Conclusions and recommendations
1. We
welcome the publication of the Defence Industrial Strategy and
congratulate the Minister for Defence Procurement and his team
for delivering the Defence Industrial Strategy to a tight timetable.
(Paragraph 9)
2. During the production
of the Defence Industrial Strategy a wide consultation with industry
took place, but we are concerned about the adequacy of the consultation
with Small and Medium Enterprises and with the MoD trade unions.
We look to the MoD to consult more fully with both Small and Medium
Enterprises and the MoD trades unions as work on the Defence Industrial
Strategy is taken forward. (Paragraph 13)
3. The initial reaction
to the Defence Industrial Strategy has been generally very positive.
(Paragraph 16)
4. We welcome the
clarity that the Defence Industrial Strategy has provided to industry
about future defence requirements, which should help to make the
UK an attractive market to defence companies. However, we note
that BAE Systems is considering selling its stake in Airbus, which
makes us uncertain of where it leaves their commitment to the
UK. Given the possible impact on UK jobs, and the fact that the
MoD is procuring A400M transport aircraft from Airbus' military
arm, we shall keep a close eye on this matter as it develops.
(Paragraph 23)
5. The defence industry
has accepted that future work will focus on the insertion of upgrades
and new capabilities and through-life maintenance of existing
platforms, rather than new platforms. (Paragraph 25)
6. The Defence Industrial
Strategy will lead to job increases and job decreases in different
sectors of the defence industry. We look to the Government to
assist, where appropriate, those sectors where job decreases are
likely. (Paragraph 27)
7. We shall take a
keen interest in any developments in the restructuring of the
dockyards. (Paragraph 33)
8. We look to the
MoD to ensure that the Maritime Industrial Strategies are produced,
and the strategies implemented, to the planned timetable. (Paragraph
34)
9. In the fixed-wing
sector, future work on Typhoon and Joint Strike Fighter will provide
work for engineers for some time to come, and there will be an
increasing focus on Unmanned Aerial Vehicles. (Paragraph 40)
10. We note that substantial
job decreases are likely to be seen in the complex weapons sector
as the MoD's investment in such weapons is to be substantially
reduced. We look to the MoD to work closely with this sector so
that this important capability and the current skills are not
lost. (Paragraph 44)
11. We agree with
the Minister for Defence Procurement that the MoD needs to demonstrate
through its own change that it is serious about the Defence Industrial
Strategy and we look forward to being "surprised" by
the pace of change that the MoD achieves. (Paragraph 47)
12. We look to the
MoD to build upon the DIS and provide more information to industry
in the future. (Paragraph 50)
13. We welcome the
fact that the MoD is seeking to identify improvements to its acquisition
arrangements, including ways to speed the process up, and we look
to the MoD to implement quickly the improvements identified. We
expect the MoD to ensure that best practice is promulgated and
the commercial skills of its officials are improved, particularly
the legal and contract compliance skills needed to ensure well-drawn
legal and production agreements involved in the new long-term
partnering approach. (Paragraph 51)
14. We are concerned
that the decline in defence research spending will impact upon
the quality of future equipment for the armed forces. We look
to the MoD to address the level of spending on defence research
in its Technology Strategy to be published this year. It would
be useful if the Technology Strategy could set out clearly the
level of defence research spending by Government and industry
over time. (Paragraph 63)
15. We look to the
MoD to make a strong case for increased funding of defence research
during the discussions with HM Treasury on the Comprehensive Spending
Review. We see this as a key investment for the future. (Paragraph
64)
16. We expect the
further work on Research and Technology to encourage and maintain
the Centres of Excellence for defence-related research. (Paragraph
66)
17. We note that the
MoD has sought to become more "user friendly" to Small
and Medium-size Enterprises which are a vital part of the UK defence
industry. We look to the MoD to improve its visibility of such
companies. (Paragraph 76)
18. We are concerned
that the MoD is only at "the start of a journey" in
terms of understanding supply chains and how to manage them. We
note that the MoD is working with the DTI, the Regional Development
Agencies and the agencies of the devolved administrations to understand
defence supply chains better. We expect this work to be progressed
quickly and good practice to be identified and promulgated. (Paragraph
77)
19. In a sector such
as fast-jet aircraft, the UK only has one company with the capacity
and capability to deliver the MoD's requirements: competition
in that environment is not achievable, or at least not compatible
with maintaining national capability. We agree that competition
is not the right answer for all procurement and that the MoD should
move towards long-term partnering arrangements in a number of
areas. (Paragraph 85)
20. Concerns have
been raised about BAE Systems being in the position of a monopoly
supplier in many areas. The company is likely to be the main contractor
on a number of the long-term partnering arrangements that the
MoD is considering. We look to MoD to demonstrate its awareness
of these concerns and to build into long-term contracts incentives
which encourage performance improvements. (Paragraph 92)
21. We recognise that
some of the contracts for long-term partnering arrangements will
be let on a non-competitive basis. But for work underlying these
arrangements there must be real competition. This is a matter
about which we have considerable concern. We look to the MoD to
ensure that there are rules in place which give clarity and transparency
to the route to market for 'sub-primes' and SMEs. Other companies
must be assured of an opportunity to compete for the work underlying
the long-term partnering arrangements. We will return to this
subject again. (Paragraph 94)
22. We consider it
vital that the UK can maintain and upgrade equipment independently.
We expect the MoD to obtain all the information and technology
transfer it requires to do this. We will continue to monitor the
progress on technology transfer in relation to the Joint Strike
Fighter. (Paragraph 99)
23. We welcome the
assurances given by the MoD that the Royal Ordnance Factory sites
at Bridgwater and Chorley would not be closed until it was "absolutely
sure" a secure alternative supply of the munitions existed.
We consider that, in an area as vital as general munitions, the
UK should never be in a position where it cannot guarantee security
of supply. (Paragraph 107)
24. We consider that
international co-operation is vital and that the European Defence
Agency is likely to have an important role in the future in many
areas covered in the DIS. (Paragraph 111)
25. We welcome the
impetus that the Minister for Defence Procurement is giving to
the implementation of the Defence Industrial Strategy and his
aim to make a difference to the UK's defence capability and strengthen
the UK's defence industry. (Paragraph 115)
26. We expect the
MoD to meet the deadlines set for the additional work flowing
from the Defence Industrial Strategy, in particular the Maritime
Industrial Strategies, the Technology Strategy and the review
of its acquisition arrangements. (Paragraph 117)
27. Given the importance
of the Defence Industrial Strategy, we plan to monitor closely
the progress in implementing it and whether it delivers the expected
benefits. We expect to inquire further into other aspects relating
to the Defence Industrial Strategy. (Paragraph 119)
28. Restructuring
the defence industry, and ensuring that research and skills are
maintained despite reduced production, will cost money. Adequate
funding will be vital for the success of the Defence Industrial
Strategy. This will be a key issue for the MoD to negotiate with
HM Treasury in the Comprehensive Spending Review. (Paragraph 121)
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