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Defence CommitteeWritten evidence from Saab

Summary

Saab welcomes the Government’s White Paper, National Security through Technology, and believes that it offers the chance for significant progress in the British defence acquisition and procurement process.

We relish the opportunity to submit written evidence to the Defence Select Committee on this issue.

In summary, we believe that:

the emphasis placed on value for money is an essential aspect of any Government’s future defence procurement policy, especially in these times of austerity;

transparency must be included in policy, and at the earliest possible opportunity;

the value of appropriate “off-the-shelf” procurement has been focused on correctly in the Government’s White Paper as this allows for the maximum amount of flexibility when dealing with threats, as well as small and medium-sized enterprise (SME) involvement in the procurement process—but this need not be at the expense of the UK supply chain, nor does it require the UK armed forces to settle for second best equipment;

as the White Paper correctly outlines, open procurement is the best possible option, as it ensures competition, value for money and, if correctly managed, significant SME involvement;

the Government’s commitment to provide information to the defence industry as early as possible is welcome, but still more could be done to improve the clarity of the procurement process;

it is important to pursue a policy which strikes the right balance between “off-the-shelf” procurement and supporting the UK’s defence industrial base;

bilateral relations between the UK and France, and the UK and the US, are of course hugely important in the defence and security fields, but:

the UK has opportunities to broaden and deepen bilateral and multilateral cooperation to include other allies, notably the Scandinavian countries.

1. Introduction: Saab’s Growing Presence in the UK

1.1 Saab AB is a global defence and security company, and we opened our London office in September 2011 as part of a major expansion into the UK. We believe this emphasises our commitment to working and growing in Britain and being a growth engine for enabling UK defence exports. With 200 employees already based throughout the UK, the new headquarters will become a hub that co-ordinates all in-country operations and helps extend our reach into the UK defence industry.

1.2 We have a long and successful relationship with the UK, providing defence products and services to the UK armed forces over a significant period of time. These products and services include combat and counter-IED training for infantry soldiers and advanced radar systems deployed, helping to secure the lives of UK troops deployed overseas. Our new UK headquarters also houses an engineering design centre that will capitalise on the UK’s maritime aircraft engineering expertise. Its first project will be to design a carrier-based version of the Gripen next generation multi-role fighter aircraft. Our design centre in London is a self-funded project where we will invest up to £3 million in the UK economy this year, supporting highly skilled UK engineers within our own operations and those within our wider UK supply chain. The recent announcement in the 2012 Budget that the Government will invest £60 million in a new UK aerodynamics centre hopefully means we can develop our design centre operations alongside this.

1.3 The Gripen multi-role fighter aircraft—Saab’s signature product—successfully supported NATO operations in Libya with the Swedish Air Force. Up to 36% of the Gripen air craft is manufactured here in the UK, where major systems such as the latest generation electronically scanned radar, and the landing gear, are made.

1.4 Saab has selected the Selex Raven electronically scanned radar to equip the next generation Gripen fighter as its main sensor. This radar is produced in Edinburgh, where the Gripen programme is protecting and sustaining this key UK technology, as well as being the launch pad for the Typhoon radar replacement. Gripen is an essential part of this programme, and is protecting the highest quality jobs, software engineering and technologies in the key UK aerospace sector.

1.5 All Gripen main and nose landing gear is produced by APPH in Runcorn, Cheshire, protecting key advanced manufacturing and design jobs and important UK manufacturing technology in the aerospace industry.

1.6 During 2012, we will also centralise our global underwater vehicle development and production in the UK. We are now in the process of merging the military underwater vehicles operations in Sweden with Saab Seaeye, a UK subsidiary based in Fareham, Hampshire. Saab Seaeye is the market leader in the design and manufacture of remotely operated underwater vehicles for the off-shore market. The move to Fareham will integrate all operations to benefit the company’s significant global customer base in the civilian and defence markets.

1.7 Our New Light Anti-tank Weapon, NLAW, is a joint program with the UK MoD. Designed by Saab in Sweden and assembled by Thales in the UK, the NLAW was developed with a team of 14 British companies situated in the north of England. More than 10,000 units have been produced with a strong UK supplier base for the worldwide market. TEAM NLAW is a founder member of the Northern Defence Industrial Association.

1.8 Saab has a significant SME footprint in the UK, with the majority of our suppliers based here, comprising a 100 firm supply chain nationally. Our activities in the UK put significant jobs and revenue into the national economy. Our business model, using suppliers from all around the country, directly contributes to the cross-party goal to rebalance the economy away from London and the South East through growing UK manufacturing and industrial output. Since 2003, Saab investment in UK companies amounts to £600 million.

1.9 Saab’s objective is to be seen as a trusted and dependable partner to the UK on all levels. We pride ourselves on a track record of delivering exactly what we promise on time, on budget and to the highest possible levels of quality and capability. Today, Saab continues to offer a different way of doing business, especially in defence and security procurement, where we “do more for less”. Indeed, our most recent Gripen delivery to the Swedish Government was delivered ahead of time and under budget.

1.10 With industrial cooperation vital in the global defence sector, we hope our enlarged UK presence will create the conditions for a wider, strategic partnership that will benefit both the UK and Sweden.

