Defence Industrial Strategy Defence Values for Acquisition

This statement of values is intended to shape the behaviour of all those involved in acquisition, including Ministers, Defence Management Board members, customers at all levels, the scrutiny community, project teams in the various delivery organisations and our private sector partners.

Everything we do is driven by the Defence Vision:

The Defence Vision

Defending the and its interests

Strengthening international peace and stability

A FORCE FOR GOOD IN THE WORLD

We achieve this aim by working together on our core task to produce battle-winning people and equipment that are: ¥ Fit for the challenge of today ¥ Ready for the tasks of tomorrow ¥ Capable of building for the future

By working together across all the Lines of Development, we will deliver the right equipment and services fi t for the purpose required by the customer, at the right time and the right cost. In delivering this Vision in Acquisition, we all must:

¥ recognise that people are the key to our success; equip them with the right skills, experience and professional qualifi cations; ¥ recognise the best can be the enemy of the very good; distinguish between must have, desirable, and nice to have if aff ordable; ¥ identify trade off s between performance, time and cost; cases for additional resources must off er realistic alternative solutions; ¥ never assume additional resources will be available; cost growth on one project can only mean less for others and for the front line; ¥ understand that time matters; slippage costs – through running on legacy equipment, extended project timescales, and damage to our reputation; ¥ think incrementally; seek out agile solutions with open architecture which permit “plug and play”; allow space for innovation and the application of best practice; ¥ quantify risk and reduce it by placing it where it can be managed most eff ectively; stopping a project before Main Gate can be a sign of maturity; ¥ recognise and respect the contribution made by industry; seek to share objectives, risks and rewards while recognising that diff erent drivers apply; ¥ value openness and transparency; share future plans and priorities wherever possible to encourage focused investment and avoid wasted eff ort; ¥ embed a through life culture in all planning and decision making; ¥ value objectivity based on clear evidence rather than advocacy; ensure that we capture past experience and allow it to shape our future behaviour; ¥ realise that success and failure matter; we will hold people to account for their performance.

Ministers and members of the Defence Management Board will play their part in working together for Defence by:

¥ speeding decision taking ¥ keeping the approval process simple ¥ empowering teams to deliver Defence Industrial Strategy Defence White Paper

Presented to Parliament by The Secretary of State for Defence By Command of Her Majesty

December 2005

£18.00 Cm 6697 Foreword

he country is rightly proud of its Armed Forces, and recognizes the vital contribution they make to ensuring our security in an uncertain world. Since the Strategic in 1998, and through successive White Papers, Twe have been transforming the , Army and to face the demands of the 21st Century. Our plans provide for agile, fl exible forces that can respond effectively to the varied challenges and opportunities we face now and in the future.

That realignment is supported by a substantial equipment programme, reconfi guring our forces to project power round the world to protect UK interests and strengthen international peace and stability. This has been supported by sustained real increases in the Defence budget arising from each Spending Review since the Government was elected in 1997.

Our Defence Industrial Strategy takes forward our Defence Industrial Policy, published in 2002, by providing greater transparency of our future defence requirements and, for the fi rst time, setting out those industrial capabilities we need in the UK to ensure that we can continue to operate our equipment in the way we choose.

The Defence Industrial Strategy recognises the important contribution that our defence industry makes to delivering military capability and the clarity provided in the strategy will, we believe, promote a dynamic, sustainable and globally competitive defence manufacturing sector. The UK market for defence equipment and services is the second largest in the world, and we recognise that the UK has a broad-based and sophisticated defence industry. The UK offers unique attractions to business and we continue to benefi t from the presence in our market of companies, whoever their shareholders are, who are prepared to invest and develop their businesses here.

But Government is clear that there are also challenges ahead. The complex, technologically challenging and high-value systems which we are introducing – and which take many years to design and bring into service – will last for many years. This places increasing emphasis on an ability to support and upgrade them through life, as well as having implications for the level of industrial capability and capacity that it is sensible or economic for industry to retain. We recognize that industry will have to reshape itself, to improve productivity and to adjust to lower production levels once current major equipment projects have been completed, while at the same time retaining the specialist skills and systems engineering capabilities required to manage military capability on a through life basis. Just as the roles and structures of the Armed Forces are transforming, so too are those of the defence industry which has itself to face the future with confi dence.

In this Strategy, we consider carefully which industrial capabilities we need to retain in the UK to ensure that we can continue to operate our equipment in the way we choose to maintain appropriate sovereignty and thereby protect our national security. The Strategy sets these out, and explains clearly for the fi rst time which industrial capabilities we require to be sustained onshore, noting that – as now – there are many that we can continue to seek to satisfy through open international competition. In doing so, it builds upon the Defence Industrial Policy, explains more clearly how procurement decisions are made, and to assist industry in planning for the future commits the Government to greater transparency of our forward plans, noting that as in any business, these change over time as spending priorities shift or cost estimates mature.

To implement this strategy will require changes on behalf of both industry and Government. Industry will need to adjust to sustain the capabilities we need once current production peaks are passed. The Government, too, needs to drive forward improvements in the way we acquire, support and upgrade our equipment. Together, the defence industry and government have to change their relationship, working to ensure that our Armed Forces continue to have the equipment they need. Doing this will help ensure the UK defence industry has a sustainable and bright future. This will require continuous effort on both sides over the coming years as it will not be easy. However, by starting the process today, while workloads are high, we can avoid facing a crisis in a few years time. We recognize some companies will fi nd the strategy’s conclusions diffi cult, but believe that industry, the City, the government and the country needs the additional clarity we are offering, to help industry reshape itself for the future.

We will look to the National Defence Industries Council to monitor our joint progress, and will review this Strategy every Spending Review period. In the meantime, and as the basis for the detailed implementation which will follow over the next few months, we commend this Strategy to you. John Reid Alan Johnson Des Browne Defence Secretary Trade and Industry Secretary Chief Secretary to the Treasury

Lord Drayson Alun Michael Minister Defence Procurement Minister of State for Industry and the Regions Defence Industrial Strategy Contents The Defence Vision Inside front cover Foreword 2 Executive Summary 6 Acronyms 143

Strategic Overview A A1 Introduction 15 A2 Military Strategic Overview 19 A3 The Defence market 25 A4 The UK business environment 34 A5 Defence research technology and innovation 38 A6 Defence exports 46 A7 Choosing the right approach 48 A8 Transparency 52 A9 Wider factors 55

Review by Industrial Sector and Cross-cutting Capabilities B B1 Systems Engineering 59 B2 Maritime 68 B3 Armoured Fighting Vehicles 78 B4 Fixed wing including UAVs 84 B5 Helicopters 90 B6 General Munitions 95 B7 Complex Weapons 100 B8 C4ISTAR 106 B9 CBRN Force Protection 114 B10 Counter Terrorism 120 B11 Technology priorities to enable defence capability 122 B12 Test and Evaluation 125

Implementing the Defence Industrial Strategy C C1 Taking forward the DIS - the challenges for change 131 C2 Getting down to work - putting the DIS into action 141 Strategic Overview A

Introduction Military Strategic Overview The Defence market The UK business environment Defence research technology and innovation Defence exports Choosing the right approach Transparency

Wider factors OverviewStrategic

Review by Industrial Sector and Cross-cutting Capabilities B Systems Engineering Maritime Armoured Fighting Vehicles Fixed wing including UAVs Helicopters General Munitions Complex Weapons C4ISTAR CBRN Force Protection Counter Terrorism Technology priorities to enable defence capability IndustrialReview by Sector and Cross-cutting Capabilities Test and Evaluation

Implementing the Defence Industrial Strategy C

Taking forward the DIS - the challenges for change Getting down to work - putting the DIS into action Implementing the Industrial Strategy Defence Executive Summary

i. The Defence Industrial Strategy (DIS) is structured in three parts: Part Our aim in the DIS A, providing the strategic context; Part B, reviewing diff erent industrial sectors and cross-cutting industrial capabilities; and Part C, outlining the implications viii. For these reasons, we need to consider how best the MOD should for MOD and industry as a whole, and how the DIS will be implemented. seek to engage with the industrial base in order to meet our requirements. The DIS fl ows from the wider Defence Industrial Policy (2002), and is ‘driven Part A – Strategic Overview by the need to provide the Armed Forces with the equipment which they require, on time, and at best value for money for the taxpayer.’ The DIS is thus ii. The global security environment in which the Armed Forces operate one of many contributions to the wider aim of ensuring that the capability has changed substantially over the past fi fteen years. Facing new and complex requirements of the Armed Forces can be met, now and in the future. challenges, the roles, size and shape of Armed Forces have also changed. In parallel, the defence industry has evolved; defence companies are now ix. The DIS will promote a sustainable industrial base, that retains often transnational, needing to attract and retain investors in international in the UK those industrial capabilities needed to ensure national security. markets – forcing increased effi ciency, restructuring and rationalisation. Our interaction with this industrial base must provide good value to the We are now reaching a crossroads. taxpayer and good returns to shareholders based on delivery of good performance, consistent with broader security and economic policy. iii. Although we are in the middle of a substantial transformation, involving a series of major new platforms (including the future aircraft x. To deliver this, the DIS: carriers, Type 45 , new medium-weight armoured fi ghting vehicles, and the A400M, Typhoon and ), we expect gives a strategic view of defence capability requirements going these platforms to have very long service lives. This means the future forward (including new projects, but also the support and upgrade business for the defence industry in many sectors will be in supporting of equipment already in service), by sector. Part of the strategic and upgrading these platforms, rapidly inserting technology to meet view is specifying, in order to meet these, which industrial emerging threats, fulfi l new requirements and respond to innovative capabilities we would wish to see retained in the UK for Defence opportunities, not immediately moving to design the next generation. reasons. We aim to communicate the overall view to industry as clearly as possible, recognising that plans change as the iv. In parallel, industrial rationalisation continues, and strategic or fi nancial environment evolves (and the DIS explains sustaining competition to meet domestic requirements is increasingly our current internal planning process, to allow industry to make diffi cult. In several sectors, following the entry into service of informed judgements about how to interpret this information); major projects, there will be substantial overcapacity in production facilities in the UK defence industry in a few years’ time. gives further detail on the principles and processes that underpin procurement and industrial decisions; v. As we look to non-British sources of supply, whether at the prime or subsystems level, we need to continue to recognise the extent to which this where there is a mismatch between the level of activity our may constrain the choices we can make about how we use our Armed Forces own plans (and export/civil opportunities) would support and – in other words, how we maintain our sovereignty and national security. that required to sustain desired industrial capabilities onshore, investigates how we might with industry address that gap. vi. Companies now have more choice than ever before about which markets to enter, which secure the best return for shareholders, and where to The evolving market and the UK business environment base their operations. If we do not make clear which industrial capabilities we need to have onshore (and this includes those maintained by foreign-owned xi. We recognise that in the UK we have a successful and defence companies), industry will make independent decisions and indigenous sophisticated industrial base with a broad range of capabilities capability which is required to maintain our national security may disappear. and which delivers a large proportion of our defence equipment and services. We welcome overseas investment where this creates vii. Equally, we do not seek to restrict the scope for international value, employment, technology or intellectual assets in the UK. cooperation and competition where this is appropriate, and we cannot aff ord to maintain a complete cradle-to-grave industrial base in all areas. xii We also recognise the attractions of the US market, given its scale As industry has told us, greater clarity is therefore needed urgently on and high levels of investment in research and technology, and that the level of which capabilities must be retained onshore, and which by implication can infl uence and attractiveness of MOD business varies by sector and by type of be met from a wider market. The DIS does not seek to set out a preferred company. But the UK provides a unique environment for the defence industry: route to international restructuring; that is very much industry’s business. But it does seek to create a clear UK context to inform these decisions. a greater proportion of our overall business is available to industry than in any other major defence nation, and growing expertise in the combination of systems engineering skills, agility and supply chain management required to deliver through-life capability management gives the UK defence industry a comparative advantage;

6 Defence Industrial Strategy we have a sophisticated demand for high-value products technology or intellectual assets in the UK and thus become part of the UK which have to stand up to active service, and consequently, defence industry. Within this strategy, we aim to tell industry very clearly are easier to market to export customers; where, to maintain our national security and keep the sovereign ability to we have an open market and diversity of suppliers which use our Armed Forces in the way we choose, we need particular industrial encourages innovation, new entrants and inward investment; capabilities in the UK (which does not preclude them being owned or and profi t potential and a trading environment which is open to new established by foreign-owned companies). We have therefore assessed procurement models, including long-term partnering arrangements, industrial capabilities against national security priorities, broken down into: which incentivise industry to drive down costs but allow increased profi ts where these are earned by improved performance; strategic assurance (capabilities which are to be retained in addition, the Government helps sustain an attractive onshore as they provide technologies or equipment overall business environment, including: important to safeguard the state, e.g. nuclear deterrent); a stable macro-economic and political environment; defence capability (where we require particular assurance leadership in science & technology, including of continued and consistent equipment performance); by targeted MOD investment; and strategic infl uence (in military, diplomatic or industrial low costs; terms), as well as recognising potential technology benefi ts Strong support industries in fi nance, business attached to these which have wider value. But as the DIS services, design and marketing; makes clear, even where we wish an industrial capability to be a highly skilled and fl exible labour force; sustained in the UK for strategic reasons, that does not necessarily a transparent business environment that preclude global competition in that sector for some projects. encourages fair competition; specifi c support to the Defence industry, including the Defence Export Services Organisation. PART B – Review by Industrial Sector and Cross-cutting Capabilities xiii. We also recognise that the bedrock of our procurement policy has to be long-term value for money. Competition is often a useful B1. System Engineering mechanism to establish this, but is not always appropriate, and needs to be used intelligently, alongside other models, considering the nature of the xvi. Given that the new platforms being brought into service are marketplace. The UK has increasing experience of new approaches which likely to remain in our inventory for many years, and are increasingly may apply in diff erent circumstances, and by setting out how we approach complex, it is little use investing in cutting-edge science unless systems diff erent situations, and the various tools available, we hope in future to engineering capability and vital long-term knowledge is maintained. speed the decision-making process signifi cantly, and pick the right tool New technologies will have less benefi t if the knowledge of how they from the toolbox fi rst time. We also recognise the need to improve the might best be exploited and inserted into existing equipment has been earned profi t margins available to industry based on good performance if lost. This demands a high level of systems engineering skills, at all levels we are to attract global investment capital into the UK defence industry. of the supply chain (recognising that much of a platform’s capability is delivered through its subsystems, which will often be the route to upgrading xiv. The priority for the DIS is in ensuring that UK industry can meet the capability), sustained through the life of the equipment. The signifi cance requirements of the Armed Forces, both now and in the future. Wider of this capability varies by sector, but it is generally very important factors, as set out in Chapter A9, will continue to be considered in acquisition for maintaining our control of how we operate our Armed Forces. decisions. The key to ensuring that a chosen procurement strategy is most suited to the circumstances of a particular project is to expose the wider B2. Maritime factors which impinge upon that project at the earliest opportunity, engaging relevant Government stakeholders from the outset in order to do so. xvii. We require versatile maritime expeditionary forces, able to project power across the globe in support of British interests and delivering eff ect Identifying and sustaining Key Industrial Capabilities on to land at a time and place of our choosing. To sustain this capability: xiv. Every nation ideally wants to keep under its control critical defence it is a high priority for the UK to retain the suite of capabilities technologies, but no country outside the US can aff ord to have a full cradle required to design complex ships and , from to grave industry in every sector, and our Armed Forces continue to benefi t concept to point of build; and the complementary skills to from the extensive range of foreign-sourced equipment currently in service. manage the build, integration, assurance, test, acceptance, And it is readily recognised that much of the equipment procured from support and upgrade of maritime platforms through-life; UK prime contractors contains non UK sourced content. We welcome the progress made in establishing understandings on security of supply and For the foreseeable future the UK will retain all of those capabilities the decision to introduce an EU Code of Conduct on Defence Procurement unique to submarines and their Nuclear Steam Raising Plant, to which aims to create an eff ective European Defence Equipment Market. We enable their design, development, build, support, operation and continue to welcome overseas products, and indeed in many signifi cant decommissioning. MOD and industry must demonstrate an ability to areas rely on overseas supply, with appropriate guarantees (which may drive down and control the costs of nuclear programmes; include technology access to ensure we can adapt equipment to meet national requirements over time) and/or judgement that any increased We also need to retain the ability to maintain and support the Navy. risk to maintaining our operational independence is acceptable. There are a number of specifi c key maritime system capabilities xv.The UK also retains a sizeable, open and broadly-based defence industry and technologies which we should retain onshore, and the which delivers a large proportion of MOD’s needs, and we welcome overseas ability to develop and integrate into platforms complex investment, especially from companies that create value, employment, maritime combat systems is also a high priority.

Defence Industrial Strategy 7 xviii. In the past, we have specifi ed that all warship hulls should be built xxii. The UK AFV industry has consolidated so that BAE Systems Land onshore. However, the national security requirement surrounds the ability to Systems (LS) is the supplier of 95% of our current inventory. We need to upgrade rapidly, integrate highly complex and sensitive subsystems, and launch manage this in-service fl eet through life whilst still retaining access to best operations from the UK base. To sustain this requires a minimum ability to build of market products at subsystem level. Building on discussions already set as well as integrate complex ships in the UK, not least to develop the workforce, in train, we will work hard with the company to give eff ect to the long-term and to adjust fi rst-of-class designs as they develop. At issue is the capacity partnering arrangement required to improve the reliability, availability and required. The Future , Type 45 and Astute projects will eff ectiveness through-life of our existing AFV fl eets. We intend to establish keep the UK shipbuilding industry fully employed for some years (and it may not a joint team early in 2006 to establish a business transformation plan have the fabrication capacity to absorb the full programme at its peak), but from underpinned by a robust milestone and performance regime. We expect to around 2016, the steady-state demand will be signifi cantly lower. The business see a signifi cant evolution of BAE Systems Land Systems both to deliver AFV must be streamlined for greater effi ciency and profi tability. The clear trend is availability and upgrades through life, and to bring advanced land systems’ for fewer more capable platforms, able to incorporate upgrades as necessary technologies, skills and processes into the UK. If successful in their evolution, to respond to new technologies and threats. The ability to do so will depend BAE Systems will be well placed for the forthcoming FRES programme. upon us working together with industry to address the fundamental issues of aff ordability and productivity. The industry, which is currently fragmented, B4. Fixed wing needs to consolidate and refocus around a core workload which sustains key capabilities and represents a viable business. Provided our key capabilities are xxiii. Air power continues to off er the ability to transform the maintained, not all of them must be exercised onshore for every project, and battlespace, utilising its inherent attributes of reach and speed to enable the strategic need for onshore execution will be judged on a case by case basis. strategic operational and tactical agility. We are introducing two new, highly sophisticated manned combat fast jets, Typhoon and the Joint xix. We will immediately start negotiations with the key submarine Combat Aircraft, which are intended to last for more than 30 years. companies with the aim of achieving a programme-level partnering agreement Current plans do not envisage the UK needing to design and build a future with a single industrial entity for the full life cycle of the submarine fl otilla, generation of manned fast jet aircraft beyond these types. However, addressing key aff ordability issues. The aim is to achieve this agreement in time precisely because the current fl eet and the new types we are introducing for award of the fourth and subsequent Astute Class submarines. For Surface are likely to have such long operational lives, we need to retain the Ship Design & Build, within the next six months, we aim to have reached a ability to maintain and upgrade these types for a considerable period. common understanding of the core load required to sustain the high-end design, systems engineering and combat systems integration skills that we have xxiii. The focus must shift to through-life support and upgrade and identifi ed as being important. We expect industry to begin restructuring itself what is required to sustain this critical capability in the absence of large- around the emerging analysis to improve its performance, and shall build on the scale manufacture. MOD has been working closely with BAE Systems, as the momentum generated by the industrial arrangements being put together on UK’s only supplier of fast jets, for some time to understand these mutual the CVF programme to drive restructuring to meet both the CVF peak and the challenges, which are likely to impact on the UK industrial footprint, in reduced post-CVF demand. For surface ship support, we will start immediate particular around BAE Air Systems’ four main production sites. We intend negotiations with the industry with the aim of exploring alternative contracting to continue to work together to explore how a long term partnering arrangements and the way ahead for the next upkeep periods, which start arrangement for the through-life availability of a signifi cant proportion in the autumn of 2006. Key Maritime Equipment industrial capabilities will of the fi xed-wing fl eet might be delivered to sustain these capabilities be supported by the production of a sustainability strategy by June 2006. and deliver improved value for money. We aim on working during 2006 to develop the solution – which will be challenging given the scale of B3. Armoured Fighting Vehicles (AFVs) the transformation that is required – and to implement it from 2007.

xx. The AFV fl eet is key to the Land Forces’ military eff ectiveness. There xxiv. We and industry share a close alignment of interest in UAV are compelling advantages to retaining a UK industrial AFV capability to and UCAV technology. Although at present we have no funded UCAV maintain and upgrade the capability of current and future equipment. We programme, targeted investment in UCAV technology demonstrator seek to maintain in the UK AFV Systems Engineering, Domain and Design programmes would help sustain the very aerospace engineering and design Knowledge for though life capability management, including the ability to act capabilities we will need to operate and support our future aircraft fl eet. as an intelligent customer for the design, development and manufacture of Such investment would also ensure that we can make better informed new AFVs and their integration into networks. We also need the intellectual decisions which will need to be taken around 2010-2015 on the future ability to design, validate and interpret the results of AFV testing, though mix of manned and unmanned aircraft. Additionally, UK industry will have most test and evaluation facilities do not necessarily have to be on-shore. the opportunity to develop a competitive edge in a potentially lucrative We also wish the UK defence industry to be able to design, build and military and civil market. We intend to move forward with a substantial integrate onto the platform AFVs’ critical subsystems, including electronic joint Technology Demonstrator Programme in this area. We hope that architecture, sensors and integrated survivability solutions. We also need to appropriate arrangements will be in place to allow this to proceed in 2006. be able to repair and overhaul AFVs onshore, and we need the industry to be able to respond quickly, including through deployed support on operations. xxv. Our plans to retain onshore the industrial capabilities required For future projects, we need industry to deliver the complex system of to ensure eff ective through-life support to the existing and planned systems that will make up the Future Rapid Eff ects System (FRES) fl eet. fast jet fl eet – and to invest in developing UCAV technology – will also provide us with the core industrial skills required to contribute xxi. It is questionable whether any single company has the ability or to any future international manned fast jet programme, should the expertise to provide all elements of the FRES capability cost-eff ectively. requirement for one emerge. This recognises both the uncertainty of The most likely solution will be a team, led by a systems integrator with our very long term requirements – with the possibility that we shall the highest levels of systems engineering, skills, resources and capabilities want to replace elements of the Typhoon and Joint Strike Fight fl eets based in the UK, in which national and international companies cooperate with manned aircraft – and that we should avoid continuing to fund to deliver the FRES platforms, including the required subsystems. industrial capabilities for which we have no identifi ed requirement.

8 Defence Industrial Strategy xxvi. Critical mission systems, including electro-optical (EO) B6. General munitions sensors, radar, Electronic Support Measures (ESM) and Defensive Aids Systems (DAS) are also signifi cant areas where we wish to retain xxxiii. Recent operations have clearly demonstrated that despite the onshore capability and where suppliers must be able to work with the increases in technology, modern warfare, particularly on the ground, prime contractor and be rewarded for developing new solutions. requires highly trained and motivated service personnel to engage in combat at a very personal level. It is in such engagements that quality xxvii. Our need to retain a minimum level of onshore capability does general munitions are essential to provide the volumes of fi re and the 24 not necessarily mean that we will need to support all aspects of our aircraft hour, all weather capability required to suppress, neutralise and demoralise in the UK. For Typhoon, we will work with our partners to create a better enemy forces. It is essential that we retain onshore the Design Authority and more effi cient business model for the aircraft’s support and upgrades, (DA) role and its underpinning capability for munitions manufactured. ensuring that we retain onshore our ability to satisfy our sovereign We also require the ability to develop munitions for specifi c purposes to requirements over its lifetime. Clearly, BAE Systems, and, for the engines match our doctrine, and maintain an intelligent customer capability for and mission systems respectively, Rolls-Royce, Smiths Aerospace and Selex non-UK designed munitions. A robust through-life management capability Sensors and Airborne Systems will have a signifi cant role to play in this.. onshore is vital. It is also essential that we retain a proof and surveillance capability onshore for UK designed munitions as well as at least a minimum xxviii. For the Joint Strike Fighter, the through-life support of the UK munitions disposals capability. We should also retain onshore the UK’s aircraft will be provided from the Global Support System insensitive munitions and related energetic materials capability, which which is being established on a co-operative basis amongst the nine JSF are world-class. But we do not consider it necessary to retain all aspects of partner nations. As part of this performance based arrangement, the bulk explosives manufacture in UK and would be prepared to source small UK also intends to establish sovereign support capabilities which would arms ammunition off shore if security of supply could be guaranteed; it is provide, in country facilities to maintain, repair and upgrade the UK fl eet presently questionable given potential undercapacity in global supply. and an Integrated Pilot and Maintainer Training Centre. Our aim is that BAE Systems as a key JSF Industry partner to Lockheed Martin will provide xxxiv. In this sector, BAE Systems has the majority of the existing business, these support services in the UK under a Team JSF badge. There is no but there remain niche capabilities abroad and elsewhere in the UK which fundamental defence requirement for a JSF Final Assembly and Check Out may meet future needs. We have therefore adopted a partnership with (FACO) facility, although an ongoing joint study between MOD, DTI and BAE Systems and are considering ways in which we can rationalise the BAE Systems, due to conclude in early 2006, is seeking to assess whether through-life management of munitions, without ruling out the prospect a UK FACO is necessary to preserve essential engineering skills within of global competition for future projects at this stage. We also have BAE Systems and would be a cost eff ective and aff ordable solution. partnering agreements with other suppliers (Rheinmettall and Wallop Defence Systems) in niche areas. We will reach further conclusions on how xxix. There is no sovereign requirement to sustain an indigenous best to sustain our required access to general munitions in summer 2006. capability in large and training aircraft. We will continue to need, however, the systems engineering and design skills and B7. Complex weapons Intellectual Property Rights for the integration of new mission systems, avionics and defensive aids into these platforms. xxxv. Complex Weapons provide our Armed Forces with battle winning precision eff ects. The UK is making a signifi cant investment in the upgrade B5. Helicopters and development of complex weapons, which peaks at just over £1BN next year and will reduce by some 40% over the next fi ve years following the xxx. Helicopters are inherently responsive, adaptable and fl exible, delivery of and . There is, apart from the and contribute to a variety of military tasks. They can operate in a programme, little signifi cant planned design and development work beyond very wide range of combat and environmental conditions, and will the next two years. This will present a substantial challenge to the industry. often be an essential part of a balanced expeditionary force. xxxvi. There are some types of complex weapon that we have bought xxxi. The helicopter sector has similar characteristics to the from overseas in the past, and we would be prepared to source future AFV sector – a high concentration of knowledge relating to the torpedoes from abroad provided we retain the capability to support existing fl eet, but a healthy international competitive environment. the current inventory, write tactical software, and design and integrate AgustaWestland’s systems engineering capability needs sustainment homing heads. However, we would wish to maintain the ability to design, to maintain our ability to support and upgrade the current fl eet. develop, assemble, support and upgrade other complex weapons, which is a complex task requiring a number of critical and sensitive underpinning xxxii. Our preferred solution is to invest in the Future Lynx product, capabilities. We also see the potential of Directed Energy Weapons. currently undergoing detailed capability and value for money assessment, to meet our Battlefi eld Reconnaissance and Surface Combatant Maritime xxxvii. The fragility of the wider UK industrial base is such that open Helicopter requirements and sustain the necessary Design Authority international competition could put the sustainment of key industrial capability at the company in the short to medium-term. We intend to capabilities at risk. We intend to work with all elements of the onshore promote a more open, predictable but demanding partnered relationship industry over the next six to twelve months to establish whether – and if so with the company, to provide better value for money and reduce their how – we can achieve a sustainable industry that meets our requirements in reliance on our investment to sustain the design engineering skill-base, a value for money fashion. There is potential for industrial rationalisation and and accordingly intend to fi nalise a Strategic Partnering Agreement consolidation and we will need to work with other European governments to with AgustaWestland by Spring 2006. We will continue to look to identify whether a coordinated approach to sustain a viable industrial base the vibrant and competitive global marketplace to satisfy our future is possible. But this will not be to the exclusion of US-owned companies, helicopter requirements (including for support). We also wish to keep in particular those who have established a fi rm foothold in the UK. diff erent levels of capability onshore in rotorblades, mission systems, survivability, vibration management and electronic architecture.

Defence Industrial Strategy 9 B8. Command, Control, Communication and be retained within UK industry, it is primarily within the areas of systems Computers, Intelligence, Surveillance, Target engineering (including design and development), testing and evaluation, Acquisition and Reconnaissance (C4ISTAR) and system packaging that the MOD needs to be able to maintain critical elements of its CT capability onshore. We believe there is no urgent xxxviii. This is a very signifi cant area where we assume sustained remedial action required to sustain these industrial capabilities. expenditure. It will be the C4ISTAR related capabilities that will help underpin the overarching Network Enabled Capability essential to B.11 Technology priorities to the continued transformation of our capability, by providing the enable defence capability technology to deliver agile, networked and informed Armed Forces. xxxxv. To support the industrial capabilities identifi ed across the sectoral xxxix. Much of the innovation is driven by the civil sector and analysis there are a number of areas in which the UK must sustain existing we are in general a relatively minor customer in a market where technological strengths or where we should, resources permitting, consider the pace of technological change creates its own set of unique developing our expertise. There are other technologies showing promise across pressures. To maintain national security, we need to maintain a range of defence applications that may have either a large impact on specifi c in the UK specifi c industrial capabilities, including: defence capabilities or a more widespread impact across many aspects of defence. These are provisionally identifi ed in the DIS, but we recognise we will High grade cryptography and associated need further work in 2006 to inform our research and technology priorities. information assurance capabilities; B.12 Test & evaluation (T&E) A continued ability to understand, integrate, assure and modify mission critical systems. xxxxvi. T&E is vital to the development, introduction into service and through-life support of the equipment used by our Armed Forces. as well as intelligent customer status and a research and development It contributes to a variety of activities which reduce risk to our Armed base supported by a manufacturing capability in specifi c areas. Forces. We use a mixture of in-house, Government Owned Contractor Operated (GoCo) and commercial T&E facilities in the UK to support xxxx. There are a number of healthy companies with the requisite the acquisition and sustainment of military capability. The majority of skills in the UK, and given civil opportunities in this sector and a large MOD T&E sites operated on our behalf by QinetiQ under the Long Term number of planned projects, competition by project seems sustainable Partnering Agreement (LTPA). All these capabilities are kept under constant for the foreseeable future. However, maintaining a cryptographic review to ensure that they continue to meet our T&E requirements and capability currently requires a specifi c strategy to sustain an end-to-end to identify potential rationalisation or effi ciency opportunities. design, development and manufacturing capability. We are working with other government departments to generate better coherence across xxxxvii. In some cases a UK based T&E capability is essential for, Government, and increase industry’s visibility of the total opportunities. amongst other things, certain quality assurance, safety or operational security needs and sovereignty of access. In other cases the important B9. Chemical, Biological, Radiological, element is to retain the ability to direct, understand, analyse and verify and Nuclear Force Protection T&E results rather than actually conduct testing on-shore, subject to certain safeguards including security of supply. We will work with xxxxi. We are committed to maintaining the UK’s political and industry to identify where such distinctions can be safely made. Our military freedom of action despite the presence, threat or use of CBRN current strategic intent in the medium term is to retain T&E capability weapons, and this is an area in which signifi cant increases in investment within the UK, but to look for overseas cooperation where appropriate. are currently planned. We need the UK industrial base, which is a world Work in the European Defence Agency may lead, in due course, to a leader in this fi eld, to deliver intelligent supplier capabilities, systems longer-term strategy to consolidate T&E capabilities across Europe. engineering, specifi c technology research, as well as the supply of certain raw materials and the manufacture of medical countermeasures. PART C: Implementing the Defence Industrial Strategy xxxxii. CBRN protection requirements have for some time been met through a healthy competitive industrial market place. We will explore xxxxviii. The DIS also presents real and fundamental challenges to the however the potential costs and benefi ts of partnering, however, Ministry of Defence. The strategy will not deliver unless the whole of the particularly with the four main industrial players in the UK (Smiths defence acquisition community, including industry, are able to make the Detection, General Dynamics UK, Serco Assurance and EDS), to see necessary shifts in behaviours, organisations and business processes. whether other acquisition models could allow us to achieve rapid and innovative acquisition and achieve better value for money. il. The basic principles of Smart Acquisition still hold true and are a strong foundation from which to take forward the DIS. But our future B.10 Counter terrorism (CT) approach to acquisition must be built around achieving primacy of through life considerations; coherence of defence spend across research xxxxiii. Given the nature of the international terrorist threat, capabilities and development, procurement and support; and successful management previously needed in specialist areas and in are increasingly of acquisition at the departmental level. Our detailed implementation becoming required across the Armed Forces. This reinforces the importance plan has specifi c initiatives to address the objectives of achieving: of the counter-terrorism sector, and provides greater opportunities for both industry and MOD to become more cost-eff ective in the CT fi eld. primacy of through-life considerations; coherence of defence spread accross research, xxxxiv. Although there are aspects of the technology base within the development, procurement and support; development, manufacture and sustainment of a CT system that need to sucessful management of acquisition at the Departmental level.

10 Defence Industrial Strategy l. The measures identifi ed under these headings are necessary to improve our acquisition performance. But they may not be suffi cient. We will appoint a senior offi cial to review our current acquisition construct and recommend changes across the MOD’s business with fi nal recommendations by May 2006 for early implementation. li. We will be looking for parallel commitment from industry in the following areas:

planning more eff ectively and jointly for the long term, embracing the vision of through-life capability management to meet our requirements cost-eff ectively;

investing in growing and maintaining a high-quality systems engineering capability within the UK;

promoting greater interaction and collaboration between MOD, prime contractors, SMEs and the universities to stimulate innovation in science, technology and engineering;

encouraging trust, openness, transparency and communication with MOD at all levels;

embracing open systems architecture principles and incremental acquisition approaches throughout the supply chain;

working jointly to foster better understanding of each others’ objectives and business processes, including a greater commitment to joint education, staff development and interchange opportunities. lii. We will keep the progress of this work, and the extent to which real change is being demonstrated on the ground, under review within the MOD, through the Acquisition Policy Board reporting to the Minister for Defence Procurement. We will want formally to review progress with the National Defence Industries Council regularly. We will also review this Strategy as a whole once every Comprehensive Spending Review period.

Defence Industrial Strategy 11 12 Defence Industrial Strategy Strategic Overview A

Introduction Military strategic overview The Defence market The UK business environment Defence research technology and innovation Defence exports and co-operative programmes Choosing the right approach Transparency

Wider factors OverviewStrategic Previous page picture contributors: BAE Systems, Eurofi ghter, Gardner Aerospace, Rolls-Royce plc Introduction A1 A1

A1.1 The global security environment and the policy context in which A1.2 In parallel, the defence industry has evolved. The defence sector has the Armed Forces operate has undergone substantial changes over the not been immune to the forces of globalisation and inter-dependence that past fi fteen years. No longer do we face an imminent and existential have characterised the wider world economy over the past thirty years. Far threat from a hostile superpower; but in its place have developed new from it: defence companies are now transnational, with the need to attract and and more complex challenges. The 1998 ‘’ (SDR) retain investors - forcing increased effi ciency, restructuring and rationalisation recognised the signifi cance of this strategic shift and established a clear and an increased focus on which markets secure best returns to shareholders. policy requirement for fl exible, expeditionary Armed Forces able to undertake a wide range of tasks at distance from the UK. Since then we A1.3 Nowhere is this more true than in the UK, which has for the past have continued to review our implementation of this broad policy direction, fi fteen years operated one of the most open defence markets in the world. responding to rapid evolution of the strategic environment. This is evident Exposing UK defence suppliers to the rigours of competitive pressure has Introduction in the series of further policy papers including the 2002 ‘SDR New Chapter’, reaped huge dividends: for the Armed Forces, in ensuring that they have the 2003 ‘Delivering Security in a Changing World’ White Paper and the access to the best military hardware on off er; to the tax payer, in reducing 2004 ‘Future Capabilities’ Command Paper. These have driven continuous substantially the costs of meeting these requirements; and to UK industry change in the roles, doctrine, size and shape of our Armed Forces. itself, which having been incentivised to increase productivity in the domestic market has been so successful in winning business abroad.

A1.4 We have now reached a crossroads. We are seeing a shift away from platform orientated programmes towards a capability-based approach, with corresponding implications for the demand required of the traditional defence industrial base. Although we are in the middle of a substantial transformation, involving a series of major new platforms (including the future Aircraft Carriers, Type 45 Destroyers, new medium-weight armoured fi ghting vehicles, and the A400M, Typhoon and Joint Strike Fighter) we expect these platforms to have very long service lives. This means the future business for the defence industry in many sectors will be in supporting and upgrading these platforms, rapidly inserting new technology to meet emerging threats, fulfi l new requirements and respond to innovative opportunities, not immediately moving to design the next generation. In parallel, the extent of industrial rationalisation means that sustaining competition to meet domestic requirements is increasingly diffi cult. In several sectors, following the entry into service of major projects, there will be substantial overcapacity in production facilities in the UK defence industry in a few years’ time.

A1.5 And as we look to non-UK sources of supply, whether at the prime or sub-systems level, we need to continue to recognise the extent to which this constrains the choices we can make about how we use our Armed Forces - in other words, how we maintain our sovereignty and national security. We need to be clear that the international nature of the defence business is such that companies now have more choice than ever before about the markets in which they choose to operate, which secure the best returns for shareholders, and where to base their operations. And we need to be clear about how the nature of global capital markets shapes these commercial judgements. If we do not make clear which industrial capabilities we need to have onshore (and this includes those maintained by foreign-owned defence companies), industry may make independent decisions which would lead to the disappearance of indigenous capabilities required to maintain our national security.

A1.6 Equally, we do not seek to restrict the scope for international cooperation and competition where this is appropriate, and we cannot aff ord to maintain a complete cradle-to-grave industrial base in all areas. As industry has told us, greater clarity is therefore needed urgently on which capabilities must be retained onshore, and which by implication can be met from a wider market. A sniper with Support Company, 1st Battalion, The Irish Guards, covers Royal Engineers extinguishing an oil well fi re, near Basra.

Defence Industrial Strategy 15 A1.7 These factors necessitate a fresh consideration of how best Objectives we should seek to engage with the marketplace in order to meet our requirements; and drive the need for a Defence Industrial Strategy (DIS). A1.13 To deliver this aim, the DIS:

The aim of the Defence Industrial Strategy ¬ gives a strategic view of defence capability requirements going forward (including new projects, but also the support and A1.8 The DIS fl ows from the Defence Industrial Policy (DIP) upgrade of equipment already in-service), by sector2. Part of published in 2002. Like that policy, it is ‘driven by the need to provide the strategic view is specifying, in order to meet these, which the Armed Forces with the equipment which they require, on time, industrial capabilities we would wish to see retained in the and at best value for money for the taxpayer.’ The DIS is thus one of UK for defence reasons. We aim to communicate the overall many contributions to the wider aim of ensuring that the capability view to industry as clearly as possible, recognising that plans requirements of the Armed Forces can be met, now and in the future. change as the strategic or fi nancial environment changes;

A1.9 The DIS is thus one of many contributions to the ¬ gives further detail on the principles and processes that wider aim of ensuring that the capability requirements of underpin procurement and industrial decisions; the Armed Forces can be met, now and in the future. ¬ where there is a mismatch between the level of activity our own A1.10 The contribution that a DIS can off er towards that overriding aim plans (and export/civil opportunities) would support and that is in promoting a sustainable industrial base, that retains in the UK those required to sustain desired capabilities, investigates how we might industrial capabilities (including infrastructure, skills, tacit knowledge, with industry address that gap, within the bounds of aff ordability. Intellectual Property (IP) and capacity) needed to ensure appropriate sovereignty and/or contribute to co-operation with allies, to ensure our A1.14 As a result, industry will be better able to make informed national security, but allows us to benefi t from products on the broader investment decisions, and industry and Government can focus on international market where appropriate, to maximise our Armed Forces’ improving delivery and productivity. Industry should note that if an cost-eff ectiveness. Our interaction with this industrial base must provide good industrial capability is not specifi ed as a strategic priority for retention value to the taxpayer and good returns to shareholders based on delivery of in the UK, this does not necessarily mean UK companies cannot win good performance, and be consistent with broader security and economic business in those areas; we may still have important projects there. policy. This explicitly includes the need to continue to make the UK a great place to establish, grow and invest in high-technology defence businesses. The scope of the DIS

A1.11 This recognises that while the industrial base from which we A1.15 We began work last year to construct a framework or matrix of procure is global, sourcing from the UK in certain areas will be essential for key technologies which, for reasons of national security, broader defence our long-term interests. The UK industrial base needs to be sustainable, interest or wider economic benefi ts, we might wish to retain in the UK, which means taking a long-term perspective, considering all the levers so that these could be explicitly taken into account in future procurement available to government, and taking into account the impact of diff erent decisions. But we now intend to move beyond saying what we care about, procurement choices on specifi c sectors or industry as a whole. We recognise to how this may be fostered and maintained, not least because it is clear the need to generate fair returns in business. Consistency with broader that several branches of industry are considering making substantial and security and economic policy in the contribution includes issues like: time-sensitive independent restructuring decisions in the near future.

¬ the importance of preventing WMD related, and A1.16 Given these drivers for early clarity, we needed to undesirable conventional, proliferation; act quickly. There are three levels to this strategy:

¬ consistency with the Government’s spending plans, and a ¬ promoting an overall business environment which is recognition that priorities may change in the future; attractive to defence companies and investors;

¬ consistency with other government initiatives and strategies, such ¬ identifying key industrial capabilities which are important as the Government’s Manufacturing Strategy and our Technology to Defence to retain in the UK industrial base to maintain Strategy, which also aff ect parts of the UK defence industry1. appropriate sovereignty (see further below), with sustainment strategies where these seem at risk; A1.12 This acknowledges the over-capacity that exists - when viewed against our likely future requirements - in several sectors of the industrial ¬ explaining how, in decisions on individual projects, we base; and recognises the likelihood that some further rationalisation is take into account industrial and other factors. inevitable (and in some cases is already being actively considered by certain companies). As such, it provides a mechanism for shaping and managing that process to the benefi t of both the customer and its suppliers. 2 Although we are increasingly thinking and structuring ourselves in capability or technology terms we recognise that industry is structured by sector or product, and thus we have to articulate our needs in this way within this document. 1 The DIP states that the UK defence industry ‘embraces all defence 3 i.e., focus on military equipment and operational services (such as the suppliers that create value, employment, technology or intellectual Strategic Sealift Service and the Future Strategic Tanker Aircraft) rather than assets in the UK. This includes both UK and foreign-owned companies’. indirect support services (such as regional prime contracting, non-operational ‘The UK defence industry should therefore be defi ned in terms of where the Information Technology, facilities management) which also fall within our technology is created, where the skills and the intellectual property reside, defi nition of the UK defence industry (‘Economic activity that is supported where jobs are created and sustained, and where the investment is made.’ by UK MOD spending and exports of defence goods and services’).

16 Defence Industrial Strategy on overseas sources, andhave madeprogress inrecent years indeveloping equipment. Inmany,service even areas, highpriority we can, anddo, rely in- engineering skillsamongstothersmay and to be important, support account othercustomers’ likely demandsat thesametime),where systems to respondability to Urgent Operational Requirements (UORs)(takinginto covers notonlybeingassured of ongoingcontracts, ofdelivery butalsothe supply ofallelements, andwill diff eracross technologies andprojects. It conduct. This isnot ‘procurement independence’, ortotal reliance onnational independence againsttherange ofoperations that we wishto beableto industrial skills, capacities, capabilitiesandtechnology to ensure operational We mustmaintain theappropriate degree ofsovereignty over A1.21 Appropriate sovereignty for theDIS,sixguidingprincipleshave beendeveloped. Against thisbackground, andinorder to settheframework A1.20 Guiding principles implementation. Butwe precede witha thesesections within Government andMODtoo; thisiscovered withPart C,onchangeand Taking thisstrategy forward islikely to meaninternal change A1.19 Full duringhandover deckoperations withHMSINVINCIBLE. on key whichhave onkey sectors defence impact direct outputs For thesecond ofthese, developing astrategic viewhasmeant focusing A1.17 in decidingbetween competitive andotherprocurement strategies. potential likeindustrial andotherwiderfactors into export account, including companies,Defence researchers andinvestors; andexplains how we take marketplace; ofthefeatures anoverview whichmake theUKattractive to needs; analysisofthechangingshapeglobalandUKdefence context whichdrivesin Part ourequipment A,whichincludesthemilitary sectors, in all cases for support andupgrade aswellsectors, asinitialacquisition: inallcasesforsupport to theextent necessary. InPart B, therefore, we have covered thefollowing priorities forourfuture capabilities. Ineacharea, we have onlydrilled-down we anticipate potential inany restructuring case;and/orb)whichare strategic Systems Engineering issuesof cross-cutting important very Inaddition,there are three separate chapters onthe A1.18 ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ Counter Terrorism CBRNForce Protection C4ISTAR Complex weapons General munitions Helicopters Fixed wingaircraft, includingUAVs Armoured Fighting ships Submarinesandsurface Vehicles and Test &Evaluation Technology Priorities, (T&E). Strategic Context 3 andwhere a)

deliver itare being considered; systems engineeringat various levels iscritical is inconceptwhen acapability phaseandanumber ofpotential technologies to conversations wecycle: forsensibleindustry-MOD needto preserve thecapacity requirement. atThis anumberofdiff isimportant erent points intheacquisition overall management andupgrade ofdesign,manufacture remains ageneral sometimes managethecomplexities, challengesandcosts associated with small teams, inmany to (thoughnotall)sectors, understand and theability that somekey Notwithstanding knowledge potentially rests invery A1.25 ofsystemsthe importance engineering Intelligent customers-intelligent suppliers: these asfarpossible, anddevelop appropriate optionsto maintain them. facilitiesorexisting technologies.focused onparticular We need to identify (including tacitknowledge) withinoracross thesupplychainrather than may orknowledge beaboutsustaininganddeveloping smallpoolsofexpertise address thechallengeofmaintaining key industrialcapabilities. this Often, cannot any longerprovide profi asustainableproduction le, Inthoseareas theDISneeds to where reduced market opportunities UKandexport A1.24 capabilities andskills Maintaining key andrapid industrial ongoing development rather thanaseriesofbig ‘must win’ procurements. include longer, more assured revenue and streams basedonlong-term support competencies that underpinit. should,The ingeneral, attractionsforindustry this andmaintaining -andpossiblyenhancingthesystems engineering management,life capability developing openarchitectures that facilitate from technology insertions. The emphasiswillincreasingly beonthrough- andtheincrementalsustainability enhancement ofexisting capabilities signifi cant upgrade packages- towards anewparadigm centred onsupport, withmajornewprocurementsof platforms -leapsofcapability orvery traditional pattern successive ofdesigningandmanufacturing generations There isageneral shiftindefence acquisition away from the A1.23 Through-life capabilitymanagement science andtechnology from othergovernment andagencies. departments available and including macro to andthesupport UKindustry economic stability We ofcourse alsorecognise thebroader attractions oftheUKforbusiness, frameworks fordefence markets inEurope andtheUnited States are evolving. ‘national’ status ofdiff erent technologies, recognising that thelegalandpolicy We inthisstrategy tools articulate available someofthepolicy to maintain the but desirable; andcontinue to encourage inward investment from overseas. dependence onsupplyfrom otherstates isinmany casesnotonlyhappening operational andeconomic senseto doso;recognise that increasing mutual engendered by co-operative arrangements withothers, where itmakes At thesametime, we mustbeprepared to exploit theopportunities A1.22 could intimefrustrate to action. maintain ourability ourfreedom ofmilitary where we are notprepared onanoverseas to riskdependency monopolywhich retention to maintain realistic isnecessary globalcompetition -inotherwords, infl uence, inmilitary, diplomatic orindustrial terms; andinsomecases, where or forlegalreasons; where specifi strategic cUKcapabilitiesgive usimportant sovereignty ofthetechnology dueto concerned sensitivity theextreme security considerationsnational security are alsorelevant where we needto retain through-life andadjustthemto ournational requirements asnecessary. Such arrangements to share thetechnologies required suchcapabilities to support amongstotherthings, to negotiate ofourability function, withothernations sourcingwhich we defence feelcomfortable equipment from overseas isalsoa this operational independence andhence ournational security. The extent to maintaining assured access to onshore industrialcapabilitieswould compromise increased assurances ofsupply, ofsecurity butthere are criticalareas where not Defence Industrial Strategy Industrial Defence A1 17 Introduction for the successful acquisition of complex projects and programmes; and in-life upgrades, including UORs, often require deep systems engineering skills and knowledge, often relating to systems brought into service many years before. But the depth of design for producability and systems engineering capability, and the concentration of eff ort needed in the UK supply base will vary throughout the CADMID4 cycle and from sector to sector, and needs to be considered accordingly.

Value for Defence

A1.26 Driving long-term best value for money lies at the heart of our Defence acquisition policy. But despite the opportunities to exploit the internationalization of the defence supply chain to generate cost savings and other advantages, we recognise the benefi ts that fl ow from the existence of a healthy, competitive and dynamic national industry (whether in terms of the amortisation of overheads associated with export sales or the risks of being subject to monopoly power should we have to look exclusively overseas for some requirements). As the DIP made clear, where defence procurement decisions impact on wider Government, this will be considered and the DIS will include understanding of the role of Government and industry, in setting a framework which maximises value and contributes to the national Science and Technology base.

Change on both sides

A1.27 Industry is likely to change as a result of taking the DIS’ conclusions into account. We, along with the wider Government, will need to change too. As well as considering structural and cultural changes, we have set out more clearly our future plans. We have also explained how we can identify situations where, unusually, competition at a particular point or level is not the best solution to drive innovation, encourage investment and produce a fair price; and indicate how, in those situations, value for money is scrutinized, incentivised and protected. We have also set out the improvement in performance we expect from the supply side.

National Defence Industries Council (NDIC).

4 Concept, Assessment, Demonstration, Manufacture, In-Service, Disposal

18 Defence Industrial Strategy Military strategic overview A2 A2

Delivering security in a changing world even more quickly than has previously been the case. This places a premium on the deployability and sustainability of our forces; A2.1 The December 2003 Defence White Paper ‘Delivering security in a changing world’ set out the Government’s analysis of the future security ¬ that we should plan to be able to operate in six core regions: environment, the implications for defence, our strategic priorities and how the Near East, the Gulf, sub-Saharan Africa, and South Asia, we intend to adapt our planning and force structures to meet the most likely and in and around Europe. However, counter-terrorism and threats and challenges. The White Paper explained the need to adapt to the more counter proliferation operations in particular will require pronounced threats presented by international terrorism, the proliferation of rapidly deployable forces able to respond swiftly and achieve Weapons of Mass Destruction (WMD) and the challenges posed to the international precise eff ects in a range of environments across the world; community by weak and failing states. It also explained how Defence should Military overview strategic exploit the opportunities presented by eff ects-based planning and operations ¬ that the force structure should be rebalanced and optimised to meet the together with highly networked and adaptable forces across all three Services. demands of up to three concurrent small and medium scale operations;

¬ that we should retain the fl exibility to reconfi gure for less frequent, but more complex and demanding, large scale operations, while concurrently conducting a small-scale peace support operation. For large scale operations we will not need to generate the full spectrum of military capabilities as the most demanding operations could only conceivably be undertaken alongside the US, either as a NATO operation or US-led coalition. Where the UK chooses to be engaged, we will wish to be able to infl uence political and military decision-making throughout the crisis, including during the post-confl ict period. To exploit this eff ectively, our Armed Forces need to be interoperable with US command and control structures, match the US operational tempo and provide those capabilities that deliver the greatest impact when operating alongside the US;

¬ that we should maintain a broad spectrum of maritime, land air, logistics, C4ISTAR1 and Special Forces capability elements to ensure we are able to conduct limited national operations, and be capable to lead and act as the framework nation for coalition operations where the US is not involved;

¬ that we must continue the transformation of our forces to concentrate on speed, precision, agility, deployability, reach and sustainability. Key to this is our ability to exploit the benefi ts of Network Enabled Capability, precision munitions and the development of eff ects-based planning and operations;

Chinook helicopters delivering aid after the ¬ that we need capabilities which can rapidly come together to achieve devastating earthquake in . specifi c military eff ect and then rapidly adapt with other capabilities to achieve what is required by the next operation. By doing so, decisive A2.2 The White Paper formed the policy baseline for the ‘Future military eff ect may be achieved through a smaller number of more capable, Capabilities’ Command Paper of July 2004, which set out the force structure linked assets acting quickly and precisely to achieve a desired outcome. and capability changes required to respond to these changes in the security environment. ‘Future Capabilities’ indicated our intention to continue the A2.4 Our future forces must be strategically agile in order to respond to process of modernising Defence, investing our resources in the capabilities and changing needs and circumstances. Agility comprises four key attributes: structures which provide fl exible and adaptable high quality Armed Forces, properly equipped to deal with the challenges and threats of the future. ¬ Responsiveness - Those capabilities that underpin our speed of response: Intelligence, Surveillance and Reconnaissance A2.3 The documents set out a revised set of assumptions and (ISR), force projection, and logistic support. Early application implications to underpin future Defence planning. These include: of military capability is likely to deliver strategic eff ects more quickly and economically. Therefore, improved strategic reach, ¬ the need to defend the UK, protect our interests overseas, counter precision and endurance are desirable characteristics. the threats from the proliferation of WMD and international terrorism, and deal with the consequences of weak and failing 1 Command, Control, Communications, and Computers, Intelligence, states requires a clear focus on projecting force, further afi eld and Surveillance, Target Acquisition and Reconnaissance.

Defence Industrial Strategy 19 ¬ Robustness - Future equipment must operate with increased in Time’ investment to fi ne tune equipment and capabilities rapidly with reliability and availability. Force elements must be able to maintain the latest technology in readiness for specifi c operations will be a necessary sustained, high tempo operations against a range of diverse and increasingly important feature of operations. Adaptive and modular but eff ective opponents. We will require combat and support architectures could support system resilience and allow for systems evolution capabilities that are versatile across the full spectrum of operations. and insertion of new hardware and software. In the context of the latter, commercial-off -the-shelf (COTS) technology has much to off er but potential ¬ Flexibility - People, structures and equipment should be capable risks in reliability, supportability and security must be adequately addressed. of conducting a wide range of Military Tasks with the fl exibility to reorganise and re-role. Wherever possible, niche capabilities that have A2.7 At the heart of the force structure and capabilities modernising limited utility across the range of Military Tasks should be avoided. programme is Network Enabled Capability (NEC). NEC is about the coherent integration of sensors, decision-makers and weapon systems along with ¬ Adaptability - Personnel and units should be well-trained support capabilities. NEC will enable the UK to operate more eff ectively in and have high utility equipment so they can adapt to changing the future strategic environment through the more effi cient sharing and circumstances. An important aspect of adaptability is being able exploitation of information within the UK Armed Forces and with other to readily introduce modifi cations arising from new technology. coalition partners. This will lead to better situational awareness across the board, facilitating improved decision making, and bringing to bear the right A2.5 To achieve our mission within a challenging strategic military capabilities at the right time to achieve the desired military eff ect. environment will require fl exibility from across Defence, from our This enhanced capability is about more then equipment; it includes exploiting equipment, force structures and people. We must adapt to stay the benefi ts to be obtained from transformed doctrine and training, and ahead of potential adversaries and be prepared to make tough optimised command and control structures. The ability to respond more quickly decisions to ensure that our forces and equipment deliver the required and precisely will act as a force multiplier enabling our forces to achieve the capabilities. Force structures will need constantly to evolve as we seek desired eff ect through smaller numbers or more capable linked assets. In to exploit new technologies, equipment and techniques to improve summary, the emphasis is no longer on quantity as a measure of capability. capability and respond to the changing strategic environment.

A2.6 Within a resource-constrained environment we must aim to maintain a technological and capability edge over our likely adversaries but not pursue During the RAF the best for the best’s sake. We also require incremental acquisition processes with procedures that align equipment requirements and specifi cations strictly employed only about 70% of the to the current and expected future threat, recognising and accepting the value and potential cost of fl exibility and incremental upgrades. We need to number of fast jets used in Operation develop standard and Urgent (UOR) procurement processes that are fl exible, agile and responsive and minimise the lead time Granby (the fi rst Gulf confl ict), but between the emergence of new technology or threat capabilities, and the delivery of new equipment or enhancements to existing capabilities. ‘Just to much greater overall eff ect

A and trailer await loading onto a RAF C-130 Hercules at Skopje military airport at the end of Operation Essential Harvest (a 5000 strong multinational operation that collected over 3000 weapons in the Balkans region).

20 Defence Industrial Strategy A2.9 Kalmadu theUKresponse Village to duringOpGARRON, theTsunami andRoyalRoyal Marinespersonnelassistthelocalinhabitantsof Navy A2.8 (NEC). EnabledCapability example ofNetwork An capability, andtheFuture Eff Rapid System ect (FRES)familyof vehicles whichwill (GMLRS) Fire andIndirect Precision Attack (IFPA) providing anagileprecision attack GuidedMultiLaunchRocketincluding Apache(whichisalready System in-service), forces.medium andheavy This changewillbeunderpinnedby somekey elements the current forces mixoflight andheavy to amore balanced oflight, structure requirement isrecognised by Future Army Structure, whichinvolves ashift from andpost-conflpeace support reconstruction. ict to meet thischanging The ability forces intheatre astheconfl develops from ict war-fi heavy ghting toenduring , revealedparticular theessential needto have to rapidly theability reconfi gure At thesametimeboththeatres, spectrum. intensity endofthemilitary andin have demonstrated thecontinued needforwar-fi ghting capabilities at thehigh which willalsocontribute to thesecuringofourmaritimesupplyroutes. 45 destroyers andnewnuclearpowered attack submarines, theAstute class, environment. byThey ourfuture willbesupported ships, AirDefence the Type strike to capabilitiesandenhance power project ourability onto theland amphibious shipping. These newFleet unitswill transform ourcarrier the Joint Combat Aircraft (operated by andRNpersonnel) bothRAF transformation we are investing intwo large aircraft carriersto operate interoperable andintegrated withUKandalliedforces. To this support land (withtheRoyal Marines)andever more frequently inthelittoral, fully force,expeditionary continuing to operate on,underandover thesea,on Royal (RN)willneedto beanincreasingly Navy versatile, network-enabled to theUK’s wealth andsecurity. To meetthechallengesoffuture, the supply routes to isessential trade insecuringourability globallythuscritical advantage.strengthen Furthermore, ourmilitary protection ofourmaritime ofothers,on theterritory power forprojecting across thebattle space to Land Maritime - The operations inIraq andAfghanistan inthelastfewyears - The seaprovides adegree ofsecurity, withoutreliance industrial capability requiredindustrial capability for retention reasons, fornational security as refl the overarching ect principleofAppropriateSovereignty -indigenous the auspices oftheNational Industries Council Defence (NDIC). The criteria Armed Forces require. This process under was trialledjointly withindustry essential forusto sustain onshore inorder to deliver the thecapability oftheUKindustrialbaseareto assist usinidentifying whichaspects have therefore criteria developed assessed industrialcapabilitiesselection them beingowned orestablishedby foreigned-owned companies). We industrialcapabilitiesintheUK(whichdoes notprecludeneed particular the sovereign to useourArmedForces ability intheway we choose, we clearlywhere, very totell maintain andkeep industry ournational security oftheUKdefence industry.become part Within this strategy, we aimto value, employment, technology assetsintheUKandthus orintellectual the UKindustrialbasethat isessential inachievingtheserequirements. the future requirement theArmedForces to support forcapability andidentify in thecontext ofspecifi chapter cindustrialsectors. Eachsector looksclosely at consider The thefuture chapters strategic withinPart Bfurther themes A2.11 are ableto anddeploy maintain forces airsuperiority worldwide inthefuture. aim to ensure that we canadaptto newthreats andenvironments andthat we bring themimproved level andspeedofresponse. ofaccuracy These changes and Nimrod willimprove MRA4 situational awareness forourcommanders to aircraft.operate transport inthefuture ASTOR alongsidethenewA400Mmilitary the fl eetoffourC-17’s we currently leaseplusanadditionalaircraft, whichwill equipped witharange ofadvanced stand-off precision weapons. We are purchasing and Joint Combat Aircraft, increasingly ableto exploit networked capabilitiesand agile AirForce equippedwithhighlycapablemulti-role aircraft suchas Typhoon modern warfare. The modernisation isdrivingforward RAF to create afl exible and A2.10 forwar-fiability ghting at large scaleeff forcesort withheavy ifnecessary. to awiderrange ofpossiblecontingencies, whileat thesametimeretaining the operations moreexpeditionary effi capability. notice These changes willallow short to ourArmy conduct theability substantial equipment programme to underway improve ourdismounted combat ASTOR, andimproved digitization andsimulation ofourtraining. There isalsoa through networked Bowman, systems surveillance suchas Watchkeeper and force. Inparallel theeff enhanced ofourlandforces ectiveness willbefurther replace many obsolete vehicles andformthecore ofourfuture mediumweight welcome overseas investment, especiallyfrom companies thatcreate whichdelivers alarge ofMOD’sindustry proportion needs, andwe The UKalsoretains asizable, openandbroadly-based defence A2.13 increased riskto maintaining ouroperational independence isacceptable. to meetnational requirements over time)and/orjudgement that any (which may includetechnology access to ensure we canadaptequipment signifi cant areas rely on overseas supply, withappropriate guarantees welcome overseas off products ered in competition, andindeedinmany create aneff ective EuropeanDefence Equipment Market. We continue to to introduce aCode ofConduct Procurement onDefence whichaimsto realised from theNovember 2005decisionby Ministers theEUDefence Agreement). Moreover, we recognise thepotential benefi tsthat may be (the US/UKDeclaration ofPrinciples andtheLetter ofIntent Framework the progress ofSupply madeinestablishingunderstandingsonSecurity from UKprimecontractors contains nonUKsourced content. We welcome Anditisreadilyservice. recognised that muchoftheequipment procured benefi tfrom the extensive range offoreign-sourced equipment currently in cradle sector, to grave inevery industry andourArmedForces continue to technologies, outside theUScanaff butnocountry ord to have afull Every nation ideallywants to keep underitscontrol criticaldefence A2.12 criteria Selection Air - Airpower has been shown to be a critically important aspect of -Airpower of aspect hasbeenshown to beacriticallyimportant ciently; allowing amore eff ective response Defence Industrial Strategy Industrial Defence A2 21 Military strategic overview discussed earlier in the strategy. They fall under the following headings: enable eff ective equipment acquisition, support and upgrade when and where we require it. This may be of ¬ Strategic assurance - Capabilities which are to be retained onshore particular importance when seeking to meet UORs. This is as they provide those technologies or equipment important for closely related to the broader concept of security of supply, the safeguard of the state. Such technologies could include those but applies when a foreign supplier might otherwise be used within the nuclear deterrent, high-grade cryptography or willing, but may be unavailable to meet the requirement in that are a key tenet of our counter terrorism capability. Industrial time - either because of the distances involved, or because capabilities could be classifi ed under this heading if for instance: their domestic customer has fi rst call on his capacity.

