Defence Industrial Policy Refresh

  • techUK techUK
    Thursday21Dec 2017
    Opinions

    techUK's initial views on the Refreshed Defence Industrial Policy released at the end of 2017.

techUK welcomes the Government’s Defence Industrial Policy Refresh (DIPR) released in mid-December 2017.

The DIPR is the UK Government’s primary policy document concerning how MOD contracts for services and equipment, and how it plans to work with industry to deliver national capabilities. The DIPR sets out to clarify a number of procurement and commercial elements of Defence policy that greatly affect UK industry. Affecting everything from research & development activities, and requirements setting, through to support to exports and intellectual property rights, the DIPR is a broad document that will demand much work to implement in 2018.

MOD’s commitment to ‘Competition and Strategic Choice as the best means of delivering value for money, increasing innovation, and opportunities for SMEs’ is welcomed by techUK, indeed our members welcome competition and the chance to justify the efficacy of their products and services. techUK encourages MOD to pair this approach with a commitment to sustaining a level and fair environment in which to compete. As explored below there are elements of UK defence procurement that persist from previous years that reinforce outdated ways of working and make it hard for new entrants to compete with incumbent suppliers.

Commercial Transformation

The importance of commercial transformation with UK Defence cannot be understated, especially when placed in the context of engagement with the digital industries. The digital transformation led by ISS has progressed over recent years and has been coupled with a new approach commercial activities in Corsham too. As the Cabinet Office directives encourage shorter and more agile agreements for ICT services ISS has attempted to break down monolithic contracts intro smaller groupings of services. This approach should favour SMEs, offering them routes into MOD that were previously held by the traditional suppliers. Although there is evidence of this, it is widely known that progress here has been slow. techUK members are keen to support this transformation and to embrace modern ways of contracting for digital products and services. In 2018 we look forward to working with Andrew Forzani, MOD’s new Chief Commercial Officer, and the yet to be appointed Commercial Director at ISS.

The Digital Industries

techUK is somewhat disappointed to see that much of the references to digital platforms and information systems within the document is restricted only to industrial engagement purposes. Throughout the document ‘industry’ is described as broad groupings of capabilities, offerings, service providers, and innovators. As the Defence industry becomes ever more diverse this is very much welcomed and commended. However, there is no reference to the intricacies of the digital industries and the potential of such companies to revolutionise the public sector. As this is a broad policy document covering a multitude of areas this omission is understandable, however techUK will continue to work with MOD officials in order to ensure this message is communicated.

techUK greatly welcomes the direct use of the Land Open System Architecture (LOSA) example within the document. LOSA is a good example of how the UK can lead on the development of open systems and create innovative commercial mechanisms. LOSA allows UK SMEs to be directly involved with an important and influential project, whilst maintaining full control and rights over their intellectual property, traditionally a tough challenge when dealing with open systems. techUK encourages MOD to maintain this approach to opportunities that allow UK SMEs to engage in collaborative discovery work. For work such as this it is critical that MOD identifies and defines the user-side demand, ensuring that the results of LOSA have a customer and an end-user, eliminating the Valley of Death.

Collection of Industry Data

As part of the Government’s prosperity agenda MOD will increase the frequency and rigour with which they collect information about UK Defence jobs, supply chain depth, and contribution to economic prosperity. The collection and utilisation of this kind of information should greatly support the extant efforts being made to show the economic value of Defence to the UK economy. However, it is important that the processes being established in order to collect this information are not overly arduous on industry. UK companies already provide much information to different government departments, and efforts should be made to discover and use the information already within MOD’s reach, then make sensible efforts to collect what else is needed.

techUK would also suggest that the information that is being collected should also be at a level of granularity that makes it multi-purpose and useful for other purposes. To give an example; the collection of information on high-skilled technical roles within Defence would be used to demonstrate how Defence provides and maintains a number of high-value roles within the UK shores. Alongside this efforts should also be made to collect information on skills gaps in these areas. What jobs cannot be filled, what skills gaps are growing, and what can Govt. do to assist industry with this situation? The collection of data for the purpose of making positive statements about Defence and the industry that supports it is a worthwhile endeavour, and efforts should be made to ensure that this activity helps address as many of Defence’s challenges as possible. This activity is a good opportunity to increase efficiency and effectiveness in industrial engagement.

The progress of the joint industry-MOD discussions on Intellectual Property Rights (IPR) are of vital importance to techUK members. At the time of writing the DEFCON currently being worked through by industry and MOD applies to more traditional equipment and services. However, following the completion of this work the next task in the process will be a DEFCON covering digital products and services, and contracts dealing with data-driven assets. The outcome of the primary DEFCON will heavily influence the approach made to the digitally-focussed DEFCON. techUK looks forward to engaging further on this work and will continue to urge MOD to take a sensible and future-leaning approach to IPR, recognising the huge investments that the private sector makes in order to develop innovative IP. techUK members develop products and services for a wide range of public sector customers; adequate protection of IPR is a major factor when looking for business; MOD has a real opportunity to appeal to innovative companies with a modern approach to IPR.

SME Policy

An important part of MOD transformation, both commercial and wider, in recent years has been the SME policy and Defence’s cultural approach to working with the UK’s smaller sized contractors. This has been a major point of interest for techUK since it was launched in 2015, and continues to be of importance for our members looking for business with the MOD. Overall techUK members have been disappointed with the pace at which the various activities within the SME Policy have been progressed since its launch. Elements such as the Supply Chain Advocate Network have struggled to gain traction within the Department and around the Commands, offering only limited opportunities for business.

