LONDON — Philip Dunne was reappointed as Britain's defense procurement minister in May when the Conservatives secured a majority to form the government for the next five years. It's a role that puts him at the heart of overseeing the MoD's defense procurement, support and technology effort. He has several other roles, notably  being responsible for defense exports, particularly in the Gulf and Asia.

Prior to the election Dunne  held  much the same role, having been appointed defense minister in September 2012 during a ministerial shake-up by the then-Conservative-led coalition government with the Liberal Democrats.

Tough equipment decisions likely still lay ahead, but July's unexpectedly favorable defense budget settlement for the next five years has left Dunne with an easier task ahead of publication at the end of the year of the strategic defense and security review.

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Q. The last government pushed through an extensive transformation program at MoD. Is there more to come?

A. The defense spending review baseline announced by the chancellor [in July] has agreed we can reinvest the proceeds of any efficiencies we can generate. That provides significant incentive on our budget holders to identify additional efficiencies because they will be able to reinvest in capabilities, be it manpower, equipment, exercises, whatever it is. That's where I think we will see much of the continuing transformation. It will be looking at the way we do business across the department and seeing if there are things we can do to drive further efficiencies. We have been quite successful in the past five years and we are on our way to £5 billion worth of annual efficiency saving. I'm not saying we will achieve that again in the next five years, but we are developing a track record of being able to do that. And unlike the last five years when the efficiencies were essentially banked by the Treasury, this time we will be able to utilize the resources.

Q. Do you have an efficiencies savings target in mind?

A. We don't know whether we can do £5 billion so I am not going to steer you towards a figure. We won't know until we have done the strategic defense and security review (SDSR), but I think we can say we will be looking for material efficiency sayings to reinvest.

Q. You recently referred to the defense industry as playing "an important role in the prosperity agenda of the nation." Does that signal a change in the industry's importance in government thinking, or just a change in language?

A. It reflects the determination of the new government to show that national security is interdependent with the prosperity of the nation. You can't generate the funds to protect the nation without having a nation that's succeeding economically, so it's important for us to demonstrate to the public if we are going to spend large amounts of money, some of that is contributing not just to the security of the nation but the prosperity as well. I think we have been reticent about highlighting the impact the spend we are making is having on the economy. That doesn't conflict with the priorities set out in the 2012 white paper for an open market approach, where we can, to procurement. We came under some pressure, and still do, to buy British first, which we can't do under EU procurement rules, although exceptions are allowed and about half of our procurement is contracted in that way.

Q. That sounds like there is no plan to revise the defense industrial strategy?

A. I expect there will be a strand in SDSR which talks about prosperity in its widest sense and how what we do contributes to the country's economic well-being. What we are absolutely not going to do is recreate an industrial strategy whereby we list the capabilities we need to maintain onshore. That's where you risk getting into peril across a number of fields, not least in protecting technologies which may become legacy technologies. You don't have the ability to innovate through such a policy in the way we think we need to in order to make sure we are at the cutting edge of technological advance. You can't keep everything in aspic.

Q. But you have to pick winners at some stage if only to direct your R&T spending.

A. That's best done through competition. We are using the Defence Growth Partnership (DGP) to help insure there is an identity of interest between industry and the department on looking for areas of innovation which will have wide application and benefit the MoD and other international allies and partners who might be interested in similar capabilities, and much of that is done though competition. We launched in the spring an innovation challenge which I am hoping to announce the outcome of at DSEi. It's only £10 million, but it's an indication of how we think the DGP can be a useful tool to align interest around innovative outcomes.

Q. Can you offer industry any hope of an increase in science and technology (S&T) spending?

A. The floor we have put in for the S&T budget is 1.2 percent of annual defense spending. As the defense budget grows it should also grow, although only at a small rate. What I can say is we are putting greater emphasis on developing disruptive technologies. Our research and development board has increased the allocation of disruptive technology spending in the S&T budget from 5 percent to 20 percent over the course of three years; that is a material shift. SDSR is to be published towards the back end of the year and that will set the direction for the remainder of the Parliament. We are looking at allocation of money so I can't tell you that number will change because it will come out in SDSR.

Q. What has come of the science partnership agreement signed with the US DoD in February 2014?

A. We are looking very closely at what the US third offset strategy is doing and looking to find complementary things to do together. Frank Kendall [the US undersecretary of defense for acquistion, technology and logistics] and I signed a science accord and we have over 100 projects running under that. We have invited Bob Work [the deputy US defense secretary] over this autumn, and one of the contributions the US will be making into our SDSR considerations is in this area of innovation, and where we each are best able to spend our research dollars to try to maximize applications that come out of it.

Q. What progress has been made toward the British Army's key require­ment for a utility vehicle fleet? Is there a funding line for it in the budget?

A. It's one of the Army's priorities for SDSR. The Army has been assessing a number of vehicles and there is a funding line within the Army element of the equipment plan (EP) for this, but some of it is currently in the uncommitted funding line for the Army. It is uncommitted until they have chosen a vehicle and committed to a contract. It is not committed but it's in there.

Q. But there will be a competition for the requirement?

A. It's likely. It's an Army decision rather than an MoD decision. If they conclude from assessing the vehicles there is really only one that meets the specification, there wouldn't be a competition. They are defining their requirement, and once they have buttoned it down, then they will decide whether it's appropriate to run a competition or not. SDSR will dictate the timescale and what's in the program.

Q. The chancellor suggested the new national shipbuilding strategy should consider ordering just one complex warship every two years, whereas BAE Systems and the Royal Navy have been working to a 12-month drumbeat for the new Type 26 frigates. When can we expect to see the strategy unveiled?

A. The strategy is likely to be unveiled, to the extent it will be unveiled, around the time of SDSR. Much of the work has been done. We have been looking at what the level of demand for warships is going to be over the next few decades and how we avoid the peaks and troughs with the impact that has on workforce skills. What we are trying to do is ensure we have a reasonably steady drumbeat of orders fulfilled over a period of time without massive gyrations.

Q. What sort of progress are you making on an order for the first three Type 26 frigates?

A. We announced in March an £859 million deal to allow BAE to purchase the first components for three warships and some on-shore test facilities for the whole class. We are in negotiation to make sure the contract structure is optimal from the customer point of view and allows the contractors to manufacture to the schedule we are looking for. Those conversations are going reasonably well and we are on track to exchange contracts next year. The intent is to replace the Type 23 frigates as they come out of service.

Q. Prime Minister David Cameron and others have flagged that intelligence, surveillance, target acquisition and reconnaissance (ISTAR) will play an important part in the SDSR. Will investments in space surveillance be a part of that upgrade?

A. ISTAR in general is a high priority for SDSR. If you look at the RAF's fleet of ISTAR assets, it's the one area of capabilities that have not had much investment apart from the Airseeker signals intelligence aircraft, the second of which has just arrived. That aside, most of the platforms are either tired or in need of life extension or replacement, so that is a pretty high priority. As you go closer to space, there are innova­tive opportunities being considered as part of SDSR, ranging from things not yet in production to things that are. An important element of our cooperation with the US and an important element in our innovation strand is in space. And as the cost of satellites and launches come down and as the UK industry becomes more successful, it's quite likely we will see more investment in space over the next five years and beyond, including the SkyNet 6 communications satellite.

Email: achuter@defensenews.com

Andrew Chuter is the United Kingdom correspondent for Defense News.

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