Pressures mount on MoD to get procurement working for the digital age

Andrew Davies, chief executive of Kier Group, was on a shortlist put forward to the prime minister for the role last month but recently withdrew, turning down a salary in the region of £650,000, including add-ons. He and his industry peers earn more than £1m.

Jeremy Quin, defence procurement minister under the previous Conservative government, is now the only candidate left in the process. But there is concern around failing to appoint someone without an industry background. The next NAD will require more than a working knowledge of strategic and tactical needs of the armed services, the defence industries old and new, the workings of Whitehall and the wiles of the Westminster village.

Their job will be to control procurement, maintain the arsenal across defence and manage investment with industry, not least with the small and medium-sized enterprises (SMEs) building cutting-edge technology, from drones, aerial systems and submarines to frontline medicine, and super-computing and quantum technology.

They will control an annual equipment spend of at least £16bn, with an overall 10-year equipment and support programme costed in 2024 at more than £300bn.

Much of the future of Britain’s defence depends on how the NAD works out. More money is promised for defence by Rachel Reeves, from the current 2.3% of gross domestic product (about £60bn) to 2.5% by the end of 2027. Nato and Donald Trump have demanded 3% by 2030, rising to 5%, which is not so much jam tomorrow, but jam in never-never land.

But in fact there is no new money for now, as the Treasury insists on a strict year-on-year accounting discipline – a process known as annualisation. A lot has gone already on buying back military houses from neglectful private contractors. About £3bn a year at least goes to Ukraine.

Interestingly, if Keir Starmer’s government agrees to join the EU defence procurement Security Action for Europe fund to access the European defence market, not only will it have to pay, as the Financial Times reported last week, but it will have to ditch Treasury annualisation practices.

Britain’s armed forces are badly depleted and face problems retaining good personnel more than recruiting, which is now picking up. In terms of equipment, the UK has only 14 155mm Archer medium howitzers. Their distinguished predecessors, the AS90 self-propelled howitzers, have all been donated to Ukraine. They have to be fed with ammunition that is produced in South Africa, and shipped and assembled in the Baltics.

The Royal Navy is down to eight, or fewer, working frigates and destroyers – so we have none of either class patrolling the hotspots in the Gulf and the Red Sea. There is currently no nuclear attack submarine at sea, and crews of the Vanguard-class vessels, armed with ballistic missiles, have had their patience and stamina tested by underwater patrols of 200 days.

Yet there is a new spirit of innovation and enterprise – a lot of it driven by experience in Ukraine. Big contractors, or the “primes”, such as BAE Systems, Leonardo and MBDA, are working in novel ways with new SMEs, delivering new kit and new tactics in record time.

The head of the army, Gen Sir Roly Walker, ordered his service to be ready for war in three years and triple its firepower and lethality in that time to tenfold by 2030.

The Asgard programme is a champion in this: a brand-new system for digital sensoring, targeting and communication, enabling a process of identifying and shooting a target on Ukraine’s frontline within minutes.

Last week, a group of army advisers exhibited Asgard’s array of drones, software demonstrators and communication kit. Tim Ventham of defence software maker Systematic proudly displayed his SitaWare Edge targeting app on a large smartphone. “You see, this is like battlefield Tinder,” he said, referencing the dating app, as he swiped the red icon of an enemy tank, picked up by a reconnaissance drone.

Intellium AI of Bristol has a staff numbering 15, specialising “in the use of AI in contested environments, processing hundreds of complex doctrines and multi-source intelligence”, according to the blurb. Its founder, Kiran Krishnamurthy, says he had “a five-hour, deep-dive meeting with the army in a basement last November. It was gruelling, and at the end they told us we’d got the contract for £5m.”

Now he worries about being swallowed by a prime: “We’ll just keep going as we are, and there is plenty more business out there.”

Others are more apprehensive. The targeting and communications systems are working, but there are concerns about “effectors”, meaning the things that shoot.

Helsing has set up a cutting-edge plant in Plymouth for top-of-the-range attack and surveillance aerial drones and innovative unmanned submarine drones. “Yet we have had absolutely no new orders since the first batch of the HX-2 for Asgard. It’s frustrating,” said a company source.

Despite the promise of a national armaments directorate, old hands fear the Whitehall end of the Ministry of Defence is finding it hard to shake off bad old habits. “The trouble is, you can never quite find out who exactly is in charge,” said a former senior military procurement officer, now an executive of a successful avionics and surveillance equipment company.

The defence procurement offensive still has to wait for defence industrial strategy, now not expected till autumn at the earliest.

“If the default position is ‘let’s muddle through’, it’s very dangerous,” said another former senior officer, and now senior political adviser to one of the big three UK defence contractors. “Muddling through isn’t going to work for much longer. It might very well bring disaster – soon.”

Photograph by Getty