In the run-up to the next UK Strategic Defence and Security Review in 2015, HOWARD WHEELDON FRAeS outlines the changes and challenges for the British defence and aerospace industry in supporting the RAF’s operations and Government industrial strategy.
This article is based on a speech given at the RUSI RAF Air Power Conference in July 2013.
[caption id="attachment_8467" align="alignnone" width="376"] Eurofighter Typhoons at RIAT. But is there trouble ahead for 'Future Force 2020'?[/caption]
I start with the premise that events since the last UK defence SDSR 2010 review have determined once and for all that interdependence between the health of the nation and what we spend on defence are not only inextricably linked but now set in stone. Air power capability has over the past three years suffered a very high proportion of burden in an attempt to reduce the overall cost of defence. UK Maritime capability has also been significantly reduced but it is not just the Royal Air Force and Royal Navy that suffered such large scale capability cuts - industry suffered massively as well. Worse perhaps is that through the radical process of change it seems to me that all sides in this process have suffered loss of stability and trust.
The UK economy is now at last showing small signs of recovery but while the profit and loss account may be heading in the right direction be aware that the cash flow and balance sheet statements are unlikely to show signs of sustainable improvement before 2017 at the earliest. Out of necessity rather than judgement spending on defence has over the past three years been severely hit. For all that most would agree that it has been right that the Government should attempt to fill the large black hole in defence budgets. This has, we are told, now been achieved which if true is excellent news. I would however remind that the 2012/13 defence budget was under-spent in the region of £3bn and that little of this amount will be carried over into the current year. Indeed, on the present basis of expectation it seems that budget under-spend for the current 2013/14 year might well exceed £2bn.
Despite reassuring words from some in Government confirming that spending on defence equipment during the period 2016 to 2020 will rise by 1% in real terms I suspect that as we move further toward achieving our ‘Future Force 2020’ ambition there will be further trouble ahead for military and defence. Indeed, while it is correct to suggest that we are now moving in the right direction my fear is bound to be that with SDSR 2015 now less than two years away any hope that we may have for achieving near-term consistency and stability in the UK military and defence arena is bound to remain challenging.
American author Tom Robbins said that “true stability results when presumed order and presumed disorder are balanced”. “A truly stable system” he said “expects the unexpected, is prepared to be disrupted and waits to be transformed”. This may be a good summary of what our armed forces and the defence industry that supplies them have gone through. And while speaking of inconsistencies it may also be true of what we await in proposed changes to defence procurement management.
I am not proposing to dwell on the proposed GoCo or DE&S+ solutions other than to agree that the current system of defence procurement has failed all sides - customer, user and supplier - and that from an industry perspective whatever emerges will be supported by them.
An ‘unofficial’ industrial strategy
We all crave stability just as we do fairness, transparency and, in the military and defence arena, the return of missing trust. In industry we appreciate that Government does now appear to have an ‘unofficial industrial strategy’ with regard to defence but what a pity that this is sometimes spoilt by MoD and other civil servants and others engaged in procurement persist in singing from a rather different hymn-sheet. Importantly industry really does appreciate the new vigour with which the Government has attested itself in terms of UK defence exports and that national interest is now at long last being put before political correctness.
But we do have another important message for government – while industry recognises that renewed vigour on the part of government has come about because of economic weakness we also need to know that as we go through a recovery phase we can do so in the knowledge that when times are better Government will continue to give the same level of support that it is giving now. Just as buying a ‘pet’ should never be ‘just’ for Christmas neither can defence industrial policy be a ‘sweater’ that you put on when the economy is cold and take off when the economy starts to warm – it must be designed to be worn permanently!
Here’s another useful quote: “operations in Iraq and Afghanistan and the war on terrorism have reduced the rate of military transformation and have revealed our lack of preparation for defensive and stability operations. This Administration has over-extended our military”. That was said by Barack Obama but it may just as easily have been said by many keen observers as to how we have reduced our defence capability whilst at the same time leaving the mission unchanged. It should I believe be a warning to any western government that chooses to believe defence and security and the strengthening the NATO alliance should no longer be the
absolute and overriding priorities of government.
Probably what astounds me most of all is that we have pushed forward a huge change process in defence policy and practice without defining basic principles of where it is and what it is that Britain wants to be in the world. Nevertheless, from now on we can be sure that whoever is empowered in government will ensure that domestic military and defence capability ambitions together with the role that we play within NATO and in protecting dependent territories will from now be built around the health of the economy as opposed to perceived military need. If there are any remaining doubters the message is quite clear - affordability now has an air of permanency when it comes to defence capability. For that we only have ourselves to blame.
