The Government has today launched a Green Paper which marks the formal consultation on Equipment, Support and Technology for UK Defence and Security.

The consultation, led by the Ministry of Defence and Home Office, will cover a range of issues, including national security, working with other countries, exports, small & medium-sized enterprises and cyber security. This is the first time these key issues have been considered together from both a defence and security perspective.

The Green Paper provides details of the consultation which will last for three months, commencing in the New Year. This will lead to a White Paper, published in Spring 2011, which will set out the Government's approach to industry and technology policy in the defence and security domains over the next five years.

Minister for Defence, Equipment, Support and Technology, Peter Luff said:

"To ensure our Armed Forces have the equipment and support they need, industry requires as much clarity as possible to plan its investment in research and production. The Strategic Defence and Security Review made clear that this consultation is an opportunity for industry and the public to help us shape how we deliver some of the vital components of our national security."

Security Minister Baroness Pauline Neville-Jones said:

"As we said in the Strategic Defence and Security Review, Government needs to be smarter in the way that we meet the challenges to national security. Defence and security go hand in hand in many areas, which is why we are increasingly joining efforts to deliver solutions."

By Jon Grevatt, IHS Jane's Asia Pacific Defence Industry Analyst

Indonesia is set to introduce its inaugural defence offset policy from 2011 as part of wide-ranging changes to the country's defence procurement policies. The policy, which is being finalised by the Ministry of Defence (MoD), is expected to call on foreign contractors to transfer technologies to Indonesian defence companies to facilitate at least 40 per cent of a production contract to take place locally under licensed manufacturing arrangements.

The offset guidelines will be implemented by the MoD's Defence Industrial Policy Committee (KKIP) and will supplant existing ad hoc guidelines that relate to defence manufacturing and technology transfer and are based on counter-trade. The objective of the offset policy is to improve indigenous industrial capabilities, reduce dependency on imports, and create meaningful employment in a country whose economy is forecast to expand rapidly over the next decade. It will be supported by a government pledge to revitalise the state-owned defence industry over the next five years through financial support and a commitment to procure military equipment from indigenous sources whenever possible.

In a bid to shape the offset guidelines, a senior official from the MoD said Indonesia was talking to several foreign countries about their respective industrial participation and offset schemes in order to learn more about best practice. Commodore Sudi Haryono, director for technology and industry in the MoD's Directorate General of Defence Facilities, said: "With input and help from foreign countries, we will make regulations for defence offset for Indonesia's defence industry. We are now talking to other countries to get their input and to listen to their experience. I think it is important to make this [happen next year]. We want offset to build Indonesia's defence industry so we can improve."

The KKIP is headed by Defence Minister Purnomo Yusgiantoro and was created under a presidential decree earlier in 2010. Its policies are being shaped by the MoD but they are expected to form a central part of the government bid to improve defence industry capability. Officials have stated that the KKIP will focus on introducing the offset policy as well as guidelines related to promoting indigenous R&D activities, licensed production, technology acquisition and ensuring industry's access to loans from state banks.

As part of its policy-forming initiatives the MoD held a conference in Jakarta in late November, which was dedicated to raising awareness of offset and learning from the experiences of speakers from countries such as India (which is continuing to adapt its offset policy after its introduction in 2005) and Australia (which abandoned its offset policy in 2008 in favour of a participation programme that encourages growth through exports). In this conference, Yusgiantoro underlined Indonesia's need to develop its own such policies and vowed that the country's use of offset and related schemes will be expected to be utilised "in every purchase of defence equipment from abroad". He added: "The offset programme will build the capacity of [Indonesia's] domestic defence industry... The government is determined to revitalise the defence industry: it is one of the priorities of the cabinet."

Another of the speakers at the offset conference was Professor Ron Matthews, deputy director of the Institute of Defence and Strategic Studies at the S Rajaratnam School of International Studies in Singapore. Prof Matthews, a regular adviser to Southeast Asian governments on their defence industry policy initiatives, said that despite Indonesia being one of the first countries in Southeast Asian to introduce a counter-trade policy in the 1970s, the country has never documented a defence offset policy and defence production has never had any credit values associated with it.

