NATO’s role in defence industry production

  • Last updated: 12 Feb. 2024 11:21

NATO plays an important role in helping Allies develop their military capabilities, including weapons systems, vehicles and other major equipment. Developing these capabilities is a national responsibility, but NATO’s coordination helps its members identify and procure the equipment they need to defend themselves and their Allies at all times, including by leveraging economies of scale. It also ensures that national systems are able to integrate seamlessly and work together when needed. Working together with the defence industry is vital to these efforts.

NATO Secretary General welcomes contracts worth 2.4 billion euros to strengthen ammunition stockpiles

 

  • A robust and flexible defence industry contributes to strengthening the Alliance’s deterrence and defence. NATO Allies are committed to sustaining the defence industrial production capacity required in peacetime, crisis and conflict.
  • NATO plays a key role as a platform for consultation and setting standards, helping Allies harmonise their defence procurement demands and helping industry understand Allied requirements so that they can deliver a sustainable supply.
  • As part of NATO’s Defence Investment Pledge (under which Allies have committed to spend at least 2% of GDP on defence), Allies have also agreed that at least 20% of their defence expenditures should be devoted to major new equipment spending, including the associated research and development.
  • At the 2023 Vilnius Summit, Allied Leaders agreed the Defence Production Action Plan to accelerate joint procurement, boost production capacity and enhance Allies’ interoperability.

 

NATO’s Defence Production Action Plan

Following Russia’s full-scale invasion of Ukraine in February 2022, NATO Allies are stepping up investments in defence production – both to increase their own capabilities for deterrence and defence, and to replenish the stockpiles that have been depleted by their support to Ukraine.

The Defence Production Action Plan sets out a number of specific actions and projects to enable the Alliance to bolster engagement with the defence industry. The Plan consists of three major themes: aggregating demand, addressing defence industrial challenges and increasing interoperability. The Plan’s output will take into account developments and ongoing efforts in other international organisations, particularly the European Union.

Aggregating demand

Aggregating demand means combining large numbers of equipment orders from NATO Allies and harmonising specific requirements. This can provide industry with clear and predictable requirements, which helps the market understand exactly what Allies need and encourages industry to invest in long-term production capacity. The Plan will facilitate aggregation of demand, including multi-year procurement contracts; help identify more agile procurement and funding mechanisms; and provide increased insight and clarity for industry on stockpile and production requirements.  

The Plan foresees greater usage of both existing NATO frameworks for aggregating demand, as well as the creation of new flexible mechanisms to address critical needs. Aggregating demand through multinational cooperation, including by making use of NATO’s High Visibility Projects, can help drive greater interoperability of key systems and interchangeability of munitions.

Existing frameworks have already helped to drive forward significant purchases of munitions. For example, under NATO’s Land Battle Decisive Munitions framework, in 2023 the NATO Support and Procurement Agency put framework contracts and orders into place for hundreds of thousands of pieces of key ammunition. These contracts, with an estimated worth of EUR 2.4 billion (including EUR 1 billion in firm orders) are delivering a wide variety of critical munition types such as 155-mm artillery, anti-tank guided missiles and main battle tank ammunition. The first deliveries under these contracts started at the end of 2023. In January 2024, NATO concluded contracts for another USD 1.2 billion in artillery ammunition, with the NSPA purchasing around 220,000 155-millimetre artillery shells.

Addressing defence industrial challenges

The Plan highlights the need for sufficient and sustainable defence industrial capacity. As more orders have been placed by Allies, delivery times for certain munition types have lengthened. NATO is working to establish a set of metrics that build a better understanding of defence industry supply chain issues and overall capacity.

A new Defence Industrial Production Board, created as a result of the Plan, brings together Allied experts on defence industrial planning and procurement, to share best practices on defence planning and other relevant issues such as procurement and supply chains. The inaugural meeting of the Board took place on 13 December 2023 and led to the creation of three working groups that will focus on: understanding overall industrial capacity, supply chains, and interoperability and industrial planning-related issues. The Board reports to NATO’s Conference of National Armaments Directors (CNAD).

The Action Plan also underlines the need to strengthen mechanisms for engaging with industry and ensuring their perspective is fully taken into account.

Increasing interoperability

The third element of the Plan is interoperability and standardization, with an initial focus on land battle decisive munitions. Interoperability ensures that all Allies can operate together to achieve common goals, including by using equipment that meets NATO standards. The Plan outlines a set of activities to improve the materiel standards review process, increase visibility on the status and level of implementation of standards across the Alliance, and support NATO materiel standards in Allies’ national capability requirements for industry.

An updated version of the Action Plan will be developed before the end of 2024.

 

Maintaining NATO’s technological edge

At the 2014 Wales Summit, NATO Allies adopted the Defence Investment Pledge, under which they agreed to commit a minimum of 2% of their Gross Domestic Product (GDP) to defence spending by 2024, in order to continue to ensure the Alliance's military readiness.

As part of this Pledge, NATO Allies also agreed that at least 20% of defence expenditures should be devoted to spending on major new equipment, including the associated research and development. This metric is perceived as a crucial indicator for the scale and pace of modernisation; where expenditures fail to meet the 20% guideline, there is an increasing risk of equipment becoming obsolete, growing capability and interoperability gaps among Allies, and a weakening of the defence industrial and technological base.

In addition to taking steps to ensure a sustained level of defence industrial production, NATO also cooperates with the defence industry on innovation in order to maintain the Alliance’s technological edge.

Emerging and disruptive technologies like artificial intelligence, autonomous systems, biotech and quantum technologies are changing the character of conflict. NATO is working with Allies, partners and the private sector to develop and adopt new technologies, shape global standards and embed principles of responsible use that reflect the Alliance’s democratic values.

 

Main coordination mechanisms

NATO coordinates capability development and engagement with the defence industry through the Conference of National Armaments Directors (CNAD), the principal committee that brings together the top national officials responsible for defence procurement in NATO member and partner countries.

The CNAD implements decisions taken by Allies as part of the NATO Defence Planning Process (NDPP). Through the NDPP, NATO identifies the capabilities that it requires, and promotes their development and acquisition by Allies.

The NATO Industrial Advisory Group (NIAG) is a high-level consultative body of senior industrialists from NATO Allies and partner countries. It advises the CNAD on how to foster government-to-industry and industry-to-industry armaments co-operation within the Alliance.

The NATO Support and Procurement Agency (NSPA) also plays a role in the Alliance’s logistics and procurement activities. It acquires, operates and maintains a wide range of capabilities that support NATO, its Allies, partners and other international organisations.