Memorandum from General Dynamics UK Ltd
THE NEW
PARTNERSHIPS BETWEEN
MOD AND
PLATFORM PRIMES
Consideration needs to be given as to how the
MoD will achieve buy-in to the DIS from industry. To ensure transparency,
the MoD should publish both the scope and terms of its new partnership
agreements with companies (such as BAE Systems on Armoured Fighting
Vehicles) as well as how it intends to police these new partnerships
at the platform prime (or tier 1) level so that they do not preclude
a healthy competition for business at tiers 2 (sub-systems) and
3 (equipment). Currently, partnerships are with platform tier
1 primes who (or whose associate group companies) also operate
at tiers 2 and 3. It is easy to assume that they will use the
partnership agreement to increase their tier 2 and 3 content to
the detriment of the rest of industry. GD UK believes publishing
will help to allay these fears.
Indeed, we would presume that the MoD already has
convincing evidence that these new partnerships offer value for
money. Previously, for example, were a contractor (A) to offer
a complete solution for an upgrade, it would have involved the
design authority (B) on the final certifications (safety, etc).
Now, however, the design authority becomes the prime contractor
for the upgrade which must, by its very nature, constitute an
extra cost should A provide the solution, as A and B will necessarily
have some degree of overlap in the task and especially the management
and thus financial cost of risk. The solution from A could now
be unaffordable within the programme budget given B's new role.
The corollary could be that a cheaper and sub-standard solution
would be selected. We presume that the MoD has considered this
aspect and will put in place checks and balances to ensure that
the best solution is chosen and that value for money is being
maintained.
FUNDAMENTAL CHANGE
IN THE
MOD—INDUSTRY
CONTRACTING CULTURE
The timescale for noticeable change that has been
set is challenging. This is as it should be and there should be
quick wins delivering successes in 2007. The real legacy of the
DIS, however, will only be seen if the deeper changes in culture
and working practices in both MoD and industry become "business
as usual". Embedding substantive cultural change in any organisation
takes years and DIS has must have the persistence to see these
fundamental changes through to success. Several areas could be
worth consideration. GD UK suggests that a senior Industry-MoD
group be set up to exchange ideas and to prioritise those which
they agree are likely to lead to substantive and lasting change.
For example:
Defence procurement is driven by the
CADMID cycle (Concept Assessment Development Manufacturing In-Service
Disposal), which has many merits. It tends, however, to aim for
a final specification level and the execution process is dominated
by risk reduction activities, which take a long time to mature
to the final state. In procurement of UORs (Urgent Operational
Requirements), time is of the essence and the much-vaunted 80%
solution is often delivered quickly. The benefit to the Armed
Forces is that it gets new capabilities earlier which can then
provide early feedback which is much more realistic than that
from a typical trial. Enhancements which are closely allied to
real user needs can then be included in the next capability release,
ie real incremental acquisition. Such increments are embedded
in modern contracts, but often they are slowed by a process too
allied to the slowness of CADMID. Combining the rigour of systems
engineering to set the overall capability specification with the
natural speed of a UOR within a framework of greater shared MoD-Industry
partnership would provide the basis for the cultural change needed
to radically enhance the speed and quality of defence procurement.
This would palpably demonstrate a true MoD-Industry IPT. Not only
could this work for equipment level acquisitions, but there is
no reason why it should not apply to more complex systems, such
as the C4I domain.
RESHAPING DEFENCE
TECHNOLOGY CENTRES
Currently, DTCs involve two main phases; 1) early-TRL
(Technology Readiness Level) research (levels 1 to 3); and 2)
aspects of exploitation (TRL levels 4 to 6) leading towards production.
The funding model has a 50% industry contribution in both phases.
Phase 1 is almost "blue sky" and it is difficult for
most businesses to see the benefits within any reasonable investment
appraisal period. Consequently, there may be a reluctance for
industry to get involved. The requirement for shared funding precludes
small companies and discourages large ones. There would be significantly
greater industry enthusiasm for Phase 1 should the industry funding
contribution be reduced and the MoD contribution be increased,
say to 80%. The right place for most businesses to invest is in
Phase 2 where MoD funding could remain at 50%. The management
of Phase 1 should, nevertheless, remain in the hands of industry
in order to derive value in Phase 2 and beyond. GD UK would welcome
the creation of a structured DTC on ISTAR.
LINKING DIS TO
EP FUNDING
The DIS gives greater clarity to MoD's approach to
future acquisition streams and goes some way to providing a macro
view in certain areas. Indeed, there is certainly clarity about
how the MoD will approach shipbuilding, helicopters and armoured
fighting vehicles. For much of industry, however, especially those
not working at the platform prime level, stability only comes
with the detail on specific programmes. The problem many face
in the current tight funding environment is a lack of clarity
of when programmes are likely to go live. The concomitant difficulties
of making investment and manpower decisions are obvious. This
not that DIS should have published a line-by-line account of the
acquisition programmes but that DIS will be diminished in its
impact should clarity on the specific programmes be too long in
coming.
BUDGET CLARITY
The budget data in the DIS is vague. Indeed, there
is the question of whether or not it actually adds up. Industry
needs clarity on the MoD's programme funding decisions over the
next five years, at least. In addition, although GD UK welcomes
the MoD's recognition that companies need to make a reasonable
profit margin, the MoD nevertheless produces current budget targets
that are unrealistically low.
INDUSTRY REPRESENTATION
GD UK welcomes the opportunity presented by the DIS
process to engage in high-level dialogue on the business of UK
defence. It has been suggested that the main vehicle for industry
dialogue with the MoD on the DIS should be the NDIC. GD UK feels,
however, that the NDIC has a bias towards a few large companies,
ie BAE Systems, Thales and Rolls-Royce. Representation on the
NDIC by smaller companies who play a strategic role in the defence
of the UK would be beneficial for the overall DIS process.
Unless, however, the MoD is prepared to champion
the DIS, the process will have been a wasted opportunity for developing
a closer working relationship between industry and the MoD.
28 February 2006
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