Posts by @JagPatel3

Foreign sales are used to justify spending billions on GCAP

What is notable about public statements made by domestic prime contractors is that there is no bold talk of taking on foreign competitors, beating them on their own turf and teaching them a lesson on how to win. Why?

Because the inescapable fact of the matter is that dominant players in the UK’s defence industry, the Select Few, haven’t got the guts to go up against all-comers in an international contest which might end up revealing what many informed people know to be the unspoken truth – that they are hopelessly uncompetitive on account of not having had the prior experience of entering open competitions, in the main, because UK governments of all persuasions have pursued a policy of gifting a steady stream of uncontested, single-source defence contracts to these indigenous contractors on a preferential basis, for as long as anyone can remember – under cover of a sham, make-believe competition. This, despite repeatedly claiming that it is government policy to procure military equipment for the Armed Forces through fair and open competition.

Yet one of the reasons put forward by producer interests to justify spending huge amounts of public money on new military equipment programmes like GCAP is that subsequent foreign sales to international customers will serve to offset the inordinately high outlay on initial design & development work, which is all too common on these type of procurement programmes – as is the recurring problem of persistent delays and cost overruns.

But how is the domestic defence industry going to export newly-designed equipment if it doesn’t enter competitions run by foreign governments in the first place?

The answer lies in the lack of ambition on the part of these usual suspects. Whereas they publicly let it be known that they want to export their products worldwide, their undeclared intention, which is central to their extractive business model, is to focus exclusively on exploiting HM Treasury to the fullest extent possible. Repeatedly perpetuating the line that spreading the design & development costs across multiple customers to get better value for money for UK taxpayers is only a ruse to persuade the government to take that all-important, purchasing and investment decision in the first place.

Which would explain why products developed in this millennium, such as the 54 Watchkeeper unmanned aerial reconnaissance drones which have cost taxpayers £1.12bn, have failed to attract even a single export customer.

On this basis, it can be said with confidence that GCAP will do no better!

@JagPatel3

The Ministry of Defence may have achieved herd stupidity

To realise its vision of becoming a science and technology superpower, the government has announced the launch of a new research agency that will fund high-risk, high-reward science projects with a directive to permit a much higher level of tolerance for failure than is normal – recognising that in research, the freedom to fail is often also the freedom to succeed.

The agency – christened ARIA, the Advanced Research and Invention Agency, provided with a budget of £800 million over five years, will have the freedom to experiment with funding models and spend taxpayers’ cash on basic science and cutting-edge technologies without requiring prior approval from the political or administrative elite. It is the brainchild of the former chief adviser to the Prime Minister, Dominic Cummings, who modelled it on the highly successful cold-war era US research agency DARPA, the Defense Advanced Research Projects Agency.

But whereas the American DARPA was given an explicit defence brief and set-up within the Department of Defense with a mandate to contribute towards the technological superiority of US Armed Forces, no such requirement has been imposed upon the British ARIA. What’s more, ARIA has been established within the Business, Energy and Industrial Strategy department with an instruction to focus on the advancement of civilian research.

There is a good reason why the Ministry of Defence has been frozen out of any prominent role in the research activities of ARIA – it simply hasn’t got any intelligent or competent people within its ranks to make a difference. Indeed, MoD may very well have achieved herd stupidity.

Consider the evidence.

The clear message behind the government’s defence procurement policy is that equipment for the Armed Forces is to be purchased through fair and open competition – the only exceptions being off-the-shelf purchases and single-source development contracts, the latter to be handed out on a preferential basis (to the Select Few).

Indeed, the government confirms this stance in its Defence Industrial Policy* by saying:

“We strive to provide our Armed Forces with the capabilities they need at the best value for money, obtaining this through open competition in the global market, wherever possible. Competitive tension is the greatest driver for innovation, productivity and earning power in any economy.”

The government intends to achieve this by selecting the single, preferred prime contractor from a choice of industry teams by running a multiple-phase, winner-takes-all competition on the basis of a level playing field genuinely open to all-comers, including non-domiciled suppliers – to ensure it gets the very best value for money for the taxpayer.

However, “sudden death” competition (which abruptly reduces the field of bidders from six to one following a one-off release of the invitation to tender) currently used by MoD, has been rendered ineffective by defence contractors who are quoting identical bottom-line selling prices against the same requirement – which amounts to price-fixing on a grand scale, with the active connivance of the Secretary of State for Defence.

This is completely at odds with protecting MoD’s commercial interests, which is what Ministers are so fond of telling the public. Worse still, MoD’s Project Team Leader located at its arms-length procurement organisation in Bristol is being denied the opportunity to choose the single prime contractor on the basis of price competitiveness, and therefore value for money.

This farcical situation has come about because MoD’s longstanding policy of disclosing the total budgeted expenditure figure or associated year-on-year financial funding profile in the ITT has resulted in defence contractors quoting identical bottom-line selling prices in their ITT responses – an entirely predictable result!

How stupid can you get?

Even the then Comptroller and Auditor General came around to accepting the view that it is not clever to reveal what the government is going to spend on a particular programme, right at the outset, because in so doing, it loses a lot of negotiating leverage with the people it might contract with.**

Sir Amyas Morse, who completed 10 years as C&AG, had a ringside view of the inner workings of government and is therefore extremely well-qualified to comment on central government contracting practices.

It is not for MoD to tell the private sector what the price of a new equipment programme should be. Instead, it is very much the business of defence contractors to tell MoD how much each new equipment programme will cost, based upon the prevailing value of goods, services, labour and finance in the free market shaped, not by the interfering hand of people in the pay of the State who always get it wrong, but by competitive market forces driven by the profit motive and winning mindset.

There is not a single person at the MoD who has the guts or wherewithal to call out the stupidity of such practices which have been going on for decades.

It would explain why the MoD has failed so miserably to deliver equipment to the Armed Forces which is fit for purpose, adequately sustained in-service and constitutes value for money through-life for as long as anyone can remember.

@JagPatel3

* Defence Industrial Policy document, Industry for Defence and a Prosperous Britain: Refreshing Defence Industrial Policy, published December 2017, p.23, PDF file (1.28 MB). https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/669958/DefenceIndustrialPolicy_Web.pdf

** See answer to Q50, oral evidence from Sir Amyas Morse before the Public Administration and Constitutional Affairs Committee, Inquiry into The Government’s Management of Major Projects, HC 1631, 6 November 2018. http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-administration-and-constitutional-affairs-committee/the-governments-management-of-major-projects/oral/92338.html

Market concentration in the defence industry

A central issue that people never bother to consider when commenting on this type of M&A in the defence sector is the likely narrowing of market participants supplying equipment to the Armed Forces – given that it is such an important factor underpinning the proper functioning of open markets.

Fortunately, the Business Secretary is minded to consider exactly this question during his deliberations!

If consolidation serves to tackle the problem of persistent delays and cost overruns on defence procurement programmes, then one can be sure that government will be in favour of it. Sadly, the reality is that consolidation only makes the situation worse because it leads to concentration and a reduction in competition.

Consider this simple fact. According to statistical data cited by House of Commons Library briefing paper CBP 08486 (on p32), over 42% of MoD’s expenditure on defence procurement for 2017-2018 amounting to over £17bn was spent on just ten suppliers. What’s more, this market share has remained pretty much the same over the last decade. Even the then C&AG, Sir Amyas Morse (who was previously Commercial Director at MoD) came around to the view that there is unhealthy market concentration in the defence industry. The current National Security Adviser who was previously MoD Permanent Secretary has also acknowledged that the defence equipment market has become much more concentrated.

