Memorandum from the Society of British
Aerospace Companies (SBAC)
1. SBAC welcomes the opportunity to contribute
to the House of Commons Defence Committee on the implementation
of the Defence Industrial Strategy (DIS).
2. Over the 11 months since the DIS was
published the Ministry of Defence (MoD) has maintained a fast
pace in launching initiatives under its two year implementation
programme. The determination of Lord Drayson and his senior level
team to drive this change programme forward continues to impress,
and SBAC have remained supportive of the effort to achieve the
DIS goals. MoD has also continued to talk to industry extensively,
through the National Defence Industries Council and a range of
other channels, including direct meetings with SBAC.
3. In the first half of the year SBAC was
principally concerned to understand how MoD would go about the
implementation process and what effect this would have on its
relationships with industry. As the year has progressed MoD has
taken a range of significant steps on the implementation path.
The key developments have been:
— The publication of the Enabling Acquisition
Change Report and launch of the Enabling Acquisition Change Programme.
— The accompanying announcement that
the Defence Procurement Agency and Defence Logistics Organisation
would be merged.
— The appointment of Amyas Morse, from
outside MoD, to take up the new post of Commercial Director for
MoD.
— The conclusion of the first long-term
partnering agreement with industry, on rotorcraft with Agusta
Westland.
— The publication of the Defence Technology
Strategy.
4. These steps are the highlights of a broader
picture of change, much of which has been enabling or incremental
in nature. For example, Lord Drayson announced the Team Complex
Weapons at the Farnborough Airshow in July, which presages a long-term
partnering agreement in the guided weapons sector; this is a very
positive step forward with MoD and Industry working in partnership
to achieve the agreement over the coming months. Another example
is the good progress on the Armoured Fighting Vehicle Partnering
agreement with BAE Systems.
5. Given the scale of the change programme
being undertaken at MoD, it is inevitably still early to make
considered judgments about the output of the reforms launched
by the DIS. A great deal more work remains to be done and a coherent
picture of a changed approach has yet to emerge. Industry still
expresses concern about different messages coming from different
parts of MoD. But industry also accepts that it must play a part
in delivering the DIS, and intensive discussions continue in many
areas, including for example a range of sectoral negotiations
(eg in the naval industry sector), the SBAC's own initiative on
supply chain excellence (SC21) and the support signalled by industry
on the Defence Values for Acquisition. SBAC believes it is essential
that the DIS succeeds if the Armed Forces are to be supported
effectively in the future, and that the UK industrial base is
to remain important in providing that support and bringing a significant
benefit to the UK economy.
6. SBAC therefore remains keen to support
the implementation of DIS. In doing so, it believes a number of
key issues must be resolved if the implementation programme is
to deliver the changes the DIS, and now the Defence Technology
Strategy (DTS), propose. These are as follows:
6a Impact of the Comprehensive Spending Review
There is concern in industry as to whether the
resources will be made available in the Comprehensive Spending
Review to enable the MoD to sustain its overall programme and,
in particular, to sustain sufficient research, technology demonstration
and procurement spending to support the Armed Forces of the future.
With the strategy in place and implementation underway, it is
absolutely crucial that sufficient funds are made available to
the department to ensure that the value of the DIS is fully realised.
Not least because this is a time when there are understandable
pressures on the department to make funds available to operations.
In the areas of research and technology, there is a need for clearer
benchmarks that identify the level of resources that are needed.
6b Promoting more investment in new technology
Despite the publication of the Defence Technology
Strategy (DTS), there still appears to be a gap in understanding
between Government and industry as to the incentives needed to
achieve greater industry investment in support of defence technology
programmes. The DTS does not give a picture which is sufficiently
complete for industry to make investment decisions. Greater transparency
on how research and technology investment will flow through to
procurement and how Intellectual Property Rights will be protected
are areas where greater clarity is needed. The "National
Aerospace Technology Strategy" cuts across both civil and
defence aerospace investment. However, investment in the strategy
has been largely sourced from the DTI research technology programme.
There is an opportunity for MoD to align its investment along
the lines of this already agreed strategy.
6c Innovation
Innovation and problem-solving for our hard-pressed
Armed Forces is a vital issue. Both government and industry want
to promote greater innovation in the supply chain, and to encourage
the involvement of SMEs, especially from outside the defence sector.
The best way to achieve this end remains under discussion; SBAC
supports the willingness of MoD to consider radical measures if
a genuine change of culture is to be achieved, but some skill
will be needed to strike the right balance.
6d Partnering
The MoD is clearly still working on its models
for long-term partnering agreements and through-life capability
planning. Industry wants to contribute constructively to that
process. These agreements will affect the industry as a whole,
not just the partners involved. It is therefore critical that
the principles underpinning the agreements should be transparent
to all. The recent MoD publication "Capability Management
Guiding Principles" is an excellent example of the proactive
work that MoD has been doing, where it has actively consulted
and involved industry. A similar paper giving Guiding Principles
for Partnering could be a good way to define generalised model(s)
for partnering. Such a "Blueprint" would be helpful
in showing what partnering relationships should look like and
might also help speed up the MoD's internal processes for addressing
sectoral partnering arrangements.
6e Supply chain relationships
If DIS is to succeed it will also be important
to gain the confidence of the whole supply chain. The SBAC's 21
Century Supply Chain (SC21) initiative, which aims to achieve
a modernised UK supply chain, that encourages innovation pull
through, better relationships and better through-life capability
management has an important role to play in contributing to the
MoD's aims. Key to success in this area will be to establish clear
measures of success and failure that both industry and MOD can
sign up to and a robust mechanism for dealing with problems in
an effective but flexible manner.
6f The international dimension
The DIS has considerable implications for UK
co-operation on acquisition with key partners, especially the
USA and major European countries. At this stage the effect of
the DIS on these relationships remains one of the least well articulated
aspects of the DIS and one on which engagement between Government
and industry is relatively limited.
6g The DIS vision
The key question for industry is what MoD will
look like in 10 years time as a result of implementing DIS. Industry
needs to have sight of MoD's vision, as the "customer"
of where it is going and how it sees the future state of the UK
defence industrial base through the DIS, to enable it to meet
the changes and challenges of DIS and ensure that it fulfils the
future needs and requirements of the armed services. The relationship
between defence and security is another interesting aspect looking
forward, reinforcing the need to understand better the interaction
between civil and defence technology development. Greater exposure
to government's thinking would therefore be welcome.
7. SBAC is committed to engage with MoD,
other Government Departments and the rest of industry to making
progress towards a coherent and comprehensive overall implementation
of the DIS during 2007. In the meantime we would welcome a further
contribution from the Committee to help create the right climate
for a productive debate and an active resolution to the difficult
issues outlined in this Memorandum.
1 December 2006
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