organiza-
tions with primary focus on governmental R&T organizations,
academia/ universities, and security; and defence industries, as
well as their interaction and cooperation with other players.
Secondly, security R&T policy supports both the formulation and

the implementation of security policy. It is very important that the
most senior political leadership makes a clear declaration in that re-
gard and, henceforth, provides definition of realistic ambitions for se-
curity R&T policy and formulates the precise roles of professional /
expert entities in the planning process, the development of capability
models and product development.
In order to devise an adequate and realistic security and defence
R&T policy the political leadership should:
• Set objectives and ambitions;
• Provide financing, adequate to these ambitions:
• Implement output- and outcome-oriented planning (and later -
management) through program-based management.
The creation of such security and defence R&T policy should ac-
count for:
• Common taxonomy of security technologies, systems, products,
etc.:
• Common models of the life cycle of security and defence products:
• Assessment of technology readiness levels.
No less important would be a mechanism for prioritization that
reflects areas of specialization, e.g., in certain security and defence ca-
pabilities, available capacities, and competitive advantages sought.
In summary, a solid basis for effective R&T policy could be set
through involvement of all major stakeholders in order to:
• Define scope and requirements;
• Define realistic ambitions (at least three distinct levels);
• Define ways to achieve the ambitions:
− on our own (national level)
− on a bi-lateral basis
− working within the framework of NATO Research and
Technology Organization
− working with the EU / European Defence Agency
− in other formats.
A good example for capabilities-based approach in R&T policy is

the EU approach that is implemented in EU Framework Program 7,
Security theme. After an extensive capabilities-based study the Euro-
pean Security Research Advisory Board (ESRAB) developed in 2006 a
detailed European Security Research Agenda. This Agenda underlies
the EU Framework Program 7, Security theme which has 7 main ar-
eas of research:
1. Security of Citizens
2. Security of Infrastructures and Utilities
3. Intelligent Surveillance and Border Security
4. Restoring Security and Safety in Case of Crisis
5. Security systems Integration, Interconnectivity and Interop-
erability
6. Security and Society
7. Security Research Coordination and Structuring
It should be noted that during the last years a number of EU
countries – Germany, France, the United Kingdom, Austria, The
Netherlands, Finland and Romania developed their own National se-
curity research programs. These national programs are based mainly
on the Security theme of FP7.
On the Road to a Bulgarian Security Research Program

There is strong need for the development and implementation of
a Bulgarian national Security Research Program. Such a program
could be developed in close cooperation among governmental R&T or-
ganizations, academia / universities and the industry. The Centre for
National Security and Defence Research (CNSDR) could contribute
with its experience and know-how that was accumulated during the
last five years within the Bulgarian Academy of Sciences.
CNSDR was established in 2002 as a specialized coordination
body within BAS on the basis of a Framework Agreement for Coop-
eration between the Ministry of Defence and BAS. The Centre facili-
tates security and defence research throughout the Academy through
provision of timely and accurate information to BAS institutes, re-
search teams and individual scientists on user needs and programs,

opportunities for bilateral and multilateral cooperation, in particular
within the framework of NATO and EU research and technology ac-
tivities. To this effect CNSDR maintains close exchange with all main
users within Bulgaria – the Ministry of Defence, the Ministry of Inte-
rior, the Ministry of State Policy for Disasters and Accidents, “G.S.
Rakovski” Defence and Staff College, and others. CNSDR maintains a
database of available technologies and the capacity of research units,
teams and scientists, informs potential users and facilitates contacts
and cooperation between researchers and users.
In 2002 CNSDR conducted a major study on Research Support for
Planning the Modernization of the Bulgarian Army: an Inventory of
security research capabilities in BAS. This study was conducted in
close cooperation with Department “National and Regional Security”
at the University of National and World Economy. The study was
used by its end-user – the Ministry of Defence in the Bulgarian Armed
Forces Modernization Plan.
During the last years very active Security R&T Policy is con-
ducted by the Standing Governmental Committee for Protection of
the Population against Natural Disasters and Accidents
(SGCPPNDA). In 2003 a Scientific Coordination Council was estab-
lished within SGCPPNDA. The Centre for National Security and De-
fence Research (CNSDR-BAS) is the administrative Secretariat of the
Scientific Council. The Centre coordinates the applied research of 7
Expert Councils dealing with radiological, chemical, medical, seismic,
meteorological, biological protection and the protection of the popula-
tion and critical infrastructure. The Centre organized two national re-
search conferences on emergency management and critical infrastruc-
ture protection in 2005 and 2007. In 2006 CNSDR co-organized the
TACOM (Terrorist Act Consequences Management) exercise which is
part of the National Crisis Management Exercise “Protection – 2006”.
For five years of its existence CNSDR’s main achievement is bet-
ter coordination and priority setting in the sphere of security research
within BAS. Therefore CNSDR strongly supports the development
and implementation of a comprehensive Bulgarian security and de-
fence R&T program. On the road to such a program a number of steps

have to be done:
• Political will for the development of a Bulgarian security research
program;
• Survey of existing institution-focused security R&T quasi-
program in Bulgaria – especially in the Ministry of Defence, Min-
istry of the Interior and the Ministry of State Policy for Disasters
and Accidents;
• Strengthening the network within the academic sector and
among business, academic sector, NGO-s and governmental in-
stitutions;
• Participation in the Technology Watch project under FP7, Secu-
rity team;
• Application of the Technology Watch taxonomy as a basis for a
Bulgarian taxonomy of security technologies, systems and prod-
ucts;
• Special focus on young scientists dealing with security research.
The PhD policy should be considered as one of the important
elements of Bulgaria’s security R&T program.
Bibliography
1. 2006 Annual Research & Technology Report: Defence Research for
the German Armed Forces in the Process of Transformation
(Bonn: Federal Ministry of Defence, Division Rü IV, December
2006).
2. Defence S&T Strategy: Science and Technology for a Secure Can-
ada (Ottawa: Department of National Defence, December 2006).
3. Guide to Capability-Based Planning, TR-JSA-TP3-2-2004 (The
Technical Cooperation Program, Joint Systems and Analysis
Group, Technical Panel 3, MORS Workshop, October 2004),
<www.mors.org/meetings/cbp/read/TP-3_CBP.pdf>.
4. Handbook on Long Term Defence Planning, RTO Technical Re-
port 69 (Paris: NATO Research and Technology Organization,
April 2003), <www.rta.nato.int/Pubs/RDP.asp?RDP=RTO-TR-
069>.
5. Joint DPA/DLO Technology Management Strategy, Summary

Paper FBG/36/08 (July 2006).
6. The Management of Defence Research and Technology, Report by
the Comptroller and Auditor General (London: National Audit
Office, March 2004).
7. Todor Tagarev, “The Art of Shaping Defence Policy: Scope, Com-
ponents, Relationships (but no Algorithms),” Connections: The
Quarterly Journal 5:1 (Spring-Summer 2006): 15-34.
INNOVATION BENCHMARKING
Assoc. Prof. Stefan Hristov, Ph.D.

Introduction
Innovation benchmarking is used for comparative analysis in the
innovation area. It serves for investigation of good world practices and
improvement of the national systems for scientific research, incl. Bul-
garian defence industry needs. The innovation activity and the tech-
nological renovation are important prerequisites for the sustainable
development of the country and for the economic prosperity of the na-
tion.
In 2006 the global leaders in the R&D performance are Finland,
Sweden, Switzerland, Japan, USA, Singapore and Israel.20 The values
of the global innovation index GSII for those countries varies between
0.76 (Finland) and 0.67 (USA). The closest ones are Germany, Den-
mark, the Netherlands, Canada, England, Korea, France, Island,
Norway, Belgium, Australia, Austria, Ireland, Luxembourg and New
Zealand. The GSII index is within from 0.63 (Germany) up to 0.47
(New Zealand). The third group includes 10 countries with GSII inno-
vation index in the interval between 0.29 (Russia) and 0.32 (Malta).
According to the cluster analysis Bulgaria takes 39th place of 48 coun-
tries with GSII=0.22 and belongs to the last group of 16 countries.
GSII index varies between 0.29 (Lithuania) and 0.11 (Romania). Our
country ranks 29th for innovation capacity, 40th for knowledge crea-
tion, and 42nd for innovation diffusion, 40th for innovation application
and 39th for intellectual property.
20
Hollander, H., A.Arundel, 2006 “Global Innovation Scoreboard” (GIS) Report, De-
cember, 2006.
This research paper is based on index scores of each country, de-

veloped by the World Economic Forum (WEF).21 They underlie in the
fundament of rating systems for global competitiveness,22 for Euro-
pean progress in reform,23 etc. The first system shows the positions of
the 125 countries on the competitiveness of national economies. The
second system rates the EU member states according to the achieved
progress in the realization of the strategic goals. In pursuance of the
Lisbon strategy on the transformation of EU into the most competi-
tive and dynamic knowledge-based economy, benchmarking with the
innovation achievements of world’s leading industrial states - USA,
Japan, China, Korea, Canada, Brazil, Australia, Israel, India, Russia,
etc. is processed.24 Within EU the innovation development of the
member countries25, as well as the development of the big regions26
has been monitored and evaluated on a regular basis. Our country has
launched Innovation.bg27 index which indicates the innovation level of
the national economy and the innovativeness of the Bulgarian enter-
prises.
Rating systems, concerning innovation performance, include
various set of selected indicators. The most frequently used ones are
the key indicators, characterizing the development of scientific-
technical progress such as innovation capabilities, scientific achieve-
ments, R&D expenditures, business environment, technological level,
technical infrastructure, development of information society, higher
education system, business practices, human capital, entrepreneur-
ship culture, intellectual property protection, etc.
21
World Economic Forum, http://www.weforum.org/
22
The Global Competitiveness Report 2005-2007, http://www.weforum.org/
23
The Lisbon Review 2006: Measuring Europe’s Progress in Reform,
http://www.weforum.org/
24
2006 Global Innovation Scoreboard (GIS), http://trendchart.cordis.lu/ eis_2006_global
_innovation_scoreboard/
25
2006 European Innovation Scoreboard (EIS), http://trendchart.cordis.lu/scoreboards
/scoreboard 2006/
26
2006 European Regional Innovation Scoreboard (ERIS), http://trendchart.cordis.lu/
eis_2006_regional_innovation_scoreboard/
27
Иновации.бг: Българската иновационна система в Европейския съюз, Фондация
“Приложни изследвания и комуникации”, С., 2007.
1. International Comparisons
International comparisons have been made on the ground of re-
search and development cost index (RDI), innovativeness index (INI),
technological readiness index (TRI), business sophistication index (BSI),
higher education and training index (HTI), information society index
(ISI), competitiveness index (GCI) and sustainable development index
(SDI). Their values change in the interval between 1 mark (minimum
score) and 7 marks (maximum score) in respective sampling for EU27
and EU10 countries. Table 1 incorporates the 2006 grade scores of the
leading EU countries, CEE members of EU and the scores of our country.
Table 1
Innovation Innovation
Indi- Bulgaria
Leader in ЕU Leader in CEE
cator
country score country score score
RDI Finland 5.90 Estonia 4.06 2.92
INI Germany 5.89 Czech Republic 4.47 3.26
BSI Germany 6.26 Czech Republic 4.96 3.59
TRI Sweden 6.01 Estonia 5.29 3.21
HTI Finland 6.23 Estonia 5.26 4.05
ISI Sweden 5.93 Estonia 5.49 3.09
GCI Finland 5.76 Estonia 5.12 3.96
SDI Finland 6.23 Slovenia 5.00 3.00
Innovation leaders in EU are Finland, Germany and Sweden, and

among CEE countries - Estonia, Czech Republic and Slovenia. RDI
values change in the interval from 2.92 to 5.90 scores, INI - from 3.26
to 5.89 scores, TRI - from 3.21 to 6.01 scores, BSI - from 3.59 to 6.26
scores, HTI - from 4.03 to 6.23 scores, ISI - from 3.09 to 5.93 scores,
GCI - from 3.96 to 5.76 scores and SDI - from 3.00 to 6.23 scores. The
highest grades of EU27 stand for business sophistication – 6.26, sus-
tainable development 6.23 and higher education and training – 6.23;
for EU10 are as follows: information society for all – 5.49, technologi-
cal readiness – 5.29 and higher education and training – 5.26.
Table 2 presents the average scores for innovation performance of
the EU27, EU10 members and score deviation of our country.
Table 2
ЕU27 ЕU10 Bulgaria
Indicator average average deviation deviation
score score from EU27 from EU10
RDI 4.147 3.621 1.227 0.701
INI 4.530 3.921 1.270 0.661
BSI 4.974 4.345 1.384 0.755
TRI 4.641 4.155 1.431 0.945
HTI 4.994 4.628 0.944 0.578
ISI 4.522 3.915 1.432 0.825
GCI 4.895 4.495 0.935 0.535
SDI 4.913 4.294 1.913 1.294
The data shows that Bulgaria has the greatest lag behind from
EU27 and EU10 in the area of sustainable development, development
of information society for all and technological readiness of the com-
panies for the innovation implementation.
Figure 1 displays the innovation profile of our country in com-
parison with EU27 and EU10 countries.
RDI
5
4
SDI INI
3
2
1 EU27
GCI 0 BSI EU10
BG
ISI TRI
HTI
Fig. 1
The European vision of the innovation development is related to

the gradual increase in financial resources for scientific research from
1.8% of GDP in 2005 up to 2.6% in 2010. In the near future the major
strategic goal is 3.0% of GDP to be allocated to strengthen the global
position of EU in the fundamental and applied science. It will further
the economic growth increase in the community.
During the next few years the attention of state institutions and
private companies in Bulgaria should be focused on lagging behind
surmount in the innovation performance compared to the other EU
countries at macro and micro level. It requires taking strict measures
for accelerating the innovation diffusion in the national economy. Ac-
tivation of the corporate management targeting the effective usage of
European funds during 2007-2013 periods is necessary.
2. Factor Models
The present research paper focuses on modelling of relationship
between the chosen variables with the use of the standard structure of
the theoretical model:
Y = f (X),
where: Y - values of the response variable;
Х - values of the predictor variable;
f – function;
In the researched models RDI is considered as a predictor vari-
able and SDI, INI, TRI, BSI, HTI and ISI respectively – as response
variables. The aim is quantitative evaluation of its influence on the
other variables.
Regression relationship between the competitiveness GCI and re-
search and development expenditures RDI is described with the fol-
lowing model:
GCI = 2.1557 + 0.6604 RDI
The designed model shows presence of positive correlation be-
tween the examined variables. Correlation coefficient value r = 0.939
shows a very strong relationship between GCI and RDI. Standard er-
ror of estimation s of the regression model is 0.1912. Coefficient of de-
termination R2 explains 88.2% of the existent variation in the re-
sponse variable GCI. It is determined by the performance of the pre-
dictor variable RDI. Estimated data, contained in ANOVA table 3 is
used for statistical test of hypothesis on sufficiency of the model.
Table 3
Degrees Sum Mean
Source of Freedom of Squares Square F-test P-value
DF SS MS
Regression 1 6.8423 6.8423 187.20 0.000
Error 25 0.9138 0.0366
Total 26 7.7561
Calculated value of F-test amounts 187.20, and theoretical value

7.77 with critical significance level α = 0.01 and degrees of freedom
ν = 1 and ω = 25. Because Fc > Ft could be stated with 99.0% prob-
ability that the present model sufficiently covers the relationship be-
tween GCI and RDI and shows that there is a substantial connection
between them.
The relationship between sustainable development SDI and re-
search and development expenditures RDI is described with the fol-
lowing model:
SDI = 0.4082 + 1.0759 RDI
This model reveals presence of positive correlation between the
chosen variables. Correlation coefficient value r = 0.902, shows very
strong relationship between SDI and RDI. Standard error of estima-
tion s of the regression model is 0.4082. Coefficient of determination
R2 explains 81.3% of existent variation in the SDI response variable,
determined by RDI predictor variable. Calculated data in Table 4
serves for statistical test of hypothesis on sufficiency of the model.
Table 4
Degrees Sum Mean
DF SS MS
Regression 1 18.159 18.159 108.97 0.000
Error 25 4.166 0.167
Total 26 22.325
Calculated value of F-test amounts 108.97 and theoretical value

ν = 1 and ω = 25. Because Fc > Ft it could be stated with 99.0% prob-
tween the factors and shows that there is a substantial connection be-
tween them.
Regression relationship between the innovativeness INI and the
research and development expenditures RDI is described with the fol-
lowing model:
INI = 0.6955 + 0.9247 RDI
chosen variables. The value of the correlation coefficient r is 0.948,
showing very strong relationship between INI and RDI. Standard er-
termination R2 explains 89.9% existent variation in the INI response
variable, determined by the performance of the predictor variable
RDI. Calculated data in Table 5 serves for statistical test of hypothe-
sis on sufficiency of the model.
Table 5
Degrees Sum Mean
DF SS MS
Regression 1 13.412 13.412 221.80 0.000
Error 25 1.512 0.060
Total 26 14.924
Calculated value of F-test amounts 221.80 and the theoretical

tween INI and RDI and shows that there is a substantial connection
between them.
The existent correlation between technological readiness TRI and
research and development expenditures RDI is described with the fol-
lowing model:
TRI = 1.6211 + 0.7281 RDI
chosen variables. Correlation coefficient r is 0.778 and points out a
strong relationship between TRI and RDI. Standard error of estima-
tion s of the regression model is 0.4651. Coefficient of determination R2
explicates 60.6% of the response variable variation TRI. It’s determined
by the performance of RDI predictor variable. Calculated data in Table
6 is used for statistical test of hypothesis on sufficiency of the model.
Table 6
Degrees Sum Mean
DF SS MS
Regression 1 8.3158 8.3158 38.44 0.000
Error 25 5.4090 0.2164
Total 26 13.7248
Calculated value of F-test amounts 38.44 and the theoretical 7.77

with critical significance level α = 0.01 and degrees of freedom ν = 1
and ω = 25. Because Fc > Ft could be stated with 99.0% probability
that the present model sufficiently covers the relationship between
TRI and RDI and shows that there is a substantial connection be-
tween them.
The following model describes the regression relationship be-
tween BSI and research and development expenditures RDI:
BSI = 1.4411 + 0.7281 RDI

The model reveals the presence of positive correlation between
the examined variables. Correlation coefficient r is 0.893 and shows a
very strong relationship between BSI and RDI. Standard error of es-
timation s of the regression model is 0.3409. Coefficient of determina-
tion R2 clarifies 79.7% of the BSI variation, determined by RDI per-
formance. Calculated data in Table 7 is used for statistical test of hy-
pothesis on sufficiency of the model.
Table 7
Degrees Sum Mean
DF SS MS
Regression 1 11.383 11.383 97.94 0.000
Error 25 2.906 0.116
Total 26 14.289
Calculated value of F-test comes up to 97.94 and the theoretical

tween BSI and RDI and shows that there is a substantial connection
between them.
The existent correlation between higher education and training
index HTI and research and development expenditures RDI is de-
scribed with:
HTI = 2.0787 + 0.7029 RDI
chosen variables. The value of the correlation coefficient r = 0,885
shows a very strong relationship between HTI and RDI. Standard er-
termination R2 clarifies 78.3% of the variation into HTI response
variable. It’s determined by the RDI predictor variable performance.
Calculated data in Table 8 is used for statistical test of hypothesis on
sufficiency of the model.
Table 8
Degrees Sum Mean
DF SS MS
Regression 1 7.7512 7.7512 90.13 0.000
Error 25 2.1501 0.0860
Total 26 9.9013

7.77 with critical significance level α = 0.01 and degrees of freedom ν
= 1 and ω = 25. Because Fc > Ft could be stated with 99.0% probabil-
ity that the present model sufficiently covers the relationship between
HTI and RDI and shows that there is a substantial connection be-
tween them.
Regression relationship between ISI and RDI is described as fol-
lows:
ISI = 1.3668 + 0.7607 RDI
The model reveals the presence of positive correlation between the
examined variables. Correlation coefficient r = 0.690 shows a strong re-
lationship between ISI and RDI. Standard error of estimation s of re-
gression model is 0.6323. Coefficient of determination R2 explains
47.6% of present variation in ISI response variable. It’s determined by
the RDI predictor variable performance. Calculated data in Table 9 is
used for statistical test of hypothesis on sufficiency of the model.
Table 9
Degrees Sum Mean
DF SS MS
Regression 1 9.0782 9.0782 22.70 0.000
Error 25 9.9960 0.3998
Total 26 19.0742

tween ISI and RDI and shows that there is a substantial connection
between them.
Conclusion
The defence industry transformation of Bulgaria requires con-
ducting of various market-orientated productions, organizational,
technological, product, marketing and other innovations. However, it
requires considerable improvement of the innovation climate in our
country, on one hand, and significant increase in budget and business
expenditure for R&D as well. Foreign experience shows that propor-
tion between these expenditures should be 1:3, i.е. it’s obligatory pri-
vate companies to increase their expenditures on R&D. Nowadays
Bulgaria spends hardly 0.42% of the GDP on science and research. It’s
necessary to put more efforts in significant improvement of the inno-
vation infrastructure and its concomitant components, as well as at-
traction of foreign direct investments FDI in hi-tech branches of the
national economy.
PERSPECTIVE FOR DEVELOPMENT OF BULGARIAN

MODEL FOR R&D MANAGEMENT IN SUPPORT OF
DEFENCE INDUSTRY
Assoc. Prof. Tsvetan Tsvetkov, Ph.D.

In this paper I present the scope, ideas, implemented and planned

activities concerning Objective 1 (To develop a NATO integrated R&D
Concept and Model as an incremental tool for the improvement of the
national R&D management system), of the Science for Peace project
982063 – Management of security related R&D in support of defence
industrial transformation. The paper has the following structure:
1. Scope of the research.
2. Research methodology.
3. What we have done?
4. Plans for the future.
1. Scope of the Research

The defence innovation system is an intricate system. There are
many elements of the system – such as players, stakeholders, institu-
tions – who interact in a complicated manner. External relations of it
are also complicated. The system is a part of the national innovation
system and relates with its other elements. The actors and stake-
holders in the research process have different and frequently contra-
dictory interests.
The intricacy of the defence innovation system requires, while
developing the concept and model for R&D management, to conduct
in advance analyses at three levels – international, national and de-
fence industry level.
On the international level objects of the research are: interna-

tional organisations, which activities concern defence industry and de-
fence R&D, institutions that could be sources to finance innovations,
research products users. The experience of some countries (both
NATO members and non-members) with developed economy is under
consideration in order to find common principles for R&D manage-
ment and to identify good practices.
On the national level objects of the research are national innova-
tion systems of countries involved at NATO SFP project, national
strategic documents that concern R&D and defence R&D, scientific
potential of the countries – as a whole and specialised in defence R&D.
On the defence industry level the analyses are oriented to actors
in R&D process, stakeholders with their specific interests, specificity
of the defence innovation process, defence industry transformation
process.
2. Research Methodology
The methodology on development of NATO integrated concept
and model (R&DCM) for management of R&D in support of defence
industrial transformation contains the following main points:
Objective of the research – to develop a NATO integrated
R&DCM as an incremental tool for improvement of the national R&D
management system.
Tasks of the research are:
• To explore NATO/EU and developed countries best practices and
regulations;
• To explore defence industry transformation processes in Bulgaria,
Romania and Macedonia;
• To formulate a concept for management of security related R&D
in support of defence industrial transformation;
• To formulate a model for management of security related R&D in
support of defence industrial transformation;
• To serve as a good example to encourage the further synergy and
complementary cooperation between the governmental institu-
tions and science institutions;

• To identify the critical areas and the crucial problems, referring
the defence industrial transformation in Bulgaria, Romania and
Macedonia.
Objects of the research are: NATO/EU requirements, innova-
tion policy and innovation systems of USA, France, Germany, UK,
The Netherlands, Bulgaria, Romania and Macedonia.
Subjects of the research are: defence related R&D manage-
ment process and defence industry transformation in Bulgaria, Ro-
mania and Macedonia. There will be explored: main actors, their func-
tions and obligations, decision-making process and related procedures,
such as financing, programme management of resources for R&D,
R&D projects management. The management process is analysed on
the strategic, organizational and social level.
Research approaches and methods:
The system approach will be a basic research instrument. From
system point of view the defence economy is considered as a system
that includes the following components: the defence innovation sys-
tem and the defence industry. These are also considered as subsys-
tems that consist of interrelated elements. The national innovation
system, the R&D system and activities in support of defence needs.
The system approach is combined with the usage of a vast num-
ber of more-general and specific methods: methods of analysis and
synthesis, analogy method, relationship analysis and causal analysis,
method of analogy, method of comparison, normative method, and
model “snow ball”.
Research structure
The analytical part of the project includes analyses in the follow-
ing directions: currently used procedures for defence operational re-
quirements formulation and defence industrial capabilities identifica-
tion, and the existing capacity of R&D management in the defence in-
dustrial sector of the participating nations. Based on the results of the
analyses a new, NATO compatible R&DCM will be developed. Teach-
ing materials will be created to cover the new Concept and Model and
some modern methods, techniques and tools in the sphere of the R&D
management in support of the Defence Industrial Sector transforma-
tion.
Organisation of the research
The specific research activities will be implemented mainly by the
young scientists with the methodical guidance of the senior research-
ers. A work schedule was created in advance.
Preliminary structure of the Concept and Model for Man-
agement of R&D
At this stage of the project, we consider the following structure of
the new Concept and Model:
Concept:
1. Concept purpose, scope and limitations, aim and tasks of the
document
2. R&D management environment
3. Scope, purpose and matters of R&D management
4. Objectives
5. Alternative R&D policies
6. Management cycle and key processes
7. Management organization, participants and stakeholders
8. Legal and executive framework for R&D management
9. Output
10. Influence on the defence industrial transformation
Model:
I. Specification of the Model and its elements
II. Graphical part of the model
1. Graphical model of the R&D management process
2. Graphical models of other key processes, related to the R&D
management.
III. Add-ons
1. List of operative legal documents regulating the R&D man-
agement.
2. List of authorities taking part in R&D management, internal

for the MoD
3. List of authorities taking part in R&D management, external
for the MoD; List of institutions and entities – potential executors of
R&D projects.
4. List of enterprises – potential integrators of research products
5. List of literature sources and other methodical materials about
R&D management.
3. What Have We Done?

The research work was distributes between national groups in
the project team as follows:
1. Bulgaria (team from Department of National and Regional Se-
curity – University of National and World Economy): UK, The
Netherlands, Israel, NATO/EU regulations.
2. Romania: USA, France.
3. Macedonia: Germany.
Nevertheless research at the national level is continuing some
more general conclusions that can be outlined. The research practices
of countries under consideration are highly diversified and depend on
established in the country traditions, adopted national R&D policy,
established connections between the government, MoD and the de-
fence sector etc. However, there are some common issues:
• Innovators’ market orientation;
• Concurrent product and process development;
• Strategic orientation of the innovation process;
• Technology cooperation and integration;
• Programme management of defence resources for innovation;
• Project management is a main tool to manage the innovation
process;
• It is essential to establish portfolio management of innovation
projects.
We started to explore the national innovation systems of involved
countries. As a base for this we use the Freeman model (Fig. 1).
Figure 1. The Benchmark NIS Model
Source: John Groenewegen and Marianne van der Steen, The Evolution of National
Innovation Systems, JOURNAL OF ECONOMIC ISSUES, Vol. XL No. 2 June 2006.
It is necessary to find the place of the defence innovation system

into the national innovation system and to determine the way both
systems will collaborate effectively. In the same manner it is neces-
sary to find interdependence between defence industrial base and de-
fence innovation system. The existence and functions of the defence
innovation system concern defence innovation process. Elements of
the system have some specific peculiarities.
The innovators can or cannot belong to the defence industrial
base. Into the “innovators” subsystem are included also institutions
who hire the researchers working on innovation activities – independ-
ent consultants, research laboratories, enterprises with own research
potential, specially established research teams etc. Consumers and

also resource providers are mostly MoD and General Staff bodies. All
other players in the innovation process belong simultaneously to the
defence innovation system and the national innovation system.
Research in the defence Industry level still is not started. Never-
theless at the present, it is possible to draw some peculiarities of the
innovation process in support of Defence in comparison with general
innovation process. The most substantial peculiarities may concern
defence products and services, the players and stakeholders in the
process and objectives of the process.
The defence products and services are pure public goods that all
society members consume. Due to several economic considerations the
government is responsible for such goods provision. Their quantity
however cannot be measured directly. That is why it is difficult to
measure the direct positive effect of an innovation project implemen-
tation. For another hand the defence sector requires several compli-
cated and high-tech systems. Their acquisition, modernisation and op-
eration require huge investments.
The multitude of players and stakeholders in the innovation
process is extremely diversified from the point of view of legal posi-
tion, ownership, own innovation potential, financial resources. This
means that it is not possible to apply a same model of relationship be-
tween MoD and the participant in every project. The MoD and Gen-
eral Staff bodies that prepare decision-making and are authorised to
make decisions, act according to the Armed forces law and several
other laws, decrees and regulations. This reflects on the characteris-
tics of their actions and on the decision making process.
The defence innovation process has specific goals that follow the
society’s interests and objectives in defence and security area. These
interests and objectives are dynamic and cannot be easily defined pre-
cisely. Specific acquisition and weapons modernisation directions are
determined by technical progress directions and speed, and forecasts
for changes in security environment. The technical progress increases
the uncertainty in definition of directions for equipment development.
At the same time, high prices of equipment require to adopt weapons
with long life time. That is why when defining the required combat
capabilities for newly acquired equipment, there is need for long term
forecasts (some 20 – 30 years) in a highly uncertain environment. Re-
liability of such forecasts is very low. These thoughts lead to a conclu-
sion, that the new equipment must be multifunctional and capable to
be used in diversified combat situations and to cover broad spectrum
of requirements, not to be highly specialised.
In the contemporary security environment it is not possible to
forecast threats appearance and characteristics even in short term.
This means that the equipment must be not only multifunctional, but
also highly mobile.
4. Plans for the Future

We are planning to continue the research work in the following
directions:
• Identification, collection and exploration of developed countries’
good practices that can be used in R&D management concept and
model development;
• Research of national innovation systems and their interdepend-
ence with defence innovation systems of countries in the project;
• Research the specificity of existing Defence R&D management
systems;
• Defence industry transformation process.
The last issue is a content of the current activity, concerning Ob-
jective 1 of the project. At this stage it is rational to give broad free-
dom of the national research groups to determine independently the
structure and character of their research due to high diversity of ex-
isting national practices. For the Bulgarian team, the preliminary
structure of this part of the research is as follows:
Introduction
1. Development of the Bulgarian defence industry till 1989:
− Till 1944
− Between 1944 - 1989
2. Established trends in development of the Bulgarian defence in-
dustry after 1989:

− Markets decline
− Reduction of the defence products production
− Research potential diminution
− Intellectual property issues solving
3. Established processes in development of the Bulgarian defence
industry:
− Conversion of the defence production
− Privatisation
− Social processes
− Restructuring of the defence production (merger and division)
− Transformation of the military maintenance bases
− Public-private partnerships
− Offset agreements
4. Prospects for defence industry after joining NATO/EU
MAZES IN THE DEFENCE RESEARCH AND DEVELOPMENT

MANAGEMENT MODEL
Colonel Venelin Georgiev, PhD, Dipl. Eng.

