Examination of Witnesses (Questions 280-299)
LORD DRAYSON,
MR DAVID
GOULD CB AND
MR MARK
GIBSON CB
28 FEBRUARY 2006
Q280 Mr Havard: You have said that you
are "assessing" companies in terms of how they actually
manage this process themselves, the larger companies, the primes,
and so on. As I understand it, you have made statements about
the joint management of SMEs by the MoD and the primes. I am not
quite sure what that means. All of that is all very well, but
the MoD presumably, which you have responsibility for, is changing
its practices and taking a particular view. How is that being
done in concert with the Department of Trade and Industry?
Lord Drayson: It is very important
that this is joined up government, and the DIS sets a good basis
for this. This was a joined up process, and we have taken on board
a lot of the input which we have had from the DTI on the way in
which this is done. It is important for me to stress that it is
not about managing companies. It is not our job to manage companies,
but it is our job to make sure that we properly understand and
manage the complexity of the supply chains. The challenge within
defence is many of these systems which deliver the military capability
are very complex and involve many different companies coming together
effectively. The way in which we do that jointly with the large
companies is both the MoD and the larger primes having clarity
on, for example, the technology tree. If you take a particular
capability and you look at what is the tree of support for that
technology going right down into the research, sometimes into
the universities themselves, you have clarity over that and the
way in which we judge a large company is on how well does that
company really understand this and does it actively manage it.
If not, this is where we need to work together to encourage that
to be done better.
Mr Gibson: To add to that from
a DTI perspective, we have a small aerospace marine defence team
of about 25 people, with about five people working on defence,
but we do have a formal relationship management with the 15 largest
aerospace and defence companies. We have quarterly meetings with
them and we have reinforced the messages in agreed Government
documents like the Defence Industrial Strategy. We also
work pretty closely with the regional development agencies, who
have clear sector leads now to the south-west RDA, and we expect
them to have a good relationship with the supply chain and to
work with them to try and improve productivity, and there are
regular meetings between the DTI's aerospace and defence team
and the RDA contacts who lead in this sector. We are trying to
reinforce the messages all the time, both in the primes and through
the RDAs, with the supply chain.
Chairman: So the sector lead for defence
is in the south-west.
Q281 Mr Havard: For England.
Mr Gibson: For England.
Q282 Chairman: BAE Systems is based all
round the country but its centre seems to be in Warton, which
is not in the south-west. How does that work?
Mr Gibson: The north-west RDA
does take a really close interest in the aerospace industry. The
Chairman of the north-west RDA is Bryan Gray, who is on the Aerospace
Leadership Council. He has been involved in the whole aerospace
strategy for the last three or four years and he takes a particular
interest in aerospace issues; so he is closely involved and talks
to BAE regularly in the north-west.
Q283 Mr Crausby: The Defence Industrial
Strategy states that industry will need to reshape itself,
and you, quite rightly, are demanding a substantial change in
a number of sectors. Is industry willing to reshape itself into
the shape that you require, how painful will this be in terms
of jobs and over what timescale do you envisage that reshape?
