defence

Procurement policy

Naval operations

Air power

International co-operation

Cash on the barrel

Clear the decks

Pilot schemes

Combined front

Minister's exclusive interview on the spending targets in his sights | Page 5

The senior service aims to trim its sails but stay ready for action | Page 8

RAF tackles budget turbulence for some blue-sky thinking | Page 11

Britain and France link arms in an allied approach to austerity | Page 13

September 2011

Distributed within The Sunday Telegraph, produced and published by Lyonsdown which takes sole responsibility for the contents

I see no ships How will our armed forces manage the fallout from the latest spending review?

A special report on defence systems

Business Reporter · September 2011

an independent report from lyonsdown, distributed with the sunday telegraph

Foreword

Defence – in this issue

3

A call to arms for hard times Cuts in defence spending over the next four years have prompted the Ministry of Defence and industry to make some tough decisions to help sustain the reductions

By Carol Jenkins The Government announced last October that it was setting out a “hard-headed reappraisal of Britain’s foreign policy and security objectives”, which translated into a cut in defence spending by 8 per cent over four years.

Effects of the Strategic Defence and Security Review (SDSR) were felt almost immediately by the industry and the armed forces as key projects were axed and proposed job losses became an uncomfortable reality. Defence giant BAE Systems announced it would make 450 workers redundant at several military sites in the UK following the news that the Nimrod spy planes and Harrier jump jet project would be cancelled.

This move sent shock waves through the industry and prompted concerns that further job losses would follow, with small to medium-sized enterprises (SMEs) – a vital part of the defence supply chain – worst hit. This has yet to be realised, but industry leaders predict the fallout could be felt in the coming year.

Such wide-ranging cuts raised questions about the UK’s ability to maintain an effective defence and about its status on the world stage as

a military superpower. However, necessity is the mother of invention and although the SDSR has brought about unequivocal cuts to key projects it has also raised a number of opportunities that could ensure the UK has a brighter future than was predicted when the reductions were first announced.

Greater co-operation with France has resulted from the fact that both countries have had to implement cuts to their defence spending and are pooling their resources and their military might for the collective good. It has yet to be seen how sustainable such a collaboration will be and what effect, if any, it has on the so-called special relationship between the UK and the US.

SDSR chopping list • Harrier jump jets retired • Nimrod spy planes cancelled • 5,000 RAF jobs axed over five years • 5,000 navy personnel to go • 25,000 civilian MoD staff also to go • Trident to face £750m saving from fewer warheads • Two aircraft carriers saved, but one will not enter service

Despite cuts being felt in both the air force and the navy, innovation is still evident in the UK defence industry – particularly in the area of submarines and unmanned aerial vehicles (UAVs) or drones.

Booming overseas defence markets have sparked hopes of increased exports for UK companies, with the government publicly supporting such growth. Industry chiefs predict that it could be tough to increase exports when countries such as China are beginning to champion their own technology rather than look to the more traditional UK market.

A report from businessman Bernard Gray, a defence specialist, prompted both the Ministry of Defence and industry to take a more robust approach to procurement and to ensure that projects are on time and in budget.

It is unlikely that there will be an immediate or long-term reversal of fortunes in defence spending as the UK and the rest of the West continue to struggle with the effects of the global recession.

With this realisation, both the industry and the MoD are pledging closer working relationships in order to maintain an acceptable standard of service in the short term and to cope with the constant spectre of more cuts in the future.

Tooth and clawback

5

Shipping forecast

8

Break in the clouds

11

Vive les Allies

13

Minister's savings strategy Future of the fleet

Threat and promise for RAF UK-France joint venture Cover photograph: Richard Scott

Contributors Publisher Bradley Scheffer brad@lyonsdown.co.uk

Journal Assistant Natalie Luketic natalie@lyonsdown.co.uk

Managing Editor Lucie Carrington lucie@lyonsdown.co.uk

Project Manager Jonathan Baer jonathan@lyonsdown.co.uk

Editor Carol Jenkins

For more information on any of our supplements please contact us: Telephone 020 8349 4363 Email info@lyonsdown.co.uk Online www.lyonsdown.co.uk

Creative Director Martin Nolan studio@lyonsdown.co.uk

Carol Jenkins is a journalist and editor specialising in defence, security and policing. She was deputy editor on Police Review and has contributed to numerous magazines covering defence and security including in-house magazines for the Crown Prosecution Service and the Home Office.

Richard Scott is consultant naval editor for Jane’s. He has written extensively on the roles, operations and equipment of the Royal Navy during a career in journalism spanning almost 20 years.

Sponsors

Tim Ripley is a defence journalist, commentator and photographer who has covered several modern fields of conflict including Libya, Iraq and Afghanistan. He has written for Jane’s Defence Weekly and The Sunday Telegraph.

Adam Baddeley is a defence journalist who travels widely in Europe, North America and Asia as editor of Soldier Modernisation and Asian Military Review. He writes for over 20 defence publications around the world.

Business Reporter · September 2011

4

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view Photos: © Crown Copyright/MoD, image from www.photos.mod.uk

Defence IT made easier Private sector IT firms can struggle when it comes to grasping how the MoD operates day-to-day, but help is at hand in the government’s own guide to best practice Military systems tend to involve large numbers of widely dispersed people who need to be ready in moments to perform difficult and dangerous missions. Even when such a system fully meets customer requirements at the outset, the service design to support it through life is often less well thought out. Unfortunately, service design shortfalls can go undetected or ignored because no exercise can fully reproduce the stresses of war, and as a consequence many military systems are never really fully tested until hostilities begin. Then it is often too late to correct short cuts, omissions and false economies, and lives can be at risk.

The issue is moving up the public agenda as the Strategic Defence and Security Review (SDSR) and the Levene report (the government’s defence review carried out by Lord Levene) demand more involvement of the private sector in the construction and management of systems that the Ministry of Defence used to manage itself, under the banners of outsourcing or “industry delivery”. The aim is for industry to provide end-to-end services in the same way that outsourcing contractors supply services such as email, billing and service desks to the commercial sector. The MoD gets the latest systems at predictable cost and the contractors see increased scope and revenue, so everyone is happy.

The fly in the ointment is that many vendors, especially IT suppliers with little experience of military systems, can design

and install equipment perfectly satisfactorily but fall down when called on to support day-to-day operations in UK, let alone in a war zone. Ironically, though the government itself already sponsors a world-class tool that can help these suppliers to manage systems professionally, many contractors choose not to make the required investment to use it. The tool is called Information Technology Infrastructure Library, universally known as ITIL. It is a comprehensive guide to best practice in IT service management, with a vast database of information including checklists of everything that needs to be done to ensure correct and effective functioning and continual improvement of an IT system through its life.

Originally developed as a bookshelf-bending line of 30 volumes, ITIL is now available online and contractors can keep it on their PCs, laptops or even iPads for instant reference. Martin Thompson of IT services provider Steria has read ITIL right through. “I used to be a lecturer in service management and I have read it all from cover to cover,” he admits. “Some may consider it to be an intense read but I enjoyed it and I consult it all the time – it is what we are all about.”

ITIL is a major strand in all of Steria’s work with the MoD, Thompson says. “One of our differentiators is that we apply ITIL processes, the de facto industry standard for IT service management, to all our contracts with the MoD. ITIL is recognised around the world to be the best practice for delivering much leaner more effective service solutions for customers, and this is a big driver for the MoD.” Steria, one of the top ten ICT suppliers to the MoD, has used ITIL in the delivery of systems and services as varied as the secure electronic messaging service (EMS) that links 80 different communities across the MoD and industry, the Land Systems Reference Centre where technical evaluations and system-wide tests are performed, and logistic information systems to improve management of the MoD’s vast inventory, much of it deployed.

“To be able to deliver best practice service management is very important, especially in the MoD after the SDSR,” Thompson says.

“Some contractors are ‘enthusiastic amateurs’, good at selling and installing the equipment but not so good at delivering the service that is increasingly required. They tend to do it in a slightly ad hoc way – they don’t have the people and processes to deliver services as well as they could.”

Steria has also built up considerable knowledge of what life is like at the front line, so as to create systems that come up with the goods when the bullets start flying. “One of things we value highly is a close relationship with our defence customers,” he says. “We have a very good understanding of the environmental, operational and cultural issues that have to be taken into account when delivering services, factoring in the type of person we are supporting. If Cpl Bloggs is running a store on the other side of

the world we need to understand the stresses and strains he is under, and we work hard to achieve that.”

The need for a deep understanding of what happens at the sharp end will only increase as the MoD seeks to outsource services to comply with the comprehensive spending review, Thompson predicts.

“The MoD is looking to industry to deliver more and more services and effective management is key to success.” When a critical service is being run by outside contractors rather than people under military discipline, the MoD needs to know they are getting the best. “When MoD goes down the managed service route they know what their financial commitment is, but it does involve trust in the supplier, and it takes a while to build up that trust. Trust is a business asset,” Thompson says.

Case Study: Biometric access systems An example of Steria's work in support of military operations is in biometric access control – a successful example of the Urgent Operational Requirement process. Steria developed and deployed the first UK biometric access control system for the UK MoD – the Biometric Identification Verification (BIV) System – in 2006.

That system is based on facial and fingerprint biometrics and was designed to be supportable by the military user. Steria deployed on CONDO (Contractors on Deployed Operations) to carry out significant changes to the system and to support continuous improvement. Steria evolved BIV into a more complex solution – Biometric Data Capture System (BDCS) – in 2009.

It includes facial, iris, fingerprint and palm biometric capability.

The biometrics are captured through enrolment processes based on mobile and fixed technology components that can be interconnected to suit deployment circumstances and communications availability.

Steria provides engineering, service management and support in the UK, and provides training and training support, deploying to operational locations as required.

ITIL underpins the work for BDCS, ensuring that the delivered service is fit for purpose right from the start.

“The fact is that diligent application of ITIL processes makes service delivery more effective and less costly.” says David Farquharson, a Steria consultant. “I have seen many examples in the past where service is not such a focus and client satisfaction has slipped steadily over the programme life. If you look at Steria’s track record over recent years it is testament to the benefits for our clients of professional service management.”

The rigorous application of ITIL enables the MoD to drive down costs through service efficiencies as contracts proceed.

“Ultimately we are aiming for continual service improvement to make it cheaper for the customer while maintaining an acceptable margin,” Farquharson says. “For any given programme scope we may thus set out to reduce our revenue year on year, which seems perverse but is what today’s market demands.”

Business Reporter · September 2011

an independent report from lyonsdown, distributed with the sunday telegraph

Policy

5 Simon Rogers

Cuts and thrust The Gray report highlighted the urgent need for a more robust approach to procurement to claw back a £38 billion overspend.

Defence minister Peter Luff talks exclusively to Business Reporter about the challenge

Luff: “We have to make people responsible and encourage them to behave in a more commercial way”

By Carol Jenkins

In the two years since Bernard Gray delivered his damning verdict on the state of defence acquisition in the UK, Whitehall has been grappling with how to create a more agile system that is both better value for money and delivers to deadline.

