(MDP0010)

Written evidence submitted by Professor David Kirkpatrick

During 1962-95 I worked for the MoD on aeronautical research, military operational analysis and project cost forecasting. In 1995-2004 I worked in the Defence Engineering Group at UCL, which was then the MoD’s designated centre of excellence for research and post-graduate education in defence acquisition. I was a specialist advisor to the HCDC during 1995 to 2011. I wrote a booklet ‘Choose your Weapon’ on cost-effectiveness analysis, and another ‘Making Ends Meet’ as a contribution to the 2010 Strategic Defence and Security Review. I was one of the principal authors of a book ‘Conquering Complexity – lessons for defence systems acquisition’. I hold post-graduate degrees in engineering and economics, and am now retired.

Executive summary

This paper reviews the unique characteristics and complexities of UK defence planning and budgeting. Since these processes require confidential information, it does not prescribe the military capabilities which the UK should have in the future, nor the defence budgets needed to create and sustain those capabilities. However it does provide a road-map by which official plans and budgets could be scrutinised and assessed. This paper also presents the particular features of defence equipment projects and of the market through which they are acquired, and it discusses the chronic challenges which beset the MoD’s acquisition process.

Foreign policy, defence programme and defence expenditure

1              The future size and shape of the UK’s armed forces, and the resulting military capabilities which they can provide, should be driven by judgements on the nature and importance of the credible future threats to the security and vital interests of the UK, and on the associated operations which those forces might be expected to undertake in response to those threats in future years. Since the UK’s military capabilities are inevitably limited, it is unlikely that its armed forces will ever again undertake a major operation independently. It follows that decisions on those UK capabilities should in principle be made in consultation with trusted allies, and within the framework of the NATO alliance. In practice residual chauvinism in many nations probably precludes an explicitly-international approach to defence planning and budgeting, but informal liaison between senior officers of alliance nations should influence the MoD’s Modernising Defence Programme (MDP). It is important that such liaison ensures that there are no significant gaps in alliance capabilities which an enterprising and ingenious enemy might identify and exploit – in planning a picnic, at least one person must bring a corkscrew.

2              Having identified the future operations which the UK’s armed forces might wish to undertake, it is possible to estimate the UK military capabilities (alongside and integrated with the capabilities of allies) which the UK’s armed forces would require in order to succeed in such operations. The chosen set of UK military capabilities then determines the array of UK combat and support units which could in the future provide those capabilities most economically. This process relies on diplomatic and technological information which is not generally in the public domain.

3              It would be irresponsible to determine the objectives of UK foreign policy without formulating a defence programme to provide armed forces, in sufficient numbers and properly equipped, able to achieve those objectives. A discrepancy between national ambitions and the armed forces available has been described as ‘punching above your weight’, reflecting the hope that the UK’s armed forces would succeed through exceptional bravery, determination and ingenuity. But sooner or later those hopes will be disappointed and the inadequate armed forces will pay the price in blood, just as a boxer punching above his weight will ultimately sustain serious injuries from a more-powerful opponent.

4              Similarly it would be futile to plan a defence programme to create and sustain a chosen set of military capabilities without reference to the financial and other resources needed for that programme, and without ensuring that the required defence budget is likely to be available. The scale and timing of the necessary resources depend on the MoD’s plans for the provision of personnel, equipment, training, infrastructure, etc. to support the chosen set of military capabilities.

5              The policy, the programme and the budget form an indissoluble triad, and are inextricably linked. All three must be determined jointly and iteratively to reach a solution which yields an adequate level of military capability at an acceptable cost. It follows that in formulating the MDP politicians, officers and cost analysts (three tribes which have very different cultures, and which do not always have sufficient mutual respect and rapport) must cooperate constructively and honestly to achieve the optimal result.

Implementing a defence programme

6              When the chosen set of UK military capabilities has been selected, the next step is to define an array of combat and support units (such as regiments, ships and squadrons) which could deliver those capabilities in future scenarios. Some of the resulting combat units would be specially trained and equipped for a particular role, and hence could not contribute to other capabilities which might be needed in the future. Other units, such as attack aircraft with varied ordnance, could contribute to more than one military capability and hence would be useful in several potential scenarios. In principle combat units could be re-trained and re-equipped, in response to changes in the geo-strategic environment, but this process would require sufficient time and money.