State Expert in Armaments and Equipment Policy Directorate
Using such a metaphor in description of a model looks strange

and not very well understandable. The reasons for that are nature and
purpose of any model that has to describe in clear and exact way the
modelled object, to contribute to easier studying and understanding
on its specific functions and characteristics and to support the process
of its management. On the other hand, the metaphorical assertion for
mazes availability in the defence research and development manage-
ment model is correct from the real condition of the activities point of
view and it could be supported by many examples.
Using the metaphor is correctly because of the specific character-
istics of the mazes such as a high extent of uncertainty for the true di-
rection that leads to the exit of the maze, a lack of exact guidance of
the current status of the subject that is situated somewhere in the
maze and high level of existent risk for the rational transition and
reaching the maze exit.
Translated in the language of the activities from the defence re-
search and development area, the characteristics of the maze present
the availability of high level of uncertainty in the management model
and for lack of clear and precise applied processes, procedures and
rules. All these features embarrass the management process of that
specific activity with the current model. In support of defined asser-
tions many examples from practice could be used, presented in a
structural way in a consequence that shows the efficiency of the de-
fence research and development model concerning policy, strategy,
system, programs, projects and processes.
According to the defence policy, which is leaded by the Ministry of

Defence, the activities from the area of research and development are
a base for all decisions connected with the Armed Forces establishing
and development – from defining the required operational capabilities
and force structures, development of the requests as technical specifi-
cations or development of the defence products at all, doing different
types of explorations connected with product exploitation and mod-
ernization to the defence product disposal and utilization. In the Po-
litical Guidance for the period 2007-2008, the Defence Minister high-
lights the necessity of enhancing the efficiency of the defence research
and development activities, improving their organization, manage-
ment and ensuring with financial resources in order to confirm the
role of these activities for the successful realization of the process of
the Armed Forces transformation and for establishing, maintaining
and developing the required operational capabilities.
As a natural continuation and concretization of the defence re-
search and development policy could be used the Defence Acquisition
Strategy and included in it demands for the area of defence research
and development activities. In the strategy, as one of the main goals is
defined the ensuring of acceptance and implementation of the newest
and most developed technologies in the defence. On the other hand,
the investments in the military explorations are presented as a critical
factor for the Armed Forces and defence industry development. The
right direction for improving the defence research and development
activities is focused on the area of the scientifically explorations and
civil technologies. According to the Defence Acquisition Strategy, all
these activities are ensured with enough resources in a qualitative and
quantitative aspect.
What do the practical results show and how could the extent of the
realization of the political intentions be measured?
In the most complete view, the defence research and development
activities management model could be found in the specific regulation
that is approved in 2004. One of the main purposes of this regulation
is to create the necessary conditions and environment for managing
the programs and the projects from the area of defence research and
development in order to be ensured optimal conditions for Defence

Acquisition Strategy implementation. As a document, the Defence Ac-
quisition Strategy is approved in 2004 and has to be periodically up-
dated – the first updating had to be done not later than 2006, in order
the strategy to be in accordance with the dynamic characteristics of
the internal and external environment for its realization.
Taking into account the expired term for updating the Acquisi-
tion Strategy and the current development of the defence policy, in-
cluding in the area of research and development activities, we can say
that it is time for the R&D model to be revised, analyzed and updated.
Using an out of data R&D model in current environment decrease the
effectiveness of the management and it is a proof for availability of
mazes in a process of R&D management.
The financial results for the R&D projects in defence do not prove
the rational implementation on the political intents, which are de-
clared in the Policy Guidance and in Defence Acquisition Strategy.
Table 1 shows the figures for the financial resources, which are
planned for the R&D projects for the period from 2003 to 2008.
Table 1 (in thousands levs)

PDM* PDM PDM PDM PDM PDM
YEAR
2003-2008 2004-2009 2005-2010 2006-2011 2007-2012 2008-2013
2003 3 900 - - - - -
2004 4 000 2 000 - - - -
2005 4 200 2 200 4 000 - - -
2006 4 500 2 800 4 060 2 520 - -
2007 4 800 4 200 4 120 3 180 1 200 -
2008 5 000 4 600 2 180 2 170 2 230 2 230
PDM* - Program Decision Memorandum
From the figures in Table 1 we can make some conclusions as fol-

lows:
− In midterm planning of the financial resources for the defence
R&D projects from the defence budget there are not the desired
extent of succession and predictability. It is obvious that in the
different Program Decision Memorandums for one year different

amounts of financial resources for R&D projects are planned and
the differences are more than 50 percent.
− As a part of the defence budget, the financial resources for the
R&D projects are away from the necessary and desired level. The
results are the same concerning comparison of the expenditures
for the R&D activities in Bulgaria and others NATO country
members.
− With such amount of financial resources that is planned for the
R&D projects, the expectations for effective and efficient results
seem as in a maze.
One of the main proofs for availability of mazes in the R&D man-
agement model could be presented by the results from the analysis on
the quality of the goals defining and planning process. The main fea-
tures of the goals in all areas of organizational work are in force for
the R&D goals. The goals should be clearly defined, easily measured,
realistic and non contradictive. All these features of the goals support
the process of their understanding by the experts and it helps them in
finding the right position in goals implementation process. The goals
with the features, mentioned above, make the management process
easier and with high probability of reaching the desired final results
and achieving the desired end state, described with the stated goals.
How the goals are defined in the area of defence R&D activities?
In the most precise view, the goals for the MoD in area of R&D
could be found in Program Guidance of the Minister of Defence. In
this document the common goals for the defence policy in different ar-
eas and the concrete goals for the different instrumental policies such
as the R&D development policy are defined.
As an example, in the Program Guidance for the period 2008-
2013 the common goal for the R&D activities is stated as enhancing
the R&D effectiveness and improving its organization, management
and financial ensuring in order to achieve a concrete contribution in
transformation of the defence system and establishing the required
operational capabilities.
For the sub policy of the Ministry of Defence “Education, qualifi-

cation, research and development in interest of defence” as opera-
tional goals are defined:
− Enhancing the role of the R&D activities in the process of the
Armed Forces transformation and modernization, Force Goals
implementation and in decisions making process.
− Further integration in the NATO and EU systems for defence
R&D projects by participation in international projects where
Bulgaria has the necessary capabilities and resources.
− Creating concepts and making experiments with participation of
the civil scientists from Bulgaria and other countries.
Dividing on the common goals for the MoD policy in area of R&D
in Program Guidance helps to be defined several sub goals as follow:
− Enhancing the role of the R&D activities in the process of the
Armed Forces transformation and modernization, Force Goals
implementation and in decisions making process.
− Further integration in the NATO and EU systems for defence
R&D projects by participation in international projects where
Bulgaria has the right capabilities and resources.
− Using contemporary systems of arms, technologies and equip-
ment.
− Realization of an active international collaboration in area of
R&D activities.
− Maintaining a high and constant qualitative level for the defence
products during their full life cycle. Optimizing the process of de-
fence products, disposal and utilization.
It is obvious that the goals and sub goals, mentioned above, are
not clearly defined, they can not be easily measured and we can not
say firmly that they are realistic ones. Defined in such way, the goals
in R&D area create the sense of mazes availability in the model for
management of this specific and complicated part of defence policy.
They do not help for improving the effectiveness of the management
process and for reaching the desired end state.
In addition, the MoD priorities in the area of R&D could be men-
tioned, which are:

− Planning and organizing the implementation of the international
R&D projects with participation on the Bulgarian defence and
civil structures.
− Improving the coordination with Research and Technology Or-
ganization in NATO and European Defence Agency end ensuring
the participation of the Bulgarian representatives in their work-
ing sessions.
− Implementing R&D projects from the military scientific organiza-
tions in order to enhance their potential in the Armed Forces
transformation process.
The defined priorities for the defence R&D activities are a real
proof that without clear policy and goals it is almost impossible to de-
cide which are the most important elements with crucial contribution
for achieving the desired final results and end state. On the other
hand the defined priorities for the R&D activities enhance the sense of
uncertainty in reaching the defined goals and results that means the
sense of maze availability in the defence R&D management model.
And finally, the effectiveness of the R&D management model de-
pends on the efficiency of the processes, procedures and practices that
are used in realization of the R&D projects. If they are complete, pre-
cise and correct, the goals and the results seem realistic and achiev-
able in full extent. At the same time, the opposite is true – using in
the practice of R&D projects on unstructured processes creates im-
pression of impracticable mazes availability in the defence R&D man-
agement model.
Table 2 shows the results from the analysis of some demands for
the defence R&D project management that are taken from the guid-
ance for R&D management and Program Guidance.
The analysis of the information from Table 2 proves that, on one
hand with such contradictive processes and procedures it is quite dif-
ficult to be reached the desired final results in the area of defence
R&D activities and, on the other hand – the statement of availability
on mazes in defence R&D model seems quite true and realistic.
Table 2
Demands according Demands

Characteristics
to the guidance according to the
of the processes
for R&D management Program Guidance
1. Term for sending the 20.12.2006 18.05.2007

plans for the R&D pro-
jects for 2008.
2. Initiators of defence – structures from MoD, – managers of the main

R&D projects General Staff, Land programs on MoD
Force, Air Force and and the Armed
NAVY; Forces.
– military scientific or-
ganizations as Defence
and Staff Collage, Na-
tional Military Acad-
emy etc.
– structures directly
submitted to the de-
fence minister
– external scientific or-
ganizations
3. Procedures for ensur- Direction from main pro- Direction from project
ing the defence R&D gram 10 to the initiators initiators to the main
projects with financial of the projects program 10
resources
4. Technology for approv- The initiators send the The initiators of the
ing the defence R&D documents of the pro- projects send docu-
projects jects, which are approved ments to the manager
by a special counsel in of the main program
MoD 10
In conclusion, we can say that the analysis on the status of the

defence R&D model and the examples that have been used in the re-
port confirm the defined these – defence R&D model has to be up-
dated in order to improve its disadvantages, named at the beginning
as mazes. The positive thing in this case is the fact that every maze
has an exit and the actions of reaching this exit depend on the desire
and the capabilities of the person who is in the maze and, on the effec-
tiveness of the activities, which this person undertakes in order to de-
serve the maze.
This fact prompts who is responsible and what has to be done in
order to eliminate the existent mazes in the defence R&D manage-
ment model and to be created the desired conditions for reaching the
final end state on each level - policy, strategy, system, processes, pro-
jects and programs in area of defence research and development ac-
tivities.
COMMAND AND CONTROL INFORMATION SYSTEMS

DEVELOPMENT CHALLENGES

Research Associate Juliana Karakaneva, Ph.D.

Defence Advanced Research Institute –
Rakovski Defence Staff College, Bulgaria
Introduction
There is no doubt about the importance of Command and Control
Systems (C2S) development in connection with decision making in
military and non military operations. C2S performance and experi-
mentation addresses new approaches, frameworks and architectures
to manage the evolution of information systems for Command and
Control (C2) applications. R&D in experimentation will reduce risks
and guide innovations on C2IS theories, methods and tools, and it
should lead to new and useful comprehension of the design, develop-
ment and evolution of C2S. Progress in measurement techniques from
quality of service to measures of effectiveness will guide the develop-
ment of new architectures and functionalities.
C2S are exceptionally complex system covering wide scope of dif-
ferent by nature systems, particularly - tactical communication, intru-
sion detection system, application system, sensor fusion, modelling of
command processes, knowledge-based procedures, human-machine-
systems, geographic information system, 3D-visualisation and interac-
tion, command of unmanned robot systems, etc.
This examination is focused on the Command and Control Infor-
mation System (C2IS) whose outputs are used as command’s immedi-
ate advisor in decision making process.
1. Fundamental
Modern communication and computer technology is the basis of
information systems development and improvement. This trend pro-
vides the creation of new human-machine interfaces, various user pro-
files and visual 2D and 3D representations, allowing precise and
timely information for command processes. The commands have the
possibility to work in the synthetic environment very close to real
conditions. Besides the information, security and reliability are as-
sured on the basis of methods and instruments of new operational
systems.
Furthermore the awareness and understanding of the operations
are moved to new strategy and tactics depending on contemporary
joint and combined missions. The efforts are focused to peace keeping
and peace making operation and operations other than war. For coali-
tion operations interoperability is a key element and can only be
achieved through unambiguous sharing of necessary information.
This requires open flexible and interoperable information infrastruc-
tures among the national systems.
The third important characteristic is the all levels interoperabil-
ity. The problem stays on the one hand in national field – to assure
compatibility among command and control information systems of dif-
ferent armed forces and on the other hand – to work on the interop-
erability among NATO nations command and control systems based
on common standards. For coalition operations, interoperability is a
key element and can only be achieved through unambiguous sharing
of required information.
High level architectures [1] are applied to achieve functional ca-
pability and interoperability between different generation software
applications. This approach is based on the communication protocols
and interfaces and common data bases standards and joint synthetic
battle spaces (Fig.1). In this area Multilateral Interoperability Pro-
gram (MIP) [2] is working to close the gaps under existing database
models. The MIP is involved in the following activities and standards:
Other Simulation
JDLM
C4ISR
SAF
JTLS
Interfaces
JCATS
HLA RTI
Fig. 1
• The (L) C2IEDM is the core of the NATO Reference Model and is
also a view model of NATO Corporate Data Model (STANAG
5523 / AdatP-32).
• Implementation of the MIP specification is a NATO Force Goal
(FG2802).
• NATO Policy on MIP calls for close co-ordination and re-use of
the MIP specification within NATO.
• Bi-SC Automated Information System will use the MIP solution
in its Land Functional Services (LandFS) to interface to national
CCIS, either in HRF/LRF, CJTF or other crisis response opera-
tion or exercise 9.
• NATO Standardization Agreement SO 01-11 calls for the imple-
mentation of MIP specifications.
The future NATO data model is Joint C3 Information Exchange
Data Model (JC3IEDM), whose main characteristics are common in-
terface, exchange mechanism and interoperability.
And last but not least it is very important to join command and con-
trol information system with the simulation system still in the process of
concept development and experimentation [3]. The reason for that sig-
nificance is the necessity of commanders and staffs preparation and

readiness to implement the operational and tactical activity in the new
strategic environment. The use of the term interoperability in certain ar-
eas of information technology is also predominant in the military com-
munity when talking about multinational Command and Control Infor-
mation System Environments (CCIS) and Modelling and Simulation
(M&S). The Multilateral Interoperability Program (MIP) on the one
hand, and the Simulation Interoperability Standards Organization
(SISO) on the other, prevails among others. Adequate support of the
Command and Control process includes the use of military operations re-
search and analysis and other areas of military simulation of an antici-
pated synthetic threat environment1. Instantly, three different instances
of interoperability occur within one single cooperative environment:
− C2IS Interoperability;
− Simulation System Interoperability;
− C2IS / Simulation Interoperability.
These become the essential pillars in interoperability technology
as needed in military decision making processes, training and exercise,
mission rehearsal and last but not least, simulation based acquisition
(SBA).
The current use of CCIS is prepared by training with simulations
and simulators. Besides many alternatives during the decision making
process are experimented through the computer assisted exercises of
staffs. In this connection is contemporary approach to develop CCIS
and simulation system under common data model (Fig.2) and to cre-
ate common data base and appropriate standard interfaces to join
these systems on data level.
2. Situation in Bulgaria
After the beginning of the reform of Bulgarian army a special work-
groups were created to develop concepts for command and control system
and integrated system of modelling and simulation and distance learning
in Bulgarian Army [4]. The working groups comprises of representatives
of Bulgarian Ministry of Defence and Armed Forces.
Conceptual
Reference
Model
MIP Common Data Federation Object

Model Model
C 4ISR SIMULATION
Fig. 2
The purpose of the concepts is to develop wide capability models

and simulations (M&S) application in Bulgarian Army (BA) as well to
provide the basis for modern CCIS of Bulgarian Army. Through the
concepts, the vision, purposes and requirements are documented and
the specific tasks are defined that have to be fulfilled by Bulgarian in-
stitutions to build the systems successfully.
The tasks of the concept are connected with the following aspects:
• To clarify the General Staff’s requirements, concerning CCIS and
the application of M&S;
• To elaborate a strategy and basic purposes to be fulfilled by BA to
achieve the vision and to satisfy the declared needs;
• To define the necessary activities to reach the assigned purposes
according to a time schedule and rational consumption of re-
sources;
• To define the responsibilities of the BA’s institutions for imple-
mentation of these concepts.
The responsibilities for the policy formation of the acquisition,
development, financing and application of systems are shared among
Ministry of Defence, General Staff, Headquarters of Armed Forces
and their subdivisions. These institutions plan, prepare and organize
all activities about command and control and simulation systems ac-
quisition, as well as its application during Command-Post Exercises.
The basic directions in which these capabilities will meet the re-
quirements and necessities of Army transformation process are the
following:
• Improvement the operational effectiveness and efficiency of
Armed Forces;
• Promotion of the process of decision making and interoperability
of Staffs;
• Training for participation in peacekeeping and peace support op-
erations and mission observation;
• Control over operational and combat plans, and analysis of
courses of action;
• International computer-assisted exercises;
• Support of the operational and tactical training of the permanent
dislocation command posts through the M&S mobile capabilities;
• Analysis and operation’s planning. Modelling of the services,
communications and logistics.
• Training and test for joined and combined international opera-
tions;
• Widely profiled education in the military educational institutions
through advanced distributed learning;
• Training of the subdivisions to help the population and civil au-
thority in cases of emergency situations and protection of impor-
tant infrastructure sites.
The wide spectrum of formulated aspects presumes the system’s
development in stages during a long period. It is necessary to define
the tasks achieving the fulfilment of the requirements of the concept.
The performance of these tasks is a multi-aspect process. On the
one hand this process is connected with organization and training of
the personnel to do adequate activities – the service and intellectual
support. On the other hand the acquisition of new technological prod-
ucts presumes the creation of the appropriate technical infrastructure
– communications, equipment, features etc.
Besides, the maintenance of the complex program requires intro-
ducing the standards, training and technological knowledge necessary

for the successful development. In this case the obtaining of the edu-
cation and the creation of the conditions for scientific researches and
projects are very important. It is stipulated to apply the methodology
of the system engineering in the military systems area and especially
the creation and use the integrated decisions in high level architecture
framework.
Conclusions
The strategic objectives are:
• Harmonization of distributed simulations for interoperability
with C2IS: Investigate and advance distributed simulation tech-
nologies to cope with competing approaches and increasing com-
plexities of C2IS. Develop and align technical standards, proce-
dures and implementation strategies of Command, Control,
Communications, Computers and Intelligence (C4I) and M&S.
Improve the interoperability between C2IS and simulation envi-
ronments (e.g. HLA) to ensure that real and experimental C2IS
are well integrated in order to facilitate the introduction of ad-
vanced C2IS techniques and tools, including the investigation of
multi-platform C2IS issues.
• Development of C2IS synthetic environments and modelling to
facilitate experimentation: Investigate and advance C2IS model-
ling and synthetic environments to improve experimentation with
C2IS. Modelling examples include commander, weapon or sensor
behaviour, as well as communication and information system in-
frastructures to model net centric warfare operations and to carry
out the required experiments. Synthetic environments supporting
a C2IS may include a virtual ship or aircraft, a virtual command
post, a virtual battlefield, etc. Such a synthetic framework will
link decision support tools, information and knowledge manage-
ment tools, models, simulations, other real hardware/software
equipment, visualization and people into a common representa-
tion of the C4I world.
Metrics and experimentation for optimum C2IS: Develop metrics

and experimentation environments to identify, quantify and measure
the benefits of optimal information systems. Improve fidelity, resolu-
tion and reliability in modelling C2IS across all hierarchical levels.
The impact of the human-in-the-loop concept, especially in decision-
making, is especially difficult to model given that decisions are made
under many degrees of uncertainty in the scenario, the model and the
outcome. While the correlation of measures with processes requires
considerable insight into the C2IS environments, such measures of
merit will allow choices between competing solutions to be made with
confidence.
References:
1. Sokolowski, John A., Andreas Tolk, Mark Phillips, A Comparison
of Military Synthetic Environments and Virtual Battlespaces,
Virginia Modelling Analysis and Simulation Centre, Old Domin-
ion University, I/ITSEC 2003.
2. Multilateral Interoperability Program, http://mip.org.
3. Menzler, H. -P., M. Sieber, Non-Hierarchical Approach to Couple
CCIS with M&S, Armed Forces Technical Centre for Communica-
tions and Electronics, Germany, Kalvarienberg, D-91171 Greding.
4. Nachev, A., J. Karakaneva, Modelling and Simulation Develop-
ment in the Bulgarian Army, RTO NMSG Meeting, 2005.
SOA BASED BUSINESS MODELLING
Assoc. Prof. Dimiter Velev, Ph.D.

Department of Informatics
Companies are transforming their business models in order to be-

come more responsive to customers and partners, and a key part of
that transformation is to reorganize information resources as sub-
stantially independent and reusable services. Nevertheless many
companies and organizations experience many of the following com-
mon problems in the attempt of introducing modifications in their
business environment and flow of operations:
• Business process that has been created for a previous develop-
ment project cannot be used because of unproven maintenance.
• Specifications cannot be redefined because the people that created
them are no longer available.
• The knowledge of system operation is limited to several employ-
ees only.
• The idea for business modification does not directly and correctly
correlate with the future modifications.
Usually business consists of two main elements [4]:
• Business process. The modelling of business process is done
mainly by using business flow charts that represent the business
processes in the real world. Business knowledge and information
sharing helps for business enhancement and improvement.
• Business data – Companies use huge amounts of complex data
and the problem of the conventional data modelling is it is time
consuming and the need of substantial human resource for it
processing.
The business environments consist of varied set of models for
representing the information flow and exchange between the included

parties: conversations, messages, documents, spreadsheets, Web inter-
faces, mind maps, flowcharts, agendas, schedules, calendars and other
loosely structured forms of information representation. The IT solu-
tions must support these multiple approaches for representing and
exchanging information and the following considerations must be
taken into account [3]:
• People - the human resource aspects of the system. The human
actors involved in the system must be examined.
• Processes - the user processes involved in the system.
• Functions - the functions required to support the processes.
• Business Information - the information required to flow in sup-
port of the processes.
• Usability - considers the usability aspects of the system and its
environment.
• Performance - considers the performance aspects of the system
and its environment
To achieve maximum flexibility and reuse, business environments
often require multiple layers of both application and data integration.
The number of layers really depends on the existing assets. In a suc-
cessful scenario a modern package may already provide high level ac-
tion and entity abstractions. Otherwise legacy packages may require
extremely low-level synchronization to remain in a consistent state.
Most cases will fall somewhere in between. Few modern packages will
be perfect for emerging needs and most low-level synchronization will
already be implemented. Modularity and dependency can even cross
the boundary between application and data integration [1].
SOA (Service-Oriented Architecture) implements the concept of
reusable services and represents the next major step in the evolution
of IT strategies [6].
SOA is an approach to distributed computing that considers soft-
ware functionality as services on a network. Businesses are looking to
SOA as the best way to leverage information technology assets and to
provide the business the agility required to compete in modern econ-
omy. SOA holds promise to companies looking to bring order to an in-
creasingly complex and chaotic IT environment and equip themselves

to manage change.
SOA can be defined as a software design and implementation
methodology for creating loosely coupled software services. It is a collec-
tion of available services on a network that communicate with one an-
other. The services, business process and business data, are loosely cou-
pled and they can be flexibly and easily used and combined in various
ways. The services have well-defined platform-independent interfaces
that support interoperability. The loosely-coupled relationship between
a service request and a service provider characterizes the state in which
the impact of change between the two communicating parties is mini-
mized across dependencies. It is accomplished by limiting the depend-
encies between a service and the request for it. It is designed on the as-
sumption that it is not necessarily specific to any one service requester.
Service orientation provides business users with understandable ser-
vices they can implement into business processes as needed.
As more loosely coupled services are defined and made available
on networks for expanded use and as visual composition and orches-
tration tools are enhanced, end-to-end process-oriented services can
be used to support business requirements to allow for rapid customi-
zation and increased flexibility. That is obviously different from busi-
nesses needing to change huge expensive applications to implement
minor changes to a business process. Hence SOA allows the process
change to take precedence and the applications to follow.
The business process is made up of actors, activities and flows,
where flows can be adorned with details about the specific informa-
tion that is passed. Each activity in the business process is repre-
sented by a business service in the service model. Business services
will be composed of other, (smaller) domain and utility services. Each
information flow in the process is represented by a document in the
information model. Documents are composed of classes from the
shared information model.
This description reflects the relationship for a single process, but
of course the business architecture and the service model are con-
cerned with the totality of processes, services and information. They
are concerned with the present, the near term and the long term.
Thus, the business model must identify all of the processes and infor-
mation that exist today, those that are currently planned or being im-
plemented, and the processes and information that are needed over
time to realize the business strategy and goals.
The business model and the information model can be defined as key
components of SOA. These two components are critical to moving a par-
ticular business environment from simply building services to an organ-
ized collection of related, non-overlapping and compassable services.
The SOA requirements for modelling can be defined as follows [2]:
• Business Level Services - Services are published at a level of ab-
straction that corresponds to real world activity and recognizable
business function. The challenge is the possibility for the imple-
mentation of comprehensive alignment and integration of the
service life cycle with the business product and/or process life cy-
cle.
• Service Based Collaboration - Although services are being widely
used internally and for integration purposes this technical orien-
tation will change soon enough, services will represent the real
business activities. Although services may be simple, they may
also be aggregated from different sources, again reflecting real
world business activities. Obviously there is a real requirement
for service interaction and dependency modelling.
• Separation of Interface from Implementation - Services are of-
fered at a business level of abstraction, which renders the inter-
face a business interface.
• Separation between Provider and Consumer - service-oriented ar-
chitectures must be designed with a view to the ease of manage-
ment. This leads to a design goal of making service specifications
as general as possible.
The process of the SOA based business modelling must describe
[3] today’s services, documents and information, those currently be-
ing implemented, and future services and information, those which
will provide the business capabilities required of the future business
processes. In other words, the SOA service model is directly influenced
by the business strategy and must identify services to provide all the
capabilities required of that strategy. And, the SOA information
model is directly influenced by the business information and must
identify all of the information required for the future processes.
The SOA based business modelling has additional important
goals. It has to manage the sharing of services and information across
processes. In other words, it needs to eliminate redundancy, overlap
and gaps between services so that each business capability is imple-
mented once, by the organizational unit that is responsible for that
capability. And that those services are used by all the different proc-
esses needing those capabilities. In addition, all of the information
shared between services must be identified in the common informa-
tion model. In other words, all services that are related to the same
business concepts must use the same information to describe those
concepts. The SOA based business modelling must ensure that all of
the information passed into and out of the business services (mostly in
the form of documents) is defined in the common information model.
In the process of SOA based business modelling two types of inte-
gration must be performed [1]:
• Application Integration - Application Integration technologies
provide the action-oriented units of the atomic business service
vocabulary. Application Integration is necessary because this kind
of action is not just a series of application calls with format trans-
formations. The primary flow might be perfectly linear, going
from one application to another. Accounting for all the possible
flows requires specifying more complex interaction. To address
the full range of action-oriented possibilities, enterprises need an
application integration platform. At the lowest level, this platform
offers connectivity for communicating with a comprehensive
range of packaged applications, as well as both legacy and modern
platforms running custom applications. On top of the connectivity
layer, it requires its own workflow engine for specifying task se-
quences, conditional branching, and exception handling. There-
fore, the solution also needs facilities for plugging in specialized
logic modules, rules engines, and brokering manual intervention.
• Data Integration - Data Integration technologies provide the en-

tity-oriented units of the atomic business service vocabulary.
Data Integration is necessary because these diverse data sources
use a wide variety of models and the services that consume the
data have a wide variety of semantic requirements. To make en-
tity information available to all the applications that need it, en-
terprises need a data integration platform. At the lowest level,
this platform enables analysts to map data sources to data ser-
vices. Then it has to provide all the query planning and optimiza-
tion features necessary for these services to respond quickly. It
must bridge different transaction and security models, translat-
ing the policies for the aggregated entity into the individual calls
necessary to implement those policies in each data source.
The best way to implement the service model is through metadata
- service contracts, policies, service composition logic, and other meta-
data that represent all the aspects of existing or required services and
their use in the organization. Metadata are the appropriate tool for
such models, because metadata support declarative representations of
dynamic configurations. This declarative nature of metadata is an es-
sential SOA provider and one of the main reasons that the prevalence
of XML has provided the means that characterizes SOA.
The benefits of SOA based business modelling include [5]:
• Clarity: Through a visibly mapped approach, organizations can
optimize those business processes that drive maximum results
and competitiveness.
• Productivity: The modelled and proved can be made available for
reuse throughout the organization, the result of which is en-
hanced productivity.
• Responsiveness: Business process modelling allows organizations
to quickly modify applications to quickly respond to market.
• Business flexibility: Modelling provides the business user with the
tools to modify and simulate business processes and predict how a
new business process will affect the business.
• Measurable metrics: Modelling allows business analysts to define
particular strategic business goals and link them to specific proc-
ess activities and parameters.