Lord Drayson: This is a ten-year
process. The point of the Defence Industrial Strategy is
to set out clarity to industry about those areas in which we expect
to have an increasing requirement, those where we expect a decreasing
requirement to take place and to give industry that clarity to
enable them to plan ahead. This is not about changes happening
tomorrow, next month, this year. It is about changes which need
to take place over a period of time to get alignment between
the defence industry's capabilities and our capabilities in terms
of our security and defence priorities. The pain comes from that
change, but change is always painful. One of the big changes which
we are asking in some sectors is for industry to put less of a
focus on the design and development of new platforms and more
of a focus on the insertion of upgrades and new capabilities and
through-life maintenance of existing platforms. That is, for some
companies, a change of culture in terms of their type of business
and that is difficult for them to do. It is for industry, though,
to step up and do it. It is not, we believe, the role of government
to manage this process. The role of government is to set out,
as we had in the DIS, what it is we need, what our priorities
are, where we regard it as essential to our defence interest to
have a capability in the United Kingdom and then to expect industry
to respond to that. The pressure on industry to do so, I think,
will come both from the fact that this clearly sets out where
the key growing markets are, and you would expect management to
therefore reflect that. We need to work with industry to facilitate
this process and to manage it as well as possible, and I am saying
to industry, pretty bluntly, this needs to start now. The evidence
that industry is responding to it, I think, is beginning to be
there. I have been encouraged by what I am seeing just in the
first few months after the publication of the Defence Industrial
Strategy. In some sectors we are asking for companies to come
together into structures to address inefficiency. It is patchy,
as you would expect. There are some companies who are looking
to see whether or not this is really going to happen and then
really getting involved in it. There are some companies who seem
to really get it and are getting on with it now. Our job within
the Ministry of Defence, and my job in particular, is to encourage
them that the Defence Industrial Strategy is a plan for
action, it is not just a policy document and that we do expect
industry to respond and get on with it in 2006.
Q284 Mr Crausby: Is there a danger that
some companies will focus on a non-defence future, the companies
that want to do that, and that the reshape will become a different
shape to the one that you really want? How do we protect ourselves
against that risk?
Lord Drayson: We have set it out
very clearly. We have said that the number one priority, as set
out in the Defence Industrial Strategy, is putting the
defence needs first. That is something which has been a real achievement
of the DIS, giving industry the clarity of how our defence capabilities
are going to be linked to the defence needs going forward, and
we have said very clearly that we have come to the conclusion
that having a healthy defence industry in this country is strategically
important to our defence interest. Therefore what we are indicating
is not a decline in the demand for defence products, we are indicating
where the shifting priorities are as the world is changing. That
gives great opportunity to industry. In fact, the way I would
put it to industry is that, given the nature of the clarity which
the UK has now given, given the nature of the tempo of operations
which our Armed Forces undertake, if industry responds to the
DIS, it is going to lead to it producing products and services
for which there will be a clear world market. Some of the responses
we have had from some of the international pilots which we have
to the clarity of the DIS back that up. I do not think we need
to be worried about companies exiting the defence market and looking
towards the civilian market, and I think the way in which we have
seen commentary about the DIS in the press and analysis suggests
that that is correct.
Q285 Mr Hancock: Could I take you a little
further down that road. You said in an article fairly recently
that there will be job increases in some sectors but inevitably
there will be job reductions, but you were not specific about
which sectors you were talking about. In an area like mine—I
represent Portsmouth which is heavily dependent on defence industries—that
would send nervous shivers down people's spines. Would you care
to clarify that a bit more today?
Lord Drayson: Yes, I will give
you two examples, one of each. In terms of where we think that
there are going to be job decreases, it is going to be in areas
such as the complex weapons area whereby we can see the decreasing
need for a certain type of weapon, and so we are working with
that industrial sector, who have very important skills, which
are not just relevant to complex weapons, and looking to encourage
them to be using those skills in areas where we have a growing
demand. I must say, from the maturity in the response in that
particular sector, that is a sector where we have seen industry
responding very well and I am optimistic that it is going to be
possible for us to manage that process effectively. Nonetheless,
we are going to see a decrease in requirement in that sector.
To give you an example, a sector where we see an increase is in
shipbuilding, the maritime sector. There the challenge is that
we need to ensure that the way we manage the increase which is
built upon the very strong shipbuilding warship orders which we
have over the coming years does not create an unsustainable level
of employment which is then going to go into a bust situation
after boom. We have got many years to plan this well. Therefore,
when you are in a situation like this where we can see increasing
orders, increasing demand, we need to be intelligent about using
that period to make sure that we are getting real efficiency into
the industry and that we do not create an unsustainable level.
Do you want to add anything to that?
