End of the line for the Defence Industrial scam?

Malcolm Rifkind has an excellent article about UK defence policy.  "The most serious problem" he suggests "has been the inability of the Ministry of Defence to control the escalating costs of procurement."

Spot on.  Until we recognise this, we'll never be able to give our armed forces the full range of kit they'd otherwise have. 

"Procurement decisions and costs must be controlled from the very top of the Ministry of Defence" ... rather than driven up by "the competing demands and aspirations of the individual Services". 

Indeed.  But it's not just inter service rivalry that's driving up costs.  The Defence Industrial Strategy deliberately limits the range of suppliers to our armed forces in order to advantage a handful of contractors.  Good news for their share price, but bad news for our military

The faux reasons given for such protectionism are sovereignty of supply or job protection.  Yet neither argument stands up to intelligent scrutiny.  The real reason for such protectionism is that it is in the commercial interests of some suppliers to exclude rival bids.    

Getting better value from the procurement budget isn't just about dealing with inter service riviary or dozy officials.  It means buying kit off-the-shelf and scapping the Defence Industrial Strategy.

Posted on 3 January 2010 by Douglas Carswell

Comments

It is hard to disagree with this post, seeing as it is right on.

However, "the most serious problem" with UK defence policy surely must be the fact the UK is embroiled in two unnecessary wars. An aggressive foreign policy will only harm (and has harmed) the UK. It is expensive in terms of blood and treasure. If the government is serious about protecting the lives of soldiers, bring them home.

Posted on 3 January 2010 18:51 by Tyler

We should buy on the open market, which in most cases would tend to be USA as they usually manufacture far larger quantities than any other friendly country and consequently get the price down. If there is no equipment on the open market to meet our specification, someone should be asking serious questions about the spec. As an engineer, I spent a lot of time writing specifications to define the users requirements; frequently I went back and asked "Do you really want this function, it will be very expensive to implement". Not infrequently the answer was that it was not essential but seemed a good idea.
MoD seems incapable of separating a "wish list" from a "must have list", and this can easily multiply the cost of an item of equipment.

Posted on 3 January 2010 23:19 by English Pensioner

"Lord, I see the King can have nothing so cheap as other men." - Samuel Pepys's verdict on the corruption and inefficiency of the royal dockyards in the 1660s.

Posted on 4 January 2010 11:22 by eeyore

You risk being ignored by being too dogmatic and simplistic. e.g. inter-service rivalry costs a fortune, and shouldn't be dismissed with a just. Buying off the shelf needs to be part of a proper strategy, not a cheap jibe. To get from the right sentiments (which you have) to the right solutions will take more work than you imply here. See if Lewis Page can help.

Posted on 4 January 2010 14:43 by ShirleyM

Open market. Off the shelf.

Posted on 4 January 2010 20:00 by Generalfeldmarschall

I tried to post a defence of the DIS here last night, but it doesn't seem to have appeared for some reason?

Posted on 4 January 2010 20:36 by Russ Williams

It seems to me that sovereign supply is a good objective in itself- but of course one that needs to be properly balanced against quality and price, it's not a be-all and end all argument.
Perhaps there's some improvement available from buying (or licensing) the designs of the most cost effective kit available worldwide, and manufacturing it here.
We could then get good kit more cheaply and retain control over its supply and use- as well as gaining knowledge of how to build better kit ourselves.
I appreciate that that's not always possible- but it doesn't seem to me to have been explored here, though the Israelis certainly do this.
The provision of jobs argument is nonsense. It means we are tying up talented and innovative people producing something that could be obtained more cheaply elsewhere- better that these people be encouraged to re-deploy in some other field where they actually are competitive- and might generate profitable work for others in the process. They are at the moment effectively unemployed, but in receipt of a full salary, and told that they actually are employed productively.

Posted on 4 January 2010 21:33 by Pat

@Russ Williams:
Russ, If you post it, I'd be very happy to have it on the site. I'm especially keen to hear from folk that think DIS is defensible.
Are you sure you posted it correctly?
Douglas

Posted on 4 January 2010 21:34 by Douglas Carswell MP

Hi Douglas!