• Tighter Integration of IT with business goals: Modelling permits
business analysts to perform the precise modelling of processes
based on resources, roles, organization, information, and business
metric perspectives. Integration also enables business analysts to
perform simulation studies of process models under various con-
ditions to assess process performance, generate performance sta-
tistics, and conduct what-if analysis.
Migrating to an SOA based business modelling will change the
way for developing, deploying and managing the information technol-
ogy used to run business. The SOA based business modelling allows
IT systems to quickly and flexibly respond to changes in the business
environment. As organizations have become more responsive to busi-
ness climate changes, they have looked for ways to adapt their tech-
nology infrastructures to be more responsive. SOA has emerged as a
leading approach to building and sharing applications that run the
business. With SOA (Services-oriented Architecture), organizations
can build components, or services, of applications that can be reused
for other applications and shared across the enterprise to bring cohe-
siveness to business process and results in greater business benefits.
Literature
1. CBDi Forum, Modelling for SOA, http://www.techtarget.com/
2. BEA, Applying a BPM and SOA Approach to Achieve Agile Busi-
ness Integration, BEA White Paper, http://www.bea.com/.
3. M. Rosen, Business Architecture and SOA,
http://www.bpminstitute.org/articles/article/article/business-
architecture-and-soa.html
4. N. Tsugane, T. Asakura, Use of Business Modelling in Require-
ments Definition Phase, http://jp.fujitsu.com.
5. S. Carter, SOA, BPM and Model-driven Development: Creating
the Perfect IT Storm, http://www.esj.com/enterprise/article.aspx.
6. T. Dwyer, Expanding SOA throughout the Enterprise,
http://www.bpminstitute.org/articles/article/article/expanding-
soa-throughout-the-enterprise.html
DEFENCE MECHANISMS AGAINST COMPUTER ATTACKS

“DISTRIBUTED DENIAL OF SERVICE” TYPE
Prof. Nina Siniagina, D.Sc.

Research Associate Stela Ruseva, Ph.D.

Introduction
Typical examples of the Denial of Service attacks are the well-
known attacks Win Nuke or SYN-Flood. They are characterized by
sending of incorrectly formed web packet or by sending by evil-minded
people of a large number of special packets, whose processing takes on
all resources of domain’s controller, which blocks the processing of the
other requests.
What is the underlying principle of the SYN-Flood attack? A vir-
tual connection is established so that two hosts can connect in the net,
according to TCP protocol. When there is a request for connection by
one of the hosts (for example the customer), a TCP –packet with a set
flag SYN is sent to the other host (for example server). The server re-
sponds to the request with set flags SYN and ACK and a virtual con-
nection is made after a confirmation by the customer has been re-
ceived. In this case, if the confirmation by the customer has not ar-
rived, the server is waiting for the response for a definite time, using
for this purpose part of its resources. The attack SYN-Flood consists
in sending of a large number of SYN-packets to establish a connection
without the corresponding confirmation. As a result, the host engages
too much resource for a non-existing connection and cannot process
other requests, i.e., the efficiency of the host is disturbed.
Special systems or inter-network filters to protect the compo-
nents of computer systems can be used for detecting of attacks, type

Denial of Service. The system Real Secure of ISS Company can be
named as an example of a means of detecting attacks. It is installed in
the host under the control of Windows NT or Solaris and not only
does it detect all attacks on the information system, it also prevents
their influence on the operation of the elements of the computer sys-
tem. The protective walls (Firewalls) operate in a similar way but they
can repulse far less attacks.
DDoS attacks differ from DoS in principle. When they appear, the
concept of attacking changes and the existing means of detecting of
IDS (Intrusion Detection System) prove to be ineffective in most of
the cases. The attacks are already accomplished at three levels. It can
be seen from Fig.1 that the evil-minded person (hacker) does not in-
teract directly with the victim. He/She acts with the help of Masters
and Daemons. There are usually several Masters installed in the
heavy traffic hosts (with a broad channel in the Internet). They re-
main unnoticed when the transmitted/received information increases.
Another important moment is that they are often severs (always
switched on) and a restart of the computer is needed to clear the Mas-
ter. The detecting of the Daemons follows after one or several Masters
have been identified. A Daemon is a program of the Troy Horse type,
which is installed on an alien machine (often using the well-known
faults in the software). Having been installed on the machines, the
Daemons get in touch with one of the Masters and receive commands
from it. In this case the attack can be stopped by the neutralization of
the Daemons. It is a problem that the computer with the Daemon in it
does not suspect anything. The only possible way out of this situation
is to handle the control over the Master, but in the more modern ver-
sions of software it is used for the realization of distributed attacks.
The Daemon may not obey the Master’s commands after the start of
the attacks. The latter increases the probability of successful realiza-
tion of the attack. But there is a drawback for the hacker because he
or she will not be able to use this net of daemons for a further attack.
While it is enough to add only a rule for the filtration of the inter-
network screen under the DoS attack, the distributed attacks need
several thousand rules (the attack is carried out by several thousand

Daemons simultaneously). Most inter-network screens are not able to
process such quantity of rules.
Malefactor
Master Master Master
Daemon Daemon Daemon Daemon Daemon Daemon Daemon
Victim Victim Victim
The operating traffic The traffic attack
Fig. 1 DDoS attacks
The general approach to defence against DDoS attacks includes

the realization of the following elements:
• Defence against DDoS attacks;
• Detection of the attack;
• Identifying of the source of attacks;
• Counteraction to the attack.
The defence includes setting of inter-network screens, testing if
the system to make clear the weak points, taking measures to improve
the server’s protection, such as ban of all kinds of traffic uncritical to
the server, optimization of the net infrastructure, etc.
• Detecting of the fact of the attack on the basis of identification of
anomalies in the operation of the server or detecting of misuse, as
well as determining of colossal traffic for a definite protocol, un-
usually high level of loading of the net.
• Different methods to track the packages are used to identify the
origin of the attack when the address of the source has been sub-
stituted. It is possible to put these methods into practice when
keeping the intermediate knots (in the route tables of routers) of
data for passing packages.
• To counteract the attack, new rules of filtration are applied, ob-
tained at the stage of identifying of the source and attempts are

made to track out and make harmless the attacking. The most
advanced mechanisms for protection provide realization of all
these stages
• Different classification schemes of the protecting mechanisms
have been developed to provide security against DDoS attacks.
They structure the objective field of DDoS and make easy the
search of ways of protection.
• CERT organization (Computer Emergency Response Team, [2])
has developed a number of recommendations and requirements
towards Internet users and providers in order to avoid DDoS at-
tacks and to minimize their consequences.
1. Modeling of Security Against Attacks of the Type

Distributed Denial of Service Type
The effective analysis of the attacks on the computer system and
the reactions in answer require a multi-aspect modelling which analy-
ses the structure of the computer network configuration, defining of
the weak points, the possibilities for antagonistic attacks.
The multi-aspect model can be used as a base for attack in real
time. The modelling of the answer can be used as an instrument, es-
timate\ing analytically the security of networks in the real world. The
model presents the components of the network, type of servers, auto-
mated places of work, routers and protecting walls, protocols and ser-
vices.
Fig. 2 shows a version of a model of an attack in which the topol-
ogy of the computer network and the configuration are modelled in
separate tables, corresponding to a “Defining of Computer Network
Type” component.
The main elements are the following tables:
Node Table includes determination of the specific character and
peculiarities of the knots. A computer system is usually considered to
be a knot but it might also be a legal entity in the present model or it
might be a telephone system, an office, etc.
Internet Resource types and names

Protocols Resource
Service Trable List
Attack Defense
Names Spec. Trable
Mission
Filter Table Defense Table File Table
(protocol)
Real Mission
Network Node Table
Table (net) Mission
Specification Config Table Serv. Table
(protocol)
Password Table Role Table

(passwd.)
Routing Table
(net)
Session
Map Table Stacks
Node indexed tables
Fig. 2. Model of attack
Routing Table is generally used to define the route to a definite

customer or to a specified address of the current knot.
Configuration Table defines the configuration of the computer
network for each protocol and each service which can be handled
(software brand).
Filter Table shows the rules, attributed to the routers in order to
filter traffic.
Defence and Defence Specification Tables store the conditions of
defence, which are accessible for each knot.
Password Table is used to present accounts and passwords.
Map Table contains information about positions and dimensions
of the elements in the computer network.
A team of scientists in SPIIRAS [10] are solving the problem of
using multi-agent systems for modelling of complex antagonistic proc-
esses in order to protect information in computer networks. The
originality of the obtained results is confirmed by the fact that, up to
the present moment, the task, based on agents’ technologies for mod-
elling of computer counteraction against evil-minded people (hackers)
and components for protection of information, has not been solved.
The aim of this approach is research and development of mathemati-

cal models of processes for protection of information in computer net-
works, presented as computer and component counteraction to hack-
ers in order to protect information resources of the of computer net-
works on the basis of using formal models and methods of distributed
artificial intellect, including multi-agent technologies.
A set of different models (analytical, hybrid, imitative on the level
of web packets, factual and measured) are used for research model-
ling.
The conceptual model of counteraction includes:
(1) Ontology of application in the field protection of information
which contains a range of applied notions and relations among them.
(2) The interaction of agents belonging to different teams (the
team of hackers and the team of / components of the system protec-
tion team);
(3) Models of individual, group or team behaviour of agents, ex-
pressed as particular intentions, accomplished through scenarios of
agents’ acting;
(4) Communication component, intended for interchange of mes-
sages between the agents;
(5) Models of the medium of operation (the computer network),
including topological and functional components.
A research prototype for modelling of distributed attacks Denial
of Service type and mechanisms for defence against them, based on
imitation of the level of web packets has been built. During the proc-
ess of designing and realization of the agents, the following elements
of the abstract architecture FIPA (Foundation for Intelligent Physical
Agents) have been used: transport and network layer, communication
language and agents’ catalogue.
There have been experimented different scenarios of attacks and
mechanisms of defence, and there have been examined networks with
different structure in which different security policies have been real-
ized. The experiments have shown the possibility to use the suggested
approach for modelling of perspective defence and analysis of protec-
tiveness of the designed networks.
The basic result of the project is a creation of an integrated ap-

proach to build information protective systems, operating in aggres-
sive, antagonistic surrounding.
There have been solved a number of additional problems and
there have also been developed models of the components of fake in-
formation systems to mislead hackers. There have been developed
models and methods to analyze vulnerability, identify the plans of
agents – hackers, there have also been made specification and verifica-
tion of computer network security policies, as well as monitoring of
their realization.
On the basis of ontology, a distributed base of knowledge about
modelling of processes of computer counteracting have been devel-
oped, which is shown in Fig.3. This ontology structures the main fa-
miliar types of attacks and their relationship. It includes a macro level
at which it describes the structural relations of the multitude of at-
tacks and a micro level, at which it describes the realization of the
particular attacks in the form of sequences of attacking actions. The
upper level of the protective ontology mechanisms against DdoS at-
tacks builds the knots which set the levels of protective mechanisms
(system, network and global). At the lower levels of ontology these
knots define the particular protective mechanisms.
DDoS Defense Mechanisms
System level Network level Global ...

mechanisms ... mechanisms ... mechanisms
Scanning Boarder Routers Improving hosts

tools security
Client bottlenecks Firewalls Ingress Using globally

Filtering coordinated filters
Moving target defense Active
Monitoring Multops Egress Tracing the IP address
Fitenning of sources of DDoS attacks
Load Balancing ...
ICMP Probabilistic IP Tunneling - IP Overlay Controlled Puchback
Traceback Traceback (Marking) flooding
IP Traceback using an Ingress Filtering & Honeypots
algebraic approach Egress Filtering
Fig 3. Ontology of the protective mechanism

There have been identified two main types of components of the

attacking system: Daemon – an agent, directly stacking DoS and Mas-
ter, - an agent, coordinating the other components of the system. The
Daemons are able to attack at different modes of operation. The latter
influences the ability of the defending team to protect, identify and
block the attack and also to track and eliminate the agents of the at-
tack. The Daemons can send attacking packets with varied intensity,
to replace the address of the sender and to do all this at varied fre-
quency.
On the basis of the INET Framework there has been developed a
prototype of the media for multi agent modelling of network attacks
and the corresponding protective mechanisms. There have been real-
ized programming means emulating the operation of FTP and HTTP
servers, as well as programming means for the customer interface,
which enables the administrator to interact with the components of
the system and control them. There have been studied experimentally
the possibilities of accomplishing a delusion for the hackers when real-
izing attacks of different kinds.
There have been devised models, methods and prototypes for ac-
tive analysis of the protectiveness of computer networks. They are
based on automatic generation and accomplishment of distributing
scenarios of attacks, with counting the diversity of hackers’ aims and
their levels of knowledge. They are intended to be realized at different
stages of the compute network life cycle, including the stages of design
and operation.
The suggested approach is founded on the applying of a complex
of hackers’ models, based on expertise knowledge, generation of sce-
narios of attacks, evaluating of the level of protection of the computer
network, etc. The outcomes of the operation of the system for protec-
tion analysis, based on the suggested approach, resulted in the discov-
ered vulnerability, tracing (graphs) of the possible multi step attacks,
weak points in the computer network, owing to which are these at-
tacks based on. Similarly, the different ways to assess security can be
used to evaluate the level of protection of the computer network and
its components, as well as to compare different configurations of the
net and application if the policy of safety.

As a basis for research in the field if modelling of a counteraction
to hackers and protective systems for protection of the Internet, there
have been used developments from the following fields: agent-oriented
modelling; controlling actions of agents; data input systems, based on
the prediction of intentions and plans of the opponent; reflex proc-
esses; theoretical game modelling; modelling of attacks on computer
networks; modelling of processes for protecting of information etc.
There has been used a method for system analysis and the theory of
the big systems, the methods of distributed artificial intellect, the the-
ory of protection of information, the theory of imitative modelling, the
theory of non-automatic devices and syntax analysis, the theory of
merging of information, finding out knowledge and data, the methods
of object oriented design, the theory of protocols and agent’s commu-
nication language formal logic and model checking.
2. Program and Apparatus Means of Protection Against

Distributed Denial of Service Types of Attacks
Of all the 4 elements, related to protection, the first one is the
most important: providing of maximum good protection – warning of
the attack. There have been put into practice a lot of attempts for
automation of this process. A specialized solution is FloodGuard [12].
FloodGuard is a programming-apparatus complex (4 cm high, 44,7 cm
wide, 68,6 cm long; weighing almost 16 kg). The functional chart of
the product is shown in Fig. 4. This system has detectors on its pro-
tected walls, communicators and routers which constantly track the
traffic and create its profile (or mask) according to such characteris-
tics as volume of packets of data, type, source, aim, etc. When anoma-
lies appear, the detector instantly raises an alarm and activates the
actuators, sending them information about these anomalies, the
source of attack, the size of the parasite traffic and the type of the
sent packages. The actuators are placed in different segments of the
net, on the routers, so that they can constantly follow the traffic and
receive data about parasite packets. When parasite packets have been
detected, the actuator immediately sends an alarm signal to the pre-
ceding module, standing on the way of the traffic before the actuator,
the recommendations being activating of filters of the corresponding
routers. In this way, the barrier for the avalanche of attacking data is
raised and the harmful traffic is blocked temporally.
Fig. 4 Chart of operation of FloodGuard system
Intel offers a system, patented by the engineers David Putzolu

and Todd Anderson, which modifies the routers in such a way that
they automatically react to the alarm signal of the attacked computer
[13]. It is supposed that the alarm signal contains a copy of the harm-
ful packet. The routers immediately create a new profile (mask) and
cut out all similar messages. If it is detected that the harmful message
passes through the raised barrier then the alarm signal changes and
the barrier is set in such a way that it totally blocks the parasite traf-
fic. Intel’s suggestion is technologically similar to the one, suggested
by Reactive Networks two years ago. Intel offers a production of
routers of a new generation with an Intel security module, which can
identify and block the harmful traffic by themselves, while at the
same time Reactive Networks sells its complex successfully.
Conclusion
The following conclusions can be drawn as a result of carried out
studies and analysis:
Each server (web, ftp, dns) in practice is vulnerable to DDoS at-
tacks. Efficient counteraction to attacks of such kind has not been dis-
covered so far and specialists only give recommendations.
There is a tendency in the last years that people need less and
less knowledge to realize attacks of such kind and consequently the
system administrator should have more knowledge and skills to pro-
tect their net.
It is not easy to avoid DDoS attacks because of difficulties con-
nected with their detection. Determining of the beginning of the at-
tacks of such a kind, compared to the normal operation of the server,
is defined by a great number of factors, which are unlikely to be iden-
tified by a single algorithm for protection.
Literature:
1. http://www.sans.org
2. http://www.cert.org
3. "Checkmate Network Security Modelling," discex, p. 0214,
DARPA Information Survivability Conference and Exposition
(DISCEX II'01) Volume 1, 2001.
4. http://www.ddosworld.com/
5. http://4.staff.washington.edu/dittrich/misc/ddos/
6. http://www.denialinfo.com/
7. Detecting Distributed Denial of Service Attacks by Sharing Dis-
tributed Beliefs, Tao Peng, Chris Leckie, Rao Kotagiri.
8. A Covariance Analysis Model for DDoS Attack Detection, Shu-

yuan Jin, Daniel S. Yeung.
9. A DoS-Resistant IP Traceback Approach, Bao-Tung Wang, Hen-
ning Schulzrinne
10. An Active Distributed Defence System to Protect Web Applica-
tions from DDoS Attacks. Xiang, Y., Zhou, W.
11. Multi-agent Modelling and Simulation of Computer Network
Security Processes (of “a game of network cats and mice”) Igor
KOTENKO Intelligent Systems Laboratory, St. Petersburg Insti-
tute for Informatics and Automation of Russian Academy of Sci-
ences (SPIIRAS) NATO ASI'05 – Nork, Yerevan, Armenia , Octo-
ber 1-12, 2005
12. http://www.reactivenetworks.com/
13. http://www.newscientist.com/article.ns?id=dn3528
THE MANAGERIAL DECISIONS BY DEFENCE INDUSTRIAL

TRANSFORMATION IN THE CONFLICTOLOGICAL
CONTEXT
Mr. Ivan Tsanov

The managerial decisions by defence industrial transformation in

the conflictological context are not good investigated from the scien-
tific point of view. Furthermore the scientific publications in that area
could be found very rarely. The reasons are from the objective and
from the subjective nature. That causality isn’t our object of investi-
gation. Undoubtedly such investigation has to be made. Our main
purpose is to present the panoramic view of that complicated prob-
lematic and also to look for some possible ways to resolve it.
The conflictological method of approach (as ontology, gnoseology
and praxiology) is a modern scientific interdisciplinary tendency com-
ing into view from the problems of the social practice [1] [2]. In the
beginning of the XXI century the biggest political-global formations
(EU, USA, Russia, and China) as well as Bulgaria are raised against
unseen and unprecedented before challenges from unknown kind and
character. The planet is turned out in the situation with the conflicts
and the contradictions as a trivial round. The big thinkers and schol-
ars of the modern times understand that the picture of the world is a
totally changed and offer the new untraditional approaches and meth-
ods for its description, explanation and prognostication. The conflic-
tological method of approach is namely such untraditional and syn-
thetic method. In essence the conflictological method of approach is
further (of today) perfection of the dialectical method – i.e. of the de-
velopment obtained a splendid mode still in the works of the great
Hegel. We dare even say that without the conflictological method of
approach (predominantly in the social sciences and the humanities)
will be difficult to realize considerable scientific break and to under-

stand the open and the secret strengths of the dialectic (development).
Those in full power refer also for our scientific area – the managerial
decisions by defence industrial transformation.
The conflictological context means that we consider the manage-
rial decisions by defence industrial transformation into the context
(area) of the contradictions and the conflicts – i.e. without equilib-
rium. Of course that not means that the managerial decisions by de-
fence industrial transformation are made only in the conflict area. On
the contrary considerably part of them passed without conflict or by
low level of the conflictological intensity (difference, polarization). We
are but interested for the high conflictological intensity and determi-
nate from it states.
The managerial decisions are relative good investigated scientific
problem. Some of the greatest world’s researchers and investigators in
the different area (management, economics, political science, sociol-
ogy, psychology) are clarified the essential parts from the theory and
the practice of the managerial decisions [3] [4]. But the situation with
the special areas of the managerial decisions is different. Here is also
the area that interested us – making the managerial decisions in the
conflictological context – i.e. in the presence of the conflict situation.
In that case the questions aren’t less then the answers [5]. But by all
the cases the managerial decisions by defence industrial transforma-
tion play the key role and are in the crucial position. According us
that axiomatically assertion don’t even has to give a proof.
By the defence industrial transformation are at hand the great
numbers of factors. But it seems to us that the leading factors are two
– the economy one and the politics one. In which relations they are
who the leading factor is all the same – the complicated questions
without categorical answer. That could be seen at the institutionally
level. For example each NATO member can choose the accepted duties
and responsibilities quite alone. That of course concern also for the
defence industrial transformation. Which way to choose, which model
to follow the origin of the strategically partners – the questions are
exceptionally from the sphere and the practice of the managerial deci-
sions. All that demonstrates that the problem isn’t invented but the
fully real is (even a problem of the day) – still waiting the scientific
explanation.
What could we do? The first steps are made. The conflictological
theory and practice are elaborated but not in full. On the problem re-
garding the managerial decisions in the conflict situations (conflic-
tological context) is worked. The defence industrial transformation is
going on to some extent. The other question is – if the direction is
right and what about the effectiveness of the transformation. Cate-
gorically the binding of all components in unified systematically rela-
tion and the scientific explanation are situated in the future. We also
must to extrapolate the knowledge in the practice. When, where and
which way all that will be do? It is difficult to gives the categorically
answers. But most important is that the scientific cycle and the scien-
tific researching in that area already start and the first hopeful results
are available.
References
1. Димитров,Д. Й. Конфликтология.,С.,Стопанство, 2003.
2. Димитров, Д. Й. Конфликтознание. Велико Търново, Faber,
2006.
3. Simon, H. A. and Associates. Decision Making and Problem solv-
ing. Washington DC, National Academy Press, 1986.
4. Drucker, P. F., The Essential Drucker: The Best of Sixty Years of
Peter Drucker’s Essential Writings on Management, Harper
Collins Publishers, 2003.
5. Цанов, Ив. Проблемът за вземане на управленско решение в
конфликтни ситуации. – В: Икономически алтернативи, бр. 2
(67). С., УНСС, 2005.
PRACTICES FOR R&D MANAGEMENT 171
Part III.
PRACTICES FOR R&D MANAGEMENT
PUBLIC-PRIVATE PARTNERSHIP IN BETWEEN

EUROPEAN TECHNOLOGY PLATFORM AND JOINT
TECHNOLOGY INITIATIVES

University of Polytechnics of Bucharest, Romania
European Defence Market a Very Particular Issue

During the last decade more often appear the claim for a single
European Defence Market, disregarding that Europe still has not a
single groceries market and Europe is unable to take advantage of its
NATO ally, the USA.
It looks like Europe shall have more modest goals in common De-
fence procurement as long as for now on European landscape there
are only: 23 AFV programs, 3 aircraft fighters, 3 frigates families, 3
aircraft carriers, and 6 assault firearms and all of these under the po-
litical government of: 3 different Kingdoms, 7 types of Republics and
more than 16 Parliament rules.
Unlike USA, Europe is a more complex grid of networks in all ar-
eas, and the ‘networking’ process it is still in its infancy (fig 1). In De-
fence aria the European landscape is heavily unbalanced, too. Six
countries spend 23.5 B /year in Defence Investment, while nineteen
countries spend 2.5 B /year in Defence Investment. All EU countries
share the same security problems but no one has the same schedule,
requirements and policy.
More, Defence procurement is directed by specific requirements,
therefore the tendency to be tailor made as local industries are used to

lobby their governments. Thus it appears reasonable to have industry
as a major player in the elaboration of cooperative programs, and
European Industry stakeholders themselves claims to have more bi-
and multilateral cooperative programs to promote specialization by
marketing prowess.
Fig.1 European Technology Needs vs. USA national

networking structure28
There is a heavy pressure on the EU to let industry to build-up its

28
Edgar Buckley, THALES at EDA/DTIB Conference, Brussels, 1st February, 2007
own cooperative networks (example: Space with Astrium versus

Thales) and to borrow the USA ‘lessons learned’ model to value past
cooperative programs (re. Typhoon)
Define and Sustain Europe’s Defence Technology Needs

The scope for more pooling between Member States in particular
technology domains was to establish the nature of the future EDTIB
and how to proceed from here to there?
It is reasonably well known now what Europe’s defence technol-
ogy needs are.
For instance, both France and the UK have published lists of
their priority requirements, which largely match one another and
which track closely also with the comprehensive material on this sub-
ject published by the USA, and it is unlikely that other European as-
sessments will vary significantly.
Where Europe lags behind the US in this area (apart from the
level of investment) is that, unlike the US, EU has no overall or com-
mon assessment of the strength of these needed technologies insofar
as they exist under European control. European technology (both civil
and military) is splintered between different Member States and there
is not pooled responsibility for them to any significant extent. There is
even a greater distinction between defence and civil or dual technol-
ogy when it comes to common investment (see FP7 settlements).
So, it becomes imperative to answer how defence technology is
sustained in practice and to put in front the importance of funded De-
velopment programs, as R&T spending (fig.2) represents only about
one-third of what is needed to sustain the technology base (and about
half of that is funded out of profits by the defence companies them-
selves). The other two thirds come from funded development projects.
And since we all know that national defence programs will be insuffi-
cient to sustain nationally-based technology into the future, these
programs will increasingly need to be cooperative in one form or an-
other.
Funded development External Internal

programs R&T R&T
To sustain the defence technology base we must provide a

sufficient "drumbeat" of funded development projects ...
Increasingly, these will need to be cooperative.
Fig. 2 Research and Technology spending:

budget architecture
2 or more European
national pool
technology domain X
Country A Country B
Domain X Domain X
Equality of access and joint responsability to support R&T
Bi- or multilateral equity across domanis
Fig.3 Base of pooling concept on Defence R&T
The concept of pooling goes way beyond that of Security of Sup-

ply, it suggests that there are certain technology domains that can
truly be shared between 2 or more countries, which means guaranteed
access, even when one of the partners disagrees with the use intended
by the other and it means joint responsibility to sustain the technol-
ogy base through funded R&T and R&D, regardless of the geographi-
cal location of the resources involved.
Of course, there are many domains where such arrangements will
be impossible – for example, hypersensitive areas such as cryptogra-
phy, and areas where third nation relations exclude it, such as strate-
gic systems and intelligence, or where the technology originates out-
side the partner countries. There will also be other constraints, such
as the need to achieve value for money and equity in the distribution
of the economic benefits, all these being very sensitive issues.
But, for good reasons, technology investment remains outside its
scope. The fundamental reason why it remains outside is that the
leading defence industrial member states wish to continue to support
critical technology and industrial capabilities within their control and
do not wish to see the results of their investments diluted across the
whole of Europe.
What this means in practice is that in parallel with continuing ef-
forts at the European level to strengthen the DTIB (fig.4) , we should
expect smaller groups of Member States, domain by domain, to pool
their technologies, their technology investments and their markets;
and on this basis signal to Industry that they are ready to see their
industrial facilities further consolidated.
European DTIB
R&T
Cooperation
Market
Consolidation
Domain DTIB
pooling
FP7
European DTIB synergies
Fig.4 DTIB among National and European pooling initiatives

Without such parallel and intermediate arrangements, it will not

be possible to achieve a significantly stronger EDTIB than exists
now29. And furthermore the situation will deteriorate. We are increas-
ingly in a “share it or lose it” situation; the sooner we realize it the
better. In parallel, it should work with the Commission to ensure that
Europe obtains the maximum benefit in the defence field from our
parallel investments in dual technology research through FP7 and fu-
ture Framework Programs.
It is likely therefore that pooling is the only way forward so far as
creating larger markets for R&T products is concerned. Similarly, fur-
ther industrial consolidation will depend to a significant extent on the
willingness of governments to share common industrial resources.
Nevertheless, pooling clearly offers a practical way forward to re-
duce uneconomic duplication of facilities and to strengthen the overall
European defence technology base.
“Everyone must have the opportunity to find their own place in
such a European DTIB. Excellent second- and third-tier companies
must have full and fair opportunities in the new European-sized mar-
ket. Non-traditional suppliers, and especially SMEs, must be actively
promoted. Old Europe, if I can use that phrase, must not ignore the
tremendous human capital to be found in “New Europe” – in the re-
cently-enlarged European Union. We would like to see more sub-
contracts and more investment, coming from the big Western Euro-
pean prime contractors into Member States”30.
Nowadays, European pooling initiative already gains at least two
R&D cooperative ‘templates’: European Technological Platforms
(ETPs) and Joint Technological Initiatives (JTIs).
What are Public-Private Partnerships for R&D?

Public-private partnerships are joint initiatives between publicly
and privately funded organizations involved in research united to
reach common goals and to boost Europe's research capacity. Under
29
Ibidem 4
30
Ibidem 2
the EU's Framework Programs for Research and Development two

such types of partnership exist: European Technology Platforms
(ETPs) and Joint Technology Initiatives (JTIs). In essence ETPs allow
public and private stakeholders to jointly define research needs while
JTIs are a way of implementing large-scale applied and industrial-
based research activities based in part on the needs identified by
ETPs. ETPs are not funded by the Framework Program but JTIs can
be.
European Technology Platforms (ETPs) help industrial and
academic research communities in specific technology fields to coordi-
nate their research and tailor it to a common “strategic research
agenda” (SRA), which sets out R&D goals, time frames and action
plans for technological advances that are relevant to industry and so-
ciety. Strategic research agendas typically seek to overcome barriers
to the development, deployment and use of new technologies. These
barriers may have to do with, for example, how research is organized,
outdated regulations, lack of common technical standards or a need
for new ones, lack of funding, disinclination to accept new technolo-
gies, or a shortage of skills and training.
ETP stakeholders agree to support their strategic research agenda
financially and to monitor its implementation. In the Commission’s
view, each ETP should represent all major stakeholders, including
small and medium-sized firms, provided that they are willing to pool
their knowledge and resources and possess the requisite R&D expertise.
What do ETPs do for industry and academia? - for industry and
academia, ETPs can help to
• build consensus around research and technology development
strategies and other
• measures needed to turn research results into marketable prod-
ucts;
• build partnerships to share risk, pool resources, and compete
worldwide; and
• speed up innovation, thanks to knowledge and experience sharing.
For the European Commission, ETPs can help to: develop com-
mon approaches to accelerate technological progress and take-up of
new technologies; improve the return on public and private research
investment, boost industry’s competitiveness and meet society’s
needs; and boost research investment in Europe.
Meanwhile, the European Commission can help ETPs by: provid-
ing advice and guidance (e.g. on the European dimension of their
work), drawing the ETP stakeholders’ attention to relevant EU-
funded research programs and policy frameworks, and helping to es-
tablish appropriate links between ETPs and relevant national R&D
programs in the EU Member States.
What Does the European Commission not do for Etps?

