Buying the biggest and best technology is always going to be high risk and expensive.
First published in January 2020.
The British prime minister’s top special adviser Dominic Cummings has set his eyes on reforming the Ministry of Defence (MoD). In this department, he has chosen a particularly difficult target to hit – and one that has eluded attempts to change it for decades.
Cummings believes he can contain the MoD’s budget by using new management techniques and restricting purchasing abilities. These broad aims are all we know so far, though there is already talk of increasing the emphasis on artificial intelligence and drone technology as opposed to traditional defence equipment.
Dominic Cummings in Downing Street.
In general, the focus is likely to be on gaining greater value for money in defence procurement. One way of achieving this would be reducing overspends and delays on equipment. But these attempts will likely fail, just like every other attempt by governments of all colours. It would appear that in order to remain a global player, either the MoD budget must be increased to a level unseen in decades in real terms, or the UK must accept a different role in today’s world. Spending has been increasing but the new prime minister has announced a “radical” review and warned that costs must be reduced.
Undoubtedly, procurement processes at the MoD need reform. Many projects run over budget and are regularly delayed. Cummings used the example of two aircraft carriers, which together cost £6.2 billion and are unlikely to be put to much use in military operations unless as part of a coalition or on humanitarian operations.
While the ship has literally sailed in the debate over the utility of the aircraft carriers, the wider issue of defence spending is desperately in need of attention.
Yet military procurement must consider the medium to long-term future as well as the present day. This is one of the major problems for defence procurement. It must seek to discover what the world will be like and what threats we will face in 20 to 30 years’ time. This never stands still and procurement must change with it.
It must be acknowledged that the latest military technology is always very expensive. The process of buying cutting-edge innovations is inevitably fraught with risk for both supplier and customer. It involves new systems, supply chains, even source materials that are of national security.
Despite these challenges, defence budgets globally have shrunk. British defence spending in the second half of the 20th century has fallen from around 12% of GDP in the 1960s to around 2% today, thereby meeting the minimum required under NATO rule. Military services have had to find ways to do more with less, which has seen infrastructure repair neglected. The consequence is a massive hidden cost of almost continual running repairs.
Meanwhile, regularly committing to massive projects with costs running into billions of pounds over several years means that estimates of delivery times and final spending totals are likely to be optimistic to say the least. This optimism means money eventually has to be found from other budgets that would be used for the repair of the wider crumbling MoD estate.
Cummings doesn’t seem to be considering the structural realities of defence procurement. Due to the sheer costs and risks, nations are less keen to carry the burden of the research and development costs, so they are not making their own technologies. The price for failure is seen to be too great a political risk. This burden is passed to private sector firms such as BAE Systems, with little guarantee of orders at the end of it.
To cover their risks, contracts provide protection for cancellation, often making it cheaper in real terms to continue to fund projects through to completion. This represents poor value to the taxpayer.
With multinational co-operation increasingly the norm for military procurement, compromises have to be made. No nation gets exactly what it wants from a shared military procurement project but for the MoD this is preferable to expensive bespoke projects that are regularly discarded or quickly obsolete.
The centralised approach to purchasing complex equipment and IT hardware doesn’t appear to satisfy anyone in defence or government. Technological advances occur at an exponential rate and quickly outpace the technology level agreed with the supplier at the start of contracts. This often means the MoD will intervene in the manufacturing process to have equipment modified, requiring either partial or complete re-designs. That, in turn, causes additional costs and delays.
Cummings may be able to push for better practices within the MoD itself, but suppliers will still put up fights to have contracts drawn up to their advantage and technological change will continue at a rapid pace. This will continue to outpace the MoD decision-making process. Wholesale reform of British defence procurement is a massive undertaking, no matter the person driving it or the force of their personality.
Difficult political decisions will have to be made either to properly fund defence or to allow the current situation to continue. But it will take a very brave politician or adviser to state that reality. Britain still wants to buy the best. It still wants to punch above its weight in international affairs. Therefore, without proper funding, overspending will continue to be the norm.🔷
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