Mr Gould: One point I want to
add is that the nature of the defence industry is changing over
time quite dramatically. There is a bit in the DIS that talks
about the amount of defence activity that is open to the private
sector. If you go back 30 years, it is really just the manufacture
of defence goods, then you get into the services and now increasingly
you find the private sector involved. For example, in military
communications right from here in the UK up to day-to-day operations
in Iraq the private sector is involved; so there is an expanding
scope of work available to the private sector in defence which
will enable us to build up. A lot of the companies involved in
that, of course, will be involved both in defence and in civil
because the technologies in communications and elsewhere are very
similar and feeding off each other.
Q286 Mr Hancock: Can I ask Mr Gibson
the role of the DTI in managing the change in those various sectors
and where you fit into the matrix of change that is going to take
place?
Mr Gibson: We fit in in the same
way that we fit in for other sectors of British industry. Where
there are large industrial closures—MG Rover is an example—we
expect the RDAs to look closest to the ground to work with the
local arms of other government departments—Jobcentre Plus,
Learning and Skills Councils—to pull together packages which
help the workers who very unfortunately lose their jobs to gain
opportunities elsewhere.
Q287 Mr Hancock: Could I come back to
you, Minister. You rightly raise the issue about the shipbuilding
capacity, and the horizon looks very bright for the Type 45s and
the carriers there, but, as you rightly say, we have to plan for
what happens after that. With the way in which the ships are being
designed now there is little chance of much of a follow-on to
increase the number of surface ships the Navy will require. How
do you envisage the MoD working with industry to prepare for that
downturn that will come post 2014 or whatever the date is?
Lord Drayson: We have analysed
the ship-building industry in this country and we can see that
we have got companies and yards which are absolutely world-class—there
is no doubt about it—and are able to go toe-to-toe against
international competition and win. There are other areas where
they are not as efficient as they need to be. When you look at
the overall industry, it is clear that too much of the industry
is represented by the MoD as a customer. What we want to see is
that. by the changes which we encourage in the way in which we
work with industry over the next 10 years, we help the industry
to become more internationally competitive, we see the spread
of best practice throughout the industry, such that industry is
able to win more orders from other customers apart from the MoD.
What we have seen in the DIS is a focus towards a high value-added
end of the ship-building industry. That is the area which we believe
we can really compete in, the area of complex systems integration.
I have visited yards and seen, for example, the Astute submarine
build and you see the complexity of that vessel—it is more
complex than the space shuttle and a lot more modern and it is
British built—so there is no doubt that our industry can
do this, but we need to get best practice throughout the industry
and I think that then will provide us with a sustainable industry
into the future, and that is what we are aiming to achieve. I
think we have the time to do it. The key is the implementation
of the Defence Industrial Strategy and the Maritime
Industrial Strategy particularly through this year. 2006 is
a very important year, because there are some important milestones
on some of the projects which we are working on, not least of
all Carrier. Carrier is going to be one of the ways in which we
are going to help to encourage and drive this process, and I am
very focused on making sure it really does happen, but I think
the opportunity is there.
Q288 Chairman: Minister, I understand
that when you were talking to the Defence Manufacturers Association
last week you said, in effect, that you were "a man in a
hurry". I hope that Mr Gould will keep his ears shut when
I ask this question. Do you find that your officials are in as
much of a hurry as you are?
Lord Drayson: I think they are
getting there, Chairman, yes.
Q289 Chairman: You have also said that
you recognise that the Ministry of Defence has got to change.
In what respects do you think that the Ministry of Defence has
got to change and how do you think those changes will be put into
effect?
Lord Drayson: I think that the
industry has to change and the MoD has to change—that is
the point—but I think there is a duty on the MoD to demonstrate
through its change that it is serious about the Defence Industrial
Strategy being real. If I was in industry running one of the
defence companies, I would be looking carefully to see how quickly
the MoD is getting on with the things that it has promised to
do. The way in which that is happening in the Department I am
actually seriously encouraged by, and I aim to surprise this Committee,
if you like, in the future by the pace of change which we are
able to achieve in the Ministry of Defence. Why do I say that?