No more spin and false hope
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Britain will soon have one of the most modern and well-equipped air forces in the world - RAF Voyager. (Airbus Military)[/caption]
The military isn’t alone is seeking stability of course – industry wants stability too. In the current and future air power related environment industry needs to know that the government will not only support it but that it values its contribution. Industry no longer wants spin or false hope that new initiatives really will lead to better coordination with its MoD customer. It wants honesty, openness and a resumption of complete trust. But industry also recognises that in the aftermath of the ‘National Security Through Technology’ White Paper
and subsequent ‘U’ turns that government has listened and got some of the message.
Industry has not always perfect, of course, and it is true that sometimes the ubiquitous words of ‘flexibility and adaptability’ have been missing in certain PFI’s and some through-life support programmes. However, it is equally correct to say that industry is now much improved in terms of performance, cost and the support that it provides to the military customer. Efficiency has improved and benefits have been passed on to the customer. We may not be all the way there yet but in terms of build programmes, through-life support, maintenance, synthetic and operational training, running bases, catering and much other operational support due to industry’s extended role I think we can usefully claim that the RAF is all the better and more efficient for the role that it now plays at the heart of service operation.
It is of course rather easy to forget that, while we may lack sufficient volume and depth in UK defence capability, Britain will soon in terms of overall air power capability have one of the most modern and best-equipped Air Forces in the world.
Partnership rather than threats?
Just as the military have, so too has industry has been forced to adjust, particularly as legacy maintenance and through-life product support programmes and upgrades prematurely ended. With too little warning in the name of affordability ‘through-life product’ all too quickly became ‘finished-life product’. As if that was not bad enough industry was then threatened by Government with carrot and stick policies of ‘buy-off-the-shelf. Thankfully we have for the most part now stopped looking back but we are still a long way away from achieving stability in either the military or industry and the loss of trust remains an issue for both. Industry has risen to the new challenge presented but how much better would it have been to hear the Coalition Government say at the start that the future for procurement would be built on partnership with industry as opposed to threats.
How much better would it have been to better involve industry in SDSR 2010 right from the start? Let us hope those lessons are learned with regard to the upcoming SDSR 2015! Despite all this industry continues to be either directly or indirectly engaged with government in many forums including engagement on the Defence Reform Bill
that will eventually lead to re-assessment and reshaping of material strategy. Industry has never stopped seeking a better relationship with its MoD customer just as it also seeks to rebuild lost trust.
Industry works hard in supporting government through bodies such as the Defence Supplier Forum
and its many working groups that cover research and development, industry support to operations, capability, information, skills retention, international strategy, communications and total support force and so on. To these has been added the Defence Growth Partnership
and the Cyber Security Growth Partnership – each having its own set of future objectives and values and yet I suspect both equally at the mercy of affordability.
Industry continues to engage with government in other policy formation discussions too such as the Anglo-French High Level Working Group, Critical Technologies, Research and Development Group, Defence Task Force, NATO Industry Engagement, various task forces, workshops and forums aimed at improving supply chains, opening doors into the MoD for SME’s, addressing licensing issues, ITAR and exports. This is hugely important and it is necessary confirmation of ongoing interaction between industry and government. This can of course be a costly exercise for all the various parties involved not least in time resource but provided that it achieves desired results it must be considered the correct way forward.
Exportability from the start
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Exportability is now high on the Government agenda (BAE Systems).[/caption]
Thanks to industry pressure the government has now had a partial change of heart with regard to issues such as exportability. Industry welcomes the view that exportability will from now on be built into equipment programmes right at the start. I loathe looking back but to think that just a year ago - just six months after the White Paper
had been published – the MoD was peddling a formula that defined exportability as ‘the characteristic of capability, equipment or technology that makes it attractive to export customers whilst not having adverse impact upon the operational advantage and freedom of action of UK armed forces! Such definition might well have come straight from a script of ‘Yes Minister’
and it presented government in a very bad light. My first thought on seeing it was how much we are paying the person who wrote it; my second was to request that Lord Levine should come back!
