In order to improve the defense cost system, experts from various fields gathered together to put their heads together for a rational cost calculation and a future-oriented win-win plan between the government and companies.

At the defense cost discussion held at the Changwon Convention Center on the 8th, the Defense Business Administration invited cost experts from various fields to share the limitations and problems of the defense cost system with regard to the current actual costs incurred and to seek future development directions to improve them.

The main participants were the director of the Defense Industry Promotion Bureau of the Defense Business Administration, the special adviser on defense and nuclear energy in Changwon, the Defense Industry Promotion Association, executives and employees of large and medium-sized defense companies, accounting professors from various universities, and about 200 people from related organizations, including researchers affiliated with the National Defense Bureau and the National Defense Federation.

This forum is evaluated as a place of communication where the government can first present the direction of the development of defense costs from a macro perspective in preparation for export-oriented and the fourth industry, and then discuss the win-win plan that the industry is looking at in a free discussion style to discuss the differences in defense market perception between the government and companies.

In particular, if we look at the introduction of the cost calculation method proposed by the Defense Business Administration, we can see an attempt to change from the current cost structure, in which total costs and profits are calculated proportionally, to the concept of cost essence in which company compensation can be achieved according to the degree of cost reduction. This is an indication of the government’s willingness to improve the current structure in a large framework, such as reducing the company’s profits when the total cost is reduced due to the characteristic of “defense cost compensates for the actual cost of the company.”

In addition, it was proposed as one of the ways to transform the current cost-based pricing structure based on material costs, labor costs, and expenses into a value-based pricing structure by strengthening cost analysis functions such as price comparison of similar equipment overseas.

Finally, the existing cost system was based on labor costs calculated according to the hours people worked, but recently, according to the expansion of the defense industry in the 4th industry and the unmanned operation of factories, the cost standards for human and mechanical work were prepared separately, laying the foundation for the industry to take the lead in keeping pace with the future industrial trend.

Kim Jin-hong, director of the Defense Industry Promotion Bureau of the Defense Business Administration, said, “I am glad to open a forum for free discussion between industry, experts, and the government for the long-term development direction of the domestic defense cost system, and we will continue to improve the defense cost system necessary for sustainable K-defense through smooth communication and consultation between the government and the defense industry.”