Firstly, the way in which the MoD responded to the challenge of
getting the Defence Industrial Strategy published in the
timescale, the way in which it went about that, and the team of
people that were responsible for it, I believe, did an absolutely
outstanding job and I saw real excellence in the Civil Service
which I think industry then responded to. We have set out a "to-do
list" of changes and we have set timescales. The Permanent
Secretary has put a small targeted team of people to look at the
whole acquisition process, based upon what we have set out as
principles in the DIS, and to report back by May on the changes
which we need to make, building on the improvements that have
been made to date. Things like Smart Acquisition, the series of
improvements in procurement which have been achieved by this Department
have been good, in my view. It is about building on that and going
further. In June, Chairman, we should be seeing the outcome of
that as one example. The impression I get within the Department
is that it is the recognition of the changing environment, and
it is the changing environment that we face, in terms of the threat
of globalisation and increasing complexity of technology, which
requires MoD to improve. Your Committee and other committees have
said that when the MoD does things well it is a real gold standard.
We need to make sure that that practice is spread more evenly,
and there are some very clear things which we need to do to achieve
that in terms of increasing things like commercial skills within
the Department. The whole emphasis on tough commercial partnerships
in the DIS requires the Department to have the people with the
know-how to manage those types of relationships. We need to ensure
that that happens. The way in which the Department tends to be
very good at the urgent operational requirement, tight procurement
process, very good indeed, but less good at some of the longer
term projects means that we need to come up with processes which
take the best out of the UOR process and apply them more effectively
to the longer term projects. There is a whole list of things—a
to-do list—which is set out in the DIS. The impression I
get is that the Department is really up for this change. Both
industry and the MoD recognise that we have an opportunity here
to make a step-change in performance. The DIS has given us a good
framework and an action plan to do that, and what I am seeing
is that the Department is responding. The way in which I think
we should be judged is in the quality of the decisions that we
take and the difference we actually make to procurement. What
I have said both to the Department and to industry is that 2005
is the year we came up with the Strategy, 2006 is the year that
we seriously implement it to be able to show results both to your
Committee, Chairman, and to others who scrutinise us, that we
really have made a difference. When I say I am a man in a hurry,
I am in a hurry to show in 2007 that this has made a real difference
to our defence capability and the strength of our defence industry.
Q290 Chairman: You may have read that
some witnesses in front of us have said that there was more information
provided to the defence industry in the United States when the
United States took some of its procurement decisions. The Ministry
of Defence used to be more forthcoming in relation to its future
intentions, its priorities and its plans. Do you think that that
is a fair accusation? Is the Ministry of Defence planning to be
more forthcoming in relation to its priorities and its plans?
Lord Drayson: Yes, it is. The
DIS sets out explicitly a recognition that there needed to be
more transparency because industry did not have enough clarity
to be able to make the investment decisions which were going to
drive the improvements which we needed to see. Without going into
the historic reasons, I think it also reflects that the relationship
between the MoD and industry was not as effective as it needs
to be, and I think that the DIS has made a positive difference
to that, and that is something which we need to build upon. We
also need to be mindful that some of the things which the United
States has done in terms of the release of information has had
some negative consequences, and we were very mindful to learn
from that. For example, I was very concerned to make sure that
in going into the gritty detail which I promised in the Defence
Industrial Strategy we did not make the mistake of providing
such clarity over where we saw the really smart, young, innovative
companies that we will provide a shopping list of acquisitions
for bigger companies. We need to be careful. We do need to push
the transparency issue consistent with our security interests,
but also being intelligent about the global market place which
we operate in and making sure that we do this in a way which helps
companies provide solutions to our needs without actually making
life more difficult for them.
Chairman: We are moving on to the issue
of sovereignty.
Q291 Robert Key: Minister, I found one
of the more intriguing chapters in your Defence Industrial
Strategy B1 on Systems Engineering and I would like to ask
you a little bit about appropriate sovereignty. Obviously, if
we are going to retain sovereignty over a proportion of our production
and systems, it is going to come at a price. Has the Government
thought how much? What price? Whether it is a 5% premium, a 10%
premium, a 20% premium. Can you give us a little more of your
thinking on what you mean by appropriate sovereignty?