¬ the technology is of such strategic importance that the ¬ Strategic infl uence - where specifi c UK capabilities give us risk of obtaining the required industrial capability from important strategic infl uence, in military, diplomatic or industrial overseas is unacceptable. The UK Government could simply terms. Collaborative or complementary programmes may often not countenance sourcing the capability from overseas; be relevant here. Such programmes may be pursued to ensure value for money and aff ordability in complex programmes and ¬ we require minimal or no risk of the capability to help enable cohesive coalition operations. The UK continues failing given its strategic importance. The risk of to enjoy the ability to actively participate in such programmes sourcing the capability from overseas increases the partly as a result of an industrial base which has a strong history likelihood of associated military capability failure; of providing world-class capabilities and technologies across all military environments and platforms. This heritage gives the UK ¬ we need to prevent an adversary from acquiring Government leverage in and access to these programmes. Once knowledge which could present them with the capacity engaged, we can better ensure that our requirements can be met to prevent our Armed Forces eff ectively deploying cost-eff ectively and bringing to bear the strengths of UK industry. or using the associated military capability; But strategic infl uence can also come at the military and strategic diplomatic levels, especially when the UK can bring something ¬ procurement or sourcing the industrial capability distinctively diff erent to the table. Thus capabilities prioritised under from overseas is prohibited for legal reasons, this heading may have one or more of the following characteristics: e.g. contravening treaty obligations. ¬ continued possession and development of an industrial ¬ Defence capability - The retention of equipment and technology capability onshore enables access to a unique UK within the UK industrial base is necessary as our Armed Forces military capability. This military capability also enables require particular assurance of continued and consistent equipment UK military planners to have particular infl uence in performance. This could include those of particular operational the development of coalition operations, and the importance, or aspects of more generic battlefi eld systems or sub- acknowledged merits of the capability concerned systems, where failure could present particular danger to our Armed may increase diplomatic infl uence more generally; Forces. Industrial capabilities could fall under this heading if, for instance: ¬ it has particular cutting edge characteristics which ¬ there is a specifi c need to assure the security of supply ensures that the UK can ensure due weight is put of an industrial capability or technology. There could be on its requirements and achieve equitable and a viable global and open marketplace for the industrial fair technology share in collaborative equipment capability, however the assurance of supply could be or research programme with other nations; suspect and would present too great a risk to the availability and reliability of eff ective equipment performance for ¬ it is important to ensure access to a particular collaboration our Armed Forces. In some cases, we may not yet be able project. This in turn may help to strengthen political and to ensure suffi cient access to Intellectual Property Rights diplomatic relationships between the UK and another nations. from overseas to provide confi dence in our ability to understand its true operational performance or to update A2.14 Technology Benefi ts - The UK defence industrial base has in the the equipment over time, in which case there may be little past been a productive and innovative source of technologies and capabilities option to seeking to produce an indigenous capability. which have had follow on civil applications. Defence has then benefi ted from the associated economies of scale. There continue to be opportunities ¬ failing to sustain the capability in the UK would lead to to pull through military technology to the civil market, recent advances in reliance on a single overseas source. This may in itself biomedical screening are a good example. Therefore, the continued investment present a risk of adverse political interference from by Government in certain areas could help enable further opportunities. We the relevant overseas Government at the point that recognise that this is not always directly an issue of national security, but it the UK seeks to procure from the relevant supplier. is a consideration to capture, in ensuring that our policy is consistent with broader Government policy on promoting innovation. In practice, we have ¬ it is important to ensure that associated Intellectual not found any capability which was important to retain only for this reason. Property (IP) within the UK is protected and not transferred to a potential adversary. Transfer of such IP to an adversary Defence planning could result in replication of our military capability and possible use against our own Armed Forces. A2.15 In order to understand the nature of our forward plans and the way they are described in this document, it is important ¬ it is particularly important that our Armed Forces have to recognise the framework within which they sit. secure priority access to the industrial base needed to

22 Defence Industrial Strategy A2.16 MOD policy staff MODpolicy develop A2.16 21 We aninternal conduct A2.18 essentially beregarded asfi xed between SpendingReviews. forthenetadditionalcost ofoperations -budgetsshould Department to respond to fiDefence, scalshocksorinthecaseof to reimburse the tomay adjustments intheintervening besubject period-forexample, SpendingReview.the baselinefornext budgets Whilst Departmental for thefollowing three years, withthefi nal year oftheperiodforming Spending Reviewsettlements conventionally budgets setDepartmental be followed by aComprehensive in2007). SpendingReviewreporting years (althoughthelastSpendingReview, whichconcluded in2004,will A2.17 Government development,capability stretching outbroadly over 15years. thenext key planningparameters andprioritiesforresource allocation and baselineforourplanningcycle. Itestablishes andthepolicy Defence tools. Itisourprincipalstrategic forthedevelopment direction of is informedby acomprehensive methodologyandsuite ofanalytical Defence. The DSGincludesdetaileddefence planningassumptionsand government andapproved departments ofState by for theSecretary (DSG), aclassifi eddocument developed in consultation withother Science InnovationScience and Technology organisation andtheDefence in thecontext oftheDISisthat theSTPprovides thebudgetfor in estates andbusinessinformation interest systems, ofparticular from covering majorareas ofexpenditure suchaspay andinvestment running costs andsomeareas of Defence ofcapital investment. Aside The STPlooksoutover afour year period, andcovers the A2.19 planning assumptions, recognising that budgetscangodown aswell asup. (EP). Beyond theendofSpendingReviewperiodtheseare onlyindictive two core elements: the ProgrammeDefence isreviewed two yeas, andadjusted every andcomprises Programme overall budgetsetintheSpendingReviewaforward Defence 'PSNVMBUJPO 4USBUFHZ (VJEBODF 4USBUFHJD *OQVU andunderpinningresource allocation to budgetholders. The %JSFDUJPO Spending &RVJQNFOU Short TermShort Plan QMBOOJOH planning

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A2.22 DECs conduct in order to deliver military, rather than simplyequipment, capability. infrastructure, information, personnelandlogisticsaswell asequipment, lines ofdevelopment, includingorganisation, concepts training, anddoctrine, stakeholders come together to co-ordinate planningacross alltheDefence programmes.capability are CWGs through thestructure whichtherelevant Groups to a DECs whoreport Capability Within theECC, itistheresponsibility ofthe A2.21 procurement iscarriedoutby Procurement theDefence Agency. are setby theEquipment Capability Customer (ECC), whilstthe for theArmedForces. The requirements fornewequipment to spendthefundsprovided fortheacquisition ofnewequipment The EPcovers a10year period, andsetsouthow we plan A2.20 equipment.Logistic ofin-service Organisation, forthesupport simultaneously. The auditsfeedinto a including therequirement scale operations to conduct ofacertain forces needto meetthemostlikely operational tasksofthefuture, which to assesswhetherornottheEPwilldeliver thecapabilitiesUK audits useasetofplanningscenarios -derived ontheDSG-against to determine whethertheyare objectives. meetingtheircapability The assessment panelsandbalance ofinvestmentanalysis, military studies, about thenature plans: planningandourforward ofDefence to understandwhat thismeansinpractice Itisimportant A2.23 andisthesource oftheCWG ofanyactivity proposals to adjusttheEP. and aroute mapforfuture development. capability The guidesthe CAP is anauthoritative statement surplusesandshortfalls, ofaDECscapability

¬ ¬ Whilst the Treasury plansinto willtake existing Departmental formalbudgets onlyextend, Our at most, three years ahead. (CWGs) are to offuture assessanddevelop optionsforthedelivery settlements willcontinue allocation. pasttrends inbudgetary -includingtheMODcanassumethat future Department account aswe setnewbudgetsintheSpendingReview, no outinto theSTPandEPperiodonelooks. thefurther uncertain Review, planningassumptionsandcosts are inevitablyever more for whichwe have budgetfrom aformalDefence theSpending priorities. Whilst itisessential that we planbeyond theperiod to changeasthegovernmentsubject periodicallyreassesses its review, theseare internal MODplanningassumptionsandare of thegovernment’s formalspendingplanssetintheSpending Where theSTPandEPextendoutbeyond thetimehorizon (DECs)to develop coherent solutions. equipment capability The "DRVJTJUJPO &RVJQNFOU 1SPDFTT Joint CapabilitiesBoard Capability Audits Capability AreaPlan Defence Industrial Strategy Industrial Defence , underpinnedby operational *OTFSWJDF , chair Directors of Equipment ofEquipment Directors Capability Working (CAP) which %JTQPTBM A2 23 Military strategic overview ¬ Within a budget set by the Spending Review settlement, ¬ For a project to have an EP or STP funding line does not necessary our planning is essentially a process of prioritisation. mean that the project has been given approval to proceed to Decisions to allocate more resources to areas of high the delivery phase. It is only at Main Gate, the main investment priority must be off set by savings elsewhere. decision point, that the commitment to the solution and specifi c performance, cost and time parameters is made. ¬ It is very important to maintain fl exibility in our planning. The security challenges we face, and hence Defence ¬ Looking to the longer term, we will tend (save for where specifi c priorities, will always be subject to change, as will cost. contractual commitments have been made) only to have an intent Our planning must be fl exible enough to respond to such or capability aspirations beyond the EP period, together with a view changes in the strategic and resource environment. of strategic priorities and the broad order fi nancial consequences of the most signifi cant programmes. Knowing the industrial ¬ Conversely, our ability to make adjustments to the capabilities likely to be required to meet such aspirations will be forward Defence Programme in the shorter term is more dependent on technological developments and investigation of constrained. For example, as fi gure A2(ii) illustrates, the full range of potential solutions to the capability need. the high level of contractual commitment to existing projects in early years of the EP limits (although does not preclude) our ability to make changes in this period.





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Royal Navy Sea King land from 42 Commando, during Operation Silkman, Sierra Leone.

24 Defence Industrial Strategy The Defence market A3 A3

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 %&'&/$&41&/% A3.1 This chapter outlines the main characteristics of the defence market at global and national UK levels, identifying recent changes,  current state and forecast near term trends. This understanding provides important context for assessing the likely evolution of our supplier base, the  implications and the degree to which we and wider Government can assume 41&/%8*5)*/%6453:  levels of positive infl uence and where necessary control over the supplier base to secure DIS objectives. The DIS does not seek to set out a preferred  route to international restructuring; that is very much industry’s business. The Defence market Defence The  But it does seek to create a clear UK context to inform these decisions. 643VTTJB $IJOB 6, +BQ 'SB (FS ,4" *OEJB *UBMZ

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A3.2 The chapter fi nishes with a framework of levers available 4PVSDF %44BOBMZTJTESBXJOHPOTFWFSBMTPVSDFT JODMVEJOH64%P%(SFFO#PPL'PSFJHO4PVSDFT  PG4VQQMZ "TTFTTNFOUPGUIF64*OEVTUSJBMCBTF%"4"TUBUJTUJDT$FOUSFGPS"SNT$POUSPM to governments which aff ect industry at both the general level, i.e.  BOE/PO1SPMJGFSBUJPO .JMJUBSZ#BMBODF the overall attractiveness of the defence business environment in Figure A3(i). a particular country, and at the specifi c level, to achieve defi ned outcomes in particular capability or technology areas. The next A3.7 Not only is the USA the largest spender, it has also continued chapter considers in more detail how these are applied in the UK. to increase spend with a rise of 4% in real terms since 2002. The largest growing category of spend is research and development which has grown Global perspective 11% in the same period3. With these disproportionate levels of defence spending, the defence industrial, technological and military gap between A3.3 The last 15 years have seen major changes in governments’ the USA and the rest of the world continues to grow. Indeed, in some defence requirements and funding profi les. Driven by the demise of the areas, the USA aspires to have technology ‘way ahead’ of others4. Warsaw Pact, global defence spending fell sharply in the 1990s by a third in real terms from $1,300 billion (or around £800 billion) in 1989 to $800 Industrial development billion (or around £500 billion) in 19961 . In the US, the world’s largest defence market, the cuts were particularly signifi cant and had a major A3.8 In response to the falling defence budgets of the 1990s, signifi cant impact on industry, driving rationalisation and consolidation within the US consolidation took place in the defence industries of the USA and Europe. supply base. A similar, but less pronounced, eff ect was seen in Europe. A3.9 In the USA the consolidation was framed by the government’s A3.4 However, since 9/11 the emergence of new threats and the commitment to rationalisation whilst retaining competition at the emphasis on national security has resulted in increased defence spending, prime contractor level. This resulted in the creation of fi ve large most notably in the USA, with increases, albeit not on the same scale, and globally important US defence companies: Lockheed Martin, also in most European countries, including the UK and . Following Northrop Grumman, Raytheon, Boeing and General Dynamics. an 18% increase in real terms over the last few years, global defence spending has now reached nearly $1,000 billion (or around £600 billion)2. A3.10 European consolidation progressed more slowly, in part due to the continuing political pressure to retain capability at a national level. A3.5 Of this, the defence market (i.e. Governmental spend with European rationalisation took a number of forms: internal national mergers industry) is estimated to be worth almost £200 billion worldwide. (e.g. with GEC), the use of joint ventures to bridge national This is largely split into discrete national markets. As fi gure A3(i) boundaries (e.g. MBDA) and limited cross-boundary consolidation (notably shows, the USA is by far the largest market at around £90 billion in EADS). As a result there are now several large European companies – namely 2004. The implication of this scale, and the high proportion spent on BAE Systems, EADS, Thales and Finmeccanica. Further rationalisation is research and technology, is that the DoD leads in the development still expected. Within the UK consolidation has been taken further than and exploitation of key enabling defence technologies and tends to in wider Europe and the industrial structure is now relatively mature and have an infl uential lead in developing advanced military doctrine and stable, although further rationalisation within this construct is possible. concepts for use of those technologies in an operational environment. A3.11 US companies continue to dominate the global defence industry. A3.6 At the next level down, despite , , Japan, the As Figure A3(ii) below demonstrates, 7 out of the top 10 defence companies UK and France all being major defence spenders, the UK market is are now US-based. BAE Systems is the fourth largest international signifi cantly larger than the others because we are increasingly relying defence company refl ecting not only its leading UK position but also on industry to take on new roles beyond equipment development and success in accessing a share of the large US market. Whilst these defence manufacture; an increasing proportion of our budget is spent sourcing companies are giants within the defence market, accounting for around products and services from a largely private sector industrial base. 50% of global sales in 2004, they are relatively small in global corporate

1 International Institute for Strategic Studies Military Balance 3 DoD Green Book 2005 2 Stockholm International Peace Research Institute 4 Defense Industrial Base Capabilities Study

Defence Industrial Strategy 25 investment terms. For example, Lockheed Martin ranked 135th in the European perspective Global 500 on 2004 revenues whilst BAE Systems ranked 399th. A3.14 The European defence environment can be characterised (MPCBMUPQEFGFODFDPNQBOJFTCBTFEPOEFGFODFSFWFOVFT b#O  as a set of largely separate domestic markets. In general continental  European markets are both smaller than the UK market and less open.

 A3.15 The desire to make European military contributions more  eff ective, combined with the economic realities associated with nations  sustaining largely separate markets, has nevertheless prompted initiatives  in cooperative procurement including several major programmes (such as  the A400M and MBDA Meteor) utilising OCCAR5 and more recently     the creation of the European Defence Agency. A recent Commission Green     Paper on the European defence market6 recognises that greater effi ciencies  can be achieved in European defence procurement. However, as in other -PDLIFFE #PFJOH /PSUISPQ #"& 3BZUIFPO (FOFSBM &"%4 )POFZXFMM5IBMFT )BMMJCVSUPO .BSUJO (SVNNBO 4ZTUFNT %ZOBNJDT European policy areas, there are signifi cant integration challenges and Source: Defence News, 2005 national interests remain a dominant factor. EU enlargement adds a further Figure A3(ii). dimension of complexity since countries such as Poland are highly aligned with the USA and will often favour purchasing US defence products and A3.12 Not all of these companies have the breadth and scale to services. Enthusiasm from governments and industry for collaborative deliver the broadest range of defence business, at the integrated development programmes has undoubtedly been tempered by diffi culties platform and system level, across the land, sea and air environments. experienced on some high profi le collaborative ventures in recent years. These include, for example, BAE Systems and Lockheed Martin. Others such as Raytheon and Honeywell, whilst still large defence A3.16 In practice, the European market remains fragmented although it is players, are more focused on specifi c types of business. hoped that the European Defence Agency will begin to make a diff erence in terms of supporting the more eff ective harmonisation of military requirements A3.13 The major defence companies, who take on the delivery of and promoting a more open defence equipment market. Progress is being complex, integrated systems and platforms, are heavily dependent on a wide made in opening project procurements to European competition and range of lower level suppliers, many of whom are signifi cant international addressing security of supply concerns, as outlined at A3.32 below. However, companies in their own right. A large proportion of the specialist intellectual at current spending levels the market cannot off er the same scale and scope as property and innovation so essential to delivering world-class military the US market. Furthermore, European national defence markets are expected capability is believed to lie in these lower tiers of the supply base. to grow at lower rates allowing the US market to continue to pull ahead.

A3.17 Historically European governments owned and controlled much -l value of around £280 million through information exchange programmes; of their indigenous supply base. In the post Cold War period there has been Cooperative programmes a trend towards privatisation or partial privatisation of previously state- -economic benefi ts through sharing development costs owned enterprises (e.g.MTU in ). This has resulted in a shift of and Cooperativethrough economies programmes, of scale undertaken in production with and allies whether in emphasis towards achievement of shareholder value rather than the delicate sharingthe USA,in-service Europe support or elsewhere, and upgrade can bring costs; together governments balance previously sought between industrial performance and national and industry and sometimes act as the stimulus for industrial ambition and, as a result, is attracting interest from private equity investors. -enhancedrestructuring. interoperability They also with off erallies; potential benefi ts in their own right: Aff ordability constraints however are likely to force governments and companies to tackle overcapacity of design and production in some sectors. -strengthening ¬ defence bilateral research relationships, cooperation including off ers security economic relationships. and technology benefi ts, with an assessed 5:1 return on investment and A3.18 Continental European companies, as well as securing their position It is important, providing in cooperative knowledge programmes, with an annual that we value still of retain around enough £280 in domestic markets, are trying to access other markets and increase exports understanding million of the through underlying information intellectual exchange property, programmes; including from to compensate for generally reducing or constant domestic budgets. The our partners, to be able to adapt our equipment through life to meet UK defence budget has grown, but UK companies still generally are seeking national ¬ requirements, economic benefi as discussed ts through at the sharing end of developmentchapter A2. to secure a share of the larger and generally more profi table US market. costs and through economies of scale in production UK companies continue to invest in the USA, making a total of around £2 and sharing in-service support and upgrade costs; billion of US acquisitions in 2004 alone in almost forty separate acquisitions. British companies such as BAE Systems, Rolls-Royce, Smiths Group, VT and ¬ enhanced interoperability with allies; QinetiQ have bought US companies to overcome the high entry barriers and secure progressive access to the market. However, a continuing ¬ jstrengthening bilateral relationships, commitment to the UK market combined with the constraints on accessing including security relationships. and operating in the US market, forces diffi cult boardroom decisions for UK companies on where to locate core capability and investment. It is important, in cooperative programmes, that we still retain enough understanding of the underlying intellectual property, including from our partners, to be able to adapt our equipment through-life to 5 OCCAR (Organisation Conjointe de Coopération en Matiere d’Armament) meet national requirements, as discussed at the end of chapter A2. is the European procurement organisation which manages a number of joint equipment programmes such as the A400M military transport aircraft and the Principle Anti-Air System (PAAMS) which will be used on the UK’s Type 45 Anti Air Warfare Destroyer. 6 Towards an EU Defence Equipment Policy” – Com(2003)113 dated 11.3.2003

26 Defence Industrial Strategy important defence innovations.important Assuch theUKprovides anattractive research anddevelopment to ensure we canremain at theforefront of command andcontrolparticularly systems. To achieve thiswe invest in and mustmaintain adequate interoperability withUSequipments, services. long term support The UKaimsto edge maintain acapability basic items to complex integrated systems; from one-off purchases to We from buyawiderange ofdefence andservices: products A3.24 Sophistication ofdemand current situation andidentifying changedrivers andtrends. isdiscussed belowindustrial base. highlighting the Eachaspect or control UKGovernment canbeconfi dent ofachievinginthe industry, to attract investment itsability andthelevel ofinfl uence These defi characteristics neits relative attractiveness to A3.23 comparedcharacteristics withotherrelevant national markets interms of: 1997/98 by 2007/08.Inaddition,theUKdefence market hassomedefi ning for over 20years. Inreal terms, defence spendingwillbe7.5%higherthan the longestperiodofsustainedreal growth intheUK’s defence spendingplans below,as we will consider further budgethasbenefi andtheDefence ted from The UKdefence market remains aconsiderable size initsown right, A3.22 UK perspective programmes, asabase, theUK, canoff erabridgebetween Europe andtheUS. with theUSbutalsoacentral role inseveral pan-European defence equipment market share, generally by acquisitions. Given theclosedefence relationship foreign-owned companies whohave successfully establishedsignifi cant UK extension from theirhomemarkets. Thales andFinmeccanica are examples of home, relatively open to foreign suppliersandshareholders andanattractive attention hasbeenfocusedonaccessing theUKmarket whichiscloserto in theUSA,otherEuropean companies have hadlesssuccess. Instead their have beenrelatively successful inestablishingtrusted suppliercredentials to othermarkets andimprove success. theirexport Whilst UKcompanies Companies basedincontinental Europe alsolookto achieve access A3.21 are taken andascompanies seekto integrate theirrecent acquisitions. to beanongoingtrend, asthemostattractive acquisition opportunities investment from theUKinto theUS,butitisunclearwhetherthislikely that at present defence investment into theUKisexceeded by outward of UKprojects, isanetexporter, includingbackto theUSA.DTI estimates employs 1500peopleacross theUKand, aswell asengagement inanumber Systems Ltd, oftheUSRaytheon Company, awhollyowned subsidiary now can alsoleadUScompanies to invest For intheUK. directly instance, Raytheon inR&D.particularly However, theseproblems, aswell ascost competitiveness, national boundariescanaff signifi ect cantly where companieschoose to invest, signifi cantly easierinthenear term, andtheeaseofsharing technology across in theUSAandrecent trends donotsuggestthat technology sharingwillget investmentthe expense offurther intheUKmarket. The politicalenvironment The key questioniswhetherinvestment into theUSAiscoming at A3.20 forshareholderview theUSAasdelivering value. thebestopportunities a highlevel ofUScontent isrequired. The fi nancialmarkets clearlycurrently the recent saleoftheAgusta Westland US101forthePresidential fl ight, but to theUSAat theplatformExports level are possible, asdemonstrated by costs remainlong asentry justifi ablefrom ashareholder value perspective. attractive inscaleandrelatively closedincomparison to othermarkets andas This trend willcontinue aslongtheUSmarket isdisproportionately A3.19 ¬ ¬ ¬ profi tpotential andthetrading environment. market opennessanddiversity ofsupply; sophistication ofdemand; selected onmeritbyselected primecontractors intheUSAandelsewhere. subsystems are promoted intheirown right andexported andhave been algorithms,warfare andopenarchitecture systems. Many oftheseenabling signature management, synthetic environments andtraining, electronic e.g.: propulsion, radars, power generation andmanagement, platform enabling capabilitiesthat addsignifi cantly to effectiveness and value, communications below). technologies Italsoincludes (discussed further covering allenvironments andincludingcivil-basedinformation and isbroadly-based, indigenousindustry platform Our forexports. home market development forproduct andsubsequently asound This to higherlevel approach forusandindustry provides opportunities processes that cancreate eff military ina range ofoperational ect scenarios. and maintained), infrastructure andinformation, and andstructures (appropriately equipments (appropriately trained andsupported), updated capability”“military i.e. integrated andagilecombinations ofpeople and theneedto planandmanagethedefence businessat thelevel of chapteroverview outlinedtheemphasisoneff operations ects-based A3.27 integratorscapability andinnovators (e.g. nichetechnology companies). companies),electronics integrators ofcomplex systems and/ormilitary EquipmentOriginal (suchasdefence technology Manufacturers), inserters of industrialplayers includingequipment design authorities(e.g. aircraft This requires thedevelopment ofacquisition modelsthat engagearange the MODlikely to bedelivered infuture withindustry. through partnership continue, withmany oftheprocesses androles currently by undertaken oftheinitialacquisition process. aspart life support This trend is setto the Future Strategic Tanker Aircraft, are beingdefi ned to address through- incremental upgrade ofcapability. Similarlyfuture programmes, suchas spares andmaintenance towards services supplyofassetavailability and programmes to move industry’s role away support solely from supplyof suppliers are already establishinginnovative arrangements around key forindustry. 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think more innovatively about the allocation of roles and responsibilities amount of the defence budget would be made accessible to and the use of commercial models to make best use of our and industry’s industry and the packaging up of diff erent elements of military comparative advantages in delivering and supporting military capability. capability at the MOD/industry interface would continue. We would retain core roles (shown in red) but become more explicitly A3.28 Market implications - Figure A3(iv) above dependent on key suppliers for delivery of defence outcomes. shows that in practice this intent implies a continuation of Any individual changes to the MOD/industry boundary are, of the rebalancing of roles that is already underway: course, likely to require consultation with Trade Unions and demonstration of better value against a public sector comparator, ¬ In the past, industry’s role (shown in orange) was limited to but the overall trend over the last few years is recognisable. the provision of our equipments, upgrades and equipment- focused support services. Our relationships with industry A3.29 Increasing importance of Information & Communications were transactional. Industry’s share of the defence Technologies (ICT): Whereas the diff erentiator in military operations could budget was focused in the Equipment Programme; previously be measured in terms of scale and potency, today it is more about agility and the ability to create an appropriate military eff ect rapidly and in response to ¬ Now we are more explicitly dependent on industry for a wider specifi c information about the operational environment. Whereas technologies range of products and services. Industry roles extend into non- such as stealth, advanced signal processing and energetic materials have generally equipment areas and already span the boundary between been defence-led and largely under the control of defence sectors, it is the peacetime and deployed environments. Products and services commercial sector that is driving innovation in ICT. Last year US businesses invested previously supplied separately are now being grouped into larger more than £40 billion on ICT research and development alone, more than the entire integrated packages (including through-life, system-of-systems US Defence R&D budget7. To remain at the leading edge of military capability will, and cross-platform) and industry now accesses the Equipment therefore, increasingly require eff ective exploitation of commercially-driven ICT. Programme and a substantial portion of the Short Term Plan (STP); A3.30 Civil ICT is characterised by open international standards, fast ¬ In the future, assuming this trend continues, an increasing technology cycle-times and high levels of investment from the major global players. A range of commercial supply models is used, normally 7 OECD based around high volume service provision incorporating upgrades.

28 Defence Industrial Strategy cost eff ectively. The DefenceCode of voluntary on ProcurementConduct our ArmedForces willbeableto secure needsmore theirequipment capability will strengthen theEuropean defence technological andindustrialbasesuchthat (EDEM), inotherwords anopen,competitive andtransparent environment that (EDA)Agency isworking to create aneff ective EuropeanDefence Equipment Market However, we are encouraging othersto besimilarlyopen,andtheEuropean Defence into localcompanies andsignifi cant retained shareholdings by somegovernments. in terms offoreign access to domesticmarkets, rulesonforeign inward investment The principalcontinental European markets remain lessopenthantheUK A3.32 Figure A3(v). technology andquicklyassessapplyitinthedefence environment. the core defence supplybaseto develop to access itsability new standards andopenarchitectures wherever possible;andencouraging level to make themarket attractive; commitment to COTS, common the useofnovel approaches, at theGovernment forexample: activity or control technologies fordefence theuseofICT purposes. This requires their businessmodelsanddevelopment iftheyare cycles to access, exploit Governments needto work withcommercial developers andalignwith foreign-owned companies, muchofwhichwas America. withBAESystems North supply chains. Incontrast, and7%with theUSAspent lessthan2%onimports our spendattributed at thislevel fl ows through to increasingly international organisations suchasNETMA andEUROPAAMS. Furthermore, of aproportion (13%)to cooperative proportion further programmes runthrough European 14%withforeign-owned UK-baseda further companies andasignifi cant was directed at imports, In 2004/05some5%ofourspendwithindustry Asfi gure A3(v)illustrates, UKdefence isa comparatively openmarket. A3.31 Market opennessand diversity ofsupply for alevel playing fi eldfordefence companies competing forbusinesswithintheEU. achieved through aself-regulatory approach, andoff thepotential eringUKindustry aimsformore opendefence equipment longheldUKpolicy markets supporting procurement grounds rulesonnational security applies to thosedefence equipment procurements exempted from theECpublic    4PVSDF%44BOBMZTJTPG.0%43(EBUBBOE%P%EPDVNFOUPOGPSFJ business environment that develops theserelationships. traditionally specialiseindefence. a The DISneedsto support the broadest supplybase, includingcompanies whodonot led technology developments through engagement with We recognise ofaccessing commercially- theimportance forexisting andnewsuppliersinthemarket.opportunity managed onathrough-life basis;thisprovides signifi cant indelivering cost-effindustry capability, military ective sophisticated. We role seeanincreasingly for important demandsontheindustrialbaseareOur becoming more Sophistication ofdemand–key implications TQFOE DPNQBOJFTPSNVUJOBUJPOBMQSPHSBNNFT PG6,TQFOEJTXJUIGPSFJHOPXOFE DPNQBOJFT 6,PXOFE FH/&5." PSHBOJTBUJPOT *ODMVEFT&VSPQFBOQSPHSBNNF 'PSFJHOPXOFEDPNQBOJFT   *NQPSUT    9 XBTTQFOUXJUIGPSFJHOPXOFEDPNQBOJFT *ODPOUSBTUJOUIF64MFTTUIBOJOUPUBM isasignifi cant step inthisdirection, HOTPVSDJOH.BSDI DPNQBOJFT 64PXOFE 'PSFJHOPXOFEDPNQBOJFT    8 which which *NQPSUT Infrastructure), Raytheon (ASTOR) and ThalesInfrastructure), Raytheon (Watchkeeper). (ASTOR) (Skynet 5,Future Strategic Tanker Aircraft), Information EDS(Defence enhanced roles foranumberofforeign-owned companies, includingEADS forward, theprofi leislikely to changewithnewprogrammes suggesting in 2004/05was highlydependent programme. ontheBowman Looking with majorprogrammes. For example UK’s General Dynamics prominence shows asnapshotintimeandoursupplierschange The chart A3.37 programme andspendwithmajorGovernment-owned supplierssuchasDstl. base, whichwilloften beinternational. Itexcludes all spendonthenuclear and notthefl ofthat ow-down fundinginto thelower levels ofthesupply and therefore onlyrefl ourhighestlevel spendwithsuppliers direct ects ofthepicture. Itisbasedonbillingdata onlyshows part This chart A3.36 by listingthe10largest suppliersin2004/05. direct Figure A3(vi)provides asnapshotofourmainsuppliers A3.35 bring suffi USA to establishthemselves intheUSmarket; UScompanies tend to beableto establish entry. Generally, European companies have to acquire inthe capability to buildpositionsintheUSAbecauseofdiff erent approaches required to the UKare lower thanthecosts associated withUKcompanies attempting UK market. The fi nancialandadministrative barriers to US companies entering capabilitiestothe scaleoftheirdomesticproduction compete favourably inthe remainspriority with theUSmarket andDoD. However, theyare ableto leverage intheUSA. it asanoptionalextensionto theiractivities focusand Their primary Large more UScompanies participate intheUKmarket selectively seeing A3.34 inAgusta capability Westland inSelex. andtheavionics/electronics capability now owns signifi oftheUK’s cant parts defence supplybase, includinghelicopter scale andgrowth intheirdomesticmarkets. For example theFinmeccanica group in theirpursuitofalternative sources ofgrowth to compensate forthelackof Continental European companies have intheUK taken opportunities A3.33 the EUpublicprocurement grounds. rulesonnatioal security around 80%ofsuchprocurements (by value) were exemted from collected from MemberStates by theEDA indicates that in2004 any MemberState mayoptoutfrom theprovisions oftheCode iftheywish. 9 8 These are ofdefence themajority equipmentprocurements; data agreed inNovember 2005(to come into eff on1July2006),Although ect cient capability intocient capability theUKto beconsidered aUK-based supplier. Defence Industrial Strategy Industrial Defence A3 29 The Defence market MOD’s top 10 direct suppliers in 2004/5 decisions around capability development and investment, especially showing location of corporate HQ where other governments maintain stakes in these companies.

A3.41 For those major UK defence companies who are developing >£1Bn signifi cant business overseas, notably in the US, our relative importance is decreasing, although we are likely to remain signifi cant whilst the UK is seen as the principal home market and we are seen as a major customer. BAE Systems A3.42 Another factor aff ecting the level of our infl uence is the degree £500-700M to which companies are focused on defence or civil markets. The major prime contractors are generally, by nature, defence companies and must remain focused on defence markets. They may have adjacent businesses QinetiQ in the civil sector, for example defence and civil aerospace interests, but these are largely driven by diff erent business models. Further GD UK down the supply chain there is more scope for leveraging common technology and capability between civil and defence sides of the business and some businesses have highly diversifi ed and often international £300-500M portfolios. In these cases our direct infl uence is more limited and we need to ensure that the UK, and the UK defence market specifi cally, is MBDA UK suffi ciently attractive to these companies as a place to do business.

A3.43 The degree to which we procure from companies with interests Rolls-Royce beyond UK defence varies sector by sector. Across the environments MOD is dependent on companies of all types and sizes. Whilst our focus is often Westland Helicopter drawn to the large companies because of their overall importance in terms (Finmeccanica Group) of scale and breadth and their visibility, we have to understand the role played by smaller companies, whether as part of a supply chain or as niche players. Some of these companies have specialist capabilities that are critical BT PLC to our ability to act responsively and fl exibly, for example in response to Urgent Operational Requirements. Whereas small companies in supply £200-300M chains tend to have their primary relationship with their industrial clients, some of the specialist companies also have direct relationships with MOD. There is often a high degree of interdependency, with MOD dependent SERCO on a single source for a particular capability and the company highly dependent on MOD as a major customer. We should therefore be able to work EDS Defence eff ectively with these companies to identify and secure core capability.

%FQFOEFODZPODJWJMCVTJOFTT UVSOPWFS  "WFSBHFUVSOPWFSQSPmMFGPS B6,BFSPTQBDF4.& Fujitsu Services   $JWJM &YQPSU Figure A3(vi).  $JWJM $JWJM $JWJM $JWJM $JWJM  A3.38 Despite these caveats, it is clear that the UK has a diverse supply base $JWJM even at the highest level. Several of the key suppliers are under foreign control %PNFTUJD  at Group level or have a signifi cant element of international ownership or 'PSFJHO %FGFODF %FGFODF  &YQPSU control. The DTI estimates that around 25% of the UK’s defence industrial base is  10 foreign owned . Furthermore several of our biggest suppliers are more heavily  focused on non-defence or international business than on UK defence business. %FGFODF %PNFTUJD  A3.39 The level of infl uence we can expect to have with companies is 6, %FGFODF %FGFODF %FGFODF %FGFODF determined by the importance of the UK defence market to the company’s %FGFODF revenue and profi t lines and the importance of engagement in the UK defence   market as a means to access and develop new technology and capability. 4NJUIT 3PMMT3PZDF #"&4ZTUFNT WFSBHF6,4.&T " WFSBHF6,BFSPTQBDF A3.40 As our supply base becomes increasingly international, our " infl uence is, other things being equal, likely to decrease. Foreign- owned companies operating in the UK market are generally less 4PVSDF#BTFEPO4#"$"FSPTQBDF*OEVTUSZ4VSWFZBOE$PNQBOZ"OBMZTJT critically dependent on us as a customer than on their home customer. Figure A3 (vii). As a result we, although an important customer, have comparatively limited infl uence over these companies and in particular over strategic 3.44 In the air environment, as fi gure A3(vii) suggests, key subsystems suppliers such as Rolls-Royce and Smiths Aerospace have thriving civil 10 Estimate based on the number of UK-based employees aerospace businesses. Small and medium sized suppliers also have undertaking defence-related work strong civil business interests and a good export track record.

30 Defence Industrial Strategy A3.48 ofdefence businessdevelopment,to otheraspects suchasR&Dandexports. risk/reward profi leachievable withintheseandtheapproach of Government ofbusinessmodelsandassociatedthe selection contracting mechanisms, the Corporate aff isdirectly performance by ected available profi tmargins, A3.47 Profi Figure A3(ix). commercial vehicle businesses, infi asdepicted gure A3(ix). extended supplybaseiscomposed ofcompanies withstrong ABRO and Thales are suppliers. theleadingdefence-focused The IntheLandenvironment BAESystems Land&Armaments, A3.46 Figure A3(viii). expected to cope reasonably well withchangesinanticipated work levels. challenges fortheprimecontractors, supplybaseis whiletheextended due to programmes including Type 45andCVF, willposeconsiderable base ishighlydiversifi ed. The anticipated spike inthenew-build workload, andcomponent whilethesub-system supply generally defence-dependent Inthemaritimeenvironment, primesare theequipment andsupport A3.45 diff erent approach industry to xed-profifi tformulae. Highrisk programmes with otherrelevant withintheUKeconomy. sectors The takes USDoD a levels work fornon-competed basedontheprincipleofcomparability           4PVSDF4#"$ 3"/%$PSQPSBUJPO 4PVSDF%44"OBMZTJTPG43(EBUB defence market usingarange oflevers identifi edlater inthissection. these companies butcanencourage themto intheUK participate in defence andcivilmarkets; we willhave infl lessdirect uence with others have diversifi edbusinesses, operating intheUKand overseas, companies we to canexpect have ahighlevel ofinfl uence. Many focused onUKdefence andhighlydependent onus. With these We are dependent onadiverse supplybase. suppliersare Some supply –key implications Market analysis anddiversity of .0%GPDVTFE PG/BWBM1SJNFCVTJOFTTJT t potential andthetrading environment 3FQBJS .0%TQFOEXJUITVQQMJFSTJOUIFMBOEFOWJSPONFOUSFWFOV  Profi t formulae .0%PXOFE BSFUIFMBSHFTU TVQQMJFSTJOUIF-BOETFDUPS #VJME  #"&4ZTUFNT"#30 . We use aformulato calculate acceptable profit 5IF6OJUFE,JOHEPNT/BWBM*OEVTUSJBM#BTF $JWJM 5SVDL$PSQ FH-FY%FGFODF.BOBHFNFOU 0TILPTI 7FIJDMFTVQQMZNBOBHFNFOUDPNQBOJFT &MFDUSPOJDT 8JMMJBN$PPL 1SPWJEFSTPGTQFDJBMJTUDBQBCJMJUZFH6MUSB %FGFODFTQFDJBMJTUTFH5IBMFT"JS%FGFODF   0UIFSLFZTVQQMJFSTJODMVEF  1SPHT .0%4IJQ .0%EFQFOEFOU 0OMZPGUIFMPXFSMFWFMTVQQMZCBTFJT 0UIFS .0%  4IJQCVJMEJOH 0UIFS  0UIFS F bN spending continues even to thecombined dwarf resources ofEurope. on R&Dissignifi cant in global terms asshown below, althoughUS determiningis acriticalfactor theriskprofi leforindustry. UKspend A3.49 the rest ofEurope ishowever largely comparable to that oftheUK. contracts, benefi tfrom signifi cantly highermargins. Theapproach across such astechnology initiatives andhighriskcontracts, includingfi xed price A3.51 andbetter andhence lessrisk, profiand clarity t returns to industry. key suppliersto provide uswithbetter value capability, more consistency and continuing to develop experience intheseareas willallow usandour acquisition andfi nancingmodelsindefence, for example PFIandPPP, to industry. ofleadingthewayThe UKhasahistory indeploying innovative that recognise that riskisshared andreward are performance, more attractive changes anddelays. Partnering relationships, designedformutualbenefi t, introducing riskincludingcancellation, requirements change, funding during thelifetimeofaprogramme oreven adecision-makingcycle, of profi tability. Long timescalesmeanthat change awhole range offactors againstfiperformance rmor xedprice isalsoacontracts key determinant fi high levels ofriskinouracquisition business, thoughtheirown project to optimisetheapproach to riskandreward. Currently perceives industry A3.50 programmes, includingtheuseofalliances andleadsystems integrators. Agency, several newcontractual modelsare beingdeployed onsignifi cant provide mutualbenefi t to usandoursuppliers.Defence Inthe Procurement in general well understood anddeployed successfully insomeareas to a widerrange ofsupplymodels. areThe now principles ofpartnering engagement withourkey suppliersisnotoptimalandhave deployed More recently we have recognised that a “one-size-fi ts-all” approach to the contract, holdingsuppliersto account against agreed milestones. risk andcost, approach andthenatransactional to management of suppliers,competition to negotiation select targeted at reducing our UK hastended towards tight defi nitionofthescope of theuseof work, may alsohave signifi infl canct uence. The traditional approach inthe securing fi rmprice withsuppliers,contracts even duringearlyphasesof investors. Whereas theUKandotherEuropean nations often insiston developmentcapability attractive that isvery to defence companies and refl aUSapproach ects to reducing riskinthe earlystagesofdefence budget was 5timesthat ofEUcountries combined (£5.5billion). This R&D compared withtheUK’s £2.3billion(0.2%GDP). The USR&D In2003,theUSAinvested £29billion(0.6%GDP) inDefence A3.52 Figure A3(x). Source: OECDScience,Technology andIndustry Scoreboard2005 48& &41 6, 64 '3  %FGFODF3%TQFOEJOHBTPG(%1 Acquisition models Risk/reward profi les Approach to R&D  . Agovernment’s approach to defence R&D  <&6505"-b#O> . ofacquisitionThe models selection . Both sidesrecognise. Both theneedforwork  b#O b#O 4QFOE  b#O Defence Industrial Strategy Industrial Defence A3 31 The Defence market programmes, the US tendency is to use cost-plus arrangements until the A3.56 Governments have a range of levers with which to respond, and risk is quantifi ed and manageable. Beyond the use of R&D to de-risk and these take many forms. Some are available through day-to-day activities, mature technology associated with specifi c programmes, funding is also for example as a customer of defence products and services (though here used to drive innovation. Chapter A10 addresses this in more detail. too, other government departments may have a role as customers, such as for equipment required for both defence and civil emergency services, or for A3.53 Exports. Exports are an important part of the defence economic secure communications). Others come from governments’ wider investments landscape, off ering higher profi t margins than domestic sales (because in the well-being of industry and some through governments’ authority as development costs are already amortised) and, therefore, reducing the a controller or regulator (including potentially a de-regulator) of industry. overall cost of a nation’s defence capability procured from its indigenous 6,(PWFSONFOUOFFETUP suppliers. UK companies continue to consolidate Britain’s position as BDIJFWFBMMUIFTF .BSLFU PVUDPNFTJOUIF6, BUUSBDUJWFOFTT the second largest defence exporter, with a 20% share of the global NBSLFU market, despite reduced defence spending in many countries and (PWFSONFOU increasing competition from traditional and newer supplier nations. BT4611035&3

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 Figure A3(xii).

 A3.57 Figure A3(xii) shows fi ve groupings of levers that can be used to achieve

 required defence industrial outcomes. There are three groups of levers available to governments through their execution of day-to-day business, namely:

           A3.58 Government as Investor – Whilst much of governmental investment 4PVSDF.0%%&40 in research and technology exists to support intelligent customer status, Figure A3(xi). some is also intended to secure appropriate technology and innovation in the industrial base. Careful deployment of a range of investment levers can support A3.54 All of these factors contribute to profi tability. US companies technology development in critical parts of industry. Furthermore, governments’ tend to be consistently more profi table than European equivalents. approaches to R&D are an important factor in determining the overall attractiveness of the defence market because it impacts on risk and profi tability.

Profi t potential and the trading environment – key implications

A number of factors drive profi tability for companies engaged in our business, including uneven project performance. The DIS provides an opportunity to create a more attractive trading environment that enables industry to maximise profi ts whilst still retaining the focus on delivery of cost-eff ective capability to us.

Levers Government can use to shape the business environment for defence companies and investors

A3.55 As earlier sections have described, we need certain features in the industrial base, namely:

¬ a market that is suffi ciently attractive to retain companies’ participation against the pull of other foreign or adjacent markets; ¬ industrial delivery: eff ectiveness and effi ciency; ¬ innovation and technology/capability development in industry; ¬ suffi cient control for Government to ensure appropriate sovereignty.

32 Defence Industrial Strategy A3.63 A3.59 further enabling agovernment’sfurther to: ability interventions canbeaimed at Secondary A3.65 determine theattractiveness ofthedomesticdefence businessto industry. core processes andspecifi orprogrammes. clinesofactivity alsofundamentally They ondefence directly most attractive eff becausetheyimpact and ectiveness relate to Levers that aff the way ect governments execute their core businessare the A3.64 be relaxed orremoved, to increase industry’s profi andagility. tability and capacity. Equally, governments canconsider where regulations can to ensure access ofindustry to,parts orcontrol over, key IPR,capability may needto exploit levers more concerned withcontrolling orrestraining A3.60 planned alignment andinterdependency between usandourkey suppliers. investment. Joint planningapproaches take thisastagefurther, providing future market understandingthat underpinsbusinessstrategy and corporate investment andbusinessoperations withalevel canprovide of industry at thestrategic andbusinesslevel capability, andaddressing military equipment A3.62 to governments intwo general categories: Beyond theselevers, there are othersavailable A3.61 - fundamentally defi nesthe attractiveness ofthedefence market. ofsuppliersandtheprofichosen to theselection tmargins available -fromacquiring theacquisition defence andservices model products the UK’s RegionalDevelopment Agencies andDevolved Administrations. across Government, notablyintheMOD, DTI andHM Treasury, andalsoin number offormsto industry. ownership IntheUK, oftheselevers isvested both fi are nancialandactivity-based, available ina provideto support will deploy in selecting anddeployingwill deploy levers: inselecting There are somekey principlestheGovernment ¬ ¬ Government asRegulator ofindustry guarantee access to andcontrol over criticaltechnologies stimulate theoverall by reducing healthofthedefence industry ¬ ¬ ¬ ¬ capability andoperationalcapability sovereignty. and capabilitieswhere theseunderpincriticalmilitary international defence sources ofadjacent industrialsectors; investmentindustry andstimulating technology transfer from barriers to entry, stimulating encouraging participation, Government asPlanner Government asCustomer Government as Supporter ofindustry Government asSupporter Specifi cinterventions mustbetargeted, mustbeassessed thoroughly before Impact introduction. Levers mustbeappliedwithinthecontext of Ingeneral itisbetter to uselevers that infl uence contained andtime-bounded. defi strategies. andcapability nedsector and limitstheriskofunintended consequences. interventions; thisismore benefi cial to allparties interact specifi withit, rather thancase-by-case c the environment ortheway we ingeneral –governments’ planningactivity, forward – The approach taken to –onoccasion, governments –Arange oflevers, an attractive place forinvestors andworkers to builddefence companies. Government deploys theselevers to diff erentiate theUKmarket andmake it appointments. chapter, Inthenext we explore inmore detailhow theUK signifi cant stakes intheirdomesticdefence industry, and control executive levers; forinstance, insomeEuropean countries theState continues to take Diff erent governments choose to deploy diff erent setsofthese A3.68 effachieve particular avery andmustbehighlytargeted. ect and canbeappliedat ageneral level. are Others intended to ofthelevers Some are intended to infl uence theenvironment A3.67 to fundingofresearch direct oracquisition ofspecifi cIPR. commercial to infl suppliersofICT uence theirfuture products ranges support’ covers arange ofintervention options, from working with that canbetakenactions to produce aneff ect. For example ‘R&T Eachofthesecategories haswithinitarange ofspecifi c A3.66 Defence Industrial Strategy Industrial Defence A3 33 The Defence market The UK business environment A4

Introduction A4.4 These characteristics have generally resulted in a split between a series of ‘homeland’ domestic markets with some international A4.1 Chapter A3 described the general shape of the evolving interaction, and ‘export’ markets for those countries without a signifi cant global defence market, and introduced the general framework of defence industrial base of their own. Some sections of the supply base levers available to Government to infl uence it. This chapter illustrates do however operate on a genuinely international basis. In addition, some of the ways in which the Government, within this framework, major defence programmes frequently have characteristics similar seeks to continue to make the UK a attractive place to establish, to the civil aerospace and other technology-intensive sectors: grow and invest in high-technology defence businesses. ¬ high cost and high risk projects; A4.2 Some of the ‘levers’ are in fact natural consequences of broader ¬ high value, low volume products; Government activity, for instance stewardship of the economy. Indeed, ¬ international collaboration in design and development; indirect levers are generally to be preferred, as they apply to all businesses ¬ high barriers to entry; and run the least risk of distorting the allocation of resources. However, ¬ issues around safety critically, long-service while defence is becoming more international, it is far from a normally lives and hence obsolescence. functioning market, possessing a number of characteristics which, taken together, diff erentiate it from other areas of manufacturing: A4.5 The market is also in general characterised by a signifi cant element of advocacy from fi rms and other governments attempting to ¬ national security considerations; infl uence high value or high prestige equipment procurement decisions. ¬ few suppliers, very few legal customers; ¬ high levels of technological and scientifi c intensity; A4.6 Around 165,000 people are directly employed in defence ¬ the central role of Governments as sponsor, manufacturing in the UK, with a further 135,000 people employed principal customer and market gatekeeper; indirectly in supply chain activity1. DTI estimates that the average ¬ to diff erent extents in diff erent countries, legal and labour productivity is £55,000 value added per employee, contributing political restrictions on company ownership. nearly 0.5% to GDP. It is a technologically intensive business, and an important part of the manufacturing sector which is a priority area A4.3 All of these can aff ect how investors view the sector. For for Government. There is widespread acceptance that the UK cannot instance, investors are likely to require a premium where they believe compete on low wage activity, nor should it seek to do so. The future of Governments will intervene to secure political, rather than commercial, UK manufacturing therefore depends on continually moving up the value priorities. On the other hand, the signifi cance of the home customer means chain by raising investment, R&D, skills and productivity, and Defence and that, if investors have confi dence in the consistency and credibility of a the UK’s manufacturing interests are closely aligned in this respect. government’s approach to the industry, the market may be less volatile. Government as an investor

A4.7 Investment in defence-related technology is critical to retaining access to cutting-edge military capability, and the next chapter discusses in detail the MOD’s research & technology activities. This however fi ts within a broader framework of Government support to science, technology and innovation. The Government’s target is to raise the overall level of research and development (R&D) investment in the UK from its current level of 1.9% of GDP to 2.5% by 2014, and our approach to this is described in the Government’s ten year Science and Innovation Investment Framework published in July 2004, and the work coordinated by the business-led Technology Strategy Board (TSB) which aims to support the pull-through of ideas emerging from the UK’s world class science and engineering base. The fi rst annual TSB report2 explains the vision behind the Technology Strategy: for the UK to be seen as a global leader in innovation and a magnet for technology-intensive companies. This also takes into

1 DASA UK Defence Statistics 2005. In this context, ‘direct’ employment is that generated in those companies providing the product or service directly to MOD, or that within the exporter. ‘Indirect’ employment is that provided through the supply chain by sub-contractors or suppliers to the ‘direct’ contractor. The fi gures refl ect average full time equivalent employment in year. The fi gures exclude MOD service and civilian personnel, and are rounded to the nearest fi ve thousand. 2 ‘A call to action’ – the Annual Report of the Technology Strategy Laser technology research © BAE Systems. Board 24 November 2005, available from www.dti.gov.uk

34 Defence Industrial Strategy Technology Strategy: followed Implementation Reports’ theAeIGT’s report. publishedJune2003(www.aeigt.co.uk).Summary’ The ‘NationalAerospace ontheFutureIndependent Report of theUKAerospace Executive Industry: Technology Strategy: followed theAeIGT’s Implementation Report’ ‘An 3 general, Government assistsinproducing anattractive environment through: and government canonlyattempt over time to infl uence these. However, in and more generally. aff Some long-term ofthe UKeconomy, characteristics ect signifi cantly contribute makingtheUK to attractive investorsto indefence The Government hasabroad range oflevers inthisarea, whichcan A4.10 Government assupporter theworkforward oftheAerospace Innovation andGrowth Team priorities identifi ed by theNational Aerospace Technology Srategy taking account existing national strategies, forexample, theaerospace research global market. hasbeendefi Network Security nedasoneofthepilotsforthis. forwhichthere needandapotentially isbothastrongservices large policy leversrange oftechnologies to andpolicy deliver innovative and products Administrations, businessandthescience basecanwork together to usea Research Councils, RegionalDevelopment Agencies (RDAs) andDevolved The MODisalsoworking closelywithDTI andothergovernment to developdepartments A4.9 2007 thescience budgetwillhave more thandoubled, risingto £3.4 billion. benefifrom whichthedefence industry ts;forinstance, between 1997and also invests more broadly intheUKscience, engineeringandtechnology base, to thegrowthin technologies important oftheUKeconomy. The Government £370millionwillbeavailable Some to businessbetween 2005and2008 as research grants, viatheDTI’s Research Calls, tocollaborative undertake research A4.8 Hand assembly soldering©Raytheon. Hand assembly Aerospace Innovation andGrowth Team’s ‘National Aerospace (AeIGT) ¬ ¬ ¬ ¬ supporting aneducation andbusinessenvironment supporting whichalso theeducation andscience base, supporting asmentioned keeping down thecosts ofsettingupandrunningbusinesses maintaining a produces strong withindustry’sconjunction own investment; above, to maintain ahighly-skilledworkforce, in up abusinessislow andtheprocess straightforward; rates oftheworld’s majoreconomies, andthecost ofsetting – e.g. at 30%theUKhasoneoflowest maincorporate tax in fi nance, designandmarketing; businessservices, stable macro-economic and political environment andpolitical stable macro-economic Innovation Platforms support industries for defence, particularly industriesfordefence, particularly where central Government, 3 . ; company credit some£400millioneachyear. isworth 2002; SMEshave to date received £778millionandthelarge linked ofjobs created to andquality thequantity orsustained. 6 5 4 has beencommittedhas in total 2005and2008. between Introduced to for large SMEsin2000andextended fi rmsin The level ofgrant available isdetermined onacase-by-case basis, Funding issplit equally the DTI between andRDAs, and £34million ¬ ¬ ¬ ¬ ¬ ¬ ¬

more general support to more business;e.g. general support theDTI runsanumberof the encouraging innovation through providing providing the skills. to defence-applicable For support instance, theEducation the capitalinvestment costs forcompanies inanEUassisted area in England, whichallows RDAs orDTI to consider paying someof isalsoprovided bysupport way Finance ofSelective forInvestment organisation, handleapplications inthefi rstinstance. Regional upoperations,start andUK Trade &Investment, ajoint DTI-FCO cover ofeligiblecosts forbusinessesplanningto aproportion administrations for Wales, Ireland to andNorthern Scotland may beavailable from theRDAs inEnglandandthedevolved marketing theattractions oftheUKasaplace to invest, grants promoting inward andregionalinvestment an additional£188millioninvalue addedsince 2002; costs foradvice onhow to exploit aninnovative idea). for Investigating anInnovative Idea(reimbursing consultancy Practice, Grants forResearch and Development, andGrants Loan Guarantee to Business Implement Best Scheme, Support aimedat SMEs, includingtheSmallFirms portfolio support companies. Italsooff ers exible from itsbusiness products fl schemes business support a business’ taxbill, orforsomeSMEs, provide acashsum; R&D taxcredit excellence and advice through regional centres ofmanufacturing primarily butnotexclusively at SMEs, to provide diagnostics similar agreement inearly2006; forMarineindustriesisexpected plan that willbefundedfrom bothpublicandprivate sources. A AgreementforSkills Aerospace (SEMTA), skillscouncil, asector whichhas launcheda with Science, EngineeringandManufacturing Technologies Alliance skills forUKmanufacturing. Inaddition,theGovernment isworking 2006, creating asinglepoint ofaccess to deliver globallycompetitive 2005 a and Secretary Trade announced on31October Secretary &Industry industry isamajorcontributor,industry account fortwo thirds ofallexports; the UKeconomy. to exports, whichthedefence Manufacturing inrecognitionprovides that benefi thissupport highvalue exports t to improveactions intheUK. manufacturing The Government and aseniorindustrialist, withatwo-year remit to deliver practical ForumManufacturing –jointly chaired by theMinister forIndustry as well as political support to specifias well aspoliticalsupport campaigns; c export Organisation, Services defence industry, Export theDefence Credits and, Guarantee specifiExport Department callyforthe organisations in Wales, Ireland; andNorthern Scotland In many cases, similarschemesare off ered by theappropriate Manufacturing Strategy Manufacturing Manufacturing Skills Academy Skills Manufacturing active support to exports support active 6 . hashelpedcompanies generateThe Service Manufacturing Advisory Service Advisory Manufacturing 5 ,acompany taxrelief that caneitherreduce that may besuitablefordefence , updated in2004,andthe Defence Industrial Strategy Industrial Defence fi scal incentives , together withacosted action , includingthrough the , to openby September : aswell as , aimed , e.g. the Sector Sector 4 . A4 35 The UK business environment A4.11 Government could also act as a supporter in situations where, security. In such cases, Government often seeks undertakings from for example, the adjustment costs from defence restructuring fell acquiring companies on retaining defence capabilities in the UK. In disproportionately upon a particular region of the country. However, addition the Government holds special shares in BAE Systems and Rolls- that assistance would be best addressed through regional policy Royce in order to protect some vital defence industrial capabilities. and targeted assistance, such as retraining programmes, rather than through the distortion of defence procurement decisions. A4.16 Other aspects of regulation include the setting and enforcement of strategic export controls, discussed in chapter A6; the MOD’s policy towards Intellectual Property; and requirements for the vetting or nationality of individuals within business before they can receive sensitive information. In some cases, this applies at the company level – cf. List X, as discussed in the Counter Terrorism Chapter. It also includes the Government’s approach to the labour market, where the UK’s regulations are the most fl exible in Europe.

Government as a customer

A4.17 How MOD behaves as a customer is most probably the critical factor in making the defence industry attractive to investors and workers. Much of this document sets out how we aim to align our and industry’s behaviours and processes, in order to ensure the capability requirements of the Armed Forces can be met, now and in the future. In particular, we can:

¬ increasingly accept COTS technology, standards, architectures, Weapon interfacing electronics © Ultra. products or services, and use open standards and architectures, wherever security considerations permit, to reduce cost to MOD, A4.12 We noted in this list encouragement of inward investment. We limit the risk of obsolescence, extend the market for industry, recognise the very positive contribution made by some fi rms in developing and open it to the widest range of suppliers possible; the UK defence industrial base, and although other nations do not operate as open a market (for either investment or procurement) as we do, we do not ¬ consistently act with a view to through-life capability management believe that further protection for the UK market is the answer. However, we and take into account the need to sustain sovereign capabilities; will continue to work with individual companies where they identify that they are being prevented from making the acquisitions they want overseas, and ¬ select acquisition models depending on the specifi c circumstances, more generally seek to open up other markets which remain heavily protected. to deliver the best long-term value for money. This includes promoting a sustainable industry that secures onshore the industrial Government as regulator capabilities we require to maintain appropriate sovereignty.

A4.13 Government, as a regulator and de-regulator, can have very A4.18 The continuing changes needed to deliver this approach signifi cant direct impact on the business environment – and the are summarised in Part C. However, it is also important to recognise potential distorting eff ects of changes to regulation need to be carefully that in some areas the relevant industry is broader than Defence, and assessed. However, there are specifi c controls in place. includes for instance the ‘blue-light’ services and other Departments and Agencies. The Government is keen to promote the spread of best A4.14 In particular, the Government has a range of instruments to practice across Government and the development of coherent approaches regulate acquisitions and mergers to ensure fair markets and security to procurement, and DIS is one part of this. For example, we recognise of supply. Merger policy in the UK is regulated under the Enterprise Act in this strategy the need to work more closely with other Departments 2002, which came into force on 1 May 2004, and the EC Mergers Directive and Agencies to produce sustainable high-grade cryptographic industrial 04/139. The Enterprise Act eff ectively took politics out of merger decisions, capabilities in the UK, including by considering the amalgamated leaving the Offi ce of Fair Trading (‘OFT’) and the Competition Commission demand across Government for cryptographic products and services. to take decisions as the independent competition authorities7. The Act allows the OFT to refer any merger to the Competition Commission if Government as planner it believes that a lessening of competition would result in any given market within the UK (or any part of the UK), require undertakings A4.19 As chapter A3 described, we are dependent on suppliers with very without reference or accept the merger without reference. diff erent characteristics for the supply of defence products and services. Some serve us alongside a range of wider civil and overseas markets; others are A4.15 The Enterprise Act also allows the Secretary of State for Trade highly dependent on the domestic defence market. Our actions as planners and Industry to intervene on public interest grounds, including national can however help encourage these suppliers to remain eff ective and effi cient, with most improvement likely where companies both have the resources to 7 The OFT will investigate competition issues of mergers where the annual engage in strategic planning, and have signifi cant potential or actual business turnover of the enterprise being merged/acquired is greater than £70M, with the MOD relative to other customers. Nevertheless, focusing solely on or if the merger/acquisition will result in a share of any given market or such suppliers would risk discouraging new entrants or limiting competition. markets of 25% or more. Mergers involving two or more member states in the EU, and with turnover in excess of 5 billion , come under the A4.20 We explain in more detail in Chapter A8 how we intend to jurisdiction of the European Commission under the EC Mergers Directive. make as much information available to industry as possible, However, the OFT retains the role as the competent authority in the UK by ranging from publishing information on equipment projects annually, liaising with the EU Commission on mergers that fall under its jurisdiction. to deeper joint planning activity where this is suitable and can realise

36 Defence Industrial Strategy environment that makes theUKanattractive place forthedefence industry. Insum: defence industriallandscape, andhow theGovernment abusiness supports This andthepreceding chapter have discussedtheglobalanddomestic A4.22 Conclusions serious issuesaboutitscurrent andproductivity. sustainability works withustoit willnotbepossibleto address dosounlessindustry in somecaseswhilewe would like to maintain anonshore capability, hard-headed assessment ofthecurrent industrialreality, recognising that distinctive, by beingendorsedacross Government, andsetagainsta similar approaches. We believe that thisstrategy be willnevertheless investigate sustainment strategies. othernations Some are taking Where thesemay beat we risk, to willwork together withindustry capabilities we wishto retain onshore reasons. fornational security Inaddition,inthisstrategy we identify theindustrial A4.21 committing to a to treat suchdiscussionsinamature way, ourconfi respecting dences and open andconsistent face towards industry. Inreturn, we industry expect topics. Insum,weon particular planto move substantially to amore therefore isempowered and make whodoeswhat withintheMODandwho clearer forindustry inappropriately. We are also, withthis strategy, publishing aguideto substantial benefi tsonbothsideswithout excluding other companies ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ahighlyskilledandfl exible strong a leadership in inaddition,asacustomer, supporter, regulator, investor we are an a services, designandmarketing;services, friendly regulation includingfl exible labourlaws); low costs encourages a stable macro-economic and political environment andpolitical a stablemacro-economic overall businessenvironment and planner, theGovernment helpssustainanattractive allow increased profi anddelivery; tsforgoodperformance to drive whichincentivise downpartnerships, industry costs but communications technologies) andinward investment; innovation, newentrants (includingininformation and proven inthisway, are easierto market customers; to export to andwhichthen,having standupto service, been active to deliver andsupplychainmanagement required agility expertise, growing inthecombination ofsystems expertise engineering to industry ofouroveralla greater proportion businessisavailable the UK defence industry acomparativethe UKdefence industry advantage; transparent sophisticated demand open market open to models new procurement support industries support mutual through-life capability management through-life capability (includinglow corporate taxrates, andbusiness- fair competition thaninany othermajordefence nation, and science &technology businessenvironment that sharingofinformation where thisisappropriate. and able to speakauthoritatively diversity ofsuppliers forhigh-value whichhave products labour force infi nance, business ; , including: and ; manufacturing , includinglong-term whichencourages gives to industry to industry ; ; on delivering thehigh-value theArmedForces products need. owned companies) off ersthechance oflong-term prosperity, focused (whichwillcontinue to includeforeign-the UKdefence industry are grasped andthechallengestackled,the opportunities we believe andattractivedistinctive environment forthedefence industry. If The Government believes thisamounts to aunique, A4.23 ¬ ¬ ¬ through thisDIS,a increasing to planwithconfi dence and to investment;attract including through further including through further of what needsto changeiftheseare to besustainable, Organisation (DESO); Services Export the Defence specifi c support we wishto retainonshore sharing ofinformation to industry, theDefence including clear articulation of those capabilities ofthosecapabilities clear articulation joint work withindustry , alongsideclearassessments Defence Industrial Strategy Industrial Defence to allow industry to allow industry . A4 37 The UK business environment Defence research technology and innovation A5

A5.3 Technology is a key driver for change in the modern world and In order to meet the challenges of the is crucial to network enabled, adaptable and rapidly deployable forces. Technology is one of the drivers of productivity and underpins much of the future we must be able to derive the UK’s productivity and success in the past few decades. This is recognised 1 by the creation of a 10 year R&T UK Government strategy3 to raise full benefi ts of advancing technology’ public and private sector investment in R&T. The results of Government R&T are often transferred into industry or carried out under contract by industry or universities. It aims to drive innovation in the UK, thereby generating greater capability for our forces. Improving equipment quality will also have a positive eff ect on UK defence export performance.

Benefi ts R&T investment has brought to military capability

¬ thermal imagers/night vision goggles giving night time combat advantage to our forces;

¬ Chobham armour, a key factor in the success of US and UK forces in both Gulf confl icts, off ers the best armoured fi ghting vehicle protection available; New Generation Service Respirator. ¬ sonar 2193, which has greatly enhanced the ability of Introduction the navy to detect traditional and stealthy mines;

A5.1 Defence is underpinned by increasingly sophisticated technologies2 ¬ technologies to detect and counter terrorist use of explosive and the UK’s battle winning military capability remains heavily dependent on devices, such as the Carver remote controlled robot; the development, exploitation and insertion of world-class technology. UK Government, industry and university research and technology (R&T) eff ort ¬ the fl ight propulsion control system to make carrier remains critical at a time of uncertain threats, as illustrated by the diverse tasks landings easier for the Joint Strike Fighter; demanded of our Armed Forces since the end of the Cold War. Although the nature of confl ict remains dirty, dangerous and deeply personal often with no ¬ stealthy materials such as tiles for acoustic substitute for ‘boots on the ground’, the UK needs to stay ahead in technology stealth on our nuclear submarines; against both conventional and novel threats, such that we can quickly develop counter measures and solutions as new threats emerge. A strong and innovative ¬ better respirators, detectors and improved vaccines to science and engineering base in UK Government research agencies, industry and protect our troops from chemical and biological attack. universities is essential to meet this need. A fundamental task is the identifi cation of the key technologies in which the UK should retain an international lead, due to their signifi cance both to sovereignty and to the competitiveness of our defence A5.4 The MOD and its partners must continue to meet the needs industrial base. Tackling this task is made easier if we have a clear understanding of of the Armed Forces and should therefore focus attention on: our current defence technology strengths as compared to international standards. ¬ technology that can and should be inserted into future R&T investment is critical to the capabilities, directly improving the delivery of military eff ect; delivery of battle winning capability ¬ technology that will enhance the delivery of A5.2 Well targeted investment in R&T is a critical enabler of our capability and decision making; national defence capability; it strengthens innovation in our defence industry, produces more capable equipment for our forces and ¬ scientifi c/technological advances in which the UK underpins our ability to operate with high technology allies like the US Defence needs to sustain a suitable level of capability or France and lead an ad hoc coalition (e.g. of European nations). in order to act as an intelligent customer;

¬ technology judged to be of emerging relevance to defence;

1 ‘Delivering Security in a Changing World - Defence ¬ R&T capability to inform the identifi cation and analysis of threats. White Paper 2003. Chapter 3.4 2 Delivering Security in a Changing World - Defence White Paper 2003 3 Science &Innovation Investment Framework 2004-2014 - HM Treasury

38 Defence Industrial Strategy Radar -QinetiQ. (MESAR)test facility ScannedAdaptive Electronically Multifunction to overcome thesethreats. This iscompounded by: to retain fl andthe exibility required technological advantage Current andfuture threats may requiringthe useofasymmetrictactics, increasingly theMODandindustry involve A5.6 eff enabling military Challenges facingR&Tin therefore ensuringtheeff ofbattle winningcapability. delivery ective making thebestdecisionsandchoices withtheresources available, and to ensure Itisimportant that we have skilledR&T staff theacquisition process toembedded inandsupporting fi from start nish, A5.5

Defence R&Tisvitalto: ¬ ¬ ¬

theextremely rapid pace oftechnological change. chemical, biological, radiological andnuclear theproliferation oftechnologically advanced systems, ¬ ¬ ¬ ¬ ¬ materials and expertise proliferation;materials andexpertise effenhance themilitary that canbeachieved; ect readily available ontheopenmarket that cangreatly support national competitiveness. support enableeff acquisition ective processes; counter neworemerging threats; deliver cost-eff capability; military ective meetdefence challenges; ect 15% ofallbusinessenterprise research anddevelopment in2004 are amongthestrongest intheworld, withaerospace accounting for some areas; UK’s aerospace andpharmaceutical industriesinparticular for concern inthefuture. Nevertheless, theUKremains aworld leaderin componentselectronic from otherregions oftheworld could beasource when theseare ourallies, butagrowing reliance suchas onproducts including thosedeveloped from civilapplications. This isoflessconcern dependent ondefence technology solutionsgenerated by othercountries, competitive technology basedindustries. We could become increasingly sophisticatedallies andemerging to and economies support inourability a riskthat inthecoming decadestheUKcould fallbehindbothourkey ofGDPfromproportion 2.3%ofGDPin1981to 1.9%now. There exists R&T. AlthoughUKinvestment inR&Thasrisencashterms, itfellasa economic wealth, suchasChinaandIndia,are now investing heavily in The international environment inwhichtechnology based(defenceand civil)industriescompete isevolving rapidly. Many nations withgrowing A5.7 estimated R&Texpenditure level equivalent to theUKby around 2020. may aff UK/USinteroperability. ect Chinais expected to grow rapidly to an high R&Texpenditure inthepastbutgapwithUSAisgrowing, which equipment. The UKiscurrently inarelatively goodposition,refl a ecting returns, andthat R&Tinvestment buysatimeadvantage over openmarket between R&Tspendandequipment quality, withasharplaw ofdiminishing A5(i). Itshows that there isasimple ‘you getwhat you pay for’ relationship capability and R&T capability Arecent MOD-sponsored studyanalysing11majordefence capable nations hasuncovered ahighlysignifi cant correlation between equipment A5.8 5 4 R&T, butrecent years have ofthiswork seen themigration to the ofpart technology. This has traditionally beenthrough MODfundedandconducted dependent onthedevelopment, ofworld-class exploitation andinsertion GivingourArmedForces theircriticaledgehasalways beenheavily A5.10 formulationplans, andequipment acquisition policy decisions. future threat analysis, operational analysisoffuture force structure across theMOD. These includetheanalysisofintelligence, current and activities otherimportant bybattle supporting winningcapability R&Tfundingremains Focused important. industry R&Talsoprovides Inorder to maintain appropriate sustainedandtargeted capability) (andhence equipment investment quality military inMODand A5.9 Advantage from –Capability Figure R&DInvestment. A5(i) of theOrganisation for Economic Cooperation andDevelopment (OECD). 2004, according to Offi from overseas, orby Government. Defence BERDrose by 13%in within businessenterprises, themselves, whetherfunded by industry Research defi andDevelopment (R&D)as ned the by FrascatiDefi nitions UKBusinessEnterprise intheUK R&D(BERD)isperformed

:FBST"EWBOUBHF                    'SBODF 6, 5 investment inthelast5-30years asshown inFigure $BQBCJMJUZ"EWBOUBHFGSPN3%*OWFTUNFOU ce ofNationalStatisticsfi gures $IJOB 4XFEFO (FSNBOZ $IJOB &TU b.3%TQFOEQFSZFBS Defence Industrial Strategy Industrial Defence 64" 4 . A5 39 Defence research technology and innovation private sector. The future will demand a balance of continuing MOD and The way ahead industry R&T in key and emerging areas. Military off the shelf (MOTS) and, where appropriate, commercially off the shelf (COTS) solutions can contribute Responding to the challenges to meeting capability challenges, but cannot be the complete answer. A5.15 We have seen that Defence R&T investment is a critical enabler A5.11 There will be an enduring need for MOD R&T expertise to for military capability and the competitiveness of our defence industry. It support all aspects of defence capability and equipment acquisition, also impacts on defence sales and the UK economy via the spin out of civil ownership and deployment. We need to rapidly prototype technologies technology companies arising from defence R&T spend31. Employment and for insertion into capability and understand how logistics and equipment training opportunities in high-technology also provides broad support to support can be made more effi cient and eff ective through the use of wealth creation in the UK. We have recognised that the environment we technology. Through all of this, the increased use of experimentation operate in has changed. Industrialised nations remain very strong in the and demonstration should enable us to determine how best to meet fi eld of R&T, but developing nations are investing signifi cantly, with civil these challenges. To achieve this we need to assess technology, sector research leading in some dual use areas, specifi cally ICT. In addition, conduct analysis and integration, improve the acceptance process and the nature of the threat has changed and we can expect opponents to through life support process, including obsolescence management. use MOTS and COTS systems (often combined) to challenge us and our interests. In this new environment, we will have to horizon-scan eff ectively A5.12 The in-service life expectancy of major platforms is increasing. technology advances (both threats and opportunities) and to access and New equipment and systems need to be even more fl exible to meet exploit the best technology to give the UK Armed Forces the military unpredictable demands, adaptable to ensure connectivity in a network capability required. In order to move forward, there are several areas that enabled world, and capable of regular upgrade. We must fi nd ways to we need to address, including how we maintain our capability, how we exploit the global market and insert technology into military capability access technology for exploitation to meet our requirements, and how to keep up with the high rate of refresh within many sectors. to improve the way in which we conduct acquisition and exploitation.

