Andrew Radley – Associate Partner, Homeland Security and Defence

The UK defence sector stands at a cross roads. The MoD faces a perfect storm of interconnected challenges: recovering an organisation exhausted from a decade of operations abroad and business change at home; defining a future force shaped for a post interventionist era; adapting to rapidly advancing technologies; dealing with the unaffordable bow wave of commitments to new equipment. 

Overarching these challenges is the reality that resources will only diminish.

How to buy and support flexible and sustainable capability on an affordable basis remains a key issue. MoD cannot only respond by simply eliminating capability, and with low numbers of key equipments there is limited room to top slice many budgets without damaging viability across the board.

A flexible approach to acquiring equipment and support will be crucial to retaining a credible defence capability.

Over the past decade the MoD has tended to move up the acquisition staircase, contracting for availability at the macro level with large and sophisticated deals, often reliant on complex business constructs.

The new era will demand change. Contracting for availability and even capability will continue, but the MoD will need to manage these contracts effectively and unlock the inefficiencies and costs from its support chain.

Other acquisition will be driven through smaller packages that are more easily contracted, deliver outputs sooner and at lower risk, and offer more flexibility.

This is likely to bring with it programmatic management, and the understanding of risks, the mechanics of value creation and service delivery. Overruns or poor service can be dealt with or contracts terminated without the consequences that prevent termination failing mega deals.

MoD will also look for opportunities to examine defence value streams and seek to outsource those which could be delivered better by industry.

Whilst MoD will no doubt shrink, £30bn a year remains a lot of money. Change will continue to be a constant and there will continue to be opportunities for those companies willing to adapt their approach.

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