Memorandum by Intellect
DEFENCE PROCUREMENT
INTRODUCTION
Intellect represents the interests of the IT,
telecommunications and electronics industries in the UK conducting
business at all levels of the supply chain. Intellect represents
more than 1,000 organisations spanning blue-chip multinationals
to early stage technology companies. Intellect members contribute
in excess of 10% of UK GDP.
Further information can be found at www.intellectuk
org
Intellect is one of four trade associations
that support the Defence Industries Council (DIC), which acts
as a focus for interaction with the Government on defence industrial
matters. In this paper Intellect aims to differentiate and present
the views of its members and welcomes this opportunity to address
those issues to the House of Commons Defence Committee in preparation
for their Procurement Inquiry.
Intellect pursues a broad programme of research
and analysis, market awareness and influence in information superiority,
information operations and associated operational concepts that
enable leverage of shared awareness to improve the efficiency
of our industry sector.
Information Age Transformation—Defence for
the C21
This response concentrates on the third aspect
of the Committee's terms of reference for this inquiry and specifically
addresses the Network Enabled Capability (NEC) aspects of MoD's
equipment procurement programme. On Defence Industrial Policy
(DIP) and Smart Acquisition more generally Intellect endorses
the work currently underway within the Industry/MoD joint structure
particularly the Equipment Capability Group and the Commercial
Policy Group.
The 1998 Strategic Defence Review (SDR) provided
a radical analysis of the UK's security priorities, missions and
tasks. As part of this forward-looking strategy the White Paper
allocated a high priority to information technology (IT) and its
application in Defence. The SDR envisaged a "single battlespace
in which maritime, land and air forces will be directed, targeted
and supplemented by a new generation of intelligence, surveillance,
information and communication systems".
The main themes of Intellect's response are
as follows:
1. UK DEFENCE
ENVIRONMENT
Intellect is conscious of the demands for improved
efficiency, effectiveness and communications across the defence
business and battlespace. Enhanced operational effectiveness—better
IT and communication systems will enable greater strategic and
operational agility during times of crisis and greater economy
of effort. The SDR put joint operations firmly at the heart of
defence planning in order to deal with increasing complexity and
unexpected situations. With the increasing demands of modern joint
operations the single service commands need improved information
sharing capability during the preparations for, as well as in,
action or peacekeeping.
HMG needs to be more joined up electronically
to enhance decision making; post SDR UK needs to be more joined
up in its military operations and, to underpin the Defence Information
Strategy that flows from the SDR; preparation for and direction
of the battlespace starts in the fixed office space and in modernising
the MoD. Information management is central to many of the Defence
Change Programmes hence the need for an information infrastructure.
This represents a significant change initiative
within the UK Defence Change Programme. In comparison to the technical
delivery it is the management change, business and military process
impact and people issues that present the greatest challenge.
Changes to the world order and the UK's defence
posture—post September 2001, the War on Terror and Defence
White Paper 2003—have necessitated changes in the MoD's
relationship with industry. Notably Defence Industrial Policy,
the evolution of Smart Acquisition, the restructuring of the MoD
Science and Technology (S&T) portfolio to include outputs
relating to technology in the supplier base and DTI's Innovation
initiative.
The information age represents a period of rapid
change for the UK as a whole, so it follows that Defence will
need to adapt to these external changes as well as make its own
changes in order to deliver better use of information. As an integral
part of these changes Intellect aims to work at establishing a
culture that encourages innovative thinking, information and knowledge
sharing, collaborative and flexible working arrangements and that,
as a consequence, support the development of new ways of working
and doing business.
It is essential that we create a UK Defence
environment that encourages innovation from the electronics industry.
Successful implementation of NEC is dependent on achieving this.
NEC must be seen "out of platform" and into embedded
systems. This is key to delivery of advanced Information Age capability
and underpins NEC and information exploitation in the battlespace.
Intellect notes that following the DPA's "Stocktake"
and the emergence of the Information Superiority (IS) cluster
both it and the DCSA (as a significant provider of services) are
reliant on the capability of this industry sector.
