Select Committee on Defence Sixth Report

5 Conclusion

149. At a time when both our Armed Forces are over-stretched and the defence budget is under pressure, it is vital that defence equipment projects are delivered on time, and the costs of defence procurement are controlled. The aim of the Smart Acquisition initiative, launched as part of the Strategic Defence Review in 1998, was to procure equipment faster, cheaper, better, and there were some early indications that that this aim might be achieved. However, the scale of the time slippage and cost increases in 2002-03, suggest that the benefits expected from Smart Acquisition are still some way off. Most disappointing of all, it was the failure to implement the initiative, rather than initiative itself, which was at fault—only one of the seven principles of Smart Acquisition has been delivered in full, and some hardly implemented at all. A programme of measures to 're-invigorate' Smart Acquisition has been identified, but its success will again depend upon how fully it is implemented. Crucial to this is the need for senior management of MoD and the Defence Procurement Agency to drive the programme forward and review its effectiveness—something which has been lacking to date in relation to Smart Acquisition.

150. The Defence Industrial Policy by comparison was launched only 20 months ago. It is hardly surprising that it has yet to deliver many tangible benefits. As well as pressing ahead with implementing the Policy, a key priority for MoD must be to push forward its work on producing an Industrial Strategy to sit alongside the Industrial Policy. Industry needs to know what kinds of industrial capabilities and technologies are likely to be required in the future, to reduce uncertainty and help it decide where best to invest.

151. The Defence Industrial Policy and Smart Acquisition should be seen as two complementary approaches to the same problem. The Defence Industrial Policy should provide a context for Smart Acquisition by giving greater clarity to industry about MoD's priorities and a more consistent and coherent baseline from which MoD can develop its relationship with industry. Smart Acquisition should put flesh on the bones of that partnership by using protocols and procedures which are understood by both sides and which are therefore seen to be fair to both sides. Thus progress in one should reinforce progress in the other. But the reverse is equally possible. Failure to implement one could undermine the effectiveness of the other. Relations between MoD and industry would deteriorate as each believed the other had failed to live up to its undertakings. The annual cycle of cost overruns and time slippages in the procurement programme would be perpetuated.

152. It is therefore crucial that the Defence Industrial Policy does not experience similar implementation problems to those which have beset the Smart Acquisition initiative. We were concerned to hear that industry believed that little real progress had been made and that already they had doubts about the priority which MoD was giving to effective implementation of the policy. Although it will be some time before the impact of the Defence Industrial Policy can be fully assessed, we welcome the publication of an Annual Review of the implementation of the Policy. Neither the MoD nor the British defence industry can afford to risk the prospect that, in a few years time, a 'Stocktake of the Defence Industrial Policy' will find endemic problems of non-implementation on the scale that the Stocktake of Smart Acquisition has found this year.

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Prepared 28 July 2004