Gray, a businessman and defence specialist, pulled no punches when he criticised the Ministry of Defence (MoD) for “running a substantially overheated equipment programme with too many types of equipment being ordered for too large a range of tasks at too high a specification”.

He found that the average programme overran by five years while the costs regularly rose by 40 per cent, or £300m. There was also a £38 billion overspend in procurement.

Given that procurement and support of military equipment consume around 40 per cent of annual defence spending, it was clear that only a rootand-branch reform of procurement policy could stem the flow of cash and reduce the inefficiency blighting the system.

When it came to power, the coalition govern­ ment wasted no time in making an example of a major defence project that it considered to be failing. Last October, as part of the Strategic

"We have to do all we can to nurture and support SMEs, as that is where the innovation often lies" – Luff Defence and Security Review (SDSR), the Nimrod MRA4 surveillance aircraft programme was cancelled with immediate effect.

That the government was prepared to scrap major projects almost overnight in its bid to reduce defence spending sent shock waves through the industry, but defence minister Peter Luff is unrepentant.

“Nimrod was an example of a programme that had a spectacularly failed procurement,” he says.

“The programme simply was not working and we couldn’t be sure it was going to work in future.

Ending a long-running contract like this sent out a powerful message that we mean business.

We are prepared to do that again if projects are deemed to be failing and they don’t improve.”

A major projects review board has been set up to scrutinise some of the MoD’s most expensive projects. Any project that the board decides is failing will be “named and shamed”.

One of Luff’s top priorities is to introduce greater personal accountability within Whitehall and streamline the bureaucracy that in the past has hampered progress.

“At present the systems are atrocious – they are obsessed with scrutiny and lack personal accountability,” says Luff. “We have to make people responsible, take away the constraints and encourage them to behave in a more commercial way.”

The UK defence industry is known for innovation and for developing equipment from scratch. However, by ignoring existing technology this process has sometimes increased delays. A project that aims to address this is Foxhound – a next-generation light patrol vehicle that incorporates Formula 1 racing technology and was devised by engineers from the World Rally Championship, McLaren F1 and BMW. Foxhound’s engine can be replaced in just 30 minutes and it can drive away from an ambush on only three wheels. Crew and passengers sit inside a protective pod, which can be quickly adapted to transform the patrol vehicle into an ambulance or supply truck. The first vehicles are expected to be available to troops for training later this year.

“Encouraging technology transfer from industries such as Formula 1, which are known for focusing on constantly changing and innovating in technology, ensures we are more efficient in delivering equipment to the front line and that we are taking the best of cuttingedge technology from other industries – not just defence,” says Luff.

The minister is adamant that reducing overall defence spending and getting tougher with the procurement process should not undermine innovation. He cites a project to provide increased pelvic protection for front line troops as an example of the fact that innovation is alive and well in the UK defence industry.

The tier one pelvic protection system – developed by a UK company – is worn as underwear manufactured from scientificallytested ballistic silk that provides an initial level of protection against the effects of blasts, including shrapnel. Tier two is a second layer of detachable pelvic body armour, worn by troops when carrying out higher risk tasks outside the wire. The third tier consists of ballistic kneelength shorts to give troops a greater level of protection on patrol.

Another priority will be encouraging the UK defence industry to launch projects with export potential. “When we are planning a major new programme, we want the industry to think about how the outside world will view this and focus on its saleability to the rest of the world,” says Luff.

However, Ian Godden, chairman of industry body ADS, is concerned that one proposal to make companies pay for export licences could hamper progress.

“My fear is that if you make the smaller companies pay a fee for an export licence then they will begin to question just how viable it is

to even think about exporting their services elsewhere,” he says.

In response, Luff says the MoD needs to provide better support to the industry by processing applications more swiftly and giving more advice to companies to improve the quality of their applications.

Godden also fears that small and medium-sized businesses (SMEs) will be forced to shed jobs over the next year as a result of the current climate.

“My big worry is that we are about to be hit with a defence recession in this country and that SMEs will be worst hit,” he says. “This is as a result of the restrictive practices of other governments preventing them moving into new markets and the fact that our government is not willing to step in and intervene on their behalf.”

Luff acknowledges that the government needs to do more to support SME interests and has set up a forum for them to engage directly with the

MoD. “We have to do all we can to nurture and support them, as that is where the innovation often lies,” he says.

Luff recognises that there are a number of key challenges ahead in defence – one of which is the fact that the nature of international terrorism over the past ten years has seen a blurring of lines between defence and security. As a result, defence ministers are working closely with their Home Office counterparts to ensure a more joined-up approach.

“My worry is that there are so many competing priorities to grapple with to bring about the kind of root-and-branch reform of procurement that is needed to make it more efficient and affordable,” says Luff.

Nevertheless, he is sending out a clear message to the defence industry that, while the government will do all it can to support it, “we are going to be a tougher, more intelligent customer for you to deal with in future”.

Business Reporter · September 2011

6

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

Conekt in the fast lane to success Automotive engineering company Conekt may be new on the radar as a defence systems supplier but it’s already building up a formidable reputation with military precision

A convoy of trucks winds its way through a sandstorm. The area is full of insurgents, so speed is of the essence, but a driver makes an error and rear-ends the truck in front. The convoy comes to a halt and now lives are at risk.

Moving convoys at speed through dangerous areas is a big problem for the army in many areas of operations, but technology developed to help drivers on Britain’s roads could provide some solutions more quickly and cost-effectively, according to Alan Jacobs-Cook, manager, electronic systems, at TRW Conekt in Solihull.

Conekt’s advanced driver assistance systems include vision technology currently used in lane departure warning systems which alert a driver if they move out of their intended lane – an awardwinning TRW Automotive system fitted to the current Lancia Delta.

Military procurement has been using more commercial off-the-shelf (COTS) systems for many years, with mixed results. Now firms such as Conekt are spearheading a move in the opposite direction, trying to find military applications for

Transfer market: motor industry technology can be readily applied to military equipment

their commercial products.

Conekt has a long and distinguished history in automotive engineering, having its roots at the Lucas Research Centre. Recently, Conekt moved into the military market and joined Team Stellar to compete in the MoD Grand Challenge to demonstrate autonomous vehicle technologies in urban environments. Team Stellar won the challenge and with it, the coveted RJ Mitchell Trophy for Innovation.

Conekt’s success got it noticed despite the company’s lack of history as a military supplier.

“It was a very strategic entry point into the

defence market for us, because it rapidly raised our profile,” says Jacobs-Cook. “We were also coming in with new technology at the research end, where market opportunities are more open to new entrants, rather than trying to compete with mature technology with established supply routes.”

The automotive industry has moved on dramatically in the last 20 to 30 years, with high performance, robust and reliable systems the norm. Nowadays cars are expected to operate without failure for years – and this reliability could be transferred to military equipment at a

relatively lower cost. Advanced driver assistance systems could even enable control of the vehicle, so high reliability is paramount when adapting it for military use.

The technologies put Conekt in the vanguard of the thrust to develop detection systems for roadside bombs and other threats, and the eventual aim is to deploy autonomous vehicles that can support IED search and location, reducing the very high risks for human soldiers.

The company’s vehicle situational awareness technologies may even take to the air – interest has been shown in a number of applications, Jacobs-Cook noted.

The next step is to become an established supplier to the MoD. Once that is achieved, export markets could also open up, he adds.

“Our products have export potential but our starting point is the UK. Getting MoD approval is the best endorsement you can get when selling abroad.” www.conekt.co.uk

Think like criminals – collaborate Harnessing the innovation in SMEs is the key to tackling cyber crime and halting the security breaches that currently cost the UK economy £27 billion a year At times, it can seem as though cybercrime is endemic. However, the UK is fortunate to have a host of small security vendors that are developing innovative solutions against new cyber threats.

There is growing belief that to leverage their knowledge and expertise to its best advantage, we must learn from the collaborative practices of cyber criminals and pool our resources.

The Office of Cyber Security and Information Assurance recently published a report that revealed the cost of cyber crime to the UK economy as £27 billion per year and growing.

It calculated that cyber crime has a significant impact on individuals and the government but the biggest impact is on UK business, which

The industry can most rapidly assess and respond to new threats when it has the right tools and methodology in place to do so accounts for 80 per cent of costs. Intellectual property theft costs UK businesses an estimated £9.2 billion and industrial espionage costs £7.6 billion per year.

The anonymity of the internet and its extension

into every area of life and business makes cyber crime more straightforward to carry out than many people would believe. And it is not only UK criminals attacking UK organisations; cyber crime is an international business from “hobby hackers” at one end of the scale to organised industrial espionage groups at the other.

Groups of hackers and activists working together can create a powerful threat, effectively spinning a criminal web around the world and often with specialist groups in separate locations.

For example, an online team may operate in the UK, sending hacked bank account details overseas to a team who can publicise the data for sale in underground forums and communities. An expert team in another location may purchase the details and manufacture counterfeit bank cards to be sold to yet another local operation overseas to exploit the cards and their funds.

Cyber crime relies on collaborative working techniques. The best approach to counter this threat, therefore, is with security technology that mirrors the criminals.

The UK has a prospering SME community that specialises in the development of technologies to fight cyber crime. These dedicated, singlesolution-focused small businesses can operate rapidly to address emerging threats, evolving their technologies at the pace of the criminal.

most rapidly assess and respond to new threats when it has the right tools and methodology in place to do so. Thales is using its industry experience to foster this innovation and turn it into a usable solution. In addition to its own significant investment in research and development, Thales has established a network of relationships with SMEs and academia to cover the whole gamut of specific threats, calling on relevant expertise where appropriate.

Small vendors have a vital role to play in combating cyber crime but need the help and experience of large security companies to bring their products to market and to be integrated into a wider solution.

Imitating the behaviour of fraudsters and hackers is often the most successful way to thwart the threat that they present. The UK hosts a vast array of cutting-edge security specialists and these organisations must consider collaborating with each other and larger industry players to remain at the forefront of cyber crime prevention.

It is critical to ensure that these pioneering technologies are better known and understood by the UK businesses that they are designed to protect. To realise this, there must be a greater level of co-operation and partnership between respected enterprise security providers and the security SME community.

It’s impossible to always be a step ahead of security activists and hackers but the industry can

Thales is exhibiting at DSEi (Defence and Security Equipment International) at London’s ExCel Centre, 13-16 September 2011, stand S6 105. www.dsei.co.uk Sam Keayes is head of Thales UK’s national security and resilience business www.thalesgroup.com

Business Reporter · September 2011

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

7

Military manoeuvres The private sector has the expertise to be on the front line when it comes to defence acquisition, says QinetiQ To describe defence acquisition as complex is rather like saying open heart surgery can be a bit tricky.

