Written evidence from General Dynamics
UK
EXECUTIVE SUMMARY
Britain's front line troops cannot be confident of
having the right equipment at the time they need it until the
defence procurement process is radically overhauled (a change
from which the tax-payer and industry would also derive considerable
benefit). General Dynamics UK is already a major contributor to
the UK's defence capability—Scout and Bowman—and,
more widely, the economy. We are well-placed, and keen, to build
on these foundations, either as part of UK sovereign capability
or through open international competition. However, maximum utility
can be derived from the Defence Sector's capability only when
a series of new principles is enshrined into defence procurement.
General Dynamics UK makes a number of recommendations to that
end.
INTRODUCTION
1. By common consent, the systems by which the Ministry
of Defence (MoD) procures equipment are fundamentally flawed.
2. Those defending the UK's interest do not have
enough of the necessary equipment when they need it, the cost
of providing equipment repeatedly and far exceeds budget, and
industry feels that its and its customers' interests are ill-served
by procurement processes which are inefficient and ineffective.
3. The Strategic Defence and Security Review (SDSR),
and the changes to defence procurement processes which will follow
in its wake, are a once-in-a-generation opportunity for the MoD
to transform how it obtains and maintains equipment to ensure
that:
— front-line forces have what thy need when they need it;
— the
MoD can extract the greatest possible utility from industry's
expertise and resources;
— industry
can exploit all available business opportunities and secure fair
profit; and
— the
tax-payer receives the best possible value for money.
4. This evidence from General Dynamics UK considers
the SDSR from our particular perspective—what might be termed
the "micro-level" standpoint. It analyses the contribution
which GD UK makes to the UK economy's Defence Sector, considers
that Sector's wider contribution to the furtherance of the UK's
strategic and economic interests and advocates a number of approaches
designed to maximise the possibility of ensuring that all interested
parties derive full benefit from the SDSR's conclusions.
5. The SDSR's impact on industry will, of course,
be felt also at the "macro-level"—this aspect
will be addressed in the parallel submission by the Defence Industries
Council, to which GD UK is contributing in parallel.
GENERAL DYNAMICS
UK'S RELATIONSHIP
WITH MOD
6. Based in the UK for almost half a century, GD
UK has a strong history of successful engagement with the MoD
as a Prime Systems Integrator.
7. The three main components of our business are
Advanced Projects and Technologies, C4I and Mission and Security
Systems.
Advanced Projects and Technologies (APT)
8. General Dynamics is the World's largest supplier
of Armoured Fighting Vehicles (AFVs), and also specialises in
platform integration, that is the creation, installation and maintenance
of complex, scalable Electronic Architecture in military vehicles.
9. GD UK was selected in 2008 for the FRES Utility
Vehicle Programme, although in the event it did not prove possible
to agree on the terms of a contract with the MoD.
10. In July this year, GD UK signed the Scout Platform
contract with the MoD, under which we will supply the Army with
its next generation of AFVs; at the same time, the Demonstration
Phase of that contract, providing for the construction of seven
prototypes, was activated.
11. The vehicle has a full survivability suite, and
sufficient additional weight-carrying capability to ensure that
survivability can be increased to meet future threats. Scout enjoys
the best "for weight" capability in the World, with
the agility to avoid being predictable in when and how it travels
and the ability to move quickly when threatened. Its electronic
architecture optimises the management, distribution and display
of ISTAR data, and is fully integrated with Bowman. To complement
this capability, the vehicle has a larger turret, in order that
such critical data can be easily and appropriately managed, and
crew task sharing can be optimised.
12. In parallel we are working on a number of Urgent
Operational Requirements (UORs), for instance as System Architect
Advisor on Wolfhound TSV and Integrator on Husky.
Command, Control, Computers and Communications,
and Intelligence (C4I)
13. General Dynamics UK is the Prime Systems Integrator
for the MoD's Bowman C4I Programme.
14. The Bowman contract was let in 2001, following
the failure of the Archer Programme. Bowman provides UK forces
with both exceptional quality secure voice communications and
secure tactical internet, incorporating situational awareness.
15. Bowman provides a mobile battlefield tactical
internet system offering secure voice and data communication and
situational awareness throughout the Battlespace. Voice communication
is both secure and conducted without the need fro encryption,
and orders and vital information can be sent in text from. Key
decision-makers can see the location of all key assets, and deploy
forces accordingly.
16. The system is now almost fully deployed; in addition
to being fitted on 13,000+ vehicles, it has been made available
to ships, aircraft and soldiers. Bowman is widely used under the
most testing conditions in Afghanistan, and has been widely praised
those using it in theatre.
17. As a result of the incremental enhancement of
capability being undertaken under the latest phase of the Programme,
improved equipment is being installed and deployed. Considerable
scope exists to extend Bowman deployment—for example, the
Future Infantry Soldier Technology (FIST) Programme, to counter
the threat from Improvised Explosive Devices (IEDs) and in support
of Special Forces.
