Source · Select Committees · Defence Committee
Recommendation 17
17
Paragraph: 115
Given that systemic challenges have not been resolved in the previous thirteen reviews of defence...
Conclusion
Given that systemic challenges have not been resolved in the previous thirteen reviews of defence procurement, we doubt that the Integrated Review will come up with even a short-term fix. We believe that the Review ought to address the strategic issues that should underpin the UK’s approach to defence procurement, in order to provide a sound basis to address these challenges in the future. The UK’s capability priorities and force structure should inform the answers to the following strategic questions on the procurement process: a. What capabilities and skills must remain sovereign and what can be bought “off-the-shelf”? What are the implications for operational advantage, freedom of action, cost and national prosperity? ) b. How does the UK define value for money in defence procurement? In Search of Strategy — The 2020 Integrated Review 59 c. How can UK defence procurement ensure the resilience of logistics and supply? d. How can the procurement process be used to foster innovation and ensure access to intellectual property? e. Is defence procurement, research and development keeping pace with future requirements? f. How will lessons from procurement failures be captured and addressed? The Committee welcomes ongoing work to review the UK’s Defence Industrial Strategy. This strategy should be informed by the strategic decisions made as part of the Integrated Review. The Committee will continue to explore the UK’s defence industrial policy in our ongoing parallel inquiry on this topic.
Paragraph Reference:
115
Government Response
Acknowledged
HM Government
Acknowledged
a) In March 2020, the Government launched a cross-Government review of the UK’s defence and security industry sectors. This work, being led by the MOD but carried out with input from across Whitehall, is considering the defence and security industry on a segment by segment basis, taking into account our national security requirements and opportunities to maximise our prosperity and global influence. Decisions on where and how we should adapt our existing 10 Third Special Report of Session 2019–21 procurement policies will be taken based on investment decisions made as part of the Integrated Review. We look forward to updating the Committee on this work in due course, including as part of the ongoing parallel inquiry into Defence industrial policy. b) In line with HM Treasury guidance, our procurement approach seeks to consider all the relevant costs and benefits, including to wider UK society overall, taking into account all social, economic, environmental and financial impacts that could be relevant to society’s prosperity, where there is relevant evidence. Cost is defined as whole life cost, not just purchase price, taking into account the cost over time, including the capital, maintenance, management, operating and disposal costs. Achieving value for money means that paying more for higher quality may be justified, and this is assessed through relevant investment appraisal and procurement processes. c) The MOD already operates, or is implementing, initiatives to better understand and manage overarching supply chain risks and opportunities. Our approach to supply chains and ensuring the security of our supply more generally is being considered as part of the review into the defence and security industrial sectors, with an increasing emphasis placed on the experiences of our response to COVID-19. Much activity is already underway to address the opportunities and risks of a globalised supply chain, but this review provides an opportunity to bring greater coherence to the various strands of activity across Defence. It also brings an opportunity to amplify and enhance our policies and procedures related to the security of supply, including a greater focus on supply chain mapping and understanding. d) and e) The MOD is also already increasing the pace and agility of our acquisition processes to better exploit innovation and enable the effective and more timely pull-through of emergent technology. We are exploring new ways of partnering the civil sector and industry earlier in the procurement process, to ensure we can benefit from innovation and new technology and inform requirements and delivery approaches at an early stage. Determining the Department’s intellectual property requirement is an important consideration to support this intent and ensure our ability to operate: the MOD has a dedicated Intellectual Property by programmes through-life. e) Defence has systems in place both to identify lessons and to conduct checks and balances as programmes are delivered. Defence Equipment and Support‘s Delivery Endorsement Committee reviews projects for their achievability, and the independent Infrastructure and Projects Authority reviews programmes at critical points, and where lessons are identified these are shared amongst the Project Delivery community. The Project Delivery Function and Chief Economist are working to improve lessons learned and project evaluation. senior staff in the Department, providing support and challenge to our Senior Responsible Owners. We have upgraded our investment decision-making approach to take better Third Special Report of Session 2019–21 11 account of the complexity and risk associated with each programme. The introduction of three-step approvals, with the Strategic Outline Case as a new and earlier approval point, provides upfront clarity of programme scope and understanding of critical risks. We have made changes to facilitate the proportionate scrutiny of individual programmes, maintaining rigour while focusing on what matters. By setting up programmes for success from the outset and exploiting this proportionate approach, we expect to improve, and where appropriate speed up, overall delivery.