It is hard not to conclude that this stranglehold by the Select Few has been the cause of poor performance and a lack of competitiveness – characterised by persistent delays, cost overruns and chronically weak export performance.

Market concentration has been allowed to grow unhindered over the last several decades because successive generations of MoD civil servants and Ministers haven’t got a clue how free markets work, not least, because they have never “felt the heat” of competitive market forces or spent a single day of their lives in the private sector.

The good news is that development of competition policy has now been taken out of the hands of MoD and transferred to BEIS under this pro-market, pro-competition government – which opens up the possibility that the Business Secretary could exercise his powers to direct the Competition and Markets Authority to conduct an investigation into the state of the defence equipment market.

Instead of following the usual tried-and-failed MoD-driven approach, this probe should be led by BEIS informed by the CMA investigation with inputs from 10 Downing St, Cabinet Office, HM Treasury, FCO, DIT and MoD.

Sharpening competition has the beneficial effect of offering the opportunity to elicit input of private sector investment capital into each phase of MoD equipment procurement programmes, thereby relieving the burden on the public purse and freeing up much needed taxpayer funds that can be diverted onto the “levelling up” mission.

An innovative proposal on how to elicit private sector investment capital into defence procurement programmes is set out in a written submission to the Public Accounts Committee which completed its inquiry into Defence Capability and the Equipment Plan 2019-29 last year.

The pdf copy of this paper can be accessed via this link:

https://committees.parliament.uk/writtenevidence/5413/pdf/

@JagPatel3

An off-the-shelf buy for this autonomous submarine capability requirement?

This government’s quest for risk-free, value for money acquisitions has seen it go for off-the-shelf purchases to satisfy its military equipment needs – in the shape of orders for the P-8A Poseidon maritime patrol aircraft, Apache AH-64E attack helicopters, MQ-9B Protector armed drones, the E-7 Wedgetail airborne early warning and control aircraft, and now BOXER armoured vehicles to satisfy its Mechanised Infantry Vehicle requirement – the latter two, after first having conducted a comprehensive market survey and then a comparative analysis of existing, in-service platforms. All of this equipment is being sourced from manufacturers of foreign origin.

The main reason why the government has decided to choose off-the-shelf products is because they are considered to be fully engineered and supported technical solutions which satisfy the key user requirements at no additional cost or risk to the Exchequer, that is to say, they do not require any UK-specific modifications or related development work laden with risk to be performed upon them.

Whereas the Ministry of Defence will not come out and say so publicly, it is clear that MoD’s preference for looking at the off-the-shelf solution as its first option is likely to be the determining factor behind its decision on which existing platform to buy for its autonomous submarine capability requirement.

After being misled by UK-based defence equipment manufacturers with false promises and lies for several decades, this generation of elite politicians, senior civil servants, military top brass and front-line procurement officials have been so badly scarred that, there remains little appetite to consider any alternatives that may be put forward by these same dishonest suppliers.

Hitherto, MoD has had a policy of buying equipment designed to a tailored technical specification requirement set by the military customer – which has, in itself, led to persistent delays and cost overruns on equipment procurement programmes because of the inability of its own people to identify, manage and control technical risks inherent in a starting-point for the technical solution that requires development work to be performed upon it.

This disgraceful situation has come about because it does not possess the capability in the form of intelligent and experienced procurement officials who have an adequate understanding of what it takes (in terms of skill types, funding, tools, processes, materials, scheduled work plan, inter-business contractual agreements etc.) to advance an immature technical solution from its existing condition, to a point where it will satisfy the technical specification requirement, within a private sector setting driven by the profit motive and people who instinctively employ sharp business practices. Consequently, they are not able to establish what the true status of the evolving technical solution is, based upon claims made by Contractors.

The harsh truth is that, these people have no business acumen at all – on account of not having spent a single day of their lives in the private sector and yet, they have been put in charge of spending taxpayers’ money to the tune of £15bn per year to buy defence equipment, outsourced services and labour from the private sector.

So, it makes sense to consider an existing, nearly-developed technical solution for this autonomous submarine requirement, not least, because it will relieve the Exchequer from having to take on development costs which usually spiral out of control.

@JagPatel3

Government has lost the capability to commission outsourced contracts

Of the £292 billion the UK government spends each year to purchase goods, services and labour from the private sector, about £57 billion goes to privately-owned entities specialising in outsourced public services – an amount which is only set to rise in the coming years, as more and more public service provision work is outsourced by this, and successor governments.

However, there is a question mark over the ability of central government departments to commission and oversee the proper functioning of outsourced service provision contracts to the satisfaction of external auditors, not least, because they simply do not have adequate numbers of suitably qualified and experienced staff on their payroll.

Asked by the Chair of the Public Administration and Constitutional Affairs Committee, Bernard Jenkin on what confidence Parliament can have in government making rational decisions, based upon evidence about whether to outsource or not, the then Comptroller and Auditor General Sir Amyas Morse* gave this astonishing reply:

“….. I think there are a lot of areas where Government does not have the capacity to do anything else but outsource. The Government are not set up to deliver all these contracts themselves, and that has been the case for a number of years. Therefore, the capacity, the volume of resource they would have to have internally to do this work, is not there, and has not been there for some time. Not only that, but in many parts of government, the capability of even acting as a prime contractor is not necessarily there. That is not a fault. It has been a choice that parts of government have made over time.”

Sir Amyas Morse, who has just completed 10 years as C&AG, has had a ringside view of the inner workings of government and is therefore extremely well-positioned to comment on the outsourcing experiment.

One of the reasons for this almost non-existent capability in Whitehall is that public servants who used to perform these tasks have ended up on the payroll of outsourced public service providers in the private sector, via the ‘revolving door’.

This is because the Business Model of early pioneers of outsourcing was predicated upon the belief that there will always be a willing and limitless supply of people coming over from the state sector to execute the contracted work, without requiring any investment to be made in conversion training, as they were already accomplished in the job in the public sector. Of course, this was true during the early days of privatisation, but it is no longer valid now, with the source of cheap and ready labour having all but dried up – which would explain why outsourcing contractors’ businesses are in such big trouble.

This mass influx into the private sector would also explain why staff on outsourcing contractors’ payroll today is made-up entirely of people who were previously in the pay of the State. Which begs the question, what are the tens of thousands of people currently in Whitehall doing?

But the real tragedy about this outsourcing experiment is that people who were previously in the pay of the State have replicated the same failure in the private sector, as recent examples have all too clearly demonstrated.

At this point, it is as well to reflect upon the reasons why the government went down the road of outsourcing public services in the first place – because, people in the pay of the State who were charged with doing this job had, for many decades, failed abysmally to show any improvement in their performance, notwithstanding persistent demands from the governing elite, of all political persuasions.

@JagPatel3

* See answer to Q496, oral evidence from Sir Amyas Morse before the Public Administration and Constitutional Affairs Committee, Inquiry into Sourcing public services: lessons to be learned from the collapse of Carillion, HC 748, 24 April 2018 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-administration-and-constitutional-affairs-committee/sourcing-public-services-lessons-to-be-learned-from-the-collapse-of-carillion/oral/82098.html

Lobbying and corruption in the defence industry

The ‘revolving door’ is one reason why public trust in Government and Public Sector institutions has fallen to a new low. This is because the twin evils of lobbying and corruption rear their ugly heads every time taxpayers’ money crosses the boundary between the Public Sector and the Private Sector.

Whereas media focus is more often on the small number of high-profile political elite who shamelessly exploit their previous contacts and know-how they have accumulated whilst in the pay of the State to line their own pockets and unwittingly skew the market in favour of their new paymasters in the Private Sector, the journey made by thousands of ordinary public servants underneath them, who are also looking to follow the example set by their political masters and cash-in on this bonanza, has escaped scrutiny.