The European Commission would not interfere on ETPs general
organization by any decisions or recommendations, along with other
inputs to policy-making, as well it does not “earmark” EU research
budgets for ETPs or their members. A research projects that supports
ETP aims must be submitted for EU research funding in just the
same way as any other. It will be evaluated in the same way, and if se-
lected, will be co-funded by the Commission, in the same way as any
other research project so it does not give ETPs any form of “privileged
access” to the European Community budget.
How Does the European Commission Assess a Would-be

ETP?
To assess whether a proposed ETP could add value, the Commis-
sion must assess whether: key stakeholders proposing an ETP in a
given, clearly-defined, field are prepared to pool their resources to
achieve common goals, and there are clear benefits to be had from
structuring and coordinating a research effort and from linking re-
search with regulation or deployment measures. This would include,
for example, a need for consensus-building around technical stan-
dards, and EU Commission help is really needed to foster co-
ordination and structuring. There are areas where a research com-
munity is “self-organizing”, and Commission intervention would not

add any real value. In the view of the Commission’s Directorate Gen-
eral for Information Society and Media, ETPs are needed only in ex-
ceptional cases, and should not become commonplace.
What are Joint Technology Initiatives (JTIs)?

There are cases in research where the sheer scale of resources in-
volved justifies setting up long-term public-private partnerships such
as JTIs. These combine private sector investment with national and
European public funding, including funds from the EU's research
framework program and, possibly, also loan finance from the Euro-
pean Investment Bank. JTIs can be established on the basis of Article
171 of the Treaty. This allows the Commission to set up joint under-
takings - independent legal entities that can receive funding from any
source and are open to all - for the efficient execution of Community
research programs. They will contribute considerably to raising Euro-
pean, Member State and private R&D investment in the technological
fields concerned and, like ETPs, to improving the impact through con-
centrating efforts and resources and avoiding fragmentation.
JTIs fall within the EU's 7th Framework Program for Research
and Development which was officially launched in January 200731. For
example, at present two JTIs in the ICT domain are ongoing (both
ARTEMIS and ENIAC are currently ETPs):
• The embedded systems JTI, ARTEMIS, meant to sustain
Europe’s world lead in embedded systems, specialized computer
components dedicated to a specific task that are part of a larger
system. It was recently signalled by European's Ministers as being
of strategic importance for Europe's economy and should start as
soon as possible.
• The nano-electronics JTI, ENIAC, is crucial for building future
applications.
31
Memo/06/438,Brussels, 21 November 2006;
Two JTIs are being presented today. The embedded systems JTI,
ARTEMIS (IP/06/1589), will sustain Europe’s world lead in embedded
systems, specialised computer components dedicated to a specific task
that are part of a larger system. It was recently signalled by Europe's
Ministers as being of strategic importance for Europe's economy and
should start as soon as possible. Europe believes that the computing
systems of the future will be "embedded" in everyday electronic de-
vices all around us. In the same way that desktop computing of the
80's and the internet in the 90's led to waves of IT revolution, a third
wave of "embedded intelligence" is around the corner which will lead
to the creation of new markets that we cannot currently envisage. The
Artemis Joint Undertaking aims to position Europe at the forefront of
this revolution which contrasts with the dominance of non-European
technologies in desktop computing and internet.
ARTEMIS first began in June 2004 (see IP/04/804) as a European
Technology Platform (see MEMO/06/331). It aimed to bring together
key players in embedded computing from many industrial sectors with
17 major companies. One of its core tasks was to define a common
Strategic Research Agenda which essentially should attract invest-
ments from stakeholders.
The Innovative Medicines Initiative will create a € 2 billion
research programme over 7 years, jointly with the pharmaceutical
industry. This programme will support the development of new
knowledge, tools and methods in order to bring better and safer
medicines quicker to the market.
The aim of IMI is to improve considerably the environment for
pharmaceutical research in Europe and overturn the trend of reloca-
tion in this crucial sector. In 1990, major European companies spent
73% of their worldwide R&D investment on EU territory. In 1999,
that was reduced to 59%. The Framework Programme will contribute
€ 1 billion €, to go directly to SMEs and universities. These will under-
take research that serves the generic, pre-competitive needs of the
pharmaceutical sector. The pharmaceutical companies will match this
€1 billion by undertaking research and development in projects with
these SMEs and universities.
For the JTIs the actual start depends on the timing of the Coun-
cil Decision to be taken later this year as part of the Portuguese presi-
dency. It is expected that ARTEMIS and IMI will start with the
first calls for proposal early in 2008.
Another example of ongoing JTI, a tool for providing better value
to the customer, sharpening industries and encouraging the evolution
of the EDTIB, as co-operation may offer a better approach to the same
ends, was that ministers from 20 countries signed the formal agree-
ment launching a €55 million Joint Investment Program for R&T
aimed at force protection, which was approved in November 2006.
This program is based on a new funding mechanism which will set a
precedent for future collaboration in Defence R&T, in line with the
Strategy agreed by the Steering Board. The signing clears the way for
a first call for proposals to be issued to more than 250 potential par-
ticipants in the contributing countries.
Annex 1
European Technological Platforms (June, 2007)
1. Advanced Engineering Materials and Technologies - EuMaT

2. European Nanoelectronics Initiative Advisory Council - ENIAC
3. European Technology Platform on Smart Systems Integration -
EPoSS
4. Future Manufacturing Technologies - MANUFUTURE
5. Future Textiles and Clothing - FTC
6. Mobile and Wireless Communications - eMobility
7. Photonics21 - Photonics
8. Photovoltaics - Photovoltaics
9. Plants for the Future - Plants
Annex 2
European Technology Platforms on Information and
Communication Technologies
Expected
ETP Aims Launched Founding Members
benefits
Smart systems Bring together Firms: Smart 05/07/06 Austria Technologie- und Systemtechnik
integration private and public Systems Integration AG, Boehringer Ingelheim microParts
(EPoSS) stakeholders to co- should boost the GmbH, CEA – LETI, Continental
ordinate smart Competitiveness of Automotive Systems, Drägerwerk AG,
systems research in entire sectors such as EADS Deutschland GmbH, EPCOS AG,
relation to aeronautics, Fiat Research Centre (CRF), FICOSA
automotives, automotives, International, S.A., Fraunhofer Institute
aerospace, telecoms homeland security, for Reliability and Microintegration IZM,
medical technologies logistics, medical Infineon, Interuniversity MicroElectronics
and logistics equipment and Center IMEC, MGI Metro Group, MIRA,
process engineering. Robert Bosch GmbH, Siemens VDO
Automotive AG, Vermon SA, VDI/VDE-IT,
Citizens: Volkswagen AG, VTI Technology Oy, VTT
socioeconomic, health Information Technology www.smart-
and environmental systemsintegration.org/public
benefits.
Integral Satcom Prepare for Firms: maximize 20/01/06 Accenture, Acorde, Adianta, Aersat, Aetheric
Initiative convergence and opportunities for Engineering, Agilent Technologies, Alcatel
( ISI) integration of Business Alenia Space, Ansur Technologies, ASMS-TF,
broadcasting, consolidation and ASTER, Atos Origin, AUTH, AWE
broadband, and growth. Communications, BUTE, CEA-LETI, Cedetel,
mobile satellite CNES, CNIT, Create-Net, CTTC, DLR, E2e
communications into Citizens: Services, EADS Astrium, Edosoft Factory,
the global benefits in the areas Elsacom, EMS Satcom, Enteos, ESOA,
telecommunicati on of Europe wide and Espaci, ESYS, ETRI, Euroma, Eutelsat,
network international Fraunhofer IIS, Gilat, Graz University of
infrastructure, in broadcasting, mobile Technology, Hispasat, Hollycroft, Horama,
support of all forms communications, IASA, ICCS, ICO, Idate, IMST, Indra Espacio,
of space broadband access, Inmarsat, Integrasys, Intracom, Isdefe, ISTI,
communication and bridging the digital Jast, Joanneum Research, Jozef Stefan
exploitation. divide, safety, crisis Institute, Kell, Mavigex, Metodos y
management, and Tecnologia, MOSSA, Moviquity, NCSR, Nd
disaster relief. Satcom, Nera, Newtec, NOA, NTUA, OHB,
OpenSky, ONERA, Promospace, Rose Vision,
SatEXPO, SatNEx, SES Global, Sibsuti,
Sirius Satellite Radio, Space Engineering,
Space Hellas, Supaero, Technical University
of Cartagena, Telenor, Telespazio, Teletel,
TriaGnoSys, TTI, Turin Polytechnic,
Universitat Autonoma de Barcelona,
Photonics Establish Europe as a Firms: closer 02/12/05 (Inter alia) Alcatel, Barco, Bookham, Carl
(PHOTONICS21) leader in the collaboration to Zeiss, DaimlerChrysler, Fiat, Fraunhofer,
development and ensure that increased Jenoptik, Laserlab Europe, Osram, Philips,
deployment of R&D activity Sagem, Trumpf Tyndall National Institute
photonics in five translates more www.photonics21.org
industrial areas efficiently into
(Information and successful products.
Communication,
Lighting and Citizens:
Displays, Consumer electronics
Manufacturing, Life applications such as
Science, and Security) large flat colour
as well as in displays for
Education and computers and TVs,
Training. medical applications
such as microsurgery
and non-invasive
imaging.
European Boost the Firms: maintain 07/10/05 KUKA, ABB, COMAU, Philips,
Robotics development of Europe’s leadership Finmeccanica, SAFRAN, EADS, Thales,
Platform robotic businesses in industrial robotics INDRA, Dassault Aviation, BAE Systems,
(EUROP) within Europe and and expand it into the Electrolux, Zenon, RURobots, OCRobotics,
bring the benefits of emerging service and Qinetiq, CEA, Fraunhofer
capable robot services security markets as www.roboticsplatform.com
to European citizens. well as to the space
market through
modularisation and
standardisation.
Citizens:
assistive technologies
for a better quality of
life, improved
security, and
intervention in hostile
and dangerous
environments
Networked Develop new software Firms: more flexible 07/09/05 Atos Origin, British Telecom, Engineering
European and electronic business models, Ingegneria Informatica S.p.A., IBM, HP,
Software and services architecture, easier to develop Nokia, ObjectWeb, SAP AG, Siemens,
Services based on open services Software AG, Telecom Italia S.p.A.
Initiative standards. Telefónica, THALES Group. www.nessi-
(NESSI) Citizens: wider range europe.com
of services, easier to
use, greater privacy
and safety.
PUBLIC/PRIVATE PARTNERSHIP FOR DEFENCE

TELECOMMUNICATIONS

Assoc. Prof. Dragomir Pargov, Ph.D.

State University of Library Studies
and Information Technologies, Sofia, Bulgaria
Introduction
After the tragedy of the 11 of September 2001 in the USA, a crea-
tion of protected telecommunications in defence and security sector
became a problem of present day.
Realizing absurdity of own experience to protect information re-
sources without a participation of all interested sides, what are all
state structures, industry, private capital and ordinary citizens, the
Pentagon starts an active propaganda of its vision about national
problem “number one”. The example of this tendency is Defence In-
formation Assurance Program (DIAP32) in which participate leading
companies as Lucent Technologies, IBM, Microsoft, Intel, Cisco, En-
trust, HP, Sun, GTE, Bay Networks, Axent, Network Associates, Mo-
torola that is focused on information security foundation, building not
only for defence infrastructure but for whole American society in
nearly ten year. This is also the purpose of National Strategy for the
Physical Protection of Critical Infrastructures33.
32
http://kiev-security.org.ua (10.10.2006)
33
US The National Strategy to Secure Cyberspace (US Government, February,
2003);http://www.whitehouse.gov/pcipb/physical_strategy.pdf (05.10.2006).
In Bulgaria as many other countries, the topic of the day is a

creation and introduction into operation of “e-government”. An im-
portant part of realization the secure network is a decision about the
transfer of objects and capacity in favour of Executive Agency “State
security and defence network” in pursuance of the Act № 168, 2005 of
the Ministerial council. The aim is the separation of long distance
communication objects of defensive purpose and war-time capacity
from communication network of Bulgarian Telecommunication Com-
pany34. The state decision of problem suggests that the privatization
of Bulgarian Telecommunication Company don’t give a possibility for
successful public private partnership (PPP).
The decisions of other European Union countries are focused to
the conclusion of long-term agreement as for example: the MOD (UK)
signed the contract with BT/INCA in 1997 for a 10-year period. The
whole process operates under the principles of the private finance ini-
tiative and public private partnership.
The decisions of public-private partnership in EU and NATO
countries are examined in detail within one of the reports presented
at the department of National and Regional Security35 seminar held
last year. Because of this fact the present paper first of all deals with
the conditions and undecided problems in the descriptive area for
Bulgaria.
The present analysis is based on long experience of authors in a
field of telecommunications usage in defence sector. The paper shows
an assessment of the possibilities for secure communications building
into partnership with private sector.
34
ДВ, бр. 62 от 2005 г., виж също така: Устройствен правилник на изпълнителна
агенция "Държавна мрежа за сигурност и отбрана" в сила от 01.01.2006 г. Обн. ДВ.
бр. 62 от 29 Юли 2005 г., изм. ДВ. бр. 96 от 30 Ноември 2005 г., отм. ДВ. бр.2 от 6
Януари 2006.
35
Zhelyazkova, M., Practices for public-private partnership in the field of information
technologies in defence sector, Annual International Workshop on Economics and
Management of Security and Defence, Sofia, June, 23-24, 2005, University Publishing
“Stopanstvo”, Sofia, 2006.
Main Problems
Public-Private Partnership Definition36: A Public-Private
Partnership (PPP) is a contractual agreement between a public
agency (federal, state or local) and a private sector entity. Through
this agreement, the skills and assets of each sector (public and pri-
vate) are shared in delivering a service or facility for the use of general
public. In addition to the sharing of resources, each party shares in
the risks and rewards potential in delivery of service and/or facility.
Six keys to successful PPPs:
• Statutory and Political Environment;
• Organizational Structure;
• Detailed Business Plan;
• Guaranteed Revenue Stream;
• Stakeholder Support;
• Pick Your Partner Carefully.
In this paper the authors analyze the current statement of first
five aspects.
Historical remarks:
• Up to 1989 the secure communication building was a task of a
government at all.
• After 1999 the first successful partnership is done in the area of
military network building among the company “Electron-
Progress” and Ministry of Defence and Ministry of Interior and
these ministries gained mobile communications based on TETRA
standard.
TErrestrial Trunked RAdio (TETRA) is an open standard for ter-
restrial radio-network, created by European Telecommunications
Standardization Institute (ETSI) through collaboration between con-
sumers, producers, regulators and providers (http:/www.tetramou.org)
and became a world standard. TETRA is implemented with a purpose
as follow:
36
http://www.ncppp.org (12.2006)
To define a new digital radio-communication technology for spe-

cial use (Private Mobile Radio, PMR) to satisfy the needs of institu-
tions for public security and safety and to replace conventional sys-
tems.
• To meet the communication requirements of European authori-
ties (under agreement) for European integration and collabora-
tion as well NATO peacekeeping operations.
• To use effectively frequency bandwidth.
• To be used as unified common infrastructure for mobile commu-
nication of authorities and institutions of public security and
safety.
Currently the new digital secure state network and protected
communications aren’t built.
In the next statement the authors suggest the possible solutions
in this area.
First Component: Statutory and Political Environment.
The main policy of state is that National Agency of Information
Technology and Systems (NAITS) has to create the collaboration out-
line in private sector.
The main directions37 of the policy are:
• Introducing the capital by stimulation the new participants on
market; insurance of legal stability; to put restraints on partici-
pants who have significant influence on market; to reduce the
regulation to the necessary minimum;
• Insurance the possibilities of choice and encouragement a compe-
tition;
• Protection of consumers interest;
• Development the following principles of the regulation-clear de-
fined strategic purposes and maximum restraint of regulating in-
37
http://www.afcea.org: Вачков, П., Конференция „Държавната политика по сигур-
ността и надеждността на съобщенията, информационните системи и технологии”
София, 27 април 2006г. Нова политика в областта на информационните
технологии и съобщенията.
terference;
• Guarantee of legal stability and technological independence of
regulating decisions.
We consider that the creation of a similar program could be
started in the Republic of Bulgaria stressing on development of Na-
tional Telecommunication Infrastructure in the sphere of de-
fence and security.
The basic objectives of this program should be:
• Continuation of construction and modernization of telecommuni-
cation infrastructure by further digitalization to achieve Euro-
pean standards /according to EU-Bulgaria Accession Negotiations
on Chapter 19 “Telecommunications and Information Technolo-
gies” as well as providing of interoperability with telecommunica-
tion networks of NATO countries;
• Creation of the National system for Crisis Prevention and Man-
agement as well as similar wartime system;
• Establishment of an Integrated European Number for emergency
112;
Second Component: Organizational Structure.
This structure isn’t created yet. Mainly, it will be based on exist-
ing structure, subordinate to NAITS. According to the engagement on
chapter 19 “Telecommunications and Information Technology“, after
Republic of Bulgaria joining to the European Union and the formation
of united European market, the project of Act on Electronic Commu-
nication (AEC) is developed, which introduces the European Union le-
gal framework 2002 and ensures the conditions as follow:
• To continue European integration and harmonization in legal
area;
• To develop the market relations, based on principles of competi-
tion;
• To implement flexible and technology-neutral regulation; gradu-
ally minimizing of sector ways for the regulation and application
of the principles of common competitive law;
As well realizing the continuity concerning the active legal order

on purpose the consecutive application the principles of:
• Stability of the normative order;
• Transparency, objectivity, equality, proportionality, a possibility
of the prognosis and consultation;
• The effective use of limited resources, including way-leave rights.
According to these statements, having in mind the insufficient
state funding for development of such programs and systems in the
Republic of Bulgaria, the possible methods for developing a National
Telecommunication Defence and Security Infrastructure are:
• Using appropriate EU funds under Public-Private Partnership
initiatives;
• Establishing Public-Private Partnership by direct investments of
private companies avoiding the BTC monopoly;
• Creating the private operator’s network attends the state institu-
tions;
Third Component: Detailed Business Plan.
Because of missing structure and unclear authority it isn’t possi-
ble to create business plan. NAITS strives for ensuring the precondi-
tions for the following processes:
• Development of the market of electronic communication net-
works and/or services;
• Creation of conditions for the equality of the companies;
• Encouragement of the competition;
• Guarantee of freedom and confidentiality of the communications;
• Protection of consumer’s interests and give the opportunity for
all-purpose services;
• Effective usage of limited resources and protection of public in-
terest;
• Ensuring the national security and electronic communications in
crises conditions;
• Encouragement the common market of electronic communication
in European Union.
The Agency will try to create close collaboration with private sec-
tor with a purpose of participation in creative and constructive initia-
tives through free competition and to become main power of the Bul-
garian information society development.
Fourth Component: Guaranteed Revenue Stream.
The results of PPP are effective if they meet the necessities and
have guarantee for the usage. The example of this fact is the mobile
operator TETRA, built based on fully private capital.
The owner of system – company ProWave had got the license for
the project before one year and half but until this moment Bulgaria
was one of the European countries without public TETRA network.
Since several years the systems on this technology has got Ministry of
Interior (for Frontier Police) and Bulgarian Army. The equipment for
these systems was provided by companies respectively Nokia and Mo-
torola and for new one – by Italian Selex Communications.
The standard TETRA is digital technology for mobile transfer of
voice and data, which has vastly higher security, compared to other
platforms for cellular communications. This is the reason that TETRA
is used exceptionally in the security sector organizations or in such
functioning in urgent conditions, for example the police, fire company,
emergency service, airport security service, nuclear power station, etc.
The company ProWave offers the services to corporative clients and
state institutions and firms.
Fifth Component: Stakeholder Support.
This component includes:
• Public Sector Employees;
• Private Sector;
• Labour Unions;
• End Users;
• Competitive Interests;
The requirements are:
• Open and frank discussion between sectors;
• Knowledge for FACTS (no myths);
• Translation possibility.
Public Employees
Recognize a valuable resource:
• Understanding of existing infrastructure;
• Understanding of local environment;
• Potential source of political influence (both positive or negative);
• Applies to both union and non-union employees.
Private Sector
• In-country private sector:
− A potential source of political influence;
− Understanding of open procurement process;
− Understanding of capital requirements and realistic
evaluation of the sources;
− Understanding of benefits to them.
• International private sector
− Understanding the legal/political environment;
− Understanding the open procurement process.
End Users/Customers
Probably the most critical groups are:
• The necessity of open, clear and full disclosure;
• Explanations of benefits and costs;
• Explanations the reasons for using a PPP, including financial and
technical area.
Conclusions
On the basis of this research the authors make the following con-
clusions:
1. The experiment to achieve effective public/private partnership in
the area of fixable network for security and defence is unsuccess-
ful (since 2005 the state controls the assets of Bulgarian Tele-
communication company through National Agency of Information
Technology and Systems).
2. In the area of mobile communications the first private network is
based on TETRA-standard. But this network isn’t still effectively

used by the institutions connected with a security and defence.
3. The existing normative base isn’t sufficient for successful pub-
lic/private partnership and this is the reason for the difficulty
with the practical realization of state strategy and policy in this
area.
References
1. http://kiev-security.org.ua (12.2006).
2. http://www.whitehouse.gov/pcipb/physical_strategy.pdf
(5.10.2006).
3. The National strategy to secure Cyberspace (US Government,
February 2003),
4. Устройствен правилник на изпълнителна агенция "Държавна
мрежа за сигурност и отбрана" (в сила от 01.01.2006 г. Обн. ДВ.
бр.62 от 29 Юли 2005г., изм. ДВ. бр.96 от 30 Ноември 2005 г.,
отм. ДВ. бр.2 от 6 Януари 2006 г.)
5. Zhelyazkova, M., Practices for public-private partnership in the
field of information technologies in defence sector, Annual Inter-
national Workshop on Economics and Management of Security
and Defence, Sofia, June 23-24, 2005, University Publishing
“Stopanstvo”, Sofia, 2006.
6. http://www.ncppp.org (12.2006)
7. http://www.afcea.org (12.2006) Вачков, П., Нова политика в
областта на информационните технологии и съобщенията,
Конференция „Държавната политика по сигурността и
надеждността на съобщенията, информационните системи и
технологии”, София, 27 април 2006 г.
DEVELOPING A RESULTS-ORIENTED MANAGEMENT FOR

DEFENCE R&D, AS A PART OF THE IMPROVEMENT OF
BULGARIAN DEFENCE RESOURCE MANAGEMENT’S
TECHNOLOGY
Colonel Dobromir Totev

It is evidently that the Armed Forces must tackle their tasks with
the resources they have. This underlines the vital importance of real-
istic and clear strategies, at both national and international level, for
correct prioritization between tasks, correct resource use, but also for
building a sense of purpose and transparency. There is also need for
permanent adaptation and for skills of change management, and the
things have to be achieved in a framework of structures, equipment
and budget that is not elastic at all.
Results-based management is a life-cycle approach to manage-
ment that integrates strategy, people, resources, processes and meas-
urements to improve decision-making, transparency and accountabil-
ity. The approach focuses on achieving outcomes, implementing per-
formance measurement, learning and changing, and reporting per-
formance.
Enhancing the efficiency of the Defence Resource Management in
Bulgarian MoD is required some additional changes and improve-
ments as:
• Fully implementation of an effective Force Management
System (FMS), which will set identification and develop-
ment of required operational capabilities (ROCs) of the
Bulgarian Armed Forces and its synchronization with the
other two sub-systems—the Integrated Defence Resource
Management System (IDRMS) and the Acquisition System
(Figure 1).
NATO PLANNING / BULGARIAN FMS
Accountability of Programs (including FGs implementation)

Acquisition
Proposals
Defense •Material & Services
Acquisition •Capital Improvement
•R&D/New Items
Strategy •Disposal Procurement
Procurement
& Disposal &
Plans Disposal
National
National
National
National
National
Documents
National
Documents Program Program
National
Documents
Documents
Documents
Programming
Objective Decision Budget Budget
Documents
Documents Guidance
Memorandum Memorandum Execution
NATO
FGs Integration Force
ROC Defense
Integration Force
within Planning
NATO
•Future Force
•Mission Needs the Defense Programs Questionnaire Plan Integration
Ministerial Statements
Guidance •IPPL
•IUPL 13 Programs
•Stationing Plan
•Preliminary Force
Integration Plan
NATO •National Position
Force Goals on FGs
(FGs) Proposals
Figure 1
Fully implementation of an effective Force Management System

is vital to ensure that critical elements of defence planning are syn-
chronized to produce a trained and ready force capable of accomplish-
ing all assigned missions. The management of the activities to produce
a trained and ready force is a complex task with many interrelated
elements. The Force Management System is a system for the man-
agement of change within the Bulgarian Armed Forces. It provides
the tools for effective and prioritized application of resources and a ra-
tional basis for decision-making. The System enables effective trade-
offs among scarce resources to modernize and create a more effective
Bulgarian defence system.
These systems enable the Ministry of Defence and Bulgarian
Army to manage the process of change, necessary to modernize their
organizations and units.
The ROC System provides organizational commanders with a

methodology and structured system to determine required operational
capabilities derived from national goals and objectives operating
within the existing strategic and national environment, design a fu-
ture force structure with those capabilities, and develop a plan to
achieve those capabilities.
The Purpose of an integrated Ministry of Defence and Bulgarian
Army Acquisition System is to translate required operational capabili-
ties into affordable, reliable and sustainable armaments, equipment,
services, and infrastructure.
• A need for a more complete and realistic vision in the De-
fence Programming Guidance (DPG);
• Enhancing the Role and Contribution of Senior Leader-
ship;
• Introduction of an integrated MoD - It is a hallmark of de-
mocratic civil-military relations and the issue is directly related to
civil-military relations, civilian oversight over armed forces and
the efficient use of defence resources in the public interest38
• Continuing education - There is a need for continued educa-
tion, especially in the major program offices, concerning (1) the
role of supporting plans (such as Plan 2015 and the recent mod-
ernization and force management plans) in the program devel-
opment and review processes, and (2) the role and responsibility
of program managers in developing and proposing balanced and
integrated multi-year programs. There is a very important need
for education of senior civilian and military leadership of MoD
and GS about ruling and using of FMS, and regulations of plan-
ning and programming of defence resources.
• Adequate financial Projections;
• Preparation of Adequate Risk Analyses;
• Using the Balanced Scorecard (BSc) methodology;
• Defence Resource Management’s Technology environ-
ment should be improved by using tools for modelling and sys-
38
Velizar Shalamanov, ‘Integrated Defence Management Model in the Context of the
Strategic, Defence Review’, Security Focus Newsletter 1/2 (June 2003)
tematic analysis of the programs.

