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 faultonly 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 effectivenesssomething 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