The starting point for all conversations about defence procurement must be that Western Europe faces its greatest security threat since the Cold War. Ukraine shares a border with no less than four NATO allies, and with rhetoric rising from Moscow about tactical nuclear strikes, there is the potential for a dangerous escalation. And that’s before we even discuss the rising tensions in the South China Sea. It is against this backdrop that the Government has discussed increasing defence spending, having already committed to an uplift following the Integrated Review of Security, Defence, Development and Foreign Policy, published in 2021.
Ensuring that the UK is ready for whatever may come is at the heart of what the UK’s defence procurement industry does. Yet its task has got even harder over recent years. There are several reasons for this.
Firstly, just like any other industry, defence is impacted by the supply chain and cost challenges that organisations across the world have experienced. High freight prices and spiralling costs for raw materials work their way through to higher costs for the goods the industry wants to buy, which places strain on budgets. In defence terms, supply chain security also means the security of supply in the face of hostile intervention, something that further complicates.
Secondly, having sent a huge amount of military aid to Ukraine, we now need to refill our arsenal. As of September this year, the MoD reported that our military aid included “hundreds of rockets, five air defence systems, 120 armoured vehicles and over 200,000 pieces of non-lethal military equipment.” The stockpile will need to be replenished for the UK’s Armed Forces to remain combat-ready.
Thirdly, every other country that has provided military aid to Ukraine has also had to replenish their donated arms and equipment. Alongside that, a number of countries, such as Germany, are significantly upping their defence spending commitments. This further drives demand – creating scarcity and rising prices.
Overall, we are seeing a perfect storm brewing in defence procurement. So, how can the industry respond and ensure that defence procurement meets the global security issues we are facing? There are significant nuances to defence procurement, but many of the answers to this question may come from the private sector.
Looking at Proxima’s work with the private sector, there are three key learnings that the UK defence procurement sector may be able to take from the work that has taken place in the private sector in the past 18 months.
Top of the list is the importance of getting good information. When things are shifting as quickly as they are (for example, in six months we’ve seen energy prices rise, then soar to unprecedented levels, before falling again), you need a process for ensuring you have information that allows you to take informed decisions and anticipate obstacles.
That brings us to the next learning – the importance of supplier collaboration. Often the organisations that will be able to add more information to your picture are your suppliers. They are closer to the problem than you, and by seeking to understand their challenges, you’ll often glean insights that will help you understand the barriers you will need to overcome.
Lastly, it’s about being creative. Since the Covid pandemic, we have seen businesses ruthlessly prioritise to ensure they can deliver what they need to. Defence is not immune from having to make trade-offs, and there should be an appetite for working to find creative solutions to the problems of supply and cost. To give one example, digitisation and commercial agility have helped information age procurement and supply chain management; these lessons could also apply in the defence and security sector.
None of this is going to be easy. As we’ve seen over the years, defence procurement is extremely complex and that will not change. But by learning from best practice across sectors, defence procurement can ensure it is able to meet the scale of the challenge ahead.