Developing a Results-oriented Management for defence R&D in
Bulgarian MoD is a timely task for the following reasons:
• It is important to improve procedure for the allocation of financial
resources among competing research and development projects
under the constraints of decrement funding.
• There are lacks of adequate efficiency measures. The MoD should
develop additional measures to address better the efficiency and
need for results-oriented measurement of the value of its overall
package of projects for modernization.
• Need of providing expert Science & Technology (S&T) advice and
knowledge to departmental decision makers.
• Helping support the Bulgarian industrial capability in defence-
related S&T.
Targets and performance management are in very close relations.
Targets are a measurable performance or success level that an organi-
zation, program or initiative plans to achieve within a specified time
period. Targets can be either quantitative or qualitative and are ap-
propriate for both outputs and outcomes. Targets are a significant
driver of “behaviours” and will need to be considered carefully and re-
viewed regularly. The target set will be simple with reasonable data
collection burden. For example there are 4 metric sets:
1. Based on delivery of Military Capability outputs. This will include
the equipment acquisition contribution as well as an assessment
of sustainability.
2. Based on change to Military Capability. This will be a new target
set measuring the ability of the Capability Change Planning proc-
ess to respond to strategic policy guidance and resource con-
straint, reflecting any shortfall in achieving both.
3. Based on the delivery of discrete projects to new equipment per-
formance, cost, time. This will include support costs associated
with equipment in-service.
4. Based on the overall health of the acquisition system, including
the efficiency of the units responsible for defence acquisition, and
will also examine lead indicators drawing management attention

to longer term trends and issues.
Using the Balanced Scorecard (BSc) methodology39 and worked
out on its basis performance metrics can improve significantly per-
formance management of IDRMS. The BSc performance management
framework may help to evolve and become more robust in its ability to
report on value added and demonstrate results for Program Managers
in Bulgarian Armed Forces.
Balanced Scorecard methodology translates strategy into action.
Working through the balanced scorecard process enables management
to define those key perspectives that will drive the business to success,
as well as to define how to measure them. The balanced scorecard
helps organizations align multiple strategies, from various units, to
the organizational strategy by linking their deliverables to those key
perspectives that drive the business. Balanced scorecard provides a
clear understanding of the strategy, and how it is supported by the
commitment to objectives from various divisions and functional units
of the organization. Ongoing performance measurement and periodic
evaluation are key tools through which progress is determined. Per-
formance measurement and evaluation present valuable opportunities
to learn and adjust so that the desired results may be achieved. BSc
provides reporting on results through the provision of integrated fi-
nancial and non-financial information. Results-based information is
used for both internal management purposes and for external ac-
countability to Parliament and Taxpayers. The reporting phase also
provides managers the opportunity to reflect on what has worked and
what has not: a process of learning and adjusting that feeds into the
next planning cycle. And finally it is important that the BSc concept
and terminology can remain constant regardless of political changes.
Every key business driver and sub-measure, used to measure
39
Robert S. Kaplan and David P. Norton, “The Balanced Scorecard: Translating Strat-
egy into Action”, by the President and Fellows of Harvard College, 1996 and Robert
S. Kaplan and David P. Norton, “Strategy Maps”, Narvard Business School Publish-
ing Corporation, 2004
drivers, must have a person assigned who has responsibility for the
performance of such driver. The balanced scorecard allows organiza-
tions to recognize key areas in their business and assign key responsi-
ble persons to maintaining the best performance and processes for
those areas. It is very important to implement this norm to R&D Pro-
jects Managers.
Measurement focuses attention on what is to be accomplished and
compels organizations to concentrate time, resources and energy on
achievement of objectives. Measurement provides feedback on pro-
gress toward objectives. If results differ from objectives, organizations
can analyze the gaps in performance and make adjustments.
For support the complex functions such as many defence tech-
nologies, the connection to a bottom line or to the mission of the or-
ganization is not always obvious. By integrating the principles of per-
formance measurement into management practices, the connection
becomes clearer.
There is an example of Defence Balanced Scorecard for defence
R&D and Acquisition, which is suitable for Bulgarian MoD40:
Performance Indicators
Strategic Targets
(Lagging/lead Indicators)
Equipment Acquisition: 1. Achieve at least 90% of Key User Requirements for
Acquire equipment effec- ongoing projects during the exact time period.
tively and efficiently. De- 2. Average In-Year variation of forecast costs for Acqui-
liver the Equipment Pro- sition projects, of less than 1% in FY…
gram to time and cost. 3. Average In-Year variation of forecast in Service Dates for
Proper resource planning Acquisition projects, to be no more than 1 month in FY…
and optimal use of re- 4. The level of application of systematic methods to peri-
sources odically and objectively assess effectiveness of programs
in achieving expected results, their impacts, both in-
tended and unintended, continued relevance and alter-
native or more cost-effective ways of achieving expected
results.
40
For preparation of this example as a main source is taken BSc introduced for MoD of
the UK.
Strategic Targets
R&D: Conduct R&D activi- 1. Number of R&D studies and projects.
ties; Ensure the continuing 2. Number of high qualified experts engaged in manag-
availability of sound tech- ing defence projects.
nical advice and of ad- 3. Assessment the level of effectiveness of the using the
vanced and affordable capacity of national science organizations, and the level
technology of developing relations with allied countries from NATO
Informed Decision makers. and EU on the field of defence R&D.
Expert knowledge of de- 4………………………………
fence products and tech-
nologies.
There has to be a consistent, comprehensive and through-life ap-

proach to acquisition by applying structured guidance and instruction
that is continually assess and strengthened to embed best practice and
experience.
There is an example of Defence Balanced Scorecard which is ap-
plicable for overall Bulgarian MoD activities: 3
Strategic Targets
STRATEGIC OUTCOMES
/Delivering what the Government
expects/
Operations: Conduct success- 1. Ability of the Armed Forces (Army) physically
fully all operations and other mili- to deploy its forces on operations - 40%;
tary tasks. 2. 8% of the Army, ...% of the AF and …% of the
Navy to be deployed on operations or other mili-
tary tasks during an exact period;
3. Operational capacity of equipment – actual

equipment V’s required to be more than …..
4…………………………………
Effectiveness: Deliver military 1. Ensure that more than 70% of units report no
capability to meet the Govern- critical or serious weaknesses against their re-
ment’s requirements. quired peacetime readiness levels during an exact
time period. (example of Lead Indicators)
2.………………………………….
Strategic Targets
Defence Policy: Formulate and 1. How Bulgaria meets its commitments in sup-
implement Defence policy. Pro- port of the NATO Response Force? – level of op-
vide defence policy that matches erational capability …
new threats and instabilities. 2 ‘Usability’ of military forces - meeting usability
targets of NATO?
3………………………………….
RESOURCE MANAGEMENT
/Planning and managing our re-
sources/
Annual budget: Maximize our 1. Variation between planned and real execution
outputs within allocated finance of resources by defence programs, during the
resources. Control resource ex- Budget Year to be no more 5%
penditure within budgeted limits 2. Actual in-year cost growth – 3%
3 Budget predictions are met and actual expenses
vary less than 3% from budgeted expenses.
4. Number of Internal and external audit reports
to be more than …
5. Assessment of the level of transparency of mili-
tary budgeting41 …
6……………………………………
Manning Levels: Recruit, train, 1. Manning Balance within each service (sur-
motivate and retain sufficient plus/deficit over the year) – between -10% and
military personnel to provide the +1% of the requirement.
military capability necessary to 2. Gains to Trained Strength (numbers of trained
meet the Government’s strategic recruits provided to the front line) – more than
objectives 80% of Army, 85% of Navy, 90% of AF.
3. Medically Fit For Task – at least 90% of Service
personnel to be medically fit for tasks.
4. Premature Voluntary Release Exits – no more
than 7% for Army, 4% for AF, 4% for Navy
5. Age profile of the Armed Forces to be …
6. Rank profile of the Armed Forces to be ..
7………………………………..
41
In the framework of “Budget Transparency Initiative for SEE” was created a
“Methodology for Evaluation of the Budgeting Process in the SEE countries”, which
may serve as a performance indicator. Todor Tagarev, “A Means of Comparing Mili-
tary Budgeting Processes in South East Europe”, “Information and Security”, Vol-
ume 11, 2003.
Strategic Targets
Defence estate: Have an estate 1. Identify for disposal land and buildings with a
of right size and quality, effec- value of over ……M
tively managed 2. Infrastructure required to fulfil Defence
Forces’ roles V’s actual infrastructure to be more
than ….
3…………………………………..
Reputation: Enhance the repu- 1. Public awareness of Defence Forces’ activities
tation of the military and civilian 2. Public’s opinion of the Defence Forces’ contri-
served in Armed Forces among bution to society (metrics are on the base of socio-
the wider Bulgarian public logical studies)
ENABLING PROCESSES
/To be organized as well as we can be/
Training: Improve individual 1. Reduce by an average of 5% the per capita cost
training and education to support of training a successful military recruit to the
changing operational and business agreed standard.
needs 2. ……………………………..
Logistic support: Provide more 1. Reduce by 10% the output costs of the Defence
responsive and integrated logistic Logistics Organization, while maintaining sup-
support at reduced cost port to the units.
2. Proportion of equipment in serviceable state to
be less than ….%
3………………………………..
Equipment Acquisition: Ac- 1. Achieve at least 90% of Key User Requirements
quire equipment effectively and for ongoing projects during the exact time period.
efficiently. Deliver the Equipment 2. Average In-Year variation of forecast costs for
Program to time and cost. Acquisition projects, of less than 1% in FY…
3. Average In-Year variation of forecast in Service
Dates for Acquisition projects, to be no more than
1 month in FY…
4…………………………….
Management: Progress towards 1. Reduce MoD Head Office and other manage-
an output management regime in- ment costs by 10% by …Year
corporating a target-setting proc- 2……………………………
ess. Drive organizational and
process transformation.
BUILDING FOR THE FUTURE
/Developing our people and or-
ganization for the future/
Strategic Targets
Future Manpower: Invest in 1. Level of development and implementation of a
personnel and their families. Iden- Learning Strategy, Leadership, and Career De-
tify the people and skills we need velopment Program.
for the future 2. Improvement in Quality of Life: number of
family houses which are provided for military
personnel in Year.
3…………………………………..
Information: Exploit informa- 1. Information architecture and performance in-
tion more fully as a strategic asset frastructure cover ….% of Units
2. Level of integration of defence information in-
frastructure to be ….
3. Reported serious weaknesses in protection of
MoD networks and information resources to be
less than ….
4……………………………..
Technology: Ensure the continu- 1. Number of R&D studies and projects.
ing availability of sound technical 2. Number of high qualified experts engaged in
advice and of advanced and af- managing defence projects.
fordable technology 3……………………………….
For a proper implementation of Performance Indicators in MoD,

it is necessary to develop:
• Plan for the evaluation of the program, which includes identifying
evaluation issues and questions, the identification of associated
data requirements, and a data collection strategy that will serve
as the foundation for subsequent evaluation activities;
• Plan to ensure the systematic reporting on the results of ongoing
performance measurement as well as evaluation, to ensure that
all reporting requirements are met.
The Armed Forces are committed to ensuring the delivery of
Value for money defence services to the Bulgarian people. The as-
signed roles will be fulfilled while simultaneously ensuring that from
available resources Armed Forces maintain the maximum capacity.
THE BUSINESS PROCESS OF R&D AND BULGARIAN

DEFENCE ACQUISITION SYSTEM: POTENTIAL FOR
IMPROVEMENT
Assist. Prof. Georgi Penchev

Introduction
In this report we will look at the organisational and process as-
pects of the Bulgarian R&D management within defence and their
implications for defence industrial transformation. There are three
main questions which have to be answered – who is conducting R&D,
how the R&D processes are (or should be) conducted and of course for
what purposes. The emphasis falls on the process of R&D manage-
ment within defence administration as a proxy between defence re-
quirements and public R&D and industry capabilities. Defining the
objectives, owners, roles and activities in R&D management process,
showing the picture of the current state by mapping these elements
we can more clearly discuss the pattern of and the path to the desired
transformation.
The process of R&D defence management, of course, is only a
part of the R&D management model. The analysis is aimed to support
the R&D management model, using at the same time the results of
previous researches and reports on the model.
The objectives, process and procedures of the R&D policy and
management are analysed according strictly to the documents setting-
up the Bulgarian Defence Acquisition System – there are no practitio-
ners consideration, there are no field research results present. Thus
the report have to be considered primely as a proposition for the fu-
ture more detailed and comprehensive research on R&D processes.
Background
Two main points can be identified in the Bulgarian defence R&D
background from 1989 until now: the end of the Cold War and the re-
form during the period 1997-2001.
The end of the Cold War overtakes the Bulgarian defence R&D
with well developed capabilities and facilities for conducting of pro-
jects within the Bulgarian specialization in Warsaw Pact. The Re-
search activities were conducted in Institutes of Ministry of Defence,
General Staff and Services with more than 1 000 researches employed.
The development, evaluation and demonstrations activities were exe-
cuted by the institutes of main industry contractors from the Military-
industrial Complex. The civilian facilities and Institutes were also
employed, mainly in development projects.
It is strange, but even in such highly-centralized environment of
state-owned and party-controlled enterprises there were unneeded
projects with doubtful effects for the military capabilities develop-
ment. The lack of strategy for defence R&D and plenty of resources
derived from huge defence budgets permits Services to start such pro-
jects42.
From the 1990 to 1997 the economic crisis, social and political
transition shrinks the defence R&D activities and their basis. This
period can be characterised with a very unstable and vague defence
reform agenda and R&D had been moved aside by more topical social
problems.
The reform was speeded up in 1997 with approval of Plan 2004
for restructuring and modernization of Bulgarian Armed Forces. Ac-
cording to the Plan 2004 the defence R&D had to be reorganized and
should be managed mainly by the newly established Bulgarian De-
fence Acquisition System (DAS) and funded under the framework of
MoD`s budget Major Program 10. All BAF`s and MoD`s research in-
stitutes should be reorganized into one unit – Institute for Advanced
Research Studies. Plan 2004 made provisions for development and
42
Interview with col. Milcho Patechkov, Head of AEPD`s Department “Research and
Technologies for Defence”, Bulgarian Army, issue 16327, 29.03.2006
approval of Plan 2002-2015 for Modernization of BAF. The results of

the reform in R&D area can be summarized very briefly as follows:
• All management units were united in a Department “Research
and Technologies for Defence” in Armaments and Equipment
Policy Directorate (AEPD), the main management body of Bul-
garian DAS;
• All Defence R&D Institutes were united in Institute for Advanced
Research Studies. Initially the Institute had 350 researchers em-
ployed, but after few months its staff was reduced drastically to
only 25 researchers;
• The Concept for Defence Acquisition and Plan 2002-2015 were
approved. The new Regulation for Defence R&D Management
was issued;
• The new consultative body was established - Intergovernmental
Expert Consultative Council on R&D (IECC) in order to co-
ordinate R&D activities with other government agencies and with
the civilian universities and research institutes.
All of the developments above appeared during the period 1998-
2004.
The Defence R&D Budget Twist – 1997-2007

Since this report is looking at process/procedural side of the R&D
management, it is a good idea to look at the R&D process outcomes.
Unfortunately, there is no public available statistics about how
many R&D projects are executed and what their topics are. Both
planned and actual budget expenditures for every fiscal year are given
as gross amount of money without detailed description into the Bul-
garian State Budget for what purposes money are planned or spent.
Nevertheless, we can look at the very interesting picture of Defence
R&D expenditures from the beginning of the defence reform – year
1997 (Plan 2004) till now.
The Figure 1 is based on the data of Table 1 and shows the
planned and actual Defence R&D budget expenditures during the pe-
riod 1997-2008.
5 000 000
4 500 000
4 000 000
3 500 000
R&D Expenditures (BGN)
3 000 000
2 500 000
Plan
2 000 000 Actual
1 500 000
1 000 000
500 000
97 98 99 00 01 02 03 04 05 06 07 08
Year
Figure 1 Planned and Actual Defence R&D

Expenditures 1997-2008
Table 1
Planned and Actual Defence R&D Expenditures 1997-2008
(In Bulgarian Levs)

Years 1997 1998 1999 2000 2001 2002
Plan 200 000 268 000 318 920 323 500 2 500 000 4 600 000
Actual 218 288 251 415 352 500 327 000 133 400 760 300
Table 1 (Continuation)
Years 2003 2004 2005 2006 2007 2008
Plan 3 900 000 2 000 000 4 000 000 2 710 000 2 000 000 2 230 000
Actual 3 900 000 749 800 200 100 434 600
Sources: Laws for the Bulgarian State Budget – 1997-2008; Bulgarian State Budget
Reports – 1997-200643
* All expenditures are given as nominal amount for every year. The expenditures for
1997-1999 are denominated by 1000 BGN by the author.
43
Bulgarian Ministry of Finance – The Budget <http://minfin.bg/bg/page/4>
We can divide the Figure 1 in two easy to find sub-periods from

1997 to 2000 and from 2001 till now. The first sub-period can be char-
acterised with a stable trend of incremental increasing of the expendi-
tures – both planned and actual. In addition, the actual expenditures
are near the planned amounts.
In contrary, the second sub-period can be characterised with a
turbulent movement both in planned and actual expenditures. The
expected trend should be fast increase in expenditures according to
the massive modernisation of BAF declared in Plan 2002-2015, but
there is no trend neither of increasing, nor for decreasing of the
planned expenditures. In spite of trend we see the huge fluctuations
in every year44.
Furthermore, there is no logic in actual expenditures figures.
There is no trend in this figures as nominal amounts. If we try to find
some logic in ratio actual/planned expenditures in order to find the ra-
tio of ineffectiveness of the planning system, we could not find any
trend or dependency.
The 'twist' in defence R&D budgets starts in year 2001 – the year
of the full implementation of PPBS and first year of new, reformed
establishment of Bulgarian MoD. The 2001 is also the first year for
the Defence Acquisition System.
The budget uncertainty, especially in the period since 2001,
shows that problems exist in management processes for Bulgarian De-
fence R&D and there are a lot of space for improvements. Addition-
ally, we can find gap between strategic plans and processes outcomes.
The suitable methodology for R&D management process analysis and
processes improvement should provide link between goals and out-
comes. Below I will discuss one possible methodology.
The R&D within DAS – the Two Customers

In every business R&D gives the strength to innovation and
brings to life new products with new preferences for the customer, as
44
The fiscal year 2003 should be excluded as non-typical. Additionally, the full coinci-
dence of planned and actual expenditures is very suspicious.
well as providing the analyses needed by management for appropriate

resource allocation.
If we look at DAS, the importance of R&D is obvious and it is also
client-oriented as in the business case. Every project for DAS should
start with analysis for capabilities gap and needs, with analyses for
technical and resources alternatives for delivering the new prod-
uct/system to the customer of DAS.
Usually in DAS regulations the customer is defined as the soldier
on the battle field. The process of DAS starts with customer require-
ments (the request from the Armed Forces units). The process should
be managed in the 'faster, cheaper, better' manner in order to supply
the Armed Forces with the needed armament and equipment in the
right time and in the right place. The implementation of best busi-
ness practices, separation of the Customer and the Supplier, creation
of competitiveness and quasi-market relationship within the defence
procurement administration were among the most important objec-
tives of DAS since its formation in US DoD. These ideas were kept in
DAS set-up in other NATO and none-NATO countries. The Bulgarian
DAS has the same preferences.
The Customer-Supplier relation is only one side of the medal. If
we look closer to it we can find that the combat soldier or even the
Army units are not independent in their decisions. They should com-
ply with Army Strategy, Military Doctrine and national strategies. All
these documents are developed in order to assure the best fit of the
national security to the economic and social development of the soci-
ety. Thus the requirements of the Armed Forces customer should not
exceed the requirements of the customer of defence – i.e. the average
voter or taxpayers. These two usually contradictory requirements
should be managed in some rational way.
Here we can find another, second customer of the DAS processes
– the taxpayer. The taxpayer is not a shareholder or stakeholder, be-
cause he/she do not invest in defence or he/she is not only affected
from defence. The taxpayer, from my point of view, is using directly
the public services defence and security – e.g. the taxpayer is a cus-
tomer, and in case of armament procurement the DAS is the player
which have to assure the interests of taxpayers – appropriate level of

security and defence balanced to economic development.
The highly theoretical arguments for existence of two different
customers in DAS can be approved in practice of the UK Armament
Management System (AMS). In AMS the Equipment Capability Cus-
tomer and the Unified Customer from MoD are defined45. Their roles
are separated in order to clear the interests of the civilian and military
customers of the DAS.
The Figure 2 can gives a graphical representation of the two cus-
tomers interaction.
Second Customer
Strategic Documents Legislation
PPB System
Armed Forces Capability Defence Defence

Customer Development Acquisition Industry
R&D Processes
International cooperation
Labor Resources
Academics and Industry
Figure 2: Two Customers in Defence Acquisition System
The Customer from AF gives its requests for new capabilities.

The requests are measured against the available resources, security
environment and interest of the taxpayer (second customer). The
process is influenced by strategic goals, legislation, labor and interna-
tional relationships.
Of course, this graphical representation is highly simplified. The
processes of DAS can be initiated with request from second customer
45
http://www.ams.mod.uk/aofcontent/strategic/guide/sg_unifiedcust.htm
and there are many other relationships. Nevertheless, Figure 2 gives

the idea that defence R&D process is an integrative process for DAS
and for Defence Management as whole.
The Process and the Business Process

The concepts as process and business process are widely used and
there are many definitions in place.
The process is an ordered set of activities transforming the input
to the desired output. It is a common definition used also into the in-
ternational standards. It implicitly gives two aspect of the process –
the structure – the set of activities executed by the ac-
tors/organisations involved in the process, as well as the purpose – the
requested outcome of the process. The purpose – the aim of the proc-
ess is the main filter which can give the criteria for different alterna-
tives for process set-up.
In order to improve the process, the activities and process as
whole have to be measured, recorded and controlled to minimise the
process time and waste of resources. This can be done by improving
the way that activities are done or by the restructuring of the activi-
ties sequence, thus avoiding the bottlenecks and unneeded activities.
Such kind of process analysis can give us the common picture of
the activities within the organisation, as well as the measures and di-
rections for improvement. The analysis and respective management
efforts for improvement will be directed toward the internal environ-
ment of the organisation. We will need additional analyses both to
„attach“ the process to some strategic or operational objective and to
asses the contribution of the process to an objective.
The management science provides many approaches for process
improvement (and even for transformation) as Total Quality Man-
agement, Theory of Constraints, Business Process Re-engineering, Six
Sigma, Balanced Score Card etc. The detailed analyses of these ap-
proaches can give us fruitful ideas and excellent management tools,
but such endeavour exceeds the tasks of this report. Nevertheless, all
authors agree that the process analysis consists from following
phases: analysis of the process objectives (outcome) – or the answer of
the question why we need this process; mapping the current state;
generation of alternatives for improvement; implementation and
measurement of the new state.
The business process are these processes within the organisation
which main objectives are to satisfy the customer requirements.
If we accept such view to the processes we easily can see the im-
plications to the management. First of all, the processes within or-
ganisation will be managed from the Outside-In manner – the cus-
tomer needs are the main reason for process execution.
Second of all, the activities will be assessed by added value for the
customer in every chain within the process sequence, thus minimising
the waste and time, as well as reaching the quality requested by the
customer.
Finally, by focusing on the customer requirements and external
environment we can provide link from the strategic level and strate-
gic processes to the operational and procedural level of the processes
and the measurement for the process will be more clear and consis-
tent.
At least, but not last, the pure process/procedural point of view
can be missleading in some range both for researchers and for manag-
ers. If the process analysis is focused only on internal environment, on
procedural and organisational aspects of activities, but not on their
significance for the process outcome (e.g. reason for process exis-
tence), the analysis can strengthen the bureaucracy. That is why the
link to strategic aims or customer success should be imperative for
every process analysis and one additional phase of identification of the
process customer goals and expectations should be added at the be-
ginning of the process analyses and improvement.
The Defence R&D Goals

It is easy to define what are the taxpayer`s (second DAS customer
– see Figure 1) goals and expectations. They are set up in main stra-
tegic documents for DAS and for Defence Management as whole.
These documents are broadly discussed and should be approved by the
highest level of the management and even by the Parliament and the
Government.
The Bulgarian Defence R&D is set-up in following documents:
• Law for Defence and Armed Forces;
• National Security Concept and Military Doctrine;
• Concept for Defence Acquisition;
• Strategy for Defence Acquisition;
• Plan 2002-2015 for the BAF modernization;
• Regulation for R&D within MoD.
The most detailed description of defence R&D goals are given in
Defence Acquisition Strategy and in the Plan 2002-2015. The goals
(and expectations) in the Strategy can be summarized as follows:
• Strengthen the international scientific and R&D cooperation
within NATO and EU;
• Strengthen the co-operation with a civilian R&D, by establishing
and maintenance of the national defence R&D base;
• Focus on applied research studies rather than fundamental stud-
ies;
• Technology transfer both from and to the private sector;
• Use of on-the-shelf technologies.46
The Plan 2002-2015 approves the following principles:
• Signing of Framework cooperation contracts with the science and
with the industry;
• Expert-coordination councils (the MoD expert bodies) formulating
the priority tasks;
• Annual programs on R&D activities are approved by the Minister
of defence;
• Financing of research on investigations and support studies in ac-
cordance with NATO requirements;
• Development of national documents or changes in the Law on
Public Procurement concerning back-up of the scientific services
towards MoD necessities.
The Plan 2002-2015 also defines the priority areas of defence
46
Strategy on Defence Aquisition - <http://www.mod.bg/en/modern.html#>
studies, according to the needs of BAF modernization47.

The goals and expectation of the DAS customers from the Armed
Forces are defined in all documents related to DAS set up and can be
summarized as follows:
• fast development and implementation of technologies;
• affordability and decrease of costs;
• usability and timely delivery of the results.
The Actors and the Process Map

The Actors
The framework for Bulgarian defence R&D processes is given in
Plan 2002-2015. The detailed description of the processes actors and
activities is provided by the MoD`s Regulation on R&D48.
According to the Regulation the bodies involved in R&D process
are divided in two main categories:
Management and Research units from the MoD and BAF – six Di-
rectorates from the MoD with main management role of AEPD, intel-
ligence services, J-4 and J-6 from the General Staff, one directorate
from each BAF`s Services and Executive Agency 'Tests and Control of
Armament and Equipment'. The R&D activities are executed by De-
fence Universities and external military and civil universities and re-
search organizations.
Consultative and Executive units. There are three levels of Con-
sultative units – in the highest level are the Councils on Moderniza-
tion and Programme Council of MoD, which discuss and approve the
Annual Plan for R&D, as well as its budget. On the second level are
the Expert Technical-Economy Committee which support the work of
the Councils and Minister of defence and prepares the Policy and
Plans for R&D . The requests for projects are approved by third level
of the Consultative bodies - the Expert Technical Committees on R&D
47
Armed Forces Modernization Plan 2002 – 2015 - <http://www.mod.bg/en/ mod-
ern.html#>
48
Regulation of R&D activities within MoD and BAF (in Bulgarian) -
<http://www.mod.bg/bg/doc_podza.html>
(ETCs) of the three Forces – the Army, the Navy and the Air Force.
The relationships and connection to the external and civil research
organisation is conducted by the Intergovernmental Expert Consulta-
tive Council on R&D (IECC).
The R&D activities are executed after the project teams are ap-
pointed by the Minister of defence. If the R&D project is started
within the DAS project the R&D project is conducted by the Inte-
grated Project Team.
The Plan for R&D is funded within framework of Major Pro-
gramme 10 of the MoD Budget.
The Process Map and Considerations
The interactions and relationships among the actors of R&D
process are given in Annex 1, Table 1 as they are set up in Plan 2002-
2015.
The more detailed process map of R&D activities is given in three
figures in Annex 2. Figures from 1 to 3 show the maps of three main
phases of R&D process – planning, execution and reporting – as it is
set up in Regulation on R&D.
If we look closer to the process/phases maps in Annex 2 we can
make the following considerations:
• The planning and reporting activities are concentrated in MoD
and the AEPD carries the main burden for maintaining the R&D
activities. AEPD is a Directorate and this burden could exceed the
capacity of the Directorate;
• There are a plenty of co-ordination activities which can lead to
the vague responsibilities and delays;
• There are no standards or guidelines for conducting of R&D proc-
ess management, which can strengthen the ad-hoc decision in
these co-ordination activities;
• The customers from the Armed forces are almost excluded from
the process – their roles are diminished to request, signing the
receipts and to report;
• There are no links or process interfaces to the defence industry
and to external research organisations. Even if the IECC exists it
has no responsibilities for gathering information, requests, etc. It
plays only consultative role within one, short activity in R&D

planning phase.
Steps toward Improvement

The process map and the analysis above can give a main direc-
tions for improvements in the defence R&D process within Defence
Acquisition as follows:
• Shorten the co-ordination/approval activities and approval of
standards and guidelines for R&D process management;
• Increase the expert capacity within management of R&D process
or set-up the new Agency under the authority of the Minister of
defence;
• Give more responsibilities to the customers from AS, especially in
development and assessment phases;
• Set-up clear contact point for external customers;
• Create procedures/units/agency for technology transfer to the in-
dustry.
Conclusions
In this report the goals and expectations of the R&D process cus-
tomers were identified. The initial map of the process was created and
few consideration of process properties and potential for improvement
were given.
The strange outcomes of the defence R&D process identified in
Bulgarian R&D budgets during the period 1997-2008 can be explained
with extremely complicated co-ordination activities demonstrated in
R&D process map. Additionally, it is obvious that the taxpayer (sec-
ond DAS customer) interest prevail over the Armed Forces customers
and the bureaucracy developed in plenty of co-ordination activities in
order to guard the goals of customers rather hinder the process.
The concept for studying the R&D process within DAS as a busi-
ness process by linking the customers goals and process outcomes can
give clear directions for process restructuring and streamlining.
ANNEX 1
Procedure on Planning and Organizing of the Activities
within the Basic Program #10 R&D
I. Request
1. Topics are submitted at the Armament policy directorate with a brief By Jan. 30th
annotation and request attached (Annexes №1 and №2) of the year X
2. The topics together with the above listed documents are then for-
warded for consideration at an Expert Technical Committee (ETC)
meeting by its secretary.
3. The proposed topics are then defined according to their priorities at the By Mar.31st
meeting. The requests for projects that do not comply with the due re-
quirements shall be rejected.
II. Assessment
1. The projects approved by ETC are presented before an expert commis-
sion to be assessed in terms of compliance /satisfying of the necessary
military capabilities/needs. The assessment is performed in accordance
with certain criteria.
2. Based upon the expert assessment the Technical development and co- By Apr.30th
operation department (TDC) shall prepare a first draft project of the
completion Plan of Program #10.
3. The latter shall be discussed and considered at an ETC meeting. By June. 30th
4. The protocol list of the topics approved shall be confirmed by the dep-
uty minister in charge of the scientific research.
III. Preparation
1. The contractors shall prepare initial requirements (IR) which contain:
– Functional requirements
– Technical requirements;
– Preliminary evaluation;
– Potential executive.
2. IR attached to the project of the Plan shall be forwarded for considera- By Sept.30th
tion at ETC. They are discussed and approved in accordance with the
requested operational requirements and are offered for confirmation
with the due prognosis value.
IV. Acceptance
1. Based upon ETC decisions, taking into consideration the limits allowed
under program #10 Armament Policy directorate a final variant of the
Plan shall be prepared and forwarded.
2. The program manager of Program #10 shall submit the Plan for con-
sideration at the Council of Modernization.
3. The council of modernization shall consider and accept the Plan with By the end of
all due financial quotes on the separate projects (topics) and make a October
decision to submit it for approval of the minister of defense in order to
be confirmed by a Minister's order.
V. Correction
1. After adopting the MoD budget for the following year (X) and the fi-
nancial quotes for Program #10, ETC shall revise the accordance with
the funds available and if necessary correct the Plan.
2. Decree of the minister of defense shall be prepared to confirm the Plan
with certain budget instructions concerning expenditures on Program
#10.
3. Preparation of the completion of the separate topics shall follow - sign- By the end of
ing of contracts with executives, etc in accordance with the confirmed December
procedures of the Law on Public Procurement, the Regulation, etc.
Source: Plan 2002-2015