A5.13 MOD, in collaboration with the UK Council for e-Business (UKCeB) Setting and aligning national defence R&T priorities is undertaking a number of R&T projects aimed at establishing shared information environments with industry. Recognising that many of A5.16 In Part B of this strategy an analysis of the cross-cutting the major platform projects are multinational, the Transatlantic Secure technical priorities for defence capability identifi es those areas in which Collaboration Programme (TSCP) is focussed on providing a framework the UK needs to sustain or develop technological strength; there are for electronic collaboration that meets national and business constraints areas of technologies with emerging defence relevance, which we on information sharing. Initially providing a secure mail capability, need to watch. And we also need to look at where the convergence the programmes goal is to provide a secure federated computing of key technology fi elds like ICT, life sciences and nanotechnology environment that can be applied to a wide range of projects. might create new threats or capabilities with defence relevance.

A5.14 There is also a need for a better understanding of the A5.17 The majority of MOD’s research programme is broadly aligned human factors that determine information assimilation and with the Department’s needs. However, we must ensure that our subsequent action, and the need to design information networks future research programme remains strongly aligned and is able across diff erent components of military capability. to address rapidly the changing defence and security situation. We will ensure that our Defence Technology Strategy (DTS) continues to be aligned with defence policy and capability requirements. Key R&T challenges for UK Defence: We will work with industry and universities to update the DTS and also engage in joint horizon-scanning activities to identify those ¬ maintain technological advantage to emerging technologies with potential defence relevance. counter emerging threats;

¬ sustain investment levels to maintain our relative global position;

¬ develop knowledge management and systems integration skills in the defence sector so that technologies can be matured and integrated into war winning systems for the future;

¬ recruit/retain skilled people to act as the MOD intelligent customer for R&T acquisition to meet defence needs;

¬ develop design and acquisition processes to enable technology insertion through equipment life; Research and Development at Dstl.

31 The extent and value of spillovers between the defence and civil industries is subject to much to debate and there are many anecdotal examples of spillovers either way, but the overall picture is not clear. MOD, DTI and HMT will be conducting further research in this area.

40 Defence Industrial Strategy in R&Tto 2.5%ofGDPby 2014 The UKGovernment hassetatarget to raise national investment A5.19 continues to lament the shortage of skilled engineers (41% shortfall), skilled continues ofskilledengineers(41%shortfall), to lament the shortage of skilledR&Tstaff isno andthedefenceexception. sector UKindustry The UKGovernment recognises theneedforastronger supply A5.20 base Maintaining the UKskills COTS. We willincrease thevalue from ourjoint investment by: customer forsystems ortechnologies, whichwillincludeMOTS and forcollaboration anattractiveimportance, andanintelligent partner allows usto incriticalareas retain capability ofnational world-class needstodefence sector maintain investment inR&Tto alevel that 6 them soasto maximisethevalue from ourinvestment. those key areas andtheskilledR&Tpeoplewe needto work in Government work together to andindustry invest andmaintain Having that agreed UK theprioritiesitisimportant A5.18 competitiveness ofnational R&T Maintaining thequalityand

Science andinnovation investment framework 2004-2014July2004 Working more eff ¬ ¬ ¬ ¬ improving theacquisition process. understandingandexploiting value inthe supplychain. to share working thecosts inpartnership ofdeveloping focusingonthecapabilitiesneededto meet ¬ ¬ ¬ ¬ ¬ ¬ new ideas and to de-risk capabilitiesandsystems.new ideasandto de-risk national priorities. defence andsecurity Defence Defence Technology Centres (DTCs) foster anduniversities inour6 withindustry partnering increasing theamount oftheresearch programme opento through ‘Suppliers Days’ we present theR&T theMOD Technology Strategy identifi esthose spinninginCOTS technology where itmeetsdefence needs. collaboration with industry anduniversities;collaboration withindustry and increase thepullthrough oftechnology; Towers ofExcellence to shares benefi tsand costs competition shouldbroaden anddeepenthesupplierbase; challenges we face andtheeff we seek; ects technologies we believe are criticalto defence; ¬ ¬ ¬ theyare diverse andcover; Data and MODhasearmarked £90millionto jointly fundedby MODandindustry; Engineering forAutonomous andSystems; Electromagnetic Remote Sensing, and;Systems Information Fusion; HumanFactors Integration; the DTCs over a5year period; ectively withindustry: ectively 6 . To thisnational policy, support the technicians (32%)andmanagerialprofessional skills(28%) science, technology andmathematics skills, April 2002. Committee onScience 2005. andtechnology inquiry A5.21 The Roberts review The Roberts A5.21 sampletesting -Dstl.Laboratory 11 10 9 8 7 - Nature Volume 483,3November entering mathematics, hard science andengineeringdegrees from 1997to 2004 mathematics, physics, chemistry, computer science andbiologyof7.5% and computer sciences. There hasbeenadecrease inA-level entries in 1997/98 and2003/04,thoughtheincreases were mainlyinbiological studying fordegrees inscience hasincreased from 38%to 41%between Scientifi c Adviser has recently pointed ofstudents outthat theproportion supply to R&Temployers andreduce innovation. The Government Chief attractive alternative careers forscience graduates would constrain their to studyscience andengineeringdisciplinesitconcluded that of 6.5)compared to 7.1inFrance, 8.6intheUSand15.8Finland UK has5.5researchers per1,000peopleemployed (below theOECDaverage to theOrganisation forEconomic Cooperation andDevelopment (OECD), the compete around 60%oftheresearch budget and corporate research was doneinDstlorQinetiQ. By2009/10we planto done inGovernment, andQinetiQ. In2002/03 around 90%ofourapplied (Dstl),whichfocusesoncorelaboratory defence research that mustbe sector. hasbeensplitinto DERA science theDefence andtechnology house andisencouraging andtheuniversity competition from industry The MODismoving away from doingmostofitsresearch in- A5.23 Widening theR&Tsupplierbase teams make thegreatest contribution to knowledge advances. areaspriority we wishto leadasanation. Increasingly interdisciplinary have truetechnical depthandworld classresearch inthose expertise together to develop solutions. capability We willalsowant teams which knowledge andsystems integrations skillswhocanpulltechnologies international R&T, needin-houseR&Tstaff MODandindustry with MOD’s needsforR&Tstaff .Inorder maketo useofbothnational and InMOD, ourHeadofProfession ischarged withmeeting A5.22 SirGareth SETfor success Roberts, –thesupply ofpeoplewith Strategic Science provision inEnglish Universities. HOCSelect EEFSouthEmployer 2003 Survey Science andinnovation investment framework 2004-2014July2004 UKmust goonpromoting andfundingscience 10 . However, there are stillrelatively fewstudents 9 foundthat fewer students were choosing Defence Industrial Strategy Industrial Defence 12 that equated to ourapplied 11 . 7 . According 8 . A5 41 Defence research technology and innovation and corporate research programme, retaining only 35% in Dstl, as depicted in Figure A5(ii). QinetiQ is free to compete with or partner with companies in Technology tiers enabling Defence capability: bidding for competed research, and has won work that MOD has competed. ¬ maintained fully in the UK. (Full provenance  and sustainability of supply);  ¬ collaboration with International partners.  (Visibility and trust in supply chain coupled with  infl uence and knowledge gain in R&T);

 ¬ MOTS solutions. (Military systems with some #VEHFUQFSDFOUBHF  provenance and sustainment of supply chain);  ¬ COTS solutions. (No need for provenance     or sustainment of supply chain).        

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%TUM 2JOFU2 $PNQFUFE A5.29 The MOD’s international collaboration strategy will enable us to Figure A5(ii) – Increase in competition in the MOD Research Programme. identify nations’ strengths and develop partnerships that will increase UK and partner nation military capability. Around 12% of our current research A5.24 In addition to developing the supplier base through competition, programme would not be achievable without international collaboration initiatives like Towers of Excellence and Defence Technology Centres have and it is essential to sustain this if we are to continue to operate alongside helped to increase partnering arrangements, share costs and improved high technology allies. Our main partners for collaboration are the US and bid quality. We are also developing the work we do through collaborative European nations, specifi cally France and . may also increase in ventures: for instance we are pursuing the setting up of joint government/ importance, in line with the inward investment of Italian industry in the UK. industry partnerships such as an International Technology Alliance (ITA) in the realm of network and information sciences (UK/USA) and an Innovation & Technology Partnership for Guided Weapons technology (UK/France). Where International R&T Collaboration: elements of the R&T programme are contracted out, it remains MOD policy that, to the extent allowed by our international obligations, this work should ¬ we will pursue international research collaboration normally be carried out onshore. This is to ensure that the UK retains and where it adds joint long-term value to Defence; develops those capabilities required for its national defence and security. this may also provide benefi t to industry; However, we shall seek to increase competition in Europe to its maximum useful extent via the use of research collaboration between governments; ¬ research collaboration can produce a return of up competition will be the preferred method for letting such contracts. to fi ve times the value of the UK investment;

Changing the way we access R&T to ¬ research collaboration with the US will continue support military capability to be of signifi cant mutual benefi t;

A5.25 We will work with the national and global technology ¬ European collaborative research will focus on joint industrial supply chain to meet the demands of the military requirement. We programmes to develop defence relevant technology; will compete much of our research programme, which will help develop the supplier base. We will also better target our international ¬ the European Defence Agency is expected to help identify collaboration activities to access global R&T with defence relevance. opportunities for collaborations between European nations;

A5.26 We will use the commercial market for our capability solutions wherever appropriate but the ability to provide an intelligent customer function for MOTS and COTS solution will persist. This transfer, and A5.30 MOTS solutions - There will be instances in which MOD adaptation as necessary, of civil technologies, either directly or via products, paying for the development of technology and equipment neither into Defence is called ‘Defence spin-in’. Expert in-house R&T capability represents good value for money nor is essential to maintaining national will maintain the UK’s credibility in areas of international collaboration. capability. In those cases we shall go to the best possible source to meet our needs, subject of course to security considerations. A5.27 Maintained fully in the UK - This R&T capability will be of vital strategic importance to UK Defence and will require full provenance A5.31 COTS solutions - These will meet many of our technology of a UK supply chain to protect our security and sovereignty. needs from the broader industrial and university base. Furthermore as the global investment in R&T continues to increase, and as an ever larger A5.28 Collaboration with International partners - The number of countries contribute to this overall growth, it will not be role of collaboration is to support technological excellence in strategic defence areas, and to provide a wider understanding of 12 NAO report Management of Defence Research and Technology 10 March 2004. defence applications across the technology domain. The latter is (note this refers to what were the applied or corporate particularly important for commercially led technologies. elements of the research programme which formed the QinetiQ assurance and not the whole research programme).

42 Defence Industrial Strategy defence technology to capability. give value formoneyandmilitary project. The key isto understandwhere civilCOTS canbeintegrated alongside design anddevelopment eff signifi can vary ort cantly dependingonthe and elements ofplatform design.Itmustbenoted that thebalance of weapons, countermeasures, sensors, combat systems, ofpropulsion aspects signifi cant elements that mustbebespoke defence technology led. e.g. will beheavily utilisedto ensure cost eff ectiveness, there willalways be a balance ofbespoke, MOTS andCOTS equipment. Whilst COTS systems through asmallnumberoftop level systems. These systems willcontain Figure A5(iii)represents platform acomplex modernmilitary A5.32 Advanced mobile communications forthebattlefiAdvanced mobilecommunications eld-QinetiQ. offuturemajority defence needscould bemetwithCOTS solutions. of R&Trelevant to defence. However, itisunrealistic to assumethat the across allareas cuttingedgeR&Tactivity possible fortheMODto support Defence ‘Spin-In’ andCOTS: ¬ ¬ ¬ ¬ ¬ ¬ where ourresearch programme generates technology with ourR&Tprogramme focusesstrongly onthose the diffi most ‘spin-in’ isthepurchase ofCOTS products, rather programme anactive oftechnology watch isessential globally, civilmarkets driver are ofscience animportant and potential, through policy. review property ofourintellectual dual-use we shallcontinue to ensure that isexploited to itsfullest unlikely to produce thesolutionswe need; technology areas is inwhichthecivilsector lessen theattractiveness ofaCOTS solution; intoproducts systems canoften complex military than theutilisation property; ofcivilintellectual to ensure that we identify thesetechnologies; useofICT;for defence use, anexample beingthemilitary technology. Itmakes senseto harnesstheseciviltechnologies culties withintegrating commercial civil include agreater emphasisonthedevelopment ofdemonstrators equipment ornew processes. Equipment related MODR&Tprogrammes should We shouldseekto realise thevalue ofinnovation by exploiting itinnew A5.34 demonstrator programmes Exploitation plansandtechnology risks, the useofexploitation plansandtechnology demonstrator programmes. to generate informedoptionsandanincreased understandingoftechnological this area canreduce riskthroughout theacquisition process, through analysis ways needs. ofmeetingcapability Appropriate andtargeted investment in to makeour ability better decisionsandenablingusto identify more cost-eff ective R&Tmustalsobeusedto improve theacquisition process by supporting A5.33 the defence acquisition process Ensuring R&Tfeeds into andimproves (balanceofdesign&development eff type by –BreakdownFigure system platforms A5(iii) ofmilitary 12 Technology Part March 4NAO Report 2004 in order to target theareas we and insertion. needto designformodularity sectors. We needto identify thosetechnologies that are likely to evolve rapidly the UKwillcontinue to draw uponadvances withinthedefence andcivilR&T In seekingto achieve anincrease inthepace ofappropriate oftake-up technology, where capability itneedsto be, relativeour military to otheralliesandcompetitors. equipment inamore costmilitary eff ective way. This willmaintain thestandingof inmindthenwe ofour canbetterwith technology sustainthecapability insertion with them.Ifwe canfi nda way to planandacquire oursystems andplatforms keep pace withUSinvestment, butwe mustensure that we are interoperable existing equipment willbeidentifi ed to respond to changingthreats. We cannot should bedesignedwithupgrade andfl inmind, exibility notingthat new roles for incremental (i.e. technology insertion ‘plug Platforms andplay’). andsystems exception) incapability. We shouldlookto openarchitectures that facilitate This willallow usto respond to bothevolution (thenorm)andrevolution (the drawingtechnology uponadvances insertion, inthedefence andcivilsectors. the proliferation andrate ofchangeinR&T. The UKmustincrease thepace The of timebetween majorplatform procurements isincreasing, asis A5.35 Eff R&Tprogrammes.of fundingbetween theEquipment Planandthesupporting determine where fundingismosteff allocated ectively andallow better alignment a criterion funding. fortheprovision offurther This willhelptheMODandindustry better exploitation ofaresearch plansfrom thestart project, whichwillbeusedas The ManagementofDefence Research and ective technology insertion inacquisition technologyinsertion ective 1SPQPSUJPOPG1MBUGPSN            4ZTUFNT*OUFHSBUJPO "WJPOJDT PCU"SSG 8BSTIJQ $PNCBU"JSDSBGU 22% 18% 22% 22% 16% $PNCBU4ZTUFN (FOFSBM4ZTUFNT 1MBUGPSN Defence Industrial Strategy Industrial Defence ort). 10% 40% 50% SQMJO"JSGSBNF 1MBUGPSN 1SPQVMTJPO 12 . This requires A5 43 Defence research technology and innovation Understanding and exploiting value in the technology supply chain

A5.36 We will work with industry to gain a better understanding of the nature and structure of the technology supply chain from prime contractors through to the lower tiers. We will continue to meet most of our major technology and acquisition requirements through large prime contractors, given their expertise and experience in systems integration. However, in today’s world of rapid technology change, there also needs to be a more eff ective engagement with the so-called ‘lower-tier’ suppliers; namely the small and medium sized enterprises (SMEs) and universities who are often involved in the development of very novel technologies and materials. We need to understand value at all levels, highlighting the role of innovation through the supply chain. One example of the varied technology suppliers to a major prime contractor developing a key PCR minilab a device to rapidly identify biological component in a propulsion delivery system is shown in Figure A5(iv). agent present in sample - Dstl. A5.37 The critical role of the prime/system-integrator organisation is to manage the overall design, concept and architecture of the system and 1% 3% the sub-system technologies. A key technological component may lie in a SME and it is important that both the prime contractors and the lower-tier  9% 16% 20% 20% 14% technology sources are supported to ensure access to innovative technology.  18% 24%  22% 50% 20%  72% A5.38 The MOD, major defence industries, universities and the DTI 18% need to make a combined eff ort to identify innovative SMEs and their  22% 20% capabilities and improve means of engagement with them. It is important  73% 80% 24% that SMEs are made aware of the opportunities available to them with  18% 40% 40% defence as a possible market for their innovation and technologies.  18%  22% 1SPQPSUJPOPG1MBUGPSN  12% 10% 14% Innovation and technology to enable  through life capability sustainment /FX "QQMJFE 1SPEVDU 1SPEVDU %JTQPTBM 4ZTUFN 3FTFBSDI 3FTFBSDI 4VQQPSU *ODFQUJPO A5.39 Greater utilisation of innovation and technology will ensure that incremental capability insertion can be achieved and that system 5FDIOPMPHZ1IBTF and component obsolescence can be overcome. Technology exploitation (a) Breakdown by technology phase may be targeted at the reduction of through life cost and the reduction of the logistics and maintenance burden experienced with older Value in the technology supply chain – a key power-system equipment. These benefi ts could be delivered throughout the supply component showing the diff erent types of organisation engaged chain to enhance the operational availability of military capability. at various stages in the product’s lifecycle, highlighting the employment of a wide range of specialist technological providers in A5.40 We will focus more R&T eff ort to support through life capability the development of a single component within a complex system sustainment and continue to work with industry to develop and insert technology to increase the endurance of equipment in the expeditionary battle 1% space and successfully deliver capability whether on land, on or under water, in 13% 9% 36% the air and in cyberspace. This shift in focus, will enable through life platform 7% capability sustainment/enhancement programmes to insert new technologies (e.g. new sensors, weapons, materials etc.) as they become suffi ciently mature. 19% 15% Summary

A5.41 Many of the conclusions for the R&T community and how these (b) Breakdown across whole-life will be taken forward are contained in Part C and form an element of how the DIS challenges will be taken forward. Here, those challenges that are most pertinent to R&T are expanded to form an outline plan of 3FTFBSDI*OTUJUVUF6OJWFSTJUZ 5PPMJOH4VQQMJFS how to meet those challenges. We must agree the R&T and capability 3BXNBUFSJBM4VQQMJFS 4FSWJDF4VQQMJFS areas we will undertake nationally and those we are happy to source on the global market from other defence industries/civil sector. 1MBOUT&RVJQNFOU4VQQMJFS 1SJNF$POUSBDUPS

5FDIOPMPHZ%FWFMPQNFOU $PNQBOZ

Figure A5(iv) – Organisations involved in through-life capability sustainment of a propulsion system component.

44 Defence Industrial Strategy strategy to getnational R&Tspendto acompetitive 2.5%ofGDPby 2014. We theGovernment together insupporting mustplay ourpart A5.43 flComputational dynamics in uid Typhoon drag coeffi ofUKR&T.maintain thequality R&Tprogramme Our mustfocuson: We mustalignourdefence prioritiesto meetMOD’s needsand A5.42 and others)have signifi cant industrialfootprints onbothsidesofthe Atlantic. companies (ledby BAESystems andRolls-Royce, butincludingCobham, Smiths, arepartners, dependent to somedegree onUStechnology. AnumberofUK number ofUKprogrammes, andcollaborative programmes withEuropean single programme beingthe Joint Strike Fighter. large Inadditionavery substantial numberofco-operative programmes withtheUSA,biggest coalitionUS-led operations. Refl this, theUKiscurrently ecting involveda in requirementsto meetUKmilitary that are predicated to alarge degree on UK-based defence industry, andanobvious source ofsupplyequipment The size oftheUSdefence market andcapability hasmadeit amagnetfor for improvements intechnology sharingarrangements required. for sovereign rather thancommercial reasons, we continue to strive pursue greater reciprocity ofaccess withtheUSA.Inparticular, and the USmarket. That isnotto say, however, that we donotcontinue to suppliershaveUK subsidiariesofUS-based even suppliedbackinto potentially helpingto sustainkey sovereign capabilities. Insomecases, useful knowledge andhelpbroaden therange ofpotential UKsuppliers, prepared to invest especiallywhere intheUK, theybringwiththem companies based inothercountries, includingintheUSA,whichare towed howitzer by hasbeenselected the MarineCorps. We alsowelcome strengths. For instance, theBAESystems M777155mmlightweight relationship, forrespective andmutualrespect industrialandtechnology arrangements,and trustinoursecurity buildingon ourbroader strategic defence requirements, basedonbothadegree ofmutualunderstanding continues to dofarbetter thanmostcountries incompeting forUS USA procures mostofitsequipment onshore, theUKdefence industry The relationship withtheUSAisingeneral ahealthy one. While the Technology sharingacross theAtlantic ¬ ¬ andthoseemerging technologies that may be needs; capability R&Talignedto MODmilitary disruptive/or have defence applications. cient cient modelling. and ofbothindustriesto improve thecurrent situation. objectives.common security Itisintheinterest ofbothGovernments bethecase, andto cooperateotherwise together inpursuitof eff capabilities, at better military ective value formoney, than would lies inenablingbothUKandUSArmedForces to acquire more of transatlanticThe importance defence industrialcooperation facilitates needsare thiswhilstensuringthat ourmutualsecurity met. programmes. What we are strivingtowards isanagreed framework which cooperate onourequipment withtheUSA (or any otherpartner) degree oftechnology transfer isrequired ifwe are to beableto fully isakeythis; security issueforus, justasitisfortheUSA.Butacertain is protected, andthat appropriate measures are putinplace to ensure life. We fullyrecognise theneedto ensure that property intellectual can bemodifi edeffectively tomeetemerging requirements through requirementsmeets thecapability againstwhichitisprocured and itisaboutbeingconfifor UKindustry; dent that theequipment buy we Europe. To reiterate, thisisnotaboutgainingcompetitive advantage to theneedsofcooperative procurement in thanthoseofourpartners US, whosetechnology we disclosure have policy foundlessadapted project, diffi butinpractice transfer istherefore ofcrucialimportance. This issoforany cooperative adapttheequipment that wenecessary procure. Appropriate technology to have to theautonomous operate, capability andwhere support To meetourown sovereign that needs, we itisimportant continue qualifi edstaff inanincreasingly competitive globalskillsmarket. forscientiststructures andengineersthat recruit andretain highly ‘literacy’ ofourstaff andexpertise . The MODmustprovide career We enhance thescience andtechnology mustfurther A5.48 eff and capability reduce technical riskintheEP. military ective technology solutionsitshouldbepossibleto provide more cost effadoption ofnewmodelsformilitary implementation ect, of acquisition process. Through theuseofbetter decisionsupport, We needto examine our how R&Tmight better support A5.47 thereby ensuringoursystems andplatforms have advantage. abattle-winning demonstration. We mustconsider how to improve technology insertion, R&T base;thiswillincludeplacinggreater emphasisontechnology and exploit UKinnovation andintelligently access andexploit theglobal national strengths, getbetter value from ourjoint investment, identify We mustdevelop newways ofworking together to maintain A5.46 supplyofhighlyskilledengineersandscientists. necessary We mustgrow theskillsbaseto ensure we have the A5.45 innovation andexploit R&Tto meetdefence needs. (includingSMEs)andtheuniversities,industry to stimulate We mustwork together more eff with ectively A5.44 culties have arisen particularly withthe culties have arisenparticularly Defence Industrial Strategy Industrial Defence A5 45 Defence research technology and innovation Defence exports A6

Introduction A6.4. The UK defence industry has also gained competitive advantage in export markets by off ering the UK’s world leading A6.1 During the Cold War, the Soviet Union supplied and dominated design excellence and pioneering innovation & invention skills. This is markets in other Warsaw Pact countries and client states for the output especially potent where another nation’s design capability is fragile or of its military industrial complex. There were also established defence has been lost. This type of export has the added benefi t of helping to trade links between NATO countries and allies. Following the demise sustain our own design capability for use on national programmes. of the Soviet Union and end of the Cold War, these established defence trade links broke down and during the 1990s the export market A6.5 Defence exports bring commercial benefi t to UK companies became more competitive, with for example, Russia and Poland now and around 20% of UK defence employment is in export work. However competing in markets alongside the USA, the UK, France and others. a UK defence industry that is able to generate signifi cant export revenue also has value for Defence for a number of more specifi c reasons : A6.2 Over the last decade , the UK defence industry has won export orders worth an average of £5 billion per annum, bringing signifi cant ¬ Defence exports support defence diplomacy benefi ts to industry and MOD. This achievement has secured the UK as the and in some countries may act as a key enabling world’s second largest defence exporter after the USA. Now that the market activity for a bi-lateral defence relationship. has become more competitive, suppliers must be able to off er customers a broader range of services; the off er of equipment alone is unlikely to meet ¬ Defence exports contribute to building local operational the total requirements of most customers, who now expect suppliers to capability and therefore enhance interoperability with off er package solutions covering equipment and support throughout the life our own forces, especially during peacekeeping missions. of a product. Indeed, as we increasingly encourage our suppliers to design for through life capability management, this is an area where UK defence ¬ Longer production runs also spread fi xed overhead costs. The industry can demonstrate increasing competitiveness in the global market. benefi t thus accruing to industry may be shared by us in the form of lower prices on future purchases from the same supplier. A6.3 The UK defence industry has a range of world-class technologies and products which it can off er allies. Much of this has been tested ¬ By sustaining longer production runs and off ering opportunities to and adapted as necessary by real operations, and as a consequence develop equipment for export customers’ requirements, defence potential export customers can have more confi dence in its reliability exports help to maintain key sovereign capabilities in and performance. UK success in overseas markets has traditionally been both production capacity and systems engineering skills, which in major platforms, but exports of sub-systems and the provision of we might otherwise have had to intervene to maintain. support services are becoming increasingly important. SMEs have an important part to play in maintaining the UK’s strong market position.

Lynx.

46 Defence Industrial Strategy these risks, we have anumberoftools, includingthefollowing: of technology, andtheriskthat afriendnow may beafoelater. To manage arefor Defence to beprotected –forinstance, oftheunintended transfer which needcareful managingifbothappropriate sovereignty andvalue A6.8 There are alsoafewpotential risksassociated withdefence exports, a widerange ofsignatories, includingtheworld’s majorarmsexporters. have aneff mechanismforenforcement ective andmonitoring; and include based oncore principles, would whichmake beunacceptable; clearwhenexports legally binding;includeallconventional arms;aseparate, self-standinginitiative; weapons. The UKhassetoutsixcriteria forsuchatreaty, callingforitto be:- of alegallybindinginternational treaty to cover thetrade inallconventional than SALW. Intheslightly longerterm theUKisalsopursuingwiderobjective binding, any principlesthat are agreed may eventually have widerimplications the UNProgramme specifi ofAction cally only covers SALW, andispolitically on transfers ofSALW andtranshipment). Although export (includingimport, ReviewConferenceof Action onminimumcommon criteria to underpincontrols agreement at the2006UNSmallArmsandLight Weapons (SALW) Programme the UKhasmadeprogress forinternational since 2003inbuildingsupport The UKisalsoat theforefront ofpromoting internationally theneed to ensure are defence responsible. exports With awiderange ofotherpartners A6.7 business supported. representing 38%ofthetotal defence businessin2004/2005, £766mof supported Department CreditsThe Guarantee Export For thesereasons A6.6 by other parts oftheMOD,by otherparts theArmedForces andwiderGovernment. This effOrganisation andsupported Services Defence isled Export by our ort interestsand security value andforthedirect to that Defence theygenerate. responsible defence inpursuitofourbroader exports, supporting foreign ¬ ¬ Arecurrent themethroughout theDISisthat we alongwiththe We Controls applyStrategic Export to prevent we believe exports to or newindustrialcapabilities establishedintheirterritory. Other the work onUKprogrammes should besubcontracted off shore nations’ requirements foroff elements set–i.e. of that particular have beenwithoutbusiness, thiscanbeunderminedby other willoften sustainsupplychainsthatexports would otherwise supply chainneededto sustainsovereign capabilities. While needto understand moredefence clearly thecomplete industry authority, withCabinet-level Ministerial discussions as necessary. basis withtheMOD, FCO advisingtheDTI andDfID asthelicensing licence applications All export are considered onacase-by-case the Consolidated Licensing Criteria. EUAndNational ArmsExport developmental plusotherconsiderations impact; as describedin diversion; would theriskthat thecost have oftheexport negative international community, including towards terrorism; theriskof regional therecipient’s national security; stability; attitude to the used forinternal repression orinternational aggression; risks to of fi naldestination; concerns that might proposed be exports and fundamental freedoms; theinternal situation inthecountry andembargoes; forhumanrights respect including sanctions take into account forexample theUK’s international commitments, be inconsistent withourlegalcommitments andwiderpolicy. These 1

, theGovernment putsconsiderable eff into ort defence considerations.” should dependmainlyonnon-economic exports small andlargely oneoff a ...as consequence thebalance ofargument about concluded that the“economic costs ofreducing defence are exports arelatively considering theimplications ofa50%reduction inUKdefence They exports. Exports’. York Centre University for Defence Studies, 2001),examined these, by andCWilkinson EconomicHartley -‘The Costs andBenefiDefence tsofUK A group ofindependentandMODeconomists (MChalmers, NDavies, K and benefi ts. e.g thebalance ofpayments, are sometimesalsoadvanced. access merger ofselected newmarkets andacquisition activity. by virtue within theglobalindustry, there forUKcompanies to may beopportunities competition. Inaddition,since there scope forconsolidation remains further success ofUS101-derived from theEH101-inUSPresidential helicopter arrangement between AgustaWestland ledto andLockheed therecent Martin fi rms, thusgivingthembroader market access. For example, the recent teaming for UK-based companies or incollaboration to work withoverseas inpartnership investment now in theUKdefence industrialbase, there are greater opportunities other nations orinresponse to aUK requirement. With thehighlevels offoreign suppliers, regardless ofwhethertheyhave beendeveloped incollaboration with onthemarketproducts now contain sourced amixofsub-systems from diff erent Further, given theinternationalisation ofthedefence industry, most A6.11 would enhance aproduct’s (andreduce its through exportability lifecosts). to consider at thedesignstageofaprogrammeopportunity features which facilitated by openarchitectures andmodularapproaches, there isnow an customers. Aswe move more to through management ourselves, lifecapability in designthat thenallows thesupplierto off eradiff erent setofoptions to export design stageofaplatform. This hasinvolved theadoptionofgreater modularity market share to competitors that have at considered theearly exportability This has tended to bethecaseforexample withwarships, andtheUKhaslost sophisticated andtherefore too expensive formany customers. potential export the earlierdesignstage. This meansthat, inmany cases, UKequipment istoo hasnotnecessarily product beenfactored into for aparticular opportunity the requirements that we specify, asthemaincustomer. Hitherto, export Ingeneral, defence industry’s isto produce priority systems to meet A6.10 sell equipment abroad that hasnotbeenendorsedby theUKArmedForces. overseas credentials. thanemphasisingitsUKin-service Itismuchharder to The UKArmedForces enjoy ahighinternational reputation and there isnobetter recommendation whenmarketing UKdefence systems A6.9 for advantage export New opportunities Merlin helicopter. 1 Arguments defence interms ofwidereconomic for supporting exports costs bidders to use UK sub-contractors onacompetitivebidders to basis. useUKsub-contractors not specifywhere work shouldbeplaced, butencourages foreign own approach to off set, does known asindustrialparticipation, sustainment issuesfordomesticsovereign capabilities. MOD’s eff onthesupplychain’s ect operation, however, andthuscreate governments’ directed off distorting setscanhave aparticularly Defence Industrial Strategy Industrial Defence A6 47 Defence exports Choosing the right approach A7

Competition, alternative approaches A more fl exible approach A7.5 With increasing technological complexity, globalisation and to competition and presenting, industry consolidation, priced based competition may not automatically result in the best opportunity for successful acquisition or maintain measuring and delivering key sovereign capabilities. This places challenges on our relationship with industry which remains fi rmly rooted in project performance. value for money in defence A7.6 Whilst competition allows the advantage of tangible price Competition comparison determined by market forces and the ability to compare competing proposals for compliance, it can also sometimes drive unintended behaviours A7.1 A sustainable and competitive UK defence industry remains essential and consequences for both us and industry. These may include unrealistic to the delivery of military capability to the UK’s Armed Forces. Open and timescales, an over optimistic assessment of risk and hence cost, and the fair competition is a fundamental component of our procurement policy to potential loss of fl exibility for timely insertions of technology in the future. deliver aff ordable defence capability at better overall value for money. A7.7 We will continue to use market forces where we can to determine A7.2 Figure A7(i) shows that over the past four years, about three quarters better value for money, but defence is not a perfect market place. We will of our contracts, by value, have been let competitively, covering the full therefore adopt procurement approaches that consider the nature of the spectrum of procurement from major equipment projects through to clothing market in the relevant sector and provide the fl exibility to respond to structural and supplies. changes, so as to sustain key sovereign capabilities and to ensure long term value for money. The Key Supplier Management process will enable us to assess the strategic and aggregate impact of diff erent potential acquisition Value of Contracts Let (Competitive vs Non-Competitive) choices, particularly those that have signifi cant industrial base consequences.

 A7.8 Whilst this Chapter focuses mainly on our relationship with     prime suppliers, we fully recognise the important role played by Small      and Medium size Enterprises (SMEs) - defined as companies employing

b#O 250 people or less - which constitute a significant core of direct suppliers     to MOD. In 2004/05, just over half of the MOD contracts let were directly      with SMEs, accounting for over half a billion pounds. Many SMEs play a crucial role in meeting Urgent Operational Requirements (UORs),      undertake prime roles for smaller requirements, and are potentially

$PNQ /PO$PNQ well placed to fulfil other roles in the context of the Models described below. We are widening our supply chain focus below the prime level Figure A7(i). to identify critical sources of key capability and technology and further to encourage SME entry into a broader range of defence opportunities. A7.3 Procurements for non-warlike goods and services are conducted Whilst the MOD already has supply chain oversight1 provisions in place, in accordance with the European Union Procurement Regulations. We will we are developing senior level links with regional industry groups work with the European Defence Agency with regard to the procurement of where issues of specific interest to SMEs can be bought to our notice. warlike goods and services, to harmonise the UK’s approach with the voluntary Code of Conduct on more open competition. In addition, we will continue to Alternative approaches advertise our requirements to encourage suppliers to seek business at all levels of the supply chain. This Chapter explains how we will adopt procurement A7.9 The 2002 Defence Industrial Policy (DIP) recognised that even strategies to make best use of available capabilities and capacities. in competitive environments there are a number of wider factors besides cost and operational eff ectiveness, aff ordability and long term value for A7.4 We are tackling industry’s concerns about the expense and money that will infl uence supplier and procurement selection. These uncertainty that can arise from protracted and ineffi cient tendering. We include security of supply and the retention of key technologies and are taking steps to speed up decision making and to minimise costs. For industrial capabilities, the implications for export potential, our wider example, we will place more emphasis on targeting smaller numbers policy framework and industrial participation. In addition there are of potential suppliers with the best credentials to bid for individual procurement factors that may be assessed and these are addressed in requirements, rather then rely on a large panel of bidders just to maintain the models set out below. These factors will be included in Invitations competitive pressure - expensive in terms of the cost of bidding, the time to Tender (ITTs) with relative weightings, and will embrace wider it takes to down-select and evaluate a large number of bids and unfulfi lled factors insofar as they relate to the individual procurements. supplier expectations. We will extend the use of streamlined procedures to pre-qualify potential bidders, to select early a preferred bidder and to 1 The MOD/Industry Commercial Policy Group Guidline No5 (Defence make the maximum use of automated evaluation tools and processes. Acquisition, The Commercial Framework Codes of Best Practice).

48 Defence Industrial Strategy procurement situations setoutbelow. They are notintended to beprescriptive: We willconsider alternative approaches to competition inthe A7.12 not held. measure anddeliver value for money Overall, thekey from objective ishow ourperspective to A7.11 is demonstrably disproportionate to thebenefi tsthat might beachieved. where itcanoff erlong term advantage orwhere the cost ofrunninga competition defence industrialcapabilities. We willnotpursuecompetition beyond thepoint may notbeableto deliver thebestlongterm value formoneyorsustainkey UK recognised The that DIPfurther there are occasions whencompetition A7.10 Figure A7(ii): FactorsFigure to A7(ii): beconsidered ¬ ¬ ¬ $0.1&5*5*7&&/7*30/.&/54

The through life support of a capability that The requires ofacapability through lifesupport theengagement to deliver andcapability Nosinglesupplierhasthecapacity the to deliver andcapability supplierhasthecapacity the One TFMFDUJPOEFDJTJPOT TVDDFTTGVMDPPQFSBUJWFXPSLJOH UPJOGPSNTVQQMJFS DBQBCJMJUZ QBTUBOEDVSSFOUQFSGPSNBODFBOE DPOTJEFSBUJPOXJMMBMTPCFHJWFOUPPSHBOJTBUJPOBM BDRVJTJUJPOPVUDPNF*OBEEJUJPOUPXJEFSGBDUPST NBZOPUBVUPNBUJDBMMZSFTVMUJOUIFCFTUWBMVF 1SJDFECBTFDPNQFUJUJPONBZCFBWBJMBCMFCVUJU capability. and/orothersystems Authority of theequipment engineering Design capabilities inindustrialbaseorotherprocurement grounds. other suppliers, oritistheonlysuitablesupplierto sustainsovereign comparedis chosenonthebasisofconsistently to highperformance requirement andischosenbecauseitthesolesource ofsupply, orit suppliers might beformedandsustained. requirement andwhere aninclusive andwillinggroup orgroups of -0/(5&3.7"-6& '03.0/&: insituations where competitions are $BUFHPSZ.BOBHFNFOUBOE4VQQMJFS%FWFMPQNFOU $IBOHJOHUIFDVMUVSFQBSUOFSJOH CFIBWJPVST +PJOU5ISPVHI-JGF#VTJOFTTBOE$PTU.PEFMT $MBSJUZPGSFRVJSFNFOUBOEFYQFDUBUJPO 0QFOOFTTBOE5SBOTQBSFODZ present, .PSF&õFDUJWF$POUSBDUJOH &/"#-&34 approaches willdependonanumberofkey cultural enablersincluding: money andinvestment comparisons anddecisions. The success ofthese strategies to achieve outcomes thebestproject andinmakingvalue for indesigningprocurementguide to ouracquisition teams andindustry The approaches setoutinthisChapter are intended asa A7.14 assessments inthesediff erent procurement situations. value formoney suppliersandundertake we willselect The modelsbelow, andFigure A7(ii)show how A7.13 ¬ ¬ ¬ ¬ Competition exists buttheprocurement canreadily becompared engenderingmore opennessandtransparencyinourdealings extending ‘best practice’ approaches partnering establishingandsustainingtheright relationships and services, orforUORswhereservices, equipment isreadily available. or benchmarked againstsimilartechnologies, suppliesand and profi forindustry. (basedongoodperformance) tability to secure better longterm value formoneytheGovernment, to appropriate MODprojects; behaviours across theacquisition community; HPWFSOFECZBõPSEBCJMJUZ SFGFSFODFUPWBMVFGPS JOBQQSPQSJBUF UIFEFDJTJPOUPQSPDFFEXJMMCF DPNQFUJUJWFQSPDFEVSFTBOEUFDIOJRVFTUIBU BJNUPSFQMJDBUFBDPNQFUJUJWFBQQSPBDI NPOFZCFODINBSLTBOEUIFVTFPGOPO 8IFSFDPNQFUJUJPOJTVOBWBJMBCMFPS /0/$0.1&5*5*7&&/7*30/.&/54 8*%&3'"$5034 t "113013*"5&407&3&*(/5: t ."3,&5$)"3"$5&3*45*$4 t Defence Industrial Strategy Industrial Defence A7 49 Choosing the right approach Project control

A7.20 At the heart of this approach is the pursuance of improved, through life project and commercial arrangements that allow more fl exibility backed up by an incremental approach to contracting, a genuine emphasis on de-risking, and the identifi cation of key indicators to measure performance and to inform entry/exit decisions at each phase of the project.

Assessing value for money

A7.21 For sole source requirements, the ultimate assessment of value for money is taken at point of deciding whether to proceed to meet the required military capability. The value of the capability may be subject to benchmarking, but where no such benchmarks exist this decision will be against the absolute need of the capability, its relative priority and its relative aff ordability, throughout the capability life.

A7.22 Except for most sole suppliers, the prospect of follow on work will be a powerful incentive; the supplier’s demonstrable performance and behaviours at key contract stages and the fl ow of sound through life value for money proposals/solutions for follow on phases will be a determinant to the placing of further packages of work. Where they exist, benchmarks derived Staff at work at the Defence Procurement Agency at Abbey Wood. from competitive sources will also be used to inform the selection decision.

Model 1: One supplier has the capacity and capability to deliver the A7.23 In the absence of competitive price pressure, it would be essential requirement and is chosen because it is the sole source of supply, or it to adopt a robust approach to the assessment of cost. Parallel working by is chosen on the basis of consistently high performance compared to MOD and industry estimators leading to agreed estimates of cost would other suppliers, or it is the only suitable supplier to sustain sovereign refl ect the close and open working relationship necessary in this approach. capabilities in the industrial base or other procurement grounds. A7.24 It may also be sensible to use joint through life cost and business models, Considering the approach in addition to backwards-looking open-book accounting; in the early stages these models will inform planning and cost assumptions, providing the basis for A7.15 For long-term projects, aff ordability, timescale, priorities and technology project cost estimates. During its life the model will be actively maintained to insertion plans will be communicated wherever possible so that suppliers can inform subsequent business case and investment decisions and support project make informed and focused investment decisions and assess opportunities prior governance. They will also allow ‘what if’ analyses for changes to the project to commitment. Early notifi cation will also enable suppliers to participate in the and periodic value for money assessments against external benchmarks. process of identifying trade off s between performance, time and through life cost. A7.25 Inherent in the model construct is the joint commitment, which A7.16 In devising the procurement strategy, consideration will need will be enshrined in the commercial arrangements, progressively to populate to be given to factors other than price; where there is technological these models with the full costs of ownership as they develop and mature. uncertainty at the early stages of the capabilities lifecycle, this may not be determinable to acceptable level of accuracy. The outcome is ultimately Model 2: No single supplier has the capacity and capability focused on a commercial arrangement with a single legal entity. to deliver a requirement and where an inclusive and willing group of suppliers might be formed and sustained. Supplier selection Considering the approach A7.17 These considerations are likely to be particularly relevant to the Assessment Phase (AP) of a project where priced based competition may not A7.26 The focus falls on establishing a successful engagement with produce the best value outcome. In selecting potential suppliers, we will assess a Prime Industrial Group, with the right culture and behaviours and a past and current performance, organisational capability, the pull through and willingness to work in an open, partnering environment to drive value utilisation of technology and capability, evidence of co-operative partnering for money throughout the life of the capability. This will include a and continuous improvement in productivity and reduced through life costs. commitment by the Group fully to share cost data and the business model through which shareholder value is to be delivered whilst respecting A7.18 When a project progresses from the AP to the Demonstration and commercial confi dentiality. The Group will seek fl exible solutions with Manufacture phases, the early down selection of a preferred supplier from a open architectures to provide for the best capability outcome, and make group of competing suppliers, may be determined by comparative reference full use of COTS procurement wherever this gives better value for money. to the factors described in the ‘Assessing Value for Money’ section below. A7.27 In circumstances where we seek to acquire an integrated set of A7.19 Where there is a need to select a potential sole source supplier i.e. where military capabilities, for which we may not have the necessary domain the package of work itself creates or supports a critical industrial capability for knowledge or expertise, we may partner with a systems integrator. reasons of sovereign control, but which is insuffi cient to maintain multiple suppliers, The systems integrator will work with us to establish the optimal mix the above selection criteria will apply but with the emphasis on informing a of capabilities and suppliers to meet the requirement, to make trade decision about whether to proceed on value for money and aff ordability grounds. off decisions and to take a wider view of network enabled issues.

50 Defence Industrial Strategy adequately the value formoneyand aff ordability considerations. dependent ondemonstrating andsatisfying acceptable performance arrangement.partnering Maintaining thisrelationship isofcourse fi nancialstatus andwillingness to engageinanopen cooperative DA, to confi subject rmation of competence, capability, capacity, Generally, thepreferred supplierwould betheappointed A7.34 Supplier selection of newtechnology, unlikely butitisvery notto includetheDA. require when upgrade orimproved opportunities theinsertion support maycapability bevested inabroader thantheDA, entity especially andmaintenance.safety Insomecasestherelevant systems engineering trade off design investment including reliability, withotheraspects to beableto interact eff withus ectively to manage technical riskand initsapplication. the designandexpertise Thus theDA isbestplaced and would have acquired property, intellectual extensive knowledge of may have beenappointed during theequipment procurement stage systems where forlegacy theDA pertinent This isparticularly A7.33 competition where theyoff ofbetter ertheprospect value formoney. where thisstillrepresents thebestoption,we willconsider alternatives to these requirements where itispracticable, andthere willbeinstances in thefuture. Whilst theconventional positionisto seekto compete sourcemany ofrevenue suppliersastheprimary inthedefence market large platforms, isincreasingly newcapability seenby longterm support With theapproaching relative downturn intheprocurement of A7.32 Considering theapproach (DA) and/orothersystems engineeringcapability. requires theengagementofequipmentDesignAuthority that Model 3. ofacapability The throughlife support profi taccordingtype of to the work carriedoutunderthe contract. to Gainshare, Target Cost Incentive Fee pricingandtheuseofriskadjusted through thelifeofproject. We willgive therefore renewed emphasis drive forimproving costs down andto value seekopportunities formoney commercial arrangements that share riskandrewards andincentives to Within thePrime IndustrialGroup we would wishto encourage A7.31 the programme, to asdiscussedinchapter thewiderfactors A9. subject individual systems orindeedelements ofthewholeat various stagesin onangoingbasis. parties This willnotpreclude thepotential to compete where there would beopenandfulldiscussionofallrelevant data by all operative working withtheGroup, inthespiritofopennessandtransparency, AswithModel1except that theprocurement would bethrough co- A7.30 Assessing value for money the supplychainadvisedoffuture competitive opportunities. Journal oftheEuropean Union(OJEU) willbeusedto keep advertising may bedrawn up. Contracts Bulletinand, where appropriate, Offi InformingtheGroup, alistofpotential second tiersuppliers A7.29 eligible supplierswilllargely bethesameasthat forModel1. to theformation oftheinclusive group. The criteria forselecting asfacilitator forusto act duringtheperiodwhichleads be necessary to meettheanticipated andcapacity capability requirement. Itmay Group whichprovides thebreadth skillsandindustrial ofdelivery Inmany circumstances there may onlybeonePrime Industrial A7.28 Supplier selection

cial practice occurspractice regularly fortheprovision ofspares, consumables andservices. at leastasfavourable asifaseparate competition hadbeenexercised. Such emergent requirement. Insodoingwe mustbeassured that the terms will be against thecontractual terms obtainedfollowing competition, to procure the We may negotiate withthesuccessful tenderer, by benchmarking A7.41 Assessing value for money rules governing andbiddingmay bereduced advertising orwaived. need. Althoughnotexempt from theprinciplesofcompetition the is that there isasupplierofanavailable equipment that meetsthe For UORs, rapid response isoftheessence and the assumption A7.40 place additional, related requirements withthat supplier. recently establishedvalue formoneybenchmarks, we willnormally Incircumstances where suppliershave against beenselected A7.39 Supplier selection a current operation oroperational orimminent military emergency. equipment. This may require existing DA leadershipinorder to support equipment, orforanenhancement oressential modifi cation to existing procedure. This isusedfortherapid purchase ofneworadditional requirementscapability forspecifi coperations, we willutiliseourUOR urgent. Ininstances where we have anurgent needto meetadditional and where are thevalue smallorthetimescales ofthegoodsorservices a contract hasrecently beenletforanidentical orsimilarrequirement eff to bothusandindustry, ort itmay dispensewith competition where Recognising that competitions are costly interms oftimeand A7.38 Considering theapproach Requirements (UORs),whereequipmentisreadilyavailable. or,supplies andservices ofUrgentOperational inthecase be comparedorbenchmarked againstsimilartechnologies, readily can Model 4.Competitionexists buttheprocurement the fullcosts ofownership. These mirror theconcepts detailedinModel1. data andto evolve aclearlyunderstood businessmodelthat willincorporate and inanopentransparent environment, to andcost share performance build andsustaineff relationships, partnering ective to work to aclearpurpose Inherent to inthesearrangements isawillingnessby usandindustry A7.37 to work collaborativelyalso includeopportunities management. oncapability maintenance, stock control, storage anddistribution.For upgrades, thismight reach andinfl areas uence into traditionally managed support by ussuchas of revenue. The rebalancing extend Industry’s ofriskswould almostcertainly might reasonably ofgreater theprospect expect reward withabetter certainty Inreturn forconsistently highandinnovative industry performance, A7.36 capability. ofmilitary - contracting foravailability and/orotheraspects rewards management theactive ofriskandthevalue itbringsto defence that reward volume andthe cost associated withthat volume, to onewhich value formoney. Insodoing, we would wishto transition from arrangements at minimumandcontinuously decreasingsupport cost andimproved longterm robust commercial arrangements that oftherequired incentivise delivery isto fi The challengeforusandindustry ndmutuallyacceptable, A7.35 Assessing value for money Defence Industrial Strategy Industrial Defence A7 51 Choosing the right approach Transparency A8

Greater openness: increasing the policy formulation or prejudice our position in negotiations with suppliers. transparency of our future plans

Making a diff erence through greater openness

A8.1 Central to the DIS is a recognition of the need to develop much closer relationships with our industrial suppliers, with a view to promoting closer working, greater trust, increased partnership and a sense of mutual endeavour. Critical to this – both as an outcome and as an enabler to change – is the need for both ourselves and our suppliers to increase the transparency of our future plans.

A8.2 The need to respond to shifts of emphasis and priority, in accordance with changes in the global security environment, evolving costings within the programme, and to any overall changes driven by the spending review Staff at work in MOD Main Building, . process and other planning processes, will place limits on the certainty of these plans. However we recognise that greater transparency - across the Sector-level information lifecycle of a capability - has the potential to off er signifi cant benefi ts for both industry and Defence, providing it is appropriately managed. Being A8.5 At sector-level, we will share information on the overall indicative more open about our future acquisition plans will help industry to plan for planning assumptions for each sector, including illustrative Equipment the longer term and to make better informed investment decisions, with Plan expenditure, as well as that on research and through-life logistics corresponding mutual benefi ts through-life. It will provide industry with support, out to ten years. This will be at a level of detail that will enable an authoritative source of information; and it should also increase investor our suppliers to make informed decisions. We will also indicate the types of confi dence in defence projects. We are committed, therefore, to moving technologies that we anticipate we will need to support new capabilities or substantially in the direction of greater openness with our suppliers. the incremental growth of equipment in-service. We will also engage in an ongoing dialogue about the extent to which we believe a particular sector What can industry expect? or business is dependent on our future orders to retain the capability and capacity needed to meet our sovereign industrial capability requirements. A8.3 In this publication, we are already bringing together more We will also, as far as security restrictions allow, be prepared to discuss our information about our plans in a single authoritative document than ever priorities for improved military capabilities over the next twenty years. All of before. We will in future continue to publish information routinely on the this information will be shared on the basis of a clear understanding that not content of the Equipment Plan, including a catalogue listing for post-Main all of these areas will be, or may ever be, funded within the programme. Gate projects of current forecast cost and ISD data. This will be regularly updated and published in the Departmental Investment Strategy, which A8.6 As set out in chapter A2, our indicative planning assumptions are will also include details of the MOD’s non-equipment investment. subjects to change at regular intervals due to government planning processes. Departmental budgets are usually set for the spending review period, and A8.4 We recognise the signifi cant disadvantages that lack of information beyond that, budgets can go down as well as up. This, together with costing or for industry can imply, and the advantages in terms, for example, of cost-base/ strategic changes, may alter the information in the DIS. overhead reduction, increased readiness and reduced cost of capital through better investment that increased openness would facilitate. If an industry Programme and project-specifi c information decides to exit a business when we had undisclosed plans for future projects there, or alternatively invests in the expectation of a likely requirement when A8.7 The data shared with suppliers on particular programmes and projects the most we might have is a capability aspiration, then neither industry nor will vary depending on the procurement strategy we plan to follow. Where MOD benefi ts and we may lose important sovereign capabilities. To square this we are satisfi ed that there is a competitive market place and we conclude circle, we are now ready to share more information than hitherto, recognising that our indicative funding allocation is adequate we will not normally that for certain data we will only do this in a controlled environment, release any additional fi nancial information. If we have doubts about the through nominated intermediaries empowered to speak authoritatively to aff ordability of our requirements we are likely to give an indication of the industry, and with industry representatives who possess appropriate security indicative funding allocation we have made and, where relevant, the profi le clearances and who can protect the information appropriately. Our approach of that provision. In a non competitive environment the data we release will will, of course, be driven by the imperative of securing an improvement in depend on our knowledge of what the supplier can off er and the readiness overall value for money across the lifecycle of our capability requirements. of both parties to share information for mutual benefi t. Other considerations This will necessarily condition what, when and how we communicate to will include the position of a project in its lifecycle; potential sensitivities industry. And we shall still need to protect information whose disclosure of international partners when the project is a collaborative one; and the could harm national security or international relations, undermine internal nature of the relationship already established with specifi c companies.

52 Defence Industrial Strategy 89 Indetermining what information to share, ouremphasiswill be onreleasing data that helpsusto achieve ourmutual objectives. A8.9 data that formutualbenefi may beshared withindustry t. Itsets out: Figure A8(i)illustrates thesector-level andproject-specifi c A8.10 How dowe intend todothis? are: project, the onhow applyto thesefactors Depending aparticular ofinformation thattypes we willbeready to consider sharingwithindustry A8.8 Figure A8(i). QSPKFDUTQFDJmDFOHBHFNFOU TFDUPSQSPHSBNNFMFWFMFOHBHFNFOU ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ howwillbeincludedinourassessment ofvalue widerfactors formoney. logisticdata required theformulation ofcost-eff to support ective associated procurement strategy; plannedexpenditure profi les; assumptionsforthethrough-life overall capability budgetary specifi cplanneddates forinviting and receiving proposals and overall dates); inandoutofservice timescales(includingproject project requirements capability andplanningassumptionsonproduction JOEVTUSZ  JOEVTUSZ XIPJO  JOEVTUSZ XIPJO .P%  .P% XIPJO  .P% XIPJO support solutions;and support requirement; tenders from industry; quantities; XIBU XIBU IJHIMFWFMDBQBCJMJUZ BTTVNQUJPOT 4VQQMJFSSFQSFTFOUBUJWFT BTJOWJUFECZ.P% $BQBCJMJUZ%BZTMFECZUIFSFMFWBOU%JSFDUPS&RVJQNFOU$BQBCJ $PODFQU $  SFQSFTFOUBUJWF "VUIPSJTFETVQQMJFS 0WFSBMMCVEHFU t UJNFTDBMFT  0WFSBMMQSPKFDU t GPSSFMFBTJOH63%  1MBOOFEEBUF t SFRVJSFNFOUT  *OEJDBUJWFDBQBCJMJUZ t BTBQQSPQSJBUF &$$'#( XJUIPUIFST EFTJSFEGPSUIFGVUVSF UFDIOPMPHJFT "TTFTTNFOU " SFQSFTFOUBUJWF "VUIPSJTFETVQQMJFS JODMVEFEJO7'.BTTFTTNFOU  )PXXJEFSGBDUPSTXJMMCF t UISPVHIMJGFTVQQPSU  4USBUFHJDBQQSPBDIUP t QSPmMF  1MBOOFEFYQFOEJUVSF t 0WFSBMMCVEHFU t 0WFSBMMQSPKFDUUJNFTDBMFT t GPSSFMFBTJOH43%  1MBOOFEEBUF t SFRVJSFNFOUT  .BUVSJOHDBQBCJMJUZ t BTBQQSPQSJBUF *15 XJUIPUIFST PWFSBMMMFWFMPGTQFOE QFSTFDUPS %FNPOTUSBUJPO %  -PHJTUJDEBUB t UISPVHIMJGFTVQQPSU  4USBUFHJDBQQSPBDIUP t 1MBOOFEFYQFOEJUVSFQSPmMF  &OEPSTFECVEHFU t &OEPSTFEUJNFTDBMFT t SFRVJSFNFOUT  &OEPSTFEDBQBCJMJUZ t BTBQQSPQSJBUF *15 XJUIPUIFST MJUZ XJUITVQQPSUGSPN%1"BOE%-0BTBQQSPQSJBUF SFQSFTFOUBUJWF "VUIPSJTFETVQQMJFS QSPDVSFNFOUDPNNFSDJBM a forumforMOD, discussionsontechnology DTI issues. andindustry Council Research andthe Technology Committee willcontinue to provide Science, Innovation and Technology staff . The NationalDefence Industries Relations Group, relevant IPTs (wherever interest) there isaparticular and Representatives, Director ofEquipment Capability, theMOD’s Supplier are currently recruiting, andwillbringtogether therelevant Key Supplier process willbeoverseen by theCommercial Director oftheMOD, whomwe areain eachcapability (includingrelevant DLO spend)to oursuppliers. This for presenting ourindicative priorities planningassumptionsandcapability conclusion ofourplanningprocess. These events willprovide themechanism round, itmakes senseto convene asuite of ‘sector days’ coincident withthe tends onlyto oftheregular experience planning majoradjustments aspart Inthecaseofsector-level information, given that ourbudget A8.12 judgement asto how thishelpsusto deliver long-term value fordefence. amount ofinformation we share forspecifi dependingonour cprojects - asidentifi edabove -may, basis, increase or onacase-by-case reduce the ofinformation thattype we project. factors may Other expose onaparticular Itshows how aproject’s aff cycle positionintheCADMID the ects A8.11 QPMJDZJOnVFODF ¬ ¬ ¬ whowe anticipate willbetheprincipalfocalpoint whowillbetheprincipalfocalpoint forsuch what information may becommunicated; for suchcommunications inindustry. communications intheMOD;and .BOVGBDUVSF . SFQSFTFOUBUJWF "VUIPSJTFETVQQMJFS -PHJTUJD%BUB t UISPVHIMJGFTVQQPSU  4USBUFHJDBQQSPBDIUP t QSPmMF  1MBOOFEFYQFOEJUVSF t 'VUVSFVQHSBEFT t PUIFSTBTBQQSPQSJBUF *15 XJUIPUIFST XJUI *OTFSWJDF * Defence Industrial Strategy Industrial Defence %JTQPTBM % A8 53 Transparency A8.13 In areas where we recognise there are particular sustainment or effi ciency issues to be tackled, we will continue to consider establishing dedicated joint teams with specifi c companies, either on an individual or collective basis, to analyse the issues and chart a way ahead. Within such teams, with non-disclosure arrangements agreed, both sides will in general share signifi cantly more information about MOD’s plans, industry’s cost base, and business models and agree assumptions for assessing potential implications. We will however only set up such arrangements where the need is clear and we see a mutual advantage; there will not be standing teams of this nature for all sectors or businesses.

What we expect from industry in return

A8.14 In return for greater visibility of our future plans, we will expect our suppliers to increase the transparency of their future plans and business information so that we can help confi rm the overall coherence of what together we are aiming to achieve. In doing so, we acknowledge the need to protect the commercial confi dentiality of company data. We also expect industry to acknowledge that the planning data we provide is just that. It will be off ered on a ‘without commitment’ basis and comes with a ‘health warning’: to refl ect changes to the environment within which our Armed Forces operate, our plans (like those in the private sector) will vary from year to year, and fi rm budgets cannot be set beyond the spending review period - MOD’s plans are subject to change at regular intervals. Industry will also need to respect the confi dence in which planning data is provided to them, in line with the obligations and expectations that are already well-established between us and our suppliers for handling sensitive data, and to be much sharper in focusing its dealings with us via authorised communication channels, rather than the much broader approach that is often adopted. In all of this, there is an explicit recognition that the greater trust that we will be investing in industry must be reciprocated: how industry responds will condition our approach in the future.

54 Defence Industrial Strategy Wider factors A9 A9

A9.1 The Defence Industrial Policy (DIP) was founded on the importance A9.4 The DIP laid out the key factors to be taken into account in of equipping our Armed Forces effi ciently with the tools they require to meet acquisition decisions: the challenges they face. This remains the fundamental starting point for the DIS. Each year a large proportion of the defence budget is spent on procuring ¬ operational eff ectiveness and cost, whole-life not just and supporting equipment. It is these activities that in eff ect defi ne and delimit initial acquisition cost, to assess value for money. The tool for our industrial policy. Above all, our relationship with the defence industry must assessing this is usually a Combined Operational Eff ectiveness be rooted in project performance – ensuring that reliable and supportable and Investment Appraisal (COEIA), combining operational equipment is developed and delivered within time and price constraints. It analysis and standard investment appraisal techniques; is not just the magnitude of Government defence spending but the effi cient use of those defence resources that enables the UK to have the most eff ective ¬ our policy is clear that value for money is considered over the long- Wider factors Wider armed forces in Europe. It is not in the interests of the taxpayer or our Armed term and wider than that for individual projects, and in particular Forces for an industrial policy to dilute this fundamental principle. We also need that any decision that would impact on our ability to compete future to recognise, however, not only individual project priorities, but the complete requirements needs to be considered very carefully. It also emphasises interaction between Government and industry. And we need to be aware of the that there are a number of capabilities which for national security reasons cumulative impact of potential decisions about individual projects on industry. we would place a high priority on retaining within the UK industrial base. The DIS builds on that policy by setting out in detail the industrial A9.2 It is fi rmly within this context that the Government seeks to capabilities we wish to maintain, and clarifi es that these two issues are maximise economic benefi t to the UK from defence expenditure, by the often linked; any decision which fails to sustain a desired capability in the development of technological skills, the creation of intellectual property, UK may aff ect both long-term value for money and national security. and an increase in the investment in the UK industry derived from exports. The Government recognises the contribution that a vibrant and A9.5 It also specifi ed thewider factors be taken into account, which innovative defence industry makes to employment, the economy and the are declared and explained to potential bidders at the earliest opportunity. national science and technology base. In particular, we aim to sustain The critical issue is that we carefully consider the potential impact on wider an environment which will enhance the competitiveness of industry. national objectives before inviting industry to tender or invest signifi cantly in a project (otherwise over time, industry’s confi dence that our decisions will A9.3 This DIS covers three areas in which we can promote these goals: be fair and transparent will decline, with knock-on consequences for value for money and military capability). Consideration of wider factors applies equally ¬ making the UK business environment attractive for investors in cases where prime contractors run competitions on behalf of the MOD. to invest in our defence industry (which we continue to defi ne as in the DIP – i.e. embracing all defence suppliers that Security of supply create value, employment, technology or intellectual assets in the UK, including both UK and foreign-owned companies). Chapter A9.6 We need to ensure that we can support equipment, or produce A4 explains how the Government, as a supporter, regulator, expendables (e.g. munitions), in times of confl ict (predicated on an planner, customer and investor, is pursuing this. Some of the assumption that we understand the dependencies within the supply chain, measures include, but are not limited to, the defence industry; where in some cases we need to do further work with industry). High levels of for instance, we have specifi c strategies for manufacturing and onshore technology and capacity may often off er greater comfort in security technology, which include the defence industry, and the UK’s stable of supply and the ability to undertake modifi cations in response to short-term macroeconomic environment is attractive to investors in all sectors; operational demand. This applies as much to support as to initial procurement.

¬ clearly identifying those industrial capabilities which we A9.7 The DIP emphasises that we need to be realistic about security of need, for national security reasons, to retain in the UK, supply advantages, recognising that increasing mutual reliance on security and, where these are threatened, developing sustainment of supply is inevitable for all nations. The weight to be put on security of strategies to foster and maintain them. Part B identifi es these supply is a question of judgement case by case, taking into account the by sector, in the context of the future Defence requirements we seek risks involved (including any mitigation provided through collaborative to fi ll, as covered in broad terms in Chapter A2, and the changing agreements such as the six nation European Letter of Intent Framework industrial landscape, as described in Chapter A3 (both of which Agreement and the US/UK Declaration of Principles Security of Supply are covered by sector in more detail in each sectoral chapter); arrangement) and the cost implications. In some cases, the capability is so signifi cant to our overall military eff ectiveness that we wish to retain it ¬ for specifi c procurement decisions, including designing onshore at least partly for that reason; security of supply, in terms of both procurement strategies and setting assessment criteria for physical and intellectual resources, is often a critical factor in deciding competitions, ensuring that our consideration is based on which capabilities must be sovereign. In most other cases, however, long-term value for money, operational eff ectiveness and we will need to balance the risk against any additional cost for onshore aff ordability, and also takes into account wider factors where supply on a case-by-case basis, taking into account value for money these are relevant. Chapter A7 gives a broad overview of how and aff ordability. In inviting industry to bid against such requirements, procurement strategies are designed; this chapter considers in more we need to avoid a ‘UK premium’ being priced into domestic bids. detail how those wider factors are identifi ed and taken into account.