Defence systems often involve leading-edge technology, sometimes combined into integrated systems never previously attempted. There may be large numbers of stakeholders with diverging priorities and widely differing procurement and approvals processes. Those responsible are sometimes remarkably optimistic about how much projects are really going to cost, with requirements changing perhaps several times through procurement lifecycles – as the National Audit Office notes in its auditing.

The squeeze on defence budgets is increasingly obliging civil servants at the Ministry of Defence (MoD) to cut their coat according to their cloth – while simultaneously cutting their own numbers.

So the MoD is facing the double whammy of trying to improve the way it handles acquisition with fewer people to manage the process. The classic solution to this scenario is to concentrate in-house resources on core activities – such as specification, contract letting and management, accounting and internal finance, meeting legal obligations including health and safety and duty of care – and outsource non-core activities to the private sector.

“If you give industry a well-defined output,

and make it in their interests to perform as well as possible, you tend to get a better outcome,” says Adam Palser, managing director for technical and information services at QinetiQ, one of the MoD’s leading suppliers of advice, services and solutions.

Commercial firms tend to be more efficient at manpower management, balancing and moving the resource base to reflect demand. By contrast, even basic measures such as time recording are rarely employed within the MoD. By serving a broad range of clients, companies such as QinetiQ develop a wider range of expertise and knowledge, enabling them to cross-fertilise and share best practice. This can be especially valuable in cementing the increasingly close relationship between defence and security, says Ron Finlayson, defence director at QinetiQ. To breadth of experience, commercial firms can add depth. “We sustain and grow many of the skills that the MoD is finding it difficult to provide in-house,” says Finlayson. “We have pockets of expertise – and where necessary deep pockets – in fields such as airframes and systems, submarines, and information and intelligence that the MoD, itself, can’t afford to maintain.”

Above all, says Palser, the private sector can be much more agile. “QinetiQ has taken £50m in costs out of the business in the last year alone

Terrain technical challenges: surveillance over Afghanistan is addressed through the PWAS programme

through more flexible employment contracts, tighter supplier deals and other moves. It’s more difficult for the public sector to do this.”

Consistency is key, according to Palser. “We achieve efficiency through a consistent and coherent approach because we know this saves

Commercial firms tend to be more efficient at manpower management, balancing and moving the resource base to reflect demand money,” he says. “This enables us to provide high-quality, consistent information to decisionmakers, giving them a much better view of the true cost of projects and the risks associated with them, and a common understanding of what outcomes the project will actually produce.”

Partnering between the MoD and industry is nothing new, says Finlayson. What’s needed now is a shift in the boundaries, with more acquisition functions carried out by industry, allowing the MoD to concentrate its reduced resources on core activities acting as an intelligent government customer. Risk analysis and risk management, day-to-day project management, definition and evidencing of safety cases, and test and evaluation are all functions that could be performed by industry.

“Working closely with industr y in a collaborative manner, preferably on a longterm basis, is what really makes the difference,” says Palser.

As budgets have tightened and concerns about over-runs have increased, there has been a natural tendency for the MoD to play safe by letting a plethora of small, short-term contracts instead of a few major ones, further exacerbated by EU procurement legal constraints. This complicates the bidding process – creating extra costs for industry that are ultimately passed on to the MoD – and creates an even more complex and inconsistent process. The end result is that taxpayers get less for their money, not more.

Companies like QinetiQ, operating collaboratively with the MoD, can leverage their position together with mutual trust to drive this process much more quickly and efficiently while remaining impartial. Similarly, small and medium-sized businesses (SMEs) have a wealth of expertise that government is keen to exploit but finds it difficult to harness.

“We run a number of projects that objectively engage a wide range of SMEs, encouraging rapid competitive process wherever needed, diversity of supply and combining the best of what the UK has to offer, all to meet the MoD’s specification,” says Finlayson. “It creates a consistency that would be impossible if the MoD had direct dealings with dozens of SMEs.” Even measures ostensibly intended to save money can have the opposite effect if not effectively carried through. Buying more equipment off-the-shelf may avoid bespoke development costs, but it creates other issues,

for example whether the procuring department really understands what it’s buying, and how will the new product be integrated with existing equipment? “It’s not no-risk, simply a different kind of risk, and it requires different skills that industry can provide,” says Palser.

The MoD now has to learn from the success of existing industry partnerships and have the courage to extend the collaborative model. “You still get people ‘man-marking’ what goes on in industry, which is inefficient,” says Finlayson.

“It’s hard for a government department to let things go, but when it does, the output can be more effective and better value for money.”

QinetiQ celebrates ten years as a private company this year having been separated from the MoD in 2001 and undergone the changes necessary to operate commercially. The next ten years will necessitate closer, trusted collaboration than ever before, and leverage of joint skills and experience.

All systems go Collaboration has been key in a number of current programmes • QinetiQ provides test-and-evaluation and training support services to the MoD under a 25-year partnering contract across 17 sites.

The aim is to deliver a better service at a lower cost, giving access to QinetiQ’s test and-evaluation capabilities and expertise, ensuring continuous investment in new technology and facilities, and enabling their efficient use.

• In the Persistent Wide Area Surveillance (PWAS) programme, QinetiQ is the lead systems integrator of a joint delivery team comprising a number of government agencies and industry partners. PWAS is a complex, fast-paced and very technically challenging programme, but the collaborative approach is enabling it to deliver new capabilities which are directly applicable to operational needs.

The goal is to transform the sector through developing a harmonised environment across the MoD, industry and research communities • To better protect the UK’s armed forces from chemical, biological, radiological and nuclear (CBRN) threats, QinetiQ is charged with leveraging private sector knowledge and practices to deliver quality protective equipment more effectively and efficiently to the front line. The CBRN goal is to transform the sector through developing a harmonised environment across the MoD, industry and research communities, and to promote a long term, sustainable UK industrial base. www.QinetiQ.com

Business Reporter · September 2011 Business Reporter · september 2011

8

an an independent report from lyonsdown, distributed with thethe sunday telegraph independent report from lyonsdown, distributed with sunday telegraph

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Maritime sailors orAt marines. the same time, some to the released with SDSR, the sameAttime, some 40 ships and40 ingness to puttoforces on the Maritime AsAs arguably the service hardest hithit byby lastlast In aInmessage year’s strategic Defence and security review thesDsr, Chief of Naval staff, Admiral platforms offer ability to maintain a long-term ships andare submarines aregiven at sea onfulfilling any given platforms year’s Strategic Defence and Security Review Chiefthe of Naval Staff, Admiral Sir Marksir submarines at sea on any day, offer anan ability to maintain a long-term (sDsr), royal Navy rapidly had to come Stanhope, Mark stanhope, the“cannot navy “cannot overseas presence.

And remember that navies day, variety fulfilling wide variety of defence tasks. overseas (SDSR), thethe Royal Navy hashas rapidly had to come said thesaid navy affordafford to do to a wide of adefence tasks. Senior officers presence.

And remember that navies to terms with budget cuts. do everything, we have to prioritise what subtle tools ‘soft power’, diplomacy and say the rN remains a fully areare to terms with painful cuts. everything, so wesohave to prioritise what wewe saysenior the RNofficers remains a fully occupied “24/7” subtle tools forfor ‘soft power’, diplomacy and where and when it, and with whom”. deployable long-term regional engagement.” the and leadership came bruised occupiedforce, “24/7” and they long-term regional engagement.”

The RNrN and its its leadership came outout bruised by by do,do, where and when wewe dodo it, and with whom”. anddeployable they stressforce, the necessity the always strived to maintain a review process in which circumstance, politics The the service is already turning attention the necessity of in a persistent a review process in which circumstance, politics RNrN hashas always strived to maintain whatwhat it of stress a persistent presence regions ofpresence interest in The service is already turning itsits attention and policy often seemed to conspire against it. A terms it terms a balanced a wide spread of in order next sDsr, 2015. a speech at rusI regions interest inwithout order toembroilment”. “influence without to to and policy often seemed to conspire against it. A a balanced force – aforce wide –spread of capabiltoof “influence thethe next SDSR, in in 2015.

In In a speech at RUSI difficult economic climate, black hole in the itycapability covering the whole spectrum of embroilment”.

July, Admiral stanhope identified two So could the tide be turning? The RN’s long- in in difficult economic climate, thethe black hole in the covering the whole spectrum of operations July, Admiral Stanhope identified two keykey so couldattributes the tide be rN’s long- challenges: MoD’s forward budget, continued “land-centric” from operations from andright diplomacy through challenges: to ensure confidence in the continued ofturning? mobility,the versatility, presence andpresence diplomacy through to championed MoD’s forward budget, continued “land-centric” to ensure confidence in the continued championed attributes of mobility, versatility, operations Afghanistan, a focus away from high-intensity to high-intensity fighting. last year’s security of the trade, energy supplies and operations in in Afghanistan, a focus away from fighting.

Last year’s reviewreview has lefthas responsiveness and adaptability are much in security of the seasea forfor trade, energy supplies and “conventional” threats and febrile inter-service a big leftgap. a bigGiving gap. giving evidence to parliamentary the parliamentary evidence responsiveness and adaptability are much resource exploitation; and to be able to use “conventional” threats and febrile inter-service evidence to the in the deployment of a sizeable force in resource exploitation; and to be able to use thethe rivalry played a part in shaping outcome that defence defence committee in May, former Chief of Naval offevidence in the of awake sizeable force maritime maritime environment to project power at range rivalry allall played a part in shaping anan outcome that committee in May, former Chief of Naval Libya. And in deployment the uncertain of the environment to project power at range landed heavy blows strength of the fleet. Staff staff Admiral Jonathon band asserted that so-called off libya.

And in the– uncertain of athe to safeguard to safeguard interests. landed heavy blows onon thethe strength of the fleet.

Admiral Sirsir Jonathon Band asserted that Arab Spring which has wake created UKuK interests. theannounced sDsr announced early retirement without a fixed-wing carrier capability “the navy fault-line so-called Arab spring – which has created a “Amidst “Amidst a future security environment SDSR the earlythe retirement of four without a fixed-wing carrier capability, “the navy stretching from the Strait of Gibraltar a future security environment characof four frigates (reducing surface shipfrom numbers is certainly longer spectrum”. fault-line from theResponse strait of gibraltar characterised by moreand uncertainty and less frigates (reducing surface ship numbers 23 is certainly nono longer fullfull spectrum”. to the Gulf – stretching the high-readiness Force terised by more uncertainty less predictability from 23 to 19 ships), pared downcapability, amphibious DrDr lee Willett, senior research fellow to the gulfremains – the high-readiness response Force predictability than we would wish, sources to 19 ships), pared down amphibious Lee Willett, senior research fellow in in Task Group on alert should there be a than we would wish, with sources ofwith potential capability andhead cut the navy’s head count by maritime maritime studies at the think-tank royal united need task remains on alert should be a conflict of potential conflict increasing and threats more and cut the navy’s count by 5,000.