Prof Matthews said, however, that Indonesia is now taking defence offset "very seriously" as it attempts to build the capabilities of state-owned defence companies, many of which continue to struggle financially: a result of years of under-funding, a dearth of contracts, and the lingering effects of the last economic crisis in Southeast Asia during the late 1990s. These entities are exemplified by naval shipbuilder PT Pal, which during the past year has undergone a restructuring process to turn around the company's ailing finances. This process will see more than half the company's 2,400 employees made redundant.

Prof Matthews said: "In my view, Indonesia does need a robust offset policy. At the moment, Indonesia's defence industry is withering on the vine almost. Indonesia is increasing its defence budget and procuring more equipment... [but] there is no work coming into the Indonesian defence factories. So I think that really needs to be addressed." He added that, in order to benefit from a defence offset policy, Indonesia needs to invest in modernising facilities to enable the absorption of foreign technologies. "It is not just putting an offset policy in place that is important," he said. "It is also about investing in the relevant associated infrastructure."

Indonesian defence officials, however, have indicated that they intend to do just that. Executives from PT Pal, for instance, have said that the modernisation of production facilities is regarded as a priority with funds expected to be sourced from state-owned banks. The House of Representatives' defence commission has provided firm political backing for such moves arguing that without such investment companies will struggle to not only win contracts but also support technology transfer through offset.

Securing such funds for investment has been problematic in the past decade or so while Indonesia's military modernisation ambitions have been limited by a lack of funds. But this time it's expected to be different. Indonesia remained relatively unscathed by the global financial crisis and the economy is now forecast to expand due to an increase in foreign investment, strong domestic demand and, in particular, the emergence of oil and gas deposits. Such factors prompted the International Monetary Fund to state recently that Indonesia is set to become one of the world's fastest-growing economies over the next five years. It has also prompted the Indonesian government to outline a number of ambitious procurement programmes – such as additional submarines and combat fighters – as well as a pledge to increase defence spending from 0.8 per cent of the GDP in 2009 to at least 1.5 per cent by 2014. Such spending plans could take the defence budget closer to the USD10 billion-mark that the government says it needs to effectively secure such a vast archipelago of more than 18,000 islands.

By Nick Watts

The government's proposed Defence Industrial Technology Policy (DITP) will be published in December. Or rather, it will be the basis for a discussion between industry and government. Both sides have much at stake, so the outcome is important. Getting the right answers means asking the right questions. The government and the MOD each need to ask three questions when formulating the DITP:

How can the UK secure the necessary operational sovereignty to guarantee the provision of key strategic capability into the future?How best can the government partner with industry to ensure the continuation of a viable defence sector in the UK?How can the government help the UK's defence sector to explore and exploit opportunities in the export market?

 For its part Industry also needs to collectively consider three questions, as it engages with the government and MOD:

How will industry adjust to the stated aim of MOD to reduce the number of operating platforms: how will this enable the UK to retain a viable defence industry? To what extent can exports help pull through programmes for the UK market?How can industry help MOD reform its acquisition process, to ensure that programmes get developed quickly and that equipment is delivered on time and on budget?

The DITP will be a Green Paper, a discussion document. This is intended to guide the subsequent discussions so that a White Paper can result. The White Paper will represent the government's settled view on the future of the MOD's industrial and technology policy for the life of this parliament, and at least until the next SDR in 2015. In the context of the SDSR and the CSR, there is much gloomy talk in the air. Yet both sides of this discussion have a mutual interest in ensuring that the other survives to fight another day.

The context, while not promising could be a lot worse. After the fall of communism the subsequent peace dividend took its toll on both the armed forces of the west and the defence industry. The notorious "Last supper" of 1993 encapsulated this. US Defence Secretary Aspin told the leaders of the 15 largest US defence contractors that the DOD was not going to solve industry's over capacity problem. The result was a wave of consolidation which has produced stronger contractors now. In Europe and the UK a similar series of consolidations took place.

The world in 2010 is far different from 1990, when policy makers were trying to get their heads around what the changes of 1989 meant. The SDSR set the context within which the industrial and technology questions need to be considered. The arithmetic of the CSR is another factor affecting the DITP. The contemporary setting does not allow the laissez faire approach adopted by Les Aspin in 1993, however much the government may wish.