Defence Industrial Strategy 55 Industrial participation Export potential

A9.8 The MOD’s Industrial Participation (IP) policy can encourage A9.12 Defence exports help to maintain key industrial capabilities technology transfer and ensure investment in particular industrial during lulls in domestic demand allowing longer production runs and capabilities within the UK. Where this contributes to developing reduce the share of fi xed overheads on MOD programmes. They also or maintaining sovereign capabilities, IP may be a key factor in its contribute to foreign and security policy interests. These benefi ts are own right; where the benefi t is of broader industrial benefi t, it may discussed further in chapter A6. Exports can also improve the economic help discriminate between two otherwise similar propositions. If strength of the defence industry. For theses reasons, a realistic assessment however the benefi t is a broader industrial one, but securing it of export potential, and the benefi ts that might accrue (to Defence or would involve selecting an option which was worse for Defence, more widely) is made at the key decision points in MOD programmes. then it would need to be considered in the same way as other wider technology and industrial capability factors. It is important that MOD Foreign and security policy interests has confi dence in a foreign supplier’s ability to deliver the IP off ered, so factors including the company’s past record will be evaluated. A9.13 Many procurement projects and collaborative ventures can be so large in scale and political importance that they have signifi cant implications Industrial capabilities for these interests. Choosing whether to cooperate with a particular country in a joint programme could have consequences for the overall bilateral A9.9 We continue to recognise that there are industrial capabilities relationship and an alliance’s military capability. For example, agreeing to which do not meet the strict defence criteria for sustainment but cooperate in a joint programme could strengthen another country’s political may be desirable to retain in the UK due to the high value they commitment to their own military’s modernisation, which we would value bring to the industrial economy, wherever they sit in the supply as part of our broader security policy because of the greater burden-sharing chain. Their signifi cance can be evaluated according to: that might then be possible in future combined operations. It is usually very diffi cult to quantify foreign and security policy interests objectively and the ¬ their potential in world markets where the UK may gain greater market potential application of this heading is very wide, but they need to be assessed share; and considered carefully. Given the relationship between defence and broader security and foreign policy, a decision which is suboptimal in a narrow ¬ the extent to which they will generate high-value added consideration of the key factors may nevertheless be the best for Defence in economic activity (including its potential for attracting inward the round. However, the interests concerned must not be transient or trivial. investment and incorporation into collaborative programmes); Wider MOD policy ¬ transferability into wider commercial applications outside defence sectors; A9.14 This covers a broad range of policy areas in which MOD Ministers, or for some matters relating to internal and Armed Forces administration ¬ impact on industrial activity regionally (including the number the Defence Management Board, have chosen to constrain the Department’s and quality of UK-based jobs that are created or sustained). actions (legal obligations are of course absolute, and all business cases must be considered for legality of the equipment including in the way we intend A9.10 All business cases on equipment (including support business cases) that equipment to be used, but policy choices are more discretionary). For are required to have supporting sections considering industrial and regional example, to comply with MOD environmental policy, we have specifi ed that implications. Assessment of such factors must however recognise that future tanker shipping should be double-hulled, and for safety reasons, that funding for such capabilities would be drawn from the defence budget. future munitions should be insensitive. Given knowledge of existing policy, options will rarely be off ered which would breach Departmental policy, except Key Technologies where compliance has a signifi cant impact on the key factors. Options that required exclusions from existing policy would need discussion with the policy A9.11 In some cases, key underpinning technologies are important lead for that area, and reference to Ministers and senior offi cials as necessary. to maintain for national security reasons, and a number are identifi ed in Part B. MOD’s science and technology strategy necessarily focuses the limited research funds available on investment in technologies judged to be of most importance for defence. These technologies will often have potential for the wider UK science base, a base also supported through DTI science, innovation and technology programmes, and will change over time, sometimes rapidly. Acknowledging the relationship between military and civilian priorities and investment strategies, in part through an ongoing engagement between MOD and DTI, is important both for MOD’s own Technology Strategy and for formulation of the MOD research programme and may also help identify areas for coordination and collaboration. The interaction between military and civilian priorities may also in some cases be relevant in other acquisition decisions.

56 Defence Industrial Strategy Review by Industrial Sector and Cross-cutting Capabilities

Systems Engineering Maritime Armoured Fighting Vehicles Fixed wing including UAVs Helicopters General Munitions Complex Weapons C4ISTAR CBRN Force Protection Counter Terrorism Technology priorities to enable defence capability Test and Evaluation

B Review by IndustrialReview by Sector and Cross-cutting Capabilities

The charts in this section are a snapshot of MOD’s current internal planning assumptions for the indicative spend in each sector. As noted in section A8 they are subject to periodic review and over time may go down as well as up. The resources available for individual sectors will be infl uenced over time by the overall size of the defence budget, the relative priority given in the MOD planning process to diff erent areas of defence capability, and the need to fl ex specifi c plans if necessary to address cost pressures in other parts of the defence budget.

Systems Engineering B1

B1.1 The DIS has been developed using Key Principles, explained B1.5 As military eff ect is increasingly delivered through the interaction in detail in Chapter A1. One of these was recognising the importance of many diff erent people, equipments and information systems, all of of systems engineering, to ensure that our equipment is procured and which will develop over time, a clear understanding of these evolving continues to develop through-life as a result of mature discussions relationships from the point of a potential need being recognised, through between intelligent customers and intelligent suppliers. development and manufacture, to the end of the solution’s service life is essential if its design is to be balanced and high performance. B1.2 In general, we need industry to have systems engineering capability so that the UK can: What is systems engineering?

integrate systems of systems; B1.6 Modern defence equipment and services delivered using equipment generally rely on discrete elements, often complex in their own right, relating design systems and upgrade them effi ciently through-life; to each other in a planned and well understood way. This combination of diff erent elements, delivering an overall result which is greater than the sum integrate sub-systems or components, in some cases of its parts, is a system, and military capability is delivered through systems. sourced from around the world, into systems; B1.7 Systems engineering is the general term for the provide a core capability from which to surge when methods used to provide optimally engineered, operationally demand requires, e.g. to address specific requirements eff ective, complex systems. Systems engineering balances B1 for a new operation or to provide a planned capability, risk, complexity, cost and technological choices to upgrade, and as new technologies emerge; provide a solution which best meets the customer’s needs.

adapt systems to take advantage of new technology B1.8 As defi ned by the International Council On Systems and to respond to changes in the threats. Engineering (INCOSE): ‘Systems Engineering is an engineering discipline whose responsibility is creating and executing an interdisciplinary B1.3 Along with industry, we need to invest in maintaining process to ensure that the customer and stakeholder’s needs are and growing high quality systems engineering capability, at satisfi ed in a high quality, trustworthy, cost effi cient and schedule all levels in the supply chain where we need systems or key compliant manner throughout a system’s entire lifecycle.’ 1 sub-systems to be designed and engineered. But the level of capability that we require onshore varies by sector. B1.9 The through-life relevance is important; even at disposal, there may be system safety or security issues to be considered, or we may B1.4 In a period when platforms are likely to remain in- have to modify equipment to meet the needs of an overseas buyer. service for many years, unless systems engineering capability Engineering Systems and vital long-term knowledge is maintained, it is little use Why does system engineering investing in cutting-edge science. New technologies will matter? Initial considerations. have less benefi t without knowledge of how they might be exploited and inserted into existing equipment. B1.10 Together with the defence industry we are in the business of delivering large, complex projects, often at the forefront of technology. The National Audit Offi ce has documented the major The late US Admiral Grace Hopper, the eminent computer sources of diffi culty associated with the delivery of our major projects, scientist, educator and thinker who fi rst coined the term ‘bug’ for the majority of which are associated with technical issues. Many of a programming error, once said, ‘Life was simple before World War these technical issues relate to the integration of the systems involved. II. After that, we had systems’. Despite systems engineering as a Improving systems engineering is, across the industry and MOD, a high discipline having begun its development around sixty years ago, priority if the Armed Forces are to get the equipment they need. its scope and defi nition remain subject to debate even amongst qualifi ed practitioners, despite attempts by the International Council On Systems Engineering (INCOSE) to establish a ‘Consensus’ (http://www.incose.org/practice/fellowsconsensus.aspx ). Within industry, diff erent companies (and diff erent systems engineers within the same company!) have diff erent views on the scope of what is meant by terms such as Systems Engineering and Systems Integration, and the relationship between these and e.g. project management. This chapter does not aim to create a new set of defi nitions, but to explain what we mean by systems engineering 1 Systems Integration is another term sometimes used synonymously in the Defence Industrial context, and why it is important. with Systems Engineering; as the ICOSE consensus (see box) describes integration as a discrete activity within a Systems Engineering process, we will generally avoid that term to avoid confusion.

Defence Industrial Strategy 59 B1.11 Individual acquisitions are increasing in their complexity, as Concepts and Doctrine; technology develops and as military eff ects increasingly are delivered Organisation; through a combination of diff erent platforms, forces and information Infrastructure; systems. Realising Network Enabled Capability (NEC) is all about making Logistics. diff erent capabilities work together in a coherent system, to deliver a step change in capability. As our own systems become more complex, achieving B1.15 The provision of the equipment capability is only one element interoperability with our allies becomes an ever greater challenge. Open therefore of military capability, and the development and operation architectures can help manage this trend, but the underlying drivers of military capability is a system in its own right. Those charged with remain. Our priorities for our forces include fl exibility, precision, agility, and delivering the equipment element have to ensure that it is consistent reach. Good systems engineering (particularly in pursuit of sustainability) with what the other Lines of Development can deliver, in a dynamic can help design out unnecessary complexity, but in general, a fl exible, relationship. This coordination is part of our core business, but those precise, agile, and long-range capability, will be a complex one. designing and developing equipment capability have to take them into account, and understand the customer’s needs, constraints, and intentions. B1.12 Maintaining capability through a system’s life, often longer than any individual’s career, requires the original understanding of the system B1.16 Systems engineering typologies can be drawn up to be retained, with the basic rationale for previous trade-off s, and the concentrating on, for instance, operational, industrial, business, dynamics of the relationship of the system’s parts, captured and understood. project, or technical aspects. Given the different perspectives Only by doing this can the implications of integrating new equipment be possible, systems engineering is as relevant in designing a understood, and opportunities seen for inserting previously unavailable software chip as it is for considering development of the military technology to improve the system’s safety and performance or drive out cost. strategy for a particular conflict or the future force structure.

B1.17 Equipment therefore needs to fi t into a broader system Systems engineering and prime contractors with the other Lines of Development, and diff erent perspectives are possible (e.g. an aircraft can be considered a system in its It is very important not to confuse the concept of a systems own right, or part of the system-of-systems that is its squadron, engineering entity with that of prime contractor. including ground crew, supply chain, information network etc).

A prime contractor is the legal entity whom we require to deliver a B1.18 Nevertheless, signifi cant equipment programmes generally product, e.g. a fully functioning ship, or service. A systems engineering represent complex systems in their own right. A number of diff erent capability requires high calibre engineering skills, a suite of modern perspectives can be taken, and it is traditional to talk about ‘Tier 1’ or organisational, modelling and simulation processes and tools, and ‘prime systems integration’ systems – which tend to be platforms – and access to facilities to test and prove the system in all aspects of its ‘Tier 2’, which are (often still complex) systems incorporated into platforms. operation. Firms acting as prime contractors will often possess much This is generally illustrated by a ‘V-diagram’ like the one opposite: of this capability, but there is no necessary reason why the prime contractor for a specifi c equipment or service should not subcontract 4ZTUFN&OHJOFFSJOHi7w%JBHSBN some or all systems engineering tasks to another fi rm or group of fi rms, /FXVQHSBEFE 6TFS3FRVJSFNFOUT 4ZTUFNEFNPOTUSBUJPO $VTUPNFS or why they should have to own all the relevant facilities, provided DPODFQUTBOEPQFSBUJPOT "TTFTTNFOU BOEWBMJEBUJPO they have assured access to them. The optimal relationship between prime contractors and systems engineers is considered further below. /FXVQHSBEFE4ZTUFN 4ZTUFNJOUFHSBUJPO 3FRVJSFNFOUTBOE "SDIJUFDUVSFT %FTJHO BOEUFTU

5JFS*OUFHSBUPS

TVCTZTUFN3FRVJSFNFOUT $PNQPOFOU1MBUGPSN BOE%FmOJUJPO JOUFHSBUJPOBOEUFTU B1.13 The complexity of the systems engineering tasks necessary to deliver military capability diff ers by sector, with a nuclear- 1SPDVSF BOE powered submarine perhaps representing the largest, most complex BTTFNCMFTVCTZTUFNT 5JFS1SPWJEFST and highly integrated platform system, compared to a relatively BOEQBSUT simple Armoured Fighting Vehicle (AFV), with more limited systems complexity. The trend is nevertheless clearly towards greater systems complexity across all sectors, and the latest AFVs B1.19 One defi nition of Tier 1 is as the‘ level of major systems that may now include a range of interdependent sensors and electronic support key defence capabilities, and which are supplied directly to sub-systems, and a huge number of lines of software code. the military user (e.g. a , helicopter, warship, vehicle, guided weapon, satellite, standalone sensor or C3I system)’. However, Diff erent levels of systems engineering this makes clear that this typology is descriptive rather than defi nitive; systems are put into tiers based on how we have traditionally contracted for a system. B1.14 Ultimately, we have to be able to bring together our resources, information and the operation of diff erent force elements to deliver B1.20 This risks confusion; e.g. guided weapons are clearly complex, military eff ects. To ensure the desired eff ects are available, planners and are generally contracted for separately from the platform(s) they have to take into account the Defence Lines of Development: reside in, but they do not represent military capability until incorporated onto those platforms - and usually, into an information network, either Training; via the platform or directly. Nevertheless, the defence industry still tends Equipment; to be structured around ‘Tier 1’ and ‘Tier 2’ products. Below Tier 2, there Personnel; may be decreasing levels of complexity or less specifi c military features, Information; until the item being used is eff ectively a commodity raw material.

60 Defence Industrial Strategy the underlyingtechnology isnotcriticalto confi dence in overall andallowsinterfaces a ‘plug and play’ approach, and understanding system architecture beingused. Ifthearchitecture hasclearlydefi ned concerned orsub-system andthe ofthepartial on thecriticality systems itdepends orsub-systems; of understandingthepartial Engineersofplatform systems donotalways needadeeplevel B1.23 below himandonelevel above him’ being addressed at least two levels understands thedetailsthat are is that ‘a goodsystems engineer ruleofthumb usedinindustry One a Tier 1and Tier 2system, we distinguishbetween: andto avoidtypology potential confusion between what is Intheremainder ofthischapter, to establishaconsistent B1.21 separate from theirphysical integration into aplatform system. systems involved andtheirpotential capability, contribution to military into networks. This may sometimesrequire deepknowledge ofthesub- require deeperandmore complex integration into theirplatforms and of diff erent sensorsand weapons systems across platforms, are likely to reside. thosewhichseekto systems, integrate Some particularly anumber requirements, andwhere between systems thecriticalinterfaces may less usefulinfuture whenconsidering how to meetoperational capability may make systems inparticular aplatform-centric perspective partial The growing ofnetworks andtheirinteraction with importance B1.22 lesser extent ondemandto meetthe changingneedsofGovernmentlesser extent policy. the complete setof defence resources thatcan beconfi gured to a greater or ofawidersystem ofsystems,itself part e.g. thecarrier battlegroup, orindeed

2 Itisofcourse possibleto seethecarrier, from anoperational perspective, as

a a We willgenerally talkabout example, from anequipment perspective, isafast-jetcombat aircraft. power to move aplatform –if incorporated into that platform; system. For example, anengineonlyhasapurpose–providing the sub-systems is onlyviableifintegrated withanaircraft platform; an air-launchedmissilehasindependent purpose, but only viableinthecontext ofacontaining system. For instance, systems partial and interacting withwidernetworks, represents aSOS sensors, communications andcommand systems andweaponry aircraft carrier, combining itsaircraft carriergroup withitsown alone.the individualsystems For acting instance, thefuture unachievable by functions together perform can whenacting have purposeandare viableindependent oftheSOS,butwhich exist, however; a Wide Area Network fi tsthisdefi nitionofasystem; as vehicles, aircraft, shipsandsubmarines. independent movement –thoughexamples includesatellites, aswell sense, asthesingleviableequipment units, usuallycapableof system system ofsystems : onewhichhasapurposeandisviableinitsown right. An : systems which only have a purpose as part of a containing : systems ofacontaining whichonlyhave apurposeaspart : thesehave independent purpose, butare

(SOS) : thesecontain systems which platform systems Network systems – in the military –inthemilitary 2 . also can contribute to theoverall challengeofoptimisingthesystem. understanding oftheoverall system, thoughiftheyhave thisthey systems may andsub-systems notalwaysof partial require deep thenthismay Similarly,performance, belessimportant. engineers application willoften needspecifi inthe relevant c expertise sector. tools andtechniques ofsystems engineeringare generic, their solved andallthepotential solutions. Althoughmany ofthe an intelligent customer andbefullyaware oftheproblem to be above andbelow isgenerally implied, even as ifitisonlyto act understanding ofthesystems engineeringtaskat tier thenext However, at eachlevel oftheprocess, somedegree of B1.24 competitiveness. Itincludesadvanced features suchas: technical responsibilities andknow how to ensure theEJ200’s sharingtheir offourleadingenginemanufacturers expertise Rolls-Royce integrates utilisingthe wholeengineperformance, gas turbinesubsystem designandwholeengineintegration. was European designedby selecting centres ofexcellence in instance, theRolls-Royce below turbofanenginepictured EJ200 canbehighlycomplexPartial orsub-systems inthemselves. For or succeeds dependingonthesophistication ofitssensors. sought: aguidedweapon, capability forinstance, fails military canalsobemajorcontributorsPartial andsub-systems to the of Rolls-Royce plc, copyright ©Rolls-Royce plc2005. This photograph isreproduced withthepermission anintegral Full EngineControl. Digital Authority anairspray combustion system; blades; singlecrystal aerofoils; wide-chord disk-and-blades blisks(aone-piece engineered afandesignthat gives without highstability from asinglepiece ofmaterial); the needforInletGuide Vanes; Defence Industrial Strategy Industrial Defence B1 61 Systems Engineering The complexity varies by sector, from those where the overall 1MBUGPSN performance of a single platform in a demanding environment &OHJOFFS (e.g. underwater, air) is the critical function, to those where the platform is a relatively simple host for a range of partial systems .JMJUBSZ and sub-systems which deliver a variety of military eff ects. DPOUFYU In most cases, the key opportunities for technology insertion are likely to come at the partial systems/sub-systems layer, but these can only be investigated if the systems engineering knowledge of the overall system architecture is maintained.

Depending on the likely sources of capability-advancing 1BSUJBMPS /FUXPSL innovation, partial systems and sub-systems engineers need 4VCTZTUFN &OHJOFFS &OHJOFFS a good understanding of the overall military context and the problems the military customer is trying to address. It is in MOD’s interest to promote this. They also need to share the incentives for continuous improvement.

Platforms and their partial systems and sub-systems increasingly B1.25 We now expect our platforms to endure in-service for long periods, have to operate in a networked environment, where systems supported by both regular and operation-specifi c upgrades. At the same of systems are reconfi gured to deal with new opportunities, time, technology, particularly in electronics, continues to evolve rapidly. often at short notice. This creates challenges by potentially This may imply that the most signifi cant opportunities for upgrading changing the military context for a particular system, but the capability will be identifi ed and resolved at a) the systems of systems, or added complexity at the technical level can be mitigated by b) the partial systems and sub-systems level, rather than being driven the use of open architectures and common standards. by fundamental modifi cations to a platform architecture. Maintaining knowledge of the system as a whole, and a Design Authority, is a crucial The strategic importance of platform enabler to this – if the implications of modifying a sub-system for the systems engineering system as a whole are unknown, it will not be safe to incorporate the change, and the platform systems engineer may remain best placed to B1.28 In defence, even ‘commodity’-like items can require deep identify areas for investigation to drive out cost and improve availability. systems engineering capability to deliver; for instance, the design and But the innovation and ability to exploit technology development and production of current and new generation microchips is a highly complex improve other aspects of military capability may increasingly reside task. A deep understanding of commodity engineering is not, however, at these lower, partial system and sub-system, levels. This is why the a general requirement. The UK also has a number of partial systems and model places all the diff erent dimensions within the context of military sub-systems suppliers with successful relationships with international capability; those with the relevant engineering knowledge in all domains platform systems suppliers and who, on the strength of their technology also have to understand the operational challenges, if they are to be able and engineering capability, compete eff ectively in the global market. to identify opportunities and the highest priorities for investment. B1.29 There are in contrast relatively few defence companies with B1.26 The recognition of the importance of some sub-systems and partial signifi cant proven platform systems level capability. The importance of systems also means that once equipment is in service, notwithstanding systems engineering at this level is not just as an eff ective and necessary the potentially closer relationship between the engineer of the platform discipline to ensure programmes are delivered to time, cost and quality. system (who has traditionally been the prime contractor for the capability) In many areas, it is fundamental to delivering the other Key Principles and the MOD, both have a clear interest in managing the supply chain very of the DIS. The platform, after all, represents the physical, viable unit, closely. This is not only to drive out unnecessary cost, but also to ensure within which all the partial systems and sub-systems come together. key underlying industrial capabilities are maintained, and sub-system/ partial systems engineers share the motivation to improve equipment Appropriate sovereignty. through-life. This is not achieved if the engineer of the platform system or the prime contractor can exercise inappropriate dominant power. Operational independence and being an intelligent Rather, it implies that, where contracting arrangements can be suitably customer. Systems engineering capability is central to designed, the platform engineer should only be rewarded for the value understanding whether the system will operate as you that it adds (including, if the prime contractor, in managing the supply want it to, when delivered, and as it evolves through chain), with innovation rewarded where it arises, so partial systems and life; it may not always be possible to tell this simply by sub-systems engineers share the incentives for continuous improvement. independent testing. This applies both for initial purchase and for support and upgrades. Having reliable access B1.27 The capability to engineer at the platform systems level to this capability within the UK, particularly for Urgent does not, therefore, of itself imply a vertically integrated supply Operational Requirements, is generally a high priority. chain. To ensure all avenues of innovation are available, vertical integration could sometimes be counter-productive. Avoiding the ‘captive customer’ risk. Relying on an overseas platform systems engineer could limit the ability to develop and The systems engineering challenge in Defence equipment is upgrade equipment to meet unique UK requirements, unless increasing, as platforms have longer planned in-service lives, but there are credible and clear contractual and political guarantees. technology, especially electronics, continues to evolve rapidly. In some areas, we may be prepared to be share sovereignty

62 Defence Industrial Strategy through usingopenarchitectures andinternational standards. as itcanbedesignedto make future modifi cations easier, forinstance management inmindmaycapability even changethedesignadopted, how itmight bemodifi ed.Designing equipment withthrough-life obsolete unnecessarily early, understandswell enough becauseno-one its documentation, andtransfer. Without this, equipment may become to berecognised, to settheright incentives andMOD andindustry for Addressing theserisksrequires oftheknowledge theimportance B1.32 B1.31 or whichwe would notwishto source, from theinternational market. produce strategically signifi cant, complex systems whichare not available, capabilities; andinsomeareas like nuclearsubmarines, itallows theUKto it allows theUKto bringto coalition operations uniqueordistinctive strategic itsignifi impact: estheUK’s status asamajordefence nation; hasabroader indefence sectors engineering capability political and Given alltheseconsiderations, maintaining aUKsystems B1.30 developed asitdid. knowledge mayThe belostat: necessary understands notonlythesystems architecture, butthereasons it eff delivered ectively withoutaplatform systems engineerthat to purchase UK-specifi cchange requirements from an overseas supplier. to othersinacooperative programme were poorvalue, orwe were still able 3 For instance ifthecosts ofmaintainingadiff erent UK confi guration compared

or, even whentheknowledge hasbeenrecorded ina collective level (through thebreak-up ofestablished individuallevel (retirements, resignations, deaths andthenormal systems from engineerwithdrawing oldervariants. support unwanted andexpensive changesinconfi guration, orriskthe engineer could lockusinto having to agree to inappropriate, on an equal or near-equal footingwithinternationalon anequalornear-equal partners. programmes, to beableto meaningfully participate itisimportant we could beexposed to overseas monopolies. Andincooperative competitively intheglobalmarket would bemarkedly reduced and systems engineer, ournegotiating leverage inprocuring equipment Strategic industrialinfl or beingcaptured onobsolete media). loss, physical accidental(actual deterioration, destruction, suitable form,through thelossofarchived knowledge orallofabusiness), in ownership ofpart teams, areas, theoutsourcing offunctional orachange process offorgetting, ornotrealising what isimportant), management Through life capability develop suchsystems hasto bemaintained onshore. is impossible, reasons. forlegalorsecurity The to ability National provision here 3 . Butintheworst case, reliance onanoverseas systems . Insomeareas, overseas sourcing uence. Without anonshore candidate platform cannotbe B1.33 when the next majorplatform isnotforeseenwhen thenext ofthat type formany years. depends onthisknowledge beingcaptured, refreshed, andutilisedeven goals andstrong leadershipto maintain vitallong-term knowledge. from andprofi delivery project t.’ needclear Both MODandindustry such knowledge isachore, andforacompany theeff detracts ort safely modifyasystem. Butfortheengineersat thetime, recording such knowledge itisoften impossibleto know later whetheronecan decisions, the “why-knowledge” and “why-not-knowledge”. Without example istheway engineersskimpon capturingtherationale for because theyrarely provide benefi enoughshort-term t. Aclassic leadership andfi rmgoals, effortsto manageknowledge spiral down According to Scientifi theDefence c Council: Advisory ‘Without strong The why-knowledge andwhy-not-knowledge However, moves Logistic intheDefence Organisation to This meansaligningincentives better, and changingbusiness Inthepast, asteady succession ofnewplatform systems andmidlife This model of activity needsthe This modelofactivity Similarly, thisproposition off erspotentially interesting Maintaining key andskills industrialcapabilities best short-term returnavailablebest short-term to thecompany maintaining skillswhichwe value butwhichdonotrefl the ect company cannotbeexpected to keep itsbestpeopleemployed moves thisonto majorprogramme; thenext but equally, a its ‘ bringstogether information willnotbemaintained ifindustry models. Vital domain-specifi cplatform systems engineering need to work closelytogether to maintain thiscapability. arethe next generally muchlonger. increasingly MODandindustry updates maintained these;now thegapsbetween oneplatform and systems, aswell asmore traditional Post Services. Design the application ofexciting newtechnology into existing platform paths these commercial opportunities andmaintainthese commercial defence capability. opportunities skills (someofwhichmay bedeepinthesupplychain)to realise to identify andplanto develop thecriticaltechnologies, teams and systems level canbring, to coordinate andpromote research, and opportunities andoffopportunities erunsolicited proposals forimproving ourcapability. its own resources, alongsideourresearch, to helpusunderstandthe rapidly astechnologycapability develops, itwillbemotivated to invest to theirshareholders. seesthat we new are Andasindustry ableto insert working onimproving reliability to reduce cost to MODandincrease profit embedded withintheoriginalprimecontractor) andlower levels, to keep engineering knowledge, at bothplatform systems level (asusually spares, demonstrate canbeincentivised to that maintain industry systems availability A Team forindividuals;gainingdeepknowledge, butinvestigating ’ fortheinitialacquisition butthen andproduction andtheuseofequipment rather of thantheproduction focus Defence Industrial Strategy Industrial Defence an entity at anentity platform contract for for contract . inturn career career B1 63 Systems Engineering systems engineers would be concerned to use their own national resources, and overseas governments will often naturally have a policy concern to favour their own technology suppliers, not least to ensure that their industry can export without external constraint. This would leave UK SMEs in particular without an easy route to market for their innovation, with consequences both for Defence and the wider UK science and technology base.

Overseas systems engineers

The Defence Industrial Policy states that the UK defence industry should be defi ned in terms of where the technology is created, where the skills and the intellectual property reside, where jobs are created and sustained, and where the investment is made. Thus an ‘overseas Apache assembly. systems engineer’ in this context is a company where the key systems engineering capabilities, including the relevant intellectual property, are outside the UK. That includes companies which might have Contracting for availability signifi cant presence in the UK, e.g. manufacturing facilities, and in all other senses be considered part of the UK defence industry. It would Our operational experience highlights the importance of reliability. equally include primarily UK-based or co-owned companies which We are procuring generally more reliable equipment and, moved their systems engineering capability and associated IP off shore. consequently, there is a reduced requirement for moving spare parts and replacement equipment. Less broken equipment being sent That does not mean that overseas companies could not off er back for repair also reduces pressure on the supply chain. It also their products in areas where we specifi ed a requirement for a means moving towards a system whereby we pay for availability platform or other systems engineering capability in the UK, either not repairs. In the past equipment has been procured with two by establishing it themselves (although the barriers to entry may separate contracts, one for delivery and one for repair. This does be high), or by acquisition, licensing or partnership with a fi rm not clearly incentivise the delivery of reliable equipment. We are that does have such capabilities onshore. For instance, it has moving to a single contract system, by which suppliers are paid long been important for the MOD to be able to modify, often for for use of equipment. A recent example of this is the £600m Urgent Operational Requirements, its C-130K Hercules aircraft, private fi nance initiative for ‘C-Vehicles’, under which the Amey Lex originally bought from the forty years ago. This has Consortium will provide heavy plant equipment, logistic support been achieved through the Sister Design Authority4 established by and construction machines over a 15-year period on a rapid fl eet Marshall of Cambridge for the original C-l30K purchase. Marshall has turnover basis. This will reduce maintenance and support costs. carried out over 1,000 upgrades, modifi cations and new equipment additions to the RAF’s fl eet and has attracted substantial further Companies are generally keen to move towards this model. While work from overseas because of its acknowledged expertise. it off ers us greater equipment availability, it also provides our industrial partners greater returns over a longer period. The Chief of Defence Logistics’ intention is to spread this business, where it is appropriate, across the whole support area. B1.35 Change on both sides. As implied in the above discussion, ensuring the retention of systems engineering capability in the UK is in general important but needs, for implementation, to be underpinned by diff erent behaviours in both us and industry. B1.34 Maintaining engineering capability at the platform systems level can also provide Value for Defence. In industry, amongst other things, it requires clear leadership and investing in maintaining and refreshing skills This model of an incentivised platform systems engineer and knowledge, and a marketing mindset – helping working to develop a design for ease of upgrade anticipate MOD’s and export customers’ needs and fi nding and support should directly improve potential suitable solutions, rather than relying on known future equipment capability and reduce costs to us. programmes and being told the system requirements.

It may in turn also improve export prospects, potentially for the mutual advantage of us and industry. This issue is explored 4 Sister Design Authority: A contractor appointed to operate in parallel with further in the supporting chapter on defence exports. the original, or current Design Authority (typically an overseas organisation) for a design, but which has access to the design records and design data, and has Having a domestic capability at platform systems level also suffi cient expertise and familiarity with the design to act as the Design Authority. assists in securing Value for Defence in competitive global The Sister Design Authority is responsible for impact of the design work it carries procurements. Unless the UK has this itself, it will be viewed as out. E.g. for airworthiness, with its access to the original design data, a Sister an ‘export market’. Without the focus that a domestic platform Design Authority is competent to decide when the opinion of the current Design systems-level engineering capability can provide, the value Authority should be sought on changes which might aff ect airworthiness. The gained from our research is likely to decline, as might national original Design Authority remains responsible for the airworthiness of that part of innovation in the supply chain. This is because overseas platform the design which has not been aff ected by the work of the Sister Design Authority.

64 Defence Industrial Strategy the UK defence industry iscurrentlythe UKdefenceprimarilyconcentrated industry asfollows: the piece, thedomain-specifi at platform ccapability systems level within maintenance alsorequires understandingthesystems design.Butacross Quays have someprofi innaval systems ciency engineering, andnaval can contribute diff erent capabilities:for example, BMT,QinetiQ and Three detail intherelevant chapter, andthere are anumberofcompanies which isexplained The inmore foreachsector industrialoverview B1.38 engineers stilltend to concentrate onalimited numberofsectors. systems level inany specifi csector, andeven intheUSlargest systems moreoutside theUSare at theplatform thanonecapability ableto support facilities whichare discussedinanotherchapter. Very fewcountries domain-specifi cknowledge andfacilities, including test andevaluation management andstandardised systems engineeringtechniques) and generalised skillsandresources andprogramme (includingproject Systems engineeringisacomplex taskinvolving amixof B1.37 asitcurrently is,industry andtheavailable methodsforengagingwithit. of theDIS. The visionhowever needsto berooted inthereal world ofthe at platform systemsparticularly level, canhelpsustaintheKey Principles and outlinedapotential visioninwhichaUKsystems engineeringcapability, We have discussedthestrategic ofsystems engineering, importance B1.36 overview Industry CBRN Smiths Detection, General Dynamics General Dynamics SmithsDetection, CBRN C4ISTAR MBDA(UK), RSL, Non-embedded Thales, BAESystems UWS Complex weapons Vehicles Armoured Fighting Fleet Auxiliary warships andRoyal Ltd, Babcock Naval Services BAESystems, Complex surface Submarines AgustaWestland UK (C-130) Strategic airlift Helicopter fi Company xed wing maritime patrol aircraft and Fast-Jet combat Sector For us, itimpliesallowing Italsomeansdemonstrating that we canbe These challengesare inPart C. considered further proposals forrapidly takingadvantage ofnewtechnology. doesproduceto beableto sensible whenindustry react maintenance anddevelopment ofvitalknowledge. throughto support, minorprogrammes andresearch, the with conjunction at fi rstdelivery, whilebeing enough notto askforoverly demanding specifi cations UK, SERCOUK, Assurance, EDS Electronics, BT, EDS,Fujitsu, LogicaCMG, QinetiQ Selex Communications, Communications,VT Ultra Grumman,Raytheon, Northrop Lockheed Martin, BAE Systems, Thales, EADS,General Dynamics, BAE Systems KBR (includingDML), Thales, VT Ltd, EngineeringServices Babcock BAESystems, KBR (includingDML) Marshall ofCambridge Eurocopter (Puma andGazelle) BAE Systems reduced costs increased profi t agile andfl exible , aligning with industry , aligningwithindustry for industry in forindustry disciplined enough

necessary, possibleorcost-eff model forengagingthat capability. only oralsofornewprojects, that doesnotofitselfimplyaparticular at thesystems level, equipment whetherforupgrading in-service say there isanational requirement to retain to engineer acapability chapter. However, to emphasiseagainthat, itisimportant where we The proposed way isexplained forward ineachsector B1.40 Sustaining thecapabilitytoengineersystems in thesecompanies shouldhave to remain where theycurrently are. principle why thesystems engineeringcapabilitiescurrently embedded including againstdemandingtimescales. Equally, there isnoreason in to upgradeand capability oradaptthosefuture vehicles asrequired, provided we designauthority could access property theintellectual another company could forfuture notestablishthat capability projects, current onshore engineerofsystems doesnotmeanthat inthissector 95% oftheUK’s current Armoured Fighting Vehicles andistheonly onshore.such acapability Thus, that BAESystems thefact hassupplied forinstance ifanoverseasUK, supplierofanewequipment established engineering capabilitiesat platform systems level could notemerge inthe reside. There isnoreason inprinciplewhy additionalcapablesystems IP), skills, required, facilitiesandcapacity andidentify where these will needto domore work to refi neindetailtheknowledge (including state oftheindustry. Inimplementing theDIS,Government andindustry to emphasisethat thisisaviewofthecurrent Itisimportant B1.39 service willbeapproximatelyservice to usage. £950million,subject PFI contract willrununtil 2024andthefullcost December ofthe coming first). We receive rather thanaproduct. aservice The commercial customers’ requirements (withtheformeralways required by to us, meetbothourand managingtheiractivities and isresponsible forgenerating businessfortheshipswhennot provides oftheirtraining itself thepersonnelandmajority alsoships are Butindustry clearlycrucialelements oftheservice. crane, andice withenhanced breaking stability capabilities. The from eitherthestern orside. a45tonneThe shipsalsocarry in mind, thevessels loading candockat ofports, awidevariety equipment military football pitches. withtransporting Designed carrier, withthree decks, eachdecknearlythelengthoftwo off (RoRo)shipsisalmostasbiganInvincible Classaircraft quickly andefficiently. Eachofthesix20,000tonne Rollon, about moving vehicles andequipment to atheatre ofoperations ahead ofitstarget date, isagoodexample. Strategic is Sealift 20monthsStrategic whichcameinto service Service, Sealift Development itself, eitherwithourassistance orwithout. The may deliverIn somecases, someoftheotherLines industry Services: ective toective retainthiscapability. In some sectors, itwillnotbeIn somesectors, Defence Industrial Strategy Industrial Defence B1 65 Systems Engineering The relationship between systems engineering Applying this analysis across the sectors capability and prime contractors B1.42 This analysis demonstrates and explains the diff erent B1.41 We have noted throughout that being able to engineer conclusions across the individual sectors considered in this Strategy. capability at a systems level, and prime contracting, are not necessarily synonymous. Nor is there a simple model of the degree of vertical B1.43 Submarines are extremely complex, rely on sensitive technology, integration that is desirable. However, taking into account diff erent levels and critical aspects cannot be procured from off shore for security reasons. of systems complexity and the overview above of potential methods of The sector is currently split into a number of monopoly suppliers (BAE engaging with industry, we can identify some general principles: Systems, DML, Rolls-Royce Marine) which contract direct with MOD, which is in turn a monopsony for the systems, sub-systems and partial systems for new projects, where the platform is itself highly complex provided, though total on-shore manufacture of every item is not required. and both physical and other aspects of integrating the partial Each of the main suppliers, and the submarine support business, is likely systems and sub-systems are challenging, the engineer designing to contain some elements of the critical systems engineering knowledge. the system is likely to require a very close understanding of Opportunities exist for greater effi ciency here, combined with action both the partial systems/sub-systems and the manufacturing to establish a more consistent workfl ow. However, industry needs to process. As the inter-relationship between sub-systems and the reshape itself to protect both the systems engineering and manufacturing overall system is complex, similar or identical knowledge is likely capability but in a more coherent and effi cient form, with signifi cant to reside at many levels. Over time, industry may fi nd it most increases in productivity. The model needs to evolve, with industry, effi cient to consolidate to remove unnecessary duplication. towards nomination of a single preferred systems engineering entity.

However, in sectors where the relationship between platform and B1.44 We require a capability in UK industry to engineer complex surface sub-systems/partial systems is less complex, and in particular ships at systems level, with enough familiarity with the manufacturing where innovation is being driven primarily at the sub-systems/ process to be able to fulfi l that function. We have in recent years operated partial systems level, it may be benefi cial to keep the systems a system of competition in stages by project. However, again there is more engineering tasks separate from the platform manufacturer, to capacity in the industry than will be required in a few years, and the systems ensure maximum openness to innovation from other suppliers. engineering capability is likely to be duplicated and sub-optimised across This might imply a design house construct, or an alliance several companies. Nor are potential synergies with support business being (consortium, joint venture, or looser arrangement) where tasks, realised, despite largely the same companies being involved. The systems roles, risks and rewards are shared between members. engineering capability needs, along with the rest of the industrial capability in this sector, to be refocused to maximise the relationship between in-service It is generally desirable, and often essential, for the UK to have an support and upgrade, and sized based on MOD’s future needs and a realistic on shore engineer of the overall system, particularly for supporting assessment of military export potential, if it is to maximise productivity. equipment in-service. However, even where the MOD has procured overwhelmingly from a UK-based supplier before, if the competitive B1.45 In the Armoured Fighting Vehicles sector, BAE Systems Land environment is healthy, then unless other considerations prevent Systems has supplied 95% of the current inventory, and the associated overseas supply5 , there is no reason in principle why another systems engineering knowledge needs maintaining and developing; supplier could not establish a similar capability in the UK for new we will work further with the company to investigate mechanisms equipment. The existing base is likely in most cases though to for ensuring this. However, the global market for future AFVs remains give the current supplier in that sector a competitive advantage. competitive, with much scope for innovation and new technology in FRES in particular. When these future systems are brought into service, Where a competition is kept open to overseas suppliers or a a systems engineering capability will be required with the highest levels cooperative arrangement is pursued, unless the cost of retaining of systems engineering, skills, resources and capabilities based in the national fl exibility is prohibitive or we are content to maintain UK. The same features – high concentration of knowledge relating to the same confi guration as another nation, MOD and industry the existing fl eet, but a healthy international competitive environment must ensure that all necessary systems-level engineering – apply to the helicopter industry, where AgustaWestland’s systems knowledge to support and upgrade the equipment once in engineering capability needs sustainment in the short term and where service is shared with an on shore systems engineer. partnership to drive improvements in support to the current fl eet is natural, but competition remains an option for the medium term. Innovation once in-service, both for improving availability and enhancing other aspects of military capability, requires access to B1.46 In the general munitions sector, BAE Systems has the vast the overall systems-level knowledge, but may not occur uniquely majority of the existing business, but there remain niche capabilities in a platform manufacturer. This is particularly the case for systems abroad which may meet future needs. We have therefore adopted where the platform is relatively less complex but the sub-systems partnerships with BAE Systems and other suppliers for support of the and partial systems have decisive infl uence on the military capability current inventory and are considering ways in which we can rationalise sought. In such cases, it will be particularly important either that the the through-life management of munitions, without ruling out the contractual mechanisms allow value to fl ow through to the layers prospect of global competition for future projects at this stage. which are actually producing the innovation, or that sub-system/ partial system engineers are able to tender for upgrades directly.

5 e.g. the impact on sustaining the requisite level of knowledge in the supplier supporting the in-service equipment

66 Defence Industrial Strategy be required to provide fortheirmaintenance andupgrade through-life. casesreside elsewhere– whichincertain inthesupplychain–that will level and sub-systems systems engineeringcapabilitiesat thepartial of theseplatforms. Butwe to sustainingthe willalsoattach importance programmes –to inthissector sustainitssystems engineeringunderstanding only company intheUKableto contribute at thetop tierto international the US).Assuchwe regard itasessential to work withBAESystems –the andcoherence commonality system capability clearly inpreserving with our interest eff –onbothcost andmilitary grounds ectiveness –lying very and upgrade UK weapons of onto thesystem aspart Team Lockheed (with the caseofJoint Strike Fighter thisislimited to to integrate theability through-life ourexisting andplannedfastcombatsupport jets, althoughin B1.49 Inaerospace, we require onshore to systems engineeringcapability to engineerandintegratecapability thealgorithmsandhomingheads. systems engineercomplete future torpedoes, thoughwe dorequire the torpedoes,in-service we donot require asovereign onshore capability to entail. We have however decidedthat whilewe require for thiscapability onshore, recognising theimplications foroperational sovereignty that would available, we may have to accept that we cannotsustain thiscapability canrestructure anddeliverindustry aviableproposition withinthefunds can besustained. Inprinciple, to us. thisisofhighpriority Butunless The challengeincomplex weapons iswhetherthecapability B1.48 approaches are sustainableshouldthesenotdemonstrate improved value. may offthat partnering butwhere ersomeopportunities, competitive foreseeable future. appliesforCBRN,where Asimilarpicture itispossible global competition bysector seemslikely project to besustainable forthe inthis systems andgiven engineeringskillsintheUK, civilopportunities For C4ISTAR there are anumberofhealthy companies with B1.47 Hercules C-130J underconstruction. Defence Industrial Strategy Industrial Defence B1 67 Systems Engineering Maritime B2

Defi nition B2.4 The two planned Future Carriers (CVF) will be the biggest surface ships ever to be built in the UK - and will carry a strike package of Joint B2.1 The Maritime Sector is that element of the Industrial Base which Combat Aircraft (JCA). The CVF programme is subject to an incremental designs, builds, supports and disposes of all naval platforms and systems. approvals process: Target In-service Dates (ISD) for the two vessels will It encompasses ships, submarines, and their integral systems; including be agreed when the manufacture phase is approved. Given that both propulsion, services, combat systems and combat system elements. It draws France and the UK are embarking on major, complex carrier procurement extensively on other sectors, such as Guided Weapons, Aerospace and C4ISTAR projects, we are examining areas of mutual benefi t and opportunities to (Command, Control, Communication and Computers, Intelligence, Surveillance, deliver economies. It is for industry to put forward proposals which will Target Acqusition and Reconnaissance). Maritime capability is delivered by the be judged on their merits and in light of national policies. It has been eff ective integration of platforms and systems, and their through-life support. agreed with France that for co-operation to work, it must deliver cost savings and must do so without delaying UK or French programmes. In 8 days the RN assembled off the coast of Africa a Joint Force of over 3000 RN, Royal Marines, Royal Fleet Auxiliary and RAF personnel, in support of the UN in Sierra Leone

B2.5 The will provide the RN’s primary Anti Air Warfare capability for over thirty years. It is a versatile warship that will provide exceptional detection and air defence capability when the Future CVF & JCA (Computer generated image). fi rst of class, HMS DARING, enters service . This capability is centred on the Principal Anti Air Missile System (PAAMS), delivered through a Strategic overview collaborative consortium in EUROPAAMS; and SAMPSON, a UK Multi Function Radar under development with BAE Systems. Up to eight B2.2 The 2004 Defence White Paper, ‘Delivering Security in a Changing Type 45 Destroyers are planned to enter service in the next decade. World – Future Capabilities’ , emphasised the importance of versatile maritime expeditionary forces to project power across the globe in support of British B2.6 A Future Surface Combatant (FSC) study is looking at how interests and delivering eff ect on to land at a time and place of our choosing. the capability currently provided by the Type 22 and Type 23 Future maritime operations are likely to follow a similar, expeditionary pattern might be met in the future. No decisions have been taken, but our current to those conducted recently. The sea off ers an opportunity for UK Forces to assumption for planning purposes is a two class platform solution. The operate with a degree of security and persistence, without reliance on the Future Mine Counter-Measures Capability is also being examined. territory of others for basing. These factors, in particular the need for freedom to operate in an uncertain world, make the sea a very attractive location B2.7 The Astute Class will be the most advanced and powerful from which to project power. To take advantage of this the Royal Navy will attack submarines the Royal Navy has ever operated and will play in future need to be an agile, network enabled expeditionary force able to a key part in our defences for decades to come. With improved switch between missions and tasks and to interoperate with chosen allies. communications, a greater capacity for joint operations and the The force will have the ability to deliver and sustain a full range of missions: ability to carry more weaponry, the Astute-class submarines from small highly focussed interventions with Special Forces, to large, high will deliver a marked increase in the flexibility of our attack intensity coalition operations, securing key infl uence in the process. This submarines. Three Astute Class nuclear powered submarines are on versatile maritime force will be capable of winning safe theatre entry for the contract with BAE Systems and due in-service in 2009, 2010 and deployment of joint forces. Through amphibious operations and a full range 2012, with potential for a further 5, subject to affordability. of medium scale off ensive air eff ort, the versatile maritime force will deliver Maritime Strike and Littoral Manoeuvre to achieve decisive eff ect on the land. B2.8 The future Amphibious Capability will be built around specialist shipping consisting of two Landing Platform Docks (LPD), one Landing Equipment Programme Platform Helicopter (LPH), an Invincible Class aircraft carrier in the LPH role, and four Landing Ship Dock(Auxiliary) (LSD(A)). The LSD(A) B2.3 We are currently in the middle of a substantial modernisation class is expected to remain in-service for around 25 years. Additionally, programme that will enhance the capabilities of the RN. It has CVF will be deployable in a secondary role as a Helicopter Carrier. particular emphasis on fewer but more capable platforms, focusing on the capability to conduct expeditionary operations.

68 Defence Industrial Strategy B2.15 arrangement with VT; itsexpectedISDis2007. the Falkland IslandsPatrol role willbethrough aleasing one third oftotal through lifecosts. Inrecent years the total amount ofsupport life cost; forexample, theinitialprocurement forCVF willaccount foraround their update andupgrade, represents asignifi cant element ofaplatform’s whole- B2.14 The Operations andanAnti-Fast Inshore Attack Craft capability. of the utility Capability investigations are underway, exploring B2.13 Vanguard submarine. B2.10 Tankers, vessels. Logistics Based Joint Sea andFleet Support Solid for retained platforms. The MARS may system-of-systems includeFleet approach to Afl oatcombined withinvestment Support, inlife extensions programme isasignifi cant plannedinvestment inanewintegrated B2.9 The Marines approaches thewell dockofHMSALBION. Cushion fromA LandingCraft, (LCAC) 539Squadron Air Royal signifi cant changeinourapproach to through-life sustainment. capability technically andcommercially opensystems solution,markingapioneeringand submarine) mainsonarinboard are electronics aboutto bedelivered by a B2.12 The remain eff forthe ective remaining lifeoftheclass. system improvement programme. This willensure thesubmarines are nearingcompletion ofaworld-leading sonarand combat B2.11 The with updates to address strength structural andplatform systems to follow. Type 23Frigate. upgrades Capability are plannedforthecombat system, to theFSCconceptcomplementary andpotentially thelifeof extends Support Type 23Frigate CapabilityUpgradeProgramme Minor War Vessels Off AflMilitary Sustainability (MARS) oat Reachand Vanguard Class Trafalgar shore Patrol Vessel to warships, submarinesandRoyal Fleet Auxiliaries, including

Class SSNs(nuclearpowered submarines) SSBN(nuclearpowered ballisticmissile forMaritimeInterdiction replacement for is

level stillrepresents offuture support signifi forUKindustry. cant opportunities Combatantslife extensionofSurface moderates outto thereduction 2030. The work hasdiminishedasaresult offorce level rationalisation, buttheplanned on the maritime sector - are consumed in supporting naval -areon themaritimesector consumed equipment. insupporting of resources spendsannually -around halftheamount theDepartment business required. Asthegraph demonstrates, signifi avery cant amount This hasimplications forbothnewprocurement andthevolume ofsupport current pace ofsuccessive newplatforms once thenewshipsare inservice. an end. Asacustomer, we cannotaff ord anddonotneed to maintain the is followed by alongerterm downturn asthesemajorprogrammes come to for UKshipbuildingas T45, Astute, andMARS work CVF comes online. This grow over ten thenext years, providing strong avery programme ofwork The assumedspendprofi is leinthemaritimesector expected to B2.16 Indicative planning assumptions Figure B2(ii). access to associated skills, facilities, processes andunderlyingtechnologies. level themaintenance is criticallydependent uponretaining ofeachcapability by abreakdownsupported ofspecifi ccapabilities. Where theseare at ahigh To meetthesetwo requirements we have identifi edsixstrategic themes throughout to mount itslife;andtheability operations from theUKbase. strategic requirements: capability military theneedto develop andsupport Retention ofonshore isdriven capability by two fundamental B2.17 in theUKindustrialbase? What isrequired for retention theoverallwhich doesnotdistort illustrative picture ofgeneral trends. the endofcurrent SpendingReviewperiod. This isprudentplanning order to thepotential ininvestment emphasise for shifts prioritiesafter ten years. The fi gures from 08/09are illustrative andincludea range in The above graph shows indicative over spending inthissector thenext IllustrativeFigure spendprofi B2(i) le.

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,OW#OMPLEXITY3UPPORT6ESSELS B2 69 Maritime B2.18 Not all key capabilities must be exercised onshore for every project. The strategic need for onshore execution will be judged on Through-life capability management. A good example of this a case by case basis (Figure B2(ii) illustrates this point); with the in practise is the refi t of HMS ILLUSTRIOUS to prepare it for a new proviso that off shore delivery should not challenge the viability of key dedicated strike carrier role. It is also a good example of how the UK capabilities in the Maritime Sector as a whole. Using this model we can shipbuilding industry can rise to such challenges. HMS ILLUSTRIOUS distinguish between that which must be executed onshore; and that was a 30 month, £120M refi t, to deliver an extensive upgrade which may be competed more widely, but might need to be executed package within an ambitious timescale. It came in under budget, onshore for reasons of sustainability or commercial viability. enabling the savings to be re-invested in additional upgrades to the ship during the refi t. Central to this success was a triangular partnership between the contractors, the MOD and the ship’s Strategic capabilities for retention onshore: company. The NAO cites this as a good practice example in its recent report - Driving the Successful Delivery of Major Defence Projects. Maritime systems engineering resourse: it is a high priority for the UK to retain the suite of capabilities required to design complex ships and submarines, from concept to point of build; and the complementary skills to manage Shipbuilding and physical integration the build, integration, assurance, test, acceptance, support and upgrade of maritime platforms through life. B2.21 In a change to the previously stated Defence Industrial Policy (DIP), there is no absolute sovereign requirement to construct all our Shipbuilding and integration: there is no absolute warship hulls onshore. We have revised our approach which concentrated requirement to build all warships and Royal Fleet Auxiliary solely on hull construction, now to consider sovereignty of the high- vessels onshore, but a minimum ability to build and value capabilities needed for our operational independence. integrate complex ships in the UK must be retained. B2.22 We need to build onshore to the extent that it sustains the ability Submarines: for the foreseeable future the UK will retain to design and physically integrate complex warships. Furthermore, since all of those capabilities unique to submarines and their warships are rarely prototyped, we need to ensure that we retain the Nuclear Steam Raising Plant (NSRP), to enable their design, ability to learn and adjust designs whilst the fi rst of class is being built. development, build, support, operation and decommissioning. Steel may be cut when the design is relatively incomplete compared to other military platforms; feedback during the production process is critical Maritime Combat Systems: the ability to develop complex maritime to ensuring that the platform meets the requirement as intended. combat systems is a high priority for the UK, and their integration into warships and submarines is an essential onshore capability.

Maritime support: the UK shall retain the ability to maintain and support the eff ectiveness of the Fleet, including incremental acquisition, generating force elements at readiness, and meeting urgent operational requirements.

Maritime systems and technologies: it is a high priority to retain onshore research, development and integration of specifi c key maritime systems and technologies.

Maritime systems engineering resource

B2.19 The systems engineering resource includes: design expertise from early concept through to design for manufacture; all elements of maritime project management and the ability to specify and manage complex warship integration, test & acceptance at the platform and system-of- systems levels. These skills are as relevant to the through-life management of military vessels as they are to the front end procurement process.

B2.20 Maintaining control of the procurement and support processes as an intelligent customer is essential, regardless of where they occur. During initial procurement and throughout service, we must be able to manage the product risk associated with complex maritime platforms, particularly for the fi rst of a new class of vessel. We are also required to fulfi l our duty as a safe and competent owner and operator of our assets; and we will regularly use industry to provide supporting advice. Therefore, retention of the Maritime Systems Engineering Resource must encompass the expertise necessary to generate and support military capability throughout the acquisition lifecycle. Type 45 Destroyer.

70 Defence Industrial Strategy Figure B2(iii). Figure B2(iii). System against20%hullcosts. the region of60%fortheCombat complex vessels; for Type 45itisin platform 2:1for costs istypically The ratio ofCombat System to of outfi ttingis conducted at thesametimeasblock construction. low order fabrication costs. This isespeciallytruewhenahighlevel ofaprogrammethe highvalue aspects signifi cantly outweigh the overhead ofanoff shore fabrication effort becomes less attractive when density’ oroutfi t to steel work ratio) ishigh:themanagement and onshore are delivery thosewhere thecomplexity (typically ‘packing capabilities. Programmeshigher-end that willtend towards total industrial programme, suffi in isolation. We mustalsoconsider thestrategic requirement foran be executed, straightforward cost considerations cannotbetaken When determining ofaprogramme where aspects should B2.25 to learntheirtrade andprogress towards themostchallengingtasks. suffi orcomplexfor specialisthullconstruction assemblytasks. There mustbe eff ective developto from scratch themostadvanced, high-value skillsneeded relevant facilitiesandskillsto beavailable onshore. Additionally, itisnot the fi tofspecifi cequipment fortheoperation inquestion), requires the per se;however, operations from mounting military theUKbase(including There isnorequirement forfabrication intheUK ofbasicstructures B2.24 continued employment insuitablyrepresentative programmes ofwork. These capabilitiescanbemaintained inthelongterm onlyby their Control requirements, andcomplex fabrication andassemblytechnologies. involving signature amelioration, NuclearBiologicalChemicalDamage maintained underUKsovereignty: thisincludesspecialisthullconstruction ofshipbuildandplatformvalue integration addedaspects that mustbe facilities, technologies andknowledge. Inparticular, itisthehighcomplexity, steelwork anditsassembly, incorporating anamalgamation ofskills, The buildofwarships extends beyond thesimplisticviewof B2.23 cient fabrication onshore to sustainaskillsdevelopment path forworkers 4PVSDF#"&4:45&.4 58IPMF8BSTIJQ  1"".4  /BWBM7FTTFM$PTUT*OEJDBUJWFTQMJU $PNCBU.JTTJPO cient involume andcomplexity to deliver 4ZTUFNT*-4(   %FTJHO     .BOBHFNFOU NBUFSJBMT 1MBUGPSN 1SPEVDUJPO 1SPEVDUJPO 0VUmU 4UFFM arrangements that guarantee UKcontrol andsafeownership. technologies mustbeprovidedsupporting withintheUKorunder minimum level ofassociated facilities, resource intellectual and manufacture, test andevaluation anddecommissioning. Anirreducible must beretained onshore. This includesdesignanddevelopment, includingthefuelelements, isastrategic thatits life-cycle, capability The to manageNuclearSteam Plant ability throughout Raising B2.28 underpinning key capabilitiesmustbesustainedintheUK. welding andfabricationexample processes. particular These specialist requiredesign andconstruction theuseofspecialisttechniques, for specialist submarineindustry. Submarinehullandinfrastructure the broader marketplace andhasto bemaintained withinthe acoustic engineeringdesignisnotreadilyStructural available from control are specifi ccapabilitiesessential to submarineperformance. manoeuvring &control, propulsor technology andatmosphere scientifi Deep cand technical advice on hydrodynamics, B2.27 or from asuffi from abroad, butonlyunderappropriate arrangements that guarantee supply, science andtechnology. elements submarinesub-system may Some besourced allunderpinnedbymanagement appropriate ofsubmarineandnuclearsafety; spansfromdelivery conceptual designthrough to disposal, andincludesthe without signifi cant reliance off onunpredictable shore expertise. This retains safelyto deliver, thecapability operate andmaintain theseplatforms, control ofanonshore submarinebusiness. Therefore, itisessential that theUK ownership andcommitments to theUSAwhichcanonlybefulfi lled by close subset ofskillswithinthemaritimeindustry. We have dutiesofnuclear The UK’s fl eetofnuclearpowered submarines requires aspecialist B2.26 Submarines specifi cation, design, integration andacceptance is fundamental to initial developing asingleintegrated Combat System. Maintaining control of provisioned onshore; butitisstrategically to becapableof important Notallelements ofaCombat System mustbedeveloped and B2.30 ships andsubmarines. engineering applyequallyforbothsurface platform’s capability. military These of Combat two aspects System integration oftheCombat System into theplatform, to deliver the intoof sub-systems asingleCombat System; andthephysical endeavours:consists oftwo complementary thelogicaldevelopment advantage are to bemaintained. Combat System engineering ongoing development isessential ifinteroperability andmilitary ACombat System isasophisticated andcomplex system, B2.29 Maritime Combat Systems Astute (Computer Generated Image). ciently broad supplierbaseto assure access andavailability. Defence Industrial Strategy Industrial Defence B2 71 Maritime procurement and through-life management of the Combat System, a signifi cant issue, or control of the programme is strategically necessary. including spiral development and incremental acquisition. This dictates Contingent docking and recovery from operations will require a UK absolute involvement at the front edge of procurement and an ongoing dockyard, especially as embarked ammunition is often involved. For the relationship with a sovereign Combat System Design Authority. less complex platforms, refi ts may be conducted off shore (e.g. RFAs and some minor war vessels) once sensitive equipment has been removed or security concerns, including force protection, otherwise safeguarded. The Type 42 Class of Destroyers has The requirement to refi t the submarine fl otilla onshore is absolute. undergone a major architectural redesign and fi ve further capability upgrades in the last 12 years.

B2.31 Physical integration of a Combat System into a maritime platform requires co-operation between the systems engineering organisation that maintains the design architecture of the platform and the Combat System design authority; given the likelihood of ongoing change through-life, this needs to be an enduring relationship. This high value-added aspect of shipbuilding must be retained within the UK maritime industrial base, if through-life development is to be pursued for complex or strategically important platforms.

Maritime support

B2.32 Support of the UK Fleet has traditionally been divided between Operational Support and Refi tting, each with very diff erent requirements and characteristics. However, the division is becoming increasingly blurred by an approach to routine upgrade known as ‘Fleet Time Fitting’, which is undertaken during periods in harbour for vessels at higher states of readiness. Onshore ability to conduct both Operational Support and Refi t is T23 . strategically essential, but largely for diff erent reasons and at diff ering scales. Maritime systems and technologies B2.33 The need for Operational Support is equally applicable to warships, submarines and RFAs. Implicit in Operational Support is the ability to mount B2.35 Running through each of the strategic themes is the need operations from the UK base through rapid force generation; it involves to sustain suffi cient research and technology investigation to develop bringing units to increased levels of readiness, including the installation of and maintain maritime domain expertise. This supports the UK in mission specifi c equipment, and the provision and integration of equipment remaining an intelligent customer, even when buying elements to meet urgent operational requirements. These tasks frequently require from off shore, and is particularly pertinent to matching capability a high speed cycle through the acquisition process, and involve classifi ed to threat. In the past, we have held suffi cient research capability in- military capabilities and the handling of highly sensitive material. Therefore, house, but it is increasingly developed and sustained by industry. key discriminators for provision of Operational Support include maintenance of national security and assured access to meet operational planning assumptions. Conduct of system upgrades by ‘Fleet Time Fitting’ increases the UK Mine Countermeasures and overall operational availability of the Fleet, but introduces similar demands to those of rapid force generation, albeit in slightly less demanding timescales. Uninhabited Underwater Vehicles expertise enabled evaluation and In preparation for Operation TELIC, adaptation of a US commercial more than 30 warships, submarines reconnaissance vehicle, which is and RFAs were fi tted with over now in service with the RN. 120 operational enhancements B2.36 The UK has a strategic advantage in many key platform and Combat in less than one month. System technologies and systems. These military capabilities are often in sensitive areas and have high security classifi cations. For the purposes of B2.34 The infrastructure required to conduct refi ts is extensive and operational and strategic security, or assured access at times of tension not readily regenerated once lost. A level of surface ship refi t capability or confl ict, onshore retention of key research and development is a high must be retained in the UK to ensure guaranteed access when required, priority. Onshore expertise also enables the exploitation of wider research including for urgent operational support. An onshore refi t capability to deliver systems that meet UK capability requirements. Retention of these becomes essential when security needs safeguarding, force protection is key capabilities is fundamental to maintaining the battle winning edge.

72 Defence Industrial Strategy currently represented ofUKshipbuilders’ by themajority portfolios. for modestlypriced frigates, complexity rather thanthehigh-end oftheirtotal build.proportion This theglobaldemand reflects domestic output, whereas European states asignificant export However, are ofthe asmallfraction UKnewbuildsforexport business. inpromotingRN isavaluable export assetto industry shouldnotbeunderestimated.the UKindustrialcapability The new shipsandsubmarines. The to potential helpsustain forexports We willspendseveral decadeto billionpoundsinthenext procure comprise around inUKshipyards. 85%ofthosebeingconstructed is theUKshipbuildingindustry’s biggestcustomer, andnaval ships in theworld’s top fouralongsideUSA,Germany andFrance. MOD Nevertheless, theUKremains amajorprovider ofwarships, ranked inthenumberofplatformsreduction required by theRoyal Navy. inUKwarship Areduction buildinghasmirrored theparallel B2.40 yachts.and refit work, andonspecialistbuildssuchasluxury remains internationally competitive onhigh-value conversion conventional steelwork isinvolved. However, theindustry of traditional merchant shipbuilding, especiallywhere extensive is nolongersufficiently competitive to winsubstantial amounts primarily from withinEurope andtheFar East. The UKindustry driven by fierce competition forcommercial shipbuildingwork, hasbeen The contraction oftheUKshipbuilding industry B2.39 The UKsector requirement operations ofafi formounting andsupporting rstclass Navy. facilitiesiswidelyseenasanessential support Retaining national military some cooperative programmes have beenpursuedby European governments. this area. To date, rationalisation hasnotextendedacross borders, although by national governments; consolidation andrationalisation isalsoevident in repair facilitiesthroughout Europe andwithintheUS,many stillcontrolled rationalisationfurther seemslikely. Similarly, there are ship extensive military Italy, andtheNetherlands:having consolidated from alarger industrialbase shipbuilding companies, France, withthebulkoftheseinUK, Germany, , two companies providing majorsub-systems. Europe hastwelve majormilitary the US,ownership hasconsolidated into two mainshipbuildingcompanies and B2.38 Global complex platforms suchaspassengercarriersandspecialistvessels. about 20%ofworld Europe shipproduction, iscompetitive forthemore Japan andChina),whichhasaround 70%ofworld production. With much for export asfordomesticuse. much forexport market; Germany producing as twice export more than60%ofthemilitary France andGermany together have B2.37 Worldwide Global overview Global andUKMarket ofthecurrentOverview maritime 1 ‘Military andCommercial ‘Military Shipbuilding’ (2005) RAND military commercial shipbuildingisdominated by theUSAandEurope. In shipbuildingismainlyinAsia(Korea, 1 adopts, thepotential ofwhichwillbeexploited programme. by theCVF approachbe learnedfrom thewiderindustry theAlliance/partnering warship integration. Nevertheless, there are someusefullessonsto experience, comparable but thisisnotdirectly to thecomplexity of facilities andresources. The widerindustrialbasehassystem integration during periodsofpeakdemandfor and otherwork, particularly role infabricationwarship avaluable facilitiesalsoundertake supporting into account shipbuilding. theincreased Non- complexity ofmilitary yards improvement cansetperformance which military targets, taking practices. The widercommercial alsooff sector ersabenchmarkagainst techniques off er considerable effi vessels, andsupport where commercialauxiliary designandproduction shipbuilding. potentiallyTheir isrelevant expertise to lesscomplex need notnecessarily exclude commercial shipyards from military The diff and erencescommercial shipbuilding between military B2.45 whoseunderlyingskillstakesupport, timeto buildandeff sustain. to ort and demandssignifi cant assurance regimes, engineeringandprofessional integration, test andcommissioning. Naval shipbuildingisspecialistwork but doesapplyto ofdesign,outfi many aspects system tting, military more complex theship:thisdoesnotnecessarily applyto hullfabrication, the commercial sector. Ingeneral terms, themore war-like thevessel, the sets andprocesses forwarship work are notavailable inyards focussedon are 20%systems, typically 80%hullconstruction. The underlyingskill andoutficonstruction tting; by contrast, fora commercial shipthe gures fi shipbuilding: thecost 70%systems, ofawarship istypically 30% hull There are cleardiff erences between warship and commercial B2.44 Application ofcommercial capacitytodefence SMEs’ to meetourrequirements ability consideration. isanimportant capabilities are ofSMEs. dependent onthespecialistskillsandexpertise primes orthosethat work withtheMOD. directly Many ofthehigherorder ofthismix,whetherwithinthesupplychain medium enterprises aspart other thantheshipbuilder, and we recognise ofsmalland theimportance and Control. More thanhalftheunitcost ofanaval vessel lieswithfi rms such assonar;Ultra isprofi cient inunderwatersystems andnaval Command engineering andintegration company, whilst supplyingspecifi csystems and marinegasturbines; Thales Naval isaleadingCombat System design, Rolls-Royce submarinenuclearpropulsion Marinedesignandmanufacture shipyard infrastructure contribute signifi cant capabilities. For example, research. to undertake additional capacity large Other companies without innavalexpertise designandsystems having engineering;QinetiQ the sector.manufacturing For example, BMT, and QinetiQ Three Quays have skills exist throughout theindustrialbase, notsimplywithinthe suchasdesignandsystems Areas integration ofcriticalexpertise B2.43 (includingupkeep). shipandsubmarinesupport surface and fabrication skillsbut, together withFSL,essentially deliver Hunter. have designcapability DMLandBabcock EngineeringServices at Swan capacity Submarines) and Shipbuilding;withfurther VT and integrate complex warships: BAESystems (Naval Shipsand to design,manufacture main companies withtheskillsnecessary ofUKwarship Ownership yards hasconsolidated to two B2.42 repair yards have therefore experienced fl uctuating work loads. limiting fundsavailable investment fortheshort-term required. The rationalise, askeenly competitive biddinghasdriven down prices, facilities. Existingsuppliershavein support notbeenincentivised to and upgrades willmoderate thistrend, theUKexhibits over-capacity maintenance techniques. Whilst someincrease indemandforupdates years, bothasaresult of force level andnewrationalized reductions workload The hasalsoreduced maritimesupport inrecent B2.41 ciencies over warship construction Defence Industrial Strategy Industrial Defence B2 73 Maritime The UK’s Maritime Industrial Base must UK Military Shipbuilding Skills Base deliver improvements in its performance.

