By Dr Jeffrey Bradford

Today saw the release of The Ministry of Defence (MoD) Defence Plan including the Government's expenditure plan for 2008-2012 (Cm 7385). The document reflects the outcome of the 2007 Comprehensive Spending Review where all Government departments make their bid for resources based on needs and performance. A senior group of Ministers arbitrate over these competing demands to determine ultimately who gets what. For the Ministry of Defence, there are a number of interesting nuances in the Defence Plan which illustrate the evolving defence priorities of the Brown adminstration:

Defence Policy (Pages 18-19)
* The Defence Plan suggests a much greater focus on Africa, no reference to America's Global War on Terror (GWOT) and in terms of current commitments in Iraq and Afghanistan "Support work to deliver a downtrend in the number of conflicts globally"

By Adam Dempsey, Research Associate, UK Defence Forum

One of the main priorities of the Strategic Defence and Security Review (SDSR) is to ensure that the Defence Budget is spent efficiently, effectively and in line with foreign policy requirements. In meeting such objectives both the SDSR and the Ministry of Defence (MoD) may advocate an increase in the outsourcing of services to the private sector. Whilst outsourcing is already a well-established practice, the Government's commitment to reducing public expenditure is likely to offer opportunities for the private sector to participate within a wider range of military activities. This will not only increase the size and value of the outsourcing market, it will also re-ignite debates regarding the 'value' of this practice.

By Deba R. Mohanty

The time to unveil India's new Defence Procurement Procedure (DPP – 2010), an official document on procedural aspects of defence procurement guidelines, is round the corner once again. While the MoD mandarins are engaged in giving final touches to the document by taking inputs from stakeholders from within the government as well as outside (like FICCI, CII, and others), it is time for an informed debate on what is considered as one of the most complex issues that the Indian defence sector has been facing from time to time.

Efforts to streamline the otherwise cumbersome defence procurement process have been going on especially since the Indian defence sector opened up for private participation in 2002. Consider this: the DPP has been revised six times, including an addendum officially announced in late October 2009, in the last eight years. The Defence Minister periodically reminds us that this is still an evolving document. Even though the review of DPP is to be taken up every two years as envisaged (No. 76, DPP-2008, p. 21), it appears that 'change' has become 'constant' at the cost of practicable inputs being injected into the document, where as it should have actually been other way round.

Autopsies of the previous DPPs have brought out some interesting insights. First, despite tall claims to reduce the time frame of acquisition process, the MoD has neither been able to reduce the number of stages of evaluation process (eleven in total, from laying down services quality requirements to post-contract management) nor do any thing that can entail positive impacts. Although specific timelines have been earmarked for each stage of the process, scope for delay has also been provided under special conditions which the vendors can take advantage of. The on-going acquisition process for 126 medium multi-role fighters (MMRCA) serves as a case in point.

Second, the central objectives of DPP revolve round ensuring expeditious procurement, sticking to prescribed time frame, demonstrating highest degree of accountability, transparency and fair competition (No. 2, DPP-2008, p. 1). Let's pick two key words 'transparency' and 'fair competition' from the text and pit them vis-à-vis available evidences. At least four major defence deals, including the multi-billion dollar 197 helicopters, have been cancelled in recent times, causing negative consequences for the ongoing military modernization programme. Official explanations often times point to 'technical reasons' in cancellation of such deals. Last two years have also witnessed close to half a dozen defence deals with a single country (read the US) through what is known as 'inter-government agreements' facilitated through Foreign Military Sales (FMS) route. At least USD 9 billion worth of weapons, including big ticket items like C-130J Hercules, P-8I maritime aircraft and the most recently agreed Javelin anti-tank guided missiles (ATGMs), have not only surpassed competitive bidding route but being purchased with little or no benefit to the Indian industry. While adequate explanations to the Indian Parliament must be treated as a norm to ensure transparency in defence acquisitions, 'fast track' or even single vendor situations in defence deals must also be explained to the Indian public and perhaps a clause to lay down norms for 'competition' must be framed to discourage 'single vendor' situation. 'Strategic considerations' (No. 73, DPP-2008, p. 21) clause at the same time must be carefully used to suit Indian interests.

