Ministry of Defence Procurement – The Same Old Issues?

(This series of articles was first published by us in December 2010 but seems relevant given the recent debate around the suitability or otherwise of the F-35 fighter planes bought by the UK’s Ministry of Defence. We have slightly edited the originals and are publishing in two parts rather than the original four – hence this is somewhat longer than our usual posts.)

A neighbour of mine is a quiet, slim, unassuming gentleman in his early 60s.  It’s only when you go into his home and see the pictures of him in full uniform, and another of him on top of Everest, that you realise there is a bit more to him than meets the eye.

He was a senior Army officer, including a spell in the paras, but he was also a logistician.  He’s talked to me a little about some of his experiences, including when he commanded logistics staff in the Falklands during the conflict of 1982.  If you ever think supply chain is just the same for the military as it is in any organisation, have a chat with someone like him.  His stories of logistics staff being killed while on duty, or the effect of supply chain and procurement decisions back in Whitehall and Bristol on front line troops; these were real issues in the Falklands and still are.   This isn’t quite like anything else.  Lives are at risk as well as national reputation and political careers.

And that is one of the reasons why getting military procurement right is both so important and so difficult.  There are issues here that don’t come into play in any other part of public or private sector procurement. That’s not just the importance of what is bought to the front-line; MOD also get into issues of national security, as well as jobs, very quickly as soon as questions of local versus non-UK suppliers for major equipment for instance.

The Times recently featured a series of ‘shock horror’ articles about MOD acquisition.  They were quickly followed by the announcement of Bernard Gray’s appointment as Chief of Defence Materiel, putting him in charge of the 20,000 staff of Defence Equipment and Support, which includes procurement, logistics, design and support and a whole range of other related activities.

It was suspiciously coincidental timing; were the Times articles designed to prepare the ground for Gray, and perhaps to diffuse any potential critics who might have claimed that he is both a Tory party adviser, and someone whose cv (in operational terms rather than as a commentator) does not obviously suggest a fit to this job? The Times was certainly very positive about his report of 2009, which, having looked through it again recently, does contain much that appears perceptive and convincing.

We’ve been talking to friends and acquaintances since the Times articles; people who are in MOD procurement; have worked in or with MOD, either as employees or consultants.  That has led us to put together our own take on matters.  We don’t by any means disagree with what Gray or the Times said in many areas.  But, as one of our contacts said, “one of the problems is that people in MOD can’t answer back to the criticisms”.  So in a couple of areas, I hope we might be able to put the other side of the story compared to the criticism that MOD procurement and related staff often seem to get – and we’ll look at some the issues facing Bernard Gray and his colleagues who have the task of reforming the processes.

But firstly, we should ask whether the process is in fact broken? There are arguments that suggest the focus on a few (admittedly important) defence equipment projects masks a generally strong performance by MOD procurement.   Certainly a number of our contributors feel that against international benchmarks, the performance is actually pretty good.  But of course the public image is conditioned by what is really a small number of high profile delays or issues.

Certainly, and I have personal evidence of this, in some areas MOD procurement is leading edge in public or even private sector terms.  In areas such as strategic relationship management, contracting for availability, supporting SMEs (smaller firms) in the supply chain, or some aspects of training, they have actually taken action and achieved results that most organisations still only talk about.

So what are the problems that MOD acquisition faces?  They fall into two categories; those which can be addressed perhaps from a ‘professional procurement / project management’ perspective, which we’ll look at in part 2, and others which are wider and require some potentially fundamental changes that go way beyond procurement, which we’ll discuss here today.

  1. Planning, budgeting and the role of politicians

This is the point that our contacts with internal MOD experience make most strongly.  Too many projects are approved and get into the pipeline, without the budget being available to see them through. We then see the ridiculous situation where projects are delayed almost before they’ve started because of budget constraints.  There is an element of conspiracy here between politicians, civil servants and the industry, but it ultimately comes down to politicians.  And this is where the Times was unfair to civil servants; it is not they who make decisions to announce a new project, when everyone knows it can’t be funded.

We still have a set of national defence policy positions, which lead to defence capability and procurement requirements that cannot be achieved with the funding allocated by government.  Our sources suggest this is still true and a test of this government’s seriousness to sort this out will be the required announcement of much reduced capability in 2011 – or (unlikely it has to be said), an announcement of higher funding.

Fundamentally, this issue “is the failure of politicians to take realistic decisions and the related failure of officials to stand up to them”.  This has to change or everything else is window dressing.

  1. Inter-service rivalry

This exacerbates the problem above. Gray makes this point strongly in his report and our contributors support his analysis that the ‘fighting one’s corner’ that goes on between the three services makes the planning and budgeting process even harder. No-one wants to admit when a project is behind schedule; no-one wants to give up their ‘share’ of the budget.  So these two key factors combine to ensure there are always too many projects and too little money. This means constant project reviews, even post contract, so that no one, including suppliers, have any certainty.

  1. Jobs and national security

According to people we’ve spoken to, “everyone knew that the Aircraft Carriers were unaffordable”.  They were nevertheless ordered because they guaranteed jobs in Scottish constituencies; but then immediately postponed for 2 years to save £200 million in that year.  This whole episode was “a bona fide scandal” according to senior people.  It wasn’t widely reported, but it is significant that Bill Jeffrey, the previous MOD Permanent Secretary, was rebuked by the public accounts committee because he didn’t ask for a ‘ministerial direction’ on the purchase of the aircraft carriers; that is, a personal ‘get out of jail’ card which says, “I’m doing this at your behest Minister even though I think it is a bad idea”.

But to be fair to Jeffrey, this dreadful decision was made by politicians, not civil servants.

The consultation paper on defence equipment published just before Xmas says this:

“Our default position is to use open competition in the global market, to buy off-the-shelf where we can, and to promote open markets in defence and security capabilities. We will take action to protect our operational advantages and freedom of action, but only where essential for national security”.

This seems admirable, but will see how that stands up the first time we see headlines about factories closing because MOD are sourcing from France, the US or India…  The same paper makes much of using defence acquisition to support UK exports, which seems sensible but could of course lead to another complication in making acquisition decisions.

“We are clear that spending on defence and security capabilities must be for the sole purpose of protecting our national security. However, there are wider benefits from having competitive and viable technological and industrial sectors in the UK; ……successful exports help build relationships with and capacity in other countries, as well as contributing to UK growth”.

If these are the macro-level issues facing MOD procurement, what about some of the more ’professional’ issues? We’ll take a look at those tomorrow.

Voices (2)

  1. Ben:

    What was the Falklands conflict in 1992, assume 1982?

    1. Peter Smith:

      Apologies, a slip of the keyboard, now corrected. Thanks!

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