UK military shipbuilding requires a highly skilled B2.47 To deliver an aff ordable forward programme the maritime sector faces work force that can be confi dent in an enduring considerable challenges, including industry’s ability to control costs. The UK and stable career path. This is particularly true maritime business is characterised by high and increasing overheads, and has a of the high value skills, knowledge and expertise skills base spread across too many entities. Procurement strategies and commercial demanded for the delivery of complex warships. arrangements have not adequately incentivised or enabled rationalisation and The ratio of white to blue-collar workers in commercial effi ciency improvements. The sector has failed consistently to deliver satisfactory yards is 1:6, in military yards it is about 1:1·7. performance, with several high-profi le maritime projects encountering delays In some areas, industry is confi dent of its ability to and cost increases. The business must be streamlined for greater effi ciency and generate capability rapidly should the need arise, profi tability, whilst mirroring UK demand and maximizing the opportunity for steelwork fabrication being a key example. However, export. The UK will need to buy warships and submarines for the foreseeable many military standards (such as for welding and surface future, but the clear trend is for fewer, more capable platforms, with longer fl atness) are higher than for commercial work. operational lives and increased opportunity for regular upgrades in response to new Research suggests that when shipyards lay-off technologies and threats. The ability to do so will depend upon us working together workers, 70% of them leave the industry and are with industry to address the fundamental issues of aff ordability and productivity. unavailable for re-hire by their former employer2. There is a perceived skills shortage in specifi c capability areas. For example, industry agrees that design engineers are in Challenges for UK Shipbuilding short supply; and the intellectual support of underpinning science and technology is also fragile in some areas. Independent study has shown: Demographics are likely to feature as an increasing challenge in the sustainability of this workforce and the Major UK Defence Acquisitions are typically behind schedule. delivery of the Maritime Sector’s key capabilities. Commercial ships are typically produced on time. Ship builders employ no consistent forecasting methodology. "HF%JTUSJCVUJPOPG6,4IJQCVJMEJOH-BCPVS'PSDF We must work with industry to better manage late changes. Late delivery of commercial ships attracts more punitive fi nancial penalties than for military vessels.   The commercial and military markets diff er signifi cantly   in ship size & complexity, acquisition process, design and    construction, and the work force skill sets and make-up.   Industry restructuring and changed industry/   MOD processes could benefi t the UK military  programme and increase export opportunities.   "HF Source: ‘Monitoring the progress of shipbuilding programmes’. RAND 2005 Source: ‘Outsourcing and Outfi tting Practices’. RAND 2005

Without improvements in performance, delivery Sustainment strategy of the forward equipment programme is threatened. Industry restructuring is a priority. To maintain the key capabilities, a vibrant onshore forward programme is required, B2.48 The current situation is unsustainable and places huge focusing on high value activities. pressure on the future programme. Whilst applicable to surface ships it is compounded many times over in the submarine domain, B2.46 The planned maritime forward programme represents a healthy due to the high cost of entry for these specialist capabilities and customer order book for the industry and is likely to sustain UK employment in the very high overheads for their continued delivery. Industry the maritime sector well into the next decade. The UK Maritime Industrial Base restructuring and consolidation is likely to be a key feature of any currently possesses the key capabilities required to support this programme. improvement programme, and fundamental to creating a viable and Furthermore, the UK has the industrial capability to design, manufacture and sustainable business to meet anticipated steady-state demand. support all UK Fleet surface ships, submarines and auxiliaries, but may not have the fabrication capacity to absorb the full programme at its peak. However, B2.49 In addition to horizontal consolidation the potential for the high volume of programmed shipbuilding activity cannot be sustained integration of procurement and support delivery must be realised indefi nitely. Beyond the peak of activity for CVF the potential work available if effi ciencies are to be generated. This off ers the prospect of better to UK industry reduces to a steadier state by around 2016. The future for UK management of through-life military capability, from delivery to shipbuilders lies in high value design, systems and sub-system assembly and disposal. It would also entail rationalisation of facilities and the integration; plus specialist and novel hull construction capability, particularly skill base, delivering a more enduring and stable career path. where there is a high outfi t to steel ratio, as exhibited in complex warships. B2.50 In light of the serious fi nancial challenges facing the industry, it 2 ‘Reducing the strains in the labour force available for warship is our view that consolidation should occur as a matter of urgency. This is building in the UK’. Furness Enterprises Ltd. July 2003. particularly pertinent to the Submarine domain, but applies across the board.

74 Defence Industrial Strategy Type 23HMSSUTHERLAND. outcomeproject rather thanmaximisingbenefi ts to oneparticipant. withrewardsresources ofallparties geared andexpertise to theoverall but innovative forUKdefence acquisition. Itdraws onthestrengths, ofarrangementtype iswell establishedintheoilandgasindustries, Carrier (CVF) isbeingpursuedthrough project Alliance. theCVF This term sustainability. Asanexample ofanoptimisedapproach theFuture where to theyare deliver necessary greater value formoneyandlong and marineequipment, butalternative approaches willbedeveloped continue to beusedwhenappropriate, especiallyforembeddedelectronics arrangements that willbeoptimisedforthesector. Competition will We willseekto employ more sophisticated strategies and B2.52 attractive rates ofreturn for industry. forperformance MOD, for andopportunities asustainableenterprise,objectives: better todeliveroptimised for three thesector key and commercial arrangements that are We willpursueprocurement strategies are criticalto improving theeffi develops.the industry We alsorecognise that asthepredominant client we they ariseandthesemight involve someformofGovernment stake inhow benefi cial to MODandindustry. We are considering potential modelsas approaches emerge. We mustbeconfi dent that consolidation willbe be customer focusedandwe are likely to express preferences asdiff erent We willnotmicromanage industry’s butitmust restructuring B2.51 consider, butmustbecustomerfocused The to nature isfor ofrestructuring industry ciency ofthesupplydemandrelationship.ciency platforms: theconcept appliesequally to discrete elements. project Load envelope, we willnotmake between entire asimplistic distinction to industry’s overheads. When considering work outside theCore Work Work Load to have on theMOD’s anadverse impact overall exposure over industrialcapacity will notexpect that required to meettheCore willbeableto bidforthis, allowing. capacity industry However, we offundertaken shore ifitdoesnotprejudice the key capabilities. UK Core Work Load requirement may be widelycompeted andpotentially Projects withinthemaritimeprogramme that exceed the B2.58 of that required todeliver theCore Work Load. We willnotpay apremium for capacityinexcess interventions, whichwillbothsmoothdemandandimprove readiness. assessing alternative maintenance withmore cycles frequent, lessintrusive result inalower andfl maintenance uctuating demand. To counter this we are platforms.than legacy This combines withthereduced size oftheFleet to submarines. The newvessels (Astute Class, Type 45)willrequire lessmaintenance maintenance cycle, whichisdominated by overhaul periods, anddefuelingfor work-rate The Support issetby thesize oftheFleet andthe B2.57 but includesdiscrete key capabilities, suchasCombat System development. life cycles. The concept ofdrumbeat isnotrestricted to majorplatform delivery, onetoplatform two years, every given anticipated force levels andplatform The drumbeat shipproduction isoftheorder longer term surface ofonenew ARTFUL); andsetstherhythm fortherest oftheprogramme, notablysupport. supplychainafter thethirdby Astute theindustry Classsubmarine(HMS a 24month SSN builddrumbeat. This to besatisfi scalesthebuildcapacity ed theme. For submarineswe have endorsed, butnotyet committed fundingfor The concept frequency, ofproject or ‘drumbeat’, isaresponse to this B2.56 attention whenadjustments to theprogramme are beingconsidered. delivering value formoney, willbegiven serious impacts sustainability critical massofonshore for bothmaintaining sovereignty expertise, and as circumstances ofsustaininga canchange;butgiven theimportance and industrialsustainability. Clearly, fl will continueexibility to be required that may bephasedto balance required capability, military aff ordability will beachieved by programme viewing theforward asasetofprojects key ofthebusinessthat delivers capabilitiesandtheviability them. This We will seek to sustainthisworkload to ensure theretention of B2.55 sustained demandtodeliver thisCore Work Load. We withvisibilityofa willprovide industry required activities to prepareinclude support anddeploy UKforces. testing across thewidermaritimeprogramme. The Core Work Load will experience forthemanagement ofbuild,the necessary integration and forlargebuild capability complex warships. willprovideThis activity is likely to becentred on,thoughnotnecessarily restricted to, anonshore in any given periodmay berequired to sustainkey capabilities. This core ofthetotalFor shipsitispossiblethat programme onlyaproportion surface The Core Work Load uniqueto submarines. willcontain allactivity B2.54 to scaleitscoreviable, allowingaccordingly. industry capacity the key capabilities, butalsooff er value formoneyandbe commercially we willdefiindustry nea Core Work Load that notonly would sustain approachlife capability basedoncost ofownership. Working with good value formoney. To viablewillrequire make theindustry athrough- industrial baseisnotlikely to orto beattractive represent to industry We recognise that simplymaintaining aminimumsovereign B2.53 Work Load, tosustainthekey necessary capabilities. There willbeaminimum level ofactivity, orCore Defence Industrial Strategy Industrial Defence B2 75 Maritime B2.59 The CVF and Type 45 programmes represent a signifi cant deviation Combat Systems sustainability and ongoing from normal steady-state demand. It would be unwise to expand onshore development will be promoted by the use of capacity above current levels, only for it to contract rapidly after CVF delivery. modern design and integration techniques, whilst Low complexity elements of CVF build are strong candidates for off shore facilitating integration of products from both large provision, if UK steady-state capacity is exceeded and better value for money scale traditional suppliers and smaller enterprises. is off ered elsewhere. After the Type 45 and CVF surge we will seek to ensure a managed transition to a more typical, less intensive build/integration activity. B2.64 Combat System design and integration capabilities are a clear This will involve smoothing the work rate to sustain the Core Work Load. strategic imperative to deliver the required installed performance in maritime combatants. The adoption of planned and future upgrades will help to maintain the necessary suite of capabilities. In parallel, submarine and warship initiatives to converge towards a reduced set of core Combat System solutions will support the incremental approach. These common core Combat Systems will seek to exploit Modular Open System Architecture design philosophies, to enable continuous obsolescence management and aff ordable capability insertion across the Fleet.

Type 45 (Computer Generated Image).

We recognise the fragility of the design base and we will implement measures to exercise the capability when this is strategically necessary and can be shown to off er long-term value for money.

B2.60 Major design is a relatively infrequent activity naturally occurring just once per class. However, maintaining the platform design is a through- life activity, with updates and upgrades requiring signifi cant design eff ort ’s Operations Room. up until a platform’s last refi t (often with further application on disposal). By combining the new build and support design activities in a rationalised B2.65 The Surface Ship Combat Management System Convergence manner, a more sustainable capability is possible. This also off ers the and submarine Common Core Combat System initiatives are both potential for whole-life cost reduction and capability enhancements, seeking to promote these strategies in the medium term. These as well as long-term career paths for the associated engineers. initiatives have the potential to consolidate and retain the strategic capabilities necessary to form Combat System Architecture Authorities B2.61 CVF detailed design work will employ much of the nation’s maritime and support the specialist capabilities necessary to integrate modern engineering workforce to the end of the decade. However, early concept and high-technology sub-systems. A key objective is to exploit Open architectural design requires a subset of this skilled workforce, which will need Architectures to allow SMEs, many from within UK industry and managed short term sustainment as their employment by CVF diminishes. academia, to contribute niche capabilities in areas such as sensor algorithms, data fusion, security, and knowledge based systems. B2.62 Submarine design capability is at risk if long gaps emerge between fi rst-of-class design eff orts. The eleven year break between the design of B2.66 In the longer term we will investigate innovative Vanguard and Astute undoubtedly led to a loss of capability and impacted on methods of sustaining the UK’s Combat System design, the Astute programme. We now aspire to an eight year drumbeat to sustain the integration and acceptance expertise and associated facilities. design capability through incremental improvements, both to drive down build We will welcome novel proposals from industry. costs and reduce subsequent support costs. In the short term key design eff ort will be focussed on improving these whole-life costs in the existing Astute We will take specifi c measures to ensure design, particularly in areas that have direct benefi t to subsequent classes. sustainability of signifi cant capabilities in 2nd and 3rd tier suppliers where these are at risk. B2.63 The submarine design programme will ensure options for a successor to the current Vanguard class deterrent are kept open in B2.67 We need further work to better understand the risks to advance of eventual decisions, likely to be necessary in this Parliament. 2nd and 3rd tier suppliers. Certain key capabilities have very limited Cost-eff ectiveness will clearly be a key factor in any consideration of sources of supply, which become fragile if they are not loaded or potential options, both submarine based and non-submarine based. managed appropriately. Several levers exist to reduce exposure to For submarine-based options it will be very important that MOD and this risk, ranging from increasing volume by amalgamating orders, to industry are able to demonstrate an ability to drive down and control removing the critical component by redesign. We will work with primes the costs of nuclear submarine programmes. Industry will be fully to prevent the loss of key capabilities through failure of the supply engaged in ensuring that design eff orts achieve the maximum impact chain. We are already moving in this direction with recent examples in control of submarine build and support costs, so sustaining the including procurement action to sustain the Astute Boat supply chain, potential for this signifi cant future business and military capability. and proposals to restructure aspects of the NSRP supply chain.

76 Defence Industrial Strategy improve itsperformance. We will buildonthemomentum generated by the itselfaroundbegin restructuring theemerging analysis assetoutabove to skills that we have identifi edasbeingimportant. to industry We expect design, systems engineeringandcombatthe high-end systems integration to arrive at acommon understandingoftheCore Work Load required to sustain Forshipdesignandbuild, we sixmonths surface aimwithinthenext B2.74 submarine programme management organisation withintheMOD. in early2007. This willbematched by theimplementation ofaunifi ed andsubsequent Astute classsubmarines of thecontract forthefourth issues. The isto objective achieve thisagreement intimefortheaward ofthesubmarineflthe fulllifecycle otilla,whileaddressing key aff ordability programme agreement level for withasingleindustrialentity partnering key companies that make upthesubmarinesupplychainto achieve a UndertheMIS,we negotiations willimmediately withthe start B2.73 the mostofimmediate opportunities. We willmove tobeginmaking ahead quickly isdependent onamoreSector coherent approach across bothdomains. improvements,support we recognize that aviableandsustainableMaritime By combining these projects, examining bothprocurement andlong-term to address growing concern ofelements ofthesector. at theperformance (SSS)projects. ShipSupport and Surface These initiatives were launched MISnow embraces theSubmarineAcquisition Modernisation (SAM) B2.72 routemap to delivering thiswhilstsustainingoursovereign capabilities. effi draw theirown conclusions. However, we needimprovements and inquality MIS isultimately dependent oncompanies’ willingnessto work together and itselfaroundrestructuring theemerging Core Work Load. The success ofthe Load indiscussionwithindustry. to Inparallel, begin we industry expect the sovereign capabilitieswe require. This includesdefi ningthe Core Work of future business, anddefi ningingreater detailhow we plan to maintain work isconcentrating onmore clearlyidentifying thelikely volume andtiming looking at how we canbesttacklethesediffi We have ontheMISforsometime, beenworking withindustry B2.71 relationship between theMODandindustry. ofdevelopingMIS willbeat theheart asustainable developing astream ofwork known astheMaritimeIndustrialStrategy (MIS). eff andaddress ectively overall long-term sustainability. Inparticular, we are across theMOD. We are committed to perform to changethat enablesindustry appointed ofnuclearsubmarineprogrammes asthesinglefocalpoint fordelivery coherence. For instance, Director General (Nuclear),basedintheDLO, hasbeen Arange ofmeasures are beingappliedto improve and ourperformance B2.70 knowledge forthebenefi tofboththeMODandprivate sector. working withindustry, usingsecondment andjoint working to develop career manageassociated disciplines. We anticipate thiswillinclude fragile. isnow Action inhandto redevelop theseareas andto actively and operator ofitsvessels. Insomespecialistareas is ourcapability the MODto fulfi litsobligations asasafeand competent owner Itisessential that for we sustainthequalitiesnecessary B2.69 develop andsustainourown capabilities. We to willseektowork togetherwithindustry exposure to cost escalations throughout thesupply chain. 1sttiersuppliersto ensure thatMOD andindustry theymanage costs occurs through bought-in equipment. Itisimperative forthe B2.68 Frequently asignifi oftheescalation cant inproject proportion ciency ifourprogrammeciency isto beaff ordable. The MISneeds to defi nethe cult sustainability issues. This improvement available capability to thefront ofthemilitary line. derived from excellent delivery, andthecontinual long-term support, fundamental shift from seekingprofi tthrough volume, to profi t head onandtacklingthechallengesitpresents, there canbea to doso,is awindow ofopportunity now. Bytakingthisopportunity needsto renew itselfandthere shipbuilding industry Our B2.76 Royal Navy, thetaxpayer oftheindustry. andforthelongterm sustainability potential.requirements export andmaximisethemilitary This isgoodforthe removing duplication andestablishingclearcentres ofexcellence, to meetour to streamline thebusinesses, makingthemmore effi ismatched to thatthe industry pattern ofdemand. There isaclearneed andintegrationif thedesign,manufacturing, within support capacity for ourselves, andindustry. Butthismore stablefuture canonlybeachieved demand fornavalcyclical warships andprovide amore future predictable streams incompetition. We have beenworking to smoothoutthelongterm build might off erbetter loaded value formoneythanseveral partially strategies. For example, onefullyloadedallocated ship stream ofsurface market. Value formoneymay soonbedelivered better through alternative ofcompetition,prospect thisisunlikely to besustainableinashrinking decade. offmiddle ofthenext Althoughover-capacity ersthetheoretical The increased fewyears demandofthenext willdiminishafter the B2.75 todothingsdiff for industry opportunity Equipment Programme opensawindow of The highwork loadintheimmediate Maritime strategy ofasustainability production fortheseequipments by June2006. Key by the maritimeequipment industrialcapabilitieswillbesupported way upkeep intheautumnof2006. headforthenext periods, whichstart with theaimofexploring alternative contracting arrangements andthe immediate we negotiationsFor shipsupport, willstart withindustry surface peakandthereduced torestructuring demand. meetboththeCVF post-CVF industrial arrangements programme beingputtogether ontheCVF to drive HMS ARGYLL. Defence Industrial Strategy Industrial Defence cient and profi table, erently. B2 77 Maritime Armoured Fighting Vehicles B3

Defi nition (Tracked) (CVR(T)) that are increasingly costly to run and have declining relative capability which exposes our forces to operational risk. B3.1 Armoured fi ghting vehicles (AFVs) are bespoke land military vehicles optimised for close combat operations which possess appropriate B3.4 AFVs will therefore continue to lie at the heart of the Army’s levels of survivability, lethality and mobility to enable operations military capability for the foreseeable future as they enable operations in a high threat environment. They perform in general utility as across the spectrum of operations, from stabilisation to warfi ghting. The well as specialised roles and can be either wheeled or tracked. Army’s two Armoured and three Mechanised brigades are the predominant users, along with 3 Royal Marines Commando Brigade with its Viking and Strategic overview Hippo vehicles. The current vehicle numbers are summarised below:

B3.2 The Defence White Paper of December 2003 stated that the UK Fleet Number requires a clear focus on projecting force, further afi eld and even more quickly than has previously been the case. This places an emphasis on (CR2) 385 speed of deployment, fl exibility, and the agility required to deploy rapidly CR2 Driver Training Tank 22 for a diverse range of expeditionary operations. We should maintain a Challenger Armoured Repair and Recovery Vehicle (CRARRV) 81 credible warfi ghting capability to undertake demanding combat in all Chieftain AVRE/AVLB/ARRV 119 appropriate Military Tasks and at varying scales of eff ort. In sum, our combat power must be credible enough to coerce and deter eff ectively Combat Engineer Tractor (CET) 73 and, when called upon, allow us to disrupt and defeat an opponent. Warrior 793 CVR(T) 1255 B3.3 The Army is being restructured in accordance with the Future Army Structure (FAS) programme to provide a fl exible and balanced Shielder 30 land force structure consisting of a mix of heavy, medium and light FV430 1492 capabilities. A key element is the medium force which, when grouped Saxon General War Role (GWR) 491 with joint assets, is termed the Medium Weight Capability. It will Saxon Patrol (Northern Ireland) 131 provide a responsive medium scale intervention force characterised by a high level of deployability (including elements by air), and Fuchs 11 greater levels of mobility, fi repower and protection than are currently Viking 108 possessed by light forces. The Future Rapid Eff ect System (FRES) lies Hippo (Beach Armoured Recovery Vehicle) 4 at the heart of this capability, but FRES is also required to replace obsolescent AFVs (e.g. Saxon, FV430 and Combat Vehicle Reconnaissance Total 4,995

Armour for the leading Battle Group of 4 Armoured Brigade wait for future deployment at Krivolac, Macedonia Tuesday March 2, 1999. The British troops and equipment were being prepared as a contingency for the developing stuation in Kosovo.

78 Defence Industrial Strategy B3.5 Equipment programmes units. Warrior’s OSDhasrecently beenextendedto theearly2030s. provide vehicle andengineer anarmoured forarmoured support infantry plan ABSVto modifytheremaining Warrior IFVs notrequired underFAS to Battlefi Support eld Vehicle (ABSV) Technology project. (FIST) The CSPwillincludethecurrent (HUMS), aswell asproviding linkagesto theFuture Integrated Soldier through anewturret, cannonandHealthUsage Monitoring System Warrior IFVs’ lethality, protection, ergonomics andavailability probably which isnow initsinitialplanningstages. current On plansitwillimprove capable to itsOSDitrequires aCapability Sustainment Programme (CSP) ofoperationson awidevariety since entering service. To ensure itremains B3.8 The tranche andassuchtheMODmay ofvehicles. needto convert afurther further in order to extendtheirlifeto thecurrent OSDof2015;thismay bereviewed Logistics Organisation (DLO) to convert thepowertrain for500vehicles willstart extensions to itsOSD. Itisincreasingly diffi B3.6 expected to undergo eitheralifeextensionoranupgrade programme. (UORs) to vehicles deployed to Iraq andAfghanistan, Saxon isnotcurrently date (OSD)out ofservice thanUrgent in2014.Other Operational Requirements B3.9 a fewhundred yards over theborder from Kosovo. aSerbiancheckpoint topauses duringapatrol observe A Challenger2tankfrom theQueensRoyal Hussars 37 The vehicle utility B3.7 to isassumedto ongoingreview. be2014,althoughthisissubject CVR(T) variants until FRESentersout oftheSpartan service. The current OSDfor by thedismounted Javelin anti-tank guidedweapon operating capability 2008. Thereafter, theFormation Recce overwatch willbemet capability guided weapon, fi tted theStrikerto variant, isplanned to itsOSDin reach Battlefi eldInformation System Application (P-BISA). The Swingfi re anti-tank communicationongoing Bowman conversion; andthefi ttingofPlatform with thermalimagersandnavigation andtarget location systems; the 1990s covering conversion to variants dieselengines;equippingScimitar series oflifeextensionprogrammes (LEPs) andupgrades since thelate (ISD)in1972,andhashad, andcontinuesservice to have, anextensive relative interms oflethality, performance andsurvivability. mobility aCSPinaroundto conduct ten to fi fteen years time to maintain its the mid2030s. We willtherefore needto consider therequirement to andP-BISA. Bowman CR2isnotexpected to leave until service successful operational lifeto date. Currently, CR2isbeing converted Saxon Combat Vehicle Reconnaissance(Tracked) (CVR(T)) Challenger 2(CR2)Challenger Warrior entered in1984andiscurrently service plannedto reach its familyentered in1987andhasbeensuccessful service FV430 entered in1998andhashada service entered in1965andhashadsuccessive service , alsoinitsconcept phase. We cult to support. In 2006 the Defence In2006theDefence cult to support. Armoured entered

B3.10 is contracted to deliver plustraining andsupport. 33ofeachtype to armoured andmechanisedbattlegroups. BAESystems LandSystems vehicles provide themobility, support counter-mobility andsurvivability Vehicle LaunchedBridgeand Armoured Vehicle Royal Engineers. These breacher); thesewillreplace thecurrent Chieftain-basedArmoured consists of TITAN (anarmoured bridgelayer) and TROJAN (anobstacle year next in December andiscurrently phase. initsmanufacture It units. andcommand support support combat combat support, service Saxon andLandRover Truck ofcombat, Mediumforavariety Utility Liaison Vehicles andSultan),FV430, (Spartan to replace someCVR(T) inthesecond halfof2007.PANTHERservice provides Command and Panther. B3.11 Trojan. Titan. The Engineer Tank System programme PANTHER isinitsDemonstration Phaseandisassumedto enter Defence Industrial Strategy Industrial Defence will enter service willenter service

B3 79 Armoured Fighting Vehicles B3.12 TERRIER, currently in its demonstration phase, is due to enter What is required for retention service in December 2008 and will replace the Combat Engineer Tractor. A in the UK industrial base? high utility combat engineer vehicle, there is potential to develop TERRIER into a wider family of engineer vehicles. BAE Systems Land Systems is B3.16 The AFV fleet lies at the heart of Land Forces military contracted to deliver 65 vehicles and initial contractor logistic support. effectiveness, without which the Land Force will be incapable of deployment or operations. Recent operations have shown B3.13 Future Rapid Eff ect System (FRES) is the Army’s highest priority their continuing importance and the significant demand for the programme and will be the central pillar of a capable, coherent and highly capabilities they provide. The following table shows the number deployable medium force. It plans to deliver a family of network-enabled of AFVs that have been deployed in recent operations: medium weight armoured vehicles covering a wide range of combat, combat support and combat service support roles. It has an ISD planning Main Heavy Warrior CVR(T) FV Saxon Other Total assumption for initial variants in the early years of the next decade, with Battle Support 430 further tranches of vehicles providing incremental enhancements to capability Tank Variant thereafter. Production is currently expected to continue into the late 2020s Falklands 10 10 1982 in order to deliver the large number of vehicles required by the Field Army. 221 124 331 584 861 357 2478 1991 B3.14 The programme is currently in its initial Assessment Phase (iAP), Bosnia 52 10 47 65 211 in which the MOD is being supported by an independent Systems House, (UN) Atkins. The broad aims of the iAP are: to further defi ne the capability 1995 required; develop aff ordable options to meet the requirement; develop Bosnia 29 26 98 176 235 79 10 653 (NATO) optimum procurement and support strategies and to manage technology and 1996 supplier risk to acceptable levels. A number of competitively let Technology Kosovo 30 12 65 35 51 193 Demonstrator Programmes (TDPs) are also being run in order to de-risk some 1999 of the emerging technology that is likely to be used on the platform. Central Iraq 116 50 236 78 251 82 813 to this are eff orts to defi ne and construct the electronic architecture, with open 2003 standards where appropriate, that will allow FRES to take its envisaged central Figure B3(ii). role within the NEC. FRES will have a pre-planned product improvement strategy to grow the capability over time, as well as a strategy for maintaining B3.17 There are compelling advantages to retaining a UK industrial a consistent modifi cation state across the fl eet during its long production run. AFV capability at a level which enables the UK to preserve the expertise it requires to maintain and upgrade the capability of current and future Indicative planning assumptions equipment, both in peacetime and for operational requirements. To make this possible, we need guaranteed access to the existing AFV fl eet Design B3.15 The key dynamic from the graph below is an assumption of an Authority (DA), BAE Systems Land Systems. But we will not do so at any increasing Equipment Plan (EP) spend which represents the beginning of cost. Indeed, the UK is willing to consider new AFV prime contractors our major investment in the FRES programme. However, there is a hiatus in being from off shore, so that we can access innovative capabilities from new platform development as the TERRIER, TITAN and TROJAN programmes foreign sources which may not be present in the UK industrial base. This have all now moved into production and envisaged major upgrades to may also include aspects of the DA role, although given that our priority the existing fl eet are not planned until the latter half of this decade or the is to be able to upgrade, meet UORs and support existing fl eets on-shore early half of the next. We currently assume a consistent long-term spend it will be necessary for the DA for new AFVs to establish or maintain within the STP of approximately £200M per annum. We expect to spend some form of substantive and empowered UK presence (which could approximately £140M in AFV research over the 10 year period, most of which be through an onshore partner with access to the necessary IPR). With will be absorbed in the FRES programme, included within the EP line. this in mind, the UK AFV industrial base needs to retain the following:

"SNPVSFE'JHIUJOH7FIJDMFT AFV Systems Engineering, Domain and Design Knowledge  - The UK’s AFV industry needs to be capable of understanding the

 military context of the UK user. Such domain knowledge should

 include a developed understanding of the operational context

&RVJQNFOU1MBO and the Defence Lines of Development. It also includes the  451 b . 3% ability to understand as an intelligent customer how to design,  develop and build a new AFV and the ability to integrate the  platform into the wider suite of capabilities that make up

 the network. This knowledge also supports the skills required

 :FBS  for the through-life capability management of AFVs, such as being able to understand how to undertake modifi cations, Figure B3(i) - Illustrative spend profi le. upgrades and complete UORs. Guaranteed access to design The above graph shows indicative spending in this sector over the next knowledge of the existing AFV fl eet will also be important to ten years. The fi gures from 08/09 are illustrative and include a range in underwrite the safety, legality and performance of these AFVs; order to emphasise the potential for shifts in investment priorities after the end of the current Spending Review period. This is prudent planning the intellectual ability to design, validate and interpret which does not distort the overall illustrative picture of general trends. the results of AFV testing should also be retained onshore, in order that the customer has complete assurance of the safety and capability of AFVs. Test and evaluation facilities do not necessarily have to be on-shore, except for sensitive sub-system testing;

80 Defence Industrial Strategy the Swedish CV90 Infantry Fightingthe Swedish Infantry CV90 Vehicle familyhave beenmore successful. andSaxon, theGermanLeopard 2MainBattle Challenger 2,CVR(T) Tank and success overUK hashadsomeexport thelast20years withthe Warrior IFV, forces butnoindigenousAFVcapability, andare heavily contested. Whilst the are usuallylimited to nations that have signifi cant investment intheirarmed markets. for eitherhomeorexport Once developed, opportunities export customer. The cost discourages independent speculative AFVdevelopment, development cost andhave ofnewproducts theirnational armed forces aslead (15-30 tonnes) categories rely ontheirnational governments to fundthehigh that produce sophisticated AFVs (30-70tonnes) andmedium intheheavy There isacompetitive world market forAFVs. Ingeneral, companies B3.18 AFV world market overview ofthecurrentOverview defence market Alvis engineersfiAlvis ttingUORs to Challenger2onOpTELIC1. the ability ofindustry theability must beonshore to guarantee operational availability. the management process to coordinate thiscomplex process not meanthat allcomponents mustbebuiltonshore, butthat of essential raw materials forcriticalsub-systems. This does to providechain, whichwillincludetheability secure sourcing repair andthemanagement ofaresponsive capability; supply ondeployedof contractor operations; support to enableasurge ofUORsinatimely manner;theprovisiondesign anddelivery operational tempo maintenance andinresponse to operational needs; overhaul AFVs ishowever required, bothforroutine Anonshore toof anAFVintheUK. repair capability and requirement to alloftheconstituent manufacture parts andrepairofAFVs manufacture AFVsub-systems critical ensure continued guaranteed access. These technologies include: build and criticalmasstoUK industrialbaseretains design, thenecessary leverage Itistherefore withcoalition partners. criticalthat the systems whichprovide orstrategic capability eitherbattle-winning Weapon systems. sensorsand High-performance software; Electronic architecture, mission-critical particularly Integrated solutions, notably survivability special and electric armour; special andelectric integrate onto theplatform suchsub-systems is of particular priority. isofparticular This includesthe to respondquicklyat timesofhigh – Within AFVs sub- are particular – There isnoabsolute to to

(FCS) programme. Within Europe, key players include GD andBAESystems have signifi cant roles intheUS Future Combat Systems weight vehicles GDalsohasastrong suchasStryker; European presence. Both which produces theM1Abrams MainBattle Tank andwheeledmedium French Leclerc MainBattle Tank and VBCI wheeledIFV, and Infantry Fighting Infantry Vehicle. The mainUSprovider is purchasing of SwedenUK, (BAESystems LandSystems Africa Hägglunds)andSouth by Most notably AFVs hasfallenbelow potential supplywhichhascausedrecent consolidation. by theirnational governments asoutlined. However, thedemandforheavy The world AFVmarket consists ofseveral majorcompanies supported B3.21 Specialised AFVs suchas TERRIER could alsobesuccessful exports. own, theFRESsolutionwould clearlybeacandidate forsuchexports. While theUKcurrently hasnomediumweight ofits product export vehiclesprice-competitive canbemodifi ed to suitnational requirements. over 10-20years, thenext where familiesoftechnically innovative, but medium weight vehicles willoff signifi er very The focuswhichtheUKandothernations are placingon cant market prospects B3.20 success,an outstandingexport itisnow generally viewed asobsolescent. signifi intheearly1970s. cant Althoughthis lightweightwas CVR(T) AFVsince has founditselfwithoutacompetitive product. We have notdeveloped a Ukraine and Turkey forexample -meansthat competition isstrong andUK into thislight AFVmarket ofnewlower cost –from manufacturers Russia, development fundedproduct more takingplace. industry However, theentry sophisticated andbothsupplydemandare greater andmore elastic, with Lightweight AFVs (inthe7-15tonnes bracket) tend to beless B3.19 mounting baseinFormer Yugoslav RepublicofMacedonia(FYROM). Warrior IrishGuards, vehicles aforward ofthe1stBattalion, at the endofCold War; andchangesinnational defence requirements and market followingcompetitive adeclineintheglobal export products; export that have notreached leadingto maturity product gapsinwork load;alackof include: low profi tmargins; thesignifi cant numberofUK national programmes etc) to one, Defence, Alvis, Vickers Systems, Defence RODefence, Marconi Systems Defence has beenitsrapid consolidation -from fi ve ormore prime companies (GKN inthepast10years The oftheUKAFVIndustry maincharacteristic B3.22 UK AFVmarket overview highlighting theneedforincreased to drive productivity competitiveness. inthemarket,capacity whichisdrivingamove towards consolidation and suppliers exist inEurope andAsia. There isthusanoversupply and ofproducts the GermanLeopard 2MainBattle Tank. In addition, anumberofother Wegmann and BAE Systems Systems Land BAE Systems United Defense Industries Rheinmetall Landsystems Gmbh Rheinmetall Landsystems hasextendeditsAFVglobalpresence from the . Drivers forthisconsolidation Defence Industrial Strategy Industrial Defence (UDI),producer oftheUSBradley General Dynamics whotogether co-produce GIAT Krauss-Maff , provider ofthe (GD), ei

B3 81 Armoured Fighting Vehicles priorities. However, the industrial model has not changed, resulting in a Sustainment strategy largely transactional relationship between the Government and industry, supported by traditional post-design service support. Much remains to be B3.28 There are two separate but linked areas involved in the sustainment done to develop a more modern relationship to manage the AFV capability of our AFV capability. The fi rst is improving the through-life management through life. The consolidation has also resulted in a pressing need for us to of the in-service capability linked to industrial transformation, and the develop a strategy with BAE Systems Land Systems in relation to the in-service second is the management of FRES. In addition, we need to understand fl eet whilst still retaining access to best of market products at sub-system level. the linkages between these two distinct but intertwined strands.

B3.23 Analysis of the forward programme and the sharp decline in B3.29 BAE Systems Land Systems is the DA for 95% of the vehicles in the design work in our programmes make it diffi cult to see how industry can current fl eet. Recognising this reality, we intend to pursue initiatives to change retain the skill base required for the key capabilities identifi ed if we were to the relationship between us in order that the demands of current operations, continue with our current approach. TITAN and TROJAN are in production, routine support and future upgrades are met more cost-eff ectively. We also and the TERRIER combat engineer vehicle is in development. These will seek improved reliability and the reduced deployed footprint necessary to support existing levels of design capability until the end of 2006, after enable the directed logistic approach which is central to the Future Army which there is no assured work. Manufacture of these vehicles fi nishes Structure (FAS). As a company, BAE Systems Land Systems operates in the in 2010. Export potential exists for TERRIER (and to a lesser extent TITAN UK, the US, Sweden and South Africa, but the activities of its constituent and TROJAN) but this is a niche market and, on its own, is unlikely to businesses are in our view largely autonomous. We wish to encourage BAE preserve signifi cant design and manufacture skills in the longer term. Systems Land Systems to become better able to move skills, information and eff ort within the company to provide improved value for money. We also wish to see continued evidence of a sustained willingness to respond to our defi ned requirements for improved through-life management of our existing armoured vehicle capability. This improved relationship will require us to take a more coherent through-life view within the Department.

B3.30 This will require real eff ort from both us and the company. We intend to work with BAE Systems Land Systems to develop a series of clear and incremental steps, which, subject to a satisfactory business case and underpinning commercial arrangements being agreed - would lead us towards a MOD/BAE Systems Land Systems partnering and business transformation agreement. Under this arrangement BAE Systems Land Systems would be Terrier. incentivised to act as the systems engineer for the current fl eet, contracting for capability provision and demonstrating a willingness to exploit the widest B3.24 The current model of support to the in-service fl eet off ers possible supply chain in order to benefi t from innovation and open competition. opportunities for design and limited manufacture work, but analysis shows This agreement will draw on lessons learned from our collective work under that such a reactive and transactional support arrangement does not of the munitions Framework Partnering Agreement, the Armoured Vehicle and itself allow long term industrial planning and restructuring. Nor does the AS90 support initiatives and, more widely, from our work to improve support current model sustain the skills needed to carry out technically complex, but for helicopters and fast jets. Successful delivery of work on the FV430 and infrequent, capability upgrades, including short notice support to UORs. potentially the Warrior and Challenger fl eets and the future relationship with ABRO will provide opportunities to build confi dence on both sides. B3.25 In particular, ABRO, a Trading Fund of the MOD provides pivotal support to operations by implementation and support for UORs. ABRO also B3.31 We have determined that there is no strategic need to provide the capability for our armoured fl eet base repair and maintenance. own ABRO, but we also recognise that ABRO provides us with a core capability in the repair and overhaul of the armoured fl eet, which must B3.26 Traditionally an AFV consists of a number of major sub-systems, be retained in the UK. We judge that until strategies for the future for which the AFV DA defi nes performance and interface requirements, provision of support for the armoured fl eet have matured, any change manufactures them or buys them in, and then integrates them into in ownership of ABRO represents an unacceptable level of risk. a working vehicle. In particular, these sub-systems can also enable the integration of the AFV into the wider military network, requiring B3.32 For the future, we require industry to deliver an increasingly complex particular expertise of the overarching electronic architecture. Thales system of systems that will make up the FRES fl eet. This includes not only the and Lockheed Martin are currently de-risking aspects of the required systems integration of complex sub-systems into the platform itself, which is electronic architecture for FRES through TDPs, in order to support more than just a question of the physical assembly, but also the integration of the role for FRES as a hub of the NEC. Furthermore, AFV combat the platform into the wider military network. This strategy is likely to involve systems are provided by both and Selex. a strong competitive element. It is questionable whether any single company has the ability or expertise to provide all elements of such a capability, whilst B3.27 The UK industrial base also has extensive experience in providing the delivering value for money and cost eff ectiveness. The most likely solution will physical architecture for AFVs such as tank track and transmissions provided by be a team in which national and international companies co-operate to deliver the William Cook group, Caterpillar and David Brown Engineering Ltd. the FRES platforms, including the required sub-systems, led by a systems integrator with the highest level of systems engineering, skills, resources and capabilities based in the UK. We welcome the international interest in the AFV market and encourage companies to invest in the UK to develop the IP and skills to meet our future AFV requirements. We must have suffi cient confi dence that we can access the IP, design authority and capability to upgrade or adapt the fl eet as required, frequently against demanding timescales.

82 Defence Industrial Strategy engage Iraqi vehicles Army onthefront line, justoutsideBasra. Callenger 2tanksofBSquadron, TheQueen’s Royal Lancers, mentioned earlier. current Our research prioritiesare focussedon: directed to specifi centities inorder to helpsustainthose key capabilities However, someofthenon-specifi cFRES research fundingmay be oftheFRESprogramme. 10years, insupport the next inparticular We currently planto spendsome£140Monresearch over B3.34 review therequirement in-house. thisentire to conduct portion within Government classifi becauseofitssecurity cation. We will regularly About30%ofourplannedAFVresearch needsto beconducted B3.33 of Network EnabledCapability as we seekto realise thebenefi ts requirements,survivability and produce increasingly demanding will increase, asevolving threats The technological complexity ofAFVs andintegration ofvehicles network. into thewidermilitary systems; sensor lethality; –includingnovel technologies survivability suchas to assessandproduce thecapability countermeasures management and integrated systems; survivability counter measures,electro-optic signature active lightweight armoursystems, protection active systems, to emerging enemy threats; Systems willbewell FRESprogramme. placed fortheforthcoming integration ofcomplex landsystems. Ifsuccessful intheirevolution, BAE keen inthesystemsare to seeabuildupintheUKofexpertise particularly skills andprocesses into drawing theUK, oninternational capabilities. We upgrades through life, andto bringadvanced landsystems’ technologies, evolution ofBAESystems LandSystems bothto deliver AFVavailability and Systems LandSystems ontheexisting fl eet we to seeasignifiexpect cant to AFVs.through agreement lifesupport withBAE Underthepartnering to sustain andthecapabilitiesskillsnecessary and theDepartment, and behavioural changesrequired ofbothBAESystems LandSystems will detailtheimprovements to beachieved, inperformance theprocess underpinned by arobust regime. milestone andperformance The plan of2006andto establishabusinesstransformation plan the earlypart on bothsides. We intend team within to establishajoint partnering willfocusonimplementing measures thatactivity buildconfi dence and eff arrangement requiredto improve thereliability, availability reached 2005,to inDecember building onthediscussionswe have already setintrain, andtheagreement We willneedto work hard withBAESystems LandSystems, B3.35 The way ahead ectiveness throughlifeectiveness ofourexisting AFVfl eets. give eff ect to the long term partnering to thelongterm partnering ect Defence Industrial Strategy Industrial Defence Initial B3 83 Armoured Fighting Vehicles Fixed Wing B4

Defi nition providing superior performance and fl exibility in both the Air Defence and Strike roles. The two main UK contractors, BAE Systems and Rolls- B4.1 This chapter covers fast jets, air transport, air refuelling, maritime Royce, have been awarded approximately 37.5% of the total 4 nation patrol, airborne surveillance, uninhabited aerial vehicles and important work share and are responsible for developing and producing part of aerospace sub-systems. the aircraft and engines respectively. The in-Service Date or ISD was achieved in 2003, and the currently assumed OSD is in the 2030s.

B4.6 Joint Strike Fighter (JSF) is the planned solution to the UK’s Joint Combat Aircraft (JCA) requirement which will succeed both the Harrier and Sea Harrier (which retires from service in early 2006). The JSF will be a stealthy fi ghter which will be capable of performing multi-role operations from land and sea. The UK is a key partner in the JSF development programme for the US Air Force, US Navy and US Marine Corps and has invested £2bn to date. The expected ISD is in the middle of the 2010s, and the currently assumed OSD is in the 2040s.

B4.7 Tornado GR4 is a 2-seat ground , capable of Joint Combat Aircraft. delivering a wide variety of ordnance. The GR4a variant provides a low level tactical reconnaissance capability. The currently assumed Strategic overview OSD is in the middle of the 2020s. Looking to the future, we will need to consider replacing the capability currently provided by the Tornado B4.2 Air power remains a fundamental component of war-fi ghting GR4. We are alive to the potential military capability that UCAVs may capability, complementing maritime and ground forces and providing an play in this force mix as a cost eff ective through life capability. off ensive and defensive capability in its own right. This will be enhanced by the increasing precision of air-delivered weapons and Network Enabled B4.8 By mid 2007, Harrier will be upgraded to GR9 standard Capability (NEC). Air power continues to off er the ability to transform with more powerful engines and electronic systems and able the battlespace, utilising its inherent attributes of reach and speed to to employ the latest smart weapons in its close air support enable strategic operational and tactical agility. To further enable this role. The currently assumed OSD is in the late 2010s. agility the RAF is undergoing a transformation and reorganisation in line with the ‘Agile Air Force (aAF) concept’ to establish agile mission groups capable of rapid reconfi guration to meet dynamic mission requirements. In addition, as an essential part of our future combat air capability, we are examining the balance between manned and uninhabited aerial vehicles. Therefore, whilst there is no current requirement for a new- design manned aircraft beyond our extant plans, future procurements of uninhabited and/or manned platforms are envisaged.

B4.3 The aerospace sector faces a potential watershed as increasing market globalisation, escalating development costs and the absence of any plans for new design manned fast jet aircraft threatens the continued viability of the UK’s existing design, development and manufacturing capabilities. Hawk Mk1. B4.4 This will herald a considerable change both for industry and Government, demanding a signifi cant shift in culture and ways of working. Training However, there is an enduring need to support and upgrade our existing and planned fl eets of manned aircraft, which are likely to have a service B4.9 UK Military Flying Training System (UKMFTS) seeks to life of at least 30 years. Moreover, in order to preserve the ability of the replace the current Flying Training System in order to deliver the required UK to conduct operations without undue dependence on other nations quantity and quality of aircrew for the three Services, in the most effi cient it will be necessary to preserve a number of capabilities onshore. and timely manner. UKMFTS achieved Initial Gate approval in Dec 02, the preferred Procurement Strategy is Public Private Partnerships (PPP), Equipment programmes with component parts of the UKMFTS system procured through a mix of Private Finance Initiatives (PFI) and Smart conventional procurement. Fast Jets The Advanced Jet Trainer portion of UKMFTS will be met by the procurement of Hawk 128; these will replace the current Hawk Mk1 B4.5 Typhoon is a multi-role combat fi ghter that will replace aircraft. A Design and Development contract was let to BAE Systems Jaguar (Out of Service Date or OSD 2007) and the Tornado F3 in in 2004. The currently expected ISD is at the end of the decade.

84 Defence Industrial Strategy B4.13 A400M (artist’s impression). B4.10 Large Aircraft Sentry. B4.11 are currently withanassumedOSDearlyinthe2030s. in-service, aircraft, isplannedto bephasedoutfrom 2008.25ofthenewer C-130J in1968andthecurrentcame into service fl eet, which comprises 25 Transport Fleet, providing andstrategic tactical airliftcapability. B4.14 decade,next with anassumedOSDtowards themiddle ofthecentury. produced SL(AMSL). by AirbusMilitary The expectedISDisearlyinthe and theUK).A400MisaPost Main-Gate beingdeveloped project and European Nations (Germany, France, Turkey, Luxembourg Spain,, is beingprocured through acollaborative programme now involving seven crisis andwillbecome themainstay oftheUK’s force. transport It tactical andstrategic inpeace totactical and allthree airliftcapability Services early in the next decade.early inthenext OSDwilldependonnegotiations withthePFIpartner. ensure that avalue formoneyPFI solutioncanbeachieved. The expectedISDis Ltd, comprising EADS,, aconsortium Rolls-Royce, Thales and Group,VT to revenue to off settheprocurement costs. We are indiscussionswithAirTanker flus amodern,well-equipped eetwhilstallowing theaircraft to earn commercial We are to expecting provide theFSTA through capability aPFI,whichshouldgive theworld-wide operationssupport inwhichtheUKmustbeready to participate. B4.12 decade.of thenext The currently assumedOSDisintheearly2030s. the endoftheirlease. We planto purchase afi fthaircraft intheearlypart are onleaseandwe have plansto purchase theseoutright from at Boeing Forces Reaction Rapid andcarrieslarger loadsthantheA400M.Four aircraft range ofoperations. Itprovides thestrategic required liftcapability to deploy for amoderntanker aircraft to replace ourcurrent C-130 Hercules C-130 Hercules A400M C-17 Sentry AEWMk1 Sentry Future Strategic Tanker Aircraft(FSTA) plays akey role infulfi llingtheairlift requirements inawide willbeanextremely fl exible aircraft that willprovide is thecurrent mainstay ofour Tactical Air isahighlycapable and versatile Airborne VC10 is planned to meet our need isplannedto meetourneed and TriStar C-130K fl eetsand which does not distort theoverallwhich doesnotdistort illustrative picture ofgeneral trends. the endofcurrent SpendingReviewperiod. This isprudentplanning order to thepotential ininvestment emphasise for shifts prioritiesafter ten years. The fi gures from 08/09are illustrative andincludea range in The above graph shows indicative over spendinginthissector thenext IllustrativeFigure spendprofi B4(i) le. will become an increasingly more signifi ofindustry’s cant part business. hand, the predicted declineinEPprovision to platforms meansthat support the current level ofcost ofnewer growth platforms. inthesupport theother On indicates muststrive to that limit of STPfundingassumedforsupport industry and develop theEP. newtechnologies to support The relatively constant level within theShort Term Plan(STP) andtheplannedresearch funding to identify Plan (EP), thecost ofmaintaining andoperating theequipment captured oversector 10years. thenext This includestheassumptionforEquipment B4.18 Figure assumptionsinthefi B4(i)illustrates ourbudgetary xed wing Indicative planningassumptions bring the UK capability intobring theUKcapability linewithNATO andtheUS. aircraft outadditionalduties,an upgrade and to to enabletheSentry carry Warning AndControl System (AWACS) aircraft. Project B4.15 FR Aviation) over to therest maintain theSentry ofitsoperational life. by BAESystems, Grumman(supported been placed withNorthrop AARand until themid-2030s. A£665Minnovative fl eet availability has contract decade.to earlynext Itisanticipated enter service to remain inservice electronic reconnaissanceelectronic andintelligence gathering. Project the B4.16 decade, withacurrently assumedOSDinthemiddleof2030s. BAE Systems. The ofthenext currently expected ISDisinthe earlypart search andrescue. Nimrod isbeingdeveloped MRA4 andproduced by can betasked role warfare forananti-submarine orfor oranti-surface completely aircraft re-engineered to deliver that alongrange capability R Mk1 B4.17 The programme isscheduledforincremental from roll-out 2012to 2015. mission systems, associated ground stations andtraining facilities. The set outto 2025. be maintained againstanevolving andincreasingly diverse target will provide anupgrade to the signifi cant role inoureffortsto develop Network Enabled Capability. As akey element inourfuture mixofsensorassets. operations. from Itisexpected to 2006forsome30years. beinservice in awiderange of scenarios, from humanitarianaidto combat commanders with accurate andtimelyground information surveillance b .        Nimrod R1    aircraft willdeliver anentirely newcapability, providing Nimrod MRA4 Nimrod R1 Airborne Stand Off Airborne Stand hasahighlysophisticated suite ofsystems usedfor HELIX isaderivative oftheMaritimePatrol Nimrod MR2. includesincremental upgrades to theaircraft derived from theexisting MR2aircraft, isa Nimrod R1 'JYFE8JOH Radar(ASTOR) anditsSentinel :FBS Defence Industrial Strategy Industrial Defence capability, enablingitto ASTOR EAGLE EAGLE willplay a HELIX willprovide isscheduled  &RVJQNFOU1MBO 3% 451

B4 85 Fixed Wing What is required for retention B4.24 Mission Systems provide the means by which air platforms of all in the UK industrial base? types (including manned, uninhabited, fast jet, large and helicopters) deliver their essential capability. They also provide a key component of an aircraft’s B4.19 As we are introducing two new highly sophisticated manned ability to survive and defend itself. A key part of air systems design is the combat fast jet aircraft types which are intended to last for more than 30 integration of systems and data within an aircraft, and integration of the years, current plans do not envisage the UK needing to design and build a aircraft within the wider command, control and information environment of future generation of manned fast jet aircraft beyond these types. However, the battle-space. Sensor fusion techniques are key to rationalising the masses precisely because the current fl eet and the new types we are introducing of incoming sensor data, whilst the ability to produce high quality mission and are likely to have such long operational lives, the retention of an aerospace safety critical software systems is needed to deliver safe, high performance engineering and design capability is critical for through-life capability systems. Mission management and information exchange systems are management, in order to provide for maintenance, major upgrade and required to enable integrated operations in joint and coalition environments. integration of new weapon systems, avionics and defensive aids. Until now, traditional thinking has linked the phases of design and development inevitably with manufacture. This model now needs to change. The focus Examples of Mission Systems include: must be on through-life capability management and what is required to sustain this critical capability in the likely absence of large-scale Electro-Optical (EO) sensors are critical to manufacture, as these skills can no longer be assumed to be automatically combat identifi cation, precision attack, terrain transferred from new aircraft design. The UK is not alone in having to avoidance, reconnaissance, visual augmentation face these issues; it applies to the rest of Europe and even to the US. / night vision and missile approach warning. Radar is critical to situational awareness, air to air and air to B4.20 The world market for the large and training aircraft is surface attack (including combat identifi cation and missile not presently a concern, and there is no sovereign requirement to guidance), ground mapping and all-weather operations. sustain an indigenous capability in these areas. We will continue to Electronic Support Measures (ESM) provides the need, however, the systems engineering and design skills and access ability to identify emissions from enemy platforms and to Intellectual Property Rights for the integration of new mission weapon systems in order to provide warning and spatial systems, avionics and defensive aids into these platforms. awareness of threats to prompt defensive action. Defensive Aids Systems (DAS) go beyond ESM to provide B4. 21 The scale and degree of sovereign support required varies the means to detect, jam, deceive and defend against threats. substantially, predominantly by type and use of aircraft. At one level, we might need a fit of special equipment to a limited number of aircraft for a specific mission. Alternatively we may need to conduct a major re-life programme involving structural and mechanical changes as B4.25 There is a strong UK based capability in the Mission Systems area, well as substantial and sensitive upgrade to the aircraft’s electronics. which has enabled the UK to deploy world-class capability without undue There is also a requirement to retain the ability to modify or upgrade dependence on other nations, and to participate in international future aircraft on a case by case basis through-life for specific purposes to programmes, such as JSF, with market-leading technology. However, this match UK Defence doctrine, which may not be reflected by other capability is now threatened by an intermittent fl ow of new programmes. nations. For example, it is important that a UK-based weapon system integration and system interface capability exists in order to ensure safe operation of any UK air system, including the integration of new technology. Retention of this capability onshore also assists in sustaining an important intelligent customer capability for non-UK designed aircraft. In other areas we may be prepared to accept other solutions.

B4.22 Safe and Lawful Operation of Aircraft: In order to comply with UK safety legislation and airworthiness standards, it will be necessary for our suppliers (onshore and offshore) to retain an understanding of our standards and processes. This is particularly important in the area of safety critical software systems and the integration, test and evaluation of new weapons.

Aerospace systems and enabling skills and technologies

B4.23 Whilst the UK will have an enduring need for access to world leading technology across the range of aerospace systems, it is neither practical nor aff ordable to retain all the relevant skills and technologies onshore. Our focus, therefore, is to identify and preserve the key underpinning skills and technologies that will allow the UK to conduct operations and deploy new world-class systems without undue dependence on other nations. The preservation of carefully targeted world-leading skills, techniques and technologies will also allow onshore companies to provide key elements of future collaborative programmes, so preserving UK strategic infl uence on those programmes. A modern “glass” cockpit © Eurofi ghter.

86 Defence Industrial Strategy a 20.5%stake inSAABAB, oftheSwedish themanufacturer Gripenaircraft. in DassaultAviation, ofRafale. the manufacturer Similarly, BAESystems holds (A400M) andthe Typhoon programme. EADSalsoholdsamajorshareholding wing aircraft market withinEurope, Company primarilyviatheAirbusMilitary of previous mergers. These two companies now dominate thedefence fi xed DASA (Germany), national companies whichthemselves were theproduct once housedwithinAerospatiale, Matra, Dassault(France), (Spain)and CASA 14 aerospace andEADScombines companies thecapabilities withintheUK, been more severe. For example, BAESystems hasgrown from themerging of chain have beenaff ected, although at thehighertiersimplications have Consolidation hasbecome a dominant theme. Alltiersofthesupply B4.30 1970s withnewvariants continuing to bedesignedindigenouslynow. fast jetonitsown since theHawk, fi rstdeveloped inthelate 1960s-early and Australia). Indeed, a theUKhasnotdesignedandmanufactured Italy,phase: USA,UK, theNetherlands, Turkey, Norway Canada, Denmark, inthedevelopmentItaly andSpain)JSF(ninenations partnering can beclearlyseenwithboth Typhoon nations: Germany, UK, (fourpartner wishes to withinitsterritory. seesomeelement of thework performed This aircraft, orbecausenations needto collaborate to share costs andeach company hasthefullsetofcapabilitiesrequired to produce world-standard The trend isforcollaborative working, eitherbecausenosingle B4.29 Typhoon. the Aeronautic (Aerospace) sector. estimate Some contractor, with2004salesof$35.5billionand33%theirin istheworld’s Lockheednearing production. Martin largest defence and with theDassaultRafale Typhoon andtheJSF inproduction The defence market isalsoentering anewphaseofactivity B4.27 expected to increase by more than40%between 2004and2009. military, isreasonably buoyant at present. Civilaircraft is production The European andUSaerospace market, bothcivilianand B4.26 and UKaerospace market ofthecurrentOverview global signifi aircraft designanddevelopment cant innewmilitary reduction work. main consideration forthemajorsuppliersisthat there willbeapotentially recent changesintheEuropean andUSaerospace defence industry. The of ever-more sophisticated, capableandexpensive platforms hasdriven platforms, suchasJSFand Typhoon. The trend towards fewer, smallerfl eets are focusedincreasingly onfewer butmore capableandfl exible multi-role The defence aerospace market, however, ischanging. Budgets B4.28 30 countries needingto replace aircraft over fi thenext ve years. fi ghter market some£9Bn could be worth p.a. by 2011withsome 1 Source: The Teal Group 1 that theworldwide through itsthree SELEXcompanies sector, electronics defence andsecurity andtheworld’s biggest sixth Finmeccanica hasbecome Europe’s second biggestoperator inthe sector. Following aseriesofagreements struckwithBAESystems, B4.31 There hasbeen similarconsolidation inthedefence electronics and SELEXSensors AirborneSystems 2 develop competitive advantage inwhat appearsto beagrowth area. BAE Systems andEADS,are inthisfi alsoactive eld, with allseeking to Israeli companies have notableexperience. European companies, including the widespread useofuninhabited platforms, afi eldinwhichUSand The future aerospace market might show asignifi cant shift to B4.35 the JSFprogramme. Indeed, theircontribution iscentral to theSTOVL variant. current USprogrammes. Rolls-Royce isalsoplaying akey role intakingforward by USacquisitions) andthelatter potentially viaitsteaming withUSprimeson due to itspresence intheJSFprogramme anditsincreasing USfocus(bolstered primes, BAESystems inthisarena, and EADShave theformer opportunities companies ableto gainaccess to USprogrammes. themajorEuropean Both willoffproduction, forthose aerospace opportunities erincreasingly important The USmarket, driven by larger defence budgetsandgreater scale of B4.34 A C-130 theaustere Hercules Post landsat airstripofArchers inKenya. company SNECMA are now theothermajorplayers intheindustry. US companies andPratt General Electric & Whitney andtheFrench US AllisonEngineCompany andBMW’s division. aero-engine The followingmanufacturers anumberofacquisitions includingthe Rolls-Royce isoneoftheworld’s aero largest engine military B4.33 implies that primecontractors may bemore likely to face sustainment issues. businesses have highlydiversifi edandoften international portfolios. This between civilanddefence sidesofthebusinessandsome and capability down thesupplychainthere ismore scope forleveraging common technology interests, buttheseare largely driven by diff erent businessmodels. Further adjacent businessesinthecivilsector, forexample defence andcivilaerospace companies andmustremain focusedondefence markets. They may have aircraft fl eets. The majorprime contractors are generally, by nature, defence ofnewtechnologies andcapabilitiesintocomponents our fortheinsertion to rely increasingly onspecialistcontractors and forindividualsub-systems suppliers’ sub-systems, rather integrated thanvertically models. We willneed on development ofsystems architectures ofother facilitating insertion The role ofprimecontractor isalsochangingto onefocusedmore B4.32 $2bn revenues splitbetween Europe America. andNorth and systems companies, withmore than10,000staff andnearly developed into oneoftheleadingtransatlantic aerospace equipment

SELEXSistemi Integrati, SELEXCommunications 2 ,andSmithsAerospace has Defence Industrial Strategy Industrial Defence B4 87 Fixed Wing Sustainment strategy B4.42 For JSF, the through life support of the UK aircraft will be provided from the Lockheed Martin Global Support System which is B4.36 The issues facing the Aerospace Sector are a matter of being established on a co-operative basis amongst the 9 JSF partner mutual concern to Government and Industry alike. The nations. This will provide support, through performance based contracts, Defence Industrial Strategy gives timely context for this. to the JSF fl eet. As part of this performance based arrangement, the UK also intends to establish sovereign support capabilities which would B4.37 At one level, we need to be clear that both the nature and volume provide, inter alia, in country facilities to maintain, repair and upgrade of customer demand are changing, with implications for the industrial base. the UK fl eet and an Integrated Pilot and Maintainer Training Centre. Our The coming decline in new programme work will have an impact on aim, endorsed by the US Department of Defence (DOD) and agreed with the UK industrial footprint, in particular around BAE Air Systems’ four main Lockheed Martin, is that BAE Systems as a key JSF Industry partner to production sites (Warton and Samlesbury in Lancashire, Brough in the East Lockheed Martin will provide these support services in the UK under a Riding of Yorkshire and Woodford in Cheshire). The challenge is to manage this Team JSF badge with contracts fl owing from the MOD to DOD to Team JSF. transition and sustain in the UK – in the absence of major new programmes There is no fundamental defence requirement for a JSF Final Assembly – the industrial skills, capabilities and technologies that are required to sustain and Check Out (FACO) facility, although an on-going joint study with DTI/ our ability to operate, support, maintain and upgrade our aircraft over the next BAE Systems, due to conclude in early 2006, is seeking to assess whether 30 years. MOD has been working closely with BAE Systems, as the UK’s a UK FACO is necessary to preserve essential engineering skills within BAE only supplier of fast jets, for some time to understand these mutual Systems and would be a cost eff ective solution or whether alternatives challenges. We are committed to continuing this dialogue with a view would provide a better outcome in terms of sustaining core skills. to fi nding a solution that meets the defence needs, now and in the future, recognising that this will need to make commercial sense for the company. Propulsion B4.38 This is likely to demand a long-term and strategic approach. To that end, MOD and BAE Systems intend to work together to explore how Power systems are central in the air, as well as at sea. In this fi eld, Rolls- a long term partnering arrangement for the through-life availability of Royce are a champion within the UK defence industry, and a world a signifi cant proportion of the fi xed-wing fl eet might be delivered. Such leader in aero-engines, marine and land systems. 100% of our major an approach, if delivered, would allow rationalisation (to take out surplus warships and 80% of our aircraft are powered by Rolls-Royce engines. capacity), improved effi ciency and better ways of working, capacity management (to smooth workloads), exit and step-in provisions, and We will wish to retain in the UK the ability to support and upgrade open-book accounting; there has to be alignment of objectives. Specifi cally, our platforms through-life, and sub-systems, including engines- often incentivised platform availability and in some cases platform capability extremely complex in their own right- are often the key route to contracts with industry will be crucial to the future delivery of operational improving reliability and other aspects of capability. Rolls-Royce is output at the frontline. It will demand changes on both sides to conduct already playing a signifi cant role as a strategic partner to the MOD business diff erently, and is probably best achieved through a phased in this area- as demonstrated by the innovative through-life engine approach so that the risks can be progressively tackled - and success, for both support arrangements already in place for Harrier, VC-10 and Nimrod. parties, assured. This needs to extend through the entire aerospace supply chain, as all have a part to play in delivering this capability through-life. We will also continue to invest in propulsion technologies where these show potential application to our future needs. B4.39 Our need to retain a minimum level of onshore capability New work includes the Aff ordable Combat Engine Technology does not necessarily mean that we will need to support all aspects of TDP, in which we will invest about £12.4M over 4 years. our aircraft in the UK. This is because generic capabilities and skills developed to support one aircraft type may be brought to bear on another, depending upon similarity of type, role, technology and complexity. In considering whether to retain an onshore support capability for any B4.43 We will also engage closely with our major suppliers to particular aircraft fl eet, we will fi rst determine where the best value review the applicability of civil standards to military aircraft. This for money can be obtained. Where this is off shore, we will assess any will allow us to gain maximum leverage from the UK civil aerospace implications of pursuing that route on our ability to preserve a minimum market and to focus our resources more specifi cally on sustaining capability across the breadth of our business. Thus, at the strategic capabilities that are unique to the military environment. level, we will manage what amounts to a portfolio approach. Aerospace systems and enabling B4.40 For any particular aircraft type there may also be a middle skills and technologies ground where, to secure value for money for example, we may rely on off -shore suppliers for major upgrade but retain onshore maintenance, B4.44 Further work to identify strategically important underpinning skills support and Urgent Operational Requirements (UORs) capabilities. and technologies will be undertaken, which we hope will be completed by Autumn 2006, and we will work closely with industry to understand how B4.41 For Typhoon, we will design a cost eff ective and aff ordable national these might be retained onshore. Our general strategy will be to target support solution, incorporating best practices from lean and end-to-end more accurately our existing research budget, possibly through research principles. We intend to work with our quadrinational partners to eff ect this. partnerships. This will help UK industry to identify and exploit new techniques However, major changes must be made in the management and operation and technologies and to remain at the technological forefront of new of the supply chain to incentivise continued improvements in the support developments. We do not envisage any signifi cant investment in production arrangements for this aircraft, ensuring that we retain onshore our ability to facilities; rather we expect to benefi t from downstream economy of scale satisfy our sovereign requirements over its lifetime. Clearly, BAE Systems, and, savings as a result of military export sales and commercial exploitation. for the engines and mission systems respectively, Rolls-Royce , Smiths Aerospace and Selex Sensors and Airborne Systems will have a signifi cant role to play in this.