Of course, everyone has a right to sell their labour in the free market to whomsoever they wish, for whatever price they can command. However, the brazen way the newly-retired political elite have gone about exercising this freedom without any checks and controls on the way they go about disseminating privileged information about inner workings of Government is scandalous, and always to the detriment of taxpayers – which is what they promised they would protect whilst in the pay of the State!

The military-political-industrial complex has been the original model for lobbying and corruption from the earliest of times – indeed, the career prospects of people in the pay of the State are inextricably linked to those with the means to produce weapons systems, facilitated by the ‘revolving door’ and intense lobbying behind the scenes where it matters most, in the corridors of power inhabited by the same, self-serving political elite.

At a time when the headcount at UK MoD’s defence equipment acquisition organisation at Abbey Wood, Bristol is being forcibly slashed as part of the 2015 Spending Review settlement with the Treasury, there exists an extremely high risk that departing procurement officials, including those who have not previously taken part in the assessment of invitation to tender responses, will be persuaded to pocket corresponding memory sticks (or CDs) and offer them in return for employment, to competitors of owners of these same CDs – thereby transferring innovative design solutions and Intellectual Property Rights which can then be used by unscrupulous recipients, to grab a larger share of the defence market.

Such behaviour only reinforces the view that lower-level defence procurement officials have nothing to offer potential employers in the Private Sector (unlike the political elite), except someone else’s (stolen) property! And when these people arrive on Contractors’ premises, they promptly become a burden on fellow co-workers and the payroll because they do not have the necessary skills (due to being selected for reasons other than merit) as task performers to add value to the business, only costs.

What’s more, because many Defence Contractors do not have a ‘Code on Ethical Behaviour in Business’ in place, they will not only happily accept such proprietary information without any qualms, but also encourage its unauthorised removal from MoD Abbey Wood – yet they would not want their own CDs to fall into the hands of their Competitors.

Such is their twisted sense of morality!

There is something very disturbing about people who have previously, as public servants sworn undying allegiance to Her Majesty Queen Elizabeth II, only to then engage in defrauding Her Majesty’s Government of taxpayers’ money on behalf of vested interests, whilst pursuing a second career in the Private Sector.

@JagPatel3

Financial risks on Trident – a Conspiracy of Concealment

It is very well for the government to suggest that project risks should “sit with the party best able to manage them”, but the fact of the matter is that, they invariably end up in the hands of the procuring authority.

Take for example, the Trident nuclear submarine replacement programme.

The problems associated with placing single-source, development contracts like Trident with selected defence contractors on a preferential basis are not only limited to the usual delays and cost over-runs – they extend to the contractual support arrangements put in place to acquire and re-provision additional Support Assets to sustain the platform in-service, for the full period of its service life.

If past record is anything to go by, this aspect of defence procurement will only deliver further spiralling costs – and a headache for the Treasury.

Financial risks don’t come any bigger than the £41bn officially set aside for the initial cost of the four Dreadnought submarines – £180bn if one takes into account the whole-life sustainment costs – given the fact that, the cost of acquiring and re-provisioning Support Assets associated with military equipment over the whole life cycle can be in the order of four to five times the prime equipment costs. It is hard not to see why there exists an extremely high risk that spending on conventional, non-nuclear equipment programmes will be crowded out by the excessive cost of the nuclear deterrent in the years ahead.

Even the then Permanent Secretary at the Ministry of Defence admitted to the Public Accounts Committee in October 2015 that, it is the likelihood of financial risks on the Trident programme materialising sometime after contract award, which keeps him awake at night.

Anyone who has worked in the defence engineering industry will know that financial risks start-out as innocuous looking technical risks on the Defence Contractor’s premises, where selected ones are deliberately concealed by the Contractor during the design and development phase, then skilfully transferred to MoD Abbey Wood, Bristol where they suddenly morph into ‘show stopping’ risks and come to the fore immediately after the main investment decision has been taken (as they have done so spectacularly on the Type 45 destroyers with total power blackouts, costing a further £280 million to fix), ultimately ending up as an additional cost burden on the Front Line Commands, who have recently been given day-to-day responsibility for managing the defence equipment budget – resulting in sleepless nights for many other people too!

This happens because a key behavioural characteristic of Defence Contractors is that they will always choose to conceal technical risks identified early in the programme, by engaging with procurement officials and getting them to focus on declared risks which ordinarily fall in the trivia category, whilst skilfully diverting their attention away from those really huge ‘show stopping’ risks which they will only reveal later on, when things go wrong, to realise their objective of ‘growing’ the Contract by getting Abbey Wood Team Leader to raise Contract Amendments and/or let Post Design Services Contracts.

They achieve this by contriving situations which entice procurement officials into partaking in detailed design decisions relating to the evolving Technical Solution, and then using this involvement to coerce procurement officials into raising Contract Amendments later on. Indeed, it the very existence of Contract Amendments and PDS Contracts that causes Contractors to conceal ‘show stopping’ risks in the first place!

These concealed risks then come to the fore immediately after (never before) the main investment decision has been taken, surprising everyone (except the Contractor) and imposing a budget-busting burden on MoD.

And because there exists no ‘Code on Ethical Behaviour in Business’ which would offer protection to good people on the Contractor’s payroll (generally in the direct labour category) who are driven by strong professional, ethical and moral values and who would otherwise blow the whistle on this conspiracy of concealment, they are forced to remain silent.

The only people who are not in the know about this blatant scam are those in the pay of the State!

So, the chances of financial risks coming to the fore on Trident after the main investment decision has been taken are about as certain as night follows day.

The Trident nuclear submarines were meant to serve as a deterrent to those who would wish to do harm to the UK, but they have ended up posing a threat to the financial security of this country.

@JagPatel3

The Role played by Contractors in Delays and Cost over-runs

The share of blame attributed to people at the Ministry of Defence for delays and cost overruns has been documented extensively over the years. But what is the role played by MoD’s other half of the partnership, namely Defence Contractors, in this epic tale of failure?

This question is especially relevant given that 97% of contracts on the Defence Nuclear Enterprise are held by just four prime contractors.

The risk that new equipment procurement programmes will fall behind schedule is driven by three significant factors – all of them, entirely within the control of the Contractor:

(a) Work allowed to commence without the full complement of Task Performers being assigned to the project performance team, right from the start.

(b) Task Performers arbitrarily (and clandestinely) re-assigned to other priority work during the term of the Contract.

(c) Task Performers, who are typically on one month’s notice corresponding to pay in arrears, abandon their posts for a better paid job elsewhere.

The practice of switching the most capable and smartest people (the ‘A’ Team members) from existing project commitments, to working on other contracts running concurrently which have gone ‘critical’, or to producing bid phase deliverables for ITT responses, is very common within Defence Contractors’ organisations – because the need to continually bring-in money or win new business takes priority over everything else, a foremost characteristic of for-profit organisations.

Indeed, such is their obsession with future income (and Share Price) that, once they have got a new Contract in the bag, their attention immediately shifts onto chasing the next one – at the expense of compromising performance on the Contract they have just won!

This all too familiar scenario is further compounded by the fact that:

(a) Contractors at every tier of the Defence Industry have mandated enforcement of a minimalist staffing policy of being just ‘one man’ deep in many of their specialist core functions, with no slack or succession plan – which unfortunately, also denies defence workers the opportunity to associate with like-minded people in the work environment, severely impeding their professional development.

