Improving Defence Procurement

Improving defence procurement is a shared ambition of industry, the Ministry of Defence (MOD), and Parliament.?Defence Equipment & Support (DE&S) has observed that the majority of its programmes are delivered on time and on budget but acknowledged that a smaller number run materially longer than expected and, in some cases, exceed their approved cost envelope.?I suspect that the MOD’s other procurement entities – the Submarine Delivery Agency (SDA) and Defence Digital – share similar experiences.

Even though the number of programmes that experience schedule or cost overruns is proportionately small, their importance to national security and the taxpayer means it is beholden upon industry and government to constantly improve.?I was therefore pleased this week to co-chair a ‘DE&S Strategy Refresh Industry Roundtable’ with Rear Admiral Jim Higham (Director Ship Support, DE&S) in Abbey Wood and give oral evidence to the House of Commons Defence Committee’s Sub-Committee inquiry on DE&S.

The roundtable with DE&S was part of work instigated by its new CEO, Andy Start, to review and optimise the organisation’s operating model.?This work has been done with industry – the first time such a collaborative approach has been taken.?I am encouraged by the outcomes of this work, which aims to increase availability of capabilities, rapidly spin-in technology advances, and improve efficiency and competitiveness.

DE&S is of course just one part of a broader acquisition and approvals system that spans from the Frontline Commands to MOD Head Office, the Cabinet Office, and the Treasury.??I made this point in my oral evidence to HCDC (at 10:20:45), which complemented previous written evidence.?I also highlighted a number of cross-cutting opportunities for improvement:-

?Adopting a ‘deadline mentality’ in developing and approving business cases, undertaking procurements, and awarding contracts;

• Removing siloes between different delivery teams.?(eg why would different teams procure different BMC4I systems?);
• Better resourcing of Government Furnished Assets / Resources (GFx);
• Focusing on best long-term value rather than lowest upfront cost; and
• Adopting a balanced approach to risk, rather than trying to remove all risk.

In addition, there are some strategic issues that the UK needs to consider.

First, the balance between competitive procurements and preferred suppliers.

This is a legitimate debate: does the MOD have enough work to sustain an industrial base through competition, does competition encourage a focus on lowest cost, and does competition encourage collaborative or transactional behaviours?

The Defence and Security Industrial Strategy (DSIS) moved away from the policy of competition by default but I do not think it properly learnt the lessons from previous long-term portfolio arrangements, such as Team Complex Weapons, which arguably created monopolistic positions.? A balance will be needed between competitions that enable long-term partnerships, particularly when they attract investment to grow the capacity and resilience of a sector, and portfolio arrangements with multiple complementary companies.?In making these decisions, the MOD will need to develop a mature, honest, and sophisticated understanding of different capability segments and the market dynamics in them – ideally in collaboration with industry.

Secondly, the balance between spending on development programmes versus buying mature systems that are already available on the market.

The UK often funds and procures development programmes, even if mature systems are already available on the market.?Examples include Directed Energy Weapons, future anti-ship missiles, rotary platforms, and Combat Air.?Development programmes have high costs, risks, and timescales attached to them.?Arguably the UK would achieve more by leveraging mature development programmes of allies.?It would be able to procure more, so achieving mass.?It could secure industrial and economic benefit through the provision of components and subsystems in spiral development.?And it could still maintain freedom of action through onshore Design Authority, systems integration, and in-service support.

As an example, I am struck by a recent report on the Global Combat Air Programme (GCAP) by the Royal United Services Institute.?The report said that GCAP is ‘now directly competing for funding with the requirement to regenerate frontline RAF combat capability to deter Russia and meet NATO commitments over the coming decade’.?It observed that ‘the UK Combat Air budget as it exists currently also offers no capacity to fund a credible ‘sixth’ or even fifth generation fighter programme.?The public refusal to acknowledge the likely costs of developing a competitive fighter risks becoming another example of the chronic MoD and defence industry habit of using overly optimistic cost estimates to lock in politically binding commitments on major projects’.

Finally, a key challenge for defence procurement exists when there is political pressure or decisions for preferred suppliers that do not align with capability needs or budgets.?Politicians therefore have as much of a role in improving defence procurement as industry and officials.