Articles taken from Flight International Magazine.

1st November: Lockheed Martin eyes common architecture for F-35, F-22
Lockheed Martin is looking at revamping several of the F-22's most critical systems with hardware from the F-35.

The initiative would create a common architecture that links upgrades of the radar, electronic warfare suite and communications, navigation and identification (CNI) system to both aircraft.

3rd November: Lockheed's F-35 faces second restructuring this year
Facing a new round of cost overruns and schedule delays, the Lockheed Martin F-35 programme will finish the final two months of 2010 in much the same way as it opened the year.

One more year of development and an extra $5 billion may be added on top of previous extensions, according to the preliminary findings of a major F-35 review leaked by the Center for Defense Information (CDI), a well-connected think-tank.

12th November: F-35 cuts 'could slash US budget': report
The US government could save about $58 billion by slashing four major aerospace and defence accounts, a presidential commission advises in a draft proposal released on 10 November.

15th November: F-35B flies with Block 1.0 software
Lockheed Martin has flown an F-35 flight test aircraft with the third of five major blocks of software for the first time. The advance represents a key step, as the programme has struggled to deliver an estimated 11.6 million lines of code demanded by fusing the aircraft's advanced sensors and avionics.

22nd November: Latest deal for 31 F-35s shows slight price decline
Lockheed Martin has finalised a nearly $3.5 billion contract to deliver 31 more F-35s at a slightly lower price than last year.

The contract award, announced late on 19 November, is a key boost for Lockheed's F-35 production programme as top Department of Defense officials are scheduled to meet on 22 November to review possible new delays and cost overruns on the development side.
The $3.5 billion award is the third contract Lockheed has received as part of the fourth lot of low-rate initial production (LRIP-4), which will be delivered in fiscal year 2013.

22nd November: Fatigue cracks raise questions about key decision in F-35 redesign
Lockheed Martin has discovered fatigue cracks on an aluminium bulkhead inside a ground test aircraft for the short take-off and landing F-35B variant after 1,500h of durability testing.
25th November: F-35 production cost fall highlights pressures facing Lockheed
With the development phase of the Lockheed Martin F-35 under close scrutiny by US Department of Defense officials, a long-awaited contract award shows that production costs are falling, while the risks are shifting from the government to the contractor.

A $3.5 billion contract awarded on 19 November completes the orders of 30 F-35s from the USA and one from the UK in the fourth annual lot of low-rate initial production, or LRIP-4. Two other deals awarded earlier for LRIP-4 aircraft raise their total cost to $4.6 billion, or about $148 million each.

Articles taken from Flight International magazine:

1st September: IAI to build wings for Lockheed's F-35
Israel Aerospace Industries will receive a multi-year contract from Lockheed Martin to manufacture up to 900 wing pairs for the F-35 Joint Strike Fighter under a new industrial co-operation agreement.

The expected pact will follow the signature of a letter of offer and acceptance (LOA) by Israel to purchase 20 F-35s for its air force.

1st September: F-35B delays lead to rephased flight-test schedule
The F-35 programme is likely to have a reshuffled flight-test schedule again as Lockheed Martin continues to struggle with the reliability of the short take-off and vertical landing variant.

It is not immediately clear if the possible "rephasing" of the flight-test schedule would result in a new overall delay for any of the three F-35 variants.

2nd September: L-3 division pushes for more F-35 work in Canada
L-3 MAS is lobbying the Canadian government to negotiate a greater role on the Lockheed Martin F-35 programme.

Concerned about the level of industrial participation on the Joint Strike Fighter, company president Sylvain Bédard pressed the case during a visit on 1 September by Prime Minister Stephen Harper to L-3's factory in Mirabel, Quebec.

8th September: DoD official shows fresh optimism on F-35 cost
A senior Department of Defense official says Lockheed Martin is now on track to reduce the cost of each F-35 by as much as 6.25%, only four months after the programme confirmed a major cost breach.

The remarks by Frank Kendall, principal deputy undersecretary of defense for acquisition, technology and logistics, represent a massive turnaround by the DoD's leadership since reporting a Nunn-McCurdy cost overrun in June and restructuring the programme last February.