(b) In their desperation to quickly build-up their project performance teams to full strength following down-selection for the first Contract performance phase, Contractors have been less than honest with new employees (particularly those originating from the Public Sector) about their individual role in the project performance team, the job content and near-term prospects – because they are not bound by a ‘Code on Ethical Behaviour in Business’. Consequently, these newcomers have no choice but to align their personal and career goals with those of their new employer on the basis of what they are told. It is the disappointment of discovering a substantial gap between the reality on the ground and what they were led to believe at interview that causes these new starters to leave – creating yet more vacancies and disruption!

(c) Instead of looking upon people on their payroll as human beings with hopes, fears and insecurities, individuals are treated like ‘economic units’ by Contractors – to be bought and sold like commodities, at will, in the free market to serve their own narrow commercial interests.

(d) Recent years has seen the working relationship between Indirect and Direct labour types to be strained beyond breaking point on account of:

i. The latter (who are all Task Performers, adding value by producing deliverables which attract payment from MoD) being compelled by the former to partake in activities which are contrary to their professional, ethical and moral convictions. In turn, this has led to Direct labour types to accuse Indirect labour types of ‘living off their backs’ by charging MoD a ‘tax surcharge’ on their labour – creating even more bitterness and division.

ii. The duplicitous policy enforced by Indirect labour types of making bold pledges in Management Plans, and then promptly rescinding on these work commitments during the follow-on Contract performance phase has had the effect of disenfranchising Direct labour types, because they think this is thoroughly deceitful behaviour.

iii. The burden of responsibility for executing the resultant grossly under-scoped Programme of Work falling on Task Performers, instead of those people on overheads who made the false, exaggerated claims about the maturity of the proposed Technical Solution in the first place.

Even more disturbingly, in the interests of furthering their careers in today’s mobile labour market, many defence industry workers especially those possessing highly marketable skills (the crème de la crème) are now willing to extend their commitment and loyalty only, as far as the next pay packet – having adopted this tactic from observing, at first hand, the behaviour of their own employers who have, for many years demonstrated their willingness to provide a service to MoD which extends only as far as the next milestone payment! Worse still, whereas every Contractor has got a Staff Recruitment Policy, none has a Staff Retention Policy.

So, when a programme in the Contract performance phase suffers a loss in personnel on the project performance team (usually those most difficult to replace), work on producing deliverables to schedule comes to an abrupt stop – leading to delays and ultimately, cost overruns.

A risk and associated cost burden that has traditionally been borne by the Ministry of Defence!

So, it is not only defence procurement officials who are to blame for the malaise afflicting defence procurement – Defence Contractors are equally culpable in creating a procurement culture which has failed to deliver equipment to the Armed Forces that is fit for purpose, adequately sustained in-service and constitutes value for money through-life.

@JagPatel3

Watchkeeper, a byword for failure

The reason why other competitor countries are pulling ahead of the UK in their ambition to sell military equipment abroad is not for a lack of UK Government support, but because the UK’s existing defence procurement process, which subsidises failure instead of rewarding success, has encouraged Defence Contractors (right down the extended industrial supply chain) to design poorly engineered products which are not only seriously uncompetitive in the domestic market, but also in export markets.

There is one MoD military equipment programme which epitomises all that is wrong with the existing procurement process. Watchkeeper. This name is a byword for failure!

Only a genuinely open and competitive defence equipment market driven by a winner-takes-all competition policy, and led by the UK Government, can incentivise indigenous Defence Contractors to deliver innovative products which will satisfy the requirements of MoD as well as export customers, at a price they are willing to pay.

@JagPatel3

Failing to quantify Whole Life Cost

One of the reasons why a £20bn funding “black hole” has re-emerged in the Ministry of Defence’s budget is because it has never bothered to consider the cost of new equipment procurement programmes on a through-life sustainment basis, preferring instead to bear down on initial acquisition costs – notwithstanding the fact that, the cost of acquiring and re-provisioning Support Assets required to sustain military equipment over the whole life cycle, can be in the order of four to five times the prime equipment costs.

A point that came to light at a recent Defence Select Committee hearing, which was told that MoD did not know what the Whole Life Cost of the first tranche of 48 F-35s was. This has come about because, for as long as anyone can remember, MoD has rigorously applied a policy of buying Support Assets for its military equipment separately, on a piece-meal basis, via a steady stream of short-term, renewable Post Design Services contracts let during the in-service phase, as and when the need arises rather than upfront, at the time of acquiring the prime equipment.

The fact of the matter is that the ability to identify, quantify and then confidently price Support Assets can only be accumulated progressively, as the Technical Solution is being advanced during the design, development, systems integration and prototyping phases of each equipment acquisition programme – it cannot be gained overnight! Central to the quantification of Whole Life Cost is the systematic determination of the inherent reliability of the prime equipment, bottom-up, starting with each individual Maintenance Significant Item. A methodology that has not been applied by Defence Contractors, because they have not been specifically directed to do so by MoD.

But what is especially worrying is that, instead of using common sense and setting-up a single fixed, all-in Through Life Budget for each new military equipment acquisition programme to encompass costs for the prime equipment and its associated Support Assets required for through-life sustainment, MoD has created two separate, expandable budgets – the Equipment Procurement Plan and the Equipment Support Plan – thereby giving a clear indication to Industry, that it is happy to continue with the practice of procuring new equipment using one pot of money for the prime equipment, and paying for its in-service support costs from the second, using Post Design Services contracts – just like in the bad old days of the Defence Procurement Agency and the Defence Logistics Organisation, the predecessor stand-alone entities to MoD’s arms-length defence procurement organisation at Abbey Wood, Bristol.

This tried-and-failed policy of buying Support Assets separately also gives the impression that MoD’s leadership has accepted that the Contractor supplying the Support Assets can be different from that which produces the prime equipment – unwittingly betraying its collective ignorance of what it is that makes Private Sector organisations tick, and how obsessively possessive they are of Intellectual Property Rights vested in their products.

@JagPatel3

Quantifying Whole Life Cost is not a priority for MoD

One of the reasons why a funding “black hole” has re-emerged in the Ministry of Defence’s budget is because it has never considered the cost of new equipment procurement programmes on a through-life sustainment basis a priority, preferring instead to bear down on initial acquisition costs. A point that came to light at a recent Defence Select Committee hearing, which was told that MoD did not know what the Whole Life Cost of the first tranche of 48 F-35s was.

This situation has come about because, for as long as anyone can remember, MoD has rigorously applied a policy of buying Support Assets for its military equipment separately, on a piece-meal basis, via a steady stream of short-term, renewable Post Design Services contracts let during the in-service phase, as and when the need arises rather than upfront, at the time of acquiring the prime equipment.

When priced and submitted as a quotation by bidders, the magnitude of this Whole Life Cost always comes as a shock to people at MoD. It need not be that way, bearing in mind that the cost of acquiring and re-provisioning Support Assets required to sustain military equipment over the whole life cycle, can be in the order of four to five times the prime equipment costs.

The simple fact of the matter is that the Whole Life Cost of any new equipment programme comprises of two significant elements – prime equipment costs and its associated Support Assets costs. The latter, itself, comprises of three discrete parts, which should be required to be identified, as separate line items in the ITT response for the first contract performance phase, namely:

(a) Not-to-exceed price for the cost of performing the Integrated Logistic Support tasks and activities as detailed in the ILS Programme. This is a one-off, non-recurring cost to MoD. Because this cost is a direct indicator of the extent to which each starting-point for the Technical Solution has already been ILSed, comparing these figures from bidders on a like-for-like basis will quickly reveal which starting-point will require the least amount work to be performed upon it, to make it meet the ILS Requirement.

