Defence Procurement Minister oral statement on the Integrated Procurement Model - 28 February 2024

With your permission Mr Speaker I would like to make a statement on our plans for reform of MOD’s Acquisition system:

…Nimrod

…snatch land rovers.

…Ajax

…Crowsnest

…Morpheus.

The narrative of our acquisition system has long been dogged by major programmes that were variously: over-complex; over-budget; over time.

Of course, military procurement is complex. And external factors, particularly supply chain disruption, have caused delays across the board – which are likely to continue hitting programmes for the time being. 

It is also true that our system has excelled at procuring vast quantities of ordnance into Ukraine.

We have not been standing still – we have been identifying and addressing the systemic issues that impact on delivery and learning and applying lessons from experience. 

We have been driving pace and agility through streamlined processes and increasing the capability and capacity of the Senior Responsible Owners.

Over the last six years, Defence Equipment and Support has come a long way in its internal reform efforts.

Nonetheless, the longstanding weaknesses of Defence acquisition are well known, including:

A tendency to ‘exquisite’ procurement… potentially too bespoke to export, leaving industrial capacity vulnerable.

As Sheldon’s Ajax report assessed, personnel wary of speaking up as problems emerge.

In particular, and in my view the most significant, the model of delegated authority implemented after Lord Levene’s 2011 report – that was supposed to drive financial responsibility but instead makes prioritisation hard to achieve in practice.

With budgets under strain from inflation, the result is inevitable – what we call ‘over-programming’; in the absence of effective prioritisation, too many projects chasing a finite amount of funding.

Inadvertently, this drives a competition between the three single services – each vying to get their programme on contract, knowing funding is over-subscribed.

Such ‘over-programming’ can only be dealt with in one way.

Delay – shifting programmes to the right to make the books balance.

But Mr Speaker, none of these problems compare to the most compelling reason for reform.

In a world where our adversaries are threatening to out-compete us in capability terms we have no choice but to reform acquisition – or see our military competitiveness diminished.

Ukraine has shown that today’s battlespace is highly contested.

Integrated operations are essential.

In 2021 we announced the ‘Integrated Operating Concept’ – recognising the military need for an integrated concept of operations, but maintaining a delegated procurement system.

So today, I announce our new Integrated Procurement Model.

In a world where multi-domain communications are critical, data integration is paramount. At the same time, where our kit must be secure with key elements made in the UK, and we must prioritise procuring enablers alongside the shiny new platform that cannot work without them.

What does this mean in practice?

There will be five key features of our new approach.

First, it will be joined up – with procurement anchored in pan-defence affordability, rather than ad hoc silos, vulnerable to over-programming.

A key example will be our pending Munitions Strategy, a top priority given our need to replenish weapons stocks to warfighting levels. Pan-defence prioritisation of munitions procurement will not only be driven by the hard reality of the greatest threats we face, but the scale of demand signal required for ‘always on’ production – the optimal outcome for both military and industry.

Secondly, we will have new checks and balances, to challenge assumptions at the outset of programmes.

Specifically, our new Integration Design Authority, based within Strategic Command, will be empowered to ensure our new approach is adopted in practice. If requirements lack a plan for data integration or accompanying enablers, the proposal will be sent back.

But they will also be able to monitor programmes for where opportunities may arise for example to better harness AI or novel technologies.

Meanwhile, in the MOD’s largely civilian sphere, a defence wide portfolio approach will bring together all the expertise at our disposal to enable properly informed choices and decisions on priorities.

The aim will be to provide a credible second opinion for Ministers to weigh alongside the military’s proposed requirements. In particular, this will include a far stronger role for our brilliant scientists at Dstl, to focus on technological viability; experts will be tasked with market analysis and prioritising advice on industrial options, ensuring we make the best informed decision on whether to go off the shelf, sovereign manufacture, or somewhere in between.

And to avoid new oversight leading simply to more red tape, this reform takes place hand in hand with Defence Design, aimed at streamlining our internal processes.

The third key feature is prioritising exportability, which will now be considered in depth from the very outset of programmes, so that we maximise the potential market for a given capability – and therefore, drive British industrial resilience.

That’s why one of the key expert voices will be our export specialists. At the moment their primary focus is on export campaigns, largely for mature products. But I want that expertise to be embedded within the MOD’s acquisition process from the beginning – giving us robust data to quantify the risk that bespoke requirements might create a delta between our needs and international demand. Above all, meaning that our international export campaigns can commence at a far earlier point in the product life cycle.

The fourth feature of our new approach is to empower industrial innovation.

We have already started our radical new venture of engaging industry at secret, to give the strongest possible understanding of our future requirements. My aim is to embed this approach throughout procurement, driving the deepest possible relationship with industry, that enables entrepreneurial innovation to flourish, and our supply chains to become more resilient. A more holistic supplier management approach will complement this by enabling the department to speak with a clearer voice regarding priorities once on contract.

Fifthly and finally, we will pursue spiral development by default.

Seeking 60%-80% of the possible, rather than striving for perfection.

For such spiral programmes we will abolish Initial Operating Capability and Full Operating Capability.

Instead of IOC or FOC…there will be MDC…the Minimum Deployable Capability.

And whilst there will have to be exceptions, we have set new default time targets for programmes: three years for digital; five for platforms.

Because this is all about pace – but to achieve pace, we need the right people… capable Senior Responsible Owners, operating in an environment of psychological safety.

As such, and given its emphasis on our people and psychological safety - I’m pleased to report that we believe we have now implemented all 24 recommendations of the Sheldon review into Ajax.

Finally, how will this systematic change be implemented?

I said to the HCDC that our plan was to launch our new model in the next financial year.

So from the second week of April, the Integration Design Authority will be formally delivering its new oversight function in support of the Integrated Procurement Model.

For major new programmes starting after that date, newly formed expert advice will be made available to Ministers – ensuring we thrash out all the hard issues at the beginning of a major procurement, locking down the key policy decisions so that our SROs and commercial functions can deliver at pace from thereon in.

Although for contractual reasons existing programmes will continue under their current procurement mode, on 8th April we will publish our new Spiral Development Playbook so that extant programmes which can adopt Spiral features will be empowered to do so.

On exportability, yesterday I published the next stage of our New Medium Helicopter competition – this includes a strong weighting for exports to ensure the high quality rotary work it will support in the UK is sustainable over the long-term.

Such an approach to weighting exportability, where appropriate, will become the default from April 8th.

From that date our three and five year targets will apply to new programmes – including top priority pending procurements such as the Mobile Fires Platform.

Ukraine has shown how close combat artillery remains critical to warfighting. We will now accelerate that crucial acquisition. Exemplifying our new approach whereby we will order critical enablers in parallel to the platform itself, particularly the ammunition.

But Ukraine has also shown the importance of drones, and uncrewed systems will form the first overall category of pipecleaner for the Integrated Procurement Model from end to end.

Alongside this statement I am today publishing a short guidance note explaining the nuts and bolts of our new acquisition approach. Copies of which will be placed in the Library of the House and believe will be available in the vote office after I have sat down Mr Speaker.

The current environment in which we find ourselves – war in Europe – has made it impossible to ignore the urgent need for change.

All focus must now be on delivery: I commend this statement to the House.