The UK Defence Industrial Policy Document: Few Real Constraints or Direction for Future Choices

The Ministry of Defence launched its Industry for Defence and a Prosperous Britain in the dead days before Christmas, apparently hoping it would have little impact. Indeed, the media coverage was minimal.

The three strands of the declared policy are:

• Improving the way defence delivers wider economic and international value, and national security objectives.
• Helping UK industry to be internationally competitive, innovative and secure.
• Making it easier for innovative companies, small firms and new defence suppliers to do business with the department.

At first glance, this appears to be nothing new, especially as support for UK defence exports and the encouragement of SMEs to contribute to defence are established elements of Britain’s stance.

The ‘commitment to open competition’ which Secretary of State Gavin Williamson emphasised in his introduction is also not novel. A readiness to work with industry through the Defence Growth Partnership, the Defence Solutions Centre and the Defence Suppliers Forum can also be interpreted as business-as-usual.

The document also asserts the continuing validity of the National Security Through Technology paper of 2012. However, as part of the MoD’s emphasis on ‘international by design’, there is slightly greater weight behind the search for collaborative partners.

However, the centrality of industry is recognised from the start:

Working with the Armed Forces and civilians in defence, industry is at the core of the United Kingdom’s defence effort in meeting National Security objectives.

Moreover, there is also a very cautious readiness to recognise the strategic value of the UK defence industrial sector in terms of freedom of action and the resilience and sustainability of national military capability, which implies a government need to nurture private sector supply chains in important areas.

The executive summary illuminates this point, stressing increased focus on ‘industrial requirements across all aspects of capability for operational advantage and freedom of action, with a more systematic approach for strengthening the way we protect and monitor them in the supply chain’.

The reference ‘to all aspects of capability’ would appear to refer to the defence lines of development framework, which includes logistics and support. This is at least a hint that the UK is considering requiring external suppliers to put in place technology transfers and support arrangements which would enable the UK to support its equipment internally (for freedom of action) and even modify it (for operational advantage).

In his foreword, Williamson speaks of the government’s responsibility ‘to obtain the right capability for our armed forces’, rather than simply referring to the best equipment.

There is also a sign of increased interest in the resilience and competitiveness of supply chains, with a commitment to ask for supply chain plans for competitive contracts with a value of more than £100 million. This appears to have been driven in part by concerns over cyber vulnerabilities to defence stemming from weaknesses in lower-tier suppliers.

While the paragraph does not address the non-competitive contracts and foreign military sales agreements, which are a feature of current procurement practices, encouragingly at multiple points through the paper the government recognises that it needs to know more about supply chains on which its suppliers depend.

Moreover, due to Brexit, the government is concerned about the country’s economic prospects, has a renewed interest in strengthening manufacturing and does not want to exclude defence from initiatives in that area.

The Refresh document therefore affirms the importance of defence industry to the economy and includes a commitment to take ‘earlier and fuller’ account of economic value in defence procurement choices. This could open the door for employment, regional development and tax revenue factors to be explicit considerations in procurement bid-assessment schemes and defence choices.

However, rather in contrast to this overall orientation, the paper also indicates that the MoD still views itself as primarily ‘a customer’ – a buyer/consumer of goods and services, rather than as the national prime contractor for the generation of military capability.

Also, Williamson said that the UK would continue to champion ‘free, fair and responsible’ defence trade and re-asserted the importance of (implicitly international) competitive tendering for defence procurement.

A weakness in the paper, notwithstanding the words on assuring operational advantage and freedom of action, is its failure to address a wide range of goods and services bought by the MoD. It also fails to assess how different categories should be treated differently or to discuss how projects requiring significant development work have different features from purchases from a production line and what the procurement implications are of platform and other major system purchases with extensive support needs and through life costs that much exceed their initial purchase price.

Finally, it is intriguing to note the latest US National Security Strategy document – also launched in December 2017 – which included the following on the Defence Industrial Base:

The ability of the military to surge in response to an emergency depends on our Nation’s ability to produce needed parts and systems, healthy and secure supply chains, and a skilled US workforce … Support for a vibrant domestic manufacturing sector, a solid defense industrial base, and resilient supply chains is a national priority.

The British paper contains significant traces of the arguments mentioned in the US document, but still leaves UK procurement bodies free to buy from the world market.

Overall, the document provides no significant constraints on government decisions: collaboration with the US and with Europeans will be pursued; there is to be competition tendering, but also close working with industry; and the government wants national freedom of action, but also wants to be open to external suppliers.

Given the complications of defence procurement and capability generation, much of this is understandable, but the absence of a clear direction limits the utility of the document as a source of guidance. It does, however, have the capacity to legitimise a range of choices.

The views expressed in this Commentary are the author’s, and do not necessarily reflect those of RUSI or any other institution.