(b) Not-to-exceed price for the cost of acquiring Support Assets for each level of repair to be delivered together with the fielded quote of prime equipment (some well ahead of IOC) to cover a specified initial support period – including the cost of holding the required stock of piece-part spares and/or Maintenance Significant Items at 4th Line, to fulfil the specified Turn Around Time i.e. a fully primed Repair Loop. Clearly, this cost is a measure of the inherent reliability i.e. overall MTBF of the proposed Technical Solution (a design characteristic wholly within the control of the Contractor) – the lower the cost, the higher the reliability. The initial support period (which will be different for each acquisition programme) should be deliberately set to commence the day after the last copy of the prime equipment is delivered and satisfactorily commissioned into service with the User – to incentivise the Prime Contractor to make sure that the manufacturing phase of the programme is completed to schedule, without any delays. The higher the percentage of non-Development items in the Technical Solution, the longer this period ought to be – perhaps 10 to 15 years.

(c) Fixed price for the cost of supplying additional Support Assets during the remaining service life of the prime equipment. This cost should be at a progressively decreasing burden upon the MoD, reflecting the steady-state reliability the equipment will achieve beyond the early-life failures exhibited during the initial support period – that is, a cost of ownership profile mirroring the classic ‘bath tub’ curve.

The only Whole Life Cost figures that matter are the ones submitted by competing Contractors – because they are the only figures that bear any correlation to the prevailing value of goods, services and labour in the free market shaped by competitive market forces.

Only the priming and performance of an ILS Programme of work can result in the full spectrum of Support Assets costs to be identified, quantified and priced.

@JagPatel3

MoD relies on spin and secrecy to deflect criticism

Honesty is not a virtue that comes naturally to people at the Ministry of Defence.

The political imperative of needing to put a positive slant on everything the Government does or will do, irrespective of whether it is true or not, is the reason why spin has become the centrepiece of this Government’s communications strategy. And because Government has got a monopoly on inside information (enabling it to maintain extremely tight control), it uses spin to divert attention away from the key issues that really matter to citizens and consequently, succeeds in suppressing alternative views and criticism from those on the outside, including Her Majesty’s Loyal Opposition.

The Ministry of Defence is particularly apt at this dark art of spinning – a skill perfected whilst defending a particularly appalling record of performance, over the last several decades. Increasingly, there is a lack of trust in the claims made by MoD about its work and achievements. MoD is able to get away with blatant lies and cover-ups because it relies on spin as its primary tool to deflect criticism – reinforced by the weapon of secrecy.

Indeed, there is a massive gap in the minds of interested observers outside the Ministry of Defence such as those in the Treasury, the Cabinet Office, BEIS, the National Audit Office, academic institutions, think tanks and the press & media on how it supposedly functions on a day-to-day basis, as depicted in official UK Government publications (which remain within the editorial control of MoD), and how it actually operates in reality.

In addition, the culture of intense secrecy within MoD has not only allowed its leadership to extend this discrepancy even further, but also conceal appallingly poor policy-making and huge failings in its defence procurement procedures, from select committees of the House of Commons – such as the Public Accounts Committee, Defence Select Committee and Public Administration & Constitutional Affairs Committee – severely undermining their parliamentary function of scrutinising the performance of MoD.

What’s more, MoD discourages free thought and self-criticism of its internal business processes, and is consequently completely reliant on outsiders to identify, and point out shortcomings in its defence equipment procurement policy.

The more secretively it works, the more incompetent it becomes. The simple fact of the matter is that secrecy breeds incompetence, whilst openness breeds competence.

@JagPatel3

Financial risks on Trident successor – a Conspiracy of Concealment

The problems associated with letting uncontested, single-source contracts like that for the new Trident nuclear submarines, scrutiny of which falls within the remit of the Single Source Regulations Office, are not only limited to the usual delays and cost overruns – they extend to the contractual support arrangements put in place to acquire and re-provision additional Support Assets to sustain the equipment in-service, for the full period of its service life.

Financial risks don’t come any bigger than the £41bn officially set aside for the initial cost of the four Trident submarines – £180bn if one takes into account the whole-life sustainment costs – given the fact that, the cost of acquiring and re-provisioning Support Assets associated with military equipment over the whole life cycle can be in the order of four to five times the prime equipment costs.

Now that Parliament has given its approval for Trident to proceed to the manufacture and build phase, the focus of attention turns to the ability of the Ministry of Defence to deliver this project without incurring the usual delays and cost overruns, which have dogged military equipment programmes for as long as anyone can remember.

On the basis of past performance, it can be predicted with certainty that the newly established Submarine Delivery Agency will not deliver Trident successor within contracted time and schedule boundaries.

Whereas the mainstream media is, as always, focused on the human interest story of the person who has been appointed as head of the SDA and the organisational construct within which he will operate, the intellectually engaging public interest story of failings in the existing business processes used by MoD to procure this highly complex weapons platform, is certain to escape scrutiny.

Not least, the likelihood that financial risks on this uncontested, single-source contract, which involves substantial design, development & systems integration work, will materialise sometime soon – a concern expressed by the then Permanent Secretary at MoD Jon Thompson, who admitted that the possibility of this happening is what keeps him awake at night, when he appeared before the Public Accounts Committee in October 2015.

Anyone who has worked in the defence engineering industry will know that financial risks start-out as innocuous looking technical risks on the Defence Contractor’s premises, where selected ones are deliberately concealed by the Contractor during the design and development phase, then skilfully transferred to MoD Abbey Wood, Bristol where they suddenly morph into ‘show stopping’ risks and come to the fore immediately after the main investment decision has been taken (as they have done so spectacularly on the Type 45 destroyers with total power blackouts, costing a further £280 million to fix), ultimately ending up as an additional cost burden on the Front Line Commands, who have recently been given day-to-day responsibility for managing the defence equipment budget – resulting in sleepless nights for many other people too!

This happens because a key behavioural characteristic of Defence Contractors is that they will always choose to conceal technical risks identified early in the programme, by engaging with procurement officials and getting them to focus on declared risks which ordinarily fall in the trivia category, whilst skilfully diverting their attention away from those really huge ‘show stopping’ risks which they will only reveal later on, when things go wrong, to realise their objective of ‘growing’ the Contract by getting Abbey Wood Team Leader to raise Contract Amendments and/or let Post Design Services Contracts.

They achieve this by contriving situations which entice procurement officials into partaking in detailed design decisions relating to the evolving Technical Solution, and then use this involvement to coerce procurement officials into raising Contract Amendments later on. Indeed, it the very existence of Contract Amendments and PDS Contracts that causes Contractors to conceal ‘show stopping’ risks in the first place!

These concealed risks then come to the fore immediately after (never before) the main investment decision has been taken, surprising everyone (except the Contractor) and imposing a budget-busting burden on MoD.

And because there exists no ‘Code on Ethical Behaviour in Business’ which would offer protection to good people on the Contractor’s payroll (generally in the direct labour category) who are driven by strong professional, ethical and moral values and who would otherwise blow the whistle on this conspiracy of concealment, they are forced to remain silent.

The only people who are not in the know about this blatant scam are those in the pay of the State!

So the chances of financial risks coming to the fore on Trident soon after the main investment decision has been taken are about as certain as night follows day.

@JagPatel3

Why senior Civil Servants are preoccupied with presentation

Not only is the long term accountability of senior Civil Servants questionable due to the game of musical chairs that they play, but the nature of work they perform on a day-to-day basis is also in doubt.

In a well-functioning democracy, the Government has a moral duty to be open and honest with citizens about its policy positions. However, in an age of media-driven Government, tensions have become acute between the governing elite’s need to get their message across to citizens, and the Civil Service’s obligation to compile factually-based Government pronouncements.

