Last But Not Least: The Defence and Security Industrial Strategy

Given its title, one might have expected the Integrated Review to have appeared as a single document – or at least as a single set of documents on the same day. In reality, the main policy document Global Britain in a Competitive Age appeared on 16th March 2021 and a separate document on the implications for Defence policy, posture and capabilities, Defence in a competitive age, a week later on 22nd March. Defence’s new Integrated Operating Concept emerged at the end of September 2020 and the Ministry of Defence (MOD)’s Science & Technology Strategy in mid-October – and the Prime Minister’s statement on the Defence budget on 19th November 2020. The last element to appear was the Defence and Security Industrial Strategy on 23rd March – last but by no means least. It is potentially one of the more significant elements of the package, especially for the UK’s air and space sectors.

According to the classical British definition, strategy involves a combination of ‘ends’, ‘ways’ and ‘means’. Looking at the Integrated Review from a Defence perspective, the 16th March white paper set the “ends” (i.e. the policy goals), the Integrated Operating Concept (IOC) the “ways”, and the Defence budget statement the ‘means’. The ‘ways’ includes – or should include – not only how military force is employed, but also how capabilities are defined and developed to pursue wider defence and security objectives. There is some material on capabilities in the IOC – but the key document in this respect is the Defence and Security Industrial Strategy (DSIS).

The DSIS supersedes the National Security Through Technology (NSTT) white paper published in February 2012. It contains a range of pronouncements, including some which chime with the earlier document. For example, it commits to reforming the Defence and Security Public Contracts Regulations – the NSTT noted that these had recently been incorporated into UK law. It also commits to reforming the Single Source Contracts Regulations – the NSTT noted the conclusions of the then recent Currie review of single source procurement. And it commits to publishing a fresh MOD Action Plan for Small and Medium sized Enterprises (SMEs) – the NSTT had set out a range of measures to enhance opportunities for SMEs. But in two ground-breaking respects

First, it denotes the defence and security industry as a ‘strategic capability’. Admittedly, it uses this phrase in a sub-heading and does not fully unpack what it means in the main text. But the contrast with previous documents and the NSTT in particular is stark. The latter says positive things about the defence and security industry – for example, ‘we need thriving, innovative and highly efficient suppliers’ and ‘the defence and security sectors of UK industry are an important part of the nation’s advanced manufacturing base’ – but the words ‘strategic’ and ‘capability’, either together or separately, do not pass its lips when discussing industry. This reflected a longstanding fear in the MOD that such language would encourage companies to seek special treatment and support from government.

The change of terminology is welcome – if long overdue.

Much of that capability has resided in industry – whether in state or private ownership – for decades or even longer. But still more – including critical research, test and evaluation installations, facilities and human capital – was privatised from the 1980s onwards.

The second key change in the DSIS is the replacement of the policy of ‘global competition by default’ by a ‘more flexible and nuanced approach… which allows defence and security departments to establish where global competition at prime level may be ineffective.’ Again, it was the NSTT white paper which had codified the former policy as ‘wherever possible, we will seek to fulfil the UK’s defence and security requirements through open competition in the domestic and global market.’ That had been the MOD’s policy since the 1980s, but the NSTT white paper was ‘concerned by the proportion of non-competitive contracts that have been let by the MOD.’ So it was felt that the principle needed restating – even if the intention was more pragmatic.

Again, this second key change is welcome – if long overdue. MOD officials felt that they had to apply the principle of establishing ‘value for money’ through competition somewhat rigidly in the 1990s to break the hold of the old ‘cosy’ (as it was caricatured) relationship between the department and the UK defence industry. But by the early 2000s it was clear that industrial best practice was moving decisively away from competing requirements openly (and frequently) in favour of building long-term partnerships with suppliers selected against more qualitative criteria. However, ‘competition as our default position’ was deeply entrenched and it was feared that any official relaxation of the policy could accentuate the pressures on the – typically overheated during that period – equipment plan. And so it persisted – until now.

Significantly, the DSIS was preceded by the establishment by the MOD and industry of the Joint Economics Data Hub (JEDHub) ‘to collect and aggregate data from across the defence sector.’ This was a response to the 2018 Dunne review which noted the paucity of reliable data on the contribution of defence to UK prosperity. That paucity was not an accident. Over the years, the MOD had gradually reduced the data that it collected from the sector as such data was deemed unnecessary to support the previous policy positions.

It is one thing to say that the MOD wants to have a ‘more strategic relationship with industry and build a more sustainable industrial base’ but another to displace old habits. The desire for ‘case-by-case’ decision-making is culturally ingrained – as is blaming suppliers when things go wrong. There is also a fear in some quarters that the ‘more nuanced approach’ will be a cover for protectionism.

And it’s worth recalling that the previous policy positions persisted – although increasingly discordant with the reality both of the changing industrial landscape and of the practice followed in a number of individual major procurements – largely because of the chronic pressure on resources. The Government says that, through the Integrated Review, ‘we will, for the first time in decades, match genuine money to credible ambitions.’ The defence budget uplift was an agreeable surprise for most external commentators – and, in principle, a balanced programme is the basis for better decision-making across the piece. But how long will it last? The twin perils of cost growth and requirement creep remain. In the meantime, the UK’s air and space sectors should benefit from a longer-term approach which takes more account of the wider economic and social contributions – not least skills development – from defence expenditure. In short, DSIS provides the conceptual framework for a more rational and pragmatic approach to defence acquisition – and thereby should help enhance significantly the resilience of our overall defence capability which is crucial for credible deterrence in an increasingly turbulent world.

Peter Watkins is a visiting professor in the Department of War Studies at King’s College London. He was formerly the Director General Strategy & International (2017-18) and Director General Security Policy (2014-17) in the UK Ministry of Defence (MOD).

Read the full collection here.