Lord Drayson: Yes. We did a thorough
analysis of the defence market by sectors and we looked at it
from the perspective of, in a particular sector were there defence
capabilities which we regarded as being so strategically important
to our defence interest and where we were concerned that not having
those capabilities on shore may lead to others having an impact
on the operational freedom so that we had to have that done here
in the United Kingdom, and so we set that out. We have also said
very clearly that we do have and want to have one of the most
open defence markets in the world. Therefore, we are not concerned
about where the shareholders owning these companies live, but
we are concerned in certain areas where the intellectual property
resides, where the design authority is held. What we have found,
and this is why a section on systems engineering is so important,
is that as defence equipment is moving in a direction where the
actual platform, such as an aircraft or an armoured fighting vehicle,
may be in service for a considerable length of time, decades in
some cases, the subsystems—communications, sensors and so
forth—which really deliver the advance military capability
have a much shorter life cycle and therefore need to be upgraded
much more frequently. We need to have the capability in this country
to do that, which is why systems engineering skills are important
in this country, it is why we need to have clarity when we go
into a project—FRES is going to be an important example—that
we know where the intellectual property is held and that we manage
intellectual property linked to the delivery of freedom of operational
capability. To answer to your question about price, we then rely
on the market to operate on a basis whereby the competition within
that—as I say, that balance of openness and encouragement
of people to bring those resources and skills into the United
Kingdom to deliver us the requirement at best value for money.
I think the important thing, which I have not touched upon this
morning, is that we have shifted our emphasis in the Defence
Industrial Strategy to make value for money the bedrock of
the whole thing away from a particular technique, such as competition,
to saying that competition is one of the many tools which we will
use and that is a recognition of the realities of the different
markets and environments we have in the different sectors. For
example, take the C4-ISTAR type sector—very healthy, lots
of innovation, does not give you much intervention—and take
another sector with much less competition, which does have a key
strategic defence capability for us, we need to be much more clear
about how much we manage that.
Q292 Robert Key: How does that relate
to investment decisions of private companies? We have just heard
from BAE Systems on explosives production, for example, that they
do not believe they should be investing in low technology, and
so they are not very interested in the Royal Ordnance factories
at Bridgewater and Chorley, it seems. They do not mind if you
cannot acquire ammunition from the United Kingdom. Are you happy
with that? Does it fit in with your analysis?
Lord Drayson: I have looked at
all of that very closely because it is very important that the
UK retains the ability, in terms of advance munitions like that,
to be able to source what it needs when it needs it, and I am
satisfied that the changes which are being made, which are about
coming up with a more efficient supply chain for the supply of
these munitions by British Aerospace, does satisfy our needs.
The key thing there is to be very clear in a manufacturing process,
whether it is munitions or anything else, of where the really
clever bit is and making sure that we have visibility of that
clever bit, that we know where the skills are to do that, and,
where those skills are important to our defence capability, such
as they are in this particular case, that they are done in the
United Kingdom. Do you want to add anything to that?
Mr Gould: Yes, several things.
Certainly on the general munitions subject, it is difficult to
distinguish between the raw materials, which have always been
bought in. Even when things were being manufactured in Bridgewater
and Chorley raw materials were being brought in from outside,
quite a lot of the supply chain came from overseas. As I understand
it, if you have got a secure supply chain of raw materials, so
long as you can assemble and manufacture the munitions and have
the capability to do that, then you are in control of your own
destiny. That is the important point. I would just like to pick
up on one point. Is there a premium for keeping things in the
UK? I am not sure that there always is or has to be. I was thinking
in particular of combat management systems in war ships and submarines.
I cannot mention individual companies, but some of the companies
who work for us doing that are very competitive internationally,
and so, although we are keeping some of those skills in the UK,
and need to (this is very important), the fact that they are competitive
internationally tells me that maybe there is not a premium for
that. Very often, if it is managed well, there does not have to
be a premium, but we do need to work very closely with the companies
to make sure that is the case.
