Select Committee on Defence Seventh Report


The Defence Industrial Strategy (DIS) was published on 15 December 2005 with the aim of providing greater transparency to the UK's future defence requirements and, for the first time, setting out those industrial capabilities the UK needs to maintain appropriate sovereignty and operate equipment independently. The DIS was produced to a tight timetable and a wide consultation with industry was undertaken. The Minister for Defence Procurement and his team should be congratulated for this work.

The DIS has been well received by industry. It requires industry to reshape to adjust to the future requirements of the MoD. In the future there will be more focus on upgrading and maintaining platforms rather than designing and building new equipment. The reshaping of the different sectors of the defence industry will result in job increases in some areas and job decreases in others.

The MoD also needs to change to demonstrate that it is serious about the DIS. Work is in hand to identify improvements to the way in which the MoD procures equipment and it will be important for these improvements to be implemented quickly. The MoD should also provide more information to industry about its future requirements.

In several areas, such as the Maritime sector and Defence Research and Technology (R&T), further work is required and specific strategies need to be developed. Defence R&T has experienced a decline in funding which, if not addressed, will result in lower quality defence equipment in the future. We see R&T as a key investment for the future.

Small and Medium-size Enterprises (SMEs) are a vital part of the UK's Defence Industrial Base, but the MoD's knowledge of SMEs and their role in the supply chain has been weak. The MoD is seeking to become more "user friendly" to SMEs and to understand better the supply chain.

In some sectors, such as fixed-wing aircraft, the UK has only one company with the capacity and capability to deliver the MoD's requirements. Competitive procurement will, therefore, not be possible if the UK is to retain national capability.

The MoD plans to make more use of long-term partnering arrangements. There are risks that this will result in monopoly supply and there are considerable concerns about the access of other companies to sub-contract work. There will need to be rules in place to ensure that 'sub-primes' and SMEs can compete for sub-contracts. We will return to this matter.

The success of the DIS will depend upon how well it is implemented and whether the MoD is adequately funded by the Treasury to deliver it. The Minister for Defence Procurement is providing the impetus for implementing the DIS and this must be maintained. The Minister has provided us with a timetabled programme for implementation of the DIS. We plan to monitor closely its progress.

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