6 CONCLUSION
104. The defence industry has already
created single national prime contractors in some sectors, and
further rationalisation seems likely. That presents a situation
where the MoD is likely to face difficult decisions in judging
whether the (possibly short-term) benefits of competition might
be outweighed by the need to preserve a competitive environment
in the longer term. An added complication is the continuing pressure
to strike the right balance between the wider value for money
and security of supply that comes from preserving UK industrial
capabilities, and the benefits for the limited defence budget
of being able to buy equipment from competitively attractive foreign
sources. These have always been difficult challenges, but will
be more so in future as the defence market becomes increasingly
global and inter-dependent.
105. Five years after Smart Procurement
was launched, its reforms have done much to contain project costs
and are beginning to bring programme timeliness under control.
However, with a changing security environment that makes long
term planning difficult, and technological change that continues
to accelerate, more still needs to be done to make defence procurement
more agile, so as to provide new capabilities for our Armed Forces
when they need it. Following the extended procurement timescales
of the Cold War is not an option. Taking advantage of new technologies
will enable more closely 'networked' capabilities and warfare
to be conducted ever more 'efficiently'. That is essential—if
we do not remain in the vanguard of new technologies, others may
use them to threaten our security.
106. Agility will only be achieved through
a willingness to put more resources into key areas to bring forward
essential new capabilities as soon as possible—and Watchkeeper
and FRES might be tests of such a new approach. But that must
not be at the expense of managing risk more effectively. That
will involve being prepared to introduce technologies in a way
that provides interim capabilities earlier, but building-in the
potential for enhancements as those technologies develop further.
Risk can be contained in that quicker fielding of capabilities,
however, only if it is tied to the maturing of the technologies
being developed. But managing risk also means providing the contractual
environment that incentivises industry while giving the MoD a
stake in projects' success, and visibility of their progress.
And finally, risk management also means building-in the flexibilities—political
and contractual—needed to adjust programmes as priorities
change.
107. The previous CDP, Sir Robert Walmsley,
played perhaps the central role in developing Smart Acquisition
and making it work in practice. The appointment of his successor
presents a valuable opportunity to reshape the initiative to meet
these further challenges, and in his early days Sir Peter Spencer
shows every sign of wanting to do so. If the route-map to the
sort of responsive procurement systems we need is yet to be drawn,
the publication of the Defence Industrial Policy does at least
point us in the right direction.
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