Instead, Kendall, addressing the Common Defense (ComDef) 2010 conference on 8 September, cited the F-35 as a key example of what Secretary of Defense Robert Gates means about making the defence industry produce more with less.

17th September: MBDA reveals clipped-fin Meteor for F-35
MBDA has revealed a slightly modified Meteor that would allow four of the beyond-visual-range air-to-air missiles to be stored inside the Lockheed Martin F-35.

A miniature Meteor mock-up featuring four clipped fins appeared for the first time in the company's display at the Air Force Association's Air & Space Conference and Technology Exposition in Washington DC.

The missile's total fin area is reduced by roughly 20% compared with the original design, says Rob Thornley, MBDA sales and business development executive. The new shape allows the Meteors to squeeze into the space designed to house four Raytheon AIM-120C7 AMRAAMs.

17th September: Israeli cabinet approves $2.75b JSF deal
The Israeli cabinet has formally approved the purchase of 20 Lockheed Martin F-35 Joint Strike Fighters for the nation's air force. The value of the deal will be around $2.75 billion.

The decision was made after a series of talks between US and Israeli officials. These focused on issues including the extent to which Israel will be allowed to instal its own electronic warfare equipment, and the level of industrial involvement that its defence industry will be granted in return for the order.

Sources suggest that the value of immediate offsets linked to the buy will total over $2 billion.

23rd September: Lockheed, US government strike deal on next F-35 order
The US government has reached an agreement with Lockheed Martin on the structure of a fixed-price contract worth more than $5 billion for up to 32 more F-35s.

The agreement is necessary before the Department of Defense signs a contract for the fourth lot of low-rate initial production, which orders F-35s projected for delivery after 2012.

The agreement ends a negotiating process that was extended by about four months to satisfy demands by the DoD for a fixed-price contract.

Lockheed previously delivered the Joint Strike Fighter under a "cost-plus" structure, allowing the contractor to be reimbursed for cost overruns.

28th September: F-35 alternate engine damaged after high-speed anomaly
General Electric/Rolls-Royce is investigating manufacturing and assembly data on a single F136 engine after it was damaged during a checkout test on 23 September.

The alternate engine for the Lockheed Martin F-35 was shut down "in a controlled manner" after an unknown anomaly at near maximum fan speed on the test stand damaged the front fan and compressor area, the company says.

29th September: Norway defers some F-35 orders by two years
Norway has pushed back orders for 16 of 20 Lockheed Martin F-35 Joint Strike Fighters by two years to 2018, but reaffirmed its commitment as a "serious and credible partner" in the programme.

The Norwegian defence ministry announced on 25 September that it will buy four F-35s in 2016 to serve as trainers, but that the remaining aircraft planned for purchase in 2016 and 2017 will be postponed until 2018.

Oslo originally planned to order as many as 48 F-35s over the five-year period from 2016 to 2020.

Rees Ward, Chief Executive ADS

The UK defence industry is a crucial partner for the Government if it is to achieve its aims around support to the Armed Forces and the Force 2020 vision, on economic growth and on exports. Without sufficient investment in the UK sector the industry will be unable to develop new battle-winning products onshore specific to our own Armed Forces as well as products for export.  There is great potential for development of the fragmented UK security market, and we support proposals for Government and industry to work together more effectively to support national security and promote economic growth.

The UK defence industry supports over 300,000 jobs and generates an estimated £35 billion per year to the economy.  It represents 10 per cent of UK manufacturing and exported £7.2 billion of products in 2009.  The wider security sector supports around 600,000 jobs and is poised for strong global growth thanks to the innovative, world-leading and proven equipment and capabilities that it develops.

The UK industry is a crucial partner for the UK Government to achieve its military and economic aims and the Green Paper offers an excellent opportunity to suggest ideas to the Government about reforms and improvements to deliver additional benefits for our troops and security authorities.  This will also benefit the taxpayer through providing increased value for money and enhanced public protection.  We welcome the open attitude in which this consultation has been carried out and we look forward to further discussions with the Government on how industry can help in the future.

In the industry's view the White Paper that will follow this Green Paper should describe how the UK's national security policy can both underpin the nation's defence and bring broader value to our economy, including how Government policy can contribute to advanced manufacturing and engineering, to the skill base and to British exports.

