Defence Procurement System: It is broken – and it’s time to fix it

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This is the title of the hard-hitting report generated by the UK House of Commons Defence Committee regarding the detailed look at the entity (Defence Equipment and Support) that purchases and then maintains the UK’s military equipment.

“We have discovered a UK procurement system which is highly bureaucratic, overly stratified, far too ponderous, with an inconsistent approach to safety, very poor accountability and a culture which appears institutionally averse to individual responsibility. We believe the system is now in need of major, comprehensive reform.”

These study results and recommendations resonate well with the current state of South African National Defence Force (SANDF) acquisition and system maintenance.

The report states in the summary closing that “With a war in Europe now raging on the eastern border of Europe, we can no longer afford, strategically, militarily, or financially to continue the broken procurement system which we have been operating, for decades. If we are to keep our nation safe, our adversaries deterred, and our allies reassured we now urgently require full-scale reform of the way we be buy and support our fighting equipment.”

The war in Ukraine has been a ‘game changer’ in defence and security terms for the United Kingdom. Here in South Africa, substitute “war in Ukraine” for “insurgency is on our doorstep” and we can no longer take our national security for granted.

The report makes 22 specific recommendations to seriously overhaul the defence procurement system. At the heart of these is improving accountability and aligning it more clearly with responsibility, to actually empower those who need to deliver change to do so.

The report is essential reading for the South African parliamentary committee on defence and military veterans, as well as the joint standing committee on defence. Why? The changes proposed should also materially improve accountability to Parliament, which has to vote for the funding of defence programmes in the first place.

Improving military procurement is a political imperative, as, “if Defence is to acquire the increased resources which we strongly believe it really needs, including over the medium to long term—and not least from a Treasury grown weary from years of multiple, high-profile procurement failures—then the Ministry of Defence now needs to demonstrably ‘put its own house in order’, to make a convincing case that it really can spend money wisely.”

There needs to be a system which places a much greater value on time, promotes a sense of urgency rather than institutional lethargy, and prevents endless ‘requirements creep’ by our own military. The output is a reformed system that should also make much greater use of both spiral development and also Urgent Capability Requirements (UCRs), previously known as Urgent Operational Requirements (UORs), both as a procurement methodology in itself but also as a ‘mindset’, which stresses the imperative of delivering battle-winning equipment, in a timely manner and at an affordable cost.

The following sentence captures the South African environment in a nutshell. “The Government will need to use this revised system to help our Armed Forces, in particular the Army, speedily address the serious equipment deficiencies in their current Order of Battle.”

The report also stresses that Defence Equipment and Support (DE&S) (think Armscor) must improve its relationships with industry, from increasing transparency about forthcoming requirements, expanding the emphasis on exportability, better defining ‘social value’ in competitions, through to fostering critical skills, preventing skill-fade and encouraging and developing the Defence apprentices and workforce of the future. This is again aligning with the current South African environment.

The issue of budgets and affordability are addressed as is the challenges that ‘annuality’ poses. Annuality refers to the difficulties created by having to work in tight one-year funding cycles. The essence of the issue is that most defence procurement programmes take multiple years. Really big programmes might last for 10 years, and if every single year you have to land the budget on the sixpence of what you forecast at the beginning of the year, or otherwise lose the money, that is really difficult, and it is not an efficient way to do business. The fixation on short-term budgets also leads to ill-founded decisions in the name of budgeting. In South Africa we have done away with a key tool in this area. The Strategic Defence Account (SDA) is the mechanism for covering the longer term acquisitions. The SDA needs to be reinstated as soon as possible and funded with a realistic value to affect the upliftment of the SANDF’s capability.

The issue of the greater value of time is quite telling. The following extract can be applied to a number of Armscor acquisitions, but it is specifically telling on the current Hoefyster project that similar to the UK Ajax Armoured Vehicle programme represents the worst of UK procurement. The Ministry of Defence should take, if necessary, a more robust attitude towards its contractors if programmes get into serious difficulty. Allied to this, Ministers should be prepared to cancel programmes that are obviously failing, rather than exercising constant ‘optimism bias’ to the detriment of the UK taxpayer.

The report conclusion starts with: ‘A Broken System’ – the Ministry of Defence must finally admit, once and for all, that there is a real problem across UK defence procurement: the current system is indeed broken and multiple, successive reviews have not yet fixed it. With a major war now under way in Ukraine, now is the time to act.

The SANDF’s resources are stretched, and insurgency is on our doorstep. The Armscor board should be almost due for replacement. I think the current board was appointed in November 2020. Maybe it is time to install a functional board. At least half of the board needs either military experience or alternatively complex technical programme delivery experience, preferably in the aerospace and defence domain. The board then need to determine if having only legal people as the defence procurement executive is wise. The current lack of military industry technical exposure is telling.

This is a call to the Minister of Defence. Now is the time to act.

Written by James Kerr, owner of Orion Consulting CC, which provides Market Entry Strategy and Bid & Proposal services to the Aerospace & Defence related industry and assists international SME mission system product suppliers to gain traction in South Africa.