Defence spending should favour UK firms, says ex-minister

The UK should be allowed to prioritise domestic companies when tendering defence contracts after Brexit, a former defence minister has said.

In a report Conservative MP and former defence procurement minister Philip Dunne said procurement rules and processes should be relaxed to speed up procurement processes, improve agility and allow the Ministry of Defence (MoD) to consider the impact on the UK economy.

Dunne also said Brexit provided an opportunity for the UK to reconsider whether it would remain part of European procurement directives, including those requiring defence contracts to be open to EU countries, or reject them to “seek greater UK prosperity benefits from our own procurements”.

The report was commissioned by Gavin Williamson, minister of defence, as an independent review into the government’s Modernising Defence Programme (MDP). It looked at ways defence procurement could be used to benefit the wider economy. It estimated the UK defence sector had one of the world’s largest turnovers, at £22bn annually, and supported 260,000 jobs.

However, it said both domestic processes and EU competition rules had created “process heavy [procurements] focused more on upfront capital costs than driving value through the life of the capability”. This was a particular problem while acquiring technology that was developing quickly, and that the MoD should consider using more off-the-shelf solutions for some products.

Traditional procurement processes were also harming R&D, the report said, and the pace of change for technology “far outpaces the MoD’s current ability to respond”. The MoD needed “a greater appetite for risk” when it came to innovation in the supply chain.

However a more sophisticated set of procurement tools would need more commercial skills, which was sometimes lacking in “quantity and quality” in the sector.

The report also encouraged the use of more UK SMEs to increase innovation in the supply chain, but said the only realistic way of achieving this would be to take into account indirect spend through the main defence contractors. “This requires a greater depth of understanding about defence supply chains than is generally available to government or industry,” it said.

Better visibility through the supply chain was also needed as part of a “more strategic view of managing risk”, including cyber threats and theft of intellectual property.

Williamsom, who is reported to have lobbied the Treasury for a £20m increase in defence spending, welcomed the report and said it “shows how vital defence is... to our economy by creating thousands of specialist and highly-skilled jobs and creating billions in exports”.

The MoD has said it will consider the report’s findings as it continues to work on MDP.

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