Third, inclusion of new features like offsets including banking, ToT conditions, 'buy and make' (Indian) and FDI have been propagated, especially by the bureaucrats and grudgingly supported by the industry, as beneficial to the Indian industry are increasingly been proved ill-thought-out and impractical. Braggart assertion by the MoD that offsets have brought nearly Rs 8,000 crore worth of work to India with Rs 48,000 crore in pipeline are in paper only and one does not know the real value of offsets as details are beyond the reach of any analyst. ToT conditions are yet to be defined properly, forget their future worth. Buy and make procedure has thus far not benefited the Indian industry in any manner, even the Raksha Udyog Ratnas are yet to be officially announced while the DPP still has a section devoted to selection of the same (Appendix C, DPP-2008, pp 164 – 75)! Increase in FDI in defence from 26 to 74 as proposed by a discussion paper prepared by the DIPP, Ministry of Commerce, has found support without credible justifications from most quarters, except for FICCI which wants it to remain at 26 percent.

In sum, most of the new features seem to have been added without much homework and the results are there for all to see. Many more issues need to be debated, however, suffice to add the end note here: its time to change the 'constant' with cosmetic changes and inject pragmatic ideas instead.

The author is a Senior Fellow in Security Studies at Observer Research Foundation.

By I.E. Shields

It is undeniable that the UK is in a financial mess, and it is equally incontestable that the present Government is determined to address the deficit since they believe that this is in the country's long-term interests. This article will challenge neither of these assumptions, but will look at the degree to which the present, and ongoing, Strategic Defence and Security Review (SDSR) is being conducted and ask whether we are in fact sleepwalking into a security disaster?

We do not know what the SDSR is going to conclude and this article is necessarily, therefore, speculative, albeit that it will not try to guess the contents of the Review. But what we do know is that the SDSR is being conducted at break-neck pace, by a very small circle of insiders (despite Government claims that it is inviting outside views: with such a compressed time-line there is insufficient time to undertake proper strategic analysis, let alone take into account external views). The results will be known soon, but we should anticipate little time for debate after the results are published, more likely an unseemly rush to implement what are likely to be hefty cuts.

And herein lies the biggest danger, not the reduction in spending, driven as it is by necessary financial considerations, but the lack of real scrutiny. There are suggestions, if not actual claims, that the Review will be based on, at least in part, a review of where Britain sees her place in the world and therefore (one might expect) how we are both to discharge our global responsibilities, and lever influence, not only to meet our own needs but also to play our part in maintaining the international order. These are lofty and laudable aims, and such a Review is to be supported and applauded. However, within such an ambition lies a potential danger: what if the conclusions are wrong? Now nobody can predict the future with much, let alone total, certainty. But scrutiny is needed for the price of failure – at best Britain's place in the world diminished (with concomitant implications for the national economy), at worse either this country or the way of life and international order to which we adhere under severe threat. No, this is not melodramatic, but a plea that the Review receives due scrutiny. But scrutiny from whom?

By Jeffrey Sterling and Nick Butler

Over the next three weeks the coalition Government will make the most significant set of decisions on UK industrial policy which have faced any administration in the last four decades. Important enough in terms of Britain's strategic position in the world, the decisions on the defence budget to be announced by the Chancellor could also crucially shape the future of much of our remaining industrial and engineering base.
Attention, both within Whitehall and in the media has inevitably focused on the possible reductions in troop numbers, on the number of carriers and jet fighters we need, on the role of the Royal Air Force, and on the future of the UK's independent nuclear deterrent.

All are serious issues but equally important, and so far barely discussed at the meetings of the National Security Council which will advise the Prime Minister on defence issues, are the questions concerning the industrial capacity which must underpin any defence strategy.
No one can deny the serious economic circumstances facing the Government or the budget problems facing the Ministry of Defence in particular. The bow wave of commitments repeatedly "pushed to the right" - a piece of civil service jargon reflecting the tendency to extend the timescale of individual projects in order to spread the cost into future years - has been well documented. So too has the "bias to optimism" which has produced a persistent and repeated underestimation of costs.

Both are real and serious problems. As the Defence Secretary has said the MoD's finances are in a mess and must be sorted out. But Britain's future defence capability cannot be made the victim of punishment for past mistakes. Defence cannot be treated as just another Government department while soldiers are fighting and dying for their country in Afghanistan. Five years ago the UK devoted some 4.5 per cent of its GDP to defence. To reduce that proportion to only 1.6 per cent – which would be the effect of the proposals currently under consideration - would not only breach our commitment to NATO which has set a two per cent guideline but would also ignore the reality of the risks we face. Balancing the budget is important but so too is Britain's ability to defend itself and our strategic international interests in a dark and threatening world.

