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Projects stack up but defence procurement needs an upgrade

Manufacturers of military equipment components know there is lots of potential business out there, but delays in confirming some projects and apparently giving equal preference to foreign primes as domestic UK primes are frustrating suppliers. Joscar, a new compliance tool, should help more subcontractors access defence work more easily – but it must happen more quickly. By Will Stirling

While for many in the industry defence spending seems flat, spending is rising with government stats showing it at £45.9bn, an increase of £3.6bn from last year, which when adjusted for inflation is an 8.9% increase. There are several substantial capital equipment projects that need UK suppliers. Tempest, aka the Global Combat Aircraft Programme, the British Army’s New Medium Helicopter, Aeralis’ new modular jet trainer, the Boxer mechanised infantry vehicle, Type 23 and 31 frigates, the £31bn Dreadnought submarine programme that is replacing the ageing Vanguard Class submarines, and others, provide a strong pipeline for the next 15 years.

And Prime Minister Rishi Sunak, commenting at the AUKUS submarine project launch in San Diego in March, said the UK will invest an extra £5bn in the armed forces over two years and increase defence spending to 2.5% of GDP, with pressure from Conservative MPs to spend more. Despite this, UK defence exports have slipped since 2010, from the second biggest defence equipment exporter in the world after the US to being nearer sixth or seventh today. A report from UK Defence and Security Exports, from data released by manufacturers and government agencies — highlighted almost £8bn worth of export contracts in 2020 — a 28.1% year-on-year decrease compared with the £11bn recorded for 2019. Reasons include pandemic-caused delays, but also ‘political expediency’ and dithering in clear decision-making on contracts.

The Army’s New Medium Helicopter (NMH) contract should have been awarded and manufacturing started by now (see MTD issue January 2022: http://read.mtdpublishing.com/january-2022/). Leonardo UK, which operates a huge helicopter build and maintenance facility in Yeovil, is or was the front runner, partly due to the added value that this big contract would bring to UK suppliers. But a new bid from an Airbus consortium including, surprisingly, Boeing, has derailed the decision as campaigners and MPs lobby the merits of Airbus’s bid. It seems bizarre, experts say, that after such a strong tender from Leonardo with a strong supplier element, the Ministry of Defence (MoD) needs to look at any other bid, that could never match this UK content.

The sense with some defence suppliers is that, despite leaving the European Union, MoD procurement under World Trade Organisation (WTO) rules and this government’s policy, gives any bidder equal status in defence contract decisions, regardless of its sovereignty.

“That the UK does not default to capable British primes and their supply chains to contract defence projects is madness,” said one defence company leader. “The UK has replaced the EU rulebook – which restricted us terribly, and is why hardline Brexiteers campaigned to leave – with the WTO rulebook. But this now apparently means we also have to compete with and tender for contracts internationally.”

The NMH is awarded partly on the social value it creates for local communities of the bidding company or group that wins the contract. Andrew Kinniburgh, Director-General at business group Make UK Defence, says: “The social value element that forms up to 10%-25% of each competitive tender, is applied as equally to UK companies as to overseas primes – so the government is potentially assessing the social value in the US or Europe on parity with the UK. That cannot be right.” He adds: “France, Italy, Germany and the US are all buying from their own companies first. If they can’t find what they need at home, they then seek a solution overseas, or create a partnership like Tempest (aka the Global Combat Aircraft Programme). We still have this mindset that we’ll run the competition, but while contract decisions dither, it destabilises investment and supply chain work that could be ramping up.”

The MoD has to tread a fine line because, while many want its procurement to show greater UK preference, it has to get high taxpayer value for money, also known as buying at the lowest viable cost. UK prime contractor tenders may be more expensive than others. In the absence of a formal industrial strategy that mandates preferential treatment to UK companies, the MoD’s open book policy is unlikely to change soon.