A further studies at the think-tank Royal United togroup evacuate UK nationals from a there variety increasing and threats more diverse, 5,000.

A further blow to maritime capability was Services services Institute (rusI), agrees that “gapping” of locations. need to evacuate uK nationals from a variety never diverse, neverbeen has there a more compelling blow to maritime capability was the decision Institute (RUSI), agrees that “gapping” has there a morebeen compelling need for the decision to scrap theMRA4 rAF’sprogramme.

Nimrod MrA4 thethe carrier capability remains a serious issue locations. for us tohow consider how the royalwill Navy… will to scrap the RAF’s Nimrod carrier capability remains a serious issue forfor of “The relatively small, focused intervention we us need to consider the Royal Navy… serve programme. navy. “you have loss of existing capability see in“the relatively small, at theof heart the ‘Adaptable britain’ posture But it was the headline-making move to de- thethe navy.

“You have thethe loss of existing capability Libya, where we arefocused seekingintervention to influencewe at serve the heart the of ‘Adaptable Britain’ posture but it was the headline-making move to in the in the short term, and difficulty in generating events see in wherefrom we are seeking influence enshrined in the sDsr,” told audience. onlibya, the ground the sea andtoair, may enshrined commission the aircraft carrier HMS Ark Royal, short term, and thethe difficulty in generating in the SDSR,” hehe told thethe audience. decommission the aircraft carrierthe hMs Ark a new a new capability 2020 time-frame. the beevents on the ground from seaofand air, may be Yetyet while service believes that recent axe the Harrier jet force and “gap” UK’s capability in in thethe 2020 time frame. The more representative of thethe sort operations while thethe service believes that recent royal, axe the harrier jet force and “gap” transition is not straightforward,” says. more representative of theundertake sort of operations events have provided a timely reminder carrier strike capability for athe transition is not straightforward,” hehe says. the UK will likely in the events have provided a timely reminder of of thethe uK’s carrier strike capability Willett also points that reduction in the the uK will likely in the continued continued importance of the navy, it recognises decade that has caused thefor Willett also points outout that thethe reduction in the years ahead,” saysundertake Commodore importance of the navy, it recognises a decade thatAlthough caused thethe most destroyer/frigate destroyer/frigate force puts real constraints years ahead,” says Commodore need better articulate relevance most angst. force puts real constraints onon Stephen Saunders (rtd), editor thethe need to to better articulate thethe relevance of of navy’s ability to meet concurrent missions. angst.

Although the new sDsr thethe saunders (rtd), editor maritime maritime forces across government, media and navy’s ability to meet concurrent missions.

SDSR committed to two ofstephen Jane’s Fighting Ships. forces across government, media and committed to two newElizacarriers, “The “the surface fleet steadily declined from of“IJane’s shipscam. public alike. carriers, HMS Queen surface fleet hashas steadily declined from 3232 think Fighting that enduring public alike. hMs Queen elizabeth and hMs in 1998 in 1998 to 19 today.

Any spare capacity gone “I think enduring “sea blindness remains a problem beth and HMS Prince to 19 today.

Any spare capacity hashas gone paigns in thethat mould of Iraq “Sea blindness remains a problem forfor thethe ca mpa ig ns i n t he service,” Prince of Wales (the latter a contingent task emerges, difficult decisions service,” says saunders. “the navy and large of Wales (the latter to – if–aifcontingent task emerges, difficult decisions and Afghanistan, says Saunders.

“The navy byby and large mould Iraq and to have catapults and have have to be made which other commitment does business sight and mind. have catapults and arto be made onon which other commitment to to where weof commit a does itsits business outout of of sight and outout of of mind. arrestor gear enable gap,” gap,” says. “the navy, it could argued, Afghanistan, where The the public does connect ships with restor gear toto enable hehe says.

“The navy, it could bebe argued, is ais a large ground force public does notnot connect ships at at seasea with victim of its own success.

It has seen continuing security of uK trade energy supplies. It’s victim of its own success.

It has seen continuing thethe security of UK trade andand energy supplies.“It’s reductions in ship numbers, delivered Band: an alert on Stanhope: a need only only when something goes wrong that people reductions in ship numbers, yetyet hashas stillstill delivered when something goes wrong that people sit sit Bond: Stanhope: capability to prioritise when it counts.” and say: ‘Where’s navy?’ ” when it counts.” upup and say: ‘Where’s thethe navy?’ ” ByBy Richard Scott Richard Scott

Business BusinessReporter Reporter· september · September2011 2011

an independent report from lyonsdown, distributed with the sunday telegraph an independent report from lyonsdown, distributed with the sunday telegraph

Defence cuts 99 Xxxxxxxxxxxxx © 2010 bae systems

How to be shipshape Get yourselves Adaptability the key forshipshape a smaller navy with fewer craft, therecalls is a demand for greater A shrinking fleet for adaptability resilience within the fleet to ensure that frontline warships available foraoperations asgreater With fewer are craft, there is demand for programmed. this drive to maximise availability, resilience within the fleet to ensure that frontwhile the sameare timeavailable trying to drive down line at warships for operations as costs, has drivenThis the mod its two main refit programmed. drive and to maximise availability, contractors – bae systems babcock – to down while at the same timeand trying to drive adopt “alliance” to ship and refit costs,anhas driven approach the MoD and its refits two main repairs. contractors – BAE Systems and Babcock – to adopt 2005,approach warship refits had been therepairs. anuntil “alliance” to ship refits and subject of completion between thesubject Until 2005, warship refits had been the dockyards.between but it became clear of completion the dockyards. that was unsustainable in was But it this became clear that this the longer term, did notterm, unsustainable in and the longer deliver right resultsthe in right and didthe not deliver terms cost and resultsofinavailability, terms of availability, quality. instead, theInstead, concept the cost and quality. of surface support concept ofship Surface Ship Support alliance under Alliancewas wasdeveloped developed under which the mod, bae systems which the MoD, BAE Systems and babcock sought to identify and Babcock sought to identify new working relationships under a a new working relationships under collaborative agreement. collaborative agreement. this Thistransformation transformationhas hasled ledtotoaaconcept concept known known asoutput class output management (Com). in the as class management (COM).

In effect, effect, the contractors each assigned contractors are eachare assigned specificspecific ship and ship and submarine for they whichtake they“throughtake submarine classesclasses for which “through-life” responsibility for engineering life” responsibility for engineering support, support, maintenance and availability. the two maintenance and availability.

The two companies companies work closely with theMoD navytoand mod work closely with the navy and co-ordinate tomaintenance co-ordinate planning, maintenance planning, prioritise work prioritise packages and work packages and target expenditure. target expenditure. pilot Pilotprogrammes programmeshave haveexceeded exceededefficiency efficiency and and availability targets. theCOM Comarrangements arrangementsare availability targets.

The are now rolled across fleet. now to to bebe rolled outout across thethe fleet.

© 2010 bae systems

Get fighting Future fleet fit

Takeher herup… up…

Take

Type the way Type26 26flagged hailed as way forward forward for combat ships in ship building

Submarine Submarineindustry industrylooks looks totoaabooming boomingfuture future

the ThetyPe Type26 26global GlobalCombat Combatship Shipisisintended intended totoform formthe thebackbone backboneofofthe thefuture futuresurface surfacefleet. fleet. entering Enteringservice serviceearly earlyininthe thenext nextdecade, decade,ititwill will progressively progressivelyreplace replacethe thecurrent currenttype Type23 23frigates frigates asasthey theyreach reachthe theend endofoftheir theirlives. lives. bAe BAEsystems Systemsbegan beganaafour-year four-yearassessment assessment phase under a £127m contract phaseprogramme programme under a £127 million contract awarded awardedininMarch March2010.

2010.ItItisisworking workingwith withthe the MoD MoDtotobalance balancethe thecost costand andcapability capabilityofofthe thenew new ship, ship,which whichisisplanned plannedtotooffer offeranti-submarine, anti-submarine, land-attack land-attackand andgeneral-purpose general-purposecapabilities. capabilities.

Flexibility, Flexibility,adaptability adaptabilityand andaffordability affordability through-life through-lifeare arethe thewatchwords. watchwords.One Onenovel novel feature featurelikely likelytotobe beincorporated incorporatedisisaamodular modular “mission “missionbay” bay”ininthe theship’s ship’sstern sternthat thatwill will allow allowfor forthe theembarkation embarkationand/or and/oroperation operationofof various variousdifferent differentpayloads. payloads.these Thesecould couldinclude include unmanned unmannedvehicles vehiclesand andrigid rigidinflatable inflatableboats. boats, building onon the first ship is scheduled Buildingwork work the first ship is planned totobegin begininin2015.

2015.AAclass classofof13 13ships shipsisisplanned, planned, with withthe thefirst firstship shiptotoenter enterservice serviceinin2021 2021and and deliveries deliveriesrunning runningatatone oneship shipper peryear yearthereafter. thereafter.

InInaamajor majordeparture, departure,the thetype Type26 26isisdesigned designed from fromthe theoutset outsettotobe be“exportable”. “exportable”.And Andtotoboost boost the theexport exportdrive, drive,government, government,industry industryand and navy navyalike alikeare aredevoting devotingsignificant significanteffort efforttoto establish establishglobal GlobalCombat Combatship Shippartnerships partnershipswith with international internationalnavies naviesthat whorequire requirenew newships shipson onaa similar similartimescale. timescale. rather Ratherthan thanundertake undertakebuilding buildingininthe theuK, UK,itit isisexpected expectedthat thatoverseas overseaspartners partnerswould wouldadapt adapt the thedesign designfor fortheir theirown ownneeds, needs,and andthen thenbuild build in-country in-countrywith withuK UKengineering engineeringand andtechnical technical support. support.last Lastseptember, September,the theuK UKformally formallyinvited invited brazil Braziltotobecome becomethe thefirst firstinternational internationalpartner partner and to a number ofof other andisistalking taking with a number otherpotential potential partners, partners,including includingAustralia, Australia,Canada, Canada,India, India, Malaysia Great promise: a new sub in the making Malaysiaand andturkey.

Turkey.

Submarine xxxxxxxxxxxxxxxxx

subMArINes SubmarinesAre areONe onesector sectorofofthe theuK’s UK’sdefence defence industry industrythat thatexpects expectsaasecure securefuture. future.With With seven sevenAstute-class Astute-classnuclear nuclearattack attacksubmarines submarines planned plannedand anddesign designwork workstarting startingon onaasuccessor Successor deterrent deterrentsubmarine, submarine,the theindustry industrycan cansee seeaa construction constructionprogramme programmestretching stretchingout outwell well beyond beyond2030.

