U.K. Defense Investment Strategy: No More Military Boondoggles

1/31/2012
By Sandra I. Erwin

A new policy paper released today by the U.K. Ministry of Defence stresses the British government’s commitment to keeping its armed forces well equipped despite a budget crunch that in recent years has eroded spending on military hardware.
But the paper’s major themes — tapping commercial companies for new technology, opening the market to foreign competitors that can provide better deals and improving U.K. buyers’ technical skills — underscore the government’s frustration with the rising costs of research and development of new weapon systems. Over the past several years, R&D has dropped from 2.6 percent to 1.2 percent of the MOD’s approximately $52 billion budget.
The white paper outlines broad goals to provide high-quality equipment for the U.K. armed forces while minimizing wasteful spending. It also calls for a new relationship with industry.
The MOD intends to invest more than $237 billion in military equipment over the next decade.
Of note are the MOD’s industrial policy guidelines, such as how it should go about protecting key domestic suppliers that would be vulnerable if U.K. military spending shrinks or if they lost business to foreign competitions. The industrial policy dilemmas outlined in the white paper are not unlike those that currently are being weighed in Washington, D.C., where Pentagon suppliers are calling for the Defense Department to protect key sectors of the U.S. industrial base.
U.K. defense budgets and military exports support around 155,000 skilled jobs, and another 145,000 indirectly employed in the supply chain. The British government’s position is that it will carefully assess the risk of losing a critical domestic supplier against the financial benefits of buying from a foreign vendor.
“The circumstances in which we will need to do this will vary according to the capability concerned and the external situation,” the white paper says. “In some cases, the costs of potential protective measures may be prohibitive.”
Some suppliers, the paper states, “may be fundamental to achieving and maintaining certain of our sovereignty requirements, so we may take action to protect those aspects of capability that they supply to us which are essential to our national security.”
Once a particular sector of the industry or specific technology has been identified as essential to national security, the MOD will gauge the cost of keeping R&D shops and production lines in business. “We will then make a decision about whether this cost is affordable and demonstrates value-for-money.”
For many of its future procurements, the U.K. plans to seek technology from the global market.
“We may wish to take the economies of scale that become possible when working with another nation, as well as the opportunity to harmonize requirements, pool resources, share facilities and overhead costs, and benefit from longer production runs,” the paper says. “Working with another nation may allow us to maximize our capabilities, by sharing technologies and aspects of capability that would not otherwise be available to the U.K.”
Working with foreign allies, the policy says, is “not detrimental to our national sovereignty provided that we retain the operational advantages and freedom of action that we judge to be essential.”
The United States is cited as the U.K.’s “major bilateral acquisition partner.”
British weapon buyers, meanwhile, have to become “intelligent customers,” the paper says. Being an intelligent customer is a catchphrase for government bureaucrats who grasp the intricacies of technology and are aware of the market trends.
The MOD calls for a “lean, skilled work force in-house. Almost all technology development is driven by the consumer market. As a result, the paper says, “We need to draw on and leverage this investment, but to succeed we need to know what to buy, where it can be bought from, and where we need to focus our own investment in science and technology.”
But the paper cautions that “success as an intelligent customer nevertheless presents its own challenges. … We must understand and assess the market place, what is potentially available, who the suppliers are, and what processes and standards are being used.”
An intelligent customer has to “understand how to integrate commercial off-the-shelf products, designed for markets with a high degree of certainty, into evolving defense and security systems and equipment. We have, therefore, to be able to identify, understand, and evaluate the technical, financial, interoperability, and security risks involved in such integration.”
 

Topics: International, Procurement

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