Next in line was arguing that the assumed benefits of defence exports are less than clear as they are not backed by identifiable evidence. Citing strengthening of influence/soft power, interoperability, longer through life support, reduced unit cost, industrial sustainment and revenue income as all not
being backed by identifiable evidence they went on to include an even longer list of widely assumed benefits that they reckoned were unsupported
by the evidence. These included retention of sovereign capability, increased production runs leading to reduction in price-per-unit, continuation of component production long after product obsolescence, simplified service support and commonality of equipment amongst allies making interoperability easier. What this shows is that despite considerable effort on the part of industry and other parts of government that the gap between MoD understanding of defence export benefits and those of industry remains very wide. It also shows that we have got a long way to go to rebuild lost trust.
This is partly what industry is often up against in its wider relationship with government. Fortunately the Prime Minister does get the message about exportability; about its reasoned part in defence diplomacy; about the value to the overall UK economy and to our armed forces. It is time that others followed suit.
Value to the economy
Last year we exported £8.8bn of defence equipment and services plus £2.7bn of security and cyber related support. Of around 450,000 direct and indirect jobs engaged in defence the export category accounts for at least 60,000. Is that not huge value to the economy in itself? We are good at what we do in defence but, just as the Government needs to invest more in organisations such as DSTL
and UKTI DSO
, so I believe does industry need to invest more in its own future. Arguably it now needs to take on a slightly higher degree of development risk and we may need to see an increase in numbers of partnerships. UK industry has some of the finest and most advanced design engineering capability in the world and much of it is within the defence industry. We have some great universities too and industry and the RAF need to better embrace the conceptual abilities within them.
But industry does now need to know that wise words of support it receives from Government really are meaningful. Say what you mean, mean what you say and then watch us turn that into actions. Industry will always deliver on its promise and it has learned from past mistakes. We live in constant hope that government has also learned that moving goal posts raises costs. That said, despite some unresolved issues we are grateful that HM Government does now appear to better understand the huge contribution and value that UK industry makes to the wider economy - not only with regard to the supply of superior equipment but through employment, skills retention, inward investment, exports and taxation.
Well, David Cameron does anyway and so too does Philip Dunne, Minister for Defence Equipment, Support and Technology. Setting aside notions of political correctness where they have been clearly inappropriate and travelling to so many countries selling Britain the PM’s genuine support of defence exports and national interest has been amazing. We thank him for that and for the manner in which he has dismissed claims from other senior ministers that because they had no budget to assist exportability it was not their responsibility to provide any support to industry.
Building relationships with defence diplomacy
The RAF continues to play a key export support role both in-country and in the UK. The result has long been self-evident in Saudi Arabia as it is now also emerging in Oman. The Air Forces of both nations work closely with the RAF particularly with regard to fast jet training at RAF Valley and Coningsby. I might add here that industry is also better for having many former serving RAF and Royal Navy officers now in its ranks.
The relationship between senior RAF officers and those of export customer air forces such as the Royal Saudi Air Force and Omani Air Force is crucial to the success of the export mission and industry. Visits to country by the Chief of the Air Staff and other senior officers together with Royal Air Force air power capability demonstration, goodwill visits to foreign ports by ships of the Royal Navy together with work by Foreign and Commonwealth Office diplomats help build strong relationship. This may be regarded as real defence diplomacy at its best. Our export success in Saudi Arabia and more recently in Oman is testament to this. We may hope that the same might soon also apply in Malaysia, UAE and Brazil.
Work in relation to UK defence exports is a vital part of the wider defence diplomacy process. Markets in South Korea, Thailand and Algeria are interesting examples of this. Other UK government organisations such as MODSAP working in the UK and in the Kingdom of Saudi Arabia are by their nature unsung but acting as the important link between customer governments and contractor involved they are absolutely crucial to long term success of that export mission.
Much of our wider export success is due to UKTI DSO whose vital and important work whether this might be briefing Ministers or merely supporting them on international visits is of huge value. UKTI DSO’s work is about understanding and interpreting proper lines of communication with governments. It is also about promoting Britain, helping new companies to get on the export ladder, providing assistance through the complicated paper work, permissions and export licence procedures involved plus also market profiling SME’s. With assistance from the RAF, Royal Navy and Army senior officers from UKTI DSO engage at major international defence exhibitions all over the world in support of UK exports. UK industry would not have achieved nearly as much as it has in terms of defence exports without the support of UKTI DSO and its predecessor organisation Defence Export Services Organisation – DESO. They are as I suggest brilliant at what they do and one example that I would highlight is the excellent work done by military personnel attached to UKTI DSO Exhibition team at Larkhill and Bovington who demonstrate equipment at dozens of international exhibitions each year.
But it may also be worth noting that UKTI DSO which had 500 people working in support of defence exports ten years ago has only 75 people supporting defence today plus another 75 separately working in support of security.