2030. however, However,with withaacontinued continueddrive drivetotocut cutcosts costs and andintroduce introducegreater greaterefficiency, efficiency,the theMoD MoD isislooking lookingtotoengender engenderaanew newand andmore more collaborative collaborativerelationship relationshipwith withand andbetween between the thethree threemajor majorcontractors contractorsininthe theuK UKsubmarine submarine industry: industry:bAe BAEsystems, Systems,which whichbuilds buildsthe the submarines submarinesatatitsitsbarrow Barrowyard; yard;babcock, Babcock,which which performs performssupport supportatatDevonport Devonportand andFaslane; Faslane; and androlls-royce, Rolls-Royce,which whichisisresponsible responsiblefor forthe the development developmentand andmanufacture manufactureofofthe theboats’ boats’ nuclear nuclearreactor reactorplants. plants. the Thesubmarine Submarineenterprise EnterprisePerformance Performance Programme Programme(sePP) (SEPP)isisthe thevehicle vehicleestablished established by bythe theMoD MoDtotoachieve achievethis thisgoal. goal.Its Itsaim aimisis totoensure ensurean anaffordable affordableand andsustainable sustainable industry, industry,achieve achievesignificant significantsavings savingsthrough through rationalisation rationalisationofoffacilities facilitiesand andmore moreinclusive inclusive working workingrelationships, relationships,and andimprove improvedelivery delivery performance. performance.to Toachieve achievethis, this,sePP SEPPisislooking looking totoadopt adoptaanew newcommercial commercialmodel modelthat thatchanges changes the theway wayininwhich whichthe theMoD MoDand andits itsindustry industry partners partnersoperate operateacross acrossthe thewider widersubmarine submarine landscape. landscape. this Thisidea ideaofofaa“one “oneteam” team”working workingethos ethosisis already alreadyenshrined enshrinedininthe thejoint jointproject projectestablished established totodesign designthe thenew newsuccessor Successorsubmarine. submarine.this This programme programmepassed passedits its“Initial “Initialgate” Gate”approval approval earlier earlierinin2011; 2011;an anintegrated integratedmanagement managementteam team will willnow nowbe beestablished establishedtotooversee overseethe theproject, project, combining combiningthe thekey keytechnical technicaland andprogramme programme decision-makers decision makersfrom fromthe theMoD MoDand andindustry. industry.

Operation plane sailing Trim the sails MoD strives for less costly, more capable aircraft carrier force

MoD strives for less costly, more capable carriers unmanned vehicles

AIrCrAFt CArrIers reMAIN a subject of controversy. measures mean athat whileof Aircraft sDsr carriers remain subject both 65,000-ton Queen elizabeth-class shipswhile will controversy.

SDSR measures mean that be built, only one Queen will beElizabeth-class maintained in service, both 65,000-ton ships will with the delivery a carrier strike capability be built, only oneof will be maintained in service, delayed to delivery about 2020. shipbuilding costs with the of atotal carrier strike capability delayed to about 2020. Total shipbuilding costs are now expected to push towards £7 billion: the National Audit Office has raised concerns over the increased cost and risk, but the MoD says the switch to the F-35C Carrier Variant of JSF will

are now expected to push towards £7 billion: the National Office raised concerns deliver aAudit cheaper andhas more capable aircraftover fully the increased cost and risk, but the MoD says the interoperable with US carriers. switch the F-35C Carrier Variant of JsFinwill ThetoMoD and its industry partners the deliver a cheaper and more capable aircraft fully Aircraft Carrier Alliance are beginning an interoperable with us carriers.

18-month programme of conversion development © 2010 baeQueen systems in order to adapt at least one of the two new Elizabeth-class aircraft carriers to a “cats and traps” configuration.

An agreement has been signed with the US Navy that will give the UK access to design

Carrier crew: at work section of HMS Queenaircraft Elizabeth Work is at anbuilders advanced stageon onaHMS Queen Elizabeth carrier

the MoD and its industry partners in the Aircraft Carrier Alliance are beginning an 18-month programme of conversion development in order to adapt at least one of the two new Queen elizabeth-class aircraft carriers to a “cats and traps” configuration.

An agreement has been signed with the us Navy that will give the uK access to design information on the latest systems aboard the us Navy’s new CVN-78 carrier. this includes the revolutionary eMAls information on the latest systems aboard the US electromagnetic aircraft launcher, which replaces Navy’s new CVN-78 carrier. the traditional steam catapult.

This includes the revolutionary EMALS It is expected that hMs Prince of Wales – the electromagnetic aircraft launcher, which replaces second-of-class which building work began the traditional for steam catapult. in May will be configured “cats traps” It is–expected that HMSwith Prince of and Wales – the from build givenfor that thebuilding advanced state of second-of-class which work began work on–hMs elizabeth would in May will beQueen configured with “cats andmake traps” the retrofit of catapults and arrestor from build given that the advanced state ofgear work impractical. on HMS Queen Elizabeth would make the retrofit will be completed ofInstead, catapultsthe andfirst-of-class arrestor gear impractical.

Instead, inthe 2016 and enter service prove theinplatform, first-of-class will be to completed 2016 and power and propulsion and missionpower system, enter service to prove the platform, and provide crewand training and undertake helicopter propulsion mission system, provide crew operations. training and undertake helicopter operations. the builtin insections sectionsin Thetwo twocarriers carriersare are being built inshipyards shipyardsacross across the uK, with final assembly the UK, with final assembly and and integration at babcock’s rosyth dockyard integration at Babcock’s Rosyth dockyard in Fife. inAFife.

A firsthull major hull due to be first major block is block due towas be transported transported rosyth bAe systems’ to Rosyth to from BAEfrom Systems’ Govan govan yard in yard in mid-August. mid-August.

Business Reporter · September 2011

10

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

Focusing on the people dimension of change The Ministry of Defence will need a radical change in the way its people work, think and are organised if it is to be fighting fit for the future The Ministry of Defence will fail to achieve effective reform of its procurement and capability systems unless it is willing to fully embrace change and invest in staff, say leading academics.

A seismic change in the way people think and work will be essential to the successful implementation of the reforms outlined in the government’s defence review carried out

by Lord Levene, according to specialists at the Centre for Defence Acquisition, part of Cranfield University.

Traditional hierarchies and fiefdoms will need to be unravelled and replaced with new transparent lines of accountability and joined-up thinking, says the centre.

The proposed reforms will have a crucial impact on the defence industry which will also need to rethink its working practices and establish new relationships with the MoD and front line services. “Even a marginal move in the strategic position of the big companies can have a huge impact on second, third or fourth tier suppliers,” says Dr David Moore, its director.

The centre is based at the Defence Academy of the UK at Shrivenham, Wiltshire, and provides independent analysis, international consultancy and Masters courses on acquisition and capability management.

Professor Derrick Neal, who has written widely Dr David Moore on the need for reform,

has welcomed the Levene proposals because they recognise the people dimension of change.

“Historically, the MoD has viewed change in terms of strategy, structure and systems. Simply pulling the same levers will fail to deliver results.

They need to pay much more attention to their people, management style, beliefs and values of their personnel,” he says.

Reducing the number of staff in defence equipment and support by 25 per cent will not in itself make the system more efficient or

Traditional hierarchies and fiefdoms will need to be unravelled and replaced with new transparent lines of accountability and joined-up thinking effective. “If the MoD fails to develop and build the knowledge and skills base of key people throughout the organisation then it won’t bring about the change it needs or gains in efficiency,” he says.

Attempts to bring in change on the cheap, cutting staff and making those who are left work harder with an additional burden on them to effect change will be disastrous, says Mark Jenkins, a lecturer on the centre’s MSc programmes who spent 39 years in the British Army.

“In order to manage change you have to have the people with the right skills in the right positions, not just at the top,’ he says.

Dr Moore concludes: “This means an urgent need to professionalise the acquisition community if defence is to meet the significant challenges ahead.” www.cranfield.ac.uk/cds/cfda/index.html

Manufacturing a new role Smaller defence contractors have to think big to prosper in today’s tough market, says contract electronics manufacture specialist Surface Technology International Smaller defence contractors must increase the range of services they offer their customers if they are to survive the coming blizzard of cuts. So says Simon Best, managing director of Surface Technology International (STI).

In many ways, Hook, Hampshire-based STI is a typical medium-size defence specialist, making printed circuit boards (PCBs) for the control systems in projects as diverse as the Eurofighter, Astute class submarines and anti-IED systems for vehicles in Afghanistan.

Cutting costs while maintaining quality will no longer be enough to prosper in a shrinking defence market, Best believes. “The cancellation of major contracts is a big problem and the prospect for new growth is flat, so we need to grow market share and we have to work harder at delivering improvements and cost reductions,” he says. “We see ourselves becoming an electronics solutions provider as time goes forward.”

As the cuts begin to bite, the prime and tier-one contractors will start to rationalise their supplier lists, and only the best will remain. “When people are reducing their supply chain you need to have

Cutting costs while maintaining quality will no longer be enough to prosper in a shrinking defence market the right procedures, the right quality standards,” Best says. “We have aimed our business at being a key friend of the prime contractors.”

The big contractors will also look at eliminating their own less mainstream activities and streamlining their core lines, which will give the smaller suppliers opportunities to step in and fill the gap. “We are looking at an enhanced range of services for corporates who have had to downsize,

to better support them with more design services including product and architecture development.

Design for manufacture and design for test, basically to move up the food chain and become a more attractive supplier to them,” he adds.

The aim is to maintain STI’s position as a preferred contractor at a time when the prime contractors are likely to be pruning the number of companies they work with. According to Best: “It’s like a restaurant. We were doing the starter, main course and sweet, but we weren’t taking the coats and selling them a cocktail, and after the meal we weren’t doing the coffee, port and taxi home.”

Smaller contractors will still need to look at reducing their own costs, of course, and sub-system manufacturers have the safety net of regulations preventing the export of many components used in defence systems, which prevents contractors from using Chinese assembly operations. However, making the naked PCBs is a process that requires a good deal of labour and can often be performed in low-wage geographies.

STI exploits this in two ways. One is to manufacture PCBs in the Philippines, at a factory purchased earlier this year. The other is to buy standard PCBs from suppliers in the Far East where volumes are higher and they benefit from economies of scale. During theses bleak times STI is positive that the future will be bright www.sti-limited.com

Learning to arrest cyber crime An innovative form of training using a simulated network environment is helping the RAF and others to stop cyber threats in their tracks A new form of cyber security training which uses a simulated ‘real life’ network environment is helping the RAF and other large organisations to thwart the threat of cyber attacks.

Cyber Defence Training uses interactive software to enable network operators to learn how to detect, recognise, mitigate and report attacks and anomalies.

Developed by defence and security specialists Cassidian and used by public and private sector organisations, the system is thought to be the first of its kind in the UK. “One of the biggest challenges for organisations is providing their network operators with the experience of combating cyber attacks, without endangering the operational network,” says Andrew Beckett, head of cyber security at Cassidian UK. “The current nature of the threat also means that new attacks are occurring all the time.

