Chair in Defence Economics - IHEDN

Maintenance in operational condition (MCO) covers all the resources (human, technical and financial), services and processes that enable defence equipment (armoured vehicle, ship, aircraft, etc.) to remain fit for use throughout its service life, right up to preparation for withdrawal from service, in order to meet the availability and activity requirements of the armed forces, branches and services (operations and operational readiness) in accordance with the provisions of operational and organic contracts. Fully enshrined in official doctrine (see, for example, the 2008 and 2013 White Papers and the 2017 Strategic Review), the MCO is now a strategic industrial function for the nation, the aim of which is to create and recreate military potential and capabilities on a cyclical basis.

Although MCO is a complex activity, the issues facing all those involved in defence - civilian representatives of the State, the military and industry - are nonetheless relatively straightforward: budgetary constraints are tight, and costs tend to rise in line with technological developments and/or the ageing of fleets in a context where operational demands are - and probably will remain - high.

The challenge is to find solutions to contain or reduce costs, given the importance of these budgetary and operational constraints. MCO therefore appears to be a central and inescapable research theme in the study of defence issues, and its management depends on financial, industrial, technological and operational dimensions.

Changes in MCO costs

From a budgetary point of view, scheduled equipment maintenance (EPM) appropriations (all equipment combined) represented around 14 % of the French defence budget in 2019, and just over a quarter of the budget allocated to equipment. If expenditure on labour and infrastructure is also taken into account, the share of the defence budget allocated to MCO probably exceeds 20 %. On a microeconomic level, MCO costs can represent between 35 % and 70 % of the total cost of ownership of a piece of defence equipment over its entire life cycle. The literature shows that the share of MCO in the total cost of ownership has tended to increase over the last 20 years (to a greater or lesser extent depending on the equipment).

The factors behind this rise in costs can be grouped into three categories: factors linked to the lifecycle of equipment (ageing, obsolescence and stress on equipment in operation), generational factors (changes in military technology, technological breakthroughs) and institutional and historical factors (reforms, changes in the regulatory framework, market structures).

Geographical organisation of the MCO

One of the ways of controlling MCO costs is to rationalise MCO management. To this end, the SIMMAD (Structure intégrée de maintien en condition opérationnelle des matériels aéronautiques du ministère de la défense) (which became the Direction de la Maintenance Aéronautique - DMAé in 2018) was created for aeronautical equipment, the Structure intégrée du maintien en condition opérationnelle des matériels terrestres (SIMMT) for land equipment and the SSF for naval equipment. These administrative restructurings are leading to geographical reorganisations of the MCO function. These can be analysed in terms of the interplay of forces between, on the one hand, centripetal forces driving concentration (economies of scale, economies of agglomeration) and, on the other hand, centrifugal forces driving dispersion of activities (transport costs and strategic costs linked to the very nature of defence activities).

This theoretical framework is a general and powerful tool for understanding the dynamics at work in the monitoring of MCO reorganisations (concentration of activities, integration of MCO activities into their regional environment, etc.). The work carried out shows that while centripetal forces are indeed at work, centrifugal forces remain strong. More generally, the weight of history and political factors also play a major role in decisions to locate defence activities.

Involvement in conflicts and consequences for the MCO

MCO is an essential part of reconstituting a country's military capability, particularly when it is required to make considerable demands on its equipment during military and non-military operations (e.g. during the fight against the coronavirus, with the mobilisation of equipment for transporting casualties and medical supplies). Yet France's commitments in Opex have risen sharply since the early 2000s. The priority allocation of resources (financial, material, human) to OPEX is leading to rationing in metropolitan France and the immobilisation of equipment as a result of postponed repairs (due to a lack of manpower or postponed orders for spare parts).

This has a knock-on effect on the training and education of troops, and therefore on the operational potential of the armed forces. In the medium to long term, the «quality» of military capital (through reduced availability) and military work (through training) deteriorates.

Ultimately, it is the question of the sustainability of military interventions from an industrial, operational and budgetary perspective that is raised in order to ensure the credibility of the armed forces' future intervention capabilities. Theoretical work is used to highlight and formalise the inter-temporal trade-offs between regeneration of capabilities and optimal use of forces; this work is illustrated by recent case studies in Germany, the United States, France, Italy, the Netherlands and the United Kingdom in particular.

Technological innovation in the MCO

Numerous initiatives and experiments based on the technologies underpinning the digitisation of value chains have been launched, or are in the process of being deployed, with the aim of significantly improving the way MCO tasks are carried out. These technologies cover a very broad spectrum: predictive maintenance and big data, the use of robots or drones for inspection or maintenance tasks, additive manufacturing and repair. What all these technologies have in common is that they are driving major changes in production processes and related business models, which are federated around concepts such as ’Industry 4.0« or the »Factory of the Future’.

A study was carried out to characterise the impact of these technologies on the organisation and implementation of MCO. In particular, the aim was to identify the practices of MCO players, both governmental and industrial, in relation to these new technologies. The results of the fieldwork show that, on the whole, the four clusters of technologies identified have potential for improving the MCO, but this potential is not perceived in the same way depending on the environment, the players interviewed and the technologies identified. These technologies remain at the heart of the practices of public and private players in the context of restructuring and modernising MCO and, more broadly, digitising value chains.