88 Defence Industrial Strategy fund industrialcapabilities forwhichwe have noidentifi ed requirement. Fighter fl eetswithmannedaircraft -andthat we should avoid continuing to that we shallwant to replace elements ofthe Typhoon andJoint Strike longterm requirements ofourvery both theuncertainty -withthepossibility fast jetprogramme, shouldtherequirement foroneemerge. This recognises core industrialskills required to contribute to any future international manned - andto invest indeveloping UCAV technology -willalsoprovide uswiththe ensure eff to the through-life ective existing andplannedfastjet support plansto Our retain onshore theindustrialcapabilitiesrequired eet to fl B4.49 together, we canensure that theUKiswell positionedforthefuture. employees. Butifwe, MODandindustry, face thischallengeup-front, with theUKat theforefront -to thedetriment ofthecompanies andtheir happen anyway, andordered butinalessstructured way andnotnecessarily it, intheglobaldefence will theinevitablereduction aerospace industry intosurvive thelongterm to meetourchangingfuture requirements. Without tothe sector remain ahealthy, competitive andprofi tableonethat can appropriate size andshapeforthedemand. With thisprocess, we canhelp other companies inthedefence aerospace sothat sector itcanreach the programmes islikely to entail, andwe willwork withBAESystems andthe The MODrecognises thediffi B4.48 intermsreduction ofbothinfrastructure andemployment isinevitable. current size isnotsustainable, oftheairsector andrationalisation and of fi aircraft hasfoursitesxed wingmilitary dedicated to airsystems. The advanced combat jetsforalongtime, andyet theprincipalonshore supplier to onitsown designandmanufacture not hadthecapability themost The aerospace isfacingatough sector challenge. The UKhas B4.47 The challengeahead arrangements to willbeinplace proceed to allow thisactivity in2006. contributing to thecosts.with MODandindustry We hopethat appropriate of relevance to UAVs andUCAVs more broadly. This would beajoint eff ort abetterdesigned to understandingofkey give technologies usandindustry place withamore substantial TDP ( Technology Demonstrator Programmes) case beingdemonstrated andappropriate commercial arrangements beingin programmes, we intend to move to avalue subject formoneybusiness forward from concept to fi rst ight in tenmonths. Buildingonthesuccess ofthese fl realised anddemonstrated. For example, BAESystems’ own Raven UAV went has signifi cantly cutthetimeinwhichnewideasand technologies canbe and engineering. This approach, whichwe are keen to usemore widely, focus onkey objectives, afastdecisionmakingprocess, andrapid prototyping pioneered arange management ofagileproject techniques; anabsolute technologyand MOD-funded demonstration programmes. This work has working onUAV technologies, following somerecent successful company very take suchanaspiration forward. team BAESystems isleadingaUKindustry consolidation andtransformation, we are considering ways inwhichwe can around Inthecontext ofthewiderdiscussionswithindustry B4.46 competitive edgeinapotentially lucrative andcivilmarket. military Additionally, thebenefi to develop a istheopportunity tforUKindustry uninhabited aircraft whichwillneedto betaken inthe2010-2015timeframe. we canmake better informeddecisionsonthefuture mixofmannedand our future fi xed wingaircraft. Suchinvestment would also ensure that that we needto provide assurance to operate ofourability andsupport aerospacehelp to sustainthevery engineeringanddesigncapabilities targeted investment inUCAV technology demonstrator programmes would UCAV technology. Althoughat present we have nofundedUCAV programme, We share aclosealignment ofinterest andindustry inUAV and B4.45 Uninhabited Combat Air Vehicles (UCAVs) Uninhabited Air Vehicles (UAVs) and culties that inplannednew reduction by by We needto develop thedialogue inwhichwe have beenengaged B4.50 The way ahead the transformation that isrequired –andto implement itfrom 2007. the way ahead–whichwillbechallenginggiven thescope ofthescale through life to operate, andupgradeourfastjetcombat aircraft support to ourability be inthesupplychain–that willbesoimportant andtechnologiesindustrial skills, –wherever capability they may agreement requiredto facilitate theeff the terms ofthebusinessrationalisation andtransformation commencing negotiations withBAESystems inearneston . We aimonworking withthecompany during2006to agree Defence Industrial Strategy Industrial Defence ective sustainmentofthe ective B4 89 Fixed Wing Helicopters B5

Defi nition Capability Domain Description Attack A helicopter capable of autonomous and co- B5.1 This chapter addresses helicopters and those systems that are unique operative attack using appropriate weapons against to them; other avionic systems are addressed in the Aerospace chapter. surface (land and maritime) and sub-surface targets Strategic overview Find A helicopter capable of autonomous action, which provides tactical commanders with B5.2 Helicopters play a major role in the UK’s military operations. The reconnaissance, surveillance and target acquisition Battlefi eld Helicopter (BH) fl eet has recently operated in a wide variety Lift A helicopter capable of a vertical-lift capability to of theatres, including urban and rural areas in Northern Ireland, the Iraqi support military operations, which must enable the desert, the mountains of Afghanistan and the jungles of Sierra Leone. rapid deployment, in-theatre movement, re-supply and extraction of joint forces and their equipment

B5.5 The requirement to move ship-based troops and equipment to the onshore Battlespace is known as Littoral Manoeuvre and is captured in the Land elements of the taxonomy.

B5.6 A number of early priorities have been agreed during an initial phase of analysis to drive the delivery of improved capability in the early years. These included: sustaining the capability currently provided by Land and Maritime Lynx and Gazelle aircraft; securing a value for money approach to modernising the maritime Merlin Mk1; progressing with a helicopter-based replacement search and rescue (SAR) capability; and undertaking restorative measures in Lift. Work necessary to defi ne how much, and when, to invest further in the Land Lift capability, including the balance between Medium and Large Lift aircraft, will be undertaken in the Land Advanced Concept Phase (LACP), reporting in late 2006.

B5.7 Search and Rescue (SAR) activities in the UK, Falkland Islands and are treated as a separate capability area, as are basic helicopter training needs (provided by the Defence Helicopter Flying School), support to training activities and general liaison roles.

Equipment programmes Chinook Mk2 transporting a Light Gun during Op SILKMAN Sierra Leone. B5.8 The Merlin Mk1 Capability Sustainment Programme (CSP) B5.3 Helicopters are inherently responsive, adaptable and fl exible, aims to ensure continuity of capability and introduce an open-systems and contribute to a variety of military tasks. They can operate in a architecture to the Royal Navy’s (RN) airborne Anti-Submarine Warfare very wide range of combat and environmental conditions. Therefore (ASW) capability. It will also enable the cost-eff ective management to be an eff ective component of a balanced expeditionary force they of obsolescence on an aircraft which has components and design need to have high reliability and availability and require the minimum features that are becoming diffi cult to support. This programme is possible deployed logistic support equipment and infrastructure. scheduled to achieve its In-Service-Date (ISD) in the middle of the next decade. Merlin Mk1 is likely to remain in-service into the 2030s. B5.4 The Future Rotorcraft Capability (FRC) programme was created in July 2004, to identify a future strategy that maximised the capability that B5.9 Replacements are needed for capabilities provided by the could be delivered from available funding. The FRC programme was directed Lynx and Gazelle aircraft in service with both the Army and the RN. The to explore opportunities to use each helicopter type to deliver more than preferred solution, currently undergoing detailed analysis to ensure, one capability, reduce the number of types of helicopters in-service and amongst other aspects, its value for money, for these requirements is the promote off -the-shelf (OTS) solutions, limiting unique UK requirements to the Future Lynx performing as the Army’s Battlefi eld Reconnaissance essential in order to drive down costs of ownership. To understand better the Helicopter (BRH) capability and the RN Surface Combatant Maritime nature of future helicopters requirements, a FRC taxonomy was agreed and Rotorcraft (SCMR), although some Gazelle will be retained in the used to defi ne the overall capability, recognising that individual platforms non-combat training, support and liaison roles. Both BRH and SCMR contribute routinely across the capability domains. For combat helicopters, are scheduled to be delivered in the middle of the next decade. three capability domains of Attack, Find and Lift were identifi ed and, within each, separate environmental requirements for Land and Maritime:

90 Defence Industrial Strategy OSDs orrequire obsolescence issuesto beaddressed withinthistimeframe. beyond decade, themiddleofnext since allwillreach theirplanned all needinvestment iftheircontribution isto to beextended theLiftcapability helicopters. The Puma, KingMk4,MerlinMk3andChinookMk2/2Awill Sea investing innewequipment orsustainingandenhancingpresent lift forward. willbedetermining Key thebalance between to thisactivity and theappropriate balance ofinvestment onhow thisshouldbetaken The LACP willmake recommendations onourfuture B5.12 readiness ofCombat SARcrews decade. inthemiddleofnext aircrewscontract that retains ofmilitary to aproportion enable operational Agency. Itisplannedto beginto replace withasingle thiscapability by civilianhelicopters undercontract to theMaritime&Coastguard in theUKare provided by andRN,withtheremainder theRAF provided 51 Currently, of themajority B5.11 Adecisionwillbetaken year next onwhethertoairworthiness. proceed. aswe1990s whichare have notinservice their beenunableto certify to finecessary eldthe8 turn ofthedecade. Assessments are alsowell onthework underway the lifeofplatform. This work to isexpected complete around the sustainment programme,capability shoulditbedecidedto extend communicationsBowman system andwillenableafuture of operations. Itisalsoanessential precursor fortheintegration ofthe fi integrated ttingofalarge numberofpartially equipments insupport aflof supporting eetwithdisparate equipment standards due theto decade.the next This work intheoverall willenableareduction cost baseline fortheChinookfl eetandis expected be to completed earlyin programme Apackageofwork known asthe B5.10 Interior ofMerlinhelicopter Squadron. of824Naval Air Apache. hasbeenlaunchedto establishasingleconfi guration Chinook Mk3s Chinook Search and Rescue (SAR) andRescue Search procured from inthelate Boeing Chinook Mk2/2AcoherenceChinook Chinook Lift helicopters capability capability

Army programme to reduce costs andproduce appropriate commonality. its potential OSDby another10years. This willbeco-ordinated withtheUS how theAHcanbesustainedthrough life, includinginvestigations to extend currently assumedOSDinaround 25years. Work isongoingto determine (AH) Inaddition,theexisting fl eetof67 B5.13 and streamlining arrangements. acceptance andrelease-to-service improved solutions; ofequipment commonality training andsupport innovativeby: exploiting arrangements; newairframes; support over ten thenext years. goalisto Our reduce thecost ofownership toexpect spendanaverage costs of£600millionayear onsupport all helicopters withintheEquipment Programme (EP). We currently Figure B5(i)shows thecurrent profi leoffundingassumedfor B5.14 Indicative planning assumptions B5.16 within theUKindustrialbase? What isrequired for retention may bescope to combine someorallofthesecontracts induecourse. liaisontaskscurrentlynon-combat by Gazelle. undertaken Inaddition,there solution willbesought inthefuture to replace and thetraining support of about£42Mperannumto industry. Itisalsolikely that aCOMR-type Registeredwhich are (COMR) Military CivilianOwned andequalspend Belize, BruneiandCyprus. These contracts amount to aircraft, over sixty liaisontasks,and othernon-operational butalsoin mainlyintheUK, Flying Training (MFTS), School surveillance, training support, VIP fl ights andtheRNusetoCommand theRAF provide (JHC), aircraft fortheMilitary which sitoutsidetheFRCandAHprogrammes, whichtheJoint Helicopter The MODhasvarious helicopter Private Finance Initiatives (PFI), B5.15 theoverallwhich doesnotdistort illustrative picture ofgeneral trends. the endofcurrent SpendingReviewperiod. This isprudentplanning order to thepotential ininvestment emphasise for shifts prioritiesafter ten years. The fi gures from 08/09are illustrative andincludea range in The above graph shows indicative over spending inthissector thenext Illustrative Figure spendprofi B5(i) le. aircraft canbeundertaken. Without theseskillswe may notbeableto skills willberequired, ofourexisting not leastto helpensure thesupport future battlespace network-enabled ofsystems abroad engineering spectrum B5.17 to besustainedto ensure ourcurrent aircraft canbesupported. fl ofmuchthein-service original manufacturer eet, andwillneed operations. These skillsare primarilyresident inAgustaWestland, the ofongoing support indirect ofnewcapability and theurgent insertion includes theprovision ofnewsensorsanddefensive aids, repair structural This includesmodifi cation andprogrammed upgrades,typically which oftheplatform. tois essential, ensure the airworthiness inparticular ofourcurrentskills criticalto thethrough-life UKdesignedaircraft support

b .          willcontinue to meettheAttack role intheLandenvironment until its   Support of current aircraft ofcurrent Support Systems engineering 3PUBSZ8JOH –Inorder to address thedemandsof :FBS – The retention onshore ofthose Defence Industrial Strategy Industrial Defence Apache AttackHelicopters  &RVJQNFOU1MBO 3% 451 B5 91 Helicopters upgrade and insert new technologies into the existing fl eet. These skills range heavily on trial and error methods. The technology enables members of the from the integration of platform, powerplant, navigation and communications Armed Forces to remain operationally eff ective in an otherwise disruptive systems through to the more complex integration of mission system, sensors environment caused by the vibrations from the platform. It has been and processors. We would also wish a modelling and simulation capacity fi tted onto Merlin Mk1. We will sustain this expertise through continued to be retained within the UK. We expect that these skills will be sustained research, linked to improved exploitation with industrial partners. through ongoing helicopter acquisition and upgrade programmes and other major Defence activities outside the helicopters environment. For example, Merlin CSP will help maintain and enhance those required skills at Lockheed Martin in Havant (the Design Authority for this system) and Thales UK (as a signifi cant equipment provider). We would also wish to exploit the wider capacity available to multinational companies, not least by managing workloads more effi ciently across the breadth of those companies.

Key technologies to enhance future platform development

B5.18 As helicopters cover a wide span of technologies and enabling areas of expertise, the totality would be unaff ordable to sustain through our demands alone. However, there are particularly important technologies for helicopters within niche areas, which provide the Armed Forces with unique capabilities and off er leverage in our co- HMS ARK ROYAL in the Northern Arabian Gulf, is resupplied operation with allies and the broader design and manufacturing base. by a Royal Navy Sea King of 820 Naval Air Squadron.

B5.19 Rotor blades - Rotor blade technology is a key area of UK B5.23 Electronic architecture – There are a variety of electronic systems expertise that has, for example, allowed the 15 tonne Merlin Mk1 aircraft which are vital to both the safe fl ight of helicopters and also their ability to operate within the same maritime rotor diameter constraint as the 10 to fi ght on the battlefi eld. As a minimum we would wish to retain the tonne Sea King variant which it replaced. The UK has been instrumental knowledge of the controlling and source software within such capabilities as: in investigating performance and enhancing blades. Looking ahead, this technology off ers better range and payload capabilities and could Infra Red (IR) systems lead to lower whole life costs and vibration. Investment in the British Electro-Optic (EO) sensors Experimental Rotor Programme (BERP) technology will continue until the Mission management software technology has been matured and successfully demonstrated in fl ight. Electronic Warfare (EW) systems This will sustain the skill base, although decisions about integration of BERP IV blades onto our helicopter fl eet will be made on their merits. Overview of the current global defence market B5.20 Mission systems – The threat spectrum in which helicopters operate places a premium on situational awareness, augmented B5.24 Market background – The fi ve major manufacturers by on-board decision-making aids and enhanced Human Machine in the global helicopter market are Boeing, Sikorsky, Eurocopter, Interface (HMI) integration, such as speaker-independent voice control. AgustaWestland and Bell. Each harnesses the majority of its revenue The design and manufacture of compact, world-leading sonar and from military sales, which are predicted to grow by 60% over the next radar systems is an example of where the UK plays a leading role in decade, as a result of the US helicopter programme. The civil market helicopter-specifi c mission systems. Continued investment in the COvert is likely to remain relatively static in comparison. This represents a Night Day Operations Rotorcraft (CONDOR) technology development signifi cant opportunity, following recent success in the US Presidential programme, which could off er exploitation opportunities around the helicopter replacement programme, for AgustaWestland as both middle of the next decade, will help to sustain this skill base. Future Lynx and Merlin have excellent export potential, particularly in the maritime segment of the future helicopter market. B5.21 Survivability – Helicopter Survivability requires a systems approach across a broad spread of capabilities including those Electro-Optical B5.25 Reductions in defence spending in all European Union countries has (EO) sensors, Radar, Electronic Support Measures (ESM) and Defensive Aids driven a marked fall-back in the amount of funds available for the research Systems (DAS) essential to underpin the UK’s land and maritime capabilities. and development of new capabilities. As a consequence, further integration It is a sensitive and critical capability that provides choice to the is likely to be required in the European market, and access to the US market in the pursuit of his mission. We intend to protect the security of supply will be critical to the viability of all helicopter manufacturers. We believe of these underpinning technologies and to minimise the opportunities the UK has an important advantage due to its close links with the US. for our adversaries to counter those systems through knowledge of their operation. We will retain the ability to manufacture prototypes, test Overview of the current UK defence market and evaluate potential solutions and use crew-in-the-loop simulation to develop tactics to support ongoing UK operational commitments. B5.26 The UK helicopter market is dominated by AgustaWestland, who currently provide the in-service and through-life support B5.22 Vibration management - The UK’s ability to design, prototype and to the majority of the UK’s helicopter fl eet. AgustaWestland validate active vibration management systems off ers signifi cant military and form part of the Finmeccanica group of companies. cost of ownership benefi ts. The ability lies in a physics-level understanding of how vibrations are transmitted through the helicopter and addressing B5.27 Lockheed Martin UK, part of the wider Lockheed Martin this through active systems; this is in contrast to other nations, which rely group, is the prime contractor for the RN Merlin Mk1 fl eet of aircraft.

92 Defence Industrial Strategy capability indevisingthe capability Vibration Management technology outlinedabove. systems forhelicopters. AgustaWestland and and AirborneSystems and fl ight control systems.Both transmission systems and engines. the GEM,GNOMEandRTM322 with (inconjunction TurboMecca) helicopter Mk7aircraft. KingASaC the Sea systems andradios andare alsotheprimecontractor fortheconversion of supplier ofavionics forhelicopters andothersub-systems suchasmission transformation. We would suchagreements expect to draw onthebreadth appropriate sovereignty over ourhelicopter andin enabling business capability where itmakes senseinterms ofbetter value formoney, maintaining encourageactively appropriate arrangements withindustry partnering withintheUKfornewaircraft. capability production However, we will requirement to maintain aseparate national helicopter designand systems engineeringcapability, althoughitisnotanabsolute sovereign cost-eff through-life ective capability. We intend to sustainastrong the helicopter inorder industrialsector to deliver amore coherent and strategy seeks to develop acloser, more transparent relationship with Within thecontext ofouragreed FRCstrategy, oursustainment B5.32 General Sustainment strategy include UKhelicopter sub-contractors B5.29 improved eff and ectiveness value formoneytheArmed Forces. associated components inorder to test whethertheirsalemight deliver that itwillconsider takingto themarket DARA’s wingand rotary trading fundoftheMOD. hasrecentlyThe Department announced by the undertaken The ofourhelicopter majority repair andoverhaul is B5.28 incentivised to improve helicopter availability andreliability through-life. to transform is to anewbusinessmodelwherefor industry industry theplatforms,demands to buttheydogenerate support arequirement These newarrangements donotsignifi cantly changethe technical industrial competencies to respond to helicopter requirements. capability and Through-Life Customer solutionswillrequire Support anumberof Contracting forAvailability, Integrated (IOS) Operational Support B5.31 ofoperations. support inthedirect andinvolvingfor services industry increasingly moving away from theprovision ofequipment to contracting The anditssources helicopter ofrevenue industry are changing, B5.30 Trends inIraq.Merlin operating

Westland TransmissionsLtd Defence Aviation RepairAgency provide avionics andinformation management Smiths Industries Smiths General Dynamics UK General Dynamics Rolls-Royce Defence Aerospace design anddevelop helicopter QinetiQ provide ofelectronic avariety Thales UK also provide particular alsoprovide particular (DARA), a and whoare amajor Selex Sensors Selex Sensors support support

support our current platforms ourcurrent through long-term, partnered support suppliers to implementrevised andnovel arrangements to B5.38 Integrated Operational Support challenging andasopencommercial confi denceswillallow. placed withAgustaWestland. arrangements forourcurrentsupport helicopters andothercontracts will helpdrive coherence in,andvalue formoneyfrom, thefuture engineering skill-base reduce theirrelianceonourinvestment to sustainthisdesign this transformation to provide better value for money and realise businesstransformation withinthecompany. We wish relationship withAgustaWestland,demanding partnered to We alsointend to B5.37 DA at to medium-term. thecompanynecessary capacity intheshort appears to provide andalsosustainsthe therequired capability military undergoing andvalue formoneyassessment, detailedcapability asit preferred solutionisto invest intheFuture Lynx product the company. Therefore, to meettheBRHandSCMRrequirement depth ofengineeringskillsrequired thetransformation of norsupport Presidential Helicopter, butthisisinsuffi work onMerlinMk1andtheUS and sub-contract opportunities export The AgustaWestland skill-baseisat present exercised through B5.36 in helicopter design, development ordemonstration activities faced with tech’‘high onlyfound engineeringchallenges, typically this skill-baseisbestsustainedby ensuringthat individualsare succession management. discipline to ensure adepthofknowledge, experience andeff ective systems. The sustainment oftheseskillsrequires asuffi and systems; andforPuma andGazelle, theyare theDA forUKspecifi c Merlin; forApache, theyhave arole to co-ordinate inputsofplatform are theplatform andsystems DA; theyare theplatform DA fortheRN a DA role: forLynx, Kingandthebattlefi Sea eld variant ofMerlinthey For ofourexisting aircraft, themajority AgustaWestland have B5.35 AgustaWestland sometimes collectively referred (DA) to Authority asaDesign capability. competence intheintegration into ofsub-systems aircraft. These skillsare standards, demandsandsafety plus design), knowledge ofUKmilitary integration, powerplant integration, test andevaluation andsoftware design,aerodynamics,(including structural dynamicsystems, avionics notice. short at very This requires ofengineering skills awidespectrum eff enhancements, andtimelyembodiment ective ofcapability sometimes crash investigations ofany andthe remedial (includingthedelivery action) issues, arrangements to respond andanability support to airworthiness Sustainment oftheexisting fl eetentails theprovision ofnecessary B5.34 Sustainment oftheexisting fl where appropriate withouralliesandindustry. incloseco-operation the development andexploitation ofkey nichetechnologies, acting robust andprofi baseintheUK. Finally, tablesupport we willencourage sale ofDARA to Fleetlands create willprovide theopportunity amore over time. Aswe recently announced, we would hopetheenvisaged inmeetingourbroad needs common approach capability withindustry future we intend ourIOSarrangements to develop towards further a Inmanagingbetter ourcurrent fl eetandthetransition to the B5.33 and depthoftheindustry’s capacity, bothintheUKandfrom abroad.

We have work alreadystarted with anumberofhelicopter . This work willalsoassesshow partnering The professionalism andeff promote a more open, predictable but promote amoreopen,predictable We intend thisprocessto beboth cient to sustainthebreadth and eet Defence Industrial Strategy Industrial Defence ciency ciency in each ectiveness ectiveness of , currently our

. B5 93 Helicopters contracts that require industry to provide serviceable aircraft B5.40 We also plan to work with Boeing to improve the through-life at the front-line. An Integrated Operational Support (IOS) approach support arrangements to our Chinook fl eet. This supports our aspiration for Sea King is in place and similar approaches are being considered for for eff ective capability management for current aircraft. Boeing, as the other aircraft. This is already delivering improved performance in aircraft DA for the Chinook aircraft, is best placed to undertake the necessary sustainability and availability, together with associated management logistical transformation needed in the supply chain that ensures Chinook information to facilitate performance management. At present, tailored can be upgraded when we wish in order to develop military capability. arrangements have been pursued on an aircraft-by-aircraft basis, but we Much of the work will be spilt between DARA for depth maintenance intend to focus eff orts on ensuring these initiatives converge and the front-line base to ensure a viable onshore presence. and that lessons are learnt, shared and implemented. Exploiting research

B5.41 We will continue to invest in research in support of the development of key helicopter related technologies. This investment averages approximately £13M per year and it is anticipated that it will remain at this level for the foreseeable future. Our priorities include: enhanced helicopter survivability; operations in Day/Night and all weather and adverse environmental conditions; improved mission decision support systems; research into improving mission performance; and ways of reducing whole life costs.

The way ahead

B5.42 We need to drive forward with AgustaWestland the implementation of the business transformation partnering arrangement that we committed to through the Heads of Agreement signed in April 2005. A partnering team (jointly resourced by MOD and AgustaWestland) has, for the last six months, been exploring partnering opportunities across those areas of the business indicated in the Heads of Agreement. We hope that by the Spring of 2006, subject to value for money having been demonstrated, we will have reached agreement on a Strategic Partnering Arrangement (SPA) which will be focused on activities to sustain the design engineering skills and knowledge of UK military demands and safety standards within the company necessary for them to provide eff ective through-life support to those elements of the in-service helicopter fl eet for which they are the DA. The SPA is intended to commit both parties to specifi c targets on, inter alia, cost and schedule adherence (and where appropriate improvement) and improvements in operational availability; it will be Humanitarian aid is off loaded from a RAF Puma in Mozambique. underpinned by a Business Transformation Plan that sets out the process and behavioural changes required both by MOD and AgustaWestland. Wider industrial engagement for the future

B5.39 We will explore how partnering contracts and concepts can be utilised in areas of the helicopter sector. But it is important to be clear that we will continue to look to the vibrant and competitive global market place to satisfy our future helicopter requirement with AgustaWestland’s role neither predefi ned nor guaranteed, but dependent on their performance and the value for money of their propositions. The support arrangements for our future helicopter fl eets, irrespective of their source of supply, will also be determined on value for money arguments (recognising that it will be important to be clear that they are coherent with existing support infrastructure and capabilities).

94 Defence Industrial Strategy General Munitions B6

Defi nition B6.6 The 105mm Improved Ammunition (IA) project is procuring an improved High Explosive (HE) round (L50) for use with B6.1 General munitions are those “simple” munitions that do not tend the Light Gun. The L50 is more cost eff ective and lethal than the in- to require interventionist maintenance procedures. The technology is based service L31 round, and has a much improved IM signature. The new primarily on energetics (explosives chemistry and mechanical engineering) and shell will use existing fuzes until the introduction of the IM TACAS F&FS where intervention is necessary it is simple and requires generic engineering towards the end of the decade. Currently the assumed ISD is 2007. capability. They do not require to be managed with their parent systems B6.7 4.5” Improved Ammunition (IA) is in service but not yet Strategic overview fi tted ‘fl eet-wide’ across the Royal Navy (RN). IA increases the range of 4.5” ammunition; a separate programme is investigating the potential B6.2 General munitions, be they Land, Sea or Air delivered, to move to a fully compliant IM round. A study is exploring options provide an essential part of the defence arsenal. Notwithstanding for improving the capability of the RN’s medium calibre gun. the drivers for increased accuracy and lower stockpiles, there will be an enduring requirement for general munitions for the foreseeable B6.8 The current OSD for CRV-7(FW) is around the end of the future to complement an increasing arsenal of complex weapons. decade to coincide with the projected OSD for Harrier GR7.

B6.3 Recent operations have clearly demonstrated that despite the increases in technology, modern warfare, particularly on the ground, B6 requires highly trained and motivated service personnel to engage in combat at a very personal level. It is in such engagements that quality general munitions, including Small Arms Ammunition (SAA), are essential to provide the volumes of fi re and the 24 hour, all weather capability required to suppress, neutralise and demoralise enemy forces. Security of supply for general munitions will therefore remain an important consideration.

Equipment programmes

B6.4 The major infl uence on future general munitions programmes is our policy on Insensitive Munitions (IM). The energetic materials that give munitions their propulsive and destructive power also make them susceptible to accident and combat stimuli such as heat, shock and impact. A number of design techniques exist which can reduce munition vulnerability, General Munitions and minimise the potential collateral damage from an event. Munitions AS90 fi ring High Explosive ammunition. incorporating these design features are termed IM. Under UK legislation we have a duty to ensure, as far as reasonably practicable, that our munitions B6.9 The L27 CHARM3 is the current in-service 120mm Armour are designed and constructed to be safe and without risk. As such, all Piercing Fin Stabilising Discarding Sabot (APFSDS) Depleted future munitions must be IM compliant. Where existing non-IM compliant Uranium (DU) tank round. The OSD is not yet known but is dependent on munitions cannot be converted, all new buys of these munitions will require the shelf lives of the L16 and L17 charges, which are being evaluated. A an IM Waiver. The aspiration is that by 2010 all new UK munitions will be IM, possible Low Vulnerability (LOVA) replacement charge is being studied. although some legacy non-IM systems may remain in service beyond 2010. For APFSDS training, the CHARM3 Training Round (C3TR) – comprising the inert L29A1 (shot) and the L18A1 (charge) – is used. The replacement of the L23A1 APFSDS tungsten round, which has an OSD of 2008, by a During Operation TELIC, of the 4,400 new tungsten round is being investigated. For the longer term, research is ongoing to assess the option of replacing the current rifled barrel containers initially shipped to the Gulf, with smoothbore. If this option were taken it is possible that, although smoothbore ammunition is currently available off the shelf, UK would seek over 25% contained munitions – some to develop, potentially with overseas partners, new ammunition in order 20,000 tonnes to match emerging threats that defeat current smoothbore ammunition. B6.10 The L31A7 High Explosive Squash Head (HESH) OSD is B6.5 The Tubed Artillery Conventional Ammunition System (TACAS) currently assumed to be around the end of the decade. L32A6 Squash programme is looking at the future requirements of the 155mm family of Head Practice Round (SH-PRAC), an inert HESH training round has munitions. This may include a more effi cient and eff ective charge system, no IM issues and hence no planned OSD. The 30mm Rarden cannon fi res improved projectiles, and new packaging, asset tracking and smart tagging. the Armour Piercing Discarding Sabot (APDS), which has a currently The Fuze and Fuze Setter (F&FS) programme seeks to deliver a F&FS for assumed OSD around the end of the decade. The 30mm High Explosive the 105mm/155mm suite of munition and will be available to all platforms. (HE) round is to remain in-service until 2012, it is not due to be replaced.

Defence Industrial Strategy 95 B6.11 The ammunition used by: £65M on general munitions next year across these three funding streams. The graph does not show spend on stock purchases which for the sniper rifl e and long range rifl e have expected FY04/05 amounted to approximately £208M. This is excluded from the ISDs later in the decade and are likely to run for graph in order to maintain consistency across all chapters. The total 15 years in alignment with the weapons; spend on general munitions is expected to remain broadly constant the 0.5 and Barrett Anti Material over the next ten years, and a general shift in balance from EP to STP Rifl e OSD is 2015 in alignment with the weapons; spend as systems currently under development are delivered. We will Automatic Grenade Launcher has an ISD is continue to focus on developing new technical solutions, including IM 2007 and has a shelf life of 10 years; technology, whilst maintaining and improving our existing capability. the 51mm Light Mortar has an OSD of 2007 for smoke and

illumination natures and 2010 for high explosive. 51mm  (FOFSBM.VOJUJPOT capability may be replaced by 40mm grenades;  the 81mm mortar is planned to be in service  for at least the next 15 years.   &RVJQNFOU1MBO  451 b .  3%







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Figure B6(i) - Illustrative spend profi le. The above graph shows indicative spending in this sector over the next ten years. The fi gures from 08/09 are illustrative and include a range in order to emphasise the potential for shifts in investment priorities after the end of the current Spending Review period. This is prudent planning which does not distort the overall illustrative picture of general trends.

Munitions Vision – To achieve a defi ned SA80 with the Underslung Grenade Launcher. military capability, when and where B6.12 The Next Generation Light Anti-Armour Weapon (NLAW) is a short-range shoulder launched unguided system with broad applications it is needed, at minimum whole-life across all arms and services and will replace the capability provided by the LAW80 weapon. The system is being developed in collaboration with Sweden, cost, whilst ensuring intrinsic safety with Saab Bofors Dynamics as prime contractor and Ltd as the main UK subcontractor. The expected ISD is the end of 2006. What is required for retention within the UK industrial base? B6.13 The Anti Structures Munition (ASM) will provide the dismounted infantry with a hand-held, shoulder launched weapon to defeat defended B6.17 In order to deliver the munitions vision and to determine structures such as buildings and bunkers. The programme is currently in a what should be retained onshore, the key is to ensure a sustainable competitive Assessment Phase between Saab Bofors Dynamics and Dynamit and secure supply that provides best value for money. Nobel Defence. Currently assumed ISD is around the end of the decade. System design B6.14 A mid-life improvement (MLI) for the Shielder system, that lays the L35A1 anti tank mines, is scheduled for the middle of the next decade to B6.18 It is essential that we retain onshore the Design Authority (DA) extend the life to the middle of the following decade. The currently assumed role and its underpinning capability for munitions manufactured in the Barmine OSD is early in the next decade, no replacement is planned. UK. From a national security perspective, dependency on another nation for this may aff ect our ability to follow a preferred strategy, due to the B6.15 There is a huge variety of explosives, pyrotechnics and provider nation having diff erent strategic goals. We also require the accessories, the detail of which is too diverse to cover. In addition, various ability to develop munitions for specifi c purposes to match our doctrine capability gaps exist or will appear due to obsolescence, age, Taggant issues where it is not refl ected by other nations. We need to maintain onshore (plastic explosive tagging laws), IM compliance and other related issues. an intelligent customer capability for non-UK designed munitions.

Indicative planning assumptions B6.19 We are a proven world leader in the fi eld of IM and related energetic materials such as Polymer Bonded Explosives (PBX) and B6.16 Figure B6(i) illustrates our assumptions for spend in standard Low Vulnerability (LOVA) propellants. The maintenance of these accruals terms on general munitions over the next 10 years. This includes capabilities in the UK can provide us with the ability to infl uence in co- the cost of new general munitions via the Equipment Plan (EP), the operative/collaborative procurement through technology sharing. cost of maintaining in-service general munitions within the Short Term Plan (STP) and the planned research funding to identify and develop new technologies to support the EP. The UK is likely to spend around System development

96 Defence Industrial Strategy of globalisation, the collapse oftheFar Eastmarket formunitions andthe cannot betermed afree market. The last15years hasseenthepressure The general munitionsmarketplace ishighlyfragmented and B6.25 ofthecurrentOverview UKdefence market components from diff erent suppliers: Land Systems) whichintegrates Prime contractor (BAESystems equipment by manufactured aUK is agoodexample ofapiece of The 5.56mmballammunition assurance andoperational needs for quality andsomesafety security AUK-based Integrated Test andEvaluation isessential capability B6.24 Test andevaluation munitions aswell asat leastaminimummunitionsdisposalscapability. that we retain onshore aproof capability forUKdesigned andsurveillance and intrinsic safety, ofcare duty andlegalcompliance Itisalsoessential activities. includes surge munitionstechnical production, management, storage capability Arobust through-life onshore management capability isvital. This B6.23 Maintaining system capabilitythrough-life to assure concurrent surge across production therequired range ofmunitions. Furthermore, mustbesuffi capability thesurge manufacturing presence inparticular, mustensure strong industry supplychainmanagement. Inorder to surge ingeneral, manufacture andfrom areduced onshore B6.22 chain compression andsurge ofahighvolume manufacture product. for onshore manufacture, butthiswould constrain thescope forsupply per annum.Ifoff shore supply could beguaranteed there would benoneed onshore, butnotat any cost. We buyintheregion of120Mrounds ofSAA islessclearcut.SAA manufacture Itisdesirable to retain SAAmanufacture though we want to retain andcasting. PBXmanufacture The positionon to ofbulk explosives retain it necessary allaspects inUK, manufacture to thisprovingsubject value formoney. However, we donotconsider onshorecapability aswell asaspecialiststeels andforging capability such, we wishto retain asubstantive andfl exible ll, assembleandpack fi operationally viableandproviding demonstrable value formoney. As through increased surge where production, technically possibleand We intend to reduce dependence onlarge munitionsstockpiles B6.21 System manufacture safe operation ofany UKproduced system. munitionwiththedelivery system integration exists inorder andsystem capability interface to ensure onshore However, intheUK. that aUK-based itisimportant platform We require littlesystem development to beretained capability B6.20 direct the testing to meet our performance and safety standards. andsafety thetestingdirect to meetourperformance it isvitalthat we retain to understand, thecapability interpret and We outthetesting donotconsider onshore, itessential to carry yet

where theydonotmeetUKstandards. 1

Currently we donotreadily accept foreign test results ciently robust 1 . develop along-term relationship withtheirnation state governments. choices have hadto bemadewhetherto exit themarket, diversify and/or consolidation andlossofdomesticcompetition. For themainmarket players, volume ofrequirements, fallingR&Dfunding, considerable industrial eff ofthepost cold ect warpeace dividend. This has resulted inthedeclining of competition. We willkeep thesituation underreview. whichcouldacquisition reduce ormerger opportunities theamount However, themarket isdynamic, and some companies are exploring environment. Assuchthere are nogrounds forimmediate concern. The to remaining ahealthy 20%issubject competitive B6.28 achieving approximately 80%ofthetotal value inFY04/05. ofourrepeatsupply themajority buysofexisting general munitions, under theterms ofthe in theaccompanying table. Ascanbeseen,BAESystems LandSystems, provided services by thesesuppliersisshown andsupport the products to general munitionsduringFY04/05,asimplifisupport edbreakdown of Figure B6(ii)shows thetop 13suppliersofgeneral munitions, and B6.27 to take theultimate supplyriskto operations; theUKhassimilarconcerns. to retain surge underUScontrol. capacity This suggeststhat USisnotprepared requirements theUSisbelieved to beaddingto itscore inorder SAAproduction, is rising, largely driven by theUSAandalso, to alesserextent, by theUK. To fulfi lits rounds perannum.Following aperiodofdeclinesince themid1990sconsumption The world market demandforSAAisestimated to beintheorder of5.2billion ofsupply.security We seethismostwiththecurrent oftheglobalmarket to usisthecapacity globaldrain for ontheSAAmarket. importance particular Of B6.26 HMS STALBANSfi ring4.5”Gun. "5,64 8JNNJT4XJU[FSMBOE #"&4ZTUFNT6, 1.14PVUI"GSJDB Framework Agreement(FPA) Partnering Defence Industrial Strategy Industrial Defence , B6 97 General Munitions )FBEMJOFT 5PQ4VQQMJFST FYD#"&-BOE4ZTUFNT 

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Supplier Product Range B6.29 An example of healthy competition is the recent contract BAE Systems Land Systems Large Calibre Training Ammunition, for supply of the Rocket Hand Fired Para Illum between PW Defence Extended Range Bomblet System, (UK), Rheinmetall (Germany) and others (who did not meet the Naval 4.5” Gun Prod HE and SUP, User Statement of Requirement). Both PW Defence and Rheinmetall 120 Tank CHARM 3 Training Round, products were tested and the Rhinemetall product was chosen. 81mm Mortar, 30mm Aden TP, 30mm DSRR Training Round, B6.30 Currently we retain in-house the through-life management of the KCB/KAA Naval Rounds, Small Arms munitions stockpile, including the management of disposal contracts. Storage, stock Ammunition, BLADE, DU Demil, maintenance and distribution of munitions are also carried out by our personnel. Munitions Global Post Design Services, Naval Proof Yard, SX2 Sustainment strategy Explosive The present Chemring Countermeasures Aircraft counter-measures Bofors Defence Ltd 105mm Illuminating B6.31 The FPA was signed in 1999 and is a long term arrangement between PW Defence General pyrotechnics including: us and RO Defence (now part of BAE Systems Land Systems). Under the Smokes, Illuminating, EOD stores terms of the agreement we will procure repeat buys of general munitions from BAE Systems Land Systems until 2010, on the assumption that the NAMMO 66mm Anti-tank rocket arrangement continues to represent best for value for money. The FPA has Wallop Defence Aircraft counter-measures proved successful and continues to provide benefi ts for both parties. Austin Hayes Ltd Packaging Rheinmetall Waff e Munition General pyrotechnics, including B6.32 The FPA ensures that the UK maintains a strategically important smokes sustainable and secure onshore industrial capability to deliver much of our general munitions requirement. It has been successful at achieving a long term value for Troon Investments Ltd Mines & explosives money agreement. It secured products at fi xed prices, resulting in a signifi cant General Dynamics Phalanx ammunition return on our initial investment and minimises the cost and risk of re-supply. QinetiQ Technical support services B6.33 The introduction of the FPA rationalised BAE Systems Land Systems Nobel Enterprises Nobel Enterprises munitions business and avoided the costs of any closures. Further, the formal Denis Meters Ltd Smokes and Marine Marker alignment with us has supported investment in new technologies and products such pyrotechnics as IM, whilst the formal adoption of gainshare mechanisms has created a culture Figure B6(ii). of continuous improvement and provided the opportunity to increase profi t rates.

98 Defence Industrial Strategy strategic onshore industrialcapability. success ofthe FPA andmaintain akey MASS isexpected to emulate the B6.41 The future specialist natures ofroles foravariety andcustomers. suppliersprovide Other nichecapabilitiesand B6.40 agreement hasalready matured agreement. into aformalpartnering at 24hoursnotice to meetsurge requirements. The Wallops Systems Defence both companies are committed to providing asignifi cant numberofstores Chemring Countermeasures. These are designedto provide capability, and the majorsuppliersofaircountermeasures, Wallop Systems Defence and We have alsocreated innovative contracting arrangements with B6.39 Partnering hasencouraged strong working relationships withbothcompanies. is Rheinmetall, and we agreement alsohave withthem. aformalpartnering the FPA withBAESystems LandSystems. The largest non-UKbasedsupplier agreement withthecompanyformal partnering basedontheprinciplesof whoprovideis PWDefence ofpyrotechnic avariety materials. We have a Inthecurrent fi nancial year ourlargest non-BAE Systems supplier B6.38 better value formoney. There are contracts 75extant to avalue of£200M. These may benichecapabilities, low volume products, orsimplyprovide About20%ofgeneral munitionsare provided by othersuppliers. B6.37 Relationship withothersuppliers to provide secure, value formoneysupplyofgeneral munitions. this was2005. announced publiclyinOctober These plansare intended reinvesting to provide inamore thecapability cost eff manner; ective drive greater effi their general munitionsbusinessintheUK. This hasresulted inplansto principles, BAESystems LandSystems therefore decidedto reconfi gure Following astrategic review, andinlinewiththepartnering B6.36 Systems LandSystems capitalinvestment andrationalisation. in order to ensure ofsupply, longterm security andincentivise BAE principleswas to reaffipartnering BAE Systems LandSystems on28September 2005. The aimofthe FPA, principlesdocument was signedbetween usand apartnering Asaresult analysisandbuildingontheexisting ofacapability B6.35 principles Partnering ofsupplyand valueto formoney. emphasisetheneedforsecurity alternative methodsto improve thecurrent arrangements, whilstcontinuing provision Signifi ofservice. cant effort hastherefore gone into exploring reduce itscost base andencourages rather ofproduct themanufacture the FPA asitdoesnotadequately incentivise BAESystems LandSystems to However, there are stillrecognised weaknesses to thecurrent B6.34 to thetaxpayer, andasustainableway forindustry. forward for thelongterm, anagreement that delivers bestvalue formoney intended to buildupontheexisting FPA withaview to securing, currentlySolution), initsAssessment Phase, isamajorMODproject

Project MASS Project ciencies intheBAESystems LandSystems cost basewhilst (MunitionsAcquisition –theSupply rm the strategic partnering intentrm thestrategic partnering being assessedincludenon-BAESystems LandSystems supplyoptions. munitions, andvalue formoneywillbeakey determinant. The options Importantly, any MASS solutionwould ofsupplyforgeneral underpinsecurity integration basedcontracting viathevertical capability ofthesupplychain. cost base, whilstalsoaddressing towards thepotential ofmoving further and to to better rationalise incentivise andreduce ourindustrialpartner its MASS alsoseeksto address theperceived weaknesses oftheFPA B6.43 our staff to consultation willbesubject withthe Trade Unions intheusual way. are well understood andacceptable. Any changeswhichhave implications for judgements aboutmoveshasty inthisarea unlesstheoperational implications replacing thesewithawidersurge capability, thoughwe willnotmake any cost footprint. Itisalsoconsidering thecaseforreducing war stockpiles, training areas, thusreducing thesupplychainbuff erstock andtheassociated analysis ofthepotential benefi delivering munitionsdirectly to tsofindustry MASS isaddressing allelements ofthesupplychain.Itwillinclude B6.42 also actively pursuing partnering arrangements withothersuppliers. pursuing partnering also actively agreed MOD/BAESystems principles. LandSystems partnering We are arrangement enshrinedintheexisting FPA asreinforces by therecently munitions inthesummerofnext year decisions onhow bestto sustainourrequiredaccessto general We needto take Project forward MASS, withaviewto making B6.45 The way ahead their scope, andcontinuing to seekinnovative contracting arrangements. agreements enhancements to by ourotherpartnering widening further doesnotcoveroption selected theseitems, then we are likely to investigate value formoneyandmaintains ourgeneral munitionscapability. IftheMASS within thescope ofMASS, dependingonwhichoptiondemonstrates thebest The 20%ofitems notprovided by BAESystems LandSystems may fall B6.44 as theyprepare adefensive positionoutsideBasra. Parachute into position Regiment, embedtheir81mmmortars The 1stBattalion, Platoon, Members ofACompany Mortar Defence Industrial Strategy Industrial Defence , buildingonthejoint working B6 99 General Munitions Complex Weapons B7

Defi nition During the 1991 Gulf War the B7.1 Complex weapons are defi ned as strategic and tactical weapons reliant upon guidance systems to achieve precision eff ects. percentage of Precision Guided Tactical complex weapons fall largely into fi ve categories: Air-to-Air; Air Defence; Air to Surface, Anti-Ship/Submarine (including Torpedoes); and Weapons dropped by the RAF was Surface to Surface. In addition to conventional weapons the chapter also takes account of precision eff ects delivered by directed energy. 20%; in Operation TELIC that balance was reversed, with 85% of weapons dropped being Precision Guided

Equipment programmes

B7.4 We have a large number of diff erent complex weapons. Traditionally, these weapons have relied upon extensive maintenance and storage facilities to ensure their peak eff ectiveness. Weapons are now increasingly being designed to require little or no maintenance. The requirement for complex weapons processing1 will, however, remain integral to the delivery of operational capability, not least due to the large quantities of legacy weapons that will remain in service for some years to come.

Anti-Ship and/or anti-Submarine Vertically lauched Seawolf missile being fi red from a Royal Navy Type 23 Frigate. B7.5 is currently the Royal Navy’s (RN) only long range anti-ship missile fi tted to both Type 23 and Type 22 Frigates. It will require Strategic overview an upgrade to give increased capability against a wider irregular target set. The assumed Out-of-service-date (OSD) is well into the 2020s. B7.2 Complex weapons provide the UK Armed Forces with battle winning precision eff ects, which are able to achieve military advantage at a reduced B7.6 Sting Ray is a lightweight anti-submarine torpedo in service and level of asset use. The UK has over the past 10 years made a signifi cant carried by RN (Helicopters and T23 Frigates) and the RAF (Nimrod). Stingray is investment in the upgrade and development of complex weapons for the currently undergoing an upgrade; Sting Ray Mod 1 which is expected to enter Armed Forces. This investment will peak at just over £1 billion next year for service next year. Its OSD is assumed to be until the end of the third decade. the delivery, research and support for complex weapons, and has allowed the UK both to develop a world class industrial capability, attract investment B7.7 Spearfi sh is a wire guided heavyweight torpedo and is the from the US and Europe and to deploy a relatively small number of highly only anti-submarine and anti-shipping armament of the RN’s submarine capable high-value assets to meet military objectives. These assets need service. An replacement (Submarine Launched Underwater Weapon, to be survivable and capable of extreme accuracy, ensuring that targets are SLUW) to this capability is being planned, including Insensitive Munition eff ectively neutralised with the minimum of collateral damage and at the (IM) compliance, either based on Spearfi sh or another military-off -the-shelf lowest risk to our own people. In order to maintain our military advantage (MOTS) weapon, and is assumed to enter service early in the next decade. the UK needs to exploit further complex cutting edge technologies such as directed energy to ensure that we have the capability to evolve our weapons Air Defence (including maritime) to meet new and increasingly irregular threats. The threat environment does not stop adapting, nor should we. In addition continued complex B7.8 provides area maritime air defence capability and is weapons eff ectiveness and fl exibility will also be dependent upon thorough launched from T42 Destroyers; it will progressively be replaced by Principal integration into the emerging Network Enabled Capability (NEC). Anti Air Missile System (PAAMS), fi ring 30 and Aster 15 , as the RN’s T45 Destroyers enter service towards the end of the decade. B7.3 Complex weapons systems also underpin the maintenance of the UK’s strategic deterrent, currently provided by the B7.9 Seawolf is the RN’s point defence missile system fi tted to missile system deployed on the Vanguard-class submarines. all frigates for hard-kill defence against aircraft and anti-ship missiles.

1 Processing refers to any weapon related activity acting upon either energetic or inert components (e.g. assembly, testing) other than operations needed in support of storage and transportation.

100 Defence Industrial Strategy B7.10 IIinOman. Sarea during Exercise Saif 26 SQNRAFRegimentlauncharapier missile untilis envisaged theendofthird to beinservice decade. The missilerunhasrecently Block2follow-on entered and service Range Air-to-Air Missile(AMRAAM) Range Air-to-Air We have two variants ofthe B7.12 2004. The anticipated OSDforASRAAM iswell into the2030s. Air-to-Air Missilethatgeneration entered short-range in fullservice of the (Sidewinder) AIM-9 The RNandRAF’s isprovided missilecapability by short-range B7.11 Air-to-Air low-fl yingaircraft. ItsOSDisplanned to be well into the2020s. range airdefence weaponshort designedto attack helicopters and Missile (HVM) over thebattlefi eldanditsplannedOSDis at least2020. B7.13 B7.14 Air-to-Surface nations currentlypartner decade. planned to earlyinthenext enter service as Meteor isacollaborative programme between theUKandfi ve other B7.15 in relation currently to thecapability provided by ALARM. capability. ofsoft-kill optionsare Avariety currently beingexplored oftheSuppression ofEnemy (SEAD) AirDefence ALARM formspart the Tornado decade. GRMk 4.ItsOSDisplannedforearlyinthenext medium-range, anti-radar, missileintegrated Air-to-Surface into to be in service until thebeginningof thethirdto beinservice decade. missilefor the AH64–Apachehelicopter andisexpected Surface

Advanced Short-Range Air-to-Air Missile(ASRAAM) Air-to-Air Advanced Short-Range

Rapier Field C(FSC) Standard 2006 and its expected OSD is in the middle of the next decade.2006 anditsexpected OSDisinthemiddleofnext the introduction ofMeteor for Typhoon. in Itwillenter service and isbeingprocured by theUKasaninterim weapon pending AIM120C-5 decade. OSDisforthemiddleofnext Expected Harrierand carried onSea Tornado F3andwillbeon Typhoon. Beyond Visual RangeAirto AirMissile(BVRAAM) Air Launched Anti RadiationAir Launched Missile(ALARM) Hellfi re AIM120B System, commercially known as is a Radio Frequency (RF)orlaserguidedAir-to- isaRadio has been in service since 1995andis currently hasbeeninservice isthecurrent variant production oftheAIM120family but hasrecently beenenhanced by theintroduction Advanced Medium- : provides low level airdefence High Velocity , isa , is a very , isavery , next , next alsoknown B7.20 Typhoon. until Itwillremain well into in-service the2020s. will beintegrated onto HarrierGR9,andisacandidate weapon for weapon that entered on service Tornado GR4 in2005.Brimstone B7.19 of theRAF’s Airto Ground forat least20years. bombingcapability aroundenter 2007andare service anticipated to become themainstay the endofdecade, withincremental enhancements over life. itsservice an initialoperating basedlargely capability onexisting technology towards mobile targets withprecision. The isexpectedto bedelivered capability by to address therequirement to beableto attack static, manoeuvring and B7.23 WeaponLightweight MobileArtillery System (Rocket) (LIMAWS(R)). early inthesecond decadewithM270andwell into the2030swith its expectedISDis2007,andassumedto until remain in-service (ratifiproduction ed by abilateral Memorandum ofUnderstanding), benefilogistic support ts, we have chosen to withUS co-ordinate missile. unitary IM-compliant To ensure economies ofscaleand B7.22 Surface-to-Surface coastal targets andhighlymanoeuvrable vessels. FAS(GW) B7.21 targets at range. This programme iscurrently initsconcept phase. to address requirement thecapability to beableto attack fast-moving beyondwill remain 2015. inservice . Paveway III(Laser)and kits are beingprocured to provide fortheUK’s guidance capability 1,000 lb Paveway II(Laser)and B7.18 Storm Shadow –Conventionally Stand-Off Armed B7.17 decade. untilremain themiddleofnext inservice ofOperation GR7 at thestart TELIC andare expected to an Urgent Operational Requirement (UOR)foruseby Harrier B7.16 The weapon isexpected tobeyond continue 2030. inservice enhanced through anincremental programme. technology insertion are characteristics plannedtoits performance beprogressively against hardened targets. The missileentered in2004and service Selected PrecisionEff Selected Brimstone Indirect Fire PrecisionAttack(IFPA)Indirect RocketGuided MultiLaunch System (GMLRS) (Guided Weapon)Future Anti-Surface Maverick Storm Shadow isplannedto provide to attack capability fi xed anti-armour missileswere procured as isanadvanced air-launchedanti-armour is a long range missile with a capability isalongrange missilewithacapability Enhanced Paveway III Enhanced Paveway II ects at Range(SPEAR) ects Paveway IV Defence Industrial Strategy Industrial Defence , thisprogramme isintended (Laser/GPS)bombswill Missile(CASOM). (Laser/GPS) (Laser/GPS)guidance isplanned isan 101 B7 Complex Weapons B7.24 The Light Forces Anti-Tank Guided Weapon (LF ATGW) What is required for retention is a man-portable, medium range guided anti-armour missile system, in the UK industrial base? which will provide the Infantry and Formation Reconnaissance with the ability to defeat modern and emerging armour threats. This B7.28 Given the signifi cance of some types of complex weapons, in many requirement is being met by the US Javelin system and replaces the cases we require absolute confi dence in the performance and safety aspects Milan and Swingfi re missiles. ISD was achieved in July 2005 and the of our weapon systems, particularly as they become more sophisticated. Weapon is expected to remain in-service well into the 2020s. This can only be guaranteed if the UK has access to and a comprehensive understanding of, the entire system and its design and controlling software. Full access to this mission critical software and information cannot always be secured when procuring complex weapons from off shore suppliers. While we have procured from off shore in the past, we have balanced this risk against the military capability aff orded by the overseas options and also against the assumption that we could continue to rely on a sustainable UK industrial base. This does not preclude future procurements off the shelf or otherwise from other nations, even where our access to critical software and information is denied. But it means recognising the risks of such approaches, and retaining the option to avoid these through a sovereign capability onshore, particularly for campaign-critical capabilities where there is little competition other than from US companies, is highly desirable.

B7.29 Therefore to maintain appropriate sovereignty, it is important that the UK can use, maintain and upgrade specifi c capabilities Javelin is launched from a Pinzgauer vehicle by 42 Commando Royal in its inventory, independent of other nations. To do this, the UK Marines during demonstration held at Imber Clump, Warminster. needs guaranteed access to the following key functions:

B7.25 Land Attack Missile (TLAM) provides a land Provide weapon systems design and performance attack capability against high value, non-hardened facilities in heavily expertise independently or as a leading player defended areas. The new Block IV missiles will bring additional in collaboration with other nations. capability over the current Block III standard missile. They will be Understand threats from technology proliferation. carried by our attack submarine fl eet and are expected to enter Exploit emerging and novel technology (outlined in service in 2007 with an approximate OSD of at least 2040. detail in the table at the end of the chapter). Develop Counter Counter-Measures (CCM). Indicative planning assumptions Respond to UORs. Undertake national projects within the relevant B7.26 We will, on current predictions, spend over £1 billion in the legal and international frameworks. Equipment Plan on new complex weapons in FY2006/2007. The scale Retain suffi cient understanding of elements of the nuclear deterrent2. of our investment in new systems is at a peak and will reduce by some Through-life capability management and support 40% over the next fi ve years as production activity begins to decline for the current weapon inventory. following the delivery of systems such as Storm Shadow and Brimstone. B7.30 In order to deliver these key functions we need access to a UK B7.27 Given the essentially incremental nature of our planned approach to industrial base that, as a minimum, provides the following capabilities: future capability development, there is, apart from the Meteor programme, little signifi cant planned design and development work beyond the Concepts generation, design and systems engineering next two years. This will present a substantial challenge as we seek to maintain those industrial capabilities we would wish to retain on-shore. B7.31 In order for the UK to act independently it will be critical to retain on-shore knowledge and experience of how the weapon system

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&RVJQNFOU1MBO  451 b . 3% Exploiting and controlling complex  weapons in a network environment

 3  B7.32 Increasingly, complex weapons will need to be networked with other

 :FBS  systems to fully exploit their potential and to be an information provider to the network. This will require the ability to modify the mission critical software Figure B7(i) - Illustrative spend profi le. The above graph shows indicative spending in this sector over the next 2 A number of UK suppliers are involved in modelling and ten years. The fi gures from 08/09 are illustrative and include a range in assessment of the current Deterrent and would be involved order to emphasise the potential for shifts in investment priorities after in any studies for any potential replacement. the end of the current Spending Review period. This is prudent planning 3 For example, the information network, mission planning, command and which does not distort the overall illustrative picture of general trends. control, targeting sources, weapon dynamics, propulsion and lethal package.

102 Defence Industrial Strategy access to suchcriticalinformation willbeakey measure ofsovereignty. counter-measures. The UK’s to design,understandand/orhave ability the existing inventory eff and ectiveness reducing ourvulnerability to fl eff exible andprecise military ects, reducing collateral damage, maintaining vital to operational success. This iscentral capability to delivering rapid, guidance,actual control, andseeker algorithmsoftheweapon istherefore and to manageweapon andnetwork interfaces. The to designthe capability and arming functions to beretainedand armingfunctions intheUKindustrialbase. conventional andnovel to warhead designthesafety andtheability damage. This leadsto arequirement knowledge ofthe forexpert required to ensure eff proportional includinglow collateral ects The designofthelethalandnonpackageis B7.34 safe ownership; allofournewweapons willneedto beIM-compliant. a range ofspecifi ccapabilitiesiftheUKis to beasafe owner. To improve These elements by asignifi theirnature carry riskthat cant safety requires These are thekey determinants oftheweapon systems performance. B7.33 Lethal packageandpropulsion to retain forthe future safeownership ofourweapons. the UKhastheleadinIMwhichwe willneed and inparticular energetics technology are andmanufacture uniqueto theUK rocket motors andwarheads. specifi Some types ofpropulsion, c in-service We asnecessary andre-life willneedto support B7.35 to buynewtorpedoes overseas. designedandmanufactured we maintain control oftheseelements, we would beprepared algorithms) andto designandintegrate homingheads. Provided and alsoto software, write tactical (fusing, guidance andcontrol The thecurrent UKmustretain to inventory support thecapability capability- Underwater Torpedoes development, userrequirements andconcepts ofoperations. programmes. oftheseprogrammes Aspects includetechnology technology through ofDEW utility anumberofresearchmilitary with conventional weapons. We are assessingthepotential inthelogisticfootprintreduction andwholelifecosts compared its potential applications, there isalsopotential forasignifi cant areas. to Due thereusable nature ofthetechnology andsomeof to reduceopportunities collateral damage, notablyinurban traditional kinetic weapons, suchasmissiles, andoff ersignifi cant / orless-lethaloptionsto replace, enhance orcomplement Explosive Devices. They could alsooff ertheUKnon-kineticand protecting ourForces from arange ofthreats, includingImprovised frequencies) could behighlysignifi cant inthefuture, for particularly We judgethat Directed Energy technologies (lasersandradio EnergyDirected Weapons (DEW) processes. This isoften referred to ascomplex weapon processing. complex weapons through andthrough-life designauthority support the inventory, requires the retention ofanonshore to maintain ability over weapon deployment to upgrade, of andtheability at leastforpart The needto sustainthecurrent inventory, have sovereign control B7.36 Through insertion life support/technology B7.39 account forover 50%oftheinvestment currently oncontract. the primecontractor inventory foraround and halfofourin-service B7.41 US programmes suchasAMRAAM, Tomahawk, HARMand TOW. inmissile electronics, capability where to itisanexporter particular (PavewayGuided Bomb with andisalsoamajorsub-contractor IV) the Raytheon Company USA.Itistheprimecontractor forthePrecision B7.40 aswellAir Defence asElectro Counter Optic Measures (EOCM). Range Velocity inShort Missile(HVM)andhashadanichecapability Bofors Dynamics that Dynamics alsohave asaprimecontractor.Bofors to act thecapability bycharacterised aseriesofsmaller, contractors suchas Thales andSaab and Italyaswell asapresence inGermany. The European isalso sector Within Europe, MBDA hasnational representation France inthe UK, MBDA, ajoint venture owned by BAESystems, EADSandFinmeccanica. primes; Raytheon andLockheed Martin. The largest European primeis The world missilemarket isdominated by two principalUS B7.37 oftheglobaldefenceOverview market to sidewinder©UltraThrough lifesupport 73 IntheUKmainplayer is inthemissilessector B7.38 oftheUKdefenceOverview market B7.42 motors andaccounts forsome60%ofourrequirements forrocket motors. have hadsuccess supplying to the wider international missilemarket. testresearch, andevaluation). support, design,in-service These companies Insyte fuzing), include capability sub-system companies intheUKwithelements Other ofthecomplex weapons B7.43 torpedoes. light andheavyweight in-service and supporting indigenous company capableofdesigning, developing, supplying Roxel UKLtd (trackers), BAE Systems Systems Land Ltd Thales AirDefence Ltd (TADL) Raytheon Systems Ltd BAE Systems Underwater Systems Ltd LM (UK)InsysLtd istheUK‘s ofrocket onlydesignerandmanufacturer Thales Missile Electronics LtdThales MissileElectronics is a wholly owned UK subsidiary of isawhollyowned UKsubsidiary and QinetiQ (warheads), Defence Industrial Strategy Industrial Defence istheprimeforHigh , (intelligent customer advice, isthesingleUK Selex UKLtd MBDA UKLtd (seekers and (seekers), , 103 B7 Complex Weapons 'VOEJOHGPSTZTUFNTPODPOUSBDUCZ1SJNF$POUSBDUPS that we do not sustain overcapacity in the onshore industrial base TADL or act in a way that, overall, weakens the sustainability of the SAAB BAES UWS capabilities and technologies to which we attach importance.

7% 4% Diff erent approaches to acquisition through-life: Raytheon We need to explore diff erent approaches to acquisition 19% and support so the required level of capability can be 11% Others maintained. In addition to restructuring the industry, 4% including the supply chain, this will require:

an open dialogue between all parties; working to improve arrangements for 55% through-life capability support; agreed mechanisms to demonstrate long-term value for money.

MBDA B7.46 Changing the way we do business will be challenging, for both us and industry, given the number of companies in the sector set against /PUFT3BZUIFPOJODMVEFT3BZUIFPO$PNQBOZJOUIF64BOE34-JOUIF6,BTXFMM BT3BZUIFPO-PDLIFFE.BSUJO+PJOU7FOUVSF0O$POUSBDUJODMVEFTBMMGVOEJOHPODF the declining workload expected on new developmental programmes. %FNPOTUSBUJPOQIBTFDPOUSBDUIBTCFFOQMBDFE TZTUFNNBZOPUZFUCFJOTFSWJDF Figure B7(ii). B7.47 We also need to take into account that the UK has overcapacity and capability when it comes to managing the maintenance, support Sustainment strategy and storage of complex weapons. Much of this capability resides within the Defence Logistics Organisation (DLO) Defence Munitions Centres B7.44 The UK needs to retain the capability within industry to design, (DMC), which should be retained in Government ownership. It is clear develop, assemble, support and upgrade complex weapons. Future demand that greater integration and rationalisation of the industry and our and investment will not support the UK’s current spectrum of industrial support capabilities could be achieved. Close MOD and industry support capability in the way it is currently provided from 2007 onwards. relationships are also likely to enable easier technology insertion and spiral development. Future partnering and commercial arrangements B7.45 The fragility of the wider UK industrial base is such that for support are therefore being explored at both the individual project unmitigated open international competition will put the sustainment and the strategic levels; we will be considering whether Contracting of key industrial capabilities at risk. We need to consider how we for Availability could bring benefits to both MOD and industry. This ensure that our requirements can be met, by a sustainable industry in will be taken into consideration during the joint work with industry a value for money fashion into the future. We intend to work with all over the next six to twelve months. Any changes to our current elements of the onshore industry, therefore, over the next six to twelve arrangements arising from this work which impact on MOD staff would months to establish whether – and if so how – this can be achieved. be subject to consultation with the Trade Unions in the usual way. This dialogue will need to be based on the following key principles: B7.48 Our approach to torpedoes will largely be centred on the A tempering of competition: For the short to medium term, outcome of the SLUW programme. We will need to consider carefully we will consider suspending the use of international competition how to sustain our world-class capability in torpedo homing head to meet our future complex weapons requirements (with the design and integration if an overseas option is chosen to provide this exception of torpedoes). We will instead be looking at whether, upgrade. If this situation arose, we would need to consider bringing the if in this period our requirements were to be directed to onshore capability into our research facilities to ensure continued secure access. industry, it would be possible to meet them, secure long-term value for money, and maintain a viable industrial base. This B7.49 Research and Development: Research and Development would of course be subject to the construction of a satisfactory is important to the maintenance of cutting edge technology. We will business case and appropriate contractual arrangements. However, need to develop a series of route maps to link technology exploration even more fundamentally, it is unlikely that the resources to future capability and exploit the high value intellectual capital built currently available could sustain the industry in its current form, up through years of investment. This will need to be co-ordinated and industry must play its part in meeting the challenge. across the complex weapons sector to remove duplication. As part of our considerations of the best means to sustain key capabilities Industrial restructuring: Given the over- capacity in the domestic and technologies, we will need to be aware of the role that and wider European market and the trans-national nature of the targeted Technology Demonstrator Programmes might play. predominant onshore industrial player, there is signifi cant potential for industrial rationalisation and consolidation. We will, as part of B7.50 Looking to the future: There are obvious attractions – given the the work mentioned above, need to work closely with our European through-life costs of supporting the large number of diff erent weapons in partners to identify whether a coordinated approach to sustain a current and planned service – in examining with industry how we might viable industrial base is possible. But this will not be to the exclusion rationalise our inventory. In addition to the associated cost savings, this of other US-owned companies, in particular those who have already might allow reductions in the overall stockpile, extend the time over which established a fi rm foothold, and, consistent with our defi nition of the production takes place (which could allow easier technology insertion and UK defence industry, are focussed on securing appropriate technology smoother production throughput) and increase our fl exibility in operations. access in the UK for us to maintain appropriate sovereignty. This This will require us to work closely with industry to develop technology will continue to be welcome, but it will be important to ensure roadmaps and maximise the benefi ts of common sub-systems technology.

104 Defence Industrial Strategy way aheadby the endof2006,withaviewto informingdecisionsin2007. will necessarily take time, butourintention isthat we shouldhave aclearer inEurope. particularly allies andpartners, This work willbecomplex and nature oftheindustrialplayers, thisdialoguewillneedalsoto engageour to ouroperational sovereignty.important that we capabilities judgetoand through-life beso support guidedweaponstogether seekto technologies sustainthe critical to establishhowworking we withtheonshoreindustry might We team charged needto establishamulti-disciplinary B7.52 The way ahead be created intheimmediate future to take thiswork. forward goingintocapability decline. Ajoint MODand UKindustrialteam will ifwe are withindustry toin conjunction avoid seeingtheUKindustrial we have demanding. laidoutwillbevery We willneedto work fast, The are real challengesinthissector very andtheapproach B7.51 Given thetrans-national with Defence Industrial Strategy Industrial Defence 105 B7 Complex Weapons C4ISTAR B8

Defi nition characterised by synchronisation. However, the pace of change is such that the delivery strategy must continue to evolve as further opportunities for NEC B8.1 C4ISTAR (Command, Control, Communication and Computers, delivery present themselves in accordance with technological innovation. Intelligence, Surveillance, Target Acquisition and Reconnaissance) comprises those capabilities, that when linked can achieve the desired B8.3 It will be the C4ISTAR related capabilities that will help underpin military eff ect by providing the ability to command and inform the Armed the overarching NEC capability by providing the technology to enable Forces in an eff ective and coherent manner and that together form the agile, networked and informed armed forces. There is thus an enduring initial stages of Network Enabled Capability (NEC). They generate and requirement for some industrial and technological capabilities across enable the delivery of accurate, timely and appropriate information and the spectrum of acquisition from system design to maintenance of intelligence products to decision-makers at all levels in national and coalition the capability, and for systems integration, system engineering and operations. The capability area can be sub-divided into two components; information assurance skills. In considering the industrial base from which Command, Control & Information Infrastructure (CCII) and ISTAR. The C4 future C4ISTAR capabilities can be derived, we must also look beyond our component of CCII provides optimised and integrated Command and Battle current providers to other sectors, from mobile phone providers to fi lm Management (CBM) and Global Information Infrastructure equipment studios, who may be able to off er innovative applications or derivations capabilities. The ISTAR component constitutes a combination of sensors, of non-military technologies in support of the desired capability. weapons systems, IT hardware & software, people and processes that collectively enable the ISTAR cycle (Direct, Collect, Process & Disseminate). The technologies associated with these capabilities are often leading edge, draw extensively on research activities, exploit developments in the civil sector, and place a premium on innovation, rapid technology insertion and eff ective system integration1. It is this sector that the principle of spiral development to enable continued operational performance is most relevant given the rapid pace of technological development.

