Tuesday 25 September 2007
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Tuesday 25 September 2007 |
By Camilla Cavendish
It has a hardware budget of £15 billion and can spend taxpayers' cash without Treasury approval. So why does the Ministry of Defence have a reputation for incompetence? In the second of our series on the enterprises of government, Camilla Cavendish examines the business of defence
The popular view of the Ministry of Defence (MoD) can be summed up as follows: "Great on operations, hopeless at procurement." Our Armed Forces are respected the world over as brave, professional fighters. But the papers are full of grumbles about rifles that jam and helicopters that are grounded because they cannot fly in cloud.
MPs recently criticised the MoD for spending £2.4 billion on Bowman radios that soldiers said were too heavy to carry and could not communicate with the radios of their allies in Iraq. The Commons Public Accounts Committee delivered a scathing report last year into the ministry's 20 biggest projects: collectively, they were £29 billion over budget and 15 years behind schedule.
It is a conundrum. Why do the same people who willingly risk their lives in Helmand or Basra, displaying extraordinary ingenuity and courage, apparently become limp yes men when they sit behind desks and spend the MoD's annual £15 billion budget on military hardware?
"No one can second-guess the theatre commander in the field," John Dowdy, a partner at McKinsey, the consultancy, who works on defence, says. "But everyone can second-guess officials at home. The average time for a defence equipment project is ten to twenty years. As an official, you probably have a two-year post. So you don't stick your neck out."
Even the bravest of souls, it seems, can be overpowered by the risk-averse Whitehall culture. Military organisations are notoriously conservative. And there is a good reason for that. The business world advances by experimentation. In the military, however, experimentation carries a disproportionate downside risk: death. Once it has a model that broadly works, the military tends to stick to it.
Yet the old Cold War model is out of date. For 40 years, the Western military-industrial complex was responding to what, essentially, was a single, known threat: the Soviet Union. The world is different today.
"The Government is faced with a series of dilemmas," Paul Beaver, an independent defence analyst, says. "It has less money to spend on defence, yet in more challenging circumstances. Since 2001 there has been an almost exponential increase in threats to the UK and to our interests, not just in Iraq and Afghanistan, but in a resurgent Russia, insecure energy supplies and so on.
Government has to think: do they spend their money on defence or security? And how do they spend it efficiently?"
Recent headlines about the Eurofighter Typhoon underline how much has changed.
Britain is trying to get out of a £5 billion contract for the aircraft, which was conceived in the 1980s to engage Soviet bombers and their accompanying fighters. Delays to the project mean that the first Typhoons have only recently been deployed by the RAF. The rest are no longer needed. The contract was drawn up tightly, to prevent other European partners from reneging on their promise to share the development costs that make up the majority of the cost of such projects. So it may prove impossible to get out of.
"In the Cold War there was an enormous premium on technical supremacy," Mr Dowdy says. "Even getting a small advantage over the other guy was worth waiting for.
But now we're in a world where the threat is dispersed and rapidly changing.
Commercial technologies (such as GPS) outstrip military ones. More people are being killed in Iraq by roadside bombs made out of mobile phone receivers and old artillery casing than by million-dollar aircraft."
In the past two years, Britain has developed a new way to get equipment to its troops quickly. The Urgent Operational Requirement (UOR) allows a field commander to order up kit from a range of suppliers, and it is impressive.
"The fastest UOR so far," Mr Beaver says, "was armour for the old 432 personnel vehicles. That came in a matter of weeks. We now have a virtual cupboard of capabilities which we know we can get hold of because companies have done a 'show and tell'. The problem is that these are one-off purchases. So there is no through-life costing."
UORs have cost about £2.8 billion so far. That money comes out of the Treasury contingency fund and it is not clear whether it will have to be paid back. The MoD is the only government department that can spend without direct Treasury approval -but up to a ceiling of only £400 million. Such tactics plug only short-term gaps. However, some strides are also being made on the bigger projects. In 2005 the Government published its Defence Industrial Strategy White Paper. This proposed, among other things, that rather than simply buying weapons systems and passing the upkeep and training to the military, the MoD should involve industry in long-term partnerships through the entire life of weapons systems and programmes.
Lord Drayson, the Minister for Defence Procurement, is making concerted efforts to offload more risk on to the private sector and to speed up the acquisition process. "He is driving a business culture through the middle of the Civil Service," Mr Beaver says. A defence commercial director, Amyas Morse, from PwC, has been appointed to improve relationships with industry.
Yet perhaps the most powerful driver for change is that our politicians are putting the MoD under enormous financial pressure. The defence budget has hit its lowest level, as a proportion of GDP, since 1930. Ministers have sent troops into five conflicts since 1997, while simultaneously cutting the defence budget, from 2.7 per cent of GDP in 1999 to only 2.2 per cent in 2006. The cuts have provoked scathing public attacks from top brass, who used to use private channels to express their anger.
General Sir Richard Dannatt, the Chief of the General Staff, has given warning that the service is dangerously overstretched. And there has recently been widespread publicity given to the tragic stories of young soldiers who have been invalided out of the Forces with appalling injuries, but paid insufficient compensation on which to live.
This cannot be good for morale. With 7,200 troops in Iraq and 5,000 in Afghanistan, the scale of Britain's global military commitments has breached guidelines that dictate how much rest soldiers get between tours. About 18,600 soldiers have quit the Army in the past six years. This is, undoubtedly, a "people" business, and those people need to be in good heart.
The Government has some tough decisions to make about what the British defence capability ought to be. Defence is a core business for governments: no nation would ever outsource such a vital role. But it is a business that urgently needs updating -and funding -if Britain is to remain the warrior nation that she still aspires to be.