The definition of those interests and the scale of resources applied to their protection are matters for high political decision. But defence is not an abstract concept. The details of each assertion of defence policy depend on the underlying ability to deliver what is promised. In 2005 the Defence Industrial Review identified the key areas where Britain needed to protect and develop engineering and technical strengths to meet specific defence needs. The report was clear. While some equipment can be bought on the open, international, market other elements absolutely require indigenous industrial capability. The integration of complex information in the cockpits of planes , the management of information gathered from multiple sources which make up the most advanced Command and Control systems and cryptography – the protection of vital information – are not skills which can be outsourced even to suppliers located in countries with whom we are close allies.

At the heart of defence policy is the national interest and to protect that interest in extreme circumstances we need companies which can develop, manufacture, supply and then service each of key leading edge technologies. We need to retain the skills and experience of the individuals and teams spread across large and small businesses whose brain power has given Britain not just security but a source of real competitive advantage.

In many of areas UK companies hold world leading positions. Although some technology cannot easily be traded, much can – to the benefit of the balance of payments and to employment across the UK. Such trade can also bring direct benefits to our own defence. There are huge spin off benefits from a sector which now represents Britain's largest remaining investment in advanced manufacturing and high level engineering skills.

A prime example is in homeland security where the world leading technology developed in this country which tracks the movements and activities of individuals and groups through advanced data management technology helps protects both against terrorism and against organised crime. Much of that technology can be sold abroad and such sales can extend the security of people in this country by making other countries such as India and Pakistan safer against threats which respect no national frontier.

The analysis behind the 2005 Defence Industrial Review was extended and updated by work undertaken by the Ministry of Defence, the Department for Business and the Home Office before the General Election. That work, commissioned and led from No 10 by one of the authors, identified the crucial links between defence policy and industrial capability. That report also identified the extent and quality of the supply chains which underpin the strengths which exist today. Regrettably that report remains unpublished.

That report should be on the table for the National Security Council, the Chancellor and the Prime Minister as they take the crucial decisions on defence policy over the next few weeks.

Traditionally and beneficially major decisions on defence in the UK have been taken on a bipartisan basis. Both the Prime Ministers we have worked for, from their very different political perspectives, believed that defence was too important to be left to the bickering and pointscoring of party politics. That was the spirit in which the last Government launched the current Strategic Defence Review. The terms of reference were discussed on a cross party basis. The timetable for the review was deliberately set to run beyond the General Election and in order to ensure that the conclusions as far as possible could be reached without reference to short term political advantage.

The serious risk now is that hasty decisions driven solely by budget considerations will destroy that bipartisan approach and will pre-empt the serious work which needs to be done in analysing the threats and risks to our national interest. We need a defence strategy which is not only resilient in the face of a fluid and volatile set of risks but also and crucially a strategy which is matched at the industrial level by an absolute commitment to maintain the means of delivery.

Once destroyed by random budget cuts that capability cannot be recreated. To cut without thought for the consequences would be to imperil the security of the nation which is the first, and preeminent responsibility of any Government.

Lord Sterling was a senior adviser on industrial policy to the Government of Margaret Thatcher. He was also Executive Chairman of P and O SN.

Nick Butler was senior policy adviser on industrial policy to the Government of Gordon Brown until the last election. He was previous head of strategy for BP.

This is an extended version of a letter published in the Financial Times yesterday.

By Adam Dempsey, Research Associate in Residence, UK Defence Forum

Russia's search an alternative buyer for S-300 air-defence missile batteries originally earmarked for Iran appears to have been hastily resolved. On 18th October Venezuela's President Hugo Chavez announced to journalists in Kiev, Ukraine, that his country intends to purchase five S-300s. The deal is expected to cost Venezuela $800 million. Russia's compliance with United Nations Resolution 1929 vindicates international consensus that Iran would use the S-300s to protect nuclear facilities. As it is highly unlikely that Venezuela has a similar nuclear programme the sale of the S-300s to Caracas should be comparatively easy. Yet why would Venezuela need to make such a purchase?

An overview of the S-300 suggests that Venezuela will be purchasing one of the most formidable air-defence systems currently available. The S-300 is capable of engaging six incoming targets simultaneously at ranges of up to 300km. According to the Federation of American Scientists the S-300 is also able to counter intensive air raids at low-to-high altitudes. The system can also be used to target low altitude objects such as cruise missiles and possibly to intercept strategic ballistic missiles.

Should Iran have completed the purchase of the S-300s the dynamics of the Middle East security environment would also have changed. As Iran's outdated air defences remain in place both the United States and Israel can retain the option of a pre-emptive strike on Tehran's nuclear facilities. Whilst the deployment of S-300s would do little to deter a larger-scale American bombardment it is likely that Tel Aviv would reassess its options. Yet this makes Chavez's decision to purchase the S-300s all the more mystifying.