The Defence & Security Industrial Strategy

On Tuesday 23 March, the Secretary of State for Defence launched the Defence and Security Industrial Strategy (DSIS) which details the framework through which government will deliver on the ambitions of the Integrated Review and Defence Command Paper. techUK has already written high level summaries of the Integrated Review and the Defence Command Paper, and in this insight we highlight the key points of the DSIS.

Responding to the publication of the Defence & Security Industrial Strategy, techUK’s Programme Head for Defence Fred Sugden said:

“The technology industry has played an important role in informing the decisions made during the development of the Defence & Security Industrial Strategy, and it is reassuring to see the importance placed on technology as both an enabler and as a capability in the DSIS, Defence Command Paper and Integrated Review.

techUK and our members look forward to working with government as it seeks to implement new ways of working with industry to deliver cutting-edge technologies to the UK’s Defence and Security community.”

The Integrated Review (IR) and the Defence Command Paper (DCP) make clear that the UK’s global role requires the Armed Forces to be equipped to deal with the changing face of warfare. To meet this need, the DSIS recognises the importance of a sustainable industrial base, ensuring the UK has access to the most sensitive and operationally critical areas of capability while maximizing the economic potential of one of the most successful and innovative sectors of British industry.

The DSIS aims to establish a more strategic relationship between government and the Defence and Security industries, highlighting areas of the industrial and technology base where the government needs to pursue a different approach to meet critical national security requirements, and defines a set of capability segments that the government considers to be strategically imperative and that need operational independence.

The DSIS aims to achieve the following goals:

• Foster an innovative and competitive UK Defence and Security industrial base;
• Ensure the UK government can acquire and maintain Defence and Security capabilities;
• Establish a closer and more strategic relationship between government and industry;
• Encourage diversity in Defence and Security supply chains to mitigate risks;
• Provide greater clarity on future requirements and technology priorities;

To achieve these aims, the DSIS sets out changes across four main areas:

1. Acquisition & Procurement Policy

As mentioned above, the DSIS is launched in the wider context of:

• The overall policy framework set out in the Integrated Review;
• An additional investment of £24bn in Defence over the next 4 years;
• Wider procurement reforms across central government and cross government policy changes including the Green Book and new social value requirements in contracts;
• New national security and investment legislation to regulate foreign direct investment (FDI);

These changes and the policies and programmes within the DSIS create an opportunity for government and industry to establish a ‘virtuous cycle’ in which:

• A substantial injection of new funding including at least £6.6bn in Defence R&D generates growth of new technologies;
• Companies have the confidence to invest themselves in developing new technologies;

The DSIS details a more strategic approach to industrial capability and will look for flexibility in acquisition strategies to deliver and grow onshore capabilities. This approach will allow government to use competition where appropriate, but also establish where global competition may be ineffective or incompatible with national security requirements.

The DSIS includes a package of legislative reform, policy changes and internal transformation that will improve the simplicity of procurement and stimulate innovation and technology exploitation. The package is particularly focused on MOD given its market-driving role as a customer but includes increasing transparency and improving communication with industry more broadly.

Other elements include:

• Reforming the Defence and Security Public Contracts

The MOD has embarked on an ambitious and comprehensive review of the Defence and Security Public Contracts Regulations as part of the broader government review of procurement regulations.

• Reforming the Single Source Contract Regulations

The MODs review of SSCRs focuses on speeding up the regime and the contracting process and incentivising suppliers to innovate and support government objectives. The changes to SSCRs will also mean that suppliers can earn higher profits where there is a significant transfer of risk, while there will be lower profit rates available for less challenging work.

• Building on progress by MOD’s Acquisition and Approvals Transformation Portfolio with focus on category management, cultural change, technology exploitation and increasing the capability of MODs commercial function

The MOD will build on the early adoption of Category Management arrangements to increase co-ordination across Defence . The department is seeking to increase technology exploitation by exploring ways to involve industry partners earlier in the process, and finding ways to increase the capacity and capability of the commercial team by continuing to invest in the commercial expertise required to support the delivery of the strategy.

• Publishing a fresh MOD SME action plan and improve MOD Industry Engagement

The MOD wants to improve MOD-Industry engagement by increasing transparency and improving communication of longer-term government priorities. This includes driving the implementation of the MOD Strategic Partnering Programme, and refreshing the MOD’s commitment to SMEs by removing barriers to entry and strengthening the Defence Suppliers Forum.

• Introducing Intellectual property strategies

The MOD is introducing Intellectual Property strategies into its acquisition process to ensure defence programmes and projects consider the costs, risks, benefits, and constraints associated with different intellectual property approaches early on.