We are concerned that MoD's understanding of
how industry works may be being eroded. Industry can help to address
MoD's difficulties in engagement with Commercial-off-the-Shelf
(COTS) capabilities including those special requirements, such
as mission and safety critical aspects. Integration is key and
whilst MoD's engagement is good at the Dstl/QinetiQ level it is
less so with broader industry.
2. NEED MORE
IG INVESTMENT
The current process highlights concern about
MoD's approach to Whole Life Cost (WLC) and Sustainability:
Initial cost dominates competitions, not value
for money (VFM).
No incentive to innovate or reduce WLC.
Inability to spend to save.
MoD's procurement aspirations are, at times,
unrealistic and there is lack of coherency across MoD—ECC/DPA/DLO
and a lack of pull through from the research programmes. Consequently
Industry's technology strategy is driven by MoD's equipment procurement
strategy, which generates concern about Industry's capability
sustainment. With long life cycle times the need for demonstrators
is crucial. True capability procurement implies closer and sooner
involvement with industry.
We recognise that Industry also needs to learn
that earlier engagement is crucial and that with incremental contracting
that not all can be defined up front. Intellect members and individuals
from committed defence contractors are currently working with
DPA/MoD in think tanks, Councils and working groups addressing
these very issues. We consider that this activity is generating
significant benefits and seek to encourage such joint work.
3. INCREASE TECHNOLOGY
FUNDING
The COTS technology (on which much of this capability
is founded) moves at a rapid pace and in so doing opens up significant
opportunities. The demands of joint operations, whether delivering
munitions or medicine, stores or support, requires a more corporate
approach to information infrastructure needs. In achieving improvements
in information management for the C21 MoD must change its perception
from a technology focus, to information infrastructure as a key
capability asset and thence an enabler of defence outputs.
There is a mismatch between the timescales of
traditional defence equipments, measured in years for development
and service life, and those of components and information technology,
in the broadest sense, which are driven by the civil market and
are measured in months. This implies a significant challenge of
managing technology obsolescence in much defence equipment. It
also has significant implications for the acquisition of defence
IT systems and for the integration of traditional military systems
into an NEC environment.
There is also concern that the adoption of different
standards by MoD from those used by the civil sector and overseas
customers for defence equipment, particularly the USA, drives
up cost, impedes competitiveness and inhibits the use of COTS.
Technology is the enabler not the rationale.
Capability is delivered by the combination of people, processes
and equipment. So the delivery of a single technology solution
will not result in the MoD becoming knowledge experts. It will
be by intercepting the current processes and ensuring staffs are
trained to use the new systems that the benefits of this corporate
endeavour will be realised. Many systems are now due for update
and so there is an investment opportunity to adopt a more corporate
approach to information.
Intellect recognise the 10:1 (or worse) funding
disparity in research spending between the USA and the UK, we
believe that this is likely to become most apparent in the area
of NEC. For electronic materials and devices the increasing R&D
expenditure in the USA through the DoD is leading to the development
of state-of-the-art technologies that are not available to European
industry at the component level. Examples include the present
availability of high power GaAs microwave devices, and much wideband
gap device technology.
4. MECHANISMS
TO ACHIEVE
CAPABILITY INSERTION
AND PULL-THROUGH
Is the current MoD Enterprise:—its processes
and its organisational structure adequate to deliver the integrated
"systems of systems" approach essential for NEC?
The need for a collaborative approach between
Military and Industry has never been greater. However there appears
to be no overall vision, architecture or plan. NEC must be treated
as an overall System of Systems that sits hierarchically above
all other systems.
We believe that there is a need to manage contracts
in a more coherent way. This means contracting with new commercial
arrangements. Another facet of change is the shifting balance
of risk that obtains through increased reliance on ever more sophisticated
information capabilities to support our operational and business
processes. Striking an informed balance between process improvement
and the potential vulnerabilities created will be a key task for
Industry and MoD to achieve.
As Industry is to be required to bring innovation
(including that sourced from SMEs) what can MoD best contribute?