The DIPR shift towards early engagement and a simpler requirements setting process both favour SMEs, indeed many of the practical changes noted in the document would increase MOD’s ability to contract directly with SMEs. It is important for MOD to work with industry when forming these new engagement mechanisms, in fact it may be more important that MOD work with non-Defence contractors in order to understand how to appeal to potential new entrants.

Transparency and visibility of opportunities is tackled directly in the DIPR paper; with the Twitter account @defenceproc and the new Supplier Portal (www.contracts.mod.uk) being the two new primary engagement routes. techUK welcomes the technologically enabled nature of these additions and will work to share awareness within our community. However, DIPR does not address an important part of SME and new entrant engagement that overshadows these kinds of changes. The access that is afforded to incumbents across Defence is a huge bonus when searching for new business opportunities. Across the public sector the temptation for customers to ‘stick to those they know’ is undoubtedly strong, and unfortunately Defence is no different. Incumbent suppliers have the advantage of having physical presence on the floorplates of MOD sites, as well as relationships with civil servants. In some situations and contracts this is preferable for all, including national security considerations. However, this culture does stifle the SME agenda and makes it hard for SMEs to feel they can compete on a level playing field. techUK implores MOD to ensure the Supplier Portal is treated as the definitive place to post contracts, and that (as much as is possible) contracts are released to industry concurrently across all sites and platforms. UK SMEs welcome competition and the chance to prove their products and services are the best available, Government has an obligation to ensure the playing field is as level as possible.

techUK members also look forward to assisting MOD with the development of the ‘supply chain plans’ for contracts worth more than £100 million. With increasingly effective cyber-attacks and economic uncertainty given the Brexit negotiations the resilience and health of the UK Defence supply chain is more important than ever before. Efforts to better understand and monitor the supply chain should be matched with initiatives from MOD, wider Government, and the prime contractors to support SMEs if they do encounter trouble.

As noted in the DIPR techUK would greatly welcome a closer relationship with MOD in order to improve the guidance on engaging with potential suppliers and making more use of digital platforms. Digital ways of working are of particular importance and can be very powerful when working with SMEs outside of the traditional Defence localities around the UK (London and the South-West).

Final Thoughts

The DIPR is largely a collection of policies and activities that MOD and wider Government have publically stated previously. This consistency and stability is welcomed by industry; indeed policies that encourage competition and drive opportunities for new entrants are ideally suited for the fast-paced nature of the digital industries. However, it is the deployment of these policies that will be of pivotal importance. DIPR has allocated a number of tasks to MOD and to industry to fulfil in the coming months; there are a number of initiatives that require industrial input and support, and there are extant processes that require resolution. 2017 was a year that challenged the way that MOD distributed responsibilities, funds, and resources – arguably this affected the ability for officials to enact policies such as those noted in this DIPR. techUK looks forward to working with MOD on all the issues noted above, the digital industries are growing in their experience of affecting public sector markets and vastly improving the efficiency and effectiveness of traditional suppliers and customers.

 

So, what will techUK be doing to support the implementation of the DIPR? The bullet points below are techUK’s primary DIPR issues:

· Digital Transformation
- techUK will continue to encourage MOD to develop more digital ways of working, and in particular, digital industry engagement mechanisms. We will continue to push for an approach to industrial engagement that engages directly with the digital industries and makes allowances for the intricacies of how our industry operates.
- techUK will continue to encourage the Front Line Commands to consider digital capabilities when setting all future equipment and service requirements. 

· SME Policy
- We will engage directly with MOD and Minister Defence Procurement through the Defence Supplier’s Forum SME Forum to monitor the progress of the changes. techUK will offer support to the Supply Chain Advocates in order to help grow their profile as well as their knowledge of the digital industries.
- techUK will also survey members who use the Supplier Portal and feedback their thoughts to MOD on its ease of use and efficacy in helping them discover new opportunities.

· Commercial Transformation
- techUK will support MOD with the development of standard contracting templates and the move to shorter and more agile contracts.
- Working directly with ISS techUK will offer industry support to shape information systems and services contracts in such a way that delivery and value for money are prioritised and innovation is encouraged.

· Defending the UK defence enterprise
- techUK will continue to support and promote the CES+ and DCPP initiatives by extolling the importance of appropriate cyber security measures to all our members and partners.
- We will offer direct support to MOD in their activities to discover more information about the UK defence supply chain, including offering industry views on what data can be most readily collected and what will require more time or resources to collect and analyse.

· Support to Exports
techUK will continue to work with MOD and DIT in order to provide UK companies, particularly SMEs, with opportunities in international markets. This will require techUK to engage with stakeholders and industry about a shift to support smaller opportunities within target markets. Recognising that not all SMEs can be supported directly by Govt. but that they may well be a minimum expectation from industry as to the support and expertise that they can access from the civil service.

· Intellectual Property Rights
techUK will continue to work with MOD and ADS to complete the current work on IPR, prioritising the interests of industry who develop and utilise IP as a core part of their business. We then look forward to deeply engaging on the forthcoming DEFCON expected to address digital services and products later in the year.

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