Mission and Security Systems (MSS)
18. General Dynamics UK specialises in developing
systems which provide the Armed Forces with high quality spatial
information on battlefield disposition in real time, thus significantly
enhancing security in vulnerable locations.
19. The focus of our Intelligence, Surveillance,
Target Acquisition and Reconnaissance (ISTAR) work is the protection
of highly exposed military operating facilities in theatre (given
the sensitive nature of this capability, it would be inappropriate
to go into greater detail here; we would, naturally, be delighted
to furnish the Committee with a more detailed account separately).
20. The balance of our MSS work relates to airborne
capability. GD UK provides avionics capability for Typhoon, Tornado,
Harrier and Future Lynx. Our contribution to Airborne Network
Enabled Capability involves work on TIEC, CIDS and Netlink.
ECONOMIC IMPORTANCE
OF THE
DEFENCE SECTOR
21. The parallel Defence Industries Council submission
will analyse in detail the very significant contribution which
the Defence Sector makes to the UK's overall economic well-being.
22. General Dynamics UK is proud of our increasingly
important role within the sector. In as much as it is possible
to capture the essence of what we do in statistics, the nature
of GD UK's contribution can be broken down thus:
— Investment
in High-Quality and High-Value Manufacturing:
Our acquisitions over recent years of Anteon, Page Europa and
Kylmar have significantly strengthened our already well-laid foundations,
leading to annual turnover of:
| 2006 | £526m
|
| 2007 | £333m |
| 2008 | £340m |
| 2009 | £401m |
— Research
and Development and Research and Technology Spending:
R and D and R and T are self-evidently critical elements of the
work of cutting-edge, high-tech companies such as GD UK. Annual
values stand at:
| 2005 | £1.48m
|
| 2006 | £2.15m |
| 2007 | £2.77m |
| 2008 | £3.67m |
| 2009 | £2.87m |
— Employment:
The significant recent growth in our workforce numbers resulting
from organic growth and acquisitions tells only part of the story;
no less significant is its geographical distribution. When, at
the turn of the decade, our business expanded very rapidly as
a result of the award of the Bowman Programme, we took a deliberate
decision to concentrate that growth on South Wales. Following
the recent signature of the contract for the Demonstration Phase
of the Scout Platform, we expect the size of our workforce to
grow steadily over the next three years, again with much of that
in South Wales.
— Exports:
Although the focus of our business traditionally has been on supplying
the UK market, overseas contracts have recently been an increasing
feature, standing in 2009 at some £10 million, and expected
to exceed £20 million in 2010.
— Supply
Chain and Small and Medium Enterprises (SMEs):
GD UK believes passionately in building a strong supply chain
based on British companies, and in particular SMEs; and we practise
what we preach. 70% by value of our work on Bowman is undertaken
by British companies. We will achieve broadly similar values on
the Scout Platform (and had planned to do likewise on FRES UV).
STRATEGIC IMPORTANCE
OF THE
DEFENCE SECTOR
23. History has repeatedly proven the advantage which
the UK has derived from retaining the ability to manufacture the
equipment needed by our Armed Forces to protect and enhance our
strategic interests. The coincidence of this Inquiry with the
celebration of the 70th Anniversary of the Battle of Britain perfectly
illustrates the critical role which sovereign capability can play
in shaping our fate.
24. As a UK Profit and Loss company, GD UK naturally
welcomes and supports defence procurement policies geared to procurement
from UK suppliers. This is reflected in our long-standing commitment—mentioned
earlier—to maximising the proportion of the equipment which
we manufacture being of UK origin, and to building supply chains
dominated by British SMEs. In the event of it being deemed that
any given equipment must be acquired under the aegis of sovereign
capability, GD UK meets all of the MoD's requirements.
25. GD UK recognises, however, that there will always
be circumstances in which onshore manufacture is not possible,
for instance either where such an approach does not make economic
sense or because there is simply no British supplier of such equipment.
There are bound to be circumstances, for instance, in which a
capability that can be produced in the UK only at a given cost
is available from elsewhere at considerably lower cost. Similarly,
certain pieces of equipment are so specialised, and the need for
them in a given economy so rare, that it simply does not make
business sense for anyone to manufacture it there. So long as
there are no compelling strategic reasons why such a capability
has to be created in the UK, General Dynamics UK believes that
it is in the wider national interest for that equipment to be
procured from overseas.
26. Elements of the Scout Platform on which we recently
signed a contract with the MoD fall into that category. For instance,
the core chassis design is based on AFVs already in service in
Spain and Austria. Further, in order to minimise risk, MoD has
directed that the first batch (of (?) 100) vehicles must be manufactured
in Spain.
27. General Dynamics UK is keen to stress, however,
that in both cases, we are taking the utmost care to minimise
the element of such work which is undertaken overseas. Scout will
bear only scant resemblance to the Spanish and Austrian vehicles
already in service. All design and development is being undertaken
in the UK. And once manufacture of the first tranche in Spain
has been completed, the entire process will be moved to the UK.