Chairman: I will come back to you on
that issue in just a second. David Borrow, is there anything you
want to ask in relation to Bridgewater and Chorley or has the
subject been covered?
Q293 Mr Borrow: I wanted to perhaps seek
some more reassurance. I am aware that the closure of Bridgwater
and Chorley will lead BAE Systems to purchase certain munitions
from overseas, and they are currently looking at a number of companies.
I have seen details of some of the companies overseas that they
are looking to buy from. There is an argument around jobs, but
there is a bigger issue around security of supply. Obviously,
before we end UK production of some of those munitions and rely
on overseas suppliers, the MoD will need to be absolutely certain
that there is security of supply and that it is not possible for
another government, at a time when we are involved in military
operations, to stop us getting access to the munitions we need.
I recognise that it is an issue around whereabouts in the technology
tree we should be putting investment, but, irrespective of that,
and that may be an issue for BAE Systems, as far as UK Plc and
as far as UK Military are concerned we need to be certain that
we can get access to the munitions that we need should we find
ourselves in a situation of military conflict in any part of the
world. At the moment those contracts have not been signed by BAE
Systems, and I just want some assurance that the MoD are going
to be absolutely sure that there is absolute certainty of security
of supply before we allow those facilities at Bridgwater and Chorley
to disappear.
Lord Drayson: That is absolutely
central to our thinking. You are absolutely right. The DIS sets
out this point about defence needs coming first. We are very mindful
of this point, and that is what is guiding our thinking. We are
not able to go into the detail of this process, but you need to
recognise that there is a generational technology change taking
place in these types of munitions which is going to require us
to go to the next generation of process anyway. This is the opportunity
to look at this process and to look at how we can make it more
efficient but also making sure that we have got, as you say, absolute
control over security of supply for the United Kingdom. The way
in which this is being brought together, looking at the shift
to manufacturing of certain elements in Glascoed, is consistent
with the objective of making sure that we have maintained this
capability.
Q294 Chairman: Can I double check something
there. When Mike Turner was before us previously and he was asked
about the closure of factories at Bridgewater and Chorley, the
phrase he used was that they would want to be "fairly sure",
but you would accept the phrase that has just been used by David
Borrow, "absolutely sure" that we would have security
of supply, would you?
Lord Drayson: Yes, absolutely
sure, and absolutely sure not just in terms of the security of
supply of the elements, as David has said. Often it is about the
cleverness of the process. What I think we need to be absolutely
sure about is what we do to the raw materials and how we bring
these things together and what is done here. I want to be absolutely
sure, in terms of security of supply of the elements coming in
and I also want to be absolutely sure about the robustness of
the manufacturing process that we are moving to, and I have spent
quite a lot of time checking that.
Q295 Mr Hancock: How can you prevent
that? How can you be absolutely sure if, as we were told by the
boss of the operation, they are determined to close these plants?
I am interested to know how you can insist upon this and be assured
that you are going to get what you have asked for?
Lord Drayson: We are the customer.
Q296 Mr Hancock: Whilst the customer
is always right, the customer does not always get what they want.
We have been in that situation as a nation where we were dependent
on certain elements of our weapons which were not delivered, which
we were restricted from using, and our soldiers were seriously
disadvantaged by it.
Lord Drayson: That is absolutely
right.
Q297 Mr Hancock: I am interested to know
how we can be absolutely sure of that now.