Intellect contends that this should be programme innovation. A
15% "innovation fund" subject to a degree of accountability.
Such contracts should be let in two elements; first delivery of
a capability and then a more flexible element say 15% contract
value to identify innovation. Perhaps there should be a mandatory
percentage of contract value allocated to innovative companies?
In any event both core manufacturers and SMEs should be engaged
in the search for novel ideas. The measure of effectiveness to
be speed of delivery to the end customer.
MoD's discomfort about managing risk is being
addressed as it endeavours to become a much more intelligent customer.
We assess that Industry is better equipped to make a description
of the risk—an LSI being required to show innovation management
capability. If MoD is to act as a Prime does it make for low risk?
The Defence Science & Technology Laboratories (Dstl) acting
as innovation manager for Integrated Project Teams (IPTs). Not
all requirement creep is bad but there is clearly a need to manage
this. Until these behavioural and cultural changes are apparent
things will not change fast enough. Much of the management of
ongoing change/requirement creep is vested in commercial/business
management and requires staff with appropriate skills to do this.
This applies to both MoD and Industry, but Industry seems to be
able to achieve these changes much faster, MoD must be able to
learn equally as quickly.
How can Industry and MoD jointly learn? Firstly
that during contract negotiation whilst industry can be innovative
it cannot take all the risk. Further education is necessary. Within
the software element of NEC changed working practices are inevitable
(ongoing education) and how to capture this experience when staff
move on or the going gets tough (eg on the first EP round) needs
to be thought through. How is staff expertise to be measured?
The current metrics are not aligned with the demands of Incremental
Acquisition.
5. BENEFITS:
RESPONSIVE SUPPLY
CHAIN—ECONOMIC
BENEFIT—NEC REALISATION
Intellect contends that the question "What
is the cost of integration for realisation of NEC?" is indicative
of the wrong approach. UK needs networks that deliver and software
to move information. Intellect's Industry sector can inject a
different commercial approach to NEC realisation embracing hardware-information
and do it at a different rate. Some aspects need to be worked
through. First are the benefits—speed of response and innovation.
Second some work in progress—why industry has difficulties
with MoD and capabilities not specifically defined for the UK
MoD market.
The "stoppers" include integration
of the management of innovation and policing which imposes obstacles
(accreditation/security controls et al).
The need for military tailoring is obvious;
the military has different uses for equipment and special requirements
will be inevitable albeit they may pose difficulties for COTS.
The way to address this is to bring these aspects to the fore
earlier and decide—with Customer 2—what risk associated
with new ideas is taken into the core programme.
In terms of output the benefits are: sustainment
of UK industrial capability and capacity, acquisition agility
and responsiveness and more effective use of technology.
Intellect seeks a properly managed transformation
process applied across industry to make sure it happens. This
will demand excellent governance to ensure it all happens fairly,
with integrity and harmoniously and as UK Plc.
6. KEY RECOMMENDATIONS
— Establish a culture that encourages
innovative thinking, information and knowledge sharing, collaborative
and flexible working arrangements and that, as a consequence,
support the development of new ways of working and doing business.
This will aid development of a UK Defence environment that encourages
innovation from the electronics industry.
— A 15% "innovation fund"
subject to a degree of accountability. Such contracts should be
let in two elements; first delivery of a capability and then a
more flexible element say 15% contract value to identify innovation.
— Rapid recognition that the IS areas
within MoD (DECs, DPA, DCSA etc) are fundamentally different to
the platform areas, and that this is the area that can deliver
against the NEC requirement.
— This recognition then needs to activate
enthusiastically continued partnering cultures, open behaviour
patterns and much closer working with this industry sector. Intellect
might play a role in filling the gap created by competition within
industry, and providing a means for MoD and Industry to come together
in a manner beneficial for all. Individual contractors will already
be attempting this, for obvious reasons. We believe that the nontraditional
defence companies and SMEs need to be included in these initiatives.
— Recognition that personnel within
this area require to be at the forefront of this "new"
way of working. Education, skills updates etc need to be given
priority.
April 2004
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