ANNEX 2
The Process Map
Figure 1: Planning Phase

Figure 2: Execution Phase

Figure 3: Reporting Phase

TRANSNATIONALISATION OF THE INTERNATIONAL

ECONOMIC RELATIONS AS AN ELEMENT OF R&D
POLICIES AND MODELS IN THE DEFENCE INDUSTRY
Ms. Maria Bakalova

Marketing Expert
In its genesis, the transnationalisation of the international eco-

nomic relations has two groups of premises from a military nature,
which are an element of the policies and models for managing the sci-
entific research and development:
1) The globalization, reflecting mainly in some military actions.
The contemporary national weapon arsenal of USA, Russia, England,
France, China and other powerful in military equipment countries
consists of a great number of global weapons, which may reach and
strike aims from any distance. This includes radio-directed rockets
with a transcontinental range, systems of satellites, which are not
only spy, but also from the type of the space weapons – although all
member-countries of the NATO have taken the obligation not to let
the use of weapons in the open space.
2) In my opinion, an objective need and an objective tendency in
the world economy, including the defence industry, is the remarkable
part which big transnational companies (TCs) take in it. Ever since
the first years of this century the gross domestic product (GDP) has
been produces in its main part from 352 big TCs, employing more
than 80 millions of specialists. That is why in most reports and publi-
cations big TCs are ranked first in the level of importance for the sci-
entific research and development. This is particularly valid for the de-
fence industry, in which the scientific research and development takes
the biggest share and although the results from the researches are
with limited access, there is a widespread transnational financing of
the researches by international financial institutions.
Not directly, but still of great importance for the policies and
models for scientific research and development in the defence indus-

try, is the transnationalisation of the production, the projecting and
studying of the services in the international economic relations. This
is also very important for Bulgaria, as it is a member of the NATO.
The sector of the services has been included comparatively late in
the process of transnationalisation. The transnationali-sation of this
specific sector is a result of the sharp increase in the importance of its
role in the conditions of the modern high-developed economy and also
of the dynamic increase in the volume of international services’ trade.
On this basis the premises have been prepared for a better quality of
the services in the world economy, as a whole, and in the defence in-
dustry, in particular. These premises have arisen from the needs of
the big industry companies with a widest range of services, also from
the accumulation of capital and the increase in the companies’ poten-
tial in the field of the services, from the accumulation of experience in
the foreign market activity, from the improving of the own informa-
tion base, which in practice creates opportunities for global optimiza-
tion of their operations.
The transnationalisation of the capital in the field of the services
is doubtlessly stimulated from the comparatively low level of liberali-
zation of the international services’ trade in the world economy. In
these conditions, the creation of foreign bases and the execution of
services “on place” are some of the tools used to penetrate in the sys-
tem of protection limits and to establish a long-term place on a given
foreign market while fully evaluating its specifics. At last, but not at
least, an important role in the transnationalisation of the trade in the
sector of services plays the diversification of the activity of the big in-
dustry corporations through their broadening in the field of services
offered. Specialized divisions in the structure of the big companies are
created, so that they can offer services to other companies too. As re-
searches show, big corporations prefer the creation of own divisions
for servicing their main activity, while the middle and small compa-
nies are orientated towards the use of services from capital and juridi-
cal independent companies, specialized in their sector.
The comparatively later transnationalisaton of the trade in the
sector of services explains the smaller part that taken by the big
transnational companies, operating in this field. This later transna-
tionalisation however is compensated by a higher intensity, which
leads to a constant increase in the volume of services, increasing also
their share in the direct foreign investments.
The transnationalisation of the trade in the sector of services is
characterized with a high level of territorial concentration: the biggest
transnational companies are located in the USA, Western Europe and
Japan. This territorial concentration of TCs in the sector of services
mainly in the developed countries is consequence of their domination
in the “production” of a wide range of services. It is also result of their
solid positions and experience in the international economic relations
with these services, their great capital power from the countries’ big-
gest companies, their high scientific research potential, etc. In the sec-
tor of services also appears a well-known phenomenon – the “produc-
tion” of services abroad is more than the export of services from the
developed countries. Even from the early 1980s the sales of services of
the foreign divisions of the American corporations exceeds more than
5 times the export of services from the USA, the same is with the im-
port of services, which is far more less than the sales of services from
the foreign divisions. Or all of the big transnational companies this
phenomenon is more clear in the sector of services than in the sector
of goods’ export.
The company structure of the big transnational companies, oper-
ating in the sector of services is characterized with clearly shown du-
ality. First, here are the companies specialized in the sector of the ser-
vices (for example tourist, transport, insurance, consultant, engineer-
ing, advertising, informational and other). Second, a solid position in
the foreign investment activity in services takes the big transnational
companies, which create or acquire specialized foreign divisions in dif-
ferent fields of the services. A typical example are the TCs, producing
electronic computerizing machines (ECMs), while at the same time of-
fering a wide range of informational services to their clients. For ex-
ample the American company IBM – the well-known world leader in
the production of ECMs, is also the main supplier of electronic com-
puterizing services. The big American corporation “General Electric”

not only produces a wide range of electric equipment and tools, but
also offers their fixation, their maintenance, leasing operations, dif-
ferent consultations, technical and economic information, designs and
builds electric stations, etc. For the servicing of the produced electric
equipment the company has created more than 50 foreign divisions.
Specific for the evolution of the transnationalisation of the sector
of services is its more and more showing diversification, including the
one in the defence system. TCs specialized in the production of ser-
vices, more and more aim to enrich their portfolio, offering not only
single types of services, but a full packet of services. Undoubtedly,
these tendencies strengthen the positions of the TCs in the competi-
tive fight for the markets of different kinds of services and minimize
the risk they take when trying to optimize the service packet they of-
fer. The diversification of the TCs’ activity in the sector of services is
achieved at the expense of the centralization of the capital in
neighbouring spheres and at the expense of the centralization of the
capital as a comparatively easier and faster way to enter services,
which are new for their main profile (namely in the defence industry).
A high level of transnationalisation can be also seen in such a
specific kind of service like the advertisement. It is the same as far as
the defence industry is concerned. About a half from all income from
advertisements for the advertising companies are on the behalf of for-
eign operations. The transnational advertising agencies work for the
global marketing of the big transnational industry companies, which
is the reason they aim long-term partnership so that the TCs can use
the services of the agency’s different foreign divisions. Such a loyalty
definitely ensures a bigger competence, purposefulness and advertis-
ing influence.
There is a strong tendency towards diversification in the personal
services too: often aircraft companies control a wide international net
of hotels. Many corporations specialized in accounting and statistical
services gradually start a consultancy business, study the markets for
their customers and try to foresee their development, give information
to these interested in it, offer advertising services, etc.
The diversification of the services (formal and informal), particu-

larly in the cases of services which add one to another, is an efficient
tool for increasing the competitiveness of the companies which offer
them. This comes from the fact, that their costs are reduced, makes a
long-term partnership between the seller and the buyer, and
strengthens the prestige of the company.
The concrete analysis of the different kinds of services confirms
the already made conclusion that there is an oligopoly structure in the
modern international economic relations in the frame of the world
economy, including the defence industry.
In the insurance business, which is an object of accelerated trans-
nationalisation, dominate companies from countries like Great Brit-
ain, USA, France, Switzerland and Germany, which hold almost ¾
from all foreign insurance offices and almost the same share in the
market as a whole. On the secondary market of insurance services
dominate about fifteen of the biggest TCs, which receive more than
50% from their income out of the country, where their headquarters
are based. This is also an element from the policies and models for
managing of the defence industry.
The transnationalisation of the international economic relations
as an element from the policies and models for scientific research and
development in the defence industry has specific aspects in the space-
crafts, and respectfully in the spacecraft industry. I mention this
branch because it is less popular and maybe less evaluated. In a pro-
ject of the Ministry of Defence of Russia for a national military doc-
trine in 2006 are defined the so called opponents – USA, NATO and
the international terrorism. The conclusions and the relevant meas-
ures which can be taken in Russia (formulated in the monograph of
Boil Todorov “The international space market in the world economy”
– Gorexpress, Sofia, 2006) are the following:
1. Enforcing the components of the military preparation, concern-
ing the usage of the open space. This means that the space market be-
tween Russia on one hand and USA and NATO on the other will be
differentiated towards the decrease of the number of space projects
concerning the use of the open space made in cooperation. This will
also limit the transnationalisation of the space industry in its military

aspect.
2. The declared by USA and Russia creation of own space stations
logically leads to acceleration of their use for military purposes. The
transnationalisation of the military space industry somehow will lead
to the grouping of partner countries and will create the following un-
ions: USA and NATO, Russia and possibly China.
3. The emerging military competition in the development of the
space military industry will include the transnationalisation in the
“capsules” outlined above and acceleration of the tendency to widen
the role of the scientific research and development in the space mili-
tary industry (mostly an increase of the products made as a result of
the conversion of techniques and technology for militarizing the open
space). Still, USA has an undoubted advantage in this field compared
with Russia. The upper convention is mostly expressed in the field of
the carrier-rockets.
For example, in the space fires sponsored by the scientific re-
search and development and the space industry, only 6 has been made
after trade orders. The others have come from the government of the
USA, particularly from its military divisions.
From the facts, policies and models for scientific research and de-
velopment activity in the defence industry showed above, it won’t be
too exaggerated if we start talking about a space transnationalisation
of the near to the Earth open space.
Great importance should be paid to the scientists and specialists
in the space defence industry as an element of the transnationalisa-
tion and as a crucial component of the policies and methods for scien-
tific research and development activity. For example, in the space ac-
tivity of Russia 100 enterprises take part and all of them are high-
technological. In the projects of the European space industry take part
2000 enterprises/companies. In USA these numbers are even more
impressive. For peaceful and war aims in the space industry are em-
ployed 100 000 people – all of them very qualified, being leading scien-
tists and specialists (this is related to the USA and the other “space”
countries).
The limited volume of the report, although very cursory, points

out the importance of the policies and models in the transnational
companies for scientific research and development activity in the de-
fence industry regarding the creation and market logistics of the intel-
lectual products for the upper mentioned field.
In my opinion, this conference is an objective necessity and with
an intellectual importance. Also, the exchange of intellectual products
is “free” on a transnational level.
CONCLUSIONS FOR THE NEW NATO MEMBERS FROM THE UK

EXPERIENCE IN DEFENCE RESEARCH AND DEVELOPMENT
Mr. Ventsislav Atanassov, MSc in Ec., MCSc

Project Manager, OBS - Bulgaria
Introduction
The new NATO members meet some challenges and difficulties
on the way of transformation of their defence industrial base accord-
ing to NATO standards and requirements which could be overcome
using the experience of other NATO countries. The UK with its
strong defence industrial base, and tradition in research and develop-
ment (R&D) policy could be good example how to succeed on the way
of defence industrial transformation. The main goal of this article is to
be investigated the reasons for UK’s defence industrial achievements
and especially in UK’s defence research and development, to be
reached some conclusions and recommendations for the new NATO
member how to organize their defence R&D.
UK R&D Policy and Organizational Transformations During the
Last Decade
The UK Ministry of Defence (MoD) requires new and better
weapons to meet potential threats. Production of such weapons re-
quires research and development. Research precedes development and
generates new technical knowledge, which is then applied to the de-
velopment of new equipment. Development involves engineering de-
sign, manufacture and testing, which might result in the eventual
production of the equipment for the Armed Forces. Even where
equipment is purchased off-the-shelf, some research is needed for in-
formed procurement decisions [1].
Defence research enables MoD to be “intelligent customer” and
an informed decision maker. These roles require MoD access to sound
and impartial technical advice in formulating operational require-
ments, in assessing options and in judging current and future threats.

Prior to the changes of 2001, DERA (Defence Evaluation and Re-
search Agency) was MoD’s main source of scientific and technical ad-
vice on the basis of its defence research. MoD then has to decide
whether to proceed to the development of a new weapon. Development
work is undertaken by industry either in the UK or overseas. Strate-
gic Defence Reviews are corner stones which define the framework of
research and development in the next coming years. In its 1998 Stra-
tegic Defence Review, the British Government confirmed its commit-
ment to maintaining a “strong British defence industry” providing
jobs, exports and ability “to continue to procure the right equipment
for UK Armed Forces at competitive prices”. For 1998-99, over 70% of
MoDs procurement spending was with UK industry; 13 % was spent
on co-operative programs; and the remaining 16% was spent on im-
ported equipment.
Major changes in UK defence R&D policy occurred before the end
of the Cold War. In 1987, the Government announced that “necessary
investment in defence R&D may crowd out valuable investment in the
civil sector” and policy aimed at a gradual reduction in the real level
of defence R&D over the next decade. In 1993, this policy was con-
firmed when it was announced that the decline “in government-
funded research would continue, with a reduction of a third by the
turn of the century” with industry expected to undertake more of the
research as a result of exposing DERA to greater competition. There is
a reduction in the level of real defence R&D spending since 1980. Dur-
ing the 1990s, both real defence spending and defence R&D fell by
similar percentages, so that R&D retained a relatively stable share of
the total defence budget. However within the R&D budget, the share
allocated to defence research increased during the 1990s.
Inevitably, with limited defence budgets, MoD cannot afford to be
at the forefront of research in all defence technologies. Difficult
choices are needed in determining how much of the defence budget to
allocate to R&D, how to share this total between research and devel-
opment and how much of the work to undertake in the UK. MoD has
a list of key defence technologies (the list is classified). These are
technologies which are viewed by MoD as “so critical that loss of ac-
cess to them would seriously degrade the UK defence capability and
thus maintaining access to them is of overriding importance”. Access
does not mean that the technologies have to be retained within the
UK or within MoD control. “Only a few defence technologies are con-
sidered so critical and sensitive that they must be retained within the
UK”.
R&D policy is tightly related with technology strategy [1]. Re-
cently, UK MoD has been developing its technology strategy. Through
the Technology Foresight program, industry has also been developing
a national strategy for defence and aerospace technologies. The aim is
to combine the MoD and industry strategies to produce a joint na-
tional strategy identifying areas in which technological excellence
might best be concentrated and developed in “Towers of Excellence”.
These “towers” are envisaged as long-term partnering arrangements
between Government, industry and independent laboratories (e.g.
Universities) with agreements about funding and sharing of intellec-
tual property. There are expected to be a number of “towers” (e.g.
around 100) and MoD expects the Towers of Excellence model to en-
able it to make defence technology choices by being selective in a ra-
tional way and making the necessary choices in partnership with in-
dustry.
The Towers of Excellence model aims to develop world class de-
fence technology capabilities in selected areas. Elsewhere, MoD recog-
nizes that providing UK forces with modern equipment will require
buying technology or equipment from overseas, usually from USA.
This has already occurred. Imports of defence equipment, mostly
aerospace systems from the USA, accounted for 3% of total MoD
equipment spending in 1980, with the figures rising to 7.1 % in 1990,
almost 17% in 1996, 19% in 1998 and about 15% in 1999. Typically,
MoD requires offsets against US imports which raises critical ques-
tions about the benefits and costs of offsets.
Faced with budgets pressures, MoD policy has been to continue to
search for value for money from its defence R&D expenditure. This
has been involved three strands of policy. First, the 1998 Smart Pro-
curement Initiative (now known as Smart Acquisition) introduced a

new acquisition procedure with more time taken for early concept and
assessment phases, exploring options and reducing risks by testing
technology (typically up to 15% of costs) resulting in incremental ac-
quisition (where a less ambitions initial capability is upgraded in
lower risk steps). Smart Procurement also introduced improved incen-
tives for contractors aimed at “beating defence inflation”. These in-
centives included
Inflation adjustments based on output indices (e.g., GDP deflator)
rather than input indices and firm prices not subject to inflation ad-
justment for contracts of up to 5 years duration. Such changed incen-
tives will affect a firm willingness to invest in defence R&D. Second,
efforts to promote the transfer of technology from defence research
(DERA) to both defence and civil industries, leading in 1999 to the
formation of Defence Diversification Agency within DERA. Third,
there were changes in the organization and ownership of defence re-
search. The 1998 Strategic Defence Review’s proposed Public Private
Partnership for DERA was expected to lead to further improvements
in value for money from defence research in terms of both cost and
quality of output [2].
UK defence R&D is undertaken either “intramural” in MoD’s re-
search establishments or extramurally mostly in private industry.
MoD expenditure on R&D work undertaken in DERA is classified as
intramural. During the 1990s, the intramural share varied between
32% and 37% of the total, with no evidence of a major of shift of R&D
funding towards private industry.
DERA has an annual turnover of some 1 billion Pounds sterling
and employs over 11500 staff in the UK. During 2001, the organiza-
tion and ownership of DERA was changed and two new units were
formed, namely, the Defence Science and Technology Laboratory
(DSTL) and “New DERA” (the Core Competence model). DSTL em-
ployed fewer than 3000 staff and remained as a trading fund under
Government ownership with MoD. It undertook those elements of
former DERA business that had to be carried out in government and
which could not easily be transferred to the private sector. These in-
cluded “sensitive” research work (e.g. chemical and biological), rela-

tionships with other governments (e.g. international collaboration)
and the need for MoD to have “in-house” impartial advice (e.g. Centre
for Defence Analysis).
As part of Government’s Public Private Partnership policy (PPP),
New DERA became a private sector company, comprising about three-
quarter of the current DERA. MoD claims that PPP is not being used
as a way of meeting shortfalls in the defence budget. Instead, the main
aims of this PPP include improved opportunities for exploiting tech-
nology “locked up” in DERA; improving access to technologies from
the civil sector for military application; introducing private capital to
meet DERA’s investment needs and exposing the Agency to private
sector disciplines; and providing increased freedoms for DERA (for
example pay and conditions for staff; ability to increase commercial
business. The fall in defence research funds and “fast moving technol-
ogy” leading to changes in the environment in which DERA operates
provide the background for New DERA.
Initially, New DERA continued to be the MoD’s main supplier of
defence research work. However, to ensure a level playing field, an in-
creasing proportion of MoD’s research program was opened to compe-
tition allowing industry access to projects from which it was previ-
ously excluded. Similarly, New DERA could broaden its markets
which involve competing with industry.
MoD retained a special share in New DERA enabling it to control
shareholdings in the new company. There are plans of MoD controls
over ownerships to exclude defence industries, those with conflicts of
interest and “undesirable parties” as well as a MoD veto over work
with third parties.
The Parliamentary Defence Committee has been a major critic of
plans to privatize DERA. It is concerned about ambiguity over New
DERAs involvement in defence manufacturing; which of New DERA’s
assets are regarded by MoD as of “strategic importance”, continued
uncertainty about the extent of controls on foreign and individual
shareholdings in New DERA; doubts about how the scientific founda-
tion of DSTL would be maintained in the long term; and doubts about
the future of Defence Diversification Agency. Further concern has

arisen because it appears that MoD will have to bear some of the costs
of the sale of New DERA, so reducing the expected financial benefits
to MoD from the sale. Overall, the Defence Committee prefers that
the proposed public-private partnership for the Defence Evaluation
and Research Agency – one of MoDs successful sectors under its pre-
sent status – was abandoned.
Economists also contributed to the debate about planned privati-
zation of DERA. One feature of PPP appears attractive but needs ad-
dressing, namely, the desire of governments to transfer expenditures
from the public budget to the private sector (to introduce private capi-
tal into DERA). Simply transferring resources from the public to the
private sector has no effect on the efficiency of resource allocation if
identical resources are used. Moreover, governments can always bor-
row more cheaply than private sector. If PPP is to lead to genuine ef-
ficiency savings, the extra financing costs for the private sector must
be offset by savings elsewhere (e.g. better management of private
capital investment projects; lower running costs for the enterprise). In
this context, there is an extensive economics literature on privatiza-
tion which suggests that the change of ownership to New DERA needs
to be accompanied by competition allowing industry to bid for MoD
research contracts.
Government-funded defence R&D has direct benefits in contrib-
uting to defence forces and equipment for national security and indi-
rect benefits in providing technology for the rest of the UK economy
(technology transfer or spill-overs). Whilst a privately-owned DERA
will have profit incentives to exploit defence technology, it will lack
incentive to promote the transfer of such technology to the rest of the
UK economy. There is also the issue of property rights in any market-
able technology resulting from MoD-funded research. Under privati-
zation, MoD might introduce profit-sharing arrangements into re-
search contracts with New DERA based on any commercial exploita-
tion of government-funded technology (e.g. variable commercial ex-
ploitation levies).
Whilst MoD claims that the PPP for DERA is not being used to
meet shortfalls in the defence budget, it accepts that it is part of the

general efficiency program. Here, questions arise about the likely fi-
nancial contribution from the privatization of New DERA and who
are the likely gainers and losers from the policy. Possible gainers in-
clude senior managers in New DERA and the institutions advising on
the privatization. Possible losers include staffs who suffer job losses
and experience changes in their terms and conditions of employment
and promotions prospects as well as the rest of UK industry which
might experience a loss of technology transfer from MoD-funded re-
search.
Rising equipment costs and falling defence budgets means that
UK defence policy cannot avoid difficult choices (the defence econom-
ics problem). These costs and budgetary pressures will require radical
changes. Already, there are doubts that the UK will be able to afford
to replace its Tornado strike aircraft and its Eurofighters. R&D for
modern defence equipment is costly and these costs are rising, so cre-
ating further incentives for the UK either to collaborate or buy di-
rectly off-the-shelf from overseas suppliers (mostly in the USA).
Collaboration requires the UK to choose between Europe and the
USA with different implications for UK defence R&D policy and the
national defence industrial base. European collaboration allows the
UK to be a major partner in high technology defence projects with
corresponding implications for UK defence R&D expenditure. For ex-
ample, on Eurofighter, the UK share of development costs is esti-
mated at 4.6 billion Pounds (1999/2000 prices). Alternatively, collabo-
ration with the USA might be based on the Joint Strike Fighter (JSF)
model where the UK is a full collaborative partner contributing 10%
of total development costs (estimated 1.7 billion Pounds for the UK
over 10 years). JSF is attractive in that if offers the UK Aerospace in-
dustry the prospect of involvement in a large-scale, next generation
combat aircraft with potential share of both high technology develop-
ment work and a share of large-scale production program (estimated
at 5000 units, including exports).
Buying equipment off-the-shelf from the USA is another pro-
curement option. Cost and budget pressures mean that this option is
likely to become more important for the UK. Typically, defence

equipment import from the USA is associated with an industrial offset
(Industrial participation) [3]. Offsets appear attractive, but appear-
ances are deceptive. Questions arise to how much of the offset repre-
sents genuinely new business: How much high technology is involved
and what are the implications for the future competitiveness of the
UK defence industries?
In the context of the need for difficult choices by the UK defence
policy-makers, the debate about the privatization of New DERA is a
relatively minor issue. It represents almost the final privatization in
the UK defence industrial base (DSTL remains in the public sector).
However, there are major issues surrounding the future of UK de-
fence R&D policy, particularly the impact on the UK defence indus-
trial base and the rest of the UK economy of further reductions in de-
fence R&D spending.
Conclusions for the New NATO Members

As it seems the basement of right R&D process is proper defined
in the guidance documents R&D policy. Such are the White Papers as
result of Strategic Defence Reviews. This proper R&D policy must be
supported by respective organizational structures as R&D agencies,
scientific research institutes, evaluation agencies etc. There must be
and continuation of this policy from one government to another. The
process should be reluctant to political changes in the country. For the
small countries most of the new military equipment would be bought
overseas, but there still is a need of institutions to provide R&D, test-
ing of new equipment and competent scientific advice to decision
makers.
The other cornerstone for the successful R&D policy is ability to
expose these R&D structures to influence of market economy and
competition, to incorporate market principles in management of R&D
projects and to introduce principles of Public Private Partnership
(PPP).
Defined R&D policy must be supported by the framework of R&D
regulations and standards. They must define clear process of Research
and development, testing, procurement and acquisition of military

equipment and armament; how to define requirements follow the op-
erational needs and threats for national security.
The R&D policy must be supported by clearly defined Towers of
Excellence for the national defence industrial base, which should fol-
low specialization of the country as NATO member and capabilities of
national industrial defence industrial base. Of course they cannot be
100 as for the UK, but there could be several up to 10 for Bulgaria, for
example.
Following restricted capabilities of smaller countries the impact
should be placed on the international collaboration in R&D and intro-
ducing of offsets programs which would stimulate transfer of techno-
logical know-how for the national defence industrial base and public
civil sector of economy.
The percentage of defence R&D budget as a part of the whole de-
fence budget should be big enough. For the UK it is 9-10% of the total
defence budget. Each country determines alone this share but it
should be not less than 4-5% of the total defence budget.
Another discussion arises about the share of procurement spend-
ing with national defence industry, the share spent on co-operative
programs and the share of imported equipment. This should be de-
fined by the national R&D policy.
There is a need of search for value for money from defence R&D
expenditure, because of restricted defence budget. Introduced by the
UK principles of Smart Procurement Initiative as more time for early
concept and assessment phases, exploring options and reducing risks
by testing technology resulting in incremental acquisition (where a
less ambitious initial capability is upgraded in lower risk steps, should
be adopted by the new NATO members, also.
The other step is privatization of parts of defence R&D, but not
cut and destroying these parts.
Closing Remarks
The main conclusion is that there is a lot that the new NATO
members could learn by the experience of the UK in defence R&D.
Transformation of defence R&D is the process which is actual f or all

NATO members and it is good to exchange experience and to adopt
ideas and good practices that are already proven. The UK is a country
with big experience in the area of transformation of defence R&D and
there is what the new NATO members to learn from it.
References:
1. Prof. Keith Hartley, “UK Defence R&D Policy”, Centre for De-
fence Economics, University of York, 2001.
2. 2. Peter Gareh, “UK`s Experience of Defence Reviews”, Interna-
tional Workshop on Defence Expenditures and Economic Devel-
opment, Proceedings pg. 56-61, Sofia, 2006.
3. 3. Prof. Keith Hartley, "Study of the Economic and Industrial
Consequences for the UK Economy of the US and UK Govern-
ments' Decision on the FCBA Requirement", Centre for Defence
Economics, University of York, June 2000.
R&D IN SUPPORT OF PROFESSIONALIZATION OF THE

BULGARIAN ARMED FORCES
Assist. Prof. Konstantin Poudin, Ph.D. student

Introduction
According to the information presented by the General Staff of
the Bulgarian Army 450 professional soldiers have left the armed
forces since the beginning of the year. In 2006 the number of the ser-
vicemen decided to leave off were 250. The Bulgarian Armed Forces
/BAF/ have to become completely professional on the 1st January 2008.
They still have to recruit about 2000 soldiers.
The figures mentioned above shows that there are significant
challenges towards the capability of Human Resource Management
/HRM/ system of the Armed Forces /AF/ to recruit and retain their
staff.
On the other hand in the context of modernization of the AF the
choice of new armaments and equipment should consider personnel
needs and features. The effective fulfilment of the missions and
achievement of the goals has to receive significant R&D support so
that a common human-machine capability to be created.
The aim of this report is to reveal some problems connected with
scientific support of the process of professionalization of the Bulgarian
Army. It reveals two aspects. The first one refers to the process of
Human Factors Integration /HFI/ which is more extensive, complex
and includes the second one which is R&D in support of recruiting
and retention activity.
The object of my presentation is the professionalization of the
BAF, the subject is the R&D activity dedicated to this process and
perspective fields where it could be conducted.
My thesis is: the professionalization of the BAF needs to be sup-

ported by regular scientific researches, which will speed up the proc-
ess and will make it more effective and easier. The number and the
range of these researches must extend after total professionalization
of the AF next year because it is not a single act but a long process
and many new questions will appear and will expect their answers in
the years ahead.
My objectives are grouped as follows:
• To reveal and analyze in brief the challenges before the profes-
sionalization;
• To analyze the need of R&D support of Human Factors Integra-
tion;
• To show the necessity of scientific support of recruiting and re-
tention activity;
• To make some conclusions and give recommendations.
• The methods are: analysis and synthesis, observation, comparison
and generalization.
In my report I have used some American researches on military
recruiting and retention and a booklet about HFI published by the
British MoD. Some ideas are taken from the course on Management
on Defence and Security read in UNWE. Some articles from special-
ized magazines and newspapers, as a source of information, are also
used.
1. Factors for Professionalization of BAF

The professionalization of the BAF is not an isolated process. It is
carrying out on the background of the transformation in the AF of the
most NATO member countries, in the contemporary conditions of the
security environment and economic globalization.
Professionalisation depends on many factors, which have differ-
ent origin and character and exert different influence, such as: politi-
cal, economical, technological, social, demographic, and psychological
ones.
According to К. Haltiner the break-up of the Warsaw Pact and
the Soviet Union and the end of era of Cold War a new question is
raised: if the conscription is appropriate base for the organization of
the contemporary AF. He claims that the idea of decline of conscrip-
tion appeared many years before the end of Cold War. Military sociol-
ogy has been studying the Theory of decline of conscription for more
40 years. The theory shows that the huge economic productivity and
the high standard of leaving in strongly industrialize societies are
based on continuous division of labour and professional specialization.
Moving power of these processes is technological progress and market
penetration in all spheres of public life. This development includes in-
creasing grade of individualism and normative pluralism, as well as
diminishing significance of traditional values and the decline of the
idea of conscription.49
The conscription is based on the national cause. In the process of
globalization the nation loses its importance as a stronghold for collec-
tive identity. Haltiner claims that the mass armed forces are organiza-
tionally homogeneous but functionally weakly differentiated and
based on physical mobilization of human mass to be effective. The AF
consisted by conscripts is not effective in regard of interrelations be-
tween staff, capital and technologies.
The economic, technical, social and political development of mili-
tary system follows principles of economization and differentiation. As
much as the inner military division of labour goes dipper, as stronger
the need of well trained and prepared soldiers is. It means that con-
temporary societies do not relay on the number of the staff. High
technologies are their base. They are in a great extant differentiated
and complex regarding their organization and functions. The ten-
dency is partial and than complex professionalization.
According to Van Droom’s opinion “the big and reach countries”
are able to maintain AF recruited on voluntary principle. Making a
comment of this idea Haltiner holds that one of the hypothesis for
“decline of mass armed forces” could be that the model of mass armed
49
Haltiner, K., The definitive end of conscription in Western Europe?, The Armed
Forces in the Contemporary Society, Defence Staff College “G.S.Rakovsky” /in Bul-
garian/, Sofia 1998, p. 48
forces in societies with economic growth and raising standard of leav-

ing lose position, giving way to the model of professional staff. In
other words, there is negative correlation between the grade of social
and economic modernization and the range of conscript military ser-
vice, regarding recruiting of military staff.50
2. Challenges Before the Process of Professionalization of

the BAF
In connection with the process of professionalization of the BAF
all HRM activities, such as recruitment and retention, assessment and
training, promotion, motivation, social adaptation and civil integra-
tion etc., have to be developed to correspond to the needs of the mod-
ern armed forces of qualified and highly motivated staff.
In this part of my report I am going to reveal some challenges be-
fore the professionalization connected mainly with the recruitment
and retention activity, and especially recruitment system. The focus is
put on this initial element of the HRM cycle, because it is fundamen-
tal and, in my opinion, it includes the rest of its elements. Moreover it
has to be considered in the context of the motivation policy – pay-
ments, accommodations, training, promotion etc.
The BAF have not got historical experience in the recruitment of
professional soldiers with the exception of a very insignificant period
in the years after the First World War. Bulgaria had the right to keep
professional armed forces counted 33 000 persons only by virtue of the
peace treaty signed in Neuilly-sur-Seine in 1919. The lag of own ex-
perience necessitates the practice of other countries mainly Great
Britain, USA etc. to be studied.
The recruitment system includes: organizational structure, per-
sonnel, recruiting goals and recruiting technology.
50
Haltiner, K., The definitive end of conscription in Western Europe?, The Armed
Forces in the Contemporary Society, Defence Staff College “G.S.Rakovsky” /in Bul-
garian/, Sofia 1998, p. 49
RECRUITING
THECHNOLOGY
RECRUITING RECRUITING
GOALS GOALS
ORGANISATIONAL
STRUCTURE
Environment
Fig. 1 Elements of the Recruiting Management System51
The personnel are the most important element of each system.