7              In selecting an array of combat and support units, it must be recognised that small units tend to be fragile in combat operations (vulnerable to losses from enemy action and/or accidents) and also tend to suffer from the diseconomies of small scale and relatively-high fixed costs. The selected array of combat and support units must have the right balance between multi-functional units which could contribute to operations in a variety of future scenarios and specialist units which would be vitally important in a particularly-dangerous scenario. When the preferred array of combat and support units has been selected, the MoD must plan how to get there from here, without demoralising disruption of existing organisations and without unacceptable peaks in defence expenditure; the structure of a nation’s armed forces and the military capabilities which they provide cannot be amended rapidly (just as super-tankers cannot easily change course).

Defence and national security

8              Through most of the previous two centuries, there was a clear distinction between the external and internal security of the UK. External security was provided by soldiers who wore red and later khaki and were sent overseas to implement foreign policy, and by sailors who wore navy blue and were deployed to deter invasion and to protect trade routes. Internal security (i.e. law and order) was provided by police who wore dark blue and generally carried no firearms (except in Ireland where large riots and small risings were never permanently extinguished). Throughout that period regular troops were only rarely deployed to aid the civil power (Sidney Street, General Strike and Ireland, three times). Troops have also been deployed unarmed to maintain essential services during industrial disputes, and to retrieve situations where other organisations have failed (BSE and London Olympics).

9              Now, as in past years, there seem to be few major interfaces between external and internal security. Most police forces can now deploy armed response units which are unlikely to need military assistance. There can be useful cooperation between the MoD and other Departments of State in some areas (like intelligence gathering, cyber warfare/terrorism, NBC threats or accidents, and maritime surveillance) but these interfaces can be managed relatively easily – more so than the interfaces between the NHS and social care. It follows that military defence can be considered separately from other aspects of national security without seriously compromising the resource allocation process.

Acquisition practices

10              The acquisition of major defence equipment projects has many special features and cannot properly be managed according to the simplistic nostrums of elementary economics (although some of the quasi-civilian goods and services which the MoD also requires can be purchased following best commercial practices). Major new defence equipment projects -

• Are designed for operation in a highly-competitive environment, often in extreme weather and climatic conditions,
• Must incorporate the most-advanced technology available or risk being outclassed by more-enterprising opponents,
• Must undergo a protracted and expensive process of assessment, development, risk management and test & evaluation, to ensure that they can be operated effectively and safely, and
• Often have short production runs and long periods of service, compared to most civilian products.

The unusual market for such defence equipment is characterised by

• Large economies of scale and institutional barriers to entry for potential suppliers, driving the global market towards few suppliers of many classes of equipment; similarly there are only few potential customers,
• Large fluctuations in demand for particular classes of equipment as customers’ defence budgets are re-allocated, and of course between peace and sporadic periods of conflict, and
• Several groups of interested stakeholders representing various factions within the government, the armed forces and the national defence industry, all of which demand the right to influence decisions for an equipment acquisition project.

11              It follows that the market for many major classes of defence equipment is imperfect, and that the acquisition of major defence equipment projects cannot be managed by reliance on market forces and taut contracts. When a customer, a prime contractor and subcontractors are together committed to a major equipment project, which will continue for decades and for which success is vitally important for all of the parties involved, it is important that their relationship should be cooperative rather than antagonistic, and should rely on mutual respect and shared interests rather than on a multitude of contractual interfaces which can easily generate perverse incentives.

12              Ten chronic challenges in the MoD’s defence acquisition have been identified by Hambleton et al[i] who also suggested remedies based on their career experience. Those ten challenges were

• Ingrained resistance to reform
• Relative immunity from scrutiny
• Diverse tribal groups
• Over-optimism in project forecasting
• Sustaining intelligent-customer capability
• Translating capability requirements into contractual specifications
• Monitoring change control on major projects
• Balancing urgency against risk in the development of new equipment
• Managing the interfaces between defence systems
• Maintaining a credible defence industrial strategy

13              Some of these challenges can be successfully identified and overcome by project managers (military or civilian) whose knowledge, skills and behaviours[ii] have been properly developed by training, education and experience. Other challenges can be addressed by top-down reforms which are sufficiently transparent and credible to merit support at the working levels, where officers and officials are wedded to traditional processes which they have already mastered and which have for many years been defensibly successful. There are also a few very-difficult challenges where particular stakeholder groups have vested interests in preserving the status quo. Some stakeholders in the armed forces and in defence industry wish to ensure that project cost forecasts remain over-optimistic and thus make the relevant projects more likely to attract funding; it is this persistent ‘conspiracy of optimism’ which yields recurrent crises in MoD budgeting. Other stakeholders try to keep the MoD’s defence industrial strategy sufficiently vague and flexible to be amenable to Service bias or political convenience.