2. Enhancing UK Productivity and Resilience

The DSIS aims to strengthen the productivity and resilience of the Defence and Security sectors by:

• Building greater resilience in defence supply chains in particular by mapping MODs most critical supply chains

The Government has already invested in a range of supply chain development initiatives across different sectors in attempts to strengthen productivity, and the MOD is already mapping its most critical supply chains. The MOD aims to improve risk reporting and management of resilience to supplier failure and potential fragility and drive greater understanding of the supply chain.

• Enhancing productivity and competitiveness of the UKs defence sector and establishing a Defence Supply Chain Development and Innovation Programme

It is also recognised that to diversify supply chains and encourage new suppliers, the main challenges businesses may face may not be about technology but finance. To support businesses that have the potential to help and mature innovative concepts, the MOD will expand its access to mentoring and finance schemes, providing access to loans, investment funding and expertise.

• Implementing the National Security and Investment Bill

The National Security and Investment Bill will introduce civil and criminal powers to enhance our ability to tackle hostile foreign investment.

• Protecting defence supply chains and sensitive technologies from malign activities

The Government will protect the UK’s economic assets from malicious intent. This includes the sophisticated threat from hostile actors. To address this the government will expand powers to make targeted and specific government intervention in areas of the economy where there are national security risks. The Government will work collaboratively with industry to protect UK intellectual property and classified R&D from external malign influence.

3. Future investment in key technologies

The DSIS, alongside the IR and the DCP aims to stimulate further private and public investment by:

• Promoting greater government leadership and communication of future R&D and capability needs

The recently published MOD S&T Strategy builds on this understanding, highlighting critical and enduring capability challenges where the MOD will focus R&D investment. In addition, all departments publish Areas of Research interest to encourage engagement with academia and new suppliers. To expand on this activity, the MOD will establish a new integrated framework for engaging with external partners in order to improve understanding, identify new opportunities and develop more inclusive and joint forward plans.

• The MOD will publish a new defence science and technology collaboration and engagement strategy

The new strategy will include the DSF Research, Technology, and Innovation Group’s Academic Pathways initiative to improve how the MOD communicates requirements to academia.

• Develop an ambitious Defence Artificial Intelligence strategy and invest in a new Defence AI Centre to accelerate adoption

The new Defence Centre for AI will serve as the nucleus to accelerate the development and exploitation of AI technologies from the battlespace to the back office. Activities will range from implementing data management techniques; developing common AI platforms, toolkits, and best practices; testing and validating novel capabilities; to delivering scalable solutions.

• Invest in DASA and expand the Defence Technology Exploitation Programme being piloted in Northern Ireland into a UK-wide activity to support collaborative projects between SMEs and Primes

The government will increase investment in DASA Challenges to identify solutions to specific requirements, and will develop cross-sector innovation campaigns through partnerships with MOD, BEIS and other government departments – structured around the Defence Innovation Priorities.

• With the DSF and Academia, discuss what further access to government science, data and technology, test facilities and expertise would be needed to accelerate development of new defence and security solutions

The Government will work with the Defence Suppliers Forum to explore how to facilitate further access to government expertise, facilities and datasets for industry and academia.

4. International Cooperation, Exports and Foreign Investment

Changes include:

• Establishing clear priorities for international cooperation and export opportunities for the Defence and Security sectors
• Establishing an investment screening unit to scrutinise overseas investments
• Enhancing and diversifying international strategic partnerships, including NATO and
• groupings such as the National Technology Industrial Base
• Creating a new government-to-government commercial mechanism for defence and security exports
• The MOD will consider exportability, adaptability, and technology protection earlier in the capability development, planning and investment processes
• Setting a new level of cross-departmental support for the Defence and Security sectors led by Ministers
• Greater use of market intelligence to understand potential export opportunities
• Conducting a transformation programme to improve transparency and the customer experience for exports through the ECJU
• Establishing a Defence and Security Faculty as part of DIT’s Export Academy, giving SMEs dedicated export support

Capability Segments

The DSIS annex outlines several capability segments considered to be of particular national importance, and where strategic imperatives apply. These must be retained onshore in the UK.

The segments are:

1. Nuclear
2. Offensive Cyber
3. Crypt Key

There are also several capability segments where operational independence applies. This means the technologies in these areas underpinning capability should be treated sensitively and protected appropriately.

The segments are:

1. Complex Weapons
2. Novel Weapons
3. Test and Evaluation
4. Chemical, Biological, Radiological and Nuclear (CBRN)

The annex also identifies domain-focused capabilities where government can dedicate resource through sector specific sub-strategies. These are maritime, land, air, and space capabilities, as we as the cross-cutting integrating capabilities of the digital backbone, sensing and detection, C4 and CEMA.

More detail on these can be found in the techUK summary of the Defence Command Paper.