However, it is nigh on impossible to separate out the true facts from such policy pronouncements because they are framed in language which propagates half-truths and sometimes, downright lies – with the deliberate intention of deceiving. Even more worryingly, press releases which are the primary source of information for the press and media about what Government is doing are crafted in such a way as to, in effect, say ‘look here, not there’ thereby focusing their attention exactly where Government wants them to, away from areas it would rather not defend in public.

One of the reasons for this modus operandi is that Government is preoccupied with presentation, manipulation of words and the dark art of spinning – instead of working on its programme of reform to deliver public services efficiently, to satisfy the wants, needs and expectations of the electorate.

The political imperative of needing to put a positive slant on everything the Government does or will do, irrespective of whether it is true or not, is the reason why spin has become the centrepiece of this Government’s communications strategy. And because Government has got a monopoly on inside information (enabling it to maintain extremely tight control), it uses spin to divert attention away from the key issues that really matter to citizens and consequently, succeeds in suppressing alternative views and criticism from those on the outside, including Her Majesty’s Loyal Opposition.

Conventional wisdom has it that Ministers shape high-level policy and select from policy options developed by special advisers and mandarins, whilst it is the job of senior Civil Servants to define lower-level policy detail underneath, so that it can be used by the rest of the Civil Service to implement the policy of the Government. However, the eagerness with which senior Civil Servants have complied with their political masters’ desire to see policy announcements framed around presentation and spin, at the expense of substance, would explain why their skills set has been narrowed down to this single, dark art.

It would also explain why the Civil Service has failed to deliver against promises made by the governing elite, in their election manifestos. This failure has been brought about by the erosion and downgrading of traditional specialist disciplines in the Civil Service like technical, commercial and project management – skills which are absolutely essential to the delivery of public services in today’s world.

What’s more, this intense focus of attention on presentation alone has resulted in a massive gap opening up between the leadership and lower ranks of the Civil Service, who have to deal with the reality of delivering public services on the ground, on a day-to-day basis, which has in itself, led to alienation and disaffection.

@JagPatel3 on twitter

User Forced into Taking Drastic Action

The Register is right to draw attention to the NAO’s conclusion that forecast costs of supporting and operating the new aircraft carriers and its embarked aircraft are less certain, and that the Ministry of Defence has always underestimated the costs of supporting its equipment.

The fact of the matter is that the problems associated with procurement of military equipment are not only limited to the usual delays and cost overruns – they extend to the contractual support arrangements put in place to acquire, and re-provision additional Support Assets to sustain the equipment in-service, for the full period of its service life.

If past record is anything to go by, this aspect of defence procurement will only deliver further spiralling costs – and a headache for the Treasury.

This is because the sustained spinning campaign mounted by the communications people at MoD HQ over the last 20 years or so has succeeded in making everyone believe that, it is acquiring Support Assets for its military equipment upfront, on a whole life sustainment basis when in fact, it has been quietly buying them separately from the prime equipment, on a piece-meal basis via a steady stream of Post Design Services contracts, let during the in-service phase – thereby, fooling not only its own people at MoD Abbey Wood and the wider MoD, but also the whole of industry and in so doing, diverting attention away from the Treasury’s exposure to whole-life sustainment costs which remain unquantified for lack of a firm Selling Price from the single main Contractor.

What’s more, it is increasingly clear that the unrelenting spending cuts are putting such a strain on MoD’s equipment budget that, for some recently commissioned equipment into service, the military User can only afford to buy Support Assets for a very short period of the in-service phase, like one or two years at a time and on others, the User has no choice but to take drastic action like, de-activating equipment for those periods when there is no available funding for the acquisition of Support Assets – periods which are only likely to get longer and longer, thereby inadvertently creating capability gaps.

There have also been instances where the Front Line Commands have refused flatly to accept new equipment into service, because they are unwilling to pay for the prohibitively high cost of sustainment, foisted on them by MoD Abbey Wood.

@JagPatel3 on twitter

Defence Procurement – Where it has all gone wrong

Despite the countless MoD reviews undertaken over the last several decades to identify failings in its defence procurement process, there remain barriers which continue to hamper the achievement of acquisition goals. Some of these barriers are:

(a) The instrument of competition has been rendered ineffective by Bidders who are quoting identical bottom-line Selling Prices against the same Requirement – thereby denying MoD Abbey Wood Team Leader the opportunity to select the preferred single Contractor on the basis of price competitiveness – and therefore value for money.

(b) MoD’s Competition Policy is further undermined by the ‘revolving door’ which continues to allow procurement team members to take up appointments with Bidders whilst the competition is still under way.

(c) The decision on which Bidders to down-select for the next phase is dependent upon warm soothing words, false promises and hollow statements of intent offered in Management Plans, instead of the much more sensible way of selecting Bidders on the basis of their performance measured during the previous phase.

(d) The extended industrial Supply Chain remains infested by distortions and inefficiencies because lower-tier subcontractors are continuing to mark-up goods and services, without adding any value. In addition, competition is not being applied by ITT recipients to select first and lower-tier Contractors. Instead, they are chosen using the old boys’ network or during a gathering at the 19th Hole limited to the great-and-the-good from subsidiary companies wholly-owned by the ITT recipient, or some other favoured, old school-tie chums – which has, in itself, allowed the continuance of corrupt practices.

(e) The widespread practice of digging out old ITTs from the archives, dusting them off, searching & replacing the project name and despatching them off to industry has resulted in the Principles of Natural Justice being routinely violated, because selection criteria essential to inform the decision on down-selection phase-by-phase is omitted – leaving Bidders in the dark as to what evaluation criteria they will be measured against.

(f) The probability of the pre-programmed schedule being ‘eroded’ during performance of the Contract is 100 percent, on account of Contractors enforcing a minimalist staffing policy of being just ‘one-man’ deep, in many of their specialist core functions with no slack or succession plan.

(g) The talent pool from which appointees for acquisition roles are drawn has only succeeded in supplying a steady stream of people who are ill-equipped to deal with the Private Sector – yet they are put in charge of spending public money! This situation has, in turn, led to dramatically reduced confidence in any new policy initiatives advanced by DE&S amongst wider MoD stakeholders and interested observers, such as Members of Parliament, National Audit Office and Treasury officials.

(h) There is no evidence of MoD’s long-standing policy of securing input of Private Sector capital into defence programmes being applied, which means that projects continue to be funded exclusively by the taxpayer – yet, the Intellectual Property Rights for the resultant fully engineered equipment, which rightly belong to the MoD, is simply handed over to the main Contractor for nothing in return.

(i) Technical risks are allowed to accumulate towards the end of acquisition cycle where they suddenly morph into 'show stopping' risks and come to the fore immediately after the main investment decision has been taken (never before), forcing Team Leader to raise Contract Amendments and let short-term, renewable Post Design Services Contracts which, in turn, has led to MoD getting appallingly poor value for money these last several decades.

It’s not so much a lack of skills at MoD Abbey Wood that is the problem, but a surplus of people with the wrong skills. The fact of the matter is that innovation and new ways of working will only come after the headcount has been cut, not before!

@JagPatel3 on twitter

Duplicitous Behaviour – Saying One Thing and Doing the Exact Opposite

It should be noted that the defence manufacturing industry has been excluded from the list of industry sectors and technologies at which the Government is planning to throw public money. Quite rightly.

Because, when it comes to the Ministry of Defence and the procurement of defence equipment for the Armed Forces, the record of performance over the decades has been abysmal.

Not least because for some years now, Defence Contractors have repeatedly expressed their eagerness to invest Private Sector capital in MoD equipment acquisition programmes, provided MoD reveals more information about its spending plans.