Hands-on training allows operators to rapidly detect attacks on networks.” The training was recently delivered to RAF network operators and is currently being offered to law enforcement agencies and other public organisations such as governments, local councils, as well as to

One of the biggest challenges for organisations is providing their network operators with the experience of combating cyber attacks without endangering the operational network

companies and the wider business world.

The move is part of an overall strategy by Cassidian to offer innovative cyber solutions and technology that can be applied across both public and private sectors.

“The business of cyber prevention is rapidly becoming a crowded marketplace with companies all lining up to provide the next ‘big idea’ to combating this ever-evolving threat,” says Beckett.

“What sets Cassidian apart from our competitors is that we have recognised it is vital that all our solutions and expertise should be transferable across sectors. Our Cyber Defence Training is as relevant to the RAF as it is to a major financial institution.

“This is part of an overall recognition by us that the nature of the cyber threat is becoming increasingly complex and can have a significant impact on our entire society and not just individual sectors.”

It also reflects the overall ethos of the UK’s national cyber security strategy in ensuring that all activity to combat cyber crime is co-ordinated and consistent, he adds. Cyber Defence Training is just part of a package of cyber security expertise being developed by Cassidian. The company recently acquired cyber security experts Regency IT Consulting to boost its efforts.

Regency employs over 20 subject matter experts in the field of information assurance and managed IT security services. It has longstanding credibility with government and military customers for its cyber expertise.

Cassidian also has a track record in cyber through its work in developing innovative cr y ptography technolog y that enables organisations to communicate securely over public networks. www.cassidian.com

Business Reporter · September 2011

an independent report from lyonsdown, distributed with the sunday telegraph

Adaptability

11

© 2010 BAE Systems

Mind the money gap While defence spending in the West is declining, budgets have risen significantly elsewhere – especially in China and the Middle East.

Carol Jenkins reports

Wing commander British air power is going through a tough time with the axing of key projects and RAF jobs. But the country could still lead the way on the next generation of unmanned craft

By Tim Ripley

Air power was at the heart of UK defence planning during the 1991 Gulf War and the Bosnian and Kosovo conflicts. This approach seemed to face heavy turbulence with the announcement in the Strategic Defence and Security Review (SDSR) that key projects would be dropped.

The long list of casualties ranges from the cancelling of the Nimrod, the sale of the Eurofighter Typhoon and the retiring of all 60 Harrier Jump Jets.

Two squadrons of 1980s-vintage Tornado GR4 bombers have been disbanded, Sentinel spy planes will be scrapped when they come home from Afghanistan in 2015, and the C-130 Hercules transport aircraft will be retired early.

Significant cuts are being made in RAF personnel figures, with the announcement that nearly 5,000 jobs will be axed over five years.

The MoD also said that 170 of its 512 trainee pilots would go.

Howard Wheeldon, senior strategist at city

analysts BGC Partners, gives a bleak assessment of the impact of the SDSR: “The repercussions of SDSR for UK air power capability have already been all too easy to see. Soon, the total number of RAF aircraft in readiness would equate to fewer than the number of F/A-18 fast jets carried on a single US Navy aircraft carrier.”

Former Wing Commander Andrew Brookes, director of the Air League lobby group, is concerned over the ability of the much-reduced RAF to sustain continued high-tempo foreign operations through the coming decade. “UK air power is undoubtedly going through a tough time and the ability of the RAF, as well as the air arms of the army and the navy, to sustain prolonged combat operations and then quickly recover for new missions is being undermined by the cutbacks in the SDSR,” he says.

“Operations such as Afghanistan and Libya are taking a heavy toll of RAF equipment and manpower; the kit will need expensive overhauls when it comes home, and the people will vote with their feet and leave the service in increasing numbers if they are asked to do back-to-back operational tours over several years.”

However, there is also good news. The potential

to develop the next generation of unmanned aerial vehicles (UAVs) or drones is one positive aspect to come out of the SDSR. Such vehicles are popular because they do not contain or need a qualified pilot on board; they can enter environments that are dangerous to human life and can stay in the air for up to 30 hours.

The Joint Strike Fighter (JSF) programme will see the UK join with France to develop the next generation of UAVs. A long-endurance “smart” or “autonomous” surveillance drone will be in British and French service by the end of the decade. It is then envisaged that the two countries will work on a combat drone to supplement and perhaps later replace the RAF Typhoon and France’s Rafale fighters.

Derek Marshall, managing director of policy and public affairs at ADS, the aerospace, defence and security trade organisation, wants UK companies to be at the forefront of this innovation – but warns that the US and Israel could end up stealing the show. “Unmanned vehicles will continue to grow in popularity and it’s essential that the UK grasps the nettle and leads the way with some very radical thinking,” he says.

Warning lights on Exports under threat if cuts send out the wrong message Industry experts are warning that cutting jobs and axing important projects could hamper efforts by UK aerospace companies to boost their export potential. The country’s aerospace industry employs 100,000 staff and another 220,000 people indirectly.

As one of the largest exporters, it adds around £2.8 billion annually to the UK balance of trade and involves some 2,600 companies across all regions of the country, according to ADS, the trade organisation for the aerospace, defence and security industry.

“We have to consider the message we are sending out to potential customers in other countries by cutting jobs and cancelling key projects.

We need to be careful that it doesn’t send out a signal that our industry is in decline,” says Derek Marshall, managing director of policy and public affairs

at ADS. The government has stated that it wants to boost the aerospace industry by increasing its exporting potential, but Marshall says its plans to charge UK aerospace companies for export licenses are counterproductive.

“If you start charging over £300 for export licenses, then the cost of exporting will rise dramatically and that will hit small to medium enterprises [SMEs] particularly hard. Many of them might question whether it is worth their while to export.”

Marshall: attack on export licence plans

The beleaguered West is having to come to terms with reduced defence spending as the recession continues to bite, but outlay on security in the Gulf, Asia Pacific and Latin America is at an alltime high – a fact that has important implications for the West, says the International Institute for Strategic Studies (IISS).

The institute raises concerns that the widening gap in defence spending between East and West could result in a global redistribution of military power.

In Military Balance, its latest assessment of international defence landscape, the IISS says: “In the Gulf, the threat perceived from Iran, with its growing missile capabilities and nuclear potential, is stimulating the Gulf Co-operation Council countries, including Saudi Arabia, to spend heavily on defence and they are emphasising combat aircraft and ground-based air defences in their procurement programmes.”

Bigger defence budgets and military procurement programmes in Asia have provoked speculation about an arms race, with China’s efforts to enhance its military capabilities and strategic assertiveness seen as fuelling such military competition.

Douglas Barrie, senior research fellow at the IISS, believes the gradual divide is “hardly surprising” and is indicative of events in the wider global economy. “These countries have increased their defence spending as a result of their booming economies and it is not surprising that their general level of defence capability will improve as a result,” he says.

“If you look at the continued emergence of China, you will see that its defence capability is

Stealthy star: China's J-20 combat plane greater than it was and it will continue to grow further. In that context, the US ability to act without interference becomes more debatable.”

Despite the fact that China is making “no grand public aspiration” to become a global power to rival the US, Barrie says, it is determined to carve out “very strong specific regional capabilities which could cause the Americans considerable difficulty”.

China’s emergence as a potential defence superpower could also hamper the UK in continuing to champion innovation abroad. The recent unveiling of the J-20 – a combat aircraft with some “stealth” characteristics – indicates that China is gradually closing the military technology gap between itself and the West.

Business Reporter · September 2011

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an independent report from lyonsdown, distributed with the sunday telegraph

Xxxxxxxxx Industry view

Combatting communication Future communicators for soldiers may take several features from civilian smartphones Today’s soldier wants to communicate on the battlefield in the same way that he communicates at home – using a pocket gizmo to talk, text, swap pictures and get information.

Of course, a military communicator will be very different to the cell phones we now take for granted in civilian life. They must be highly secure, resistant to jamming and extremely robust, and capable of signalling directly with each other in the absence of a cellular networking infrastructure. They must also be capable of acting as mobile relay stations so that messages can be sent from unit to unit to reach the main communications backbone.

But a future personal soldier communicator may take several features from civilian smartphones, says John Wall, managing director of ITT Defence Ltd UK. “We are developing smartphones with very high levels of security, because what soldiers really want is the same sort

Developing a battlefield smartphone with half the features of the iPhone is likely to be held back by the expected cuts in defence spending of equipment they have in civilian life,” he says.

“It would be able to run apps just like civilian cell phones, for all sorts of things such as geolocation and route planning.”

Most apps are likely to focus on maps, showing the soldier’s position and that of his comrades and as much information about the enemy as available. Such situational awareness is critical for warfighting advantage. Another emerging technology is enhanced reality – the ability to

show information about a scene captured on the phone’s camera.

Away from the combat zone, smartphone apps are already being deployed in the US for munitions information and medical support. Some of the capabilities of the civilian smartphone are already appearing in radios supplied by ITT Defence for the Bowman Army communications system.

“We supply the Bowman VHF radio system, providing soldiers with secure voice and narrowband data communications, and also the UHF High Capacity Data Radio (HCDR) system, a mobile system that provides the backbone communications layer for the battlefield internet,” Wall says.

“The VHF radio was designed specifically for the Bowman requirement and leveraged technology from the US-equivalent Sincgars radio. The HCDR was also developed for the Bowman requirement and is the most capable ad hoc networking radio in the market today.

A programme to further enhance the HCDR’s data capability to meet increasing operational needs is also ongoing. This will provide a very robust wideband solution for the MoD and will be available in export versions for sale into worldwide markets. These VHF and HCDR radios are all made and supported at ITT’s UK facility in Basingstoke.”

Deployment of the HCDR has extended the availability of internet-like wideband data to soldiers in the field for the first time and is a major advance, but providing a battlefield smartphone with anything near the capabilities of the iPhone is a long way off. Capable though they are, current battlefield radios are bulky and heavy by comparison. Battery life is also an issue.

“At the dismounted soldier level, current solutions provide voice with limited situational awareness,” Wall says. “As you go up the command structure, the amount of information and intelligence increase in both need and in availability, but combat soldiers are focused

on the essentials – such as knowing where your mates are, and having enough ammunition and supplies to survive.”

Many of the issues are addressed by ad hoc networking of the latest handheld units, such as ITT's SpearNet radio, and the GNOMAD (Global Network On-The-Move Active Distribution) satellite communication system. “We have developed ad hoc networking solutions which address this and, with satcomm solutions that enable us to reach back via any satellite network to command headquarters, there are ways around the bottlenecks,” Wall says. “The GNOMAD system product was developed in less than 18 months as a commercial off-the-shelf solution and has been really well received.”

Developing a battlefield smartphone with half the features of the iPhone is likely to be held back by the expected cuts in defence spending, however.

The main obstacles to progress are severe budget constraints coupled with considerable uncertainties of the roadmap to get from where we

are now to the vision of the integrated battlefield for Future Force 2020.

