Julian Brazier is a director of a firm specialising in applying virtual reality to logistic chains. He was on the Defence Select Committee for nine years and a Defence Minister for two. Before entering Parliament, he was co-author of a major international comparison of defence procurement.
It is welcome news that Boris Johnson’s new government is to take a deep look at defence procurement. Any casual reading of the National Audit Office’s output shows that huge overruns in cost and time are besetting many large government programmes, from NHS software to HS2 to fast jet fighters. But the sheer size and complexity of defence equipment purchase makes it especially challenging. The Ministry of Defence has also suffered from EU regulations in ways that it now it needs to disentangle.
Recent attempts to improve procurement have focused most heavily on the sharp end of negotiations, like driving down margins, but sometimes a step back can help. Talk of more competition can be naïve if the choice simply amounts to either buying from a national monopoly or making an off-the-shelf purchase from the USA – with implications for the permanent loss of domestic design capability. Five major changes would greatly improve performance, three of them strategic and two structural.
First, we must decide what capabilities we wish to keep in Britain and how. With a Prime Minister who has called himself a ‘Brexity Michael Heseltine’, we can breathe the words ‘Defence industrial strategy’. We need to relate defence to the much larger scale national investment in civil technology (private and public), ensuring that defence benefits from new ideas and that we don’t pay to reinvent the digital wheel. In one area – John Parker’s excellent National Shipbuilding Strategy – we have a first stepping stone, but America, France and Sweden all have more developed strategies than us. Sweden with a population of just nine million has developed several generations of fast jet fighters without collaborating with other governments.
Spending on defence research has been squeezed much faster than the defence budget has fallen, prompting many expressions of concern from the Defence Select Committee. It is good that early indications are that this will change. Closer links with civilian research and development, (in so far as it is not in university departments infiltrated by the Chinese) will help to keep a viable, competitive British defence industry.
Second, we have to get more players into the field. The MoD has several initiatives to get SMEs involved, with an innovative Dragon’s Den approach, but radical changes in the market will only come when the department’s attitude to Intellectual Property Rights (IPRs), competition and risk changes.
Imagine that a new player develops a radically new idea for dealing with a military problem and takes it to MoD. Partly because of EU rules and partly because of political suspicion of corruption reflected in civil service codes, Defence will usually put the concept out to tender after the proof of concept stage.
While the letter of commercial confidentiality is strictly upheld, the spirit of the process can simply end up enriching a larger existing player who undercuts the company with the original idea. Not surprisingly, the brightest and best often steer clear of government contracts.
This applies to sub-contracting too. Prime contractors can sign up to agreements which promise to put much of the work out to tender yet ensure that the work they want stays in house by building in penalties which smaller companies simply cannot risk. There is a balance to be struck – an important project must not run into the sand because a small but crucial provider has failed, but the current approach is often skewed too heavily in favour of the prime contractor.
Third, more emphasis needs to be placed in through life costs. This brings in the cost of manning, maintenance, stocks and training. A positive example, is that the heavy overruns in the capital costs of the carriers are partially offset by the astonishing savings achieved in expensive manpower which the radical design provides (1,500 against 5,000 for only slightly larger American counterparts). All too often, however, new equipments are introduced which prove costly to man and maintain.
Extensive testing with prototypes and technology demonstrators, can help to strike the right balance. The Army’s light recce vehicle, Jackal, was introduced in haste to save lives from IEDs in Afghanistan. A recent tragic fatality has shown that it is unstable – and retro-redesign will be expensive.
Moving to structure, the fourth requirement is to skill up the procurement teams themselves. Bringing in expensive people who may not understand the complexities of military requirements is not always a good idea. The Swedes have among the highest proportion of uniformed project managers, for example, rather than civil servants but they hold their posts for much longer than their UK counterparts and get good project management training.
The biggest gap – repeatedly pointed to by Defence Select Committee and National Audit Office reports – is in the contracts staff where underpaid and undertrained civil servants are negotiating with some of the best commercial lawyers in the UK. The humiliation of the failures in the Capita recruiting contract and the muddles in the maintenance of MoD housing both show that this problem extends beyond equipment purchase. Unless we do more to train and reward contract staff, other planned reforms are likely to fail; for example, sub-contracting practice will be driven by the small-print of the contract.
This area also requires some disentangling of EU regulations – including on recruiting. To take an example, if a uniformed expert with valuable knowledge in a particular technology, retires, and wishes to continue in the same role as a civil servant, he or she will have to reapply for their job. So, a process is triggered wasting several months.
The fifth issue is also structural. Opposite the project teams in DE&S, sit the capability staffs of the three services and Joint Forces. They draft the specifications and check on progress. The relationship between the two, and the various committees where they interact, is a complicated one but critical at every stage of procurement. It also needs reform. To give an example, On the Defence Select Committee a few years ago, we discovered that the most junior tier of the capability staff were having the first part of their annual appraisal written by the project managers of the projects they were meant to be auditing – integration gone mad!
Side by side with these policy and structural reforms is one wider issue. In the 2010 Defence and Security Review, a doctrine was emphasised called ‘Whole Force’ – meaning that defence should be agnostic as to whether capabilities were kept in regulars, reserves, civil servants or contractors.
This was only cursorily mentioned in the 2015 Review. There has been some progress, but it is uneven across Defence. A failure to recognise that more capabilities can be held outside expensive regular manpower may leave us without enough money for the equipment our forces need, however efficient our procurement.