The British government plans to unveil a new defense and security industrial and technology policy this year that will spell out the national industrial capabilities deemed essential to meetnational security needs, even in an age of austerity.
If the discussion in 2010 in U.K. defense circles was all about the Strategic Defense and Security Review (SDSR) that saw a range of high-profile defense programs cut—from the Nimrod MRA4 maritime patrol aircraft to the early retirement of the Harrier GR.9 fleet—then 2011 is shaping up to be the year in which the government aims to tackle long-standing policy and defense management issues that have similarly profound implications for the country’s defense industrial base.
A central element is the three-month comment period kicking off Jan. 5 (to be concluded by April 1) that is part of a green paper released on Dec. 20 entitled: “Equipment, Support, and Technology for U.K. Defense and Security: A Consultation Paper.” It is the building block on which a policy white paper will be based.
Last month, the government also named Bernard Gray as the procurement czar for the Defense Ministry. Gray was the author of a hard-hitting critique of the U.K. military procurement process highlighting many of the shortcomings in the system that led to overruns. Starting on Jan. 4, Gray now has a four-year mandate as chief of defense materiel to fix many of the problems he lamented.
In making the appointment, Defense Secretary Liam Fox says that “unlike many others who talk about the problems facing defense procurement, he talks about solutions. He will provide clear direction and leadership to [the Defense Equipment and Support organization] during the very challenging time ahead and will be a huge asset to the Defense Board and the civilian leadership team in defense.”
In July, a defense reform panel is due to make its recommendation on changes for the Defense Ministry, including in the realm of acquisition.
The planned acquisition reform efforts and defense industrial and technology policy review will be closely watched by industry. Several senior industry officials have indicated they are concerned the Conservative-Liberal Democrat coalition government that took power in May has been more indifferent to industry’s concerns than the previous Labour government. While there was a recognition that during the conduct of the SDSR such distance was required, recent months have seen growing concern the government is not as willing to listen to the views voiced by the aerospace and defense sector.
In reaction to the formal launch of the green paper on Dec. 20, Ian Godden, president of the Aerospace, Defense and Security lobbying group says that “this will help industry—from large multinationals to small and medium-sized businesses—engage fully with the [Defense Ministry], the Home Office and government more widely in order to identify what the government requires of industry to support our armed forces and as a major contributor to wealth creation in this country.”
One area some industry officials have expressed concern over is support for exports, which the government vowed to strengthen. The green paper reiterates the government’s commitment to across-ministerial support for such sales.
Another area to be addressed in the pending policy is how the government plans to deal with equipment competitions or strategic purchasing to sustain national capabilities. In its green paper, the government echos the tenets of the previous Defense Industrial Strategy. The DIS, spelled out in December 2005, aimed to balance the need for maintaining key skills with buying off-the-shelf, and created several funding initiatives, such as Team Complex Weapons, to preserve capacities deemed essential.
The green paper states that “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 defense and security capabilities. We will take action to protect our operational advantages and freedom of action, but only where essential for national security.” The policy is designed to inform spending decisions for the next few years, at least until the next SDSR which is planned for 2015.
“A key priority, therefore, is identifying the handful of critical areas where the U.K. has or needs an operational advantage and freedom of action for a particular capability, where we may have to take action to sustain the underpinning technologies and skills in order to protect our national security. To achieve this, especially at a time of financial challenge, may involve encouraging innovative approaches to and opening up wider markets for important capabilities.”
The effort to devise a new industrial strategy is more complex this time around than five years ago, not just because of greater fiscal austerity, but also because the U.K. already has committed to increasing cooperation with French defense industry on a range of projects, some of which remain to be defined. That is already reflected in the green paper, which states that “acceptance of greater mutual dependence on some of our key allies” may be required.
The green paper, for the first time, combines defense and security in its review, and also addresses cybersecurity, which the government has singled out in the SDSR as a major area of focus and one of the few spending areas projected to see growth. The government has yet to spell out how it will spend the additional £650 million ($1 billion) earmarked for cybersecurity in the next few years. It is also a domain in which government plans to work particularly closely with the private sector, with details due to emerge this year when the “Cyber Security Strategy” is unveiled.
The green paper provides little guidance on what defense industrial skills the government plans to protect, although it notes that defensive measures against chemical and biological weapons are one area in which the country wants to have independence.
In addition, the green paper highlights several science and technology areas in which it believes a more effective, cross-government strategy is required, including activities in the realms of space, autonomous systems, nanotechnology, neuroscience, sensor systems, cyberspace and energy.
One segment of industry that will be monitoring the outcome of the industrial policy review particularly closely is small and medium-sized enterprises. While Britain’s top-tier aerospace and defense companies have long become less dependent on their small domestic market—BAE Systems derives the bulk of its revenue from the U.S.—for lower-tier companies the revenue picture is often different.
The government signals it is eager to sustain a healthy cadre of subcontractors and is eying policies aimed at sustaining smaller firms. “We will consider whether [Defense Ministry] guidance should encourage procurement teams in certain cases specifically to welcome bids from consortia [of SMEs],” the green paper states. The government may also make the use of British SMEs a requirement when awarding sole-source contracts and, when programs are competed, bidding prime contractors may be required to furnish lists of likely subcontractors, including small businesses.
Another area to be scrutinized is support services. The U.K. has been increasingly looking to contractor logistics support in key areas. The green paper notes that the government is “currently looking into ways of developing our support activities with industry. This could include new employment models, looking at regular military, reserves, civil servants and contractors working alongside each other to deliver seamless assured support to our military commanders. We would need to be aligned in processes, procedures and information flows so that we can reduce costs, risks and administrative friction.”
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