In the last couple of years things have been driven by the need to sustain operations in Iraq and Afghanistan and to take urgent steps to address emerging operational requirements in theatre. “The extensive use of the Urgent Operational Requirements (UOR) process over the past few years, while providing a mechanism for obtaining essential equipment quickly, has disrupted the main equipment programmes and has resulted in a patchwork of systems out there which are not well integrated, which isn't where you want to be,” Wall says.

A not her ba r r ier to prog ress is a n understandable reluctance by the army to engage in another all-encompassing megaproject with significant technological risk attached. “Bowman is such a huge system,” Wall says, “The army has discovered that making system-wide changes is a very lengthy and disruptive thing to do. This has influenced thinking about how they want to evolve that capability going forward and there will not be such a big change again - it is simply too difficult and expensive.”

Wall advocates a close look at the kit the army already has, to identify how to evolve these systems to meet Future Force 2020 with minimum modification. He points out that the very large quantity of equipment purchased for Iraq and Afghanistan means that the army has a large inventory of new radios in stock. “Do legacy systems do the job already?” he asks. “If so, for how long can they be maintained through obsolescence, and at what point will they have to be replaced?”

The army may have to come to terms with communications capability remaining at current levels for some time. “There is unlikely to be much new funding for additional capability for the next five years or so, so it is clear that ways of sustaining current equipment must be found.

The US Sincgars (Single Channel Ground and Airborne Radio System) programme has shown that there are ways of upgrading equipment for the very latest technology incrementally evolving what you have got in a natural process.”

Commercial off-the-shelf (COTS) products will become a much more important part of procurement, but it has limitations. “Use of COTS will be an increasing factor in terms of affordability and time to market as we approach Future Force 2020, because they offer such significant cost advantages,” Wall says. “However, COTS equipment is driven by the commercial market and is only supported for so long before the market moves on to the new bright and shiny toy.”

What seems inevitable is a much greater involvement of defence contractors in service provision and systems support that used to be performed directly by the army and the MoD. “We will see more companies developing equipment using their own capital rather than on government programmes. Try before you buy will become more and more the norm – our GNOMAD satellite system is a perfect example, where ITT funded development, sold it in the US, but marketed it internationally.”

Eventually, communications may become more of a service provided to the military with service-level agreements, rather like civilian mobile phone networks. “It will be much more of a partnership between industry and the MoD. Contractors will provide services that have historically been conducted by the green army.

We are already seeing civilian contractors being deployed further and further forward in the battlespace in support of high tech equipment every day,” Wall says.

John Wall is managing director of ITT Defence www.ITTdefence.co.uk

Business Reporter · September 2011

an independent report from lyonsdown, distributed with the sunday telegraph

Partnership

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Attack of the cybermen Will virtual warfare be more of a threat to our national security than the real thing? Adam Baddeley looks at the evidence While spending on defence has been reduced, governments are investing in measures to combat potential cyber enemies. They fear that attacks in cyberspace could pose more of a risk than actual warfare.

The British government’s first cyber security strategy warns that the threat of a cyber attack is very real and that future targets could include businesses, the national power grid, financial markets and Whitehall departments. It has pledged to invest £650m in tackling cyber crime, which government figures reveal costs the UK £27 billion a year.

“Digital networks are now at the heart of our transport, power and communications systems, and our economy as a whole. This reliance brings the capacity for warfare to cyberspace,” says Nick Harvey, minister of state for the armed forces.

This sentiment was echoed by the Royal United Services Institute (RUSI) think-tank in a recent paper on cyber security. “There is strong evidence that criminals, terrorists and spies have become increasingly skilled and able to use

Entente frugal Austerity has led to unprecedented levels of co-operation between the UK and France to improve their collective defence capability

By Adam Baddeley As a young battalion commander in Flanders in 1916, Winston Churchill donned a French soldier’s Poilu helmet as a potent symbol of co-operation between Britain and France. Fast forward to June 1940 when Churchill, by then Britain’s prime minister, posited a political union between the two countries to negate the fall of France.

History is full of examples of greater military co-operation between the two countries, particularly in times of crisis. This latest union is borne more out of financial crisis than actual conflict, with both countries pledging to reduce their defence spending in order to rein in the public deficit.

In the UK, the Strategic Defence and Security Review (SDSR), announced last autumn, pledged a reduction in defence spending of 8 per cent over the next four years. In France, the defence ministry last year pledged to reduce spending by €3.5 billion over the next three years.

It was against this backdrop that the prime minister, David Cameron, and President Sarkozy signed the Anglo-French Defence Co-operation Treaty in November. By working together, the two countries believe their global objectives can be better, and more cost-effectively, achieved.

The treaty covers such areas as nuclear research, satellites, strategic airlift and joint expeditionary forces for Nato, UN and EU tasks.

The defence secretary, Liam Fox, says there are “many reasons” why this co-operation makes sense. Not only are the two countries Western Europe’s only nuclear powers, they are also its biggest defence spenders and the only two nations with large-scale expeditionary force capability.

“It makes little sense for the two most powerful armed forces in Europe to be spending more than necessary on duplicate Barrie: more to the move than just budgets

capabilities, which could be delivered in a more cost-effective manner,” he says.

Douglas Barrie, senior fellow at the International Institute for Strategic Studies, says the move is a result of more than just budget pressures and its implications are wider – including the changing US approach to foreign policy.

“Take Libya for example,” he says. “The US has taken a deliberate step back and hasn’t led from the front. It has said to the likes of France and the UK: ‘We are going to support you but we are not going to take the lead.’ As a result of this, France and the UK have teamed up.”

British and French troops took part in an exercise – Flandres 2011 – in June to lay the groundwork for the development of a joint expeditionary force, not least in testing the “interoperability” of their communication and IT systems. A full assessment of the exercise will be released later this year.

Britain and France have been surprised by the effect of their co-operation in Libya and

Joining forces The co-operation measures agreed between the UK and France include: • A non-standing Combined Joint Expeditionary Force (CJEF) capable of carrying out a range of operations, whether acting bilaterally or through Nato, the EU or other coalition arrangements • A maritime task group built around the French carrier Charles de Gaulle, with the ability, by the early 2020s, to deploy an integrated force incorporating assets from both countries • Joint military doctrine and training programmes • Greater bilateral co-operation on the acquisition of equipment – for example, in unmanned aerial systems, complex weapons, submarine technologies, satellite communications and research • Aligned logistics – including providing spares and support to the new A400M transport aircraft • A stronger technology base • Joint action emerging security concerns such as cyber security

want not only to maintain but enhance this joint approach. The collaborative arrangements have gone beyond defence capabilities to encompass a broader industrial co-operation. The two countries have signed a memorandum of understanding to align their industries in support of the objectives of the treaty, and in July 30 companies took part in the first Anglo-French industry in London.

“This is a strategic relationship. Although there will be short-term benefits, our real success will come over years not months,” says defence minister Peter Luff.

His enthusiasm is shared by Laurent ColletBillon, the head of France’s procurement agency, Direction Générale pour l’Armement (DGA). “Cooperation in acquisition, research and technology, capability planning, procurement and support is a vital component in a transformed defence relationship and a significant means of securing both military capability and necessary budgetary savings in a time of financial austerity,” he says.

The British government is mindful of the questions greater co-operation raises in terms of threats to its sovereignty and independence.

Fox was quick to quash these concerns and say that only the government would ever decide when to deploy British troops, with whom and under what conditions.

He also recognises that the UK has unique national interests and that it could not always expect to depend on its partners when these interests are threatened.

Past examples of Anglo-French co-operation have raised doubt about the sustainability of collaboration and whether it would survive a change in government. Sarkozy is a self-confirmed Atlanticist – a pejorative term in some French political circles – and has seen his popularity diminish. The potential Socialist Party opponents in next year’s presidential election do not share his enthusiasm for co-operation outside a panEuropean context.

Although unlikely, any change in the financial fortunes of either country or a U-turn by the US in its future foreign policy will all help determine the sustainability of the newly formed relationship.

Harvey: digital networks under threat cyberspace at a time when the UK, like most other countries, is increasingly dependent on cyberspace to function,” says Margaret Gilmore, senior research fellow at RUSI. However, a study published this year by the Organisation for Economic Co-operation and Development says the risks posed by a cyber attack have been over-hyped.

Its authors, Peter Sommer, a visiting professor at the London School of Economics, and Ian Brown, of the Oxford Internet Institute, say the effects of a cyber attack are short-lived and localised.

“Very few single cyber-related events have the capacity to cause a global shock,” says Sommer.

“Governments nevertheless need to make detailed preparations to withstand and recover from a wide range of cyber events.”

The challenge is how to measure the impact of an emerging threat on a wide range of targets, from the high-end information security of Whitehall down to online gaming networks.

Cyber malfeasance is certainly growing.

In 2008, the FBI found that more money was made by organised crime online than through drug trafficking.

The International Cyber Security Protection Alliance has now been formed in the UK to encourage businesses and the government to work more closely together on combating any threat.

Gilmore: strong evidence that criminals are using cyberspace

Business Reporter · September 2011

14

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

Astute thinking Counterfeit electronic components can be a very real problem, putting lives as well as livelihoods at risk, says Astute Electronics Counterfeiting is not just about fake Rolexes – fakers are making huge quantities of electronic components from simple capacitors to expensive processor chips and selling them as genuine parts.

Worryingly, unlike Hermès scarf rip-offs, these fakes can end up in aircraft or combat systems where they can put servicemen and women’s lives in danger.

Allegations of counterfeiting of components, including fake microcircuits in missile defence hardware, have been linked to China. US senator John McCain, a member of the Senate Armed Services Committee, is among those calling for an investigation.

“The United States and China… have overlapping interests and

this is one of them. It should be in Chinese interests not to have counterfeiting of these electronic parts going on, because it would harm legitimate Chinese companies as well.”

And the problem is getting worse – the number of reported incidents rose from fewer than 4,000 in 2005 to nearly 10,000 in 2008. These figures are likely to be just the tip of the iceberg, too.

The popularity of buying offshore at minimum price on the internet has given the counterfeiters their opportunity, allowing criminals to use such ploys as posing as original equipment manufacturers for respectable suppliers that are “eliminating surplus stock”.

“It is a massive problem,” says Geoff Hill, managing director of defence specialist Astute Electronics. “It is very dangerous, especially if the fake part is in an aircraft or front-line system.”

Forged electronic components are now very sophisticated, Hill says. “It started with chips that looked right but had no die inside, but now they have got cleverer and may substitute a chip that works but is a cheaper, older model that may get past initial checks.”

Electronics distributors must tighten their procurement procedures to eliminate fake chips, he warns. “While people continue to buy with price as the main driver these people will survive – because people keep feeding them,” he says. “Our job is education, telling people about the problem and saying you have to protect yourself with warranties, traceability and testing. You have to remember that you aren’t going to make money by saving $2 on the purchase price if it costs you £2m to correct the problem.”