Strategic overview

B8.2 The 2004 White Paper ‘Delivering Security in a Changing World: Future Capabilities’ stated that the continued transformation of UK forces is dependent on exploiting the benefi t of NEC. It also noted that NEC, by enabling ‘the ability to respond more quickly and precisely, will act as a force multiplier enabling our forces to achieve the desired eff ect through a High Level Network Map. smaller number of more capable assets.’ NEC is one of our highest priorities for future investment in research, acquisition, people and training. The B8.4 The increasing incidence of asymmetric operations in diffi cult delivery strategy focuses on three Epochs: Initial State, achieved by 2009 and environments (including the urban) against irregular forces and individuals characterised by interconnection; Transitional State, achieved by the middle who are increasingly aware of our ISTAR capabilities is driving a requirement of the next decade and characterised by integration, and Mature State, with for increasingly detailed, unambiguous, persistent and timely information. an aim of achievement by the middle of the second decade onwards and At the same time, peace enforcement and peace keeping operations require persistent surveillance in a more benign environment. 1 Given the large number of defence capabilities that have some C4ISTAR functionality as a second or lower order function of the system in which they B8.5 It is assumed that the longstanding strategic relationship with reside e.g. platform mission and command systems, weapon locating and the US will continue for the foreseeable future. In particular, with respect guidance radars; navigation and aircraft defensive aids, and in order to establish to ISTAR, it is assumed that access to US research and industrial capabilities a manageable boundary for this Chapter, the above Defi nition of C4ISTAR has will continue on a similar footing, albeit we are operating with continued been interpreted in a relatively literal sense. Thus, in considering future defence uncertainty regarding current and future access to US technology. capability demand and associated industrial and technological capabilities, the analysis concentrates on those systems and applications whose core Equipment programmes function is to Command and Inform the Armed Forces as defi ned above. These are principally the defence capabilities for which requirements are set by the B8.6 There are a variety of programmes that are either in initial Equipment Customers Directorates CCII and ISTAR. In consequence, some of planning stages, are due to enter service soon or have recently entered the industrial and technological capabilities identifi ed will have relevance to service that provide capability over three principal areas; Command defence capabilities discussed in other Chapters and vice versa. In a similar vein, and Battlespace Management, the Network and ISTAR. business information system applications supporting functions such as defence logistics and personnel or medical services are addressed only superfi cially, B8.7 Command and Battlespace Management are on the basis that enabling technologies and industrial capabilities import programmes that are envisaged to provide commanders principally from the civil commercial sector, the larger customer base for which with the data and information that they need. will drive innovation and functionality that defence applications can exploit.

106 Defence Industrial Strategy B8.9 Challenger 2andCombat Vehicle Reconnaissance Tracked (CVRT) Scimitar. (UK).JustoverDynamics 1000systems willbedelivered to equip Warrior, programmeBowman thecontract forP-BISA was awarded to General situational awareness andoperational ofthe planningtools. Aspart internet. tactical Bowman Itwillprovide secure voice anddata messaging, armoured vehicle commanders to sendandreceive information over the P-BISA (CIP) (P-BISA) B8.8 B8.13 The B8.10 threat environment. Itiscurrently initsassessment phase. innationalNEC community andmulti-national operations inamulti- air defence, to enableagraduated andenduringcontribution to the environment world-wide, eitheraloneorasanelement ofintegrated envisaged to provide anear-real timecorrelated fortheland airpicture will support aflwill support exible and integrated orders creation and dissemination (ARRC C2IS) System. The onoperations, ofwhichisthe Commandthe headquarters Support part the UKisrequired to provide Command Intelligence Systems (CIS) for Astheframework Corps, nation Reaction forHQAllied Rapid B8.14 frontline airfi elds, training airfi elds, rangesand contracted airfi elds. operationscontrol involving Itwillsupport services. at allthree services aims to provide terminal airtraffi generation thenext ofmilitary grow incrementally to encompass alldefence assetsandcommodities: Management of Materials in Transit (MMIT). The systems will transactional (MJDI), Joint and (JAMES) Asset Management andEngineeringSolutions as ‘transactional’ systems: Management oftheJoint Deployed Inventory Chain. throughout theJoint Support to-end These includeJC2SP, aswell commanders at alllevels inthedeployed force, andassettracking end- a Joint Logistic to Logistic Picture to provide decisionsupport thenecessary Ahierarchy of B8.12 and bare baseoperating ofJRRFoperations. locations aspart aircraft toenable military operate safely from anumberofaustere instrument fl 24hoursaday ight inall rulesservice, weathers, to locations.Base Itwillallow airtraffi to anadditionaltwo baresimultaneous support Deployed Operating (DATCCE) B8.11 The allofwhicharehas fourconstituent intheConcept parts orAssessment phase. andJOCS)extendsfunctionality.(RNCSS, RAFCIS This complex programme Information Infrastructure (DII)that bringtogether three existing systems, applicationIt willdevelop hosted ontheDefence acommand support JAMES willdeliver engineeringandassetmanagement MMITwillprovide amanagement information layer above asset MJDIwillprovide inventory management andtheauditable , which is a part ofthewider , whichisapart Land Environment Air Picture Provision (LEAPP) EnvironmentLand AirPicture Platform Battlefi eldInformation Systems Application HUMS capability deliveredHUMS capability through platform projects. support Whole Fleet Management andtheexploitation of defence, includingthemanagement information system to of allequipment andkey equipment components across tracking systems inorder to managesupplychainoperations. account forallmaterial Depots. outsidetheBase heldinDefence J2CSP programme aimsto increase ourDATC to enable capability willcomprise applications (andassociated infrastructure) that Joint Military Air TraffiJoint Military Deployable Air Traffi ARRC CommandandControlInformation System programme, willprovide hardware andsoftware to enable isthe Joint Command and Control Support Programme Joint CommandandControlSupport logistic capabilitiesare beingdeveloped to deliver c ControlCapabilityEnhancement c controllers to provide afull c Services (JMATS) ComBAT, and Infrastructure programme , is c . its modularandfl operations. exible useon expeditionary The vehicles The system canbemounted ineither vehicles ortransit casesto enable all ofthesubordinate Joint Force Component Command Headquarters. Cormorant willenabletheJoint Task Force to command Headquarters of theJoint Force. Ahigh capacity, secure communications system, provides communications withinandbetween thedeployed Headquarters Forcedesigned to Reaction meettheneedsofJoint Rapid It (JRRF). B8.20 the ArmedForces andshouldhave lifeofat least20years. aservice Capabilityfromservices. Skynet5isalready beingmadeavailable for responsible ofsatellite fortheendto enddelivery communications Maritime andLandterminals makingthecommercial partner, Paradigm, Finance hasbeenextendedto Initiative include (PFI)anditsboundary 4 ground andspace segment. Skynet5isbeingprocured asaPrivate satellite communications andwill, incrementally, replace theSkynet B8.19 to thefront navigation lineforall3services. precision andasatellite- providing andvoice communications data Bowman istheUK’s system, communications tactical B8.18 the rapid andsecure communication ofdata: B8.17 is envisaged to come around into theturnofdecade. service currently by inanAssessment Phasewhichissupported Thales, and command andcontrol andbattle preparation. The programme is andtargetsurveillance acquisition andassistance withnavigation, for thesoldier’s role includingimproved protection, day andnight enemy. Itwillprovide anintegrated suite ofcapabilitiesadjusted to ofthedismounted move,the ability infantry fi ndandengagethe B8.16 through level, to tactical airbattle intheUK. management andsurveillance Air C2system capableofplanning, taskingandexecuting operational level (UKASCACS) B8.15 The management. Full isenvisaged inthelatter delivery halfofthisdecade. process, situational awareness, planning, synchronisation andinformation Bowman islikelyBowman to well remain into in-service the2020s. of, operations. (UK)are General Dynamics delivering thisproject. situational awareness at alllevels andaidplanningfor, andcontrol there are asetofcommon software tools that willenhance and littoral operations. Inadditionto secure voice communications ofland communications system insupport forallthree services Cormorant 5 Skynet Bowman Network Future Integrated Soldier Technology (FIST) project isintended project to investigate optionsto provide anintegrated UK Air Surveillance, CommandandControlSystemUK AirSurveillance, is delivering the next generation of military isdelivering generation thenext ofmilitary programmes are designedto facilitate isproviding theArmedForces withatactical isanewcapability, that hasrecently entered service, Defence Industrial Strategy Industrial Defence willenhance 107 B8 C4ISTAR can fi t onto the RAF’s C-130 aircraft to enable rapid deployment. It will be fully interoperable with other UK communications systems such as Ptarmigan, Bowman and Skynet 5 and allows communications between UK and Allied headquarters. EADS UK Ltd is delivering this capability.

B8.21 The Defence HF Communications Service (DHFCS) provides a coherent solution to the defence strategic High Frequency (HF) communications requirement until the end of the decade. It is bringing the disparate maritime and air systems together under a single service provision that will also capture the HF facilities in the overseas commands. The service provider is responsible for both the technical solution and the provision of HF services and is expected to introduce new services and improved technology on an incremental basis throughout the programme. It is expected that the new service will deliver a step change in data throughput, improved reliability through the exploitation of new automated processes and a reduction in manpower required to operate the system. The DHFCS contractor is VT Communication. Satellite communications provide a rear link B8.22 General Key Management (GKM) has recently entered service and between overseas deployments in the UK. is a tri-service project to replace the current manual distribution of un-encrypted, hard copy material, with a computer controlled system, which will manage B8.28 The Defence Fixed Telecommunications System (DFTS) and distribute encrypted key material stored on magnetic media. Currently provides our voice and data fi xed telecommunications services. This is all Communication Security material (key variable, cryptographic equipment currently being delivered through a 15 year Public Private Partnership (PPP) and publications) is managed by the use of manpower intensive hand written deal signed with British Telecom in 1997 and extended until 2012 this year. records. A manual system will not be able to handle the predicted increase in key material. GKM will manage the existing physical material for some of B8.29 Project ANSON is envisaged to provide defence users, outside our high grade cryptography products. The GKM contractor is EADS UK Ltd. the battlespace, with an effi cient high grade messaging capability to exchange the correct information, with the correct people, at the B8.23 The RNJTIDS/STDL project will provide a secure, Electro- correct time, in the correct format and in a legally accountable manner. Magnetic Capability resistant, high capacity, digital Tactical Data Link It is planned to complement the medium grade messaging capability capability (Link 16), to the Royal Navy and is about to come into service. and will be delivered as part of DII, in the latter half of this decade. This capability will overcome the critical limitations of Link 11 for the exchange of near real time tactical information in the line of sight B8.30 The Joint Network Integration Body (JNIB) is a joint MOD/ domain, and will maintain interoperability with Allies. The related STDL Industry body empowered to intervene and deliver solutions to integration (Secure Tactical Data Link) programme (now merged into RNJTIDS), problems between component joint planning networks. JNIB is being approved in the mid 1990s, extends use of the same L16 messages delivered using a combination of existing MOD resources and directly incorporated into command systems under the RNJTIDS programme, to contracted industry resource from the key companies concerned. Beyond Line Of Sight via UK Super High Frequency satellite bearers. B8.31 In addition, we also invest in bodies such as the Integration B8.24 FALCON is intended to provide a tactical formation level Authority (IA) which works towards the integration of information secure trunk communications system for the UK and the Allied Rapid and projects across the whole battlespace in order to enhance military Reaction Corps (ARRC). It is planned to replace the capability provided capability in the conduct of joint and combined operations. by Ptarmigan, RTTS/DLAN and EUROMUX. FALCON should contribute to the ‘Resilient Information Infrastructure’ theme of NEC by providing the B8.32 ISTAR programmes planned to facilitate the processes modern, secure communications infrastructure required by deployed needed to acquire and analyse data for the Armed Forces: formations and operating bases, such as Bowman and Cormorant.

B8.25 Computer Network Defence is planned to provide an ongoing capability to protect our network above existing defensive measures. It will consist of an integrated set of mechanisms, processes and organisations, and an eff ective command structure, which together will maintain our capability to defend our Information Systems (IS) from attempts to disrupt or disable them.

B8.26 Physical Infrastructure for Deployable Headquarters will provide environmentally protected and appropriately deployable physical infrastructure for dismounted headquarters and communication nodes, in order to ensure that off the shelf C4I equipments do not fail in harsh environments. The capability will enter service around the turn of the decade.

B8.27 The Defence Information Infrastructure (DII) will provide a networked IS infrastructure, at all classifi cations and caveats of information, to all non-deployed units and headquarters and certain deployed elements. The programme is being delivered incrementally by the Atlas Consortium. Sentinel R Mk 1 at take-off .

108 Defence Industrial Strategy B8.39 stations andtraining facilities. The programme iscurrently intheAssessment Phase. provided by theNimrod reconnaissance R1electronic aircraft andassociated ground of intelligence material withinMODand with otherGovernment departments. integration ofintelligence systems to enableeff sharingand ective exploitation B8.38 Project NATO andUSE-3variants. The iscurrently project intheAssessment Phase. the airbattle. This upgrade isrequired into to bringtheUKcapability linewith the airbattle. The AWACS iscriticalinthesuccessful capability prosecution of commensurate withanAWACS, suchascontrol ofaircraft andmanagement of provided E-3Daircraft outadditionalduties by to theSentry enableitto carry B8.37 Project Watchkeeper. The AirborneStandOffRadar system ( B8.33 B8.34 currently expected to beginto from enter theendof2006. service Global Express aircraft, willbeknown RMk1. astheSentinel They are Ltd. The fi ASTORve airplatforms, basedonamodifi Bombardier ed eff to develop NEC.ASTOR orts isbeingdeveloped Raytheonby Systems in ourfuture mixofsensorassets, ASTOR willplay asignifi cant role inour scenarios, from humanitarianaidto combat operations. Asakey element accurate andtimelyground information surveillance inawiderange of Armed Forces anentirely newcapability, providing commanders with B8.35 SOOTHSAYER to towards enter equipment service willstart theendofdecade. contractor in2003,following athree year competitive assessment phase. joint operations. Systems Lockheed Integration Martin was asprime selected the digitisedlandbattlespace andbeinteroperable systems in withotherEW light rolehigh mobility andarmoured vehicles andwillbefullyintegrated into measures counter andelectronic support measures (ECM).Itwillbefi tted to equipment. (EW) warfare electronic The system willcomprise bothelectronic UK andwillbeginto deliver from capability theendofdecade. quickly to thosethat needit. The isbeingdeveloped capability by Thales into thewidercommand andcontrol digitisednetwork passingdata information, includingimagery. WATCHKEEPER willbefullyintegrated system willprovide UKcommanders withaccurate, timelyandhighquality B8.36 The project, aimingto mature theSHAMAN solution andde-risk preferred contractor foranAdvanced Demonstration phaseforthe team ledby BAESystems Insyte was inearly2005asthe selected measures to Royal support electronic warships. Navy AUK/USindustry open architecture systems to provide forcommunication thecapability UK INTELWEB SOOTHSAYER SHAMAN WATCHKEEPER HELIX EAGLE intends to useCommercial Off theShelf (COTS), willprovide incremental upgrades to thecapability incorporates someoftheworld’s mostadvanced willprovide anupgrade currently to thecapability aimsto determine themostcost eff solution for ective tactical Uninhabited Aerial tactical Vehicle (UAV) ASTOR ) willgive our solutions, whichare likely to roll outincrementally over two decades. thenext programme, establishingrequirements andreaching aviewonpotential Contractorand Support (DDASC). theConceptThis willsupport phaseofthe placed withLogicaCMG therole to undertake ofDABINETT Development of nearreal timeISTAR data inthedeepbattlespace. Acontract hasbeen intended to enablepersistent processing collection, anddissemination to systems inallenvironments. DABINETT willcomprise asystem ofsystems commanders’ requests forinformation, andprovide targeting information gather anddisseminate strategic, operational intelligence, andtactical answer inthedeepbattlespace,collection envisaged willbeusedto thecapability gapsresultingcapability from thechangingthreat. Focused onpersistent ISTAR Chapter, the Establishedafter publication oftheStrategic ReviewNew Defence B8.41 assets. The MASC programme iscurrently intheAssessment Phase. aswell asbattlesurface management ofairdefence fi ghters andother variant. MASC shouldprovide oftheairand forsurveillance acapability currently aff orded and Sea KingMk7AirborneSurveillance by the Control Combat Aircraft andFuture Carrier. Itisenvisaged to continue thecapability forms thethird element oftheCarrier Strike capability, alongsidetheJoint aims to provide anassured andcontrol airbornesurveillance capability, The andControl MaritimeAirborneSurveillance ( B8.40 the STP. The fi gure doesnotdiff erentiate between these two STP components. provisionassociated withsomeservice that projects are entirely fundedfrom and thosethat over willenter service theperiod. Italsoincludestheresource (STP) resource ofcurrent equipments associated in-service withthesupport overthis sector ten thenext years. Figure B8(i)shows theShort Term Plan We to expect spendintheregion of£2BNto £2.5BNperannumin B8.42 Illustrative planningassumptions requiring aviableUKresearch, development, and design,manufacture protecting national eyes sensitive onlyinformation are areas particularly control isrequired, information systems assurance andcryptographic Interms ofspecifi c capabilities forwhichameasure ofsovereign B8.44 them through-life. beableto support systems andinparticular to understand our of system engineeringskillsto enableindustry need to reside However, in theUK. there isaneedto develop acadre to equipment design andmanufacture ability doesnot generally programme oftheforward ofcapabilities, Insupport the B8.43 in theUKindustrialbase? What isrequired for retention theoverallwhich doesnotdistort illustrative picture ofgeneral trends. the endofcurrent SpendingReviewperiod. This is prudentplanning order to thepotential ininvestment emphasise for shifts prioritiesafter ten years. The fi gures from 08/09are illustrative andincludea range in The above graph shows indicative over spending inthissector thenext -IllustrativeFigure spendprofi B8(i) le.  b .        DABINETT programme seeksto fi llthechallengingISTAR $*45"3 :FBS Defence Industrial Strategy Industrial Defence MASC  ) programme, 3% 451 &RVJQNFOU1MBO 109 B8 C4ISTAR support capability. A sustainment strategy must be developed in concert companies as particularly visible players at both Group and Division levels: with other Government departments and is linked to current cross- Government information assurance (including cryptographic) studies. BAE Systems Thales EADS General Dynamics B8.45 In other capability areas, the sovereign ability to design, Lockheed Martin Northrop Grumman demonstrate and perhaps build advanced systems may be advantageous Raytheon Selex Communications to foster a balanced relationship with other nations. National capability VT Communications in cryptographic systems, network integration and the design, build and BT EDS operation of satellites, particularly small satellites, are examples of world- Fujitsu LogicaCMG leading niche capabilities that may help to provide such leverage. QinetiQ

B8.46 More generally, across the C4ISTAR capability B8.49 At the sub-system level, the supply base is spread across a the UK needs to retain suffi cient expertise to: number of smaller enterprises as well as within the large primes, and often reaching into the commercial sector within the UK and overseas. understand capability requirements; Sourcing strategies refl ect the general pattern of global supply and value develop user and system requirements; chains exhibited across all high technology sectors. There is an increasing architect and maintain complex networks and communications opportunity to develop innovative capability solutions across the supply with the ability to interoperate with a wide range of chain from within traditional sub-system providers as well as those who potential partners in support of operations; may not necessarily consider themselves potential defence suppliers, for architect an overall system; example mobile-phone data package providers or the biometrics industry. assess the global marketplace; conduct research into areas that cannot be provided cost-eff ectively by the global marketplace; pull through successful research into in-service systems; test and evaluate systems; support within the UK equipment through life – including modifi cation and technology insertion to facilitate upgrades and obsolescence management; maintain custody and the integrity of the increasing quantity of national military and intelligence data.

B8.47 In terms of technologies there are a number in which C4ISTAR are dependent, and in which there may, case by case, be a need for targeted investment to ensure a continued understanding of emerging developments Artist’s impression of Skynet5. or to have assurance regarding their security of supply. These include: B8.50 US investment and US companies dominate the world defence market Antennas Multilevel Security and as the above list demonstrates, several of those US defence companies have made a substantial investment in a UK presence, attracted by the business Architectures Nuclear C2 opportunities and openness of the UK market. However, the larger US defence Combat ID Radiation Hardening investment may create an imbalance in favour of US technologies in some Data Fusion Radio Frequency (RF) integration important fi elds presenting a further challenge for sustainment, in particular and Electro Magnetic Capability regarding diffi culties about technology transfer. Areas where the UK market presence has diminished in relative terms include EW and tactical communications. Digital Networks Satellite Technology Electro-optic/Infra-Red Imaging Synthetic Aperture Radar B8.51 The wider civil market may off er a counter-balance for the future Electronic Counter Measures and Tactical Data Links and provides signifi cant potential for further innovation and competition. Electronic Counter Counter Measures For example, the European mobile communications industry has highly Electronic Support Measures Sortware Defi ned Radios developed digital networks and is a world leader. Civil IS providers have signifi cant experience in the creation of secure and reliable networks which Extra High Frequency Digital Signal Processing could have potential application in the military environment. Additionally, satellite communications the ability of military personnel to rapidly absorb and act upon a wealth of High Integrity and Safety Critical Computing information demands particular cognitive capabilities that could be provided Wideband High Power Amplifi ers by a variety of civil industry, which we may not have previously considered in depth such as fi lm studios and computer console manufacturers who have signifi cant experience and success in the wider cognitive fi eld. Overview of the current UK defence market B8.52 The consensus of analysis of trends in defence expenditure is B8.48 The C4ISTAR industrial sector is in good health. There is the potential that C4ISTAR is a growing market. Factors driving this growth include: for eff ective competition between onshore and off shore suppliers. Many of the companies within the sector have a strong presence in other markets, defence- the massive market in electronic systems and software related and civil, the latter providing opportunities for technologies to spin for domestic, commercial and entertainment purposes in to defence or to be exploited or further developed in support of exclusively has created both the expectation and industrial defence demands. At the prime contract level, we recognise the following foundation for a similarly rich military environment;

110 Defence Industrial Strategy as ‘offi the ‘battlespace’ environments are blurring, withwhat might beconsidered and extreme reliability. Indeed, theboundariesbetween the ‘business’ and example packagingforharshenvironments, protection, extreme security is more signifi cant where there are challengingdefence characteristics, for likely to beconstrained by rather intellectual thantechnical resource. This consideration for sustainment, systems aswork is to modifylong-serving commercial applications ifthere isinsuffi development canquickly waste work, althoughexpertise andtransfer to defence. programmes Defence alsoprovide interesting andinnovative the individualsinpossessionofthoseskillsare readily deployable outside While many skillsare applied to specifi cdefence needsand constraints, communications, computing, signalanddata processing capabilities. is baseduponexploitation oftechnologies derived from commercial via theestablisheddefence contractors, muchofthesystems content of equipment Althoughthevast expenditure majority iscurrently B8.53 ce’ beingdelivered applications andservices close to the front line. traditional boundariesbetween land, seaandairforces are budgetary pressure budgetary to leverage from additionalcapability existing demandforgreater interoperability witha ‘coalition ofthewilling’, information assimilation anddissemination oftime-critical developments, doctrinal suchasthechangeinmilitary there israpid obsolescence challenges whichpresents particular application ofcommercial technologies. true This isparticularly development ofnewtechnologies, forexample synthetic all environments, fusingoutputs from multiplesensors. divide andalsomeansthat systems mustinteroperate across reduce forcesblurring –network-enabled the willfurther platforms andto upgrade existing C4ISTAR equipment; products, where appropriate, amongstlikely coalition partners; coupled withtheuseofCommercial-offparticular -the-Shelf (COTS) communication networks would facilitate greater interoperability, with alliedforces. Adoption ofcommon standards withinallied ofrequirementsre-evaluation basedontheneedforinteroperability with. Lessons learnedfrom Kosovo, Afghanistan andIraq have ledto a we havewhich could include partners yet operations to undertake to relayability information backto C2systems; platforms capableoflong-persistence andwiththe or withdrawal. This drives increased demandforsensor to identify enemy forces andstrike before concealment mobile forces that are fl exibly ‘networked’; fromstructures static to rapidly deployable andhighly andupdated throughoutserviced apotentially longservice-life; will becriticalto ensure theseIScapabilitiescancontinue to be of obsolescence. Therefore, management ofspares andstocks withsoftware andprocessorsservice that are already at themargins canbeseeninnewplatformsthis discontinuity ofcycle entering into platforms withmuchlongerlifecycles. At itsmostextreme, that forsub-systems mustbeintegratedand businessopportunities operations inawiderangealso beingusedto ofsystems; support System (GPS) etc. Businesstools, suchasoffi provided thetechnical basisforsmallradios, GlobalPositioning in thecommunications and ‘personal devices’ sectors, whichhave ISTARcarry capabilities(e.g. onmediumandlarge UAVs); that hasenabledtheexpansion ofthoseplatforms ableto radar,aperture coupled withthecontraction insensorsize cient business. This isacritical ce automation, are that are essential forthemaintenance ofUKoperational sovereignty. These are: We have identifi edfourareas withintheC4ISTAR ofindustrialcapability sector withexisting systems,these inconjunction withwhichtheymustinteroperate. understanding ofrapidly developing to technologies exploit andtheability We require to have available to defence acomprehensive B8.54 Sustainment strategy a consolidated pan-Government demand foralower grade product. ofhighgradefor UKdesignandmanufacture alongside cryptography will beto generate a “pyramid ofdemand” that could putthedemand better coherence across Government. Inessence, ofthework theobjective (GCHQ),Headquarters to assessthisaggregated demand andgenerate GroupElectronics oftheGovernment (CESG), Security part Communications Work, by us, supported isbeingledby theCommunications B8.58 an aggregated basiswhichto develop asustainablebusinessplan. iscurrentlyfor cryptography fragmented, of thusdeprivingindustry with themarket that isnotaidedby theGovernment’s thefact demand offcryptography inthefuture. ered However, industry by ourinteraction and assuchhave asignifi cant role to playtype of inshapingthegrade and represent withinGovernment, themajorcustomer forhighgrade encryption case predominantly theUS)willalsobepursued. Interms ofquantity, we access to developments (inthis community inthewidercryptographic issues suchasnational security. The broader benefi tsofinclusion and critical to theintegrity andprotection oftheproduct of and support sovereign to production control capability ofcryptographic thoseaspects high grade information forMODandwiderGovernment requires aUK needs, itremains strategically vitalacross Government. Protection of volume compared withthecommercial sector’s lower grade cryptography Althoughthemarket forhighgrade islow cryptography in B8.57 High grade cryptography whichweare intend of ourdrive opportunities to towards exploit insupport NEC. technology accelerationand thecomplementary withinthecommercial sector interact with,themarket. The relative strength oftheC4ISTAR industrialbase Butwe mustalsochangetheway we present ourrequirements to, and B8.56 off eringthemselves asplayers inthesystem engineeringarena. to thosewithatraditional background defence sector are increasingly diverse these, supply chain.Of companies withacommercial, asopposed currently withinarelatively by strong a setofindustrialprimessupported this technology. The maintenance ofotherC4ISTAR capabilitiesresides becausethere areand inpart limited for commercial opportunities development teams andproduction to becomprised ofUKNationals, capability.and manufacturing This derives from aneedforthedesign, requires astrategy design,development to sustainanend-to-end currently these, capability Of onlymaintaining acryptographic B8.55 asustainedresearch anddevelopment base(attracting the as to act acontinued (forbothusandindustry) ability acontinued to understand, ability integrate, assure highgrade andassociated cryptography manufacturing capability inspecifi capability manufacturing careas ofdefence technology. right calibre by a ofindividualswiththeright skills)supported application;technologies forpotential military an intelligent customer, to track emerging inparticular and modifymissioncriticalsystems; information assurance capabilities; Defence Industrial Strategy Industrial Defence 111 B8 C4ISTAR in conjunction with industry via programmes such as NITEworks2 and DABINETT and the establishment of the Integration Authority but the approach needs to be further developed into a coherent programme delivery doctrine that includes all phases from concept to disposal.

Research and technology

B8.62 In order to sustain a vibrant onshore R&T base in this sector, both within MOD and industry, we are maintaining an overall research programme in this area currently funded at around £55M per annum. Figure B8(ii) illustrates the proportion of the programme currently allocated to each of the major elements of interest. This allocation will change as research priorities are adjusted to respond to developing areas of interest, but it does refl ect a key aspect of our ability to remain as an intelligent customer of emerging technologies and concepts.

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112 Defence Industrial Strategy Figure B8(iii). of solutionssuchasinterfaces, data specifi cations andprotocols. suppliers, andhighlight key areas to beaddressed inthedevelopment will aidcomprehension ofintent between usascustomer andindustry and contributing to thedevelopment ofgenuinelyjoined-updoctrine. This (MODAF) willbekey to expressing NECrequirements inconsistent terms level.or capability Architectural ofDefence FrameworkThe Ministry - from high-level overviews, to more detailedexpressions at functional NEC architecture, where thisisrelevant, andwillshare thiswithindustry We willalsoensure coherence inour approach to theoverall B8.67 constraints ofthedesired andbetter enterprise articulation outcome. intentions considerations), (withinobvious security onaff clarity ordability We willprovide increased transparency ofourcapability B8.66 Presenting ourrequirements tothemarket The primary objectives oftheimplementation objectives are:The project primary across theMODwas developed, thismethodologyisMODAF. Therefore, amethodologyfordeveloping consistent architectures interoperability ofNetwork EnabledCapability. that isat theheart isakeyall MODacquisition activities enablerto achievingthe consistent meansofdefi ningplatform andsystem across interfaces It hasbeenrecognised for sometimewithintheMODthat a MODAF &OIBODFE QPUFOUJBM FYQPSU To make recommendations to vendors suchthat suitable To develop for thedirectives andguidance necessary To develop anArchitectural Framework basedupon To embedthebusinesschangerequired to input from theimplementation project. it becomes self-sustainingwithoutcontinued implement thearchitectural framework suchthat that may utilisethearchitecturalparties framework. tool sets are developed andmadeavailable to allofthe this architectural framework to beimplemented. to MOD-specifi cacquisition andoperational processes. defence andcommercial andto bestpractice tailorthis -PXFSDPTUPG PXOFSTIJQ UFDIOPMPHZ DBQBCJMJUZ NBUDIFT .JMJUBSZ DIBOHF 0QFO4ZTUFNT#FOFmUT *NQSPWFE %FTJHO 4ZTUFN 7'. 3FEVDFESJTL *ODSFNFOUBM "DRVJTJUJPO BDRVJTJUJPO 4IPSUFOFE UISPVHI DZDMF GPSJOEVTUSZUP PQQPSUVOJUZ DPNQFUF (SFBUFS requirements systems. we may stillneedclosedoronlypartially-open a consumer withinsuffi B8(iii). The challenge foruswillbeto avoid ashiftto oursimplybeing potential andassistfuturecommercial (seefi export opportunities gure by themarket, to develop solutionsthat shouldenableindustry maximise recognised by formalbodies, orwhichare accepted standards asdefacto standardsinterface that are non-proprietary, already establishedand the greatest useofopensystems architecture approaches. The useof Complementing this, we willwishto seesolutionsthat make B8.68 B8.71 So thestrategy So forC4ISTAR willbeto: B8.71 skills are exercised regularly, willdiminish. theyand/ortheircurrency end defence requirements. Inthoseareas there isariskthat unlessthe high- to meetandsupport the UKindustrialbaseofthoseskillsnecessary continuing needto maintain awareness ofthedepthandbreadth within and theweight ofcivilinvestment itattracts. Butthere willalsobea We caningeneral benefi tfrom the customerextended base B8.70 development andresearch ofhightechnologyfurther industry intheUK. This isconsistent withbroader Government the to objectives support information assuranceintegration initiatives. andsupporting activities complex systems capableofundertaking sustainment ofahighlyskilledsector highclassificertain cation requirements, ourinterests lieprincipallyinthe plans,forward recognising we thepriority attach to delivering NEC.Beyond programmesassociated represent support asizeable ofour proportion and commercial customer bases. The C4ISTAR forward equipment and health withsignifi cant potential forenduringearningsacross defence ofthisendeavour,support theC4ISTAR isbroadly industrialsector ingood C4ISTAR capabilitiesare essential to theachievement ofNEC.In B8.69 Conclusion encourage and support theuseofopen systems architectures encourage andsupport identify intended system architectures and plans, ofourforward and visibility give industry continue to to explore encourage awidercivilindustry thepotential work to target withallareas defence ofindustry andcommercial achieve better cross-Government coordination and COTS to products thegreatest degree. practicable associated details; interface potential solutionsfrom anearlystage; where to appropriate helpdevelop theopportunity application ofitsknowledge to andproducts thedefence market; benefiDefence tandwhichhave clear exploitation paths; research expenditure that to off activities erthegreatest potential of demandforcryptography; cient infl uence over system design. For some Defence Industrial Strategy Industrial Defence 113 B8 C4ISTAR CBRN Force Protection B9

Defi nition terrorism and the proliferation of Weapons of Mass Destruction (WMD) as ‘the two most serious and direct threats to our peace and security’. B9.1 The Chemical, Biological, Radiological and Nuclear (CBRN) protection capability area is focused on the development and B9.3 As the CBRN threat becomes more diverse, the defensive CBRN provision of capabilities that support our CBRN defence policy. These capability required by today’s service personnel inevitably broadens. Our capabilities are broken down into three broad categories: Armed Forces are able to deploy rapidly to almost any region of the world, and face an increasing number of potential CBRN challenges. They may Timely warning - the detection and identifi cation of CBRN come across remnants of discontinued CBRN programmes, encounter weapons and materials, with the ability to process data and endemic diseases that could be diffi cult to distinguish from biological provide information to facilitate decision-taking and action; warfare (BW) attacks, or be exposed to toxic industrial hazards (TIHs). In all cases, having the right capability is absolutely key to success. Survive - the capabilities, based around the person, necessary to survive a CBRN challenge: and B9.4 With the need for fl exible rapidly-deployable Armed Forces that are able to operate in a number of diff erent circumstances, our force Sustain - the unit/force level capabilities required to, protection posture requires similar fl exibility and should impart a low confi rm the extent of a hazard, rapidly recover from an physiological burden within a minimal logistical footprint. We are therefore event, and sustain/regain operational tempo. developing and enhancing integrated surveillance, warning and reporting, monitoring, protection and detection capabilities. Fundamental to the Strategic overview future of CBRN protection are the opportunities represented by Network Enabled Capability (NEC). Intelligent networking will give increased B9.2 We are committed to maintaining the UK’s political and situational awareness and facilitate rapid hazard prediction. Data fusion military freedom of action despite the presence, threat or use of CBRN from a multitude of sensors will create the CBRN recognised picture. weapons. The spectrum of this threat is broad and may come from a number of diff erent aggressors, from state-sponsored programmes to B9.5 Aligned to the rapid technological development in this sector international terrorist organisations. The 2003 Defence White Paper, of defence are the potential economies of scale to be found when ‘Delivering Security in a Changing World’, identifi ed international considering the wider CBRN market place. In particular this includes

Pre deployment CBRN and damage control training on board HMS INVINCIBLE.

114 Defence Industrial Strategy B9.10 remain valid, however, profi nameanddelivery theproject lemay change. which theseassumptionsare delivered. The netresult isthat theassumptions Warning, Survive will entail thebrigadingofcurrent programme assumptionsunder incremental acquisition andtherapid exploitation ofemerging technologies. It eff management. capability ective Itistheprecursor to facilitate timely below isthecurrent Outlined CBRNequipment programme. Over the coming months theprogramme isundergoing areview to enablemore B9.9 divided into theconceptual groupings of Timely Warning, andSustain. Survive decision makingandincreased situational awareness. The CBRNprogramme is suppliers iskey. oftheprogramme At isNECwhichwill enablerapid theheart We take asystems approach to CBRNprotection. The ofindustry ability to deliver fullyintegrated systems, often from oftechnology awidevariety B9.8 research establishment hasbeenretained withinDstl, asastrategic asset. suppliers andinfl uences prioritiesforinvestment. For this reason our therefore, drives industrialdevelopment, growth ofintelligent supports deliver eff systems ective rapidly to thefront line.Our targeted research, counter that threat. isanincremental Second acquisition approach to base that seeksto thethreat characterise andestablishtheprinciplesto are two mainthemesto theprogramme. The fi rstis a strong research of globalterrorism. To combat thissignifi cant technical challengethere conventional weapons industriallymanufactured systems to theemergence threat environment. The threat we face isalmostlimitless, from themore The UK’s CBRNprotection programmedeveloping emerging isfocusedonrapidly technology to deliver solutionsto thecomplex B9.7 Equipment programmes engaged withboththeHomeOffi fully investigate how theseeconomies canbeexploited andwe are fully ofHealth.Amajorstrand ofourindustrialstrategyDepartment isto Home Offi the homelanddefence/counter terrorism whichisledby the sector force… intime’ inorder to avoid, to take to decisive protect: action, that the impact ofanythat CBRNattack theimpact willbelow andnever achieve itsgoal. byOnly achievingthiscanwe messageto sendthepowerful allaggressors equipment ableto readily detect, withstandandrespond to CBRNchallenges. Strong CBRNforce protection oftheUK’s hasalways formedpart deterrent posture. We mustequipourhighlyprofessional troops withadvanced B9.6 Board, Board Delivery andResearch Strategy Board.

are gainedthrough stockpile sharing andjointcontracting. organisation to enhance nationalcapabilities. In additioneffi 2 1 Collaboration ofHealthanditspurchasing withtheDepartment Engagement isthrough theHomeOffi Warning ofCBRNplanning isafundamental part andreporting ce andtheconsequence management area through the Timely Warning fi ve years. Itis expected haveto life into the2020s. aservice isplannedandshouldfollow within with increased functionality Increment 1isplannedto bedelivered increment in2007.Afurther to bemadeinanticipation of, orresponse to, aCBRNevent. with otherdefence applications andenableoperational decisions networked battlespace, helpingachieve NEC.Itwillbeintegrated (BISA) Application remain withintheUK. The These elements are, ofnecessity, classifi edandtheirdetailsmust systems, anagent database andnational threat assessments. and deterrence andisdependent onothercommand andcontrol and Sustain –thecapabilitiesrequired to ‘warn the isthesoftware providing CBRNinputto the ce andwillprobably recast themannerin 1 NBC Battlefi eldInformation System and the Department ofHealth andtheDepartment ce chaired CBRNStrategic ciencies 2 . Timely Man-portable ChemicalAgentDetector.Man-portable UK military and civil biological detection andidentifi andcivilbiologicaldetection UKmilitary cation The The Joint CBRNRegiment’s The With aplannedfi eldingdate fortheendofthisdecade

also provide theoperational CBRN advice commander withexpert light forces forrapid deployment. These specialist8-manteams matched capability toanalysis andtransportation earlyentry provide astrategic identifi CBRNdetection, cation, monitoring, are to expected have lifeofat least 15years. aservice provides thefoundation forthegrowth offuture systems and (IMS) Agent (CWA). utilise Both since 2004provide alarmat attack levels ofChemical Warfare (MCAD) AgentDetectors Chemical Man-portable logistical burden associated withcurrent D&Isystems. will give anincrease inthe withareduction incapability andidentifibiological detection that cation (D&I)capability will provide theRoyal (RN)withafullyautomated Navy which detectors andprovide withotherin-service abaseupon in concert to complement theISMSprogramme. bio-detection Itwillfunction be available by the endofthedecade, andwillprovide generic System Detection (UBDS) Unmanned Biological ofbasicforce isafundamental protection. part capability The in2006andtoenter have lifeinto service the2020s. aservice systemgeneric unmannedbiologicaldetection andisplannedto detectors, isto bedelivered withacommercial off theshelf (COTS) chemical, radiologicalable to andnuclear within-service interface enable timelywarning ofaCBRNevent. The system, whichwillbe will beoneofthesystems providing theBISAwithinformation to will provide a ‘plug andplay’ suite ofsensorsto LandandAirforces, envisaged thiswill beakey component offuture defence platforms. (an )andsustain(reconnoitre capabilities. andsurvey) Itis liquid andvapour capability. detection Itprovides timelywarning date decadeandwillprovide inthemiddleofnext astandoff Off Stand the is expected to beavailable decade. by themiddleofnext Monitoring andAnalysis(DIMA) systems, suchasUBDS. The system possibility, BDT 3may replace Identifi someplannedDetection, cation, toa detect warn capability. With future integration a opportunities BDT 3 Maritime Biological Detection System Detection (MBDS) Maritime Biological Integrated ManagementSystem Sensor (ISMS) Lightweight Chemical Agent Detector (LCAD) AgentDetector Lightweight Chemical whichisapivotal technology to current and capability willcombine stand-off detectors andsimplesensors to provide Biological Detection Tier 3(BDT Detection 3) Biological Chemical Detector (SOCD) Detector Chemical Ion-Mobility Spectrometry Ion-MobilitySpectrometry Light Role Teams (LRTs) Defence Industrial Strategy Industrial Defence hasaproposed delivery candevelop. , whichwill will in-service in-service and , , which 115 B9 CBRN Force Protection and ability to prepare the way for follow-on forces. Expected to be available in the latter half of this decade, the teams will be self-suffi cient and have reach-back capability to the UK.

Dstl sponsored research on reagents is directly feeding into the Rapid Diagnosis System (RDS) which is being developed to identify illness that may have been caused by undetected low level exposure to possible BW agents, TIHs or endemic disease. Anomalous symptom events will be detected by the Real-time Medical Surveillance System (RMS) using software analysis to assist the man in the loop.

B9.11 Survive – the capabilities, based around man, ‘to survive a CBRN challenge’:

Personal NBC Protection System (PNPS) will, by the middle of the next decade, provide all personnel with an integrated system Troops based in , practice masking-up drills during an NBC drill. of Individual Protective Equipment (IPE) that gives protection against a range of NBC hazards with a reduced physiological Multi Level Decontamination (MLD) is aimed at burden. It will be aligned to the future soldier systems (such providing a ‘thorough’ decontamination capability at unit as Future Integrated Soldier Technology, FIST) which may level through the joint operational area, from personnel to aff ect the planned ISD. It will be used in conjunction with the sensitive equipment and whole platform and is expected General Service Respirator (GSR) which is due in-service to be available in the middle of the next decade. by the end of next year. The GSR will provide very high levels of respiratory protection while reducing the physiological and Unit Decontamination Capability (UDC) is a programme psychological burden suff ered by personnel using this equipment to provide a low burden integrated self-contained ‘thorough’ and is expected to have a service life well into the 2030s. decontamination capability to enable the removal of IPE and reduce casualties. Planned to be available by the From the middle of the next decade, the Deployable Collective latter half of this decade, it may become part of a system Protection System (DCPS) will provide an easily transportable of systems within the longer term MLD programme. and erectable collective protection system. It is an aspiration to combine this with standard military tentage, where Aircrew Chemical Agent Detector (ACAD) will provide considerations include coatings, fi ltration and decontamination. a chemical detection capability with unparalleled levels of sensitivity from the middle of the next decade. It is an aspiration The incrementally acquired Aircraft and Aircrew CBRN to merge ACAD with the replacement unmasking aid to deliver a Survive to Operate (AACSTO) programme looks to provide widely deployable capability which upgrades/replaces LCAD. protection and hazard management capability in aircraft operations. It seeks to reduce the burden on the individual, The recently delivered Tactical Radiation Monitoring Equipment improve decontamination of aircraft and protect the insides of (TRaME) provides a comprehensive suite of detectors and monitors certain aircraft from cross contamination. Due to be phased in for our use on the battlefi eld. In addition sensors, for a number of service from the middle of the next decade, the programme current and future platforms, are being researched in conjunction represents a signifi cant enhancement to our current capability. with the host platform’s development. Therefore, those platform based detectors fall outside the scope of this chapter. TRaME is in- B9.12 Sustain – the unit/force level capabilities to service now and is expected to have a service life of into the 2020s. confi rm the extent of a hazard, to rapidly recover from an event, and to sustain/regain operational tempo: Medical Countermeasures (Med CM). Whilst protection from, and avoidance of Biological and Chemical attack may be The NBC Reconnaissance & Survey (NBC R&S) programme possible, there are many scenarios in which our forces could be is designed to develop the capability gap left as Fuchs exposed to biological and chemical agents. In these instances (reconnaissance vehicle) approaches the end of its life. eff ective Med CM will be essential in avoiding casualties and Planned for introduction in the middle of the next decade maintaining operational tempo. Med CM can be delivered either and currently planned as a FRES (Future Rapid Eff ects System) as pre or post event prophylaxis, or as post exposure therapy. variant which will deliver a full suite of CBRN detectors. The MOD has a vigorous research and development programme Using a multitude of systems to monitor a wide variety of surfaces, in this area based around the widely recognised excellence including personnel, equipment, buildings and terrain the and expertise of Dstl and is addressing nerve agent antidotes, Chemical Monitoring Capability (CMC) is currently split into vaccines and antitoxins. Within the next fi ve years we plan that an two programmes. The Surface Detection System (SDS) which improved nerve agent antidote, a licensed antitoxin and a number aims to confi rm and identify the presence of known threat chemical of vaccines will have been fi elded. In the subsequent decade it is agents will be used in conjunction with an Unmasking Aid (UA). anticipated that further countermeasures will be made available. The preferred solution may involve the use of disclosure technology, IMS and fl ame photometry. Biological Surface Monitoring Capability (BSMC) will provide a biological equivalent to SDS. Both systems are planned to enter service in the middle of the next decade.

116 Defence Industrial Strategy is aState to anumberofnon-proliferation Party treaties inthatdistinctive theUK’s posture ispurely defensive. InadditiontheUK B9.14 The area CBRNcapability andtheassociated are industrialsector in theUKindustrialbase? What isrequired for retention theoverallwhich doesnotdistort illustrative picture ofgeneral trends. the endofcurrent SpendingReviewperiod. This isprudentplanning order to thepotential ininvestment emphasise for shifts prioritiesafter ten years. The fi gures from 08/09are illustrative andincludea range in The above graph shows indicative over spendinginthissector thenext -IllustrativeFigure spendprofi B9(i) le. include theinvestment oftheplatform basedprogrammes. madeaspart our existing capability. The CBRNprogramme describedabove doesnot on developing newtechnical solutions, whilstmaintaining andimproving number ofthelarge programmes are delivered. We willcontinue to focus year.next The total CBRNpackageisplannedto increase outto 2015asa spend around andresearch £120MonCBRNprotection acquisition, support identify anddevelop theEP. newtechnologies to support The UKwill within theShort Term Plan(STP) andtheplanned research fundingto Plan (EP), thecost ofmaintaining andoperating theequipment captured over 10years. thenext This includestheplannedspendonEquipment Figure B9(i)illustrates ourcurrent assumptionsforCBRNspend B9.13 Indicative planningassumptions order to enable the delivery of military efforder ofmilitary to enable thedelivery theArmed to ects Forces: to guarantee access to thefollowing key intheCBRNarea in functions byis notdistracted other nations’ strategic goals. Itistherefore vital supplier basewhichfullyunderstands the UK’s approach to CBRNand industrial sector. on-shore Maintaining thiscapability willresult ina isessential,our capability withafocusedandagile inconjunction of rapidly developing technology, incrementally, to continuously increase develop technological solutionsto complex problems. Taking advantage Providing eff CBRNprotection ective isa constant battle to B9.16 agreements signifi andassuchexerts cant strategic infl uence. advantageous research through international andtechnology partnering position withitsstrategic Inparticular, partners. theUKcanachieve very development base. andmanufacturing This places theUKinaunique strong research programme withtheUK’s inconjunction successful of CBRNprotection systems. This isinthemaindueto anexceptionally The UKisat theforefront ofthedevelopment andproduction B9.15 national strategic prioritiesdrives usto retain astrong on-shore focus. the needto retain atechnological advantage inthefi eldaligned to our concernsnational security andthoseofourinternational allies. Therefore, global commercial free fl limitedow ofsensitive by our technology isfurther scope what ofR&Dactivities, canbesold, andalsoto whichcountries. The breadth often ofthemarket limiting the place forourindustrialpartners 3 Chemical Weapons Convention andBiological andToxin Weapons Convention. b .        $#3/ :FBS 3 . This governs the  3% 451 &RVJQNFOU1MBO a world-class capability inthefollowing broad capability a world-class areas: to anindustrialbasethat, asaminimum,iscapableofproviding Inorder to deliver thesekeywe needaccess functions B9.17

for CBRNprotection must beconsidered attheearlieststages ofallacquisitions. capability. It isintrinsicto all areas and, acommon as enabler, therequirements through provision ofaprotected supplychainto disposal. us andindustry. from This extends thedevelopment ofDstlresearch, advantagetechnologies -this provides and themilitary awin-winfor to continued development whileprotecting oftheindustrialbase key 5 4 CBRNtechnologies andthinking must beintegrated withoverall military Non-proliferation licences andexport are considered fundamental ofsupply. Maintain security Retaincredible involvement inCBRNdeterrence; Respondto Urgent Operational Requirements (UORs); Exploiteconomies ofscaleacross Government; Maintain anational CBRNfocusto infl uence across defence Control CBRNtechnology proliferation Exploitemerging technology anddeveloping equipment/systems;

products fromproducts overseas are equallyvalid inthisarea. dependent ontheavailability oftechnology andmanufactured The arguments fornotallowing defence capabilitiesto be intheUKgivesthis capability aspecialinfluence incollaboration. andthemaintenance ofa world spectrometry leaderion-mobility forthedevelopmentcountry oftechnology impossible. The UKis associatedpriority withCBRNmakes thereliance onathird use ofoffshore suppliersundesirable. Inadditionthestrategic and theunderpinningintelligence themmakes the to support Reporting Protection Physical and Identification, and Identification, Detection and developed on-shore are thoseassociated with: above. Technologies note that mustberetained ofparticular is onlypossibleusingtheIntelligent Suppliersmentioned increase ofCBRNprotection. to thecapability This development developmentthat would withfurther deliver asignificant being aproof ofprincipleortheidentification ofatechnology drive usto invest asignificant amount inR&T; theoutput CBRN threat andalackofdemandinthecommercial sector Technology Exploitation procurement strategy isnotaff ected by othernations’ strategic goals. andwhose development doctrine ofsystems that suitourmilitary inclusive sensitive ofthosesecurity items iskey. This willallow the sourced off shore, however, to deliver theability the total package, to Systemsof theability Engineer. The may well component be parts purely from in-houseresources. Vital to usistheretention onshore contractors possessalltheskillsto deliver thecomplete solution System Engineering Intelligent Supplier research baseto develop principlesanddeliver solutions. working closelywiththedefenceshould becomfortable remain at theforefront oftechnology. The intelligent supplier supply andensuringbothourArmedForces andindustrialbase underpins therelationship we have withindustry, guaranteeing available andthecontext inwhichwe willusethem. This concept knowledge ofCBRNinterms ofthetechnicalin-depth solutions retention onshore oftheintelligent supplierwhoshouldhave and thecomplexity oftheCBRNarea, ourprimeconcern isthe . Inalltheseareas theUKspecificprotection factors . Due to. Due therapid pullthrough oftechnology . CBRNsystems are few complex andvery . The ofspecificsthe sensitivity Defence Industrial Strategy Industrial Defence

Biological AgentDetection Biological 4 ; and Warning and Chemical Chemical 5 ; 117 B9 CBRN Force Protection Supply of Raw Materials. In conjunction with the need to ensure B9.19 The supplier base within the UK is strong and growing due in part to security of supply of technology is the need to ensure an onshore increased focus on the homeland defence market. This is attracting suppliers manufacturer that can provide certain key raw materials. It is who have not previously shown a defence interest, which should benefi t us our intent to reduce the reliance of large stockpiles and engage by facilitating access to innovative solutions and technologies. The industry is in procurement based on surge production. Of particular note in represented by NBC UK, a special interest group within the Defence Manufacturers’ this respect is the supply of Anti Gas Cloth for CBRN protective Association. The membership of 55 companies has a signifi cant interest in CBRN suits where we must be able to guarantee a product that meets either as integrators, manufacturers in their own right or as sub-contractors. our stringent quality and protection requirements. Certain other Those represented span every fi eld from CBRN protection for the individual raw materials are fundamental to the UK’s biological defence (clothing) via man-portable detection equipment right through to large highly capability and their security, quality and guaranteed supply must not specialised systems and equipments for the detection and identifi cation of be compromised. The ability to surge, with the associated logistic biological agents. Currently UK industry has interests in the home market as implications will be carefully considered on a case by case basis. well as the increasingly profi table international sector6. The industry remains fi rmly focused on meeting domestic requirements; however, although the UK Medical Countermeasures Manufacture. Medical market is buoyant and our predicted spend is likely to increase, the US market Countermeasures are the most sensitive area of our CBRN interests. continues to present an attractive commercial proposition to industry. If industry The capabilities of the countermeasures and the defi nition of the fails to achieve its commercial expectations within the UK, its focus may shift threat that they counter is of such a sensitive nature that sole reliance from not only exploiting US opportunities as they arise, but diverting research on off shore development and manufacturing is impossible. Certain and technology investment into that market. UK industrial consolidation agreements do exist with our close Allies to share research and in some and development into the US would therefore present a risk to us associated instances collaboration in procurement exists, however, the retention with technology transfer and could harm our operational eff ectiveness. of a strong UK skills and manufacture base is vital. This industrial process is also of signifi cant interest to other Government departments. B9.20 Although the number of companies interested in CBRN business is large, often the contractors are relatively small and specialist. There are only a Overview of the current few companies that could be considered targets as industrial partners or capable global and UK market of providing a prime contractor role. These are currently: Smiths Detection (detection and identifi cation),General Dynamics UK (systems integration and B9.18 CBRN protection requirements have for some time been manufacture), SERCO Assurance (systems integration), EDS (systems integration). met through a healthy and competitive industrial market place. All of the current larger value contracts have been established 6 Example: Smiths Detection has recently made inroads into the through competitive tendering exercises with, notably, no single Japanese market. The industry’s most profi table sector is the contractor more successful than the other main competitors. US marketplace, both military and homeland defence.

The Joint CBRN Regiment capabilities include nuclear and chemical survey, biological agent detection, and post attack decontamination .

118 Defence Industrial Strategy both MOD’s andindustry’s aspirations thefollowing strategy willbefollowed: The UK’s commercial isbuoyant. CBRNsector To manageeff ectively B9.21 Sustainment strategy fi eldablesolutionsinnicheareas where there isno commercial market. readily available Dstlcanproduce forindustrialexploitation. Ifnecessary oftechnical solutionstoon thedelivery theCBRNproblem, whichis place. Therefore, research ofDstl’s across thespectrum isfocused activity be progressed to apoint where cantake technology transfer to industry been retained asastrategic asset. This enablestheunderlyingscience to the marketplace become lessbuoyant, CBRNresearch withinDstlhas To protect what we capabilities, assessasourpriority should B9.23 achieve rapid andinnovative acquisition alongsidebetter value formoney. players to intheUK, seewhetherotheracquisition modelscould allow usto costs andbenefi withthefourmainindustrial particularly tsofpartnering, non-proliferation willalsobehonoured. We willexplore however thepotential will have to betargeted at UKbasedindustry. International Agreements on base intheUKsomeofdevelopment, contracts andsupport production of sensitive information. We recognise that to maintain an ‘intelligent supplier’ thosebasedaround security, inparticular risk, ofsupplyandprotection security deliver, off shore supplierswillnotbeprecluded unlesstheirinclusionincreases of risk. Whilst theonshore industrialbaseisbuoyant andgenerally ableto levels.performance concernWhole asisthereduction lifecost isaparticular that seeksthebestcandidate to ensure value formoneywhilstguaranteeing The CBRNprocurement strategy isthusprimarilyoneofcompetition B9.22

and we see mechanisminthefuture.TDPs asanimportant of MODfunded Technology Demonstrator Programmes (TDPs), and Pall for TERRIER. The systems were by de-risked theuse by thecombined eff ofAmetek, Aircontrol orts Technologies developed Hunter by Domnick Ltd for TITAN and TROJAN, and funded research anddevelopment. These systems,were engineering vehicle, were spin-inofcommercially adirect TROJAN engineeringtanksystems andthe TERRIER battlefi eld systems now coming into fortheUK’s production TITAN and The development oftheworld’s fi rst regeneratable NBC ltration fi Early engagement with industry to establishhow besttheycan Earlyengagement withindustry Maximisetheeconomies ofscalefrom Continue to focusresearch ontheearly Explore to protect innovative anddevelop opportunities partnering Incrementally acquire to deliver solutionsrapidly and imposed by theuseofUKspecifi csensitive technologies. achieve theirglobalcommercial aspirations withintheboundaries eff cross ective Government working. transfer oftechnology to industry. capabilitiesandprocessesthe priority we wishto retain intheUK. avoid forindustry. thefeastorfaminecycle innovative andfl exible supply-chain. This work willbegininearly2006. acquisition to ensure continued value formoneywhilstmaintaining an toNBC UK, lookat thebenefi tsofothermodels, for suchaspartnering, work thosecompanies whoare withindustry, membersof inparticular utilising competition asaprocurement strategy inthepast, we want to and joint contracting. Additionally, whilstwe have beensuccessful in potential forco-operative purchasing, shared research, stockpile sharing Offi buildingontheexisting dialoguebetween MOD,Departments, theHome Government to derive economies ofscaleforequipment purchased across We available withinwider willanalysetheopportunities B9.24 Way ahead ce and the Department ofHealth. ce andtheDepartment This willincludeinvestigating the Defence Industrial Strategy Industrial Defence 119 B9 CBRN Force Protection Counter Terrorism B10

Defi nition Equipment programmes

B10.1 Counter terrorism (CT) is a pan-Government activity, the policy B10.5 The development and procurement of specialist CT capabilities is responsibility for which sits primarily with the Home Offi ce (for activities largely led by the Director of Equipment Capability (Special Projects) – DEC internal to the UK) and the Foreign & Commonwealth Offi ce (for activities (SP) – and the Special Projects Integrated Projects Teams (IPTs) within overseas). The MOD provides military support, and takes the lead, in those the Defence Procurement Agency. Procurement projects are currently areas where military forces on operations are at risk from terrorist attack. being run in the areas of mobility, communications, force protection and improvised explosive device detection and disposal, amongst others. Strategic overview The details of these projects remain classifi ed, and are contained in a separate and expanded version of this chapter, the details of which are B10.2 The threat from international terrorism to the security and available to suitably qualifi ed companies at the MOD’s discretion. economic interests of the UK, its partners and its allies will, for the foreseeable future, derive from individuals and networks motivated B10.6 Many of the projects being run by DEC(SP) and the Special by extremist ideologies which are committed to an international Projects IPTs have utility outside the CT arena, and could, for instance, campaign against the West and those nations and governments support general Special Forces (SF) operations in wartime. associated with Western ideals or interests. Their activities will be marked by an extreme ruthlessness in seeking to maximise civilian Indicative planning assumptions casualties. Suicide attacks will be a feature of their operations. They will exploit as mass-eff ect weapons readily available means B10.7 CT requirements are captured within the Capability such as aircraft and tankers, and they will aim to develop Chemical, Area Plan (CAP) for DEC(SP) within the MOD, and drive both Biological, Radiological and Nuclear (CBRN) means of attack. the research into and procurement of new equipment.

B10.3 The threat presented by terrorist networks will be B10.8 Figure B10(i) illustrates the currently assumed overall enduring, although the level of support and sympathy for their resources for the CT Equipment Programme, Short Term Plan objectives from host nations will depend upon: the degree of support costs and CT research over the next decade. economic prosperity imbalance with the West; the impact of reform and progress towards democratisation; the eff ectiveness of CT B10.9 It is worth noting that the MOD’s spending in this sector have operations; progress with key issues such as the Peace been bolstered over recent years by spending on Urgent Operational Process; and the scale of cultural antipathy towards the West. Requirements. The UK will continue to require the wherewithal to rapidly advance new technologies into the front-line. B10.4 Given the nature of the threat, capabilities traditionally needed in niche areas and Northern Ireland are increasingly becoming

required across the force structure. This reinforces the importance $PVOUFS5FSSPSJTN of the counter terrorism sector, a sector to which the UK is a major   contributor, and provides greater opportunities for both industry  and MOD to become more cost-eff ective in the CT fi eld.   &RVJQNFOU1MBO  451 b .  3%    

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Figure B10(i) Illustrative spend profi le. The above graph shows indicative spending in this sector over the next ten years. The fi gures from 08/09 are illustrative and include a range in order to emphasise the potential for shifts in investment priorities after the end of the current Spending Review period. This is prudent planning which does not distort the overall illustrative picture of general trends.

Capability priorities

B10.10 In contrast to many of the areas covered by the rest of the DIS, CT is underpinned by technologies utilised in many areas of industry – from the cutting-edge physics of electro-optics and RF sources through to the rather cruder, though no less important, problems of vehicle mobility and specialist demolitions charges. In some cases

120 Defence Industrial Strategy MOD does not have perfect knowledge ofallcompanies thatMOD doesnothave might perfect industry.understanding between MODand theCT theonehand, On procurement withtheCT organisationsindustry isthelackofcommon The key issuepreventing increased andearlierengagement of B10.15 the diff erent technological areas need to beestablished. of engagement mechanismsappropriate to thechallengesfacing must beacknowledged covers that CT awidearea, andavariety for greater earlyengagement withindustry. At thesametime, it There isagenerally recognised community needwithintheCT B10.14 Sustainment strategy conditions. weather camera deployed surveillance inextreme Overt majority ofitsspecialistequipmentisretainedwithinUKindustry. operations, CT to conduct forinstance, that from capability transferringof itsCT overseas. Itiscriticalto theUK’s ability system packagingthat theMODneedsto beableto prevent criticalelements engineering (includingdesignanddevelopment), testing andevaluation, and be retained withinUKindustry, itisprimarilywithintheareas ofsystems development, system andsustainment manufacture that ofaCT needto Althoughthere ofthetechnology are basewithinthe aspects B10.11 a system, ortheway itisusedonanoperation, remain sensitive. is well way understood, itisimplemented buttheparticular within reveal capabilities. Inothercasesthe technology used criticalmilitary details ofthetechnology needto beprotected, astheirexposure would remedial action requiredremedial action to sustainkey industrialcapabilities. relationship between MODandindustry, we believe there isnourgent more usableormore eff ective. Whilst there are ways ofimproving the modifi edfollowing purchase to render itmore covert, more robust, byeither useddirectly UKSForothers, or(inasmallpercentage ofcases) MOD iscommercial-off -the-shelf (COTS), where existing equipment is Approximately 50%ofCT-related procurement withinthe B10.13 clearance oftheirproducts,their security andutility known as ‘List X’. for classifyingthesuppliersthat make sector, uptheCT onthebasisof dependent ontheMODfortheircommercial viability. There isasystem in thelatter casethere are believed to benosupplierswhoare entirely national companies to ofnichedevices, smallmanufacturers although are spread across many hundreds ofsuppliers, ranging from large multi- number ofuses, innature). someofwhichhappento beCT Procurements know equipment to may andthosewhoseproducts bespecialistCT have a (an assessment that covers boththosecompanies supplyingwhat they We isgenerally believe robust arena that intheCT theUKindustry B10.12 ofcurrentOverview global andUKmarket

design authorityfor the

able to anticipate andaddress any emerging issues. through greater the MODwillbe engagement withindustry issues are Nosustainability currently evident, but B10.18 and testing andevaluating ofspecialistequipment. occurs mainlyintheareas ofsystem designandengineering, ofCT-relatedor otherwise withintheUK industrialcapability With theexception ofvarious nichecapabilities, retention B10.17 under way, orare planned, to ameliorate thissituation include: that theMODisattempting to fi ll. whichare Mitigation either activities doesnothave ofthesetCT-related visibility industry gaps capability be ableto off ersolutions to itsproblems, whileontheotherhandUK characterised bycharacterised several broad statements, asfollows: The MODapproach to CT-related procurement canbe B10.16 Conclusion combining capability gapanalysisandsubsequent combining capability assistingcompanies whomight have somethingto off erinthe declassifying(to thegreatest extent possible)Invitations andthe usingtheCAP watch’‘industry jointly to engageearly with maintaining anongoing watch’‘industry to identify companies maintaining alistof ‘key trusted suppliers’ whocould begiven greater arranging earlybriefiCT- onforthcoming ngforindustry LiaisonOffi creating anIndustry many oftherequirements are highlyclassifi ed(i.e. SECRETorabove). itinvolves asignifi cant amount of COTS purchasing; itinvolves alarge numberofsmallcompanies anda itisfast-moving andreactive to known threats; itcovers adiverse andwidetechnology base; to act astheinitialpoint forqueriesand approaches; ofcontact to act interoperability anddeliver economies ofscale. inorder to expediteDepartments development, achieve equipment procurement Government withOther greater access to classifi ed requirements information; contract competition, thusallowingof anactual them procurementCT arena to achieve ListXstatus independent to Tender (ITTs) issuedintheDPA Contracts Bulletin; basis, modifi edoff versionsof -the-shelf COTS products; andencourage themto develop,industry ona ‘no-commitment’ mightwhose products fi gaps; llknown capability transition from MODresearch into commercial/bespoke products; access to theMOD’s area, fortheCT thusfacilitating CAP better related procurement viaIndustrialBriefi projects ngDays; relatively smallnumber oflarge companies; cer withintheSpecialProjects IPTs, Defence Industrial Strategy Industrial Defence B10 121 Counter Terrotism Technology priorities to enable defence capability B11

B11.1 The analysis by major platform sector in this strategy has Technologies on which the UK needs to identifi ed a number of industrial capabilities which the UK will need sustain or develop technological strengths to retain on-shore. Key technologies that underpin these sectors have also been discussed. Our recent Technology Strategy1 and the National B11.8 In order to support the industrial capabilities identifi ed across Defence Industry Technology Strategy2 also provide specifi c information the sectoral analysis there are a number of areas in which the UK must on the importance of technologies for defence capability. This section sustain existing technological strengths or where we should consider draws together the critical underpinning and cross cutting technologies developing our expertise. The technologies described here support a that need to be sustained in the UK in support of sectoral strategies. number of sectors and capabilities. Other important technologies will be needed on-shore to support more specifi c sectoral or capability needs. B11.2 Some of this technology will be available from the broader industrial base, for instance COTS solutions. Furthermore as the global B11.9 These technical areas can be discussed in terms of: investment in R&T continues to increase, and as an ever larger number of countries contribute to this overall growth, it is impossible for us to support technology that can be inserted into future capability solutions cutting edge activity across all areas of R&T of relevance to defence. and will directly improve the delivery of military eff ect;

B11.3 To take forward the DIS we need to identify what we need to technology which will enhance enabling processes to the be good at to protect our security and sovereignty. This should help delivery of capability and enhance decision making; to sustain and indeed enhance the competitiveness of our Defence industry. We also need an objective understanding of what we are technology for which no specifi ed capability or eff ect has been good at and those key areas where Defence must still lead. identifi ed, but where technology watch is required as future exploitation or mitigation of that technology may become important. B11.4 Our increased collection of and reliance upon information derived from many diff erent sensors, based on varied platforms, has many implications. Technologies for future capability solutions These include the need for more R&T on the human factors that determine information assimilation and appropriate action, and the need to design B11.10 Secure and robust communication technologies – future information networks across diff erent components of military capability. defence capability against diverse and often asymmetric threats will depend on secure and robust communications. While we will benefi t B11.5 The life expectancy of major platforms is increasing due in part greatly from the large civil investment in communications, defence to the costs of replacement. This generates an increased emphasis on the communications systems have to be rapidly deployed in widely varying need for equipment and systems to be fl exible to meet unpredictable circumstances, work in very diffi cult environments and often off er a high demands, adaptable to ensure connectivity in a network enabled world, degree of security, both short and long term. Key technologies are: and capable of continuous upgrade and rapid technology insertion. information infrastructure; B11.6 In order to address these issues, the UK will need to cryptography. have a leading edge understanding in the areas of: B11.11 Data and information technologies – an increasing reliance overall equipment design and integration; on information and intelligence to maintain superiority over our opponents design and performance of sub-systems; means that the ability to process, manage and exploit the wide range and properties and limitations of key components; large volume of data available to the armed forces remains vital to the UK. through-life capability management; Again much of the underpinning technological developments will come from delivering cost eff ective military solutions. civil investment but UK defence will need to maintain and develop expertise in:

B11.7 Furthermore, to support future adaptation and image analysis; integration our supplier base will need to have: target identifi cation and tracking algorithms; data fusion; the ability to control and manage equipment network design and stability. design, modifi cation and integration; suffi cient knowledge of, and access to, sub-system design and B11.12 Sensor technologies – sensors remain absolutely critical to manufacture to allow modifi cation and re-confi guration; nearly all aspects of defence capability including situational awareness and knowledge of, and access to, the key components and detection and identifi cation of targets. Our ability to fi nd, identify and localise technologies needed to support upgrades. targets, many of which may be heavily concealed, in cluttered environments, or mobile, relies to a very large extent on the performance and correct use of advanced sensors. Battlespace and situational awareness, including battle 1 MOD Technology Strategy, Priorities for Defence damage assessment, rely on the development of systems to ensure full Research [UK Restricted] dated May 2005. integration between the sensors and mission and weapon programming 2 National Defence Industry Technology Strategy 2004. activities. In addition technology areas such as the detection of chemical

122 Defence Industrial Strategy B11.13 Optics labmeasuringMTFofaninfrared lens© BAESystems. biological agent detectors, are criticalto UKdefence. Key technologies are: as well asothermore specialisedsensorssuchassonarandchemical (SAR) are slowly emerging. Consequently, these, technologies supporting Where size islessofanissue, thebenefiRadar tsof Synthetic Aperture the highresolution imagesoff (EO)sensing. ered Electro-Optic by compact by sensorsworking at Frequency (RF)(e.g. Radio to radar) iscomplementary capability. For sensing, electro-magnetic theall-weather off performance ered and biologicalagents are becoming to increasingly ourdefence important B11.15 B11.14 advanced guidance ofweapons anduninhabited platforms. a world lead isinautonomous andsemi-autonomous systems for guidance andcontrol. Anarea where UKhas, andshouldmaintain, intechnologiesto forprecision beunderpinnedby expertise are central to UKdefence aimsandneeds. These willcontinue is addressed at aholisticsystem level. are: Key technologies forsurvivability against thebroad range ofpotential threats that survivability itisimportant equipment andpersonnel, iscentral to UKdefence policy. Inorder to survive effi that combine combat sensingandelectronic technologies inasinglemore that theUKwillincreasingly wishto develop anddeploy integrated systems and muchoftheunderlyingtechnology baseisshared withradar. Itislikely combat techniques across are many important areas ofdefence capability cient andeff payload. ective Technologies essential to thisarea are: Chemical Biological Radiological andNuclearprotection. ChemicalBiological Radiological defensive aidssystems, includingEOandRFCounter Measures; lightweight andnovel armoursystems; andsignature low observables control; combat. electronic RFengineeringto support RFandEODirected Energy Weapons; electronic Warfare; Counter electronic Measures; threat identifi detection, cation andlocalisation sensorintegration. detectors forchemicalandbiologicalagents; sonar; EOsensors; radar andRFengineering(e.g. phasedarrays; low mass/power Guidance andcontroltechnologies Integrated survivability (Electronic Support Measures); (Electronic Support consumption technologies, RFsystems); multi-function Electronic combat technologies Electronic –ahighlevel ofsurvivability, for –like sensors, electronic –precision eff ects track and, where appropriate, exploit advances intheseareas, suchas: information andanalysisspace that are developing rapidly. We must in B11.11,there are anumberofemerging technology areas inthe high speedthreats. Moving from forward thecore technologies discussed an appropriate andtimelyresponse, against short-range particularly - underpinningalloftheabove willbeautomated decisionaidsto ensure gain acompetitive advantage inthisarea oftechnology. and that UKexcellence inpropulsion to provides theopportunity for power isdriven by increasingly complex embeddedelectronics; plant inUCAVs could become asdemand acriticaldefence capability We alsorecognise that integrated propulsion andpower B11.19 will needto understandandexploit, applications, ormodifyto are: meetmilitary power sources are ofalltypes an increasing priority. Key technologies that we we seekto deploy lighter forces more rapidly andwithalower logisticburden, including oursoldiers, become more capablethrough beingbetter equipped, and B11.18 B11.17 B11.16 management©Ultra.Signature guidance technologies discussedabove, themainareas ofinterest include: operation willneedto betailored to defence needs. Inadditionto the great dealwillbeavailable from ofremote butmany thecivilsector aspects technical ofpolicy. capabilitiesfordeliveringare important thisaspect A very protect andmake bestuseofourpeople. Automation andremote operation deploy autonomous systems wherever possibleandappropriate, inorder to personnel ofourarmedforces are ourmostvaluable resource andwe seekto semi-autonomous sensingandprocessing; fuelcells. personalpower sources; effi highbandwidthencryption. highbandwidthsecure data-links; Advanced SignalProcessing; Digital data storage; selfadaptingnetworks; data miningandinformation extraction; information anddata management; low power electronics. longendurance propulsion techniques; accurate underwater navigation; computer assisted decisionmaking; Power sourceandsupplytechnologies Automated Information andKnowledge technologies Technologies for remote andautonomous operation cient motive power forvehicles andpower supplyforsystems; Defence Industrial Strategy Industrial Defence -asourdefence systems, -the

B11 123 Technology priorities B11.20 Human Performance – alongside the development Technology area and exploitation of the autonomous and semi-autonomous systems discussed above, the human will be the key decision Secure and robust communication technologies maker at every level of command. It is therefore vital that research Data and information technologies is undertaken into human decision making, cognitive processes, Sensor technologies and techniques to enhance elements of human performance. Guidance and control technologies Technologies for enhancing Electronic combat technologies capability delivery Integrated survivability B11.21 Technologies to support system integration and support Automated Information and Knowledge technologies - as we face a more diverse range of threats we will need to ensure that our Technologies for remote and autonomous operation capability is fl exible, adaptable and capable of upgrade. We will, at the Power source and supply technologies same time, need to ensure that the high level of connectivity and integration required for eff ective Network Enabled Capability is maintained. This Human performance fl exible networked capability will require development and exploitation, or Technologies to support system integration and support intelligence in accessing and militarisation, of technologies to support: Summary of technology areas . logistics (particularly COTS technologies e.g. asset tagging & tracking); Next stages of analysis of R&D priorities advanced modelling for analysis and experimentation including eff ects based operations; B11.22 Following on from this statement of priorities, we need a further numerical methods for simulation and Test & Evaluation; level of analysis that will form the basis of further work in 2006. This will new decision support models; allow us to better understand and describe the nature of these technologies, open architectures; where they are in the supply chain, and the level of existing UK expertise. architectures and design to support technology insertion; This analysis will enable further discussion and planning with industry on: obsolescence management; advanced data-loggers and failure algorithms; those areas in which maintaining a UK capability is assessment and mitigation of environmental impact. of vital strategic importance (here the security and viability of UK supply chain is essential); Technologies with emerging where we can and should collaborate in both industry defence relevance and university sectors at home and abroad; where we can buy military sub-systems and components, but to B11.22 In the sections above technologies important to defence adapt and integrate (here the supply chain must be acceptable, have been grouped together to highlight where they are of particular sustainable and secure. This requires intelligent customer importance. There are, of course, other technologies showing promise expertise, including assessment of product fi tness-for-purpose); across a range of defence applications that may have either a large impact where we can buy COTS (but must have on specifi c defence capabilities or a more widespread impact across intelligent customer expertise). many aspects of defence. These can provide both an increased threat and opportunities for improved defensive capability. Examples include:

smart materials and structures; Micro Electro-mechanical Machines (MEMS) for reduced size, weight and cost; novel energetic materials with enhanced properties; supersonic and hypersonic technologies; biotechnology and the eff ect on human performance (e.g. countermeasures to complex molecules with mood altering properties); wideband, high power electronics; quantum state systems for computing and communications; the wide potential of nanotechnology.