Not sure what happened - I think it said it had sent, but who knows? I'd said:

The DIS hasn't been implemented, which is part of the problem.

Instead there's a sham of competition where one or two bidders slug it out for months or even years to jump through DE&S hoops before the whole process is tossed aside and something is bought off-the-shelf from someone else, then scrapped after 18 months because otherwise the Urgent Operational Requirement would have to come out of MoD funds rather than from the Treasury as it's deemed to have been part of the Equipment Plan.

Naturally, after being jerked around like that, industry (located anywhere) starts charging more for the hassle of dealing with the UK MoD.

The main benefit to industry from the DIS is not the protectionism, it's the long-term strategy - as with the French 'Loi de Programmation' for the DGA.

Long-term contracts mean that investment can be made, costs cut and risk premiums slashed, lowering the price to the customer, while still being profitable for industry.

It's either a virtuous or vicious circle, depending on how the hand is played, but the number of players is too small for it to be a free market.

Posted on 4 January 2010 21:47 by Russ Williams

Well, I tried again last night - about 21:50 - and definitely got the "your comment has been stored" message. Something to do with the length? Using an and-sign?

It's here: http://kingofwrong.blogspot.com/2010/01/defence-industrial-strategy.html

The short version is "DIS was about the only way of getting cheap kit anyone had ever come up with"

Posted on 5 January 2010 09:12 by Russ Williams

Hi Douglas

The idea of improving things with one swoosh of the pen and scrapping the DIS is simply fantasy, sorry, but it is that simple.

I am no defender of the MoD or industry but if you think any other major nation with a defence industry does not have the same problems is wrong.

The US does not always produce the best kit, often what they have is utter tosh.

The way forward is a careful scaling back of the ambitions of DIS and reducing the capability list for which it insists on sovereign capability.

Nuclear propulsion, crypto and a few others are absolutely non negotiable but others can be cut out. Perhaps we need to concentrate on design expertise rather than manufacturing and concentrate more efforts on exportability to drive down unit costs.

One of the major problems is that of spiraling costs causing reductions in numbers, a vicious circle. This is because we insist on the 99% of capability when 90% might do, achieve some export success and upgrade through the life of the kit.

Some of our greatest export successes like the Hawk trainer and 105mm Light Gun (just a couple of random examples) were produced well before the DIS and have both been continually upgraded.

There are dangers of buying off the shelf because the shelf is owned by someone else.

Complex issues cannot be solved with one line answers

Posted on 5 January 2010 20:06 by Think Defence

@ThinkDefence: I respect your view point, but disagree.

Other nations with protectionist defence industries do indeed tend to suffer from similar problems caused by protectionism - ie inflated costs and late delivery. But by suggesting that we buy more kit from other nations, I am not suggesting that we buy what they fail to produce effectively.

On the contrary, I am suggesting that we shop around a bit to buy what works.

Opponents of "off the shelf" often appear to imply that the alternative is to pay a bit more for our own kit.

The reality more often is that the alternative to not buying "off the shelf" is to not have the kit at all. Do you really think it preferable to not have the kit, rather than to purchase off a trusted ally?

You are right that defence procurement is a complex issue. That is precisely why it requires much clarity of thought.

Posted on 5 January 2010 20:20 by Douglas Carswell

@Think Defence: spot-on!

Gold-plating requirements is the main reason for Defence Inflation and slippages and, yes, "the shelf is owned by someone else" is an absolutely critical point. We have had spares for US kit diverted to the US customer, leaving us unable to maintain equipment. We have had the Belgians refuse access to NATO stockpiles because they didn't believe the Iraq invasion was legal.

If the UK has no control over its defence supply chains in a world this peaceful, what chance is there if things start getting nasty and trade barriers really go up? There are some things which the nation simply cannot survive without, and assuming that they will always be traded on the global markets leaves us vulnerable to the same sort of liquidity trap that led to the bank crisis.

@Douglas: Yes, we should buy more off-the-shelf, but not everything the forces need is available off-the-shelf. That's why MoD-industy partnerships are important to reduce the delay in getting novel kit to the front-lines.

Posted on 6 January 2010 10:51 by Russ Williams

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