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MoD Acquisition and the Gray Report

Commentary, 27 August 2009
Defence Policy, UK Defence, Europe
The Ministry of Defence’s (MoD) equipment acquisition system has come under increasing fire over the last decade. And not without reason: huge effort, continuous change and much MoD hype has not brought improvement in delivery terms that we need.

Despite two excellent initiatives – Smart Procurement in 1998 and the Defence Industrial Strategy (DIS) in 2005 – the Ministry of Defence’s (MoD) equipment acquisition system has come under increasing fire over the last decade. And not without reason: huge effort, continuous change and much MoD hype has not brought improvement in delivery terms that we need.

Force Protection Helicopter

By Brigadier (retd) Bill Kincaid, Editor RUSI Defence Systems
27 August 2009

Background

The Ministry of Defence (MoD) is quick to point out that a huge amount of equipment has been delivered to the front line in quick time under the Urgent Operational Requirements (UOR) procedures. So it has. But UORs have their downsides: they undermine equipment coherence; they are not funded for long-term manning and support; they pose considerable training issues; they are often sourced from outside the UK thus undermining the DIS; and sustainable through-life capability is not delivered.

Despite these problems, a significant proportion of front line equipment continues to be delivered through the UOR process. Some of this is inevitable because of changing threats leading to unforeseen requirements, but much (the majority?) is at least partially the result of grossly inadequate funding of the equipment programme over the last decade or more. There is a black hole – estimates vary from £25 billion to £70 billion, the exact figure being open to interpretation – and this underfunding leads to cuts, delays and equipment downgrading which often opens up equipment gaps that later have to be closed in a hurry through UORs.

Many analyses, studies and initiatives have been undertaken both within the MoD and without, but with little clear improvement. The latest of my series of ‘Dinosaur’ books – Changing the Dinosaur’s Spots – sets out the problems and suggests solutions. Dismissed as ‘nonsense’ by the MoD, it seems to be very close to the findings of the recent report by Bernard Gray, who was commissioned by the then Secretary of State for Defence, John Hutton, to conduct a review of the acquisition process. His findings are reported to have caused much controversy within the MoD, and there are even rumours that its findings are too damaging for public consumption.

Amongst other things, Gray is reported as saying that:

• The scale of MoD bungling is so severe it is harming our ability . . . to conduct difficult current operations.

• The MoD department in charge of procurement is so incompetent that it should be privatised.

• The problems, and the sums of money involved, have almost lost their power to shock, so endemic is the issue.

• The programme is unaffordable on any likely projection of future budgets.

These criticisms are hardly new but they are harsher than previous assessments and show that the problems of acquisition are becoming increasingly serious. Despite much effort, recent governments have failed to achieve significant change with the result that defence, and particularly acquisition, has continued to spiral downward.

Next steps

The failure to improve delivery is due to many things, but perhaps the most important failing lies in the inability to change culture in the MoD. There are two main reasons for this:

• True culture change is very difficult to achieve, so the MoD’s emphasis has been centred on the easier changes to process and organisation.

• Culture change has to be driven from the top by one man who remains in place for several years – at least five, probably more. This has not happened.

Both key initiatives (Smart Procurement and the DIS) emphasised the overriding need for culture change, but in neither case was this properly followed through, partly because key officials were happier remaining in their comfort zones, but crucially because the architect of each resigned within two years of publication of their initiatives – George Robertson to take up a key NATO post and Lord Drayson through frustration.

What are the culture problems?

First and foremost is the ‘Whitehall delay mentality’. Government officials find it less career threatening to postpone a decision than make one and risk getting it wrong. Unlike the UOR process, ‘time-to-market’, which drives decisions in non-government organisations, is not a factor in ‘normal’ procurement. However, delay costs money and therefore delay in effect reduces the already inadequate size of the available budget. As the budget falls, more ‘savings’, often in the form of delays, have to be made, thus increasing costs still further and reducing the budget yet more. If delay was properly costed in Whitehall and if officials were rewarded for making good, but ‘courageous’, decisions rather than career-safe delays, this issue would quickly disappear.

Next is the increasing gap between commitments and funding. It is ministers who make defence commitments and it is ministers who provide the budget. It is ministers who must bear the blame for the disparity between the two. The increasing gap between commitments and funding means that the MoD has to spend huge effort every year in looking for ‘savings’ which usually come in the form of moving programmes off ‘to the right’, thus increasing costs. The forward programme must be affordable.

Another major issue is the lack of a clear head of acquisition in the MoD. Many are responsible but none of these has the necessary authority to match the responsibility. For four years over the last decade, we have had such an acquisition head – from 1998–1999 in Lord Robertson, and from 2005–2007 in Lord Drayson. During these years progress was set in motion, but as each left the internal opposition was able to unstitch that progress despite the efforts of a few souls further down. The organisation at the top of defence has to be sorted out so that responsibility and authority can be matched, thus producing true accountability.

While some improvement has been made in the relationship between the MoD and the defence industry, there remains a clear adversarial culture, not least amongst the commercial staff. The DIS recommended a major shift to strategic partnering, but this is not possible so long as the MoD fails to realise the need to share pain as well as gain. This necessary shift in attitude must be made. It is not impossible as there are examples of where such a shift has been achieved.

There are many other culture changes that must be made: proper empowerment of individuals; clear rewards for improved delivery; improvement in skills; overcoming risk-aversion; emphasis on maximising the upside rather than minimising the downside; instilling a ‘time-to-market’ mentality; and learning lessons rather than identifying and then forgetting them.

The reports of Bernard Gray’s review, if confirmed, will largely substantiate the views published in the recent RUSI book, Changing the Dinosaur’s Spots, and points to the serious position in which defence acquisition finds itself. Denial and inaction, which is the staple response of this Government, can only make things worse and increase the risk to soldiers’ lives.

The views expressed above are the author's own, and do not necessarily reflect those of RUSI.

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