Growing the Contribution of Defence to UK Prosperity – Headlines for UK Industry

Putting aside political resignations, Brexit negotiations, and international intrigue (who’d have thought England would get to the semis…) UK Defence has maintained its position in the public consciousness over the last month. The search for additional defence funding and the political manoeuvrings around that topic have been the centre of...

Putting aside political resignations, Brexit negotiations, and international intrigue (who’d have thought England would get to the semis…) UK Defence has maintained its position in the public consciousness over the last month. The search for additional defence funding and the political manoeuvrings around that topic have been the centre of attention for industry and onlookers alike. However, this week sees the launch of something potentially less immediately headline grabbing, but much more influential in the long term.

As part of the Modernising Defence Programme (MDP) the Secretary of State asked former Minister for Defence Procurement, Phillip Dunne MP to conduct a review of Defence’s contribution to national prosperity. Initially this was undertaken to provide statistical data and a clearer picture of the UK Defence industry as well as the myriad other value-added activities and contributions that are made by our industry. What has evolved over the past few months appears to be a report that recommends a series of changes to both the processes and culture within the MoD that could bring real change to the way Defence is viewed (and views itself) with regard to the prosperity agenda. The report can be found here. 

What immediately jumps out from the 41 recommendations made by Phillip Dunne is the breadth of subjects that touch on prosperity; contracting methods, R&D funding, tax, people and skills, intellectual property, exporting, data collection, and the regional agenda all feature will specific recommendations. It is clear that the engagement process for the report has been robust (ADS engaged fully with the consultation where possible) and the arguments made within the body of the document are balanced and reasonable. With such a wide range of recommendations it could be quite easy to lose the central purpose of the document in the minutiae; however these are the key points that stand out to us:

MOD should more strongly consider prosperity criteria when running competitions, and increase flexibility in weighting these considerations – this is a key recommendation that is strongly supported by ADS. The report calls for greater flexibility when considering these factors; something that would encourage programme teams to take a more subjective and arguably more considered approach to judging competitive bids. ADS will watch this with great interest and stands ready to support MoD in implementing these factors into the bid process.

MOD should consider whether spending 1.2% of the defence budget on R&D is enough to fulfil Government investment targets – This recommendation to review the current levels of funding comes at a time when the wider Defence budget is under scrutiny and the importance of innovation continues to grow. Investment in R&D and S&T activities retains highly skilled jobs and maintains the UK’s expertise in developing high-value intellectual property within business. The recommendation also provides an opportunity to revisit the alignment of extant R&D investment, potentially facilitating a shift in focus to fit with the Government’s Grand Challenges.

The MOD should support DIT plans to strengthen DIT-DSO, and industry should take more leadership over the ‘Team UK’ approach – it is clear that defence exports are a major contributor to the UK economy and the report highlights this very well. ADS would welcome a rejuvenated effort from Government to directly support defence exports of all kinds, from large programmes in service with the UK armed forces, to not-in-service equipment provided by UK suppliers. As the UK works to develop linkages with new trading partners it is important that all resources are utilised in this effort.

MOD should consider the exit of the UK from the EU as an opportunity to revisit procurement law and increase weighting on prosperity factors – Given the grand political challenges posed by Brexit it is hard to see how this recommendation could be effectively implemented in the short term. The increased weighting on prosperity factors would be a welcome shift, however given the tangled political, legal, and procurement situations caused by Brexit it may be wiser to approach this issue from a different angle.

MOD should revisit how it judges appetite for risk and risk transfer in contracts – This is a welcome recommendation and one that is vital for the sustainment and success of the UK defence industry. Risk transfer and achieving appropriate and reasonable margins are issues that affect the long-term health of an industry, and are particularly pertinent issues when placed in the context of UK public services and complex dynamic defence programmes. ADS believes that a cultural shift in MoD’s risk appetite would help address a number of commercial issues where avoidable friction is currently causing inefficiency.

ADS looks forward to the MoD’s response to this report and the ways in which recommendations will be implemented. The report’s 41 recommendations create a vision for a MoD which is both more aware and engaged with the parts of the nation that directly support it. From SMEs in the North-East providing bespoke capabilities to higher-education institutions performing vital S&T activities UK defence boasts a wide network of partners and suppliers; it is now time to derive even more benefit and value from those relationships.

Source: www.adsgroup.org.uk