14              The optimal defence industrial strategy for the UK, which should evolve in response to continuing developments in the strategic, economic and industrial environments, has been debated inconclusively for decades, and it has fluctuated from protection of strategic industries to open competition and back again through a variety of intermediate policies tailored for different industrial sectors. Air Chief Marshall Hillier[iii] hopes that a coherent framework for managing the UK’s defence industrial base can be ‘worked through over the coming months’. I await his conclusions with interest.

Extramural advice

15              In any hierarchical organisation, such as the armed forces, it can be career limiting to disagree openly with higher-ranking officers. Such organisations can be reluctant to innovate in response to changes in their environments. It is notorious that the British Army and the Royal Navy remained nostalgically wedded to horsed cavalry and dreadnought battleships long after their military capability had declined; the Royal Air Force has been unenthusiastic about supporting the development of unmanned aircraft. Hence the MoD should regularly seek independent extramural advice on its plans and policies, and should be prepared to consider such advice on its merits.

16              The external organisations which are most closely involved in defence affairs (and which are accordingly relatively-well informed) are the major industrial contractors, which have their own profit-driven agendas, and the various UK academic and research organisations which are closely linked to the MoD. They can all offer advice in off-the-record discussions, but must be careful not to forfeit the MoD’s goodwill.

17              The MoD often receives public advice from journalists[iv] and less frequently from academics. During the Cold War, there were several studies by defence economists regarding the MoD’s equipment acquisition policies and about the impact of defence spending on the UK economy, but such studies have dwindled as the defence budget has become an ever-smaller fraction of Government expenditure.

18              The MoD has occasionally sought advice on its management of defence equipment acquisition from external consultants, but such people may have lacked the necessary in-depth understanding of the many pitfalls in defence acquisition, and not all of their recommendations have been adopted. The National Audit Office (NAO) has regularly reviewed the MoD’s performance in its management of major projects, and in 2009[v] revealed to Parliament a serious underfunding of the MoD’s acquisition programme, an incipient problem which MoD witnesses to the HCDC in the preceding years had underrated. The NAO’s independence, its ongoing involvement with MoD projects and its extensive records put it in an excellent position to offer external advice on the MoD’s project management.

19              The MoD’s project managers also need advice on various aspects of a new project, including new technologies, reliability & maintainability, risk analysis, test & evaluation, integrated logistic support, industrial issues, etc. In former times the managers might have accessed almost all of that advice from within the MoD and its research establishments, allowing them to be intelligent customers for major equipment projects. However, the MoD’s intramural sources of expertise have been eroded because of reductions in its acquisition organisation, because of frequent transfers of its personnel to preclude ‘cosy relationships’ with suppliers, because of the privatisation of most of DERA, etc. Witnesses to earlier HCDC enquiries have claimed that the MoD itself now lacks intelligent-customer capability. Accordingly MoD project managers now hope to obtain any necessary advice from extramural organisations (industrial contractors, academia and consultants) which may have other priorities or potential conflicts of interest.

Concluding remarks

20              This paper does not comment on the Government’s view that state-based threats are now the greatest risk to the UK, nor on the extent to which earlier defence reviews have actually been implemented. It does address the other six questions in the Committee’s call for evidence. This paper argues that the UK’s foreign policy, the size and shape of its armed forces, and the level of its defence expenditure form an indissoluble triad which must be decided jointly, not separately. It claims that defence and security can be considered separately, with interfaces which are few and can be managed relatively easily. It discusses the special features of defence projects and of defence markets, and how these features should determine the MoD’s equipment acquisition policies and processes. Finally it suggests that the MoD, like any hierarchical organisation in the public or private sectors, should regularly seek expert independent advice on its programmes and its management arrangements, and recognises that MoD’s project managers now need to seek more extramural advice than formerly on many aspects of project management.

13 April 2018