| Six years ago the Ministry of Defence (MoD) introduced Smart Acquisition. Its objectives were to procure equipment faster, cheaper, better. On almost all counts, it has failed to deliver. In 2002-03 the top 20 defence equipment projects experienced in-year cost increases totalling £3.1 billion. They also suffered further time slippage—on average, they will be delivered a year and a half late. More cost increases and time slippages can be expected when the 2003-04 figures are published. This means that our Armed Forces are still not getting the equipment they need when they need it. Cost increases of this magnitude not only mean cancellations or further delays in the equipment programme, but can also lead to cuts elsewhere in defence.
The Chief of Defence Procurement—head of the Defence Procurement Agency—has found that only one of the seven principles underlying Smart Acquisition has been implemented in full. He has instituted a fundamental overhaul of the initiative. We will be looking for regular reports on its progress.
On specific projects:
- The 'alliance' arrangements for the Future Carrier programme are expected to work well. Further work is continuing to de-risk this project before going to the main investment approval point.
- The Joint Strike Fighter will operate from the Future Carriers, but issues relating to the weight of the aircraft need to be resolved and could impact on the expected in-service date and possibly on the overall programme.
- The in-service date for Eurofighter/Typhoon was finally achieved in 2003—54 months late. MoD wants the second tranche of aircraft, which have yet to be ordered, to be adapted to multi-role rather than the air-defence role. Officials' belief that the required enhancements will have little impact on the total cost of the programme appears optimistic, unless there are plans to reduce the size of the third tranche.
- An assessment phase contract for the Future Rapid Effect System (FRES) is to be placed at the end of the year. Concern remains that the in-service date of 2009 is unrealistic.
- The main investment decision for the Watchkeeper Unmanned Air Vehicle is expected at the end of the year, but some slippage has already been experienced in the planned date for its initial operating capability.
The Defence Industrial Policy was launched in October 2002. Although it has led to an improved dialogue between industry and Government, practical implementation of its core principles remains patchy. The decision by the Secretary of State to purchase the Hawk trainer aircraft resulted in substantial exports for the UK, and has been cited by MoD as a good example of the Defence Industrial Policy working. But in taking that decision the Secretary of State had to override a formal recommendation from officials which does not appear to have included consideration of the wider factors set out in the Defence Industrial Policy, such as export potential or the likely effects on British industry. These wider factors should be taken into account from an early stage in the procurement process, not left to the end as they seem to have been in this case.
Consolidation in the UK defence industry has continued. While ownership of UK defence companies by overseas companies can bring potential advantages, it also leads to longer term risks, in terms of security and the impact on competition, which should be fully considered. MoD must clarify what industrial capabilities and kinds of technologies it believes the UK's defence industry must be capable of providing in the future
Unfortunately, the expected waiver for the UK from the US International Traffic in Arms Regulations (ITAR) has yet to be secured, and protectionist measures in the US have re-emerged. These issues are potentially damaging to the UK and US defence industries and to the relationship between the two countries. The continuing failure to resolve them is unacceptable and must be addressed at the highest level.
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