Written evidence from Edward Atkin
INTRODUCTION
My interest in procurement comes from my experience
in owning and running one of Britain's most successful manufacturing
businesses over a period of 30 years. When I sold Cannon Avent
Baby Products (CABP) in 2005, we were the global leaders in our
field. I know that this experience places me in a privileged position
to be able to offer my testimony to the Strategic Defence and
Security Review (SDSR).
During my time with CABP I spent in the region of
£100 million on the latest engineering, electronic and computer
systems purchased from suppliers in Japan, Italy, Germany, France,
the United States and the United Kingdom. I found that there was
a consistent trend in improving speed, reliability and accuracy
of the products we bought and used whilst their costs in real
terms fell. I attribute this tendency primarily to the development
and use of Computer-Aided Design (CAD) and the introduction of
microprocessors. This new technology obviated the need for mechanical
linkages, which were the main source of expense and failures in
equipment.
I have met many senior military people and politicians
through various charitable and political activities and it seems
that my experience in procurement is at total variance to that
of the Ministry of Defence (MoD), where I have seen costs fall
the MoD has seen them spiral out of control. I therefore think
that it would be worthwhile to offer some thoughts on improving
MoD practices.
EMPOWERING INDIVIDUALS
1. Successful negotiation requires proficient
negotiators. At CABP we used people who understood all the variables,
knew all of the competitive pressures and were masters of their
brief. We also expected deep discounts in recognition of our past
loyalty and future business opportunities. Crucially, our negotiators
were always able to give a final decision within 24 hours. Ryanair
employs the same techniques and is renowned for its tough negotiating
style and the strong results it achieves. Whilst processes in
government are subject to different and additional pressures,
I am doubtful that the MoD is even in principle striving to employ
the same highly effective practices.
2. In a similar vein, committees are not conducive
to innovation and they rarely make the right decision. History
is littered with instances of breakthrough products being developed
by individuals who stubbornly persisted with their ideas: Samuel
Colt and the revolver; Hiram Maxim and the machinegun; Frank Whittle
and jet propulsion; Geoffrey de Havilland and his aircraft designs;
Mikhail Kalashnikov and the AK-47; and to move away from the world
of defence, Steve Jobs and Apple products.
3. Additionally, those with great experience
in a field are often unable to identify and define future needs
and technologies. Our Armed Forces should be geared towards adaptability
in order to be able to react to threats that are as of yet unknown
not equipped to fight the wars of yesteryear.
4. The key thread that runs through the preceding
considerations is that significantly empowering individuals within
the MoD will lead to better decision-making and better outcomes
in the procurement process.
DEFENCE CONTRACTS
AND VALUE
ENGINEERING
5. "Fixed-cost contracts" are always
preferable to "cost-plus contracts". "Cost-plus
contracts" invariably incentivise failure by covering a manufacturer's
expenses even when they get it wrong, whilst paying additionally
to enable them to make a profit. Where "cost-plus contracts"
are unavoidable, for example in Research & Development, then
the MoD needs to ensure that the contracts have more efficient
and effective oversight and are tied to objective performance
criteria. Furthermore, a realistic appreciation of baseline costs
must be arrived at in advance.
6. Long-term development contracts are likely
to result in failure. This is because engineering costs are continually
falling whilst the quality and capabilities of electronics are
improving at an accelerated rate. I propose that a 12-month plan
for any electronic equipment should be the maximum threshold considered.
How long does it take Apple, Canon, Nokia or Samsung to introduce
new products? Has anyone at the MOD considered looking at the
UK Grand Prix teams for examples of rapid development techniques?
If we want to avoid situations like the 20-year development saga
of the Bowman tactical communications system then we need to
learn from the knowledge and skills that are readily available
in other industries.
7. The MoD does not seem to have any process
in place to enable "value engineering" options to be
considered. "Value engineering" is absolutely critical
for any engineering project as it provides a problem solving framework
for the increase in value of a product either through an improvement
in function or the reduction in cost. Bad engineering, for example
of a tank, might elevate increased function to the disregard of
cost or vice versa. The faster the tank turret, the closer the
tolerances, then the higher the probable cost, build time and
power required for it to operate, which in turn increases the
likelihood of breakdown or failure. The contrast between the over-engineered
and unreliable Tiger tank and its contemporary the efficient and
cost-effective Soviet T-34 serves as a prime example of the benefits
of "value engineering". What process does the MOD have
in place that decides upon the best compromise?
DEFENCE EXPENDITURE
AND THE
DEFENCE INDUSTRY
8. Many areas of Defence expenditure seem to
have a political, rather than a military, justification. For example,
Trident should really form part of the Foreign and Commonwealth
Office Budget as the likelihood that it will ever be used in a
military context is minimal, its real significance is political.
If a nuclear capability is required then it seems that if a pilotless
delivery system has not already been produced then one could be
developed at very low cost.
9. British Defence contractors, like all other
industries, should seek the majority of their profits
from abroad. The MoD's budget constitutes a small fraction of
the overall world market in defence and so it makes considerably
more sense for British based defence contractors to chase the
significantly bigger opportunities available overseas. This would
have the added benefit of minimising their reliance on the UK
market and as such shield them from domestic political variability.
STRATEGIC CONSIDERATIONS
10. I believe that the future of the Armed Forces
lies in flexibility. We need an Army that is well trained and
capable of performing a wide range of operations with equal proficiency,
which is in turn supported by excellent air transport capabilities
and adapted Naval Cargo vessels. Such a force must be capable
of deploying troops and light tanks to almost any region of the
world within a period of a few days. In turn, the Navy should
focus on very high-speed and lightly armed Rigid-hull inflatable
Boats (RIBs) supported by mother ships with light helicopters
and Unmanned Aerial Vehicles (UAVs).
11. All of these assets should be light, cheap,
almost disposable and easily replaceable. The more expensive and
the higher the profile of any piece of equipment then the greater
the inherent risk in its use and the higher the cost to protect
it. If a piece of equipment is too precious to be put in harm's
way then it cannot be used effectively and essentially it becomes
worthless. Recent developments in missile technology, notably
from the Chinese, may feasibly place equipment such as aircraft
carriers within this category.
12. Any significant long-term expenditure is
a waste of resources as the enemy will learn of it and factor
it into their planning. The "Maginot Line" was an astronomical
failure in this regard and speaks to the importance of a dynamic
strategy. Resources are always at a premium and so any state's
armed forces will always have weaknesses. The enemy will always
choose to attack these weak points. Taking this into consideration
the highest priority should be placed upon the speed and flexibility
with which you can respond. This is especially true of asymmetric
warfare.
13. I have made all of the above assertions based
upon a zero probability of any new war between members of the
European Union or NATO and with an understanding that we cannot
know where the greatest threats to our national security will
emanate from in five, 10 or 15 years from now.
I think that this gives you an adequate picture of
my line of thinking. If you wish to discuss any or all of the
above points then please feel free to contact me.
6 September 2010
| 