Yet, Defence Contractors’ behaviour is contrary to declarations of intent made in public because they have been found to be hoarding mountains of cash clandestinely and then sitting on it, instead of using it to fund in-house research & development to gain a competitive advantage, boost productivity and readying off-the-shelf products – by advancing the developmental status of their staring-points for the Technical Solution from its existing condition, to a point where it will satisfy the qualitative and quantitative requirements expressed in the invitation to tender, which will also serve to ease the burden on MoD’s equipment budget.

This amounts to duplicitous behaviour – saying one thing and doing the exact opposite!

The nub of the problem is that Contractors’ Business Model is founded on lies and deception; perpetrated by the few upon the unsuspecting many – Governments, Shareholders, Members of Parliament, employees, academics, the military, Supply Chain partners, journalists and the wider community – over several decades.

Not a shred of honest intent is to be detected anywhere.

A proposal for eliciting Private Sector investment capital into defence procurement programmes is set out in this written submission to the Department of Business, Energy and Industrial Strategy’s ongoing inquiry into Industrial Strategy.

The pdf copy of the paper can be downloaded from:

http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/business-innovation-and-skills-committee/industrial-strategy/written/36606.pdf

@JagPatel3 on twitter

The Government should be wary about resuscitating an Industrial Strategy

It is the job of Government to foster an environment which causes the Private Sector to innovate, grow, create jobs and make a profit. It is not the job of Government to create jobs.

It is the misinterpretation of this responsibility, on the part of some well-meaning people that has persuaded them to resuscitate the idea of an Industrial Strategy, which entails the Government intervening in the market with public funds, to stimulate economic activity and boost export-led growth.

However, this means that people in the pay of the State get to choose which industry sector receives the subsidy, and which does not – leaving them exposed to the charge of favouring the privileged few at the expense of the many, and also skewing the market in favour of the same selected few, for decades to come.

Additionally, there exists an extremely high risk that public funds committed in this way will not deliver the return on investment as advertised, or worse still, squandered altogether because:

(a) Civil servants in Whitehall who are charged with negotiating the contract details are ill-equipped to deal with the Private Sector, which means that they will be duped into spending taxpayers’ money on poorly conceived projects – only for this to come to light years later, when some Select Committee of the House of Commons produces a report on its findings.

(b) The internal business process used to select recipients for State aid is susceptible to manipulation and distortion by parliamentary lobbyists in the pay of those who can afford to spend the most.

(c) It is certain that the final decision on the choice of recipients, which is in the hands of the governing elite will be made, not in the national interest but to serve the interests of career politicians.

So until these fundamental problems are addressed and dealt with, the Government should be wary about resuscitating an Industrial Strategy.

@JagPatel3 on twitter

Government strongly favours buying off-the-shelf equipment

The GEMS employee suggestion webpage form is not the only off-the-shelf purchase MoD has made – it extends to much bigger defence equipment acquisitions too.

The Government has recently revised its defence procurement policy to consider buying, as its first and foremost priority, new military equipment for the Armed Forces which automatically falls in the off-the-shelf category – specifically because an off-the-shelf equipment is a fully engineered and supported technical solution which satisfies the key user requirements at no additional cost or risk to the Exchequer, that is to say, it does not require any development work laden with risk, to be performed upon it.

The reason why the Government has moved away from its long-standing procurement policy of buying equipment designed to a tailored technical specification requirement set by the military customer (which it will not admit to in public) is because, it is no longer confident in the ability of its own people to identify, manage and control technical risks inherent in a starting-point for the technical solution that requires development work to be performed upon it – which has been the cause of persistent delays and cost overruns on equipment acquisition programmes, over the last several decades.

This is because it does not possess the capability in the form of intelligent and experienced procurement officials who have an adequate understanding of what it takes (in terms of skill types, funding, tools, processes, materials, scheduled work plan, inter-business contractual agreements etc.) to advance an immature technical solution from its existing condition, to a point where it will satisfy the technical specification requirement, within a Private Sector setting driven by the profit motive. The harsh reality is that they have no business acumen – on account of not having spent a single day of their lives in the Private Sector.

Nor is the existing defence procurement process (which has evolved over the years) conducive towards delivering equipment for the Armed Forces which is fit for purpose, adequately sustained in-service and constitutes value for money through-life, because it has been interfered with by Defence Contractors (most notably the Select Few) who have skewed it decisively in their favour, at every turn.

The Government’s considered assessment is that it is unlikely to accumulate an in-house capability of the desired quality and numbers anytime soon, certainly not in the foreseeable future. It has also been realistic and concluded that it is nigh on impossible to reconstitute the existing, flawed procurement process alongside the tough 2015 Spending Review commitments to be fulfilled in this Parliament, further complicated by the Brexit vote – hence its preference for the off-the-shelf option.

Ironically, one of the most spectacular benefits to be derived from buying off-the-shelf equipment is that the leadership at MoD will be freed from its burdensome responsibility of having to upskill its existing procurement staff to a level comparable with that exhibited by counterparts in industry, because this type of acquisition is relatively straightforward and can even be undertaken by mediocre post holders – not least, because it is devoid of hidden financial, technical or schedule risks.

If anyone has any doubt about the determination of this Government to press ahead with considering the off-the-shelf solution as its first option, then they should look no further than its decision to buy the standard Boeing P-8A Poseidon maritime patrol aircraft to plug the capability gap left behind by the cancellation of Nimrod MRA4. Settling on the choice of the P-8A Poseidon means that these aircraft cannot be refuelled in-flight by the RAF’s Voyager tanker planes to extend their range and endurance on-station, because the former are fitted with the flying-boom receptacle whereas the latter are equipped with the probe-and-drogue system – making them entirely incompatible. The Government has taken a lot of flak from informed commentators and endured negative publicity in the press and media for this serious operational deficiency – nevertheless, it has decided to go ahead with the purchase.

So what impact does this policy shift have on Defence Contractors’ business prospects?

UK-based military equipment manufacturers who do not possess off-the-shelf equipment and are in the business of developing & building weapons platforms are most likely to be adversely affected by this adjustment in defence procurement policy. To counter haemorrhaging their domestic market share to similarly positioned players from the US and elsewhere, UK-based Defence Contractors have little choice but to increase their competitiveness significantly, by first selling their products in the international marketplace – on price, superior technical performance & timely delivery – and then re-entering the domestic market with fully developed products rebranded as off-the-shelf offerings, to satisfy UK Government needs, just as the Americans have done.

It is believed that some 20 percent of the equipment procurement budget is currently being spent on buying off-the-shelf equipment. This slice is only set to increase, as more and more projects which involve significant development work are side-lined in favour of off-the-shelf purchases.

@JagPatel3 on twitter

Spin and secrecy in MoD

No surprise that this announcement (like countless before) has been led by spin!

The political imperative of needing to put a positive slant on everything the Government does or will do, irrespective of whether it is true or not, is the reason why spin has become the centrepiece of this Government’s communications strategy. And because Government has got a monopoly on inside information, it uses spin to divert attention away from the key issues that really matter and consequently, succeeds in supressing alternative views and criticism from those on the outside.

The Ministry of Defence is particularly apt at this dark art of spinning. Increasingly, there is a lack of trust in the claims made by MoD about its work and achievements. MoD is able to get away with blatant lies because it relies on spin as its primary tool to deflect criticism – reinforced by the weapon of secrecy.

Indeed, there is a massive gap in the minds of interested observers outside the Ministry of Defence such as those in the Treasury, the Cabinet Office, the National Audit Office, academic institutions, think tanks and the press & media on how it supposedly functions on a day-to-day basis, as depicted in official UK Government publications (which remain within the editorial control of MoD), and how it actually operates in reality.