28. We also recognise that, in cases where purchase
must be from overseas, difficulties and delays resulting from
"infection" by US International Traffic in Arms Regulations
(ITAR) can have a significant bearing on the optimum method of
procurement. Our experience on Scout is again relevant. We have
ensured that the offshore element of procurement deliberately
is entirely ITAR-free. Further, Intellectual Property Rights rest
with the MoD.
MAKING THE
BEST OF
THE OPPORTUNITIES
THE SDSR OFFERS
29. General Dynamics UK endorsed the view of the
Conservative Party in Opposition that it is was imperative to
conduct a root-and-branch Strategic Defence Review, since it is
undoubtedly the case that: (i) there is no definitive sense within
Government of what constitutes the UK's strategic interests and
(ii) (whatever those interests are judged to be) the resources
available to protect and enhance those interests are at best ill-matched
to need and, almost certainly, inadequate.
30. We particularly welcomed the intention to prevent
the conclusions of such a Review being at the mercy of budgetary
considerations by deferring all analysis of the affordability
of perceived national interests until after those interests had
been identified.
31. GD UK therefore is disappointed that the conclusions
which the SDSR reaches will, in the event, be influenced by funding
decisions taken as a result of the implementation of the Comprehensive
Spending Review (CSR). However, we recognise that the scale of
the inherited Budget Deficit, and the approach which the Coalition
Government has adopted towards tackling it, have meant that the
originally intended separation has not been possible. That said,
we are reassured that MoD and HM Treasury are both committed,
as far as possible, to minimise dilution of the "purity"
of the analysis of strategic national interests.
32. The SDSR is, of course, part of an inter-related
series of analyses of the MoD's work currently, or shortly to
be, underway—the other components being the CSR, the work
of the Defence Reform Unit and "DIS 2". General Dynamics
UK believes it is imperative to build into the work of these different
reviews a series of measures which will result in defence procurement
being overhauled, in order to ensure that the capability which
front line troops need is available when they need it.
33. GD UK believes that the scale of the overhaul
required, and the importance of making such change, is so great
as to make the issue worthy of separate investigation by the Committee.
This would ensure that the Committee's considered views could
be incorporated into "DIS 2".
34. That said, we strongly endorse the five so-called
"-abilities" which the then Shadow Defence Secretary
Dr Liam Fox identified as the criteria against which to judge
the suitability of the acquisition process.
35. So far as it is possible to identify the principles
which should govern defence procurement within the space constraints
of a contribution to an analysis of strategic interests, GD UK
offers the following thumbnail analysis, focussing on the "Five
Fox -abilities":
— Capability:
industry has a duty of care to provide Britain's Armed Forces
with equipment that is fit for purpose for the tactical and operational
demands of current operations. In order to facilitate this, the
by-words which should henceforth shape the procurement process
are better, faster and cheaper.
— Adaptability:
much military equipment is likely to be in-service with our Armed
Forces for decades. Over the lifetime of such equipment, the nature
of the operations on which those Armed Forces are likely to be
deployed is almost certain to change significantly, thus presenting
a very wide range of operational challenges. The need to future-proof
against such possibilities requires that equipment must be designed
to accommodate a variety of systems and emerging technologies
where these offer operational advantage. In particular, the practice
of defining Common Base Platforms will minimise the requirement
for costly bespoke design variations in response to changing needs.
The practice of "gold-plating" to ensure that equipment
meets 100% of the predicted requirements expected of it should
be dropped. 80-85%, delivered quickly, invariably will better
serve national interests.
— Interoperability:
there is an increasingly strong likelihood that the UK's Armed
Forces will in the future be deployed on overseas missions as
part of wider multi-national forces. This should dictate that
the industry and military standards applied to the design and
operation of equipment are consistent with those applied by our
most likely partners.
— Affordability:
defence equipment manufacturers have a duty to offer the MoD (and,
by extension, the taxpayer) the best possible price by focussing
on design features and supply chains which reduce both acquisition
and operating costs without compromising performance. Further,
manufacturers should commit themselves to the principle that they
gainshare with the MoD any further price reductions which can
be achieved, and to the practice of Open Book Accounting for all
contract changes.
— Exportability:
the initial capital costs of creating specific military capability
for the UK's Armed Forces largely from scratch will often be very
considerable—particularly, though not exclusively, where
the principle of sovereign capability applies. There is therefore
considerable attraction in ensuring that such capability can be
easily modified to meet the needs of other armed forces, especially
those of the UK's close allies, since sales to such countries
would help to dilute the initial capital costs. Against that background,
GD UK strongly welcomes the decision to appoint a Minister with
specific responsibility to promote defence exports.
36. General Dynamics UK wishes to stress that we
have enshrined each of the principles outlined above in the successful
bid which we made for the Demonstration Phase of the Scout Platform.
6 September 2010
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