Contract management in the defence sector is a world of its own. To illustrate the point, in the United States (where contract management originated) there is even a dedicated agency, the DCMA (Defense Contract Management Agency).
In large programmes (energy, transport, infrastructure), contract management frequently takes on political and strategic dimensions. In defence, however, these inputs are ever-present, and the rules of the game are often dictated by issues that go well beyond the contract itself. In this article, we dive into what sets this role apart in the defence sector, exploring the various facets that make it a profession of its own.
I. A highly political environment
a. Contracts at the heart of international relations
Defence contracts are (almost) never mere commercial documents. Every agreement signed reflects a decision weighing the national industrial base, foreign policy and other sovereignty issues. A recent and emblematic example is the Australian submarine contract (which even has its own Wikipedia page). Originally signed in 2016, this contract for the supply of 12 conventional submarines derived from the Barracuda was terminated in the autumn of 2021 in favour of a partnership between the United Kingdom, the United States and Australia (the AUKUS pact). The decision triggered a major diplomatic crisis, showing just how deeply defence contracts are bound up with geopolitical relations, and also led to a penalty payment officially put at €555m.
In this world, the contract manager must therefore master not only the legal and commercial aspects of contracts, but also take an interest in the diplomatic dynamics underlying them. A contractual decision can have repercussions far beyond the technical delivery of the programme.
b. A rationale often far removed from the contract
It is not unusual for the objectives, needs and requests of the parties to drift a long way from the contract text during a project. Defence contracts are often concluded with strategic interests, military alliances and industrial policies in mind, and more generally with considerations that do not always sit comfortably with the requirements of public procurement. Some contractual commitments may therefore be adjusted or adapted as bilateral or multilateral relations evolve, which requires the contract manager to read between the lines, gauge the underlying stakes and adopt an agile posture, able to absorb diplomatic and strategic reversals.
II. A strong culture of the spoken word and of relationships
a. The importance of the given word
While in some fields pre-contract oral exchanges cease to count once the contract is signed, in the defence sector the spoken word still carries real weight. Contracts remain legally binding, but many negotiations, adjustments and dispute settlements take place informally, in bilateral meetings, confidential steering committees, or even simple telephone calls.
The contract manager must therefore excel in the art of dialogue, negotiation and interpersonal relations, because even more than in other sectors, managing defence contracts rests on the ability to build and maintain trust with counterparts… whom you will often meet again on other deals!
b. Contractual rigour takes second place
Strict application of the contract terms is frequently adapted to operational realities on the ground. A late delivery, an unforeseen technological development or a change in military doctrine may call for adjustments, and these are sometimes the subject of tacit exchanges that are not always formalised. The contract manager therefore operates in a grey area, where contractual formalism must coexist with a degree of pragmatism.
III. A closed ecosystem
a. A small circle of economic players
The defence sector works as a relatively closed club. It mainly involves:
- end clients, namely defence ministries (or their dedicated purchasing bodies) and the end user, namely the using corps or forces;
- suppliers from the BITD (Base Industrielle et Technologique de Défense) or DIB (Defense Industrial Base) in the United States, which fall into two (main) camps:
- a handful of large "prime contractors" (for example: Thales, BAE Systems, Lockheed Martin, etc.)
- specialist subcontractors and suppliers
These same players meet regularly around the same tables and on the same planes, whether to negotiate new contracts, run existing programmes or settle disputes. Needless to say, with such a closed circuit, the contract manager must work hard to build long-term relationships with every stakeholder.
b. Contract management has to adapt
In an environment where everyone knows everyone, standardised contract management methods and negotiation techniques quickly reach their limits. Each relationship has to be handled in a bespoke way (which does not rule out having a base of best practices). A contract manager working with the DGA will need different methods from those used with the British DE&S, or with Saudi Arabia’s GAMI or SAMI.
These interactions, often shaped by long-term personal relationships, make it more important than elsewhere to build on lessons learned and on the memory of past projects. The contract manager must therefore develop a finely tuned approach adapted to each partner, and know how to document and track deviations in order to use them, on the current project or even on a future one.
IV. Specific contractual features
a. The sensitivity of information
Performance of defence contracts frequently involves exchanging information whose classification can vary (note that since 2020 France has only two classification levels: secret and very secret). Whether it be technical specifications, drawings, studies, operational doctrine or concepts of employment, confidentiality is everywhere.
Document management then becomes a central issue in contract management: strict access control, file encryption, clearance procedures, restrictions on circulating information, compartmentalised teams… the slightest lapse can have major consequences, for security as well as under the contract. This management therefore becomes one of the challenges of contract management (the person responsible usually remains a security officer, but the contract manager often plays an active part in the RACI for information management), given how dramatic the consequences of a data leak can be.
b. Other specific obligations
Beyond confidentiality, which carries a different weight in the defence sector, the contract manager also has to deal with specific regulations on other topics:
- Export control (ITAR, EAR, etc.)
- Business ethics and anti-corruption
- In-service support and MRO requirements, often very long and demanding
- Offset and knowledge transfer
These specific features make contract management particularly complex and require the contract manager to have a thorough grasp of industrial, logistical and strategic issues.
V. Specific skills and profile
a. A dual contractual and geopolitical grounding
The contract manager in defence must have a solid contractual grounding, often strongly international in focus, but also a very good understanding of industrial constraints, military stakes and both political and industrial alliances.
They often have to talk to in-house counsel, systems engineers, staff officers and political decision-makers alike.
b. Particular soft skills
Beyond the technical skills mentioned above, which come on top of those generally required in contract management, certain soft skills (or human qualities) are also essential and, because they matter so much, are a hallmark of the sector:
- diplomacy and negotiating ability
- great discretion
- resilience
- creativity
- a sharp political sense
Armed with these soft skills, the contract manager in the defence sector is able to find balanced compromises, to find ways out of technical or scheduling deadlocks that sometimes seem unavoidable, and ultimately to enable complex programmes to be delivered.
Conclusion: a balancing act at the heart of political stakes
As in other fields (construction, IT, major projects), contract management is gaining ground in the defence sector. Even so, moving from one sector to another is not easy, and moving into defence even less so.
While contract management, in every sector, requires combining contract law, industrial strategy, technical complexity, supply chain and uncertainty, the defence sector adds a political and diplomatic dimension. Every defence contract commits far more than budgets: it contributes to the sovereignty of states, the stability of alliances and the security of nations.
In this context, the contract manager becomes a key player, guaranteeing the right balance between the interests of the various stakeholders. Their ability to manoeuvre with finesse and judgement makes all the difference in a sector where every decision can have systemic consequences.