2. Topic 1 & 2

2.1 As previously mentioned Saab has a significant operations base within the UK and seeks to grow this further in the future. We are keen to contribute to the work of the Committee in assessing the White Paper, National Security through Technology, although at this stage we feel that it may be premature for us to address the first two topics of the Committee’s inquiry in any length. We will therefore be focusing our written evidence on topics three and four of the inquiry. However, we wish to state that Saab is a strong supporter and experienced supplier of integrated support solutions from product development, all the way to turn key capabilities; this involves innovative and unique financial models.

3 Topic 3

3.1 The procurement process outlined in the White Paper offers a chance for significant improvements on the past and the emphasis on value for money is essential.

3.2 Transparency at an early stage is highly desirable, enabling industry to invest in advance leading to the most appropriate equipment delivered to Government. Providing clear information to industry on procurement, benefits not only industry by way of providing it with clarity and Research and Development (R&D) confidence, but also means the UK’s defence capabilities could be developed to the highest level to enable timely and appropriate response to any future threats.

3.3 A flexible and responsive defence policy is absolutely essential for the UK and “off-the-shelf” procurement solutions have a major role to play in this. “Off-the-shelf” solutions can help to guarantee MoD budgets are not overspent, delivering value for money on time, since the risk of developing the product may already have been undertaken and paid for elsewhere. “Off-the-shelf” procurement, correctly managed, also works with the Government’s ambition as outlined in the White Paper to involve SME’s more in the procurement process, as many “off-the-shelf” projects have a significant SME footprint across the UK.

3.4 As the White Paper makes clear, open procurement is the best policy and practice. When it is implemented correctly it will lead to value for money and will ensure the best balance of “off-the-shelf” procurement and supporting the UK’s industrial base.

3.5 The Government’s White Paper places a great emphasis on SMEs and including them in the procurement process. This is an entirely justified position that we strongly support and it can be developed even further. Companies like Saab source a huge volume of their operations and materials from the British aerospace and defence industry. For example over thirty% by component value of the Gripen fighter is manufactured in the UK. Additionally one of our main targets for the UK is to grow from our 200 plus strong foot print organically, and by transfer of technology from Sweden.

4. Topic 4

4.1 It is important to stress that Saab, although presently operating from a limited UK industrial footprint, seeks to build and develop a strong defence manufacturing base here in the UK. Indeed, we are doing our best to strengthen it, and are grateful to the policies of successive UK Governments which have enabled this.

4.2 It is our view—shaped by our own experience—that an open and competitive UK defence market is not only important for securing value for money for the UK taxpayer, it also permits overseas companies such as Saab to come into the UK in order to establish local operations and export from the UK with a strong competitive UK industry base.

4.3 Thus, for example, UK jobs and UK exports benefit significantly from any sales to third party countries of our Gripen, NLAW and Live Training products, just as they will from any future sales of the underwater vehicles whose research base we are concentrating in this country. For that reason, we are grateful to the support over the years from UKTI in aiding our efforts to sell NLAW, Gripen and Live Training into the export market. This benefits us, and enables us to benefit the UK.

4.4 This shows why the principles of “off-the-shelf” procurement and support for industry and exports are entirely compatible. For the Ministry of Defence to have an effective and balanced defence policy, to ensure growth and rebalancing of the economy, and for procurement to be as streamlined as possible, it is essential that “off-the-shelf” procurement is exercised in conjunction with maintaining the UK’s industrial base and retention of indigenous capability.

4.5 We believe that it is simply not true that a procurement strategy needs to be a choice between the UK’s national security and the UK’s economy. Furthermore, the Government can also safeguard SME involvement in the procurement process by following this policy, due to the high levels of UK defence industrial base input in major defence projects.

4.6 It is becoming increasingly clear that current and future defence policy must include international cooperation with the UK’s allies. Under the Treaty on the Functioning of the European Union (TFEU) the UK is required to act fairly, transparently, and openly by opening competition for defence and security contracts at EU level. Please refer to article 101 and article 326 of the Treaty.

4.7 The Government’s White Paper focuses on the relationship between the UK and the US and that between the UK and France. Of course those relations are very important, not least because of the long standing close co-operation between the armed services of those countries. This is not in conflict with our positive arguments above about “off the shelf” procurement and a strong SME involvements and doesn’t exclude relationship with other parties and industries, as Saab and Sweden has been proving over the years.

4.8 In the recent Shadow Defence Review consultation document, the Labour Party made a specific commitment to develop bilateral partnerships with Scandinavian and Baltic nations. We welcome this proposal and we hope the Government will consider it seriously when looking at future strategic defence partners. It would be highly desirable for the defence policy of the UK to have a wide range of bilateral partnerships in the defence sphere, focusing on sharing developments in research and technology, and coordinating in areas of procurement. Developing bilateral partnerships with Scandinavian countries will enable the UK to increase its ability to respond to threats facing the country in the future, as well as being beneficial to the defence industries of the nations involved.

4.9 We welcome the Committee’s timely and appropriate inquiry, and would be happy to furnish the Committee with any further information in support of it.

April 2012

Prepared 6th February 2013