Military recruitment needs well prepared, qualified and experience re-
cruiting specialists who are able to gain successfully recruiting goals.
Armed forces might create own potential of such specialists through
elaboration and implementation of effective training and motivation
policy. They could also use different forms of public-private partner-
ship. For example, the concept of outsourcing gives new opportunities
for the development of military recruiting activity.
The organizational structure supposes that a system of ele-
ments with well defined functions and hierarchy is available. Regard-
ing the recruiting system the main problem is about the functions and
the range of activity of its elements. The professional armed forces
need a flexible and well structured recruiting system. In the current
army recruiting system many elements fulfil the same thing which is
a serious – time and resource consuming problem, expecting to be re-
solved.
The recruiting technology or what the recruiting activity
includes is very important for the success of the whole recruiting ac-
51
Fig. 1 is based on the Levitt’s Diagram of the system of management.
tivity. The technology supposes two main questions: “How young Bul-
garians to be attracted to serve in the AF?” and “What can attract
them?” The first one refers to the advertising policy, to the sources
of recruits and the concrete recruiting activities. The second is con-
nected with a large spectrum of motivation activities – payments, ac-
commodation, promotion, training etc. These are also among the main
aspects of the retention activity. At present the low payment and ac-
commodation problem are the main challenges before the motivation
policy in the BAF.
There are two types of recruiting goals. The first one is defined
in the strategic documents of the AF where their total number in
peace and war time is fixed. At present according to the Military Doc-
trine the peace time number of the forces is 45 000 people. In fact
their number is about 39 000 people. Recruiting system has to keep
constantly this level of serviceman. The second one is connected with
the activity of each recruiting specialist. In the current recruiting
practice of the BAF, individual recruiting goals do not exist. It wills
well if the functions and goals of recruiting specialists will be clearly
defined.
Together with the quantity of potential candidates that has to be
attracted, their quality characteristics have to be defined. This is con-
nected with the successful fulfilment of service duty and achievement
of the goals of the AF. That is why the definition of the criteria for
military service is very important. Their verification needs serious sci-
entific support.
3. R&D in Support of Professionalization of the BAF

Professionalization of the BAF needs a significant scientific sup-
port. Researches might be dedicated to different aspects of the process
and several approaches could be used. HFI includes many issues that
deserve special scientific interest and among them is the recruiting
and retention one.
A) R&D in Support of Human Factors Integration /HFI/ in

the BAF
Military capability is not just a function of equipment perform-
ance, but depends on a combination of interacting elements. People
are a key component of any defence systems. Systems developers need
to ensure that systems are designed, taking into account all lines of
development, in order to achieve effective operations. That is why
human factors must be integrated into design of systems.
The system of Human Factors Integration /HFI/ aims to “ensure
that the human component is adequately considered in capability de-
velopment”. HFI is a systematic process for identifying, tracking and
resolving human related issues ensuring a balanced development of
both technologies and human aspects capabilities.52
According to widely accepted opinion HFI involves the identifica-
tion and trade-off of the human-related issues that could impact heav-
ily upon defence acquisition. In order to ensure that all issues are con-
sidered, they have been categorized into 7 main areas or domains. Any
decision in one of the domains can easily impact in another domain.
HFI in the professional Armed Forces is a very important process
and need significant scientific support especially in the main 7 do-
mains.53 These domains are:
• Manpower – It is concerned with numbers of military and civil-
ian personnel required and potentially available to operate, main-
tain, sustain and provide training for systems.
• Personnel – The researches in this domain must treat cognitive
and physical capabilities required to be able to train for operate,
maintain and sustain system. Some of the questions that are im-
portant within this domain are: What physical characteristics will
personnel have?; What aptitudes and abilities will personnel bring
to the role?; How will the right personnel be recruited for the
roles and how will personnel be effectively retained within roles?;
What cultural and social factors might be important?; What kind
52
The MoD HFI Process Handbook, Edition 1, December 2005, p. 1
53
of previous experience and training would be advantageous or

disadvantageous in potential recruits?; How will humans interact
with each other when working with the system?.
• Training – This domain is concerned with the instruction or
education and on-the-job or unit training required in order pro-
viding personnel with their essential job skills, knowledge, values
and attitudes. Some of the important questions that must be sub-
ject of research and development within this domain are: What
methods of training will be most helpful in teaching personnel to
use the new systems? What standards should training technolo-
gies reach? Will automation of some functions cause a de-skilling
effect among personnel? etc.
• Human Factors Engineering – This domain includes the inte-
gration of human characteristics into system definition, design,
development and evaluation to optimize human-machine per-
formance under operational conditions. The questions that might
be important within this sphere are: How should tasks be allo-
cated to individuals/groups and which tasks should be automated?
How should the workplace be designed to best accommodate the
operator/maintainer? etc.
• System Safety – This domain suppose following questions:
What are the potential error sources that need to be analyzed and
assessed? What are the impacts on the operators/maintainers
when the system is functioning abnormally; Is there the potential
for operators/maintainers to misuse the system in ways that could
affect safety? The errors can be induced through bad design, poor
training or poor/inadequate management systems.
• Health Hazardous – This sphere supposes elimination and
diminution of health hazardous conditions during the use of a
system – vibration, fumes, radiation, noise, which may cause
death, injury, illness, disability or reduce the performance of per-
sonnel;
• Social and Organizational – This domain is relatively new. It
has appeared in connection with increase of the importance of
multinational operations. The experience of British MoD shows
that it evolves issues such as: shared situation awareness; cul-

tural issue; trust and information sharing; alternative organiza-
tional configuration.54
The R&D in these 7 domains should be followed by concrete ac-
tivities otherwise it will be useless.
B) R&D in Support of Recruiting and Retention Activity

in the BAF
Behavioural approach
The term “intention to enlist” or the “propensity to enlist” is a
key notion if we, as researchers, choose the behavioural approach. To
attract more, highly motivated and well educated people military au-
thorities should find the answer of the question: What does the “in-
tention to enlist” depend on? The intention does not always translate
in to behaviour. Sometimes people state a negative intention to enlist,
but with time end up enlisting in the military. Sometimes they have
positive intention but never enlist. That is why the variables which
determine whether the “intention to enlist” translate into enlistment
behaviour have to be studied.
The variables that facilitate or prevent the person from carrying
out their intention could be grouped as follows:
• Environmental Factors – mainly these are the variables of the re-
cruiting environment;
• Individual Features – they include requisite qualification, skills
and abilities to perform the behaviour.
• Which are these environmental factors? How do they influence on
the intention to enlist? The studies should answer to these ques-
tions.
Regarding the individual features they also have to be clearly de-
fined from the description of the job and missions, goals and objectives
that have to be achieved and fulfilled by the Armed Forces. They need
to be confirmed by means of observations and studies conducted by ci-
54
vilian and military experts.

Despite the fact that sometimes the “propensity to enlist” does
not transform into real behaviour, as a whole, it is a good predictor of
enlistment behaviour. Thus, it is of key interest to understand what
factors cause some individuals to have positive intent with respect to
enlisting in the military and others to have negative intent.55
The factors of “propensity to enlist” and their determinants have
to be defined. Sometimes they could be measured. According to a sur-
vey dedicated on the evaluation of military advertising and recruiting
such factors are: individual’s personal attitude toward enlisting, nor-
mative pressures that are brought to bear on the individual and self-
efficacy which means whether the individual believes, he or she can,
in fact, perform the behaviour.
Economic approach
An economic theory of enlistment often focuses on individual de-
cision making about whether to join the military or pursue civilian al-
ternatives. Economic theory assumes that an individual who is con-
sidering military service makes the decision to join by comparing the
perceived utility he or she expects to receive from military service
with the utility he or she receive remaining a civilian. In economic
theories, it is not uncommon to elucidate the role of wages and com-
pensation in influencing these utilities. For example, it might be as-
serted that the utility for a given career choice is based on the com-
pensation associated with that choice /W/ and other non-pecuniary as-
pects of the choice /g/. In this case the utility associated with the mili-
tary choice can be represented by the equation Um = wm + gm and
the utility associated with the civilian choice by Uc = wc + gc. A
youth prefers to join the military if the expected utility from military
service exceeds the expected utility from civilian life, that is Um > Uc
or wm – wc < gc – gm. 56
This approach suppose R&D dedicated to the youth choice, differ-
ent alternatives for future realization and how and to what extent
55
Evaluating Military Advertising and Recruiting: Theory and Methodology, p.20
56
Evaluating Military Advertising and Recruiting: Theory and Methodology, p.26
could be satisfying.
Conclusion
Professionalization of the BAF is not a single act but a complex
and innovative process. It puts new challenges before HRM system
which development needs serious scientific support.
The research activity should include all aspects of HRM - starting
with military recruiting and finishing with retirement of the service-
men. All these activities are connected. They could be studied in the
context of the whole motivation policy in the AF.
Special attention must be paid to the relation between human
factor and the other resources so that a synergetic effect to be
achieved.
The recruiting and retention activity can be studied through dif-
ferent approaches. No matter the chosen approach, the results of all
these research activities have to find real application into the policy of
professionalisation and in all its aspects – recruiting and retention
policy, training policy, motivation policy, social and educational policy,
health policy etc.
References
1. Ivanov, T., Management on Defence and Security, lectures for the
students at UNWE, 2006/2007
2. Paul R. Sackett, Anne S. Mavor, Evaluating Military Advertising
and Recruiting: Theory and Methodology, 2004,http://www.nap.
edu/catalog.php.record id=10867
3. The MoD HFI Process Handbook, Edition 1, December 2005,
http://www.hfidtc.com/pdf/HFI_Process_Booklet.pdf
DEVELOPMENT OF THE BULGARIAN DEFENCE

INDUSTRY DURING THE PERIOD UNTIL 1989
Mr. Nikolay Stavrev, Ph.D. student

1. Development of the Defence Industry Within the Period

(1912 – 1939)
During the Balkan wars (1912 – 1913) the country did not have
any heavy industry and the enterprises of different fields directed to
the production of military goods did not succeed to entirely ensure the
needs of the armed forces and the population during the conflict. The
fabric industry had significant abilities thus succeeding to produce the
necessary amounts of clothing for the army. However, generally the
wartime organization of this branch was lacking ideas. The chemical
industry managed to supply some types of explosive substances
(stone-cutting gunpowder etc.) and chemicals.
The First World War burst out in 1914 and Bulgaria was involved
in it one year later – 1915. 141 enterprises of the national economy
were militarized in the climax of the conflict in 1917.
Despite of the restrictive conditions of the Treaty of Neuilly
(1918) the manufacturing and reconstruction activity of military
goods kept on being performed in Sofia arsenal. At the end of 1919 an
artillery reconstruction battery was created to the enterprise and in
1920 a carriage reconstruction workshop. In this look during the first
years after the war Sofia arsenal was a universal military workshop
for creation of some new and reconstruction of almost all products for
equipping the Bulgarian Army. The production capacity of the car-
tridge department are within the range of 200 000 cartridges per
twenty-four-hour and of the equipment department – preparation of
900 000 cartridges per twenty-four-hour period.57

In 1925 the construction of State Military Factory (SMF) started
in the town of Kazanlak. Till the end of 1927 the entire re-
establishing of Sofia arsenal in the new military factory was carried
out. Only a branch of SMF remained in Sofia operating till 1935 with
the task to purchase and provide the necessary materials for work in
the factory. Several years took for the State Military Factory to grow
and in 1930 its branch in Sopot was opened. At the beginning of 1939
this branch started operating as a separate military plant. At the be-
ginning of 1934 a new equipment installation was purchased for the
military factory in Kazanlak from the Danish company “Nilsen” and
“Vinter”. New equipment started operating in the gunpowder-
explosive department from 1936 on. These new technologies gave the
possibility to produce new types of war supplies for the personal port-
able firearm.
After 1935 Bulgaria strenuously started importing military mate-
rials from Germany. The factory in Kazanlak was equipped with new
machines, facilities and installations imported by the companies “Sta-
lunion”, “Eimuko”, “Han & Kolb”, “Hose & Brede”, “Liove” etc. After
1937 the capacity of the factory were widened and along with the pro-
duction of cartridges for the firearm started the production of shells
for all types of guns and howitzers which are equipped by the Bulgar-
ian Army. Along with this started the production of barrels for new ri-
fles, carbines and machine-guns. 1935 started the production of gas
helmets model ДФВ – 36. 1938 started the independent production of
guns. A complex installation was delivered for production by “Re-
inmetal” – Germany at the price of 24 millions of levs. At the end of
the 30 years The State Military Factory in Kazanlak established as a
major production center of the country with the capacity for thorough
and complete reconstruction of the arming and war supplies and for
the production of firearm, machine-gun and artillery armament.
The second main direction in the development of the military in-
dustry was within the field of the dockyard activity and shipbuilding.
57
Петров Л., Военната икономика на България 1919-1945, УИ „Стопанство”, София,
1999
In 1897 the Naval arsenal was created acting dockyard. Within the
period between the two World Wars (1918 – 1939) it concentrated on
the maintenance of the few Bulgarian military vessels. In 1924 the re-
construction of the torpedo boat “Smeli”, taken out from the sea bot-
tom, was successfully performed. A year later the torpedo boats
“Druzki”, “Hrabri” and “Strogi” were reconstructed. During the 30-
ies several ships were reconstructed which allowed the Bulgarian
Navy to have though minimal military capacity without granting by
the State a huge amount of resources for purchasing military ships.
The third direction of the military industry was the aviation in-
dustry. After the Treaty of Neuilly the disbanding of the plane work-
shop in Bojurishte started. Only three years later in 1921 it was rec-
reated again and 1923 pointed the beginning of the Bulgarian plane
building. The first serial planes were manufactured and started oper-
ating in 1925. They were a copy of the German plane “DFW”. The
first Bulgarian plane of an original construction design is DАR – 1,
which is an educational and training one for the initial training. Dur-
ing the next years the models DАR – 2 and DАR – 3 were developed
and implemented in the serial production. Subsequently transport
and educational and training models DАR – 4, DАR – 5, DАR – 6, DАR
– 7, DАR – 8 and DАR – 9 were developed and manufactured.
In 1927 the Bulgarian state signed a contract with the Czechoslo-
vakian company “Aero Praga” for the building of a plane company in
Kazanlak. It was a short period of building the factory buildings,
which were equipped with machines and facilities for the production
of 100 planes per annum. In 1930 the plane complex was bought off by
the Italian company “Kaprioni”. The first plane of the Italian com-
pany was made in 1932 and was named as КБ – 1. For 7-8 years only
“Kaprioni” manufactured dozens of planes for the military aviation,
which made necessary in 1938 to open military reconstruction work-
shops for the aviation equipment in Plovdiv, Gorna Oriahovitza,
Yambol and Karlovo. The year 1939 started the production of a new
big aviation factory near the town of Lovech.
The activity of developing the military industry was tightly re-
lated to the scientific publication activity on the issue. In the begin-
ning of the 30-ies in the new magazine “Bulgarian military thinking”

a trial to present the importance of the military industry was made. In
1938 a number of serious surveys on the topic were performed. A
number of publications were issued with the recommendation to dis-
concentrate the military production in different towns mainly inside
the country. Practically these ideas were realized considering the fur-
ther development of the industry in Kazanlak, Sopot, Sofia, and
Lovech.
The general conclusion for the Bulgarian military industry for the
period between the two World Wars indicates a significant branch
growth. Although the own production could not satisfy the army
needs, the successes in the development of the defence industrial base
gave favorable possibilities for the branch development. A confirma-
tion of this trend is the fact that at the end of 1939 Bulgaria is an in-
dustrial aviation state.
2. The Period of the Second World War (1939-1945)

The period of the Second World War is specific with the strong
development of the military industry in Bulgaria. The main military
enterprises, specialized entirely in the production of such products
during the war were Kazanlak, Sopot and Sofia (for the land army),
Kazanlak and Lovech (for the aviation) and Varna (for navy). The two
factories in Kazanlak and Sofia are the biggest. They employ about
10 800 workers, 707 officers and soldiers and 550 military officials.
For the scale of Bulgaria these are big industrial enterprises.
The beginning of the 40-ies the Bulgarian arms industry started
widening in terms of new enterprises. At the end of year 1942 the first
Bulgarian dynamite factory “D. Stoimenov and Co. joint stock com-
pany” was opened. At the beginning of the year 1943 the pyrotechnic
factory on train station “General Jostovo” near Skopie started opera-
tion. The enterprises for rear guarding got collected. Every trial for
inventive and introductory activity was encouraged by the state.
Mainly important for the period is the military industry in the
naval arsenal of Varna. About 1500 people work in it. According to
reference information prepared for the Minister of communications in
1944 „the naval workshop is a reconstruction technical workshop spe-

cially designated for performing the reconstruction of the ships of the
Black Sea Navy”. Within the period 1940 – 1944 the naval production
in Varna was intended mainly for the needs of the German navy. In
the year 1944 a small military reconstruction workshop was created
on Tasos isle, operating entirely for the needs of the Germany war
navy.
After the year 1940 the development of the aviation industry in
the country continued. The regional plane workshops in Bojurishte,
Plovdiv, Yambol and Kazanlak were collected and renamed into Main
reconstruction workshops. Along with that river airport workshops
were built for operating reconstructions in Vrajdebna, Graf Ignatievo,
Gorna Oriahovitza, and Telish. A State reconstruction factory was
built in Karlovo for thorough reconstruction of the planes. The State
Plane Factory in the town of Lovech was completed and started opera-
tion in 1942. The main units of the factory were the constructor’s
compartment, production compartment, plane compartment, factory
control, factory laboratory, fitting-weldering compartment, carpen-
ter’s workshop, mechanical compartment and installation compart-
ment. As far long ago as in the year 1942 more than 700 people were
working in the factory. Within the period 1942 – 1943 36 educational-
training planes were manufactured in Lovech. The evaluation of the
specialists was that these were high quality ones. 72 gliders were
manufactured for the same period as well.
What was specific for the planes manufactured in Bulgaria during
the period of the Second World War (1939 - 1944) was that they were
significantly better and of higher capacity than those made during the
period of the 30-ies. They were faster and had significantly higher
flight distance. The aviation equipment was significantly improved –
firearms and bombs. This was possible thanks to the good operational
organization of the production process. The entire work process from
the planning to construction of the aircraft building was placed under
strict inspection and control.
Characterizing the state of the Bulgarian military industry for
the period after the 1912 till the end of the Second World War (1945)
it can be stated that it developed successfully and at good speed. The

purchasing of contemporary installations and equipment allowed the
production of a range of high quality products in large scales – car-
tridges, fuses, new armament bodies, rifles, carbines, explosive sub-
stances, semi-manufactured goods, planes, carbines etc. Generally not
few successful construction decisions appear. An optical sight for the
heavy machine-gun “Maxim” was made in the State Military Factory
in the town Kazanlak. In June 1942 tests were performed proving
that this sight excels the original one at distance above 800 meters
with a higher measuring accuracy and clearer visibility at lower
weight. Compared to the big World countries of powerful military in-
dustry, the Bulgarian military industry remained comparatively un-
developed. The reasons for this trend are numerous. On one hand the
Bulgarian armament industry was completely depending on the ex-
ternal import of raw materials, machines, installations and technique.
On the other hand it was poorly energy supplied. Nevertheless the ca-
pacity was increased many times during the period of the Second
World War.
In the existing political and economical conditions in the middle
of ХХ century, a small country like Bulgaria succeeded for short time
in the 30-ies and 40-ies to develop significant military industry. In the
lack of own resources and developed heavy industry the successes of
the country in this field were indisputable. The establishing of the
military production during the period until 1944 gave solid ground for
its development during the socialistic period.
3. Development of the Defence Industry Within the Period

(1944 – 1989)
After the end of the Second World War the so-called “two pole
model” was formed by military, economical and political contrariety
between the states of NATO and the states of the Treaty of Warsaw.
During this period the defence industry in Bulgaria grew many times.
The number of the enterprises of this branch reached 150. They were
all state property. Their size and production capacities were different.
Within the period of the 80-ies of ХХ century the Bulgarian military
industry manufactured around 10 % of the Gross National Product of

the state as hardly 7 – 8 % (out of the 10) were directed for the needs
of the national armed forces. The large output of the Bulgarian mili-
tary industrial complex was exported mainly for the member states of
the Treaty of Warsaw and less for third countries.
The defence industry of the state was based on the scale industri-
alization. The production was directed to light weapons, rockets and
ammunitions whose technological limits were reached comparatively
easily. These products did not involve the usage of sophisticated mate-
rials and specialized electronic equipment. The output was compliant
with the Soviet standards and licenses. The sophisticated and more
fashionable products were manufactured with basic elements im-
ported from the Soviet Union. During the most successful years of op-
eration of the defence industry the country was arranged in the first
decade of the exporters of military goods. In the 80-ies the export for
the member states of CMEA reached to output for 2 – 2,5 mlrd of levs
and for the remaining world to 900 mln dollars per annum. The cur-
rency return for the exported military products was around 240%
which meant that every 1 lev introduced in the production corre-
sponded to 2,4 levs of the export.
The Bulgarian defence industry had created a system of scientific
institutes that were introducing goods of high quality characteristics.
The country was on the first place in the production of cumulative
anti-tank grenade, shot by manual anti-tank grenade dischargers as
well as of many other cumulative shots. Around 8 thousands of anti-
aircraft rockets “Strela” were being produced, having even better in-
dications than the American “Stinger”. The country was taking the
second place after USSR (the states of the Treaty of Warsaw) in the
production of war supplies. Including the anti-tank rockets, wire
managed or laser ray managed (system “Bastion”) as well as unman-
ageable rockets and aviation ammunitions. Along with this a wide
scale of laser equipment, laser range-finders, night sight devices, laser
technological settlements, and fusillade fire rockets, radio explosives
etc. In Bulgaria a huge quantity of armoured carriers and automotive
artillery settlements were being produced. The production of military
electronics, optical electronics and engineering facilities was signifi-

cant.
Until the year of 1989 the military industrial complex increased
to 180 thousand employees.58 The plants and enterprises were 100 %
state property, grouped in holdings and consortiums. The main pro-
ductions in the defence industry of the state for the period until the
year 1989 are: war supplies production; production of light firearms;
production of artillery and rocket armaments; armoured tank produc-
tion; ships and vessels production, production of connecting and
communication technique; radio-locator production; optical electronic
production.
The biggest military factories in Bulgarian until the year of 1989
year are:
• Arsenal (Kazanlak);
• VMZ (Sopot);
• Beta (Cherven Bryaq);
• Arcus (Luaskovets);
• Dunarit (Rousse);
• Cherno More (Varna);
• Trema (Triavna);
• Prima (Montana);
• OMZ (Sofia);
• Ekoel (Pleven);
• OELT (Sofia);
• Samel (Samokov);
• Elovitza (Gabrovo);
• Signal (Sofia).
After the World War II Arsenal (Kazanlak) started the production
of new articles of primary importance for the country - three-furrow
ploughs, disk harrows, batteries, diesel engines, electric motors, as
well as the repair of optical systems and the production of the first
lathes and vertical milling machines.
Since 01.04.1947 by the Decree of the Council of Ministers the
58
Иванов Т., Икономика на отбраната, УИ „Стопанство”, София, 2002
State Military Factory became a self-supported economic unit. By De-

cree of the Council of Ministers of 30.12.1948 the Military plants in
the country merged into a special State holding "Metalchim" and the
State Military Factory-Kazanlak passed from the Defence Ministry
to Ministry of Industry and crafts under the name of "Factory-10".
During the years 1956-58 "Factory-10" started the production of a re-
coilless canon B-10, as well as of assault rifle. Its first specimen was
manufactured in 1958 and the jubilee-one million-in 1982. In 1967
started the Development Centre, which in 1984 grew into an Institute
for Machine-tools.59
In the course of the following period were introduced new produc-
tion facilities as follows:
• Factory for springs;
• Factory for special purpose machinery;
• Factory for optional equipment (non-standard);
• Production of powders, primers and pyrotechnic products;
• Workshop for CNC machines;
• Computing center etc.
From 1977 till 1989 the factory was known in Bulgaria and
abroad as "F.Engels" Machine Building Plant. The machinery fleet is
continually improved and modernized thus enlarging the possibilities
for a wider scale of production. Simultaneously grew the number and
the qualification of the specialists. All that was a premise for perfect-
ing the licensed production, design and serial production of new prod-
ucts:
• 1971-72 - 9x18 mm pistol cartridges;
• 1971-73 - 7,62 mm machine gun ;
• 1972-74 - 9 mm "Makarov" pistol;
• 1976-78 - 7,62 mm tank machine gun ;
• 1983 - 23 mm anti-aircraft system ZU-23-2;
• 1984-86 - 5,45 mm assault rifle ;
• 1985-87 - 5,45x39,5mm cartridges;
• 1986-87- 122 mm howitzer etc.
59
http://www.arsenal-bg.com/defence.htm
Vazovski Mashinostroitelni Zavodi (VMZ – Sopot) is found in

1936. After 1945 year VMZ passed trough different stages of its de-
velopment. The special production is specialized in:
• Antitank guided missiles - 9М14М „Malyutka”, 9М115М „Metis”,
9М111-2 „Fagot”, 9М111 – М „Faktoria”;
• Antitank unguided missiles;
• Aviation unguided missiles – 57 and 80 mm;
• Artillery ammunition – 100, 122, 152 and 150 mm;
• 122 mm M-21 of Rocket projectile (GRAD);
• Fuzes;
Dunarit (Rousse) is founded in 1903 year. After 1945 it is special-
ized in:
• Aviations ammunitions;
• Artillery ammunitions;
• Engineer ammunition;
• Industrial explosives.
Samel (Samokov) was established in 1964 aiming at satisfying the
needs of the Bulgarian Army of electronic communications equip-
ment. The products of Samel are well accepted in the UK, Belgium,
France, USA, as well as many countries from the Middle East and Af-
rica.60 The special productions of Samel are:
• Radios;
• Charging devise;
• Field telephone sets;
• Radio Jammers;
• Communications and information shelters;
• Systems for surveillance and guarding;
• Anti-aircraft missile systems.
Founded 1976 in Cherven bryag, Beta is one of the leading and
developing Bulgarian companies. As a technology orientated company
Beta operates within 80 buildings located on more than 664 000 sq. m.
60
http://samel90.com/
ground area.61 State-of-the-art machinery, meticulous production con-

trol and experienced engineer’s computer projects expedite the work-
flow through the company's manufacturing facilities. Working in the
field of the industrial market, Beta maintains diverse metal-
processing in-house technical capabilities including cold stamping,
welding, termo-processing, bending, manufacturing of rubber details
and other technological facilities, like surface treatment, powder coat-
ing, galvanizing.
Arcus is located in town of Lyascovets the Company is founded in
1965 year as a mechanical engineering plant of production of fuzzes.
Through the years it expended its product range to include ammuni-
tion, small arms, and close support weapons.
The system of the military repair factories, whose successor is
TEREM EAD, was established in 1963 as an economic entity uniting
the military repair factories of the Ministry of Defence and providing
repair for the armament and equipment of the Bulgarian Armed
Forces.
TEREM - Bozhurishte is founded in 1968. It is specialized in:
overhauls and repairs radars, navigation and communication stations
and equipment, internal combustion engines and electrical genera-
tors; upgrades radar stations; manufactures radar amplifiers and
spare parts for radar stations.
TEREM - Varna is founded in 1897. After 1945 year TEREM
Varna has technological possibilities for the construction of the follow-
ing vessels:
• Freight and passenger boat of the Pioneer type;
• Multipurpose freight and passenger boat;
• Hydrographic boat and torpedo catcher;
• Tow- and thruster boat;
• Diver boat;
• Raid barge of the Akula /Shark/ type;
• Mars missile and artillery target;
• Fire fighting towboat.
61
http://www.beta.bg/
TEREM - Veliko Tarnovo is founded in 1953. Overhauls and re-

pairs all types of small arms, artillery systems and all basic missile
systems in service with the Bulgarian Armed Forces.
TEREM - Kostenetz is founded in 1957 and specialized in: over-
hauls and repairs all calibers of artillery, mortar rounds and rifle am-
munition; manufactures mobile air targets, smoke grenades; carries
out destruction and utilization of all kinds of rifles, artillery and mor-
tar ammunition; commercial products: production blasts, smoke anti-
frost grenades, agricultural machinery;
TEREM - Letetz is founded in 1949. In 1947 by a Minister’ decree
was established an aviation repair workshop. In pursuance of it, on
the 31 of January 1949, through an order of the Air Force Com-
mander, the staff of the workshop was promulgated. In 1954 through
an order of the Air Force Commander were merged the aircraft work-
shops in the town of Bozhurishte and in the village of Vrazhdebna.
The new one was located in the village of Vrazhdebna, while the one
in the town of Bozhurishte was closed. Pursuant to the Minister’s de-
cree in 1965 the Aviation Repair Base was transformed into “Military
Repair Bases and Factories” Department, which in 1969 was renamed
into MRZ. “Murgash” In 1992 the factory was renamed into VRZ
“Letetz”.
Bulgarian Military Repair Factory "G.Benkovski" was established
to provide repair, overhaul and upgrading of the Bulgarian Air Forces
aircraft and equipment, as well as manufacture of spare parts. The
factory started on the 1-st of October 1939 as a workshop for different
kind of military and civil aircraft, used by the Bulgarian Air Forces.
Since 1967 the Aircraft Repair Factory “G.Benkovxi” has carried out
overhaul of aviation equipment, airplane and engines, belonging to
different countries from Europe, Asia and Africa. Since 1982 its ex-
ports has amounted to 50% of the production scheme. During these
years we have developed capabilities for the overhaul of over 32 mod-
els of aircraft and 30 engines.
TEREM - Targovishte is founded in 1966. It is specialized in:
• overhauls tanks (T-55, T-62, T-72, T-72M) and armoured military
vehicles (MT-LB, BMP-1and modification based on MT-LB);
• upgrades tanks (T-55 and T-72) and armoured personnel carriers

(BTR-60PB);
• manufactures MT-LB prime-movers and modifications, spare
parts and maintenance kits for tanks and armoured vehicles, as
well as gear boxes and transmissions.
The development of the defence industry in Bulgaria for the pe-
riod 1944 – 1989 was as a result of the geopolitical orientation of the
state to the structures of CMEA and the Treaty of Warsaw. The pro-
duction of military and special products in the country was performed
entirely as per Soviet model; it was completely specialized in the pro-
duction of Soviet weapons. Based on this production a range of im-
provements and innovations were created and introduced by the Bul-
garian specialist. The Bulgarian military products during this period
was distinguished by high quality and scale production capacity allow-
ing the country export the products in dozens of states in the world
from Europe, Asia, Africa and America.
Sources
1. Иванов, Т., Икономика на отбраната, УИ „Стопанство”, София,
2002
2. Петров, Л., Военната икономика на България 1919-1945, УИ
„Стопанство”, София, 1999
3. Саздов, Д., Проблеми на стопанската история на България, УИ
„Стопанство”, 1996
4. http://www.arsenal-bg.com/defence.htm
5. http://www.arcus-bg.com/
6. http://www.beta.bg/
7. http://www.dunarit.rousse.bg/
8. http://www.terem.bg//special.aspx
9. http://www.vmz.bg/
10. http://niti.kazanlak.bg/
11. http://samel90.com/
ECONOMIC DEVELOPMENT AND SECURITY POLICIES -

