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New U.K. Policy Focuses On Competition, Technology

Feb. 1, 2012 - 11:43AM   |  
By ANDREW CHUTER   |   Comments
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LONDON — Britain’s government finally took the wrappers off a new defense and security industrial policy Feb 1, laying out how it hopes to use open competition, technology and exportability to provide Europe’s biggest military spender and its industry with a viable future.

The timing of the white paper, which seeks to boost defense exports to help maintain industry competitiveness, was hardly auspicious, some might say cursed, coming just 24 hours after Britain was on the losing end of a decision by the Indian government to buy the Dassault Rafale fighter rather than the four-nation Eurofighter Typhoon, in which the U.K. is a major partner.

The document, formally known as the National Security Through Technology White Paper, provides key guidance on procurement and support policy as part of the Conservative-led coalition government’s wider defense transformation efforts in the face of continuing budget austerity.

It’s the first significant attempt to realign British defense industrial thinking since the then-Labour Procurement Minister Lord Drayson released a strategy document in 2005.

Industry executives here said the new white paper faces the same challenge as Drayson’s much-commended effort—– implementation by middle management in the MoD.

“Contrary to general opinion, the delay in the white paper’s release would appear to have been beneficial, resulting in deeper understanding of industry’s concerns within the government. The proof of the pudding is in the eating, and in the case of the white paper, this means its implementation,” said Rees Ward, chief executive at ADS, the defense and aerospace lobby group.

The white paper doesn’t stray far from the consultative document published by the government last year but does provide more detail on how the Ministry of Defence hopes to provide British forces with modern, affordable equipment while supporting domestic industry where appropriate.

The highlights of the document include:

• No further cut to the science and technology budget, maintaining it at least at the current level of 1.2 percent of the MoD budget, spending more than 400 million pounds ($629.9 million) a year.

• Where possible, buy weapons and services in open competition, much of it off the shelf.

• Have a get-out clause on open competition where Britain needs to maintain technology advantage.

• Creation of a cross-department ministerial group led by Cabinet Office Minister Oliver Letwin to consider the wider industrial , technology and support implications of weapon procurement.

• Increased government support for overseas sales, including appointment of a senior official in the MoD for export coordination with the department and new arrangements for training personnel from foreign customers.

• A range of cultural and process changes to make it easier for small and medium-sized companies to do business with the MoD.

• Support for industry on a sector-for-sector basis has largely been removed. Exceptions include nuclear, complex weapons, cyber and stealth.

In an interview with Defense News on Feb. 1, Peter Luff defense equipment and technology minister, said that although research spending is a priority there is no prospect for now to raise budgets.

“We understand the importance of technology; we have put a floor in the spend on science and technology and won’t go beyond that,” Luff said. “It was cut dramatically by the previous government; we will not let further cuts happen. At present, though, there is no prospect of an increase.

“What I don’t know is what the level should be, but clearly we are not spending enough. It’s been reduced to the absolute minimum. I would like to see it rise but in the current economic circumstance and the challenges facing defense, I can’t make that promise. It is a high priority though,” he said.

Luff said the MoD’s off-the-shelf procurement policy and open competition would likely be focused on mature technologies such as the C-17 and commodities rather than new technology.

“Yes, our default position is to buy off the shelf and to use open competition where we can. That’s qualified by the principle of what we call ‘technological advantage’. Where we need to maintain freedom of action or operational advantage, then we will take action to sustain that,” he said.

Derek Marshall, the policy director at ADS, said that in some respects not a lot had changed.

“Britain has operated with an open competition policy since the 1980s so that’s not an issue. With terms like operational sovereignty still on the map, the reality is the MoD has the freedom of action to do whatever it wants. It can justify buying from the U.K. if it wants, equally it can justify purchasing from the U.S. or elsewhere when it suits,” he said.

In effect, Luff acknowledged the ambiguity of the policy, saying, “Our default position is buy off the shelf and open competition, but we also understand what that means in practice for British industry. Look at the Sea Ceptor naval missile deal we announced with MBDA on [Jan. 30]. That’s a clear case of where we need to protect our operational advantage and freedom of operation. We do understand where we have to protect our advantage,” he said.

“We are not softening on this. The MoD has an absolute responsibility to secure the nation from threat and that means we have to buy stuff that’s in our best interests of that purpose. If something is available now at a good price and meets the needs of the armed forces, we will buy it, we won’t spend money developing an expensive alternative just for the sake of some industrial policy,” said Luff.

“On the other hand, in practice, what we mean is off the shelf and open competition is typically best for buying commodities and mature technology of which the C-17 is the best example of that. Things that can easily be bought off the shelf, no one has suggested we should put money into the U.K. aerospace sector to develop a C-17 rival, you wouldn’t do it. Commodities you obviously buy in the open market.” he said.

ADS boss Ward said industry is comfortable with the government’s open-competition policy but that there are issues about how it will work.

“The question is how it is implemented in practice. The need to develop capability in the U.K. remains, as the white paper recognizes in its section on technology. Industry believes that each procurement should be evaluated against criteria which ensure that our armed forces’ needs are met and the value-for-money test includes the benefits to the economy as a whole rather than any narrower measure,” said Ward.

One of the big complaints by industry here has been the fact that if locally developed weapons are not acquired by the British armed forces, the export effort would be stalled as nobody else would buy them either.

It’s a point, Luff conceded.

“There is some truth in that. It is important and we’ll look at that very carefully when we make our decisions. Nevertheless, I would like to see industry take more risk than they have. Previously, they have been too reliant on being spoon-fed [by the MoD],” he said.

Industrialist here say they are not adverse to private venture investment but it has to be based on clarity regarding the MoD’s likely equipment requirements over the next decade or so.

A long-promised commitment by the government to publish a costed 10-year equipment plan has yet to be fulfilled by the MoD.

Luff said the plan had been held up by the arrival of a new defense secretary last October and discussions over the 2012 planning round.

The white paper said only that the 10-year equipment plan would be published later this year.

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