Fast jet training opportunities
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Hawk T2s - could the RAF's expertise in training spearhead export success? (Paul Heasman/BAE Systems)[/caption]
Exportability also includes through life product and service support and training. Fast jet training and the extensive use of synthetic training within this is an area in which the UK leads but much more can and needs to be done. As mentioned earlier along with training of our own fast jet pilots the RAF actively engages on training pilots of the Royal Saudi Air Force and will soon begin training Omani Air Force pilots. Fast-jet training is an area that I personally believe the combination of industry and the RAF could, with more investment, should not only embrace but use to our better economic advantage. If we had the will we could take on principle fast jet training of the vast majority of NATO members using the brilliant synthetic training facility that we have developed to work alongside the superb BAE Hawk T2 aircraft and which has been specifically designed as the lead-in-trainer aircraft for Typhoon and F-35 Joint Strike Fighter aircraft.
Industry has rightly embraced partnership across the whole airpower arena be this public/private sector cooperation, inter-company and international partnerships involved in project capability design and build. Partnerships between the military and industry now embrace through life product support and the military equivalent of power by the hour. Partnerships between industry and military are responsible for keeping most of our military aircraft and helicopters flying. PPP’s, PFI and outsourcing of requirement may not always be the perfect solution for the military but given the rationale of reducing cost even if sometimes partnerships don’t get off to the best of starts they are, particularly at intra governments and intra company level here to stay.
[caption id="attachment_8473" align="alignnone" width="376"]
International partnerships present opportunities, but also challenges.[/caption]
Clearly there are lessons to be learned in terms of partnerships between industry and government. We have taken a lot on ourselves in a very short time and not always succeeded within a set timescale. This is most often when the partnership is of a complex nature such as fast jet training or when capital equipment programmes suffer entry into service delays. What both sides have, I hoped, learned is the need for greater flexibility and adaptability to be built into future PPP and PFI programmes at the start.
But the future has to be about more partnering between military and industry both in product and service capability. In terms of government partnering where political national interest and other hostages to fortune can get in the way of progress - as witnessed for example by slow progress in Anglo/French and Critical Technology issues - caution is advised. Sharing costs of military capability development may look sensible politically but practicalities, technology, industrial and differing cultures can and do get in the way.
Critical technology retention is a highly contentious issue for both the UK and France and one that has no easy answers. But although nurturing the concept of Anglo/French cooperation will require an act of political faith by both sides - sharing of risk and responsibility for developing new capital defence product can actually make sense.
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Will key air power capabilities be run down before their replacements are in place?[/caption]
Industry will always work with whatever government policy is decided and it will continue to do its best to reduce capital and through life support cost. Building export potential into a product at the initial stage as is being done in Type 26 frigate development benefits both industry and government. But if we are to develop high end product and component, increase export potential and reduce the potential through life cost we need to significantly raise the current 1.2% level of investment the government invests in defence research and technology through DSTL. Industry needs to invest more too.
I should say that, whilst I fear that SDSR 2015 will lead to a premature running down of further RAF fast jet capability before new equipment due to replace it might be fully multi-role capable, that is a call for the Chief of the Air Staff to make rather than me. We have come a very long way over the past year or so in adapting to a new order in UK defence capability. We know that parts of the military are now stretched in relation to available resources but we also know that more work needs to be done to create better efficiencies. The Army is now rather belatedly beginning to go through a period of massive change but there is so much more that could be done – saving money in procurement and logistics stands out.
A year ago industry still smarted over issues in the ‘National Security Through Technology’ White Paper
that MoD priority would be to procure through an open competition basis using off-the-shelf purchases wherever practical and appropriate. Exportability hardly featured and there was little if any real commitment to UK defence industry. What a change in just a year. Now we are led to believe that some of the worst elements of the White Paper have been quietly dropped even though this has not yet actually been evidenced! But unlike competitor nations such as Germany we in Britain have no ‘formal’ defence industrial strategy to work within and worse, whilst trust between military and industry is now strong, trust between industry and the MoD customer is yet to be rebuilt.
Industry had not been consulted until far too late through the SDSR 2010 process so I hope that in SDSR 2015 industry will be consulted early and that the views of senior military will not so easily be dismissed. Committing to a ten-year equipment programme may be fine in practice but this takes little account of military perceptions and history. We may hope that by the time SDSR 2015 is published the next government recognises that defence capability cuts have far enough. I live more in hope than in expectation.