In addition, the culture of intense secrecy within MoD has not only allowed its leadership to extend this discrepancy even further, but also conceal appallingly poor policy-making and huge failings in its defence procurement procedures, from select committees of the House of Commons – such as the Public Accounts Committee, Defence Select Committee and Public Administration & Constitutional Affairs Committee – severely undermining their parliamentary function of scrutinising the performance of MoD.

What’s more, MoD discourages free thought and self-criticism of its internal business processes, and is consequently completely reliant on outsiders to identify, and point out shortcomings in its defence procurement policy.

@JagPatel3 on twitter

Price-fixing on a Grand Scale

The clear message behind the Government’s defence procurement policy is that military equipment for the Armed Forces is to be purchased through fair and open competition – the only exception being off-the-shelf purchases and single-source contracts.

This is to be achieved by selecting the preferred Prime Contractor from a choice of industry teams by running a multiple-phase, winner-takes-all competition on the basis of a level playing field, genuinely open to all-comers including non-domiciled suppliers – to ensure it gets the very best value for money for the taxpayer.

However, the ‘sudden death’ competition (which reduces the field of Bidders from six to one following a one-off release of the invitation to tender) currently used by MoD has been rendered ineffective by Defence Contractors, who are quoting identical bottom-line Selling Prices against the same Requirement – which amounts to price-fixing on a grand scale, with the active connivance of the Secretary of State for Defence. Worse still, MoD’s Project Team Leader at Abbey Wood, Bristol is being denied the opportunity to choose the single Prime Contractor on the basis of price competitiveness, and therefore value for money.

This has come about because MoD’s long-standing policy of disclosing the total budgeted expenditure figure or associated year-on-year financial funding profile in the ITT has resulted in Defence Contractors quoting identical bottom-line Selling Prices in their ITT responses – an entirely predictable result!

It is not for MoD to tell the Private Sector what the price of a new equipment programme should be. Instead, it is very much the business of Defence Contractors to tell MoD how much each new equipment programme will cost, based upon the prevailing value of goods, services, labour and finance in the free market shaped, not by the interfering hand of people in the pay of the State who always get it wrong, but by competitive market forces.

@JagPatel3 on twitter

Lack of Project Management skills in the Civil Service

It has long been established as a fact that the lack of commercial skills in the Civil Service is hampering attempts to make central Government procurement more efficient – a point that the former Chair of the Public Accounts Committee highlighted time and again, during the last Parliament.

With respect to the Ministry of Defence, one must add the Project Management skills of its acquisition officials at MoD Abbey Wood, Bristol as a serious obstacle to value for money procurement.

Because, instead of requiring Defence Contractors to scope a fully costed and priced Programme of Work in Microsoft Project to advance the developmental status of their starting-points for their Technical Solutions from their existing condition, to a point where they will satisfy the qualitative and quantitative requirements expressed in the technical specification, MoD is persisting with the tried-and-failed practice of asking for a plethora of Management Plans as a response to the invitation to tender – which has given Contractors a chance to stuff these plans full of:

(a) Pretty pictures and diagrams.

(b) Grossly exaggerated claims regarding the maturity of the starting-point for the Technical Solution.

(c) Warm soothing words, false promises and hollow statements of intent skilfully crafted in such a way as to allow Contractors to rescind on work commitments later on, during the Contract performance phase.

(d) Organisational charts with names of self-important people on overheads who will not be getting hands-on with the work to be done in the next phase.

(e) An asking price quoted in the ITT response which bears no correlation to the work intended to be performed by the Contractor during the follow-on phase.

(f) A non-existent or useless schedule.

In addition, the widespread practice of digging out old ITTs from the archives, dusting them off, searching & replacing the project name and despatching them off to Contractors has resulted in the Principles of Natural Justice being routinely violated, because selection criteria essential to inform the decision on down-selection, phase-by-phase is omitted – leaving Bidders in the dark as to what evaluation criteria they will be measured against.

Such is the stupid folly of the moment that this is what passes for best practice in Project Management in the 21st century, as practiced by MoD civil servants and Defence Contractors!

It’s not so much a lack of skills in the Civil Service that is the problem, but a surplus of people with the wrong skills. Accordingly, innovation and new ways of working in the Civil Service will come only after the headcount has been cut, not before!

@JagPatel3 on twitter

MoD fails to elicit Innovative Proposals

So what is stifling innovation in the defence manufacturing sector? Why is it in such a bad place that MoD has had to intervene to revive this habit?

Whereas it has come to be seen as an utter failure, a commendable aim of the then much heralded Smart Acquisition policy introduced by the last Labour Government was to create an environment within which those motivated by the prospect of making money are moved to voluntarily come up with, and put forward Innovative Proposals, within the context of a winner-takes-all competition.

It was envisaged that such an approach would exploit the fertile innovative streak and problem-solving capability in the Private Sector (erased in the Public Sector due to incessant conditioning of the mind from an early age) to elicit alternative, much more efficient and technologically new ways of acquiring equipment for the Armed Forces that is fit for purpose, adequately sustained in-service and constitutes value for money through-life.

The sad reality is that such high aspirations have not been realised at all. The two main reasons why there has been pitifully little, in the way of Innovative Proposals are:

(a) Firstly, it is the narrow-minded, ‘tick box’ mentality of individual defence procurement officials and their knee-jerk reaction of adhering rigidly to tried-and-failed practices of the past that dissuades Defence Contractors from coming-up with and putting forward new, innovative ways of satisfying the totality of the Requirement – notwithstanding the clear invitation in the ITT. Indeed, far from compiling Innovative Proposals, Contractors are doing the exact opposite! They are pre-occupied with dumbing down the contents of their Management Plans to a level commensurate with procurement officials’ (and military top brasses’) intellect – to cut the risk of their submissions being side-lined for being labelled as ‘above the heads’ of those assessing them.

(b) Secondly, it is the near certainty that their innovative ideas and intellectual property (revealed in Management Plans) will end up in the hands of their Competitors, via the route of the ‘revolving door’ that Contractors fear most. Transfer of proprietary information in this way continues to occur because, the only way procurement officials can embark upon a second career with Defence Contractors is by making them an offer they cannot refuse.

Indeed, the career prospects of people in the pay of the State are inextricably linked to those with the means to produce weapons systems, facilitated by the ‘revolving door’ and intensive lobbying behind the scenes where it matters most, in the corridors of power.

At a time when the headcount at MoD’s defence equipment acquisition organisation at Abbey Wood, Bristol is being forcibly slashed as part of a deal with the Treasury, there exists an extremely high risk that departing procurement officials, including those who have not previously taken part in the assessment of ITT responses, will be persuaded to pocket corresponding memory sticks (or CDs) and offer them in return for employment, to competitors of owners of these same CDs – thereby transferring innovative design solutions and Intellectual Property Rights which can be used by unscrupulous recipients, to grab a larger share of the defence market.

Such behaviour only reinforces the view that defence procurement officials have nothing to offer potential employers in the Private Sector, except someone else’s property! And when these people arrive on Contractors’ premises, they promptly become a burden on fellow co-workers and the payroll because they do not have the necessary skills (due to being selected for reasons other than merit) as Task Performers to add value to the business, only costs.

What’s more, because many Defence Contractors do not have a ‘Code on Ethical Behaviour in Business’ in place, they will not only happily accept such proprietary information without any qualms, but also encourage its unauthorised removal from MoD Abbey Wood – yet they would not want their own CDs to fall into the hands of their Competitors.

Such is their twisted sense of morality!

@JagPatel3 on twitter