The pressure on resources was the trigger for the defence services to adopt the business models of the corporate world in managing their capability in a more cost effective and efficient manner. What is called ‘noncore’ functions, in the military parlance, like logistics, supply chain management and maintenance of equipment got replaced by more businesslike models. In the ‘tooth to tail’ formation of the forces it was the tail which felt the immediate impact. The concept of Performance Based Logistics has become the preferred method of weapon system sustainment in various countries with USA and UK taking the lead. The approach called the Performance-Based-Life-Cycle product support has been attributed with providing success in improvements in system readiness and reducing the cost of supporting platforms.
Leasing of capital equipment, another common commercial practice has also been adapted for military purpose. According to a research study by Naval Post Graduate School, Monterey, the decision is not ‘lease versus buy’ but ‘lease versus do without’. The question that should be asked is, “How critical is the requirement for national security?” Capital leasing allows the Government to receive and use assets immediately and spread the cash outlays over the lease period rather than frontloading 100 percent of the cost. Thus, leasing can provide the Government with an extremely powerful tool to provide financing alternatives that normally would not be available. The US Government has leased mission-critical equipment when funds were unavailable, allowing the military services to gain immediate access to assets, while spreading outlays over the life of the lease, avoiding single-year funding spikes that compromise other programs. Leasing has also been resorted to in order to bridge capability gaps, especially if the need for an asset is short-term or indeterminate.
Leasing of equipment not only provides an alternative, in a situation of fund crunch but also has the advantage to provide the much needed capability in a shorter time span. The study titled “Rethinking the Buy vs. Lease Decision” by Jacques S. Gansler, William Lucyshyn, and John Rigilano has given the example of the US Navy MPS program, which was the first peace-time attempt to fund a multi-billion dollar military program via leasing. Due to the priority to give funds to combat programs leasing seemed the only plausible strategy for acquiring the ships as the outright purchase of the ships was considered unaffordable by Navy officials. In 1982, the Navy entered 13 long-term lease contracts for 13 MPS vessels this allowed the Navy to meet immediate support requirements through Operations and Maintenance appropriations over the 20 to 25 year contract terms rather than through large, upfront capital obligations. Within four years, the Navy received all 13 vessels. The immediate availability of these ships allowed rapid deployment to support Operation Desert Storm, Operation Iraqi Freedom, combined forces exercises, and international exercises such as NATO’s bi-annual Dynamic Mix (Bailey & Escoe, 2004).