Vigilance is crucial. “We see a very small proportion of fakes because we keep a large blacklist of known suppliers of counterfeit chips, and we insist on long warranty periods and net terms instead of paying upfront,” Hill says.

“But the main deterrent is that we have our own test facilities that can very quickly detect fake components.” Alistair Stroud, operations manager at Astute Electronics, runs the company’s test labs. He has seen the rise of the counterfeiters from the sharp end.

“One method used in counterfeiting is the stripping of components off printed circuit boards under the guise of recycling,” Stroud explains. “They’re sorted into lots that look similar, and

The popularity of buying offshore at minimum price on the internet has given the counterfeiters their opportunity when they think they have a demand for a device that has the same physical characteristics they remove the original part markings and mark them with the required part number and logos.

“Then they counterfeit the packaging and documentation extremely accurately. To the untrained naked eye the devices can look like the real thing.” www.astute.co.uk ©UK MoD Crown Copyright 2011

A very special supplier Thanks to its unique relationship with the MoD, specialist equipment supplier Istec has its sights set on a more global role When a piece of equipment is adopted by British special forces, it gains a gold seal of approval.

That seal of approval is increasingly opening the door for take-up in larger numbers by the rest of the army – and opening up export markets to allied armies.

Istec, a small specialist company in Hertfordshire that designs and supplies gun mounts and sighting systems for the vehicles, helicopters and boats, is looking to expand both its business and premises. Four years ago it was a small defence company primarily providing defence equipment to the UK’s and other special forces around the world. Experience gained in working to the exacting standards and requirements of these unique customers

ideally placed it to meet the demands of the army’s Urgent Operational Requirements.

“Istec has prided itself on its ability to adapt and meet the changing and expanding requirements of its customers. This was evident when we were asked to produce a range of protected weapon stations for the MoD. Working closely with the MoD’s Project Team, the vehicle manufacturers and integrators we were able to design, test and deliver a range of equipments to time, cost and performance,” says Mark Lee, Istec’s Business Development Manager.

Supplying such important elements in an assault system or on a platform is a good way to up your game as designers and manufacturers, Lee says. “It is not just a matter of looking in our catalogue and saying ‘we will have one of those’.

We have to work with trials units and the ‘Users’ to provide the exceptional levels of performance, reliability and support they require.”

Designing gun mounts is not a simple process, requiring a deep understanding of the platform it is mounted on and the weapon concerned.

Ever-increasing amounts of kit that have to be carried – including extra ammunition, the soldier’s personal weapon, a battery of sensors and, of course, armour – makes weight the main challenge. The mount must also be buffered to prevent the recoil disturbing electronic sighting systems.

“More importantly, designing, manufacturing and delivering equipment is no longer enough,” says Lee. Istec believes in and operates a cradle to grave approach with its products and believes in supporting its products throughout their

working life. Publications, product support and development and after-sales service are an important, and growing, sector of its business.

Istec’s growth has forged strong links with a number of major defence contractors around the world and, as well as being a sub-component supplier directly to various vehicle and weapon manufacturers, it has formed a number of teaming arrangements for new products.

Istec does not manufacture its components but sub-contracts the work around a network of local firms and assembles the units, cementing its position as a leading supplier. Istec believes that the ability of the company to grow is in no small part due to the unique relationship the company

The endorsement provided by sales to British forces on operations is one of the main factors fuelling Istec’s spurt of growth over the past four years has with its local main sub-contractors, Lee says. “Without their ability to meet our growing demands, we would have been forced to look further afield and cultivate new relationships at a time when we needed stability and focus.”

There is a quid pro quo and Istec has been able to help out these companies with work during lean periods. And at a time when the armed forces

face the prospect of deep cuts, Lee expects Istec’s status as a supplier to the UK MoD to stand the company in good stead.

“Other than moving into new markets with the equipment we already provide, Istec’s future growth is likely to be in improving and upgrading current designs rather than developing radically new products,” Lee says.

Improvements include motorising the basic manually-operated gun mounts and adding features such as relaxed viewers that enable gunners to take a look through their sights without raising their heads and possibly exposing themselves to enemy fire. Weapon stations are also increasingly being fitted with sophisticated target-cueing systems that provide targeting information directly to the gunner’s sight. As threats increase, armour standards become higher and all Istec’s Protected Weapon Stations are capable of being “up armoured”.

“All these add-ons will plug into our systems and give them greater capability. We are making sure the equipment we have can do more for longer,” Lee says. “They won’t make them truly ‘next-generation’ but they will make them the best they can be.” www.istecservices.com

Business Reporter · September 2011

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

15

Meeting the challenge Civilian companies can supply increased efficiency and reduced costs to the under-fire MoD, says distribution specialist Multipart Nobody gets the Victoria Cross for supplying vehicle spare parts to the front line – but when the supply chain goes wrong, they certainly can get pilloried.

The House of Commons’ Public Accounts Committee recently issued a highly critical report, warning that the MoD’s warehouse inventory systems are at “critical risk of failure”. The report continued: “If these systems fail, then the result could be shortages at the front line within as little as 30 days.”

Most of these problems should be addressed by the £800m supply chain IT system, the Future Logistics Information Services (FLIS) project, but this will not come into service until 2014.

In the background, however, some areas of

the MoD’s vast spare parts supply organisation have been taken over by civilian companies, with considerable success. The Challenger tank fleet, for example, has been supported for more than a decade by supply chain and materials management specialists, Multipart The privatisation of Challenger support has delivered a 27 per cent increase in parts availability, a 90 per cent reduction in delivery times and a 33 per cent reduction in cost to the MoD. On top of that, the inventory held by the MoD was slashed by 89 per cent. Significant additional financial savings to the taxpayer have also been achieved through an approved resourcing process.

The model is one that has huge potential for

reducing costs while improving efficiency at a time of financial stress, according to Multipart’s business support manager Brian Hewer. “The MoD has to make fewer vehicles do more, and has less money to spend on them. The kind of thing we have been doing for the past 10 years on the Challenger tank, while it may be unglamorous, makes a very big difference to the affordability of the equipment,” he says.

Multipart also supplies spare parts for the MoD’s world-wide fleet of construction vehicles including everything from cranes and dump trucks to bulldozers, itself run under a private finance initiative contract by the Amey Lex Consortium (ALC).

Spares specialists such as Multipart can achieve these results because they are focussed on spares rather than manufacture, Hewer says: “We are a spare parts management organisation.

Manufacturers concentrate on the equipment itself and the spares are often an afterthought, but for us it is our only thought – it is what we do.”

Experience and information are key to providing a better spare parts service, he believes. “We are able to make better-informed decisions, which also means we can provide better information to the MoD so they can make better decisions and actually save money,” he says. “It helps them truly move from being providers to deciders.”

The main saving to the taxpayer is the transference of risk to the contractor. Multipart owns the stock of spare parts right up to the point at which it is delivered – generating savings by ensuring the parts are purchased intelligently

and managed effectively. But there are many other advantages to using a specialist spare parts supplier rather than simply contracting the original manufacturer for after-sales support.

According to Multipart key account manager Phil Ainscough, a specialist spares operation has the advantage of not being tied to the original equipment manufacturer. “We have a flexible purchasing department – we can go anywhere to get the best deal. A lot of the big organisations don't have that expertise,” he says. “Because we are experts at inventory management, we hold less inventory but provide exceptional delivered availability’ A particular problem with the defence industry is that small numbers of highly specialised and expensive spares must be held for long periods, a very difficult inventory control problem that only a few logistics operations have the expertise to manage effectively, according to Belinda Greenwood, Multipart’s supply chain manager.

“It is not always about buying spare parts cheaper, it is about buying the right quantities at the right time so you are not spending excessive amounts of money on stock that will sit on the shelf for months or years,” she says.

“Forty per cent of spares for the construction fleet are only ever ordered once, creating a huge challenge in slow-moving parts management: thankfully we are experts in slow-moving inventory.” www.multipart.com

Partners in progress Small and medium-sized enterprises are the lifeblood of the UK’s defence industry and have a big role to play with our armed forces, says communications manufacturer Vitavox Britain has a priceless resource in the thousands of small and medium-sized companies that supply specialist equipment to our armed forces, but they are in danger of being squeezed out by changes in the way defence equipment is ordered.

Major projects used to be ordered and managed directly by the Ministry of Defence, but the trend is now to appoint a prime contractor. This means that small companies which have built up a relationship with the MoD, sometimes over many years, must build partnerships with the new, multinational conglomerates that now dominate defence procurement. Under acute pressure to cut costs, the MoD is also moving to commercial off-the-shelf (COTS) equipment.

The risk is that Britain will lose its specialist expertise and experience if small companies are unable to compete in the new

Small and medium-sized businesses must adapt quickly to the rise of the prime contractors if they are to survive order, according to John Moore, director of Secomak, which supplies battle-hardened microphones and loudspeakers to the Royal Navy through its Vitavox division.

“This country has a huge number of small enterprises that understand the needs for this sort of product and this expertise will be lost if contracts go overseas,” he warns.

Audio equipment in warships is a particular case in point, Moore says. Microphones in particular are vulnerable, and if one

fails the user is rendered speechless. “In naval exercises anything handheld such as microphones can be thrown anywhere and often is,” he points out.

You don’t get this ruggedness on the shelves of your local computer superstore. Also off-the-shelf equipment would rarely comply with the navy’s complex systems requirements. Moore says the microphones have to link with the RICE (Rationalised Internal Communications Equipment) protocol for RN systems, “so if you have a commercial microphone the connector wouldn't be right and the output wouldn't be right to fit into the RICE system”.

Loudspeakers are particularly exposed to conditions never experienced in civilian life. “Warships are often taken at high speed into big waves, so outside loudspeakers are under seawater a lot.

Our loudspeakers are explosion proof and shockproof, rated to 70g, so there is every chance that if there is an explosion on board some loudspeakers will survive, which is incredibly important for saving lives,” Moore says.

“It is important that equipment is able to withstand pressure waves too – the Australian navy purchased a warship from the Americans that had COTS loudspeakers, but when the ship fired its own surface to air missiles the shock wave took out all the speakers. They had to strip them all out and replace them with ours, which are designed to withstand that.

"Complete UK production has one immediate advantage for the UK prime contractor in that the product is not subject to the onerous US ITAR (International Trafficking in Arms Regulations).

Our entire range is ITAR free and this is a real advantage to UK and other non-US prime contractors ."

Meanwhile, SMEs must adapt quickly to the rise of the prime contractors if they are to survive, Moore believes. “This represents a massive challenge for SMEs to connect with the new routes to

market. It also represents excellent opportunity as export markets open up for the focused business,” he says.

Vitavox is already well on the way, having forged partnerships with prime contractors such as BAE Systems for the Astute class submarines and Thales UK for the Foxhound light protected patrol vehicle. www.vitavox-sound.com