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Procurement

In the Spotlight: Britain’s Impending Defence Procurement Review

Dominic Cummings, the Prime Minister’s Chief Special Adviser, is planning a full review of defence procurement. This is welcome if, unlike recent reviews, it is thorough and does not shirk politically embarrassing issues. Over 90 percent of defence programmes are brought in on time and budget, and many by excellent agile small and medium-sized enterprises, so Cummings – or more appropriately those who will execute the review – will need to focus on large, high-risk programmes.

Almost all major public sector procurement is bedevilled by cost escalation. Just look at the Hinkley Point nuclear reactor programme (up from an estimate of £16 to over £20 billion), Crossrail (up 1½ times to £18 billion) or the HS2 high speed railway project, which was initially estimated to cost £34 billion, but may yet end up costing £88 billion). Cost overruns, serious delay, poor delivery and lack of political consistency are not problems confined to the Ministry of Defence. So a thorough review could yield benefits right across government.

The principal procurement failings include over-specification, over-optimistic initial cost forecasting (which our bidding process encourages), poor contracting, political and ideological interference, inappropriate use of public–private partnerships, delay and change in specification, inadequate examination of through-life costs, lack of adequate programme control, and political reprogramming caused by budget cuts. All these lead to avoidable cost increases.  

In a recent letter to the Times, David Gould, a much respected senior civil servant, contrasted his experience in defence procurement in UK with his new employer in Australia: ‘Striving to execute UK strategic programmes without knowing how much money would be available in any year (sometimes monthly) [compared] with Australia where I was given clear and simple objectives by a Government willing consistently to fund them’.

The starting point for defence acquisition must be a clear view of national strategy – what the government wishes to be able to do, at what scale and against what kind of threat. This determines force structure and equipment to be purchased. A successful acquisition review is inextricably tied to a comprehensive review of Strategic Defence and Security (SDSR).

Defence acquisition has some particular features.  Potential enemies may introduce new technology and capabilities. Friendly or hostile policy may change, and this can render existing or planned procurement irrelevant. Equipment which cannot survive unexpected attack, or inflict serious harm on an enemy, may be of no value at all. Capability reductions – financially driven – often possible in civil programmes, can bring unacceptable operational risk. And in today’s cyber jungle, procuring adaptability is a must.  

Moreover, trained personnel, sufficient support and adequate stocks are required which take into account rapid expenditure or loss in action. Failure to invest properly can render procurement a token rather than an effective effort. And, typically, a sophisticated platform costs three to four times its initial acquisition cost across its service life, so calculating overall financial liabilities is always tricky.

In general, fast procurement is cheapest and most efficient. Ordering the full run at start of a programme provides the lowest unit cost; stop/start behaviour bedevils efficient roll out, and ‘reprofiling’ or reducing planned numbers in response to short-term budget crises inevitably leads to increased cost and creates expensive contract issues. Defence sector companies are far more commercially savvy and fleet of foot than government.

Cummings must also consider our native defence industrial capacity. It is one thing to buy cheaper abroad, but reliable supply in war or crisis, loss of intellectual property and retention of a skilled labour force are also vital longer-term factors. The recent takeover of UK companies has raised important issues which a clear defence industrial strategy might solve.

Nevertheless, there remains plenty of room for improvement. Despite earnest studies by eminent figures the problems remain unsolved. Cummings rightly stresses accountability, and logic suggests that every significant programme should have a minister’s and an official’s name on it; the practice of government seeking scapegoats outside government for government errors must cease.

But underpinning all this is the Gould doctrine, the ‘giving of clear and simple objectives by a Government willing consistently to fund them’. The SDSR and procurement reviews must be joined at the hip. Then, a real benchmark for future policy will have been established.  

Air Chief Marshal Sir Michael Graydon, former Chief of the Air Staff.

Vice Admiral Sir Jeremy Blackham, lately Deputy Chief of Defence Staff and former RUSI Vice-President.

Major General Jonathan Shaw, previously Director Special Forces and, subsequently, Assistant Chief of Defence Staff.

BANNER IMAGE: Courtesy of IRStone/Adobe Stock.

The views expressed in this Commentary are the authors’, and do not represent those of RUSI or any other institution.

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