CHALLENGES AND PERSPECTIVES FOR RESEARCH
Mr. Rainer Stenzel

Degreed Economist/Social Economist,
Expert for Cross-Border Business and Economic Cooperation
1. Changed Environmental Conditions as Challenges for

Economy and Security Policies.
1.1. Compatibilities of Challenges
New technologies in the areas of production, information, and
communications as well as political changes foster internationaliza-
tion of the economy and commerce.
The changed market dynamic forces companies increasingly to
question their own competitiveness and competitive position – now
and in the future.62 Business activities and entrepreneurial actions in
(decentralized) structures, global orientation, permanent pressure due
to ongoing changes, and adequate employee management are chal-
lenges corporate management is facing.
Environmental conditions for security policies also have changed
drastically over the past decades. Among others, they are character-
ized by the end of the cold war, changes in Europe, the 9/11 terrorist
attacks, the wars in Afghanistan and Iraq, and all of the associated
new threat scenarios. It seems that globalization in itself is the cause
of new crises potentials characterized by a high degree of inter-
correlation with other crises or societal developments.63
62
Cf. Kormalis, V.: Internationalisierungsbetroffenheit und Internationalisierungss-
trategien, Tectum, Marburg (Germany), 2005, p. 12 et seq.
63
Cf. Kernic, F./ Hauser, G.: Handbuch zur europaeischen Sicherheit, 2. edit., Lang,
Frankfurt am Main (Germany), 2006, p. 24 et seq.
For example, Huber/Eggenhofer64 outlines the insecurity parame-

ter in an interesting article concerning the military as follows: "The
greater the level of insecurity about the environment in which deci-
sions must be made, the higher the risk associated with these deci-
sions. In the sense of minimizing the decision risk, insecurity thus
constitutes a double challenge. One aspect concerns the question of
how insecurity can be reduced; another aspect how to consider insecu-
rity that cannot be eliminated in planning and operation. This applies
to all decision levels, including strategic-planning, cooperative-
tactical, and technological.... The insecurity connected with the civiliz-
ing development is strategic in nature...."
Concerning the second parameter of the complexity, the authors
explain that military operations, for example, must be seen in context
with other elements of diplomacy or the information as elements of an
overall strategy, which affect one another and significantly increase
the level of complexity.65
Although based on a different target term, the named parameters
for the area of business also can be identified under different slightly
changed situational conditions within the scope of the internationali-
zation strategy of companies. "Complexity is a central term of the
newer system theory. It refers to specific developmental conditions of
modern societies that are the cause for many social situations and re-
lationships having become multilayered and very complex (...)."66
The environmental conditions for companies or the economy in
general as well as the security policy are therefore characterized by an
increased level of insecurity as well as increasing complexity. For all
intents and purposes, one is able to consider this to be a compatibility
of challenges.
It results in new, similar requirements for businesses as well as
64
Cf. Huber, R.K./ Eggenhofer, P.: Transformation der Bundeswehr - Intellektuelle und
Kulturelle Herausforderungen. In: Deutsche Sicherheitspolitik - Rueckblick, Bilanz
und Perspektiven (R.C. Meier-Walser, Edit.), Berichte und Studien 87, Muenchen
(Germany), 2006, Hanns-Seidel- Stiftung, p. 99
65
Cf. ibid. p. 101
66
Cf. Willke, H.: Systemtheorie I – Grundlagen: eine Einfuehrung in die Grundprob-
leme der Theorie sozialer Systeme., 5. edit., Stuttgart (Germany), 1996, p. 18
for actors within the area of measures and actions relevant to and as-
sociated with security: Flexibility, interaction, and cooperation are
more significant across all levels.
1.2. Reactions to Changed Environmental Conditions
Several trends can be outlined in the area of business and com-
merce as a reaction or action to changed environmental conditions.
For one, there is the (inner) organizational change of workflows and
structures starting with the concept of "lean production" gaining in
popularity in the industry in the 90s. Small-and-medium sized com-
panies have by now adopted numerous new approaches of implement-
ing more flexible processes and procedures with faster response times.
Virtual company structures are also gaining in significance within the
scope of these changes. Moreover, the concept of "knowledge manage-
ment" has been implemented by companies in view of the increasing
importance of know-how as a raw material or resource.67
Changed approaches, procedures, and structures, however, are
also to be found across all relationships with the outside area. Net-
working starts already on a local or regional level. International busi-
ness relationships of companies are no longer an exception but the
rule instead. Cooperation with others, including in the area of inter-
national activities, gains in importance.
The understanding of (Eastern European) security policy also
changes fundamentally as a reaction to the changing requirements.
The role and objective of the security policy is no longer to manage
risks and dangers by exclusively "reacting" to them. Instead, the pos-
sibility of risks and dangers during any preliminary phases of any con-
flict are already considered to be part of the security policy domain.
Due to the complexity of the interdependencies and interconnectivi-
ties, it is possible that "…local and regional crises disintegrate into re-
gions relevant for one's own security…" describe Huber/Eggenhofer
quite accurately.68 "Security policy thus becomes a topic and task on a
67
See therefore: Voelker, R./ Sauer, S./ Simon, M.: Wissensmanagement im Innovation-
sprozess, Physica, Heidelberg (Germany), 2007
68
Cf. Huber, R.K./ Eggenhofer, P, loc. cit., p. 11
global scale, which requires preventative and coordinated actions in

all political spheres with the goal of steering the civilizing develop-
ment into the direction of desirable and controllable scenarios."69
A modified security policy definition is well illustrated by the con-
ception of the 7th Research Framework Program of the EU.70 Accord-
ingly, security research is defined as a separate focal point, which in
turn is made up of several subtopics. The scope and extent of the as-
signed topics is in this case remarkable. In addition to more tradi-
tional research fields such as research concerning technology-
supported risk and danger defence and the protection of the technical
systems and infrastructures from attack, topics also include economic
implications. The following question covers a key issue: How can the
benefit of security be defined within the corporate or economic con-
text and how can security research in turn generate advantages in the
area of competitiveness?
2. Interdependencies Between the Interests of Business

and Security Policy – Example Germany.
2.1. Macro Level: Practical Interface between Business
and Security Policy
Any security policy does not only exist as a theoretical construct
but also affects the everyday interests of the economy and commerce.
This is to be illustrated briefly with a few selected examples from
Germany.
Just as other armies of NATO, the German military is undergo-
ing a transformation process. Based on a changed view of security
policies, the goal consists of realizing an army that can be utilized as
flexibly as possible with specially trained forces and networked opera-
tional and deployed troop management. This implies significant
changes, among others for the weapons systems to be employed (com-
patibility), the structural flexibility of the systems (rapid deploy-
69
Ibid.
70
See for more details: Geiger, G.: EU-Sicherheitsforschung in: SWP-Aktuell 21,
Stiftung Wissenschaft und Politik, Berlin (Germany), 2007, p. 1-4
ment/redeployment), and the personal gear and equipment of the sol-

diers (adequacy).
This easily illustrates the direct reference to the interests of busi-
ness and commerce. It is evident that the permanent process of re-
structuring includes (not only national) industries, companies, and
suppliers primarily in their function as developers and producers. Due
to the special order structure in the area of military technology and
military procurement, a significant demand is made on business for
the future development in transformation processes on the decision-
makers in the area of security policies to improve planning in this
field. Planning reliability is considered a decisive co-criterion for suc-
cessful cooperation and teamwork between business and trade and the
military or security policies.71
A direct relationship between security policies and commerce is
also reflected in models about new forms of distributing or delegating
tasks between the private and the public sector. The public-private
partnerships also realized and planned in the area of security policies
– under the term Public-Private-Partnership72 – are on the one hand
certainly only simple responses to reduced budgets or limited public
resources but on the other hand they are also a means to increase the
efficiency of fulfilling tasks and enable in part first (strategic) new
orientations in certain areas (of security policies).
In conclusion, a third practical example for the interdependencies
between business and security policies: The transformation of the
German army has significant repercussions especially on regional
economies. Numerous bases and casernes of the German military are
either eliminated entirely or reduced in size. The regional economy is
affected by fewer purchases being made due to the reduced number of
71
See for example Prof. Dr. Hans H. Driftmann as president of the UVNord – Vere-
inigung der Unternehmensverbände in Hamburg und Schleswig-Holstein e.V. (Asso-
ciation of the employers`associations of Hamburg and Schleswig-Hostein) in his in
speech „Die Transformation der Bundeswehr aus Sicht der schleswig-holsteinischen
Wirtschaft“ addressed to the section Rendsburg der Gesellschaft für Wehr- und Si-
cherheitspolitik e.V. at the 10.10.2006 - cit. to the manuscript.
72
Cf. Schmette, M.: Gestaltungsprinzipien für die Initiierung und Realisierung von
Public Private Partnership, Aachen (Germany), 2005
army personnel, and this is true especially for small-and-medium

sized companies. A note in this context: the practical implementation
of the conversion in Germany has for the most part been carried out
without the sustained participation of the German army up to this
point in time. The German military up to now has regularly rejected
any demands for considering economic and political structural com-
ponents when planning and also denies any responsibility towards re-
gional political representatives concerning the support of economy-
boosting or stabilizing activities.
2.2. Micro Level: Leadership and Organization

Business, meaning companies and corporations, their employees
and executives, must be able to anticipate and respond flexibly to the
described economic and societal changes. Structural changes, how-
ever, do not "automatically" result in behavioural changes. Instead,
structural measures form the basis for the necessary awareness and
behavioural changes that can be achieved through suitable qualifica-
tion and competency development.
While the prevalent assumption in the past was that entrepre-
neurial thinking and acting was the responsibility of owners or man-
agers, today's approach considers (partial) corporate qualification and
motivation of the employees a necessity.73
The perception of what constitutes management or leadership is
closely associated with the organization structure of a company and
characterized by significant changes. If the trend in theories and hy-
potheses of the past few years is analyzed, it becomes clear that re-
search now includes new target groups and circumstances into the
context of management and leadership. While the context to be exam-
ined initially consisted frequently of only the executive or manager
and his or her impact on directly supervised employees, additional ex-
ecutives or managers with impact on employees (as technical experts
of their sphere of duties), individual employees by and through col-
73
Cf. Wunderer, R.: Fuehrung und Zusammenarbeit. 6. edit., Luchterhand, Muenchen
(Germany), 2006, p. 45
leagues have recently been examined and incorporated into the man-
agement and leadership context. Management is also discussed in de-
pendency with dynamic influence factors, with examining mostly the
efficiency of different management styles in different development
phases of executives, employees, and organization.
In summary, it is possible to state that employee management is
by now considered an integrated and integral part of corporate man-
agement and leadership (the example of the implementation problems
in the area of organization and leadership, e.g. within the military,
applies here as well).74 This point of view is also reflected in the for-
mulation of models as well as management and leadership principles.
Self-monitoring gains in importance insofar, as a better adaptation
competency and motivation of the employees, can be achieved through
a higher degree of competency transfer as well.
Leaders in the military will also have to face new demands and
requirements. "Insecurity and complexity and the associated (objec-
tive) risk present superiors with the challenge to exhibit responsible
leadership to reduce the subjective risk perceived by their soldiers.
Since the perceived risk shapes behaviour, the objective is to reduce
this risk to a measure that facilitates soldiers exhibiting behaviour
that fits the situation."75
And the authors are justified in describing the situation similar to
that in companies where, for example, networked operations imply an
increase of decentralized decisions and with an increased competency
transfer to smaller groups or individuals. In the future, supervisors
will be asked (in individual cases) – similar as in companies – to iden-
tify or legitimate operations in a meaningful manner.
3. Perspectives and Conclusions

The previous paragraphs outlined how the understanding of "se-
curity" has changed in Europe. How the requirements for business
74
Cf. Kostka, C./ Moench, A.: Change Management, 3. edit., Hanser, Muenchen (Ger-
many), 2006, p. 27
75
Cf. Huber, R.K./ Eggenhofer, P, loc. cit., p. 12
have changed was outlined as well and what large intersections exist
with view on future security perspectives. What statements can be de-
rived from this for the area of research?
There is already a vast amount of different experts' opinions and
theoretical fragments concerning this topic but they were purposely
ignored in this article, which leads me to those issues that for the
most part represent the actual challenges for security research in the
near future.
New theoretical rehashing is less in demand than a concentrated
scientific focus on practical, applicable, and transferable models in the
various areas. Result preference should be set down as a clear guide-
line of the research process. Here are a few examples to illustrate this
point:
The interlocking of security and defence related political issues
with aspects from the area of research pertaining to economic applica-
tions and other societal sphere is obvious. With view of the orientation
and organization of research and research support and promotion, it
would be appropriate to discuss here models of optimal management,
the integration of results of other sub-disciplines, etc., as well as the
integration of as many as possible societal players into networks
across different levels and to promote the exchange about these as-
pects as well as the implementation in projects.
The primary requirement is here not the genesis of new theories,
because science has numerous models and tools at its disposal such as
from the field of management and organization research.76 Instead,
the objective of the development should consist of direct and practical
action options that can be easily adjusted without much effort or ex-
penditure to meet the needs of structures of different countries.
On the application level, developments in the area of IT are natu-
rally very important. However, I share the opinion that a technically
oriented "security architecture" is not sufficient. In addition to train-
ing for the application of modern IT systems in areas relevant to secu-
76
Cf. Jochmann, W./ Gechter, S.: Strategisches Kompetenzmanagement, Springer, Ber-
lin (Germany), 2007 and Becker, F.G.: Organisation der Unternehmensleitung,
Kohlhammer, Stuttgart (Germany), 2007
rity and in business, the training concerning management and behav-

iour in complexly structured situations and environmental conditions
that are characterized by a high degree of insecurity is decisive not
only for the supportability of security concepts but also the overall vi-
ability of companies and commerce in the near and distant future in
general.
The key issue is here to meet the new contextual requirements
through appropriate education and training concepts. As an example
to illustrate this point within the scope of the general trend of further
internationalization and cooperation, I would like to mention the in-
tersecting areas of the intercultural and the area of management of
cooperation activities. Intercultural competency (indispensable for
soldiers stationed abroad) should no longer focus simply on multicul-
tural sensitivity towards different behaviours and procedures but
rather enable participants to interpret for themselves standards and
choices within the context of societal rules. In this respect, the goal is
identical with the previously listed objectives: Behaviour and leader-
ship in situations marked by insecurity must be learned through
training – one could call it guiding orientation. Such training models
should be tested in various situations and checked for practicability in
various areas with tangible results being obtained speedily.
It seems that the general preparation of different groups of per-
sons to face and handle new challenges and situations using education
and training is the core of a successful strategy. It is still astonishing
within this context to what extent new methods and forms are not ap-
plied and seem to exist in the shadows: Virtual learning is more likely
to be used for standard situations;77 a combination with presentation
events in the form of a blended learning is often underrepresented.
Beyond this scope, however, it is important to remember that espe-
cially the key advantage of overcoming spatial distances has develop-
mental potential through new technologies within the European di-
mension and is primarily applied by target groups of higher hierar-
chies, e.g. in institutions and companies with the corresponding re-
77
Cf. Breitner, M. H.: E-Learning : Geschaeftsmodelle und Einsatzkonzepte, Gabler,
Wiesbaden (Gemany), 2006, p. 49
sources. But what is more obvious than supporting the conveyance of

intercultural and multicultural differences across transnational (vir-
tual) work group processes as well?
Last but not least, research and research management are still
faced with yet another decisive challenge – anchoring in regional envi-
ronments. Similar as with regional policies and especially the regional
business development, where a definition and development of regional
resources up to and including competency bundling into clusters hap-
pens, a more intensive - but not exclusive - regionalization of practical
research and application activities would foster not only the interlac-
ing of security policies and business (and with that the application
compatibility and transparency of the results) but also induce positive
effects in view of the economic development of regions.
Research in the areas mentioned previously is carried out in the
interest of business as well as the interest of the actors in the security
policy sphere. Because results of training or best practices in the area
of change management, for example, is relevant (with variations) for
the application in companies and the security domain
The same applies to fields of research with a seemingly fleeting
association with security policies such as research activities regarding
conversion strategies with a regional connection or association or con-
cept models of Public Private Partnership (PPP). Security policies
should always be defined comprehensively except for a few exceptions
and include economic implications across several levels. This would
mean that security research within the regional environment could
also include concerns of regional commerce and trade. With this per-
spective in mind, models of conversion management including affected
regional institutions and decision makers or, for example, models for
carrying out and assigning duties and responsibilities within the scope
of PPPs could also be part and function of forward-looking security
research.
Bibliography:
1. Becker, F.G.: Organisation der Unternehmensleitung, Kohl-
hammer, Stuttgart (Germany), 2007
2. Breitner, M. H.: E-Learning : Geschaeftsmodelle und Ein-

satzkonzepte, Gabler, Wiesbaden (Gemany), 2006
3. Driftmann, H.H.: - as president of the UVNord – Vereinigung
der Unternehmensverbände in Hamburg und Schleswig-Holstein
e.V. (Association of the employers`associations of Hamburg and
Schleswig-Hostein) - „Die Transformation der Bundeswehr aus
Sicht der schleswig-holsteinischen Wirtschaft“, speech addressed
to the section Rendsburg der Gesellschaft für Wehr- und Sicher-
heitspolitik e.V. at the 10.10.2006 - cit. to the manuscript.
4. Geiger, G.: EU-Sicherheitsforschung in: SWP-Aktuell 21,
Stiftung Wissenschaft und Politik, Berlin (Germany), 2007, p. 1-4
5. Huber, R.K./ Eggenhofer, P.: Transformation der Bundeswehr
- Intellektuelle und Kulturelle Herausforderungen. In: Deutsche
Sicherheitspolitik - Rueckblick, Bilanz und Perspektiven (R.C.
Meier-Walser, Edit.), Berichte und Studien 87, Muenchen (Ger-
many), 2006, Hanns-Seidel-Stiftung, p. 92-104
6. Jochmann, W./Gechter, S.: Strategisches Kompetenzmanage-
ment, Springer, Berlin (Germany), 2007
7. Kernic, F./Hauser, G.: Handbuch zur europaeischen Sicherheit,
2. edit., Lang, Frankfurt am Main (Germany), 2006
8. Kormalis, V.: Internationalisierungsbetroffenheit und Interna-
tionalisierungsstrategien, Tectum, Marburg (Germany), 2005
9. Kostka, C./ Moench, A.: Change Management, 3. edit., Hanser,
Muenchen (Germany), 2006
10. Schmette, M.: Gestaltungsprinzipien für die Initiierung und
Realisierung von Public Private Partnership, Aachen (Germany),
2005
11. Voelker, R./ Sauer, S./ Simon, M.: Wissensmanagement im
Innovationsprozess, Physica, Heidelberg (Germany), 2007
12. Willke, H.: Systemtheorie I – Grundlagen: eine Einfuehrung in
die Grundprobleme der Theorie sozialer Systeme. 5. edit., Stutt-
gart (Germany), 1996
13. Wunderer, R.: Fuehrung und Zusammenarbeit. 6. edit., Lu-
chterhand, Muenchen (Germany), 2006
POWER POINT PRESENTATIONS 273
Part IV.
POWER POINT PRESENTATIONS
ELECTRON PROGRESS –
AS AN INNOVATIVE PARTNER OF MOD
Mr. Krassimir Pingelov

Executive Director, Electron Progress AD
Mr. Kiril Stoychev

Expert, Electron Progress AD
R&D ACTIVITIES AT ELECTRON PROGRESS AD
SOFIA, 29 JUNE, 2007

CONTENTS
HISTORY AND COMPETENCIES
R&D ACTIVITIES
HISTORY AND COMPETENCIES

History
Established in 1976 as an Institute for Defense Electronics,

designed to provide R&D of special electronics and equipment
for the state needs;
In 2002 – privatized as Electron Progress ȺD and 100% private

ownership achieved in 2004;
Electron Progress AD has sustained the leadership in the

Bulgarian Defense Industry for around 30 years, continuing to
improve its performance;
In 2004 the company was announced as Strategic Partner of the

Bulgarian Ministry of Defense;
Electron Progress AD develops, manufactures and integrates

communication and information systems for the defense and the
national security.
Being the First in Bulgaria

1996 – The first BG company representing a US Defense Company;
1997 – The first BG company involved in Foreign Military Funds

(FMF);
2003 – The first BG company NATO AQAP 2110 Certified;
2004 – The first BG company managed by a US CEO;
2004 - The first BG defense company presented at the London Fund

Exchange Investors;
2005 – The first BG company awarded NATO BOA Agreement;
2006 – first Bulgarian company applying the offset approach to

assemble last generation of Harris radio-communications
equipment.
Competencies
Turn-key solutions in wide area network

communications and information
technology sectors;
Design and System architecture

of communication and information
systems;
Design and Integration of C4ISR systems;

Range of choice of equipment,
Software development; logistics and equipment integration;
Training and service support;
Proven project management
capabilities in national security and
defense projects;
Research and development in the anti-
terrorist domain.
Basic Ordering Agreement

Electron Progress AD is the first Bulgarian
company signed BOA with NATO Consultation,
Command and Control Agency (NC3A);
BOA provides participation of qualified firms,

under the principles of non-discrimination in
various projects especially in the IT area ;
This gives serious advantages and it means that our

company becomes a NATO preferred partner and it
has been granted easier access to assignment and
performance of tasks and projects for the purpose of
the Alliance.
Projects
Electron Progress AD is proud to present the developed projects:
Ministry of Defense Nationwide

Telecommunication Backbone System
“Strandja-2”
European Emergency Number 112
Comet M- counteracting IED
National Military Command Center

(NMCC)
Crisis management systems
Strandja-2
Strandja-2 is the telecommunications

backbone network of the Bulgarian Army.
The project is being realized on the entire
country’s territory. The system provides
real time data, voice and video transfer.
Electron Progress AD provided a turn-key
solution to the Ministry of Defense and
Bulgarian Armed Forces for the
development of the system. Services based
exceptionally on client demand.
European Emergency Number 112
Coming quickly to the rescue in an emergency, providing

immediate assistance in a road accident, ensuring active support
for the victims of disasters-this is what people expect from the
brigades, police forces and ambulance services;
IECC provide all the functions required to efficiently manage any

incident;
All emergency calls are received, even type and location are
determined, the proper action resources selected and, finally,
commands issued to the appropriate resource, such as fire
department, police station, first-aid service, vehicles or foot
patrol.
R&D ACTIVITIES
R&D ACTIVITIES
Ideas
Analysis
Brainstorming
Requirements gathering
Development and testing
Solutions and systems deployments
R&D Problems
Budget for R&D – from 3% until 7% or more?
Shortage of motivation in the staff about R&D;
Want of projects financing from THE GOVERMENT;
Evidence for expedience.

Decisions of R&D Problems
Jointly activities with leading company;

Work in a short time;
Contacts with universities;
Developing of know-how for strategic fields and
directions.
R&D ACTIVITIES AT ELECTRON PROGRESS AD
SYSTEMS, WHICH PREVENTS REMOTE CONTROLLED DETONATION OF

IED;
SOFTWARE FOR NATIONAL SECURITY AND DEFENSE;
SYSTEM FOR MONITORING, EARLY WARNING AND SIGNALING;
CRISIS MANAGEMENT SYSTEMS;
ANALYSIS OF EXISTING INFORMATION SYSTEMS INCLUDED IN

NATIONAL SYSTEM FOR MONITORING, EARLY WARNING AND
SIGNALING;
DEVELOPING OF METHODOLOGY FOR CREATING OF PLANS FOR

PROTECTING AGAINST DISASTERS AND SYSTEM FOR ASSESSING OF
CRITICAL INFRASTRUCTURE ON MUNICIPALITY LEVEL.
COMET M
Human lives protection technology
State-of-art device for counter measuring remote detonation of IED,
activated by radio frequency channels and non-professional Remote
Controlled detonation devices
- protected communications channel
- special counteracting algorithm
- developed according to NATO standards
The device protects, military and civil convoys buildings, ports,
airports, strategic objects etc
SOFTWARE FOR NATIONAL SECURITY

AND DEFENSE-National Military Command
Center (PROJECT)
Description & Scope
Visual processing and distribution of crisis management
information;
The system performs monitoring, analyzes and evaluates
the situation, distributes the information where must,
manages databases, supports the coordination all the
activities in the process of military crisis or situation;
Full physical and informational security with access levels,
ID access control; data encryption.
SOFTWARE FOR MD –
Naval Forces Project
Description & Scope
Visual processing and distribution of crisis management
information
Crisis management system
Our purpose is to provide solutions for effective, full-time

operating system for surveillance, information exchange, early
warning, prevention and crisis management;
Building a crisis management centers will allow 24/7

surveillance, analysis and evaluation of the situation, the
potentially dangerous sites and objects, the disposable
resources, forces and equipment;
Such center will provide the officers with needed information

for taking the optimal decisions in times of crisis, accidents
and terrorism; reliable connection with the state administration
and the exchange of information itself.
ANALYSIS OF INFORMATION SYSTEMS INCLUDING

NATIONAL SYSTEM FOR MONITORING, EARLY
WARNING AND SIGNALING
OBJECT
ANALYSIS OF LAWS, CREATING THE
RECOMMENDATION OF NEW LAWS ADAPTING WITH
THESE IN EU;
ANALYSIS OF EXISTING INFORMATION SYSTEMS FOR

MONITORING, EARLY WARNING AND SIGNALING ON
NATIONAL AND MUNICIPALITY LEVEL;
CREATING THE RECOMMENDATIONS FOR THE

MODERNIZATION AND CONSTRUCT OF NEW
INFORMATION SYSTEMS;
PREPARATION AND EDUCATION OF MAYORS,

GOVERNORS, PUBLIC SERVANTS OF REGIONAL
ADMINISTRATIONS.
DEVELOPING OF METHODOLOGY FOR CREATING OF PLANS

FOR PROTECTING AGAINST DISASTERS AND SYSTEM FOR
ASSESSING OF CRITICAL INFRASTRUCTURE ON
MUNICIPALITY LEVEL
OBJECT
DEVELOPING OF METHODOLOGY FOR CREATING OF
PLANS FOR PROTECTING AGAINST DISASTERS ON
MUNICIPALITY LEVEL;
DEVELOPING OF METHODOLOGY FOR CREATING OF

SYSTEM ASSESSING FOR CRITICAL
INFRASTRUCTURE ON MUNICIPALITY LEVEL;
PREPARATION AND EDUCATION OF MAYORS,

GOVERNORS, PUBLIC SERVANTS OF REGIONAL
ADMINISTRATIONS.
PLANS FOR R & D ACTIVITIES IN THE FUTURE
Principal contractor of modernization

projects for the Bulgarian Army;
Integration and development of C2,

C3, C4ISR systems;
Participation in NATO and EU

programs;
Development and integration of

communication and information
connectivity for corporate clients;
Development of center of excellence

for specialized hi-tech training and
tests.
Thank you!
1309 Sofia, Bulgaria
1, Kukush str.
Tel: (+359 2) 81 27 315
Fax: (+359 2) 82 11 284
E-mail: office@eprogress.bg
www.eprogress.bg
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Policy and Models for R&D Management in Support of

Conference Paper · June 2007

Master programme in Nuclear Security View project

Trends in Regional Development and Security Management View project

The user has requested enhancement of the downloaded file.

SfP-982063 Management of Security Related R&D in

UNIVERSITY OF NATIONAL AND WORLD ECONOMY

Department “National and Regional Security”

Policy and Models for

POLICY AND MODELS FOR R&D MANAGEMENT IN SUPPORT

Tilcho Ivanov and contributors

Editors: Professor Tilcho Ivanov, Ph.D.

GREETINGS TO THE CONFERENCE ...................................................................................... 7

Prof. Plamen Mishev, D.Sc.

PART I. PROBLEMS AND POLICIES OF DEFENCE INDUSTRIAL TRANSFORMATION15

ECONOMIC TRANSITION AND DEFENCE INDUSTRIAL TRANSFORMATION:

THE MACEDONIAN DEFENCE MARKET AND TRANSFORMATION ....................... 65

SHAPING BULGARIA’S SECURITY AND DEFENCE R&T POLICY ........................ 105

COMMAND AND CONTROL INFORMATION SYSTEMS DEVELOPMENT

PART III. PRACTICES FOR R&D MANAGEMENT ............................................................ 171

PUBLIC-PRIVATE PARTNERSHIP IN BETWEEN EUROPEAN TECHNOLOGY

THE BUSINESS PROCESS OF R&D AND BULGARIAN DEFENCE ACQUISITION

PART IV. POWER POINT PRESENTATIONS ..................................................................... 273

ELECTRON PROGRESS – AS AN INNOVATIVE PARTNER OF MOD ..................... 273

In the conditions of globalization of political and economic proc-

opment of a methodology for further scientific analysis and research

Prof. Tilcho Ivanov, Ph.D.

GREETINGS TO THE CONFERENCE

UNIVERSITY OF NATIONAL AND WORLD ECONOMY –

Dear Ladies and Gentlemen,

world markets, dynamic development of information technologies and

Prof. Plamen Mishev, D.Sc.

MINISTRY OF DEFENCE OF THE REPUBLIC OF BULGARIA

Dear Generals and Officers,

Mr. Simeon Nikolov

MINISTRY OF ECONOMY AND ENERGY

Dear Ladies and Gentlemen,

high priority by the Ministry of Economy and Energy.

Ms. Ivelina Bahchevanova,

Prof. Tilcho Ivanov, Ph.D.

The looking for the right answers of these questions is an objec-

Inherited and Transitional Economic and Social

• Narrow industrial cooperation for the key product components

fluence the security industrial decisions. There are no common ac-

Army Demand, Force Goals and Acquisition

capable to meet the expeditionary mission due to lack of strategic and

governments from Cold War era stimulated the companies to establish

Defence Industrial Challenge

of political decisions and activities, which support this political line,

Internal Driving Economic Interests and Policies

set for every modernization project. The collection of the potential

R&D Capability and Transitional Politics

technological backwardness becomes a traditional instrumental objec-

Dynamics of Defence and Civilian R&D Budgets

The last 16 years of national practice demonstrated how difficult is

Employment in Defence R&D

tion, which is around 1% of the available personnel.

Organization of Defence R&D

State Policy (Dual-use Technologies, Privatization,

Defence Mergers and International Arms Industry

tion. The process has enforced a sharp increase of trade companies,

Alternatives for the Defence Industry Transformation

tional reserve stockpiling; emergency preparedness, national and