The experience of the defence and security sectors as well as their excellence in products and services is recognised both at home and by other nations.  The UK is number one in Europe and second only to the US worldwide in the defence exports market with a 21 per cent market share.  Furthermore, the innovative and proven UK security sector is primed for global growth providing the correct climate is delivered by the Government.  UK industry is also a world leader in providing engineering and training support services through innovative contracts and partnerships that demonstrably reduce MoD costs and have great potential as an export model in their own right alongside equipment sales.

Industry believes that the Government would gain through assessing the economic benefits of the UK defence and security supply chain as well as the unique strategic value of the industry to the nation and to UK national security.

A|D|S is the trade organisation advancing the UK Aerospace, Defence, Security and Space industries. A|D|S was formed from the merger of the Association of Police and Public Security Suppliers (APPSS), the Defence Manufacturers Association (DMA) and the Society of British Aerospace Companies (SBAC) in October 2009. A|D|S also encompasses the British Aviation Group (BAG).

The Public Accounts Committee published its 23rd Report of Session 2010-2011. This report on the Major Projects 2010, on the basis of evidence from the MoD, examined its progress in meeting cost, time and performance targets for its 15 top-spending military equipment projects. Progress made by the MoD on individual defence equipment projects, has been overshadowed by continuing failure on important major projects. Unaffordable decisions taken in the short-term have led to the inevitable waste of billions of pounds over time. In the wake of the Defence Review, the MoD has still to spell out if and how it has got its defence procurement budget under control.

In one previous hearing, where the focus was on only four projects, over £8 billion of taxpayer's money was identified, which had been written off or incurred simply for reasons of delay. The scale of the budget shortfall has pressurised the MoD into taking difficult decisions to cancel important military capabilities like Nimrod and Sentinel, thereby increasing operational risks and writing off nearly £5 billion. The Department has also taken short-term decisions to delay and re-scope individual projects to keep its in-year spending within the voted limits. Such decisions have been taken without a full understanding of the financial implications. The consequence has been hugely damaging; in just one year an increase of over £3 billion in the overall cost of the Department's major projects.

The Minister for Defence Equipment, Support and Technology, Peter Luf MP, today laid in Parliament, a Green Paper entitled Equipment, Support andTechnology for UK Defence and Security: A Consultation Paper.

He said "The first duty of Government is the security of our nation. It is therefore
essential that the UK equips itself with the right tools to tackle current and
future threats. The convergence of defence and security that underpinned the
Strategic Defence and Security Review means that we should seek to bring together
our approach to equipment, support, and technology in both the defence and security
sectors. I have therefore worked with the Minister for Security in preparing this
Green Paper to reflect our new approach. We have also included cyber security as a
separate section because it is a new and fundamental challenge.

"Our default position is to use open competition in the global market; to buy
off-the-shelf where we can; and to promote open markets in defence and security
capabilities. We will take action to protect our operational advantages and freedom
of action, but only where essential for national security.

"The UK currently enjoys a strong industrial presence in the defence and security
markets and export success abroad in those markets; last year, defence and security
exports achieved around £8.5 billion revenue. We are committed to doing more to
promote exports of both defence and security products from the UK to responsible
nations, as well as to boost the role of small and medium sized enterprises, both in
their direct and indirect supplies to the Government and its agencies."

The Green Paper is available online at http://defenceconsultations.org.uk/. The
formal public consultation period will run from January to March 2011 The Government plans
to publish a White Paper on these issues in 2011.

Defence Viewpoints will publish further comment and analysis shortly

Bernard Gray has been appointed as the MOD's Chief of Defence Materiel, leading on the delivery of all aspects of the Defence Equipment and Support Plan. This includes responsibility for MOD assets worth £104Billion and an annual operating budget of £13Billion.

Bernard Gray replaces General Sir Kevin O'Donoghue who has been in the post since its creation in April 2007 and is retiring. Bernard Gray will take up his 4 year appointment on 4 January 2011.

A well known figure on the UK defence scene is leaving SBAC and moving to AirTanker as Corporate Communications Manager.In recent days Mary Ann Griffiths has been seconded to the MOD-industry Joint Communications Group, but is now returning to industry as part of the AirTanker programme as it (literally) takes off.