Lord Drayson: We are learning
the lessons of the past, and it is very important for us as a
nation to recognise that to get the defence capabilities we need
in many cases we have to enter into international collaborations,
because the nature of technology these days means you have to
do that, but we also need to be mindful of the point, which you
rightly raise, of avoiding getting into a position where in the
future we are unable to use the defence equipment in the way in
which we wish to use it because of restrictions which are being
placed upon us, which is why we are thinking very intelligently,
as set out in the DIS, differentiating between the different types
of equipment and capability and making sure that we are taking
decisions to deliver that defence capability. This is an example
where we have got both a shift towards a different manufacturing
process in a different location and a shift in terms of procurement
of certain elements in that and we need to manage that very carefully
indeed. There is no easy answer to this. The way in which you
do it is by being very intelligent as a customer, being robust
in terms of what you expect your suppliers to do and making sure
that you have got these assurances in place and you check that
they are in place as you go forward.
Q298 Mr Borrow: I can accept the situation
that, if we were dealing with a small UK manufacturer of munitions
who had decided that it was not economic to continue to produce
those munitions, there is not a lot that the MoD can do, but in
this situation we are talking about a special arrangement and
agreement between the MoD and BAE Systems to supply the bulk of
munitions. That is part of the Defence Industrial Strategy.
They are in a sense the preferred customer. Therefore, if there
are parts of that package of munitions which they currently produce
which as a company they decide it is not economic to produce in
the future, there is a strong obligation on them to satisfy the
customer that they can still supply those munitions, with an absolute
guarantee of supply, even if they as a company are not doing all
the manufacturing. As I understand it, that is the key element
of the DIS in relation to explosives and munitions, the fact that
BAE are central to that role. Should they as a company decide
not to do certain things, they have still got the obligation to
deliver those munitions and explosives and guarantee absolutely
that they will be supplied as and when required by our military
personnel.
Mr Gould: We have had a partnering
arrangement with Royal Ordnance for several years now in response
to the very incident that Mr Hancock referred to earlier with
the artillery ammunition. That has worked, on the whole, pretty
well for us. Clearly, I could infer that it has not worked quite
so well for the company in some areas, but you are absolutely
right: in seeking to have a negotiation with a company that will
continue that sort of long term arrangement, they must, as part
of that deal, satisfy us that the supply chain they are putting
in place does all the things that we require it to do. They must
do it differently from the way it has been done in the past but
they must satisfy us or we do not do the deal, we do something
different. I am optimistic.
Mr Hancock: You might be interested to
know in the letter that BAE Systems sent us today[4]
one of the companies that they put forward as one of the five
is in the very country that caused us all the problems last time.
Q299 Robert Key: Hardly a day goes by
without somebody talking, either in the Houses of Parliament or
in the media, about the two-way street in defence procurement,
particularly with the United States of America. I was delighted
to see an interview with you at the time in February in which
you said that the battle over technology transfer was your top
priority for this year. How is it going, Minister?
Lord Drayson: I would say it is
progressing reasonably well, but the test will be where we have
got to at the end of this year, and the test will be the Joint
Strike Fighter. We are working very hard indeed, I am working
very hard indeed, on this issue because it is central to our defence
needs, and I know that the Secretary of State is also working
very hard, and throughout government. JSF is a project where we
recognise the real benefits which the United Kingdom is gaining
through working with the United States on this aircraft. However,
we are also clear, as set out in our Defence Industrial Strategy,
that being able to exercise the operational freedoms which we
need over time with this aircraft is affected by technology transfer.
Therefore, the reason it is my top priority is because we know
that we need, by the end of this year, to have got clarity over
certain elements of technology transfer which need to happen (and
I need to stress) on a government to government basis to enable
this to happen satisfactorily. I am optimistic that we can solve
that. It is not a naive optimism, it is based upon the progress
which I think we are seeing, but we are working very hard on it.
I also think it indicates a general shift which is taking place
within the defence industry, and which you have alluded to a bit
already in your earlier question, which is the growing strategic
importance of intellectual property to defence capability. Therefore,
what I am looking to see happen, alongside the emphasis which
we are placing on research and technology, is strategic management
of intellectual property in procurement decisions up front in
terms of clarity of the design authority, relationships with international
partners and technology transfer, and that is something which
we are actively working on this year, but I am expecting, frankly,
for this to be resolved satisfactorily for us by the end of this
year.
4 Note: See Ev 121-122 Back
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