124 Defence Industrial Strategy Test and Evaluation B12

Defi nition other things the performance characteristics of the equipment, how it operates with other military capabilities and importantly that it is safe to use. B12.1 A Test and Evaluation (T&E) capability is a combination of facilities, equipment, people, skills and methods, which enable the demonstration, Design and development measurement and analysis of the performance of a system and the assessment of the results. This can range from testing a simple switch to evaluating B12.4 During the concept and assessment phases of the CADMID acquisition complex systems, such as the performance characteristics of a warship. cycle, there will be a signifi cant requirement to test new technologies and concepts in particular to ensure their feasibility for use, for both new Strategic overview equipment procurement and upgrades. For new technologies under development, some T&E will be undertaken via modelling in synthetic B12.2 T&E is vital to the development, introduction into service and environments and laboratory analysis in order to obtain an informed view through-life support of the equipment used by our Armed Forces. It on feasibility without resorting to potentially expensive physical testing. contributes to a variety of activities, which reduce risk to our Armed Forces. Decision-making Assurance that systems are safe and suitable for military use B12.5 Access to T&E facilities and capabilities are important when down-selecting equipment or technology solutions. They enable B12.3 The traditional but still relevant view of T&E relates to the testing the decision maker to be aware of the variety of factors relevant to B1 2 of equipment before it enters service with the Armed Forces. These activities the equipment or technology, how they perform and any associated occur following completion of equipment development and prototyping. risks, enabling recommendations about new and adapted equipment As we move towards an incremental acquisition system there will be a or technology for procurement. We place particular focus within our requirement for more Test and Evaluation to take place on platforms and other procurement processes on the importance of this type of early risk equipment through-life, as and when upgrade and modifi cation work takes reduction within equipment programmes. This helps both to ensure place. There will be a wide range of testing undertaken on the equipment, an understanding of expected military capability but also to facilitate in a variety of diff erent environments and scenarios to ensure that it meets greater value for money later on in the procurement process as we will the exacting needs of the Armed Forces. This often necessitates the need for have developed an understanding (and where possible mitigated) of dedicated ranges and facilities, both in the UK and abroad to test amongst risks associated with new technology and equipment development. Test and Evaluation Test

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Defence Industrial Strategy 125 3POB

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Figure B12(i) – Major LTPA T&E sites.

Tactical and operational development B12.10 A number of trials are also conducted overseas because, for example, particular environmental conditions cannot be naturally B12.6 The use of T&E capabilities is paramount for testing equipment replicated within the UK e.g. hot/dry (desert), hot/humid (jungle), cold/ and technology within tactical and operational scenarios, in order to icing climates or due to other constraints (e.g. physical lack of suitable mirror battle conditions where a true appreciation can be gauged of the space) or because they require facilities that do not exist in the UK. military eff ectiveness of the capability tested. T&E facilities also present opportunities to test the interoperability of our military capability with our B12.11 There is a balance to be struck between retaining in the allies, to help ensure eff ective coalition deployments and expeditions. UK the required range of T&E facilities and avoiding duplication and overcapacity. This implies a clear understanding of the our T&E T&E locations requirements, on which we have work in hand. It also implies the need, in the context of the LTPA, to keep under review the size and shape B12.7 We use a mixture of in-house, Government Owned Contractor of the T&E industrial base. An in depth study of LTPA requirements is Operated (GoCo) and commercial T&E facilities to support the acquisition due to complete next year, as part of the fi ve yearly LTPA process. and sustainment of military capability. These are a mixture of UK and overseas assets. Figure B12(i) indicates the location of the major MOD T&E T&E vision sites operated on our behalf by QinetiQ under the Long Term Partnering Agreement (LTPA) and indicates the type of services they provide. B12.12 The vision is to establish an eff ective, cost-effi cient and coherent approach to allow for the testing and evaluation of equipment to support B12.8 The LTPA is a £5.6bn 25-year contract covering the MOD- military capability both through research prior to, and then throughout owned T&E facilities previously operated by the Defence Evaluation and the CADMID cycle. The vision includes aspects such as training, tactics, Research Agency (DERA). All these capabilities are kept under constant doctrine and procedures and the use of more operationally realistic review to ensure that they continue to meet our T&E requirements and and measurable T&E environments. There is little doubt that future to identify potential rationalisation or effi ciency opportunities. T&E capabilities will need to provide the means to identify, and then reduce, technical, programme and cost risks from the earliest possible B12.9 The map shows the breadth of T&E testing that is undertaken on-shore stages of acquisition through both synthetic and physical means. via the LTPA. A number of privately-owned facilities are not shown, but provide additional or similar types of T&E capability. For example, BAE Systems operate B12.13 The realisation of our vision will require optimisation, an aircraft testing facility at Warton in Lancashire, next to their fast jet production and development, of existing UK T&E facilities coupled facility, similar to the testing facility operated by QineitQ at Boscombe Down. with analysis of other opportunities. For example:

126 Defence Industrial Strategy money forthetaxpayer, whilstmaintaining defence capability. any relevantundertake rationalisation to ensure continued value for to understandthereasons forduplicationwith industry andifnecessary within theUKbutalsoininternational arena, we willneedto work Where ouranalysisidentifi esareas of T&Eduplication, principally B12.16 to includeGovernment andcommercial T&E capabilitiesinto theanalysis. amongst othernations, hasbeenat theforefront ofthisprocess andiskeen and propose ‘rationalisation’ oftheEuropean Defence T&E Base. The UK, (EDA) by Agency Defence national representatives, andsupported to analyse requirements, andalsoincludesaninitiative, by theEuropean started our Air T&E capabilities, routine fi ve-yearly review ofthe LTPA capability future defence acquisitions.support This includeswork to review both Work isalready to underway capture ourlong-term needsto B12.15 steps T&E next that theoptimummixisdelivered and, more importantly, sustained. personnelwillstillberequired.and supporting The challengeisto ensure and physical testing, however specialistanddedicated T&E ranges, facilities complete panacea. There may beashiftinthebalance between laboratory physicalto conduct equipment andsystem testing itisnotnecessarily a the increasing reliance willundoubtedly reduce onthese activities theneed workway together capability. to MODandindustry develop military Whilst the NITEworks experimentation willdrive capability improvements inthe are playing role anincreasingly in important ForT&E activities. example, analysis, Laboratory experimentation, simulation andmodelling B12.14 Artifi and suppliersworking together to realise thepotential ofNEC. whichseescustomers partnership operates asauniqueMOD-industry can take to deliver improved to thefront capability line. NITEworks battlespace to identify thebenefi steps tsofNECandthepractical we to delivery. This isachieved through experimentation inasimulated delivery. NITEworks NECfrom isoneofthekey ideas meansofcarrying andtheoptionsforitseff (NEC) Enabled Capability andtimely ective and experimental environment to assessthebenefi tsofNetwork In July2000NITEworks was establishedto provide anintegration greater withoverseas co-operation Governments andindustry. greater useofmodellingandsimulation; networking of T&E andotherfacilities; greater mobility, anddeployability, ofcomplex T&E equipment; cial T&E a longer-term strategy to consolidate T&E capabilitiesacross Europe. operation where appropriate. The EDA work may lead, induecourse, to term isto retain butlookforoverseas withintheUK, T&E capability co- purposes.defence capability The current strategic intent inthemedium can besafelymadebasedontheprinciplethat facilitiesare retained for We to identify willwork where withindustry suchdistinctions B12.18 safeguards ofsupply. to includingsecurity certain subject verify T&E results testing on-shore, ratherconduct thanactually element isto retain to direct, theability understand, analyseand needs andsovereigntysecurity ofaccess. Inothercasestheimportant assurance, quality oroperationalamongst otherthings, safety certain InsomecasesaUKbased isessential for,T&E capability B12.17 Conclusion Defence Industrial Strategy Industrial Defence B1 2 127 Test and Evaluation 128 Defence Industrial Strategy Implementing the Defence Industrial Strategy

Taking forward the DIS - the challenges for change Getting down to work - putting the DIS into action

C Implementing the Industrial Strategy Defence

Taking forward the DIS - the challenges for change C1

C1.1 The DIS presents real and urgent challenges to the way in risk and performance management, and tailoring our procurement which the Department conducts the business of defence acquisition approach to the needs of individual acquisition programmes. in future. If we are to step up to those challenges and translate the strategic intent into a reality, we must acknowledge the need to change. C1.4 The nature of acquisition is evolving and we face an increasingly The strategy will not deliver unless the defence acquisition community demanding and complex environment. Closer collaborative engagement as a whole, including industry as well as MOD, make the essential between us and our industrial suppliers will be vital if we are to continue transformation in our behaviours, organisations and business processes. to deliver the improvements that the Armed Forces and UK taxpayers demand. The increasing pace of technological change, linked to a demand C1.2 Our Smart Acquisition initiative has delivered signifi cant benefi ts for delivery of projects that combine new equipment with other elements for Defence in the form of improved performance and delivery of aff ordable, such as through-life support and training as an integrated capability present battle winning capability to the Front Line. The basic principles of Smart challenges that both the Department and industry must face together. Acquisition still hold true and existing change programmes throughout the Department provide a solid foundation on which to build. C1.5 Our future approach to acquisition will therefore be built around the objective of achieving:

‘There has been further progress on measures to improve primacy of through life considerations. performance within the Defence Procurement Agency and coherence of defence spend across research elsewhere in the Department. These improvements focus on development, procurement and support. the following areas: performance of key suppliers; the skills and successful management of acquisition at the departmental level. development of staff ; project and risk management; increased use of trade-off s between time, cost and capability of equipment; C1.6 Taken together these objectives will form the basis better joint working of those responsible for acquisition within of our acquisition reform programme, and our response to the the Department; and stronger project scrutiny at all levels’. challenges of the DIS. We intend to build on our achievements to date - consolidating success and embedding best practice – but also National Audit Offi ce Report – Major P rojects recognising that we need to drive reform where it is needed. Report 2005, HC595-1, Session 2005-06 Our Values for Defence Acquisition

C1.7 Successful acquisition depends not just on getting our strategy, C1.3 We must address the remaining challenges across the organisation and management processes right. We must ensure the Department of embedding a through-life systems approach, achieving fundamental enablers are right, such as the cultural environment in a better and more transparent relationship with industry, improving which we do business, the values and behaviours to which we adhere.

C1 Taking forward the DIS - forward Taking change the challenges for

A meeting of the National Defence Industries Council.

Defence Industrial Strategy 131 Defence Values for Acquisition

Defending the United Kingdom and its interests

Strengthening international peace and stability A FORCE FOR GOOD IN THE WORLD

We achieve this aim by working together on our core task to produce battle-winning people and equipment that are:

fi t for the challenge of today; ready for the tasks of tomorrow; capable of building for the future;

Our defence values for acquisition

By working together across all the Lines of Development, we will deliver the right equipment and services fi t for the purpose required by the customer, at the right time and the right cost.

In delivering this Vision in Acquisition, we all must:

recognise that people are the key to our success; equip them with the right skills, experience and professional qualifi cations; recognise the best can be the enemy of the very good; distinguish between must have, desirable, and nice to have if aff ordable; identify trade off s between performance, time and cost; cases for additional resources must off er realistic alternative solutions; never assume additional resources will be available; cost growth on one project can only mean less for others and for the front line; understand that time matters; slippage costs – through running on legacy equipment, extended project timescales, and damage to our reputation; think incrementally; seek out agile solutions with open architecture which permit “plug and play”; allow space for innovation and the application of best practice; quantify risk and reduce it by placing it where it can be managed most eff ectively; stopping a project before Main Gate can be a sign of maturity; recognise and respect the contribution made by industry; seek to share objectives, risks and rewards while recognising that diff erent drivers apply; value openness and transparency; share future plans and priorities wherever possible to encourage focused investment and avoid wasted eff ort; embed a through life culture in all planning and decision making; value objectivity based on clear evidence rather than advocacy; ensure that we capture past experience and allow it to shape our future behaviour; realise that success and failure matter; we will hold people to account for their performance.

C1.8 In October 2005, we announced a core set of defence values Achieving the gold standard for acquisition which build on our Defence Vision to shape the behaviour of all those involved in acquisition, including: Ministers, the Defence C1.10 The recent Value For Money report from the National Audit Management Board, customers at all levels, the scrutiny community, Offi ce1 identifi ed several examples of ‘Gold Standard’ performance in project teams in the delivery organisations and private sector partners. our projects “with a number at the very forefront of good project control”, against a benchmark of worldwide best practice in other C1.9 We will embed these values for acquisition in our sectors. In setting out our agenda for change, we must take the whole partnering arrangements through clear leadership at all levels by: of the Department forward on a broad front, embedding best practice in everything we do. We set out below our priority areas for action ensuring all key acquisition decisions refer explicitly to and the steps we will take to achieve the changes we are seeking. how they reinforce and demonstrate these values; refl ecting these values in our acquisition personnel Through life relationships with industry objective setting and reward structures; embedding these values in our core acquisition guidance C1.11 Defence acquisition must be able to adapt to the increasing documents and education programmes; and uncertainty in our external environment and the future operational using these values as the basis of the way we develop our future relationship with industry. 1 National Audit Offi ce ‘Driving the Successful Delivery of Major Defence Projects: Eff ective Project Control is a Key Factor in Successful Projects’. HC 30 Session 2005-2006

132 Defence Industrial Strategy requirements; programmes that are increasingly complex, of higher clear boundaries of responsibility and authority in the value and higher risk; a greater drive for innovation and continuing dealings between us and industry with explicit codes of cost improvement, and models of product and service delivery that practice and behaviour that are actively managed; are more through-life and long term in nature. Relationships between Department and industry that are purely transactional and conducted at arms-length will struggle to meet these challenges. Increasingly Working jointly with the MOD, Rolls-Royce Defence Aerospace they demand the use of a diff erent style of relationship. has achieved improved mission availability whilst reducing cost of ownership with its MRMS - Mission Ready Management Solutions- strategy. This focuses Rolls-Royce’s aftermarket support ‘Successful working relationships are characterised by soft factors such on the creation of cost-eff ective solutions, specifi cally customised as team working, trust and honesty. When the Department and its to the requirements of individual platforms and customers and industry partners on a project display these behaviours they are more designed to provide enhanced value through the application of likely to develop a common understanding of the task, the progress Rolls-Royce’s IPR and unique product knowledge. Rolls-Royce being made and give early warning of problems. When a project and the DLO have jointly embarked upon a partnering approach operates in a supportive and open corporate environment the other to transform the logistic support to the Front Line Commands. parts of the project’s own organisation, such as senior management, are more likely to have timely and accurate information about the Whilst MRMS is a relatively status of the project to enable them to make sensible decisions.’ new concept, exemplifi ed by the benefi ts fl owing from the National Audit Offi ce – Driving the successful delivery support solution for the RB199 of major projects, HC30 Session 2005-06 engine in the RAF’s Tornado aircraft, which in a pilot contract delivered 30% cash savings C1.12 The emphasis on our future approach to ensuring value for money whilst improving engine has highlighted the need to place greater emphasis on fostering better, and availability, it builds on a track where appropriate, longer term relationships with our key suppliers, and record of previous successful the use of appropriate commercial tools, including competition of formal innovation. The successful Total parnering agreements. This must be underpinned by greater openness Support Programme for the and transparency, with a common and more explicit understanding of Spey 250 engine in Nimrod how to achieve best value for both Defence and industry. While there R1/MR2 led the way. Under are examples of good practice in fostering good relationships, including this arrangement, average in Defence Estates, these are not as widespread as they should be. engine on-wing time has more than doubled, unplanned C1.13 ‘Partnering’ defi nes how the parties conduct themselves rejections have been reduced by and the working attitudes that are valued. While it can describe a 50% and spares consumption legal framework of partnership, the basic ethos and the associated has reduced by over 20%. behaviours are not restricted to any particular method of contracting. The achievement of these innovative support solutions has been based C1.14 Learning the requisite behaviours and skills, as well as other on the establishment of a joint Rolls-Royce/DLO team, working within professional procurement competencies, takes time and experience. We a partnering arrangement. The arrangement included developing a recognise that it will be some time before all our acquisition specialists are jointly owned through-life cost model, shared assumptions database, able to demonstrate signifi cant experience of practising these partnering joint risk register and an integrated cost reduction programme behaviours. We are committed to retraining and developing our people involving Rolls-Royce, its supply chain, the DLO and Strike Command. to develop the competencies required, and will encourage individuals to plan their careers with a view to preparing them for such positions. By fi rst clearly understanding the desired outcomes of all parties, Nevertheless, we recognise that in the short term we may not be able a contracting model was developed which has established to fi nd internally all the individuals we require who have or can develop eff ective performance-based incentives for reducing the C1 quickly the requisite skills and experience, and would therefore need to through-life cost of RB199, not least by applying Lean Support recruit externally. To ensure that we maintain a vibrant, highly skilled Principles to maximise total support eff ectiveness. acquisition community in the department in the longer term we will also, in line with the Professional Skills in Government agenda, actively This innovative approach has relied on the adoption of entirely encourage continued movement between the Department and Industry. diff erent behaviours by industry and the MOD, which have been characterised by a change in leadership style and co- C1.15 The business environment to which we aspire is one in which there is: location to achieve successful joint team working, based on shared information and aligned business objectives. a relationship which is less ‘adversarial’ in style, based on a mutual understanding of where the motivations and interests of each party lie, acknowledging and managing the areas of diff erence and tension; an ethos that encourages potential problems to be brought to light early, with eff ective mechanisms for the timely resolution;

a willingness to share information with industry in a spirit of the DIS - forward Taking change the challenges for openness and transparency at all levels. This must begin from the earliest stages of the project lifecycle, involving industry more closely in helping us to identify and shape the requirement;

Defence Industrial Strategy 133 more widespread use of ‘partnering arrangements’2 in our contracting relationships where appropriate; having explicit Defence Estates Supplier Association codes of practice and behaviour that are actively managed; Defence Estates (DE), through the adoption of Prime Contracting, relationships between MOD, industry and others that has generated a major rationalisation of the traditional property encourage innovation and facilitate the insertion of new management and core works contracts, reducing them from technologies and upgrades into military capabilities. In some over 200 into 5 regional based medium term contracts of areas this will require greater understanding and management between 7 and 10 years duration. A signifi cant proportion of of the critical points in the industrial supply chain. DE’s business is or will be contracted out to a much-reduced number of suppliers for the medium to long term. C1.16 We will therefore: As part of DE’s Supplier Management strategy we aim to improve place a greater emphasis on joint team behaviours the overall working relationship with key suppliers following and relationship management as part of the core this move to longer, high value contracts. We believe that the business of all our acquisition. This will include Supplier Association format provides us with a formal structure developing project teams which have the tools, skills and through which we can achieve this objective. The associations expertise to facilitate more eff ective relationships; are intended to be inclusive and a ‘joint’ initiative, therefore cannot work without the commitment of DE’s key suppliers. create a new Defence Commercial Director post in the

centre of the Department with a pan-Defence strategic %FWFMPQ 4QSFBE#FTU outlook. This appointment has already been advertised. The post 1SBDUJDF *OGPSNBUJPO #FODINBSLJOH holder will be responsible for driving forward the commercial &YDIBOHF aspects of the Defence Industrial Strategy and, in particular, for developing partnering arrangements with industry that #SFBLJOH "EESFTT embed the right behaviours and incentives for both parties; EPXO $PNNPO CBSSJFST #FOFmUT *TTVFT 1VSQPTF place greater emphasis on partnering behaviours, the

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$POUSBDU 1SPmU invest increased resource and commitment into driving *NQSPWFNFOUT .BSHJOT forward the Key Supplier Management initiative to deliver a framework that will improve and develop our knowledge, understanding, and relationships with key suppliers DE organised workshops with its suppliers during November 2005 throughout the supply chain focusing on mutually benefi cial to launch the Supplier Associations and are confi dent that by improvements in decision making and performance, while early 2006 the associations will be fully established and will have also improving risk management across our portfolio; identifi ed specifi c areas on which DE can work collaboratively with its suppliers, in order to generate tangible outputs and effi ciencies. improve commercial awareness and the understanding of industry for our acquisition staff at all levels. This will include a greater use of joint training and development, and creating more opportunities for short, focused exchanges of staff between the Department and industry; Delivery of integrated solutions

ensure greater collaboration between defence, industry and C1.17 We will continue to promote adoption of a more integrated the universities in the fi elds of science, technology and engineering. approach to the delivery of military capability, through our focus on We will develop the supplier base by building on our existing Through Life Capability Management as the basis of all our acquisition plans to compete more of the research programme and forming activities. While the principle of an empowered equipment capability partnerships between government, industry and universities; customer is now well embedded into our acquisition system, we need to improve the synchronisation of other contributing defence Lines publish a guide, intended for an industry audience, of Development (see text box). The delivery of new and enhanced making it clear whom within our acquisition organisations has military capability requires orchestrated action across complex the lead responsibility and can speak authoritatively on particular change programmes in addition to the equipment itself. subjects. This guide will be published electronically and will be updated through the Acquisition Management System.

2 A ‘partnering arrangement’ is not generally a legally binding form and it can be applied to any contractual relationship. It diff ers from a formal ‘Partnering Agreement’ in which the MOD and a supplier form a legally binding, collaborative entity.

134 Defence Industrial Strategy manage the inter-dependencies between our projects Defence Lines of Development more intelligently and eff ectively; and

Training exploit opportunities to provide more cost eff ective ways Equipment to provide military capability through innovation and People change in the non-equipment Lines of Development. Information Doctrine and Concepts *ODSFBTFE Organisation *OWPMWFNFOU Infrastructure Logistics $POUSBDUJOHGPS"WBJMBCJMJUZ $POUSBDUJOHGPS $BQBCJMJUZ 4VQQMJFSSFTQPOTJCMFGPSEFMJWFSJOH QMBUGPSNTBOEFRVJQNFOUUPBOBHSFFE QFSGPSNBODFBOEPVUQVUTTUBOEBSE 4VQQMJFS $POUSBDUJOHGPS "WBJMBCJMJUZ

The Future Rotorcraft (FRC) programme, initiated in 2004, 4QBSFT combined the funding and requirements of several helicopter *ODMVTJWF $POUSBDUJOHGPS$BQBCJMJUZ equipment projects to achieve increasing coherence and cost- 4VQQMJFSSFTQPOTJCMFGPSQSPWJEJOH BDBQBCJMJUZ FH"JS3FGVFMJOH BOEPVUQVUT eff ectiveness within capital and support cost constraints. 5SBEJUJPOBM UPBHSFFEQFSGPSNBODFTUBOEBSET

The programme needed to balance the priorities for investment across the non-combat (e.g. Search And Rescue) and combat 1SPWJEFS 5IF%-0 %FDJEFS rotorcraft capability domains of Lift, Find and Attack in both the Figure C1(i). Land and Maritime environments. This was driven by the need to address ageing and obsolescence issues on elements of our current fl eet; all three Services have rotorcraft responsibilities. C1.20 We will take action to create a strong programme management environment around our projects that will: A Senior Responsible Owner was appointed to provide leadership within the Department for this complex challenge. Additionally, one manage the overarching portfolio of projects within a of the three Directors of Equipment Capability with responsibility capability area, including research and technology, capability for rotorcraft was vested with the Single Point of Accountability upgrade and in-service capability in a coherent manner. for all rotorcraft programmes. The third structural change within Programme teams will be accountable for the initiation and the Department was the appointment of a dedicated FRC IPT execution of projects, working with suppliers to reduce the Leader to marshal the eff orts of IPTs in this key capability area. likelihood of individual projects over-running and the impact on the wider acquisition budget if this is unavoidable;

manage cross project issues; oversee the integration of projects and other Lines of Development into military capability; increase our capability to trade-off between performance, time and cost; and provide a focal point for underpinning industrial base issues and ensure coherent engagement with the market. This will include an intelligent approach to the structuring of the supply chain to maximise innovation and nurture the necessary systems engineering capabilities;

act as overarching design authority for the capability area; to enable faster and cheaper capability upgrade; C1 manage the insertion of new technologies and increments; better focus on the pull-through of new technology; exploit opportunities to reduce through-life costs by more coherent management of the total portfolio of equipment and projects; C1.18 We have created a number of through-life IPTs with dual accountability to the DPA and the DLO, to provide a cradle to grave approach invest in developing programme management to equipment management. The DLO is already driving an end to end capabilities and competence within acquisition. This will through-life view of logistic support solutions that provides opportunities ensure the availability of the key enablers defi ned by the OGC and incentives for industry to align with our capability needs. for Successful Delivery Skills and Centres of Excellence.

C1.19 There is much more that we still need to do, if we are to: C1.21 We will run Pathfi nder programmes to test and de-risk this approach to capability programmes with close

get the best value for money from the defence industrial involvement from industry in the areas concerned. the DIS - forward Taking change the challenges for base in the delivery of battle-winning capability to the front line, not just at the level of individual projects but across multiple projects and programmes;

Defence Industrial Strategy 135 .0% $VTUPNFS ‘The Department should apply lessons from the procurement of

$BQBCJMJUZSFRVJSFNFOU capabilities through Urgent Operational Requirements more widely, $BQBCJMJUZCBTFEGVOEJOHQSPmMF 5JNF*NQFSBUJWFT for example fl exible procurement and rapid competition techniques.’

5ISPVHI-JGF 1SPHSBNNF.BOBHFNFOU ‘The single most impressive aspect of our study has been the massive 1FFST  %FTJHO 1SPHSBNNF 4ZODISPOJTF %FNBOE 4VQQMZ$IBJO *OUFHSBUJPO 5SBEF0õT %FMJWFSZ-0% .BOBHFNFOU 4USVDUVSF 1PTTJCMF commitment by staff in the Department and in industry who, in times .0%JOEVTUSZ *OUFSGBDFT of need, assume the task of delivering Urgent Operational Requirements

*OEJWJEVBM1SPKFDU to the warfi ghter in addition to their normal ongoing duties.’ 1FSGPSNBODF$PTU5JNF &OWFMPQFT *OEJWJEVBM National Audit Offi ce Report – The Rapid Procurement of 1SPKFDUT %1"%-0 */%6453: Capability to Support Operations, HC1161, Session 2003-04

Figure C1(ii).

C1.26 There is also much that we can learn from our handling of Urgent Pathfi nder Programmes Operational Requirements, recognising the unique circumstances in which they are generated and delivered. Nevertheless, such rapid procurements Sustained Maritime Surface Combatant Capability. are a testament to the dedication and ability of our acquisition community The long-term sustainment of the capabilities currently in times of crisis, and show a pragmatism and preparedness to trade delivered by Maritime Surface Combatants alongside a performance and make use of innovative contracting approaches. solution for the Key User Requirements previously identifi ed by the Future Surface Combatant programme. C1.27 Alternative acquisition lifecycles, such as incremental acquisition, are better suited to these challenges and allow for a staged Sustained Armoured Vehicle Capability. The long- approach to the reduction and management of project risk. They also term sustainment of the capability delivered by the off er fl exibility to enable the insertion of new technology and a rapid current and programmed Armoured Vehicles. response to evolving requirements and operational circumstances.

Faced with high levels of programme risk and a rapidly C1.22 The key features of the Pathfi nder programmes will be: developing technology base, the PICASSO project adopted an incremental strategy, combined with the appointment of a culture change through setting the right values and behaviours; Prime Systems Integrator (PSI) and a Joint Project Offi ce.

a programme approach to through-life capability management; The strategy has enabled the PICASSO team to deliver capability in manageable programme increments, with assessment activity eff ective integration across all the Defence Lines of conducted concurrently with the delivery of each increment. The Development to deliver sustainable military capability; PSI is responsible for assessment, delivery and integration of future increments and the through-life Operation & Maintenance of the eff ective techniques for capability trade-off with early current and future capability. This approach has been eff ective industry engagement in capability analysis; in mitigating the programme risk by giving the team the agility to react to emerging issues and to trade performance, time and Defence/industry joint working to understand and address the cost for each increment based on changing requirements. dynamics of the supply chain and sources of innovation. It has allowed MOD and industry to pool ideas and has promoted C1.23 We are working up business cases for each of the Pathfi nders with the a clearer understanding of how industry solutions can meet intention that both programmes will launch in the fi rst half of 2006. We also MOD’s needs. This approach also gives MOD the opportunity to intend to capture lessons emerging from our FRC, SAM and Acquisition for NEC direct industry to integrate known third party solutions into programmes as a means of identifying best practice in programme management. legacy and new capability. Progress to date has been excellent and the project is meeting its 10% confi dence level estimates. C1.24 Work is also underway to assess the application of programme management approaches to the departmental Information Systems portfolio, and to consider the need for clear end-to-end ownership of the processes used for the delivery of the Command Information Systems within MOD. C1.28 To inform and support such alternative acquisition lifecycles we will require new models and analysis that enhance our ability to: Innovation, agility and fl exibility understand how capability and technology C1.25 We must be able to respond to the rapidly changing strategic combine to deliver us the military eff ect; and operational environment by adapting current and future capabilities exploiting the opportunities off ered by technology innovation. We must develop clear options for consideration; remain alive to developments in the commercial market, particularly in the fi elds of information and communication technologies that are evolving at a conduct balance of investment to inform decisions between pace that can outstrip the ability of our procurement processes to respond. investment in platforms and weapons or enabling systems.

136 Defence Industrial Strategy C1.29 We must also look to research and technology (R&T) to C1.31 Adoption of open system architectural principles can assist in provide more aff ordable and cost-eff ective capability. This must provide developing modular solutions that maximise the opportunities for technology a greater focus for our future programmes. Examples of where R&T insertion, as well as promoting innovation and competition within the programmes have helped to address aff ordability issues include: supply chain. These principles ensure the equipment design process employs declared, common standards, interfaces and supporting formats. seeker research work on the Brimstone air-launched anti-armour missile allowed savings of £15-20 C1.32 There is further scope to exploit synthetic environment million, and increased the capability. approaches and the use of experimentation techniques involving the end user. These techniques can also be used to capture and refi ne Flight control research for the JSF, providing estimated cost requirements; identify and de-risk the fi nal solution; ensure all Lines saving of £40 million for fi xed costs and £3.6 billion over of Development have been addressed; and support an end to end the next 30 years for a research cost of only £50 million. perspective on the key integration and interoperability issues.

C1.33 Exploitation of e-procurement techniques off ers the potential The Tornado F3 Sustainment Programme (FSP) is a to further streamline the acquisition process, reduce bureaucracy and collaborative project to upgrade the Tornado F3 to fi t AMRAAM promote an eff ective collaborative working environment with industry. This and ASRAAM missiles and to make improvements to the radar applies to the procurement of commodity items, the acceleration of bidding and mission computer software. The project combines several and tendering, and support to virtual teams working with industry. E- upgrades into a single, coherent package of work, delivered in procurement does not just replace paper transactions. It transforms business increments. The small joint team (comprising Tornado IPT, Fast processes and fosters more eff ective trading partnerships with our suppliers. Jet and Weapons Operational Evaluation Unit, BAE Systems, QinetiQ and the missile, radar and computer contractors) have adopted concurrent engineering principles, strong teamwork and Submarine Combat Systems Open Systems Architecture simultaneous development, trials and operational evaluation. aims to harness the extraordinary development in COTS processor power to manage traditional military system obsolescence, reduce whole-life costs and sustain capability. It is based around three principles: improving open access to software applications from a variety of sources; reducing dependence on a single provider of bespoke military hardware; avoiding “lock in” to a single provider by establishing MOD led activities to oversee and separate application development, selection processes, standards development and management of systems integration.

Technical demonstration has shown the maturity of the approach, drawing on US experience. The process has required industry to accept the reduction in business volume and adopt OSA to remain engaged, without MOD liability for the down-sizing. Greater processor capacity and “smarter” applications considerably improve existing performance. A major benefi t of the OSA is that new applications in response to urgent capability demands can be hosted more rapidly and at lower cost; major system cycle time for introducing new This has reduced the projected time (by 50%) and cost (by 30%) as well capability is reduced by approximately 75% and it is expected that as allowing front line views to be incorporated early in the development support and upgrade costs will be reduced by approximately 40%. process. Already at the midpoint, the programme has proven resilient in the face of a number of technical problems but has still achieved all of its stretch milestones. This approach is being broadened into the Tornado Capability Development and Sustainment Service to accelerate C1 the introduction of new technology onto the Tornado GR4 from 2010 to 2007; this opens up the architecture of the aircraft to make future technology insertion easier and hence reduce whole-life costs.

C1.30 We will seek to realise the value of innovation by exploiting it better in new equipment or new processes, including a greater emphasis on the development of demonstrators3. These off er major benefi ts by providing a means to challenge conventional views on system solutions and off ering early risk reduction. We will also improve the planning of research exploitation, and to use this to inform funding

decisions. This will help the MOD and industry allocate funding and align the DIS - forward Taking change the challenges for equipment and the supporting R&T programmes.

3 The Management of Defence Research and Technology Part 4 NAO Report March 2004

Defence Industrial Strategy 137 C1.34 The major enabler for e-procurement is already in place. The C1.37 We will take action to create a consistent and Defence Electronic Commerce Service provides the principal portal for clearly defi ned operating framework for how we conduct, e-business transactions between the Department and its trading partners. govern and control our projects. This framework will: Suppliers already trading through this route have identifi ed a number of key benefi ts including: less paperwork and administration; quicker payment; embed the Defence Values for Acquisition greater competitive advantage through reduction in inventory holdings; throughout the organisation; direct supply to the customer and greater control of the supply chain. establish a strong and professional ‘doctrine’ for how C1.35 We will take action to make our acquisition approach the Department conducts its acquisition business; more innovative, agile and fl exible at the project level, by: reduce the burden of compliance and governance and improve streamlining decision making, recognising the speed and responsiveness of our decision-making; that delays in decision-making have a cost; be underpinned by a set of obligations that clearly articulate fully exploiting the potential of e-procurement, what customers, suppliers and other stakeholders can expect throughout the MOD acquisition organisations; in their dealings with the acquisition organisations.

rebalancing our governance arrangements C1.38 The DPA intends to review and clarify its operating framework towards a greater emphasis on assurance that risk is during 2006, working in conjunction with the other areas of acquisition progressively reduced through the life of the project; to ensure consistency and alignment. The DLO Procurement Reform and Category Management initiatives have also made progress in promoting recognising that being prepared to cancel projects, if necessary greater coherence and consistency among their logistics teams. We will work before Main Gate, is a necessary part of a healthy acquisition across the acquisition community as a whole to exploit opportunities for system recognising the impact this may have on bidders; improved joint working and commonality of approach, including reviewing and streamlining the Acquisition Management System to ensure that content increasing the tempo of procurement; matching to the underlying is relevant, authoritative and readily accessible to practitioners. Together speed of technology change and changing operational needs, moving with the Defence Values for Acquisition, and the Acquisition Handbook, to the presumption that all projects should use more fl exible this will form a coherent and readily accessible suite of guidance. approaches (such as incremental or evolutionary acquisition);

systematically reviewing the procurement strategies for ‘Top team oversight of major programmes is critical to success. IPPD our existing pre-Main Gate project population to identify recommends that departments establish a centre of excellence, potential benefi ts and opportunities for improved delivery combining the roles of programme offi ce and departmental capacity/ through a more fl exibleapproach to acquisition; capability building. The centre of excellence will ensure Management Boards and Ministers have the systems and data they need to prioritise, developing an improved approach to technology insertion, monitor delivery, and balance risk against departmental capability.’ allowing us to ‘plug and play’ new technologies more easily into our major systems and platforms, maintaining a capability edge and Improving Project and Programme Delivery: Offi ce of Public ensuring interoperability with high technology allies such as the US Service Reform and France. Specifi cally, working with industry to identify innovative best practice and benchmark UK performance against other nations for cost eff ective technology insertion by the end of 2006; C1.39 We will implement the OGC Commerce Project and Programme working with industry and universities to identify management ‘Centre of Excellence’ model to ensure that we: national sources of innovation and where the important technologies we need are: continue to drive toward the NAO ‘Gold Standard’, and toward best in class professional procurement practices in improving the pull-through of technology from research public and private sector organisations world-wide; into capabilities; increased technology scanning to identify potential opportunities and threats, and the funding and fully integrate risk management into our project management focus of technology and capability demonstrators; approach;

exploiting synthetic environment and experimentation identify and progressively implement a set of best approaches to reduce risk and facilitate early engagement in class project control and reporting tools. of the operational customer in system design. C1.40 We will also embed improved joint working between the Consistency in our approach DPA and DLO exploiting opportunities for improved alignment, commonality of approach and economy of eff ort. These include: C1.36 Empowered and accountable Integrated Project Teams remain a core principle of how we conduct acquisition. But some of our project continuing to launch through-life IPTs; teams behave inconsistently and may fail to follow best practice. Empowerment can also result in approaches that are eff ective at project rationalising the provision of enabling services that level, but which may not be in the best overall defence interest. provide specialist skills in support of IPT activity;

138 Defence Industrial Strategy improving our knowledge management and our learning Acquisition Values. This will include looking to new approaches from experience across the acquisition community. to recruitment, pay and grading, and reward, to attract, develop and retain people with the right skills. We must also ensure that Professional delivery skills our most challenging projects attract, and are led by our very best, and that we grow people for those roles through the course C1.41 We must ensure that the appropriate training, development of their careers. Individual and team achievements in project and professional standards are in place for all those involved in delivery must also be appropriately recognised and rewarded. An acquisition, and that staff receive due reward and recognition for evaluation of current initiatives will be undertaken with the Project their competence and for their achievements in project delivery. Delivery Skills Programme and completed by October 2006;

C1.42 The Acquisition Leadership Development Scheme is key to make increased use of professional accreditation achieving this and provides a clear career anchor and development schemes for engineers, project management, fi nance and structure for acquisition professionals. There are currently some commercial staff in our professional acquisition streams; 664 members. Senior leaders in their respective professional fi elds have been identifi ed as development partners to: determine the co-ordinate the eff ort on Professional Delivery Skills with the action future skills needs; develop and advise on career paths; and inspire to improve the Science and Technology skills base within individuals to acquire the skills the acquisition community requires. Defence;

C1.43 Current initiatives in this area include: increase investment in systems engineering skills and training in the Department and in industry. a MSc in Defence Acquisition Management launched by the Defence academy; place greater emphasis on staff continuity in delivering projects. The tenure of staff in key posts must a Business Graduate Development Scheme providing ensure greater continuity of responsibility, and relationships acquisition teams with a new pool of high calibre across critical phases and events in the project life. professional commercial managers; C1.45 We are also committed to seeking ways to exploit graduate recruitment schemes to enhance critical skills delivery and project management skills in industry. We will: in project management, engineering and fi nance. work more closely with industry in developing acquisition C1.44 The Civilian Workforce Plan for 2005 describes our overall strategy skills and professionalism. This will include reinvigorating the for our civilian workforce and will enable us to maximise our pool of talent joint working initiatives on human resources issues, including and match people and skills to the demands of the job. This places a high joint learning events, shared development opportunities, short priority on programme and project management skills and on ensuring and focused interchange opportunities for acquisition staff , that our recruitment, reward and recognition practices deliver people in and more joint education through the Defence Academy; the numbers we need with the necessary skills and motivation. We will: explore alternative models for independent address the shortages in Project Delivery Skills within the project management of major projects. We will pilot department through a programme to address critical shortages of this approach on two acquisition programmes. project and programme management and acquisition leadership skills. This will include key milestones to be achieved by April 2006; Moving forward

improve our recruitment, reward and recognition practices C1.46 This section has set out an ambitious and challenging change to deliver acquisition staff of the number and quality we need agenda that will require committed and visible leadership within the and whose behaviour demonstrates their commitment to our Department. We intend to drive hard to realise the benefi ts as soon as C1 Taking forward the DIS - forward Taking change the challenges for

Defence Industrial Strategy 139 possible, recognising that it will be some time before results are fully visible externally. This change agenda will be led and driven by the Acquisition Policy Board (APB) which will regularly review progress and ensure change activities are adequately resourced and supported across the Department.

C1.47 We have created a Directorate of Defence Acquisition responsible to the APB for coordinating this programme of change, tracking and capturing benefi ts, and ensuring that obstacles are recognised and addressed.

C1.48 All of this will be necessary if we are to improve our acquisition performance. But we recognise that it may not be suffi cient. We need better to understand where our current processes, structures and organisation support, encourage, hinder or obstruct our ability to achieve the objectives of this change programme, and to address the obstacles of the DIS.

C1.49 We will appoint a senior offi cial to review our current acquisition construct and make recommendations for change where needed. This individual will report directly to the Permanent Under Secretary and, through him, to the APB. They will have a clear remit to range across the whole of the Department’s business and be encouraged to take a broad view of the acquisition process. They will report progress to the APB on a regular basis, with fi nal recommendations by May 2006 for early implementation.

The challenge to industry

C1.50 The Department is committed to driving this change agenda. We will be looking for parallel commitment from industry to:

plan more eff ectively and jointly for the long term, embracing the vision of through life capability management so as to focus on meeting our requirements in the most cost-eff ective way in whole-life terms;

invest in growing and maintaining a high-quality systems engineering capability within the UK, at all levels in the supply chain where we need key systems and sub-systems to be designed and engineered;

join us in our eff orts to promote greater interaction and collaboration between Defence, industry and the universities to stimulate innovation in science, technology and engineering;

embrace the use of open systems architectural principles and incremental acquisition principles throughout the supply chain, and help us to fi nd more cost- eff ective approaches to technology insertion;

work jointly to foster better understanding of each others’ objectives and business processes, including a greater commitment to joint education, staff development and interchange opportunities;

promote the use of partnering behaviours in industry’s interface with the Department at all levels, so as to encourage trust, openness, transparency and communication.

1 See Chapter A5, para A5.19 on developing the MOD’s R&T programme.

140 Defence Industrial Strategy Getting down to work - putting the DIS into action C2

C2.1 The Defence Industrial Strategy sets out a comprehensive to our ability to operate, support and upgrade our fast agenda for change, both in how we approach and interact with the jet combat aircraft through-life. We aim on working with market place in several areas and in how we and industry behave and the company during 2006 to agree the way ahead – which will are organised. Much eff ort has been expended – within the MOD, be challenging given the scope of the scale of the transformation across Government and in industry – in putting it together. that is required – and to implement it from 2007. In parallel and contributing to these eff orts, subject to value for money being C2.2 But all this will be for nothing unless Government and industry are demonstrated and appropriate commercial arrangements being put prepared to work together to address the real challenges that we face if we in place, we intend to move ahead with a substantial Uninhabited are both to maintain the industrial capabilities and technological skills that we Aerial Vehicle Technology Demonstrator Programme in 2006; require in order to maintain the operational capability of our Armed Forces in a manner that is attractive in a business sense. For instance, we and industry for Armoured Fighting Vehicles, working hard with BAE Systems, agree that in general we must gain a much deeper understanding of the supply building on the discussions we have already set in train, and the chains for defence; this will require signifi cant, ongoing work on a number agreement reached in December 2005, to give eff ect to the long of fronts. In that sense, the publication of the DIS is the start, rather than the term partnering arrangement required to improve end, of a process. Its detailed implementation is the hard work to come. the reliability, availability and eff ectiveness through life of our existing AFV fl eets. Initial activity will focus on C2.3 We recognise this, and the importance of making the DIS more implementing measures that build confi dence on both sides. than simply words. For our part, we are committed to work with industry We intend to establish a joint partnering team within the early to take forward the work identifi ed as being required in the various sector part of 2006 and to establish a business transformation plan strategies. To that end we attach real importance in the short term to: underpinned by a robust milestone and performance regime. The plan will detail the improvements in performance to be in the maritime sector, building on the close joint working achieved, the process and behavioural changes required of that has been in hand for some months to develop a maritime both BAE Systems and the Department, and the capabilities industrial strategy. To this effect we will immediately start and skills necessary to sustain through life support to AFVs; negotiations with the key companies that make up the submarine supply chain to achieve a programme level for helicopters, driving forward with AgustaWestland the partnering agreement with a single industrial entity for the implementation of the business transformation partnering full lifecycle of the submarine flotilla, while addressing key arrangement to which we committed through the Heads of affordability issues. The objective is to achieve this agreement Agreement signed in April 2005. A partnering team (jointly in time for the award of the contract for the fourth and resourced by MOD and AgustaWestland) has, for the last six subsequent Astute class submarines. This will be matched months, been exploring partnering opportunities across those by the implementation of a unified submarine programme areas of the business indicated in the Heads of Agreement. We management organisation within the MOD. For surface ship hope that by the Spring 2006, subject to value for money design and build, we aim within the next six months having been demonstrated, we will have reached agreement to arrive at a common understanding of the core load on a Strategic Partnering Arrangement (SPA) which will be required to sustain the high-end design, systems engineering focused on activities to sustain the design engineering skills and and combat systems integration skills that we have identified knowledge of UK military demands and safety standards within as being important. We expect industry to begin restructuring the company necessary for them to provide eff ective through- itself to improve its performance and shall build on the life support to those elements of the in-service helicopter fl eet momentum generated by the industrial arrangements being for which they are the design authority. The SPA is intended to C2 put together on the CVF programme to drive restructuring to commit both parties to specifi c targets on, inter alia, cost and meet both the CVF peak and the reduced post-CVF demand. schedule adherence (and where appropriate improvement) and For surface ship support, we will start immediate improvements in operational availability; it will be underpinned negotiations with the industry with the aim of exploring by a Business Transformation Plan that sets out the process and alternative contracting arrangements and the way behavioural changes required both in MOD and AgustaWestland; ahead for contracting the next upkeep periods, which start in the autumn of next year. Key maritime equipment for complex weapons, establishing a multi-disciplinary team charged industrial capabilities will be supported by the production of a with working with all elements of the onshore industry sustainability strategy for these key equipments by June 2006; to establish how we might together seek both to meet our ongoing requirements and sustain in an industrially for fi xed wing aircraft, developing the dialogue in which we have been viable manner the critical guided weapons technologies engaged by commencing negotiations with BAE Systems on and through life support capabilities that we judge to be

the terms of the business rationalisation and transformation so important to our operational sovereignty. Given the - work to Getting down actionputting the DIS into agreement required to facilitate the eff ective sustainment of transnational nature of the industrial players, this dialogue will the industrial skills, capability and technologies – wherever need also to engage our allies and partners, particularly in Europe. they may be in the supply chain – that will be so important This work will be complex and will necessarily take time, but our

Defence Industrial Strategy 141 intention is that we should have a clearer way ahead by mid-2006; in the areas of project and programme management and acquisition leadership. Key milestones are to be achieved by April 2006; for general munitions, taking forward Project MASS, with a view to making decisions on how best to sustain our required access will ensure that our recruitment, reward and recognition to general munitions in the summer of next year, building practices deliver acquisition staff of the quality we need in the on the joint working arrangements enshrined in the existing numbers required whose behaviour demonstrates their commitment Framework Partnering Agreement as reinforced by the recently to our Defence Values for Acquisition. An evaluation of current agreed MOD/BAE Systems LS partnering principles. We are also incentivisation initiatives will be completed by October 2006; actively pursuing partnering arrangements with other suppliers. will establish a strong and professional operating framework C2.5 In addition to this sector specifi c work, we will also for how the Department conducts its acquisition business. work to give eff ect to the conclusions identifi ed with respect Under the DPA Forward programme, the DPA will be piloting the to science and technology. Specifi cally, we will: operating framework during 2006, working in conjunction with the other areas of acquisition to ensure consistency and alignment; review the alignment of our research programme with MOD needs and the needs of the defence industry, with a view will review – so that we are in a position to make to improving the alignment, quality and military exploitation judgements about this by May 2006 – the extent to of the research programme. This work is encompassed in the which the current process and organisational construct ongoing MOD Science and Technology Capability and Alignment supports, encourages, hinders or obstructs the delivery Study and will be published by Summer 2006; it will be repeated of excellence in acquisition. This would allow us to commit every two years in concert with the biennial planning process; to changes that are required this side of the summer recess;

conduct further work better to understand the underpinning are looking forward to discussing further with industry technologies that the UK must have for security and sovereignty – in the fi rst instance through the commercial policy reasons, where the UK is strong and where we need to focus our sub-group of the NDIC early in the New Year – our ideas R&T eff orts. We hope this will be completed by Autumn 2006; about alternatives to competition as a means where appropriate of assessing value for money, with a view to by mid-2006 update our Defence Technology Strategy to developing a concrete action plan for taking them forward; refl ect the conclusions of the DIS and this related work. We will engage the R&T sub-group of the NDIC in this endeavour; will start with immediate eff ect, to deliver on our revised policy of providing industry with a better and develop a better understanding of the innovation process longer term understanding of our future plans. and map out the technology trees for major capabilities, systems and platforms in a report, which we aim to produce C2.7 We will ke ep the progress of this work, and the extent to which real by the Autumn of 2006. We will work with the R&T sub-group change is being demonstrated on the ground, under review within the MOD, of the NDIC to identify sources of technology and innovation through the Acquisition Policy Board reporting to the Minister for Defence throughout the supply chain and ensure that relevant Procurement. We will want formally to review progress with the NDIC regularly, technologies are pulled through into military capability. and intend to off er the NDIC a detailed plan at its next meeting.

C2.6 More broadly, we will place real eff ort and priority ondriving C2.8 This is an ambitious and demanding programme of concurrent forward the programme of cultural, behavioural, procedural activities aimed at delivering a step-change improvement in acquisition and where necessary organisational change set out in Chapter performance, underpinned by improved relationships between the MOD C1. Our priorities for acquisition improvement are: partnering and and its suppliers and enhanced confi dence in our ability to sustain the relationships with industry, through-life; delivery of integrated core industrial capabilities, technologies and skills that are required solutions; agility and fl exibility in projects; consistency in our approach; to allow us eff ectively and in an appropriately sovereign manner, to and professional delivery skills. Specifi cally, in the near term we: operate our Armed Forces. We are committed to making it work and to investing the time, eff ort and resources to ensure that it does. will work with industry to develop, roll out and implement a joint plan for embedding the Defence Acquisition Values C2.9 We recognise that this will require tough decisions along the way; throughout the acquisition community. We expect to be we shall not shirk them. We look to industry to rise to the challenge with in a position to launch this within three months and will us, recognising the opportunities for future prosperity that will ensue. The apply the real commitment of resource, time and eff ort that will nation’s Armed Forces, and indeed the nation’s interests, require nothing less. be required to eff ect lasting change through 2006 and beyond;

are currently scoping two Pathfi nders programmes to test and de-risk a programme approach to through-life capability management with the intention that the Pathfi nder programme teams will launch in the fi rst half of 2006;

will address the shortages in Project Delivery Skills within the Department by building on our existing Project Delivery Skills Strategy to deliver an accelerated pan-Defence Project Delivery Skills programme that will identify and fi ll the critical gaps, in particular

142 Defence Industrial Strategy Acronyms

AACSTO Aircraft and Aircrew CBRN Survive to Operate D&I Detection and Identifi cation AAF Agile Air Force DA Design Authority ABRO Army Base Repair Organisation DARA Defence Aviation Repair Agency ABSV Armoured Battlefi eld Support Vehicle DAS Defensive Aid Systems ACAD Aircrew Chemical Agent Detector DATCCE Deployable Air Traffi c Control Capability Enhancement AFV Armoured Fighting Vehicles DCPS Deployable Collective Protection System AH Attack Helicopter DDASC DABINETT Development and Support Contractor ALARM Air Launched Anti Radiation Missile DEC Director Equipment Capability AMRAAM Advanced Medium-Range Air-to-Air Missile DEC(SP) Director Equipment Capability (Special Projects) APDS Armour Piercing Discarding Sabot DERA Defence Evaluation and Research Agency ARRC Allied Rapid Reaction Corps DESO Defence Exports Services Organisation ASM Anti Structures Munition DfID Department for International Development ASRAAM Advanced Short-Range Air-to-Air Missile DFTS Defence Fixed Telephone Service ASTOR Airborne Stand Off Radar DG Director General ASW Anti-Submarine Warfare DHFCS Defence HF Communications Service ATGW Anti Tank Guided Weapon DII Defence Information Infrastructure AWACS Airborne Warning and Control System DIP Defence Industrial Policy BAES LS BAES Land Systems DIS Defence Industrial Strategy BDT 3 Biological Detection Tier 3 DoD Department of Defence BERP British Experimental Rotor Programme DS&S Defence Strategy and Solutions BH Battlefi eld Helicopters DSG Defence Strategic Guidance BISA Battlefi eld Information System Application DTC Defence Technology Centres BRH Battlefi eld Reconnaissance Helicopter DTI Department of Trade and Industry BSMC Biological Surface Monitoring Capability DU Depleated Uranium BVRAAM Beyond Visual Range Air-to-Air Missile ECC Equipment Capability Customer BW Biological Warfare ECM Electronic Counter Measures C2 Command and Control EDA European Defence Agency C2IS Command and Control Information Systems EDEM European Defence Equipment Market C4ISR Command, Control, Communication and Computing, EO Electro Optic Intelligence, Surveillance and Reconnaissance EOCM Electro Optic Counter-Measures C4ISTAR Command, Control, Communication and Computers, EP Equipment Plan Intelligence, Surveillance, Target Acquisition and EPW2 Enhanced Paveway 2 Reconnaissance ESM Electronic Support Measures CADMID Concept, Assessment, Demonstration, Manufacture, In- EW Electronic Warfare Service, Disposal F&FS Fuze and Fuze Setter CAP Capability Area Plan FACO Final Assembly and Check Out CASOM Conventionally Armed Stand-Off Missile FAS Future Army Structures CBM Command and Battle Management FAS GW Future Anti-Surface (Guided Weapon) CBRN Chemical, Biological, Radiological and Nuclear FCO Foreign and Commonwealth Offi ce CCII Command, Control & Information Infrastructure FIAC Fast Inshore Attack Craft CCM Counter Counter-Measures FIST Future Integrated Soldier Technology CESG Communications Electronics Security Group FMCMC Future Mine Counter-Measures Capability CIS Command Intelligence Systems FPA Framework Partnering Agreement CMC Chemical Monitoring Capability FRC Future Rotorcraft Capability COEIA Combined Operational Eff ectiveness and Investment FRES Future Rapid Eff ects System Appraisal FSC Future Surface Combatant COMR Civilian Owned Military Registered FSC Field Standard C CONDOR Covert Night Day Operations Rotorcraft FSTA Future Strategic Tanker Aircraft COTS Commercial Off the Shelf GCHQ Governments Communications Headquaters CR2 Challenger 2 GMLRS Guided Multi Launch Rocket System CSP Capability Sustainment Programme GoCo Government owned Contractor operated CT Counter-Terrorism GPS Global Positioning System CUP Capability Upgrade Programme GSR General Service Respirator

CVF Future Carrier Strike GT Gas Turbine Acronyms CVR Combat Vehicle Reconnaissance HE High Explosive CVRT Combat Vehicle Reconnaissance Tracked HESH High Explosive Squash Head CWG Capability Working Group HF High Frequency

Defence Industrial Strategy 143 HMI Human Machine Interface MVD Medium Versatile Derivative HMT Her Majesty’s Treasury NBC R&S NBC Reconnaissance & Survey HUMS Health and Usage Monitoring System NBCD Nuclear Biological Chemical Damage Control HVM High Velocity Missile NDIC National Defence Industries Council IA Improved Ammunition NEC Network Enabled Capability IA Integration Authority NLAW Next Generation Light Anti-Armour Weapon ICT Information Communication Technology NSQEP Nuclear Suitably Qualifi ed and Experienced Personnel IFPA Indirect Fire Precision Attack NSRP Nuclear Steam Raising Plant IFV Infantry Fighting Vehicle OA Open Architectures IM Insensitive Munitions OCCAR Organisation Conjointe de Cooperation en Matiere IMS Ion-Mobility Spectrometry d’Armament INCOSE International Council On Systems Engineering OECD Organisation for Economic Co-operation and Development IOS Integrated Operational Support OFT Offi ce of Fair Trading IP Intellectual Property OGDs Other Government Departments IP Industrial Participation OJEU Offi cial Journal of the European Union IPR Intellectual Property Rights OSD Out of Service Date IPTs Integrated Project Teams OTS Off the shelf IR Infra-Red P3I Pre-Planned Product Improvement IS Information Systems PAAMS Principal Anti Air Missile System ISD In-Service Date P-BISA Platform Battlefi eld Information Systems Application ISMS Integrated Sensor Management System PBX Polymer Bond Explosives ITT Invitation To Tender PFI Private Finance Initiative J2CSP Joint Command and Control Support Programme PNPS Personnel NBC Protection System JAMES Joint Asset Management and Engineering Solutions PPP Public Private Partnership JCA Joint Combat Aircraft PSI Prime Systems Integrator JHC PWII Paveway II JMATS Joint Military Air Traffi c Services PWIV Paveway IV JNIB Joint Network Integration Body R&D Research and Development JRRF Joint Rapid Reaction Force R&T Research and Technology JSF Joint Strike Fighter RAF Royal Air Force KERR Kinetic Energy Risk Reduction RCS Radar Cross Section LACP Land Advanced Concept Phase RDA Regional Development Agency LCAC Landing Craft, Air Cushion RDMS Remote Delivered Mine System LCAD Lightweight Chemical Agent Detector RDS Rapid Diagnosis System LEAPP Land Environment Air Picture Provision RF Radio Frequency LEP Life Extension Programmes RFA Royal Fleet Auxiliary LF ATGW Light Forces Anti-Tank Guided Weapon RM Royal Marines LFA Low Frequency Active RMS Real-time Medical Surveillance System LIMAWS Lightweight Mobile Artillery Weapon System RN Royal Navy LOVA Low Vulnerability SAA Small Arms Ammunition LPD Landing Platform Dock SALW Small Arms and Light Weapons LPH Landing Platform Helicopter SAM Submarine Acquisition Modernisation LRT Light Role Team SAR Search and Rescue LSD(A) Landing Ship Dock(Auxiliary) SAR Synthetic Aperture Radar LTPA Long Term Partnering Agreement SCMR Surface Combatant Maritime Rotorcraft MARS Military Afl oat Reach and Sustainability SDR Strategic Defence Review MASC Maritime Airborne Surveillance and Control SDS Surface Detection System MASS Munitions Acquisition – the Supply Solution SEAD Suppression of Enemy Air Defence MBDS Maritime Biological Detection System SEMTA Science, Engineering and Manufacturing Technologies MCAD Man-portable Chemical Agent Detectors Alliance MCM Mine Counter Measures SF Special Forces Med CM Medical Countermeasures SH-PRAC Squash Head Practice Round MEMS Micro Electric Mechanical Machines SLUW Submarine Launched Underwater Weapon MFTS Military Flying Training School SME Small and Medium size Enterprises MIS Maritime Industrial Strategy SOCD Stand Off Chemical Detector MJDI Management of the Joint Deployed Inventory SPA Strategic Partnering Arrangement MLD Multi Level Decontamination SPEAR Selected Precision Eff ects at Range MLI Mid Life Improvement SSBN nuclear powered ballistic missile submarine MMIT Management of Materials in Transit SSN nuclear powered submarine MODAF Ministry of Defence Architectural Framework SSS Surface Ship Support MOTS Modifi ed off the shelf STDL Secure Tactical Data Link MTE Military Task Equipment STOVL Short Take-Off and Vertical Landing MTs Military Tasks STP Short Term Plan

144 Defence Industrial Strategy T&E Test and Evaluation TACAS Tubed Artillery Conventional Ammunition System TADL Thales Air Defence Ltd TBD To Be Decided TDP Technology Demonstrator Programme TEWA Threat Evaluation and Weapon Allocation TIH Toxic Industrial Hazards TLAM Tomahawk Land Attack Missile TRaME Tactical Radiation Monitoring Equipment TSB Technology Strategy Board TSCP Transatlantic Secure Collaboration Programme TSS Transforming Submarine Support TUM Truck Utility Medium UA Unmasking Aid UAV Uninhabitated Air Vehicle UBDS Unmanned Biological Detection System UCAV Unmanned Combat Air Vehicle UDS Unit Decontamination Capability UKASCACS UK Air Surveillance Command and Control System UKMFTS UK Military Flying Training System UN United Nations UOR Urgent Operational Requirement UxV Unmanned x Vehicles (i.e. where x could be underwater, surface, air etc) VMF Versatile Maritime Force VSC Versatile Surface Combatant WCSP Warrior Capability Sustainment Programme WLC Whole Life Cost WMD Weapons of Mass Destruction Acronyms

Defence Industrial Strategy 145 146 Defence Industrial Strategy