Cost Effectiveness Analyses Models in the Defence System in Republic Bulgaria

The thesis resulting from the research on the “costs-effects” relation is the principle of economic efficiency of defence capabilities. At first glance, the arguments in this direction are well-known and popular in crisis situations of various nature, including the current financial and economic crisis in the country, and the question about the cost of public welfare-security and defence is debatable. This cost is manifested through the defence capabilities of a country. In the new security environment, the compilation of a national defence strategy is a priority of the Defence Ministry, which has more and more limited resources. This means that they should be treated as an economic activity. An economic activity is considered as any purposeful activity, allocating and combining scarce resources among alternatives, making it possible to maximize the outcomes and minimize costs. The ratio between the costs and benefits of a given resource or combination of resources to achieve a pre-defined objective is pushed to the forefront and the rationalization of management decisions is based on it. This necessitates a cost effectiveness analysis, hence the evaluation of the outcomes (benefits) is manifested in the “cost-effect (benefit)” analysis. Defence as a product has the basic features of any commodity or service, i.e. it is designed for exchange, is useful, and meets certain needs. But due to the fact that it meets very specific needs (preservation of the territorial integrity of the country and improving its national security), it is distinguished by certain features which may be summarized as follows: collectivity of production and consumption of defence as a product necessary to the public, expressed by its consumption indivisibility; lack of market valuation of the price of defence as a product upon its consumption (as a monetary expression of its value); the usefulness of defence as a product is reflected in its capacity to meet the system's needs for security and defence, which determines its conditional nature, expressed in reaching certain operational capabilities; the realization of defence as a product, unlike the products of civil legal entities, is not subject to a clearly formulated outcome of activity, such as profit, which makes implementation of the principle of economic efficiency and profitability of minor importance for the Armed Forces (AF)