Accessing work packages: Meet the Buyer

A successful business development tool is ‘meet the buyer’ events. Make UK Defence, the Midlands Aerospace Alliance (MAA), North West Aerospace Alliance and ADS, trade associations all organise physical and online meet the buyer (MTB) events. While its last MTB event was several months ago, the MAA took 20 members to the Paris Air Show in late June, its biggest presence at the show. “This illustrates the positive conditions in the civil aerospace sector now, and the ramp-up that is happening,” says MD Dr Andrew Mair. The Make UK Defence ‘meet the buyer’ event in mid-June successfully focused on Land Systems & Maritime Technology and was online. Seventeen buying organisations participated, such as Atlas Elektronik, BAE Systems Naval Ships, Harland & Wolff, RBSL, Thales and many more. These companies discussed programmes such as Mechanised Infantry Vehicle, Dreadnought and Fleet Solid Support Ship.

Make UK Defence reports that buying requirements at the event were very diverse, ranging from container fabrication to artificial intelligence to battery technology to painting to anti-jamming solutions. Because the event was virtual, and suppliers had up to 15 or 20 minutes per vendor, between 600 and 700 individual meetings were packed into a day.

“For over seven years our ‘meet the buyer’ events have proven to be a great way for defence contractors to discover suppliers that can offer innovative and essential capabilities,” says Andrew Kinniburgh. “But equally they offer a clear path for suppliers to initiate dialogue with relevant customers. We’re delighted to learn of several delegates winning serious business that was initiated from meetings at these events. Defence can be a tricky market to navigate, so it’s great that we can play a small part in helping these companies.” 

Aeralis

Aeralis is the world’s first modular military jet. The cockpit, wings, wing tips, fuselage and avionics packages are all modular, so Aeralis can build the training jets to each customer’s specifications, avoiding the need to buy highly expensive aircraft to train their pilots. An uncrewed module is available for unmanned aircraft customers, and the fuselage can be extended to carry more fuel.

The modular jet can also change the flight systems, so it can feel exactly like flying the jet aircraft you want – with configurations covering basic jet trainer, advanced jet trainer, operational, light combat, tanker trainer and other variants. By having jet trainers that are preconfigured with the same or almost identical avionics and software for a Eurofighter Typhoon or F-35, for example, trainee pilots can receive hours of realistic feel of those aircraft (without the same thrust), and learn the motor skills they need for them, without needing to fly those specific aircraft. This means you can train more pilots and save vast costs. If the market likes these as much as Aeralis hopes, production will soon reach the hundreds, providing long-term contracts for many defence and avionics suppliers.

Reducing barriers to entry for subcontractors

Many subcontract engineering companies have the right manufacturing technology to produce military parts – ranging from missile wing brackets to trigger assemblies for artillery guns and wiring looms – but they also need defence-grade accreditation to qualify for programmes, and there are other strict requirements. Some programmes require security-cleared personnel to view documents rated above the ‘confidential level’ by the clearance system the MoD operates. Also, they need safe IT systems. “Having cyber security is today a pass or fail for defence work,” says Make UK’s Kinniburgh. “Typically SMEs work for a tier one or prime and you need to show that prime that you have either Cyber Essentials or Cyber Essentials Plus (minimum cyber security protection). Cyber attacks of prime companies are often accessed through their supply chains.”

But for small firms who’ve been thwarted in their efforts to access defence work, help is at hand through Joscar, a new, single-site compliance database for defence suppliers. Operated by the privately-owned business Helios, it is endorsed by the MoD and 12 primes, which were involved in its development.

Joscar is, in essence, a long and complicated 100-page questionnaire, covering all the required certifications such as ISO:9001 and ISO:27001 (Information Security Management Systems), cyber security, year-end accounts and P&L. This gives the company compliance to a broadly-defined military standard for defence companies, and Joscar registration. In theory, all the primes and the MoD who’ve signed up to Joscar remove all the duplicate questions that Joscar has already answered.

For example, if BAE Systems wanted to seek approved valve manufacturers, it can search Joscar for those that are fully defence-compliant. “The MoD and the primes are trying hard, but there is still a lot of certification that asks the same questions that Joscar has already asked them,” says a defence sector expert. “They are working on it but it’s moving at a glacial pace and SMEs like your readers need this to pick up fast.”