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One of the more intractable questions which confront defence policy makers and industry at the moment is how to do more with less. More particularly for the UK the question breaks down into several even more tricky parts. How can the UK remain a player on the world stage with a diminishing defence budget? How can the UK sustain the defence infrastructure necessary to support a very high tech industry in a time of austerity? What choices will policy makers be able to make in the future, and what choices will be ruled out by the lack of capability?
By Nick Watts, Great North News Services
All of these questions, and more, were considered at the RUSI defence industries and society conference on Thursday and Friday 28 – 29th June. An array of august speakers, including Peter Luff MP the Minister for Defence Equipment and Support as well as leading industry figures and academics, directed their thoughts to addressing issues raised by these questions. The unspoken question was "can Britain afford to retain a world class industry in an era when its armed forces are ordering less equipment?" The answer to this question matters for those who work in the defence industry and its wider supply chain. It also matters for the UK as a whole since the aerospace and defence sector is a world class centre of excellence which could be lost if investment in the high tech Research and Development which this industry needs is lost.
Several elements combine to complicate these questions. Technology gives western security and armed forces an advantage over most likely opponents, but this edge only endures while research and development continues to advance that superiority. This in turn impacts on the cost of equipment; not just the up-front cost of purchase, but also the cost of sustaining the equipment and of up-grading it. One challenge facing equipment manufacturers is the ability to produce equipment which will be able to be adapted to other purposes during the course of its service life. Mostly this involves sensors and the way they all work together. This makes systems integration a key element of a successful defence industrial capability.
Another complicating element is the fact that defence contractors along with other industries are engaged in the process of globalisation. To continue to achieve a return to investors, companies seek growth through acquisition of others as well as developing new technologies. This means that companies which were formerly based in say the UK, are now global entities and the British MOD is just one among many customers. Another element is that because of the costs involved a diminishing number of contractors begin to have a monopolistic effect. The MOD as the customer needs the skills to be able to assess on the one hand the efficacy of the product offering (weapons and sensors) as well as being able to judge the price and how to manage what are often complicated projects, when it comes to the design and build of major platforms.
Defence is unlike other areas of acquisition where the government buys equipment and supplies, for several very obvious reasons. Firstly because it involves the defence and security of the UK and people's lives are at stake. Secondly the cost involved and the associated matter of high tech jobs in a variety of parliamentary constituencies. Thirdly defence equipment is also a means by which the UK develops and maintains links with allies around the world. It is also a means of winning exports. The defence ministry, therefore, very quickly enters choppy political waters. The cancellation of the Nimrod MRA4 left the UK without any maritime patrol capability. This decision arose because of the contractor's inability to demonstrate that the project would be finished within a reasonable time and cost limit. Other projects have been subject to cost over runs as well as lengthy delays in bringing them into service. All of these matters are regularly examined by the Public Accounts Committee, the Defence selects committee and the National Audit Office.
So – any attempt to examine the questions posed above needs careful examination. The conference speakers looked at the role of MOD as a customer, both in terms of defining its needs and managing its relations with industry. How can the MOD be an intelligent or even an expert customer, when it comes to evaluating highly complicated equipment. Who will certify up-grades and modifications to legacy equipment – one of the key issues arising from the Haddon Cave report into the loss of a Nimrod over Afghanistan? For all these things the MOD's Defence Equipment and Support branch (DE&S – formerly the Defence Procurement Agency) needs expert skills. One decision still awaited is how this process will be managed. The preferred option of Bernard Gray the Chief of Defence Materiel is to interpose a GoCo – a Government owned and commercially operated entity between the MOD and the defence contractors. This entity is expected to combine the functions of commercial negotiation over price with the project management of equipment programmes, both areas where the MOD is deemed to be lacking.
The Minister for Defence Equipment and Support sought to re-assure the audience. He was fulsome in his praise for the UK's defence sector and the way in which it has supported British forces on operations in Iraq, Afghanistan and most recently during the Libyan operation. He reassured those listening that the government was well advanced in its plans to reform the way MOD does business. He reiterated that the defence equipment budget was in a better place than it has been recently. He also reminded the conference that a floor of 1.2% of the MOD budget was in place to sustain necessary Research and Development. Above all he sought to address the perception that the UK has abandoned any idea of a Defence Industrial Strategy. The recent defence white paper on National Security through Technology, published in February, sought to address some of the questions highlighted at the beginning of this article.
In essence the white paper answers the question what technologies does the UK need to safeguard its security, not which industries. A cute distinction you might think, but it sets out the government's direction of travel with regard to the defence sector. Certain key national capabilities such as nuclear related technologies are safeguarded. The government's additional funding for cyber defence has also been noted. The government set out is stall on the basis of needing the requisite defence capabilities to operate at a time and in a manner of its choosing. To do this it needs equipment which it can upgrade and adapt as circumstances require. The minister sought to reassure the conference that a lack of a formally expressed strategy was a reflection of the changing nature of technology, rather than a deliberate policy of benign neglect. Despite the rhetoric of "Off the shelf" the minister pointed to a 40% spend of the equipment budget on sole source contracts in the UK; of the remaining 60% most items were sourced in the UK. However, it was evident that the government did not want to be in a position where a contractor could hold a programme to ransom by threatening to close plants in the UK.
The future of the UK's defence and security sector, and the related supply chain and those academic research institutes which supply it represents an ecosystem which is in precarious balance. It remains one of the UK's world class industries where we compete on a par with our global competitors. This ecosystem needs to be nurtured if it is to yield the technologies which can respond to rapidly changing situations. It also needs to be robust enough to generate export winning equipment. Moreover it needs to be resilient enough if it is to weather the occasional dry season.