The long awaited and much anticipated technology, equipment and support for UK defence and security white paper was finally published on 01 February 2012. Intellect is pleased to see it, especially as our members had put forth significant time in participating in the consultation process. The paper, interestingly titled ‘National security through technology’, covers a lot of ground in 65 pages. It is  intended to be a high level guide to how HM Government (HMG) will procure national security capabilities until the next strategic defence and security review (SDSR) in 2015.  Below are our views of how some items in the paper will affect the defence and security ICT industries. 

Value for money and that tax issue

Open procurement principal is identified in the paper as the chosen method for maximising value for money (VFM) while achieving national security. HMG will, where appropriate, buy off-the-shelf (COTS) in the domestic and international market. However, work will be kept in the UK  for capabilities  where HMG needs to retain operational advantage or freedom of action. It’s also recognised that sometimes COTS will need to be modified. The white paper highlights that modifying COTS ‘always involves a balance of risk’. What it doesn’t acknowledge is that modifying COTS will also often involve an increase in cost – sometimes a substantial cost.

Perhaps the most controversial element of the paper is the statement that open procurement will inspire industry to be more efficient and competitive, giving UK industry a greater chance of  winning  contracts domestically and overseas. Yet, if HMG doesn’t place contracts with UK companies, these firms will not have the funding to develop globally competitive solutions – the chicken and egg syndrome. In comparison, our European and American allies recognise the importance of stimulating the competitiveness of domestic companies by, at times, prioritising domestic firms over international firms. There’s another element to this argument that is also not acknowledged in the white paper – the loss of tax revenue associated with HMG’s decision not to give a ‘leg-up’ to UK companies. According to ‘The Destination of the Defence Pound’, a recent report published by RUSI, ‘it would make financial sense on tax grounds alone to select a UK-sourced solution, even if it were priced up to a third more expensive than an external offering.’ The study finds that by placing a £1 million contract with a ‘British businesses and conducting the work on-shore, close to 36% of HMG spend was returned to the Exchequer via tax and National Insurance contributions’.

The ultimate question, however, is if the white paper’s policy of open procurement really any different than what UK defence and security  ICT suppliers faced before? Not really. In fact, some of our members have already publically stated that this ‘new approach’ is actually business as usual. The nature of ICT in these sectors, particularly for prime contractors, is that suppliers integrate internationally-sourced components to match the MoD or Home Office’s bespoke requirements. This is a point Intellect stressed in its input into this strategy.

Innovation

The white paper announces that the MoD will publish its 10-year forward equipment plan later this year as well as annually outline its future science and technology themes. Intellect is encouraged to see that two of its priorities in its input into this consultation have been adopted.  The commitment to spend a minimum of 1.2% of the MoD’s budget on science and technology is also a step in the right direction.

With more transparency and clear funding for science and technology the defence and security ICT industry should be able to prioritise investment with greater confidence that research will be pulled though into a procured for capability.

Exports

The white paper states that HMG will ‘do its utmost to support responsible defence and security exports by considering exportability issues early in the acquisition cycle’. It acknowledges  that sometimes the MoD sets its equipment requirements so high that the resulting system is too complex and expensive for export. MoD efforts to modify the way that it specifies requirements in order to not close the door on other potential customers coupled with the adoption of modularity and open systems will be welcomed by the defence security ICT industry.

Open Systems

The white paper also states that the MoD and national security agencies will make greater use of open systems, which is defined as  ‘systems which are based on publically known standard interfaces that allow anyone to use and communicate with equipment that adheres to the same standards’. Intellect welcomes  this move toward open systems as it should reduce the cost and complexity of integrating components and assist domestic firms in exporting solutions designed initially for UK use. There are, however, a number of challenges in uniformly applying open systems for the procurement of defence and security ICT capabilities and services. These challenges were outlined in Intellect’s input into this consultation and a 2009 paper titled ‘Open Systems in C4ISTAR Procurement‘.

SMEs

With regard to SMEs, the MoD vows to streamline its procurement and payment processes, reform the framework agreement for technical support (FATS) arrangements, reduce its reporting and administration burden, and improve SMEs’ access to the MoD. While these changes are welcome, the devil is in the detail. How, for instance, will the MoD improve its ability to engage with SMEs amidst its reduction in both military and civilian personnel?

Conclusion

The publication of the white paper is very much welcome by Intellect and its members. It confirms months of speculation about how the coalition government intends to equip and support itself in order to defend and secure the nation. Did the 10 month delay result in anything earth-shattering or new? Not really. We now eagerly await the real meat – the 10-year forward equipment plan, the publication of the defence and security science and technology themes, and a more considered approach to measuring VFM.

This entry was posted on Friday, February 3rd, 2012 at 4:44 pm and is filed under Defence and Security, SMEs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.