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‘From Whitehall With Luff’

Last week the Ministry of Defence released its much anticipated White Paper, which details how the department intends to streamline its procurement process to ensure the armed forces continue to be outfitted with best-of-breed equipment. The document, ‘National Security through Technology: Technology Equipment, and Support for UK Defence and Security’, prioritises investment in Science and Technology (S&T), supports UK Small and Medium Enterprises (SMEs) and opens the door to international competition.

The document is aimed at procuring the best equipment at the right cost within an acceptable and relevant operational timeframe; and all without stifling innovation or restricting the lifeblood to the UK’s defence industry. Clearly that’s an extraordinarily difficult task, but this White Paper is a good foundation towards meeting these goals.

Speaking exclusively with Defence IQ Peter Luff, Minister for Defence Equipment, Support and Technology, said:

“No one seriously thinks it’s right to reinvent the wheel.  If a mature technology is available off-the-shelf, like the C17, of course we should buy it.  But to say this is bad for British business is nonsense.  Modifying off-the-shelf purchases with UK requirements such as communications and ECM equipment offers real, added value work for UK companies. And last weeks’ award of the Sea Ceptor development contract to MBDA shows a high level of investment in UK business too.”

Luff also revealed the MoD’s budget for defence equipment spending: “We plan to spend over £150 billion on defence equipment over the next ten years,” Luff said. “We will strongly support responsible exports, increasing the market opportunities for all defence and security companies and encouraging them to invest in the UK.”

Industry support

The document has been received to a somewhat mixed reception, with Shadow Defence Secretary Jim Murphy calling it a “missed opportunity.” In contrast a number of commentators and organisations have come out in support of the White Paper, not least of which is the ADS Group, the UK’s defence trade organisation, because it “allowed for meaningful dialogue between industry and Government.”

Rees Ward, CEO at ADS, said: “Contrary to general opinion, the delay in the White Paper’s release would appear to have been beneficial, resulting in deeper understanding of industries concerns within the Government. The proof is of the pudding is in the eating, and in the case of the White Paper, this means its implementation. Industry is therefore looking forward to working in partnership with Government to ensure that the White Paper’s proposals are carried out to the benefit of both the nation’s defence and security and the achievement of growth in the economy.”

The support of ADS is telling, incontrovertible almost. Much of the document’s criticism has centred on how it will affect the UK defence industry, yet ADS (whose very existence is to “advance” the UK defence industry) has welcomed it.

Harvesting growth: Innovation as the seed

In Defence IQ’s Armoured Vehicles 2012 industry report released last month, I wrote that R&D (S&T, R&T, call it what you will) is likely to be the real loser as the contracting economy takes a stranglehold on the defence industry. This was apparent from the Public Accounts Committee (PAC) report on the UK’s armoured vehicle procurement process, entitled ‘The cost-effective delivery of an armoured vehicle capability.’

“Over the past six years the Department has removed £47.4 billion from its equipment programme up to 2020-21,” the report states.

Of that £47.4 billion funding gap, £10.8 billion (23%) was removed from armour vehicle projects alone. I argued that this was less a cut to current capacity but, more worryingly, a restriction on future capability. As we now stand, while this is still an issue – after all the numbers don’t lie – at least this new White Paper is addressing this concern head-on. It’s effectively ring-fencing R&D, keeping it at a stable 1.2% of the total budget, which equates to £400 million each year.

This is another point in the document that ADS’s Ward is enthusiastic about. “R&T is the seed corn from which an industry can grow and thrive,” asserts Ward. “It is reassuring for Government to guarantee an investment which will deliver significant returns to the overall economy. Studies show that a defence investment of £100 million will deliver returns of £230 million.”

Further to this the White Paper addresses another two key issues; international competition and closer ties to UK SMEs.

“Wherever possible, we will seek to fulfil the UK’s defence and security requirements through open competition in the domestic and global market,” the report states.

Much has been made of this perceived desertion of the UK defence industry, but to some extent the MoD has always had an open policy of procuring the best-of-breed equipment whether that be from home or abroad. That’s a more politically sensitive issue rather than an industry relevant one.

Indeed, for ADS it doesn’t present a problem. “HMG (Her Majesty’s Government) has long espoused open competition as its main acquisition method and industry is comfortable with this approach,” Ward said. As such, the increased focus on the SME community is more directly important for the UK defence community because, as the report points out, 42% of the MoD’s equipment contracts (worth almost £1 billion per year) are dished out to SMEs.

As stated by the MoD: “The new measures in the White Paper will make it easier for smaller contractors to compete for Government tenders, help them to develop new products and provide expert advice to help them export.”

Luff underlined the significance of this saying that, “giving smaller businesses bigger opportunities is good for the economy but it’s also good for defence. They bring real innovation, responsiveness and customer focus and so can play a big part in helping us meet both our defence and our financial objectives.”

Reasons for optimism

When I wrote about the “conspiracy of optimism” at the MoD in December, Luff, along with Chief of Defence Materiel Bernard Gray, were said to be putting together a wave of reforms to streamline the acquisition process and make it efficient for both government and industry. At the time, Luff said on BBC Radio 4’s ‘Buying Defence’ programme that “we will be as radical as we need to be.”

Defence Secretary Philip Hammond said in November last year that “the MoD is an oil tanker. It has 250,000 people and you can’t turn it on a six pence.” This White Paper will not reverse some of the deeply ingrained issues at the MoD overnight, but it is another strong hand on that steering wheel helping to turn it around. “The culture is changing,” Hammond assures us.

Luff is equally optimistic, saying he sees “a real determination inside MoD to make things work better.  We have an ambitious package of reforms of which the policies of the White Paper are an important part. I really believe we can change things for the better.”

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