Douglas Carswell

30 NOV 2016

Defence procurement needs competition - not industrial strategy

The Royal Navy today has only 19 frigates and destroyers. That's too few for comfort. Sir John Parker's report on shipbuilding critiques some of what's gone wrong with defence procurement. But it doesn't go far enough.

Too much taxpayers' money is consumed in wasteful defence procurement. Major projects routinely arrive years late and billions over budget – if they arrive at all.

The comparison to private-sector procurement is staggering. Parker notes that the Type 23 Frigate took 17 years to deliver, whereas 'mega-cruise' ships, which are 9 times the size, are delivered in 5.

The delay makes a huge difference. There's not much point in a ground-breaking, complex system if it is obsolete by the time it is delivered.

Our warships need to be built more quickly. So why aren't they?

Partly because government is often held to ransom by a monopoly contractor. Parker points out that BAE Systems' shipyards are "the only UK shipyards currently used to design build and commission a sophisticated naval warship" – thanks to "an exclusive position held under the Terms of Business Agreement between BAES and MOD."

In this context, Parker's recommendation that the construction of the Type 31 Frigate be opened up to a wider range of companies and shipyards in the UK is welcome. As is his plan for the Type 31 to be simpler, so that it can enter service urgently.

I'm less convinced by his belief that an industrial strategy which gives British shipyards a monopoly over warship construction can make them more, rather than less, competitive.

It's important to sustain British shipbuilding. But the way to achieve that is to free our shipyards to compete internationally – not to give them preferential treatment.

The reason BAE's shipyards in Scotland are less efficient than commercial shipyards elsewhere in the UK is because the government gives them guaranteed custom, whether or not they meet deadlines and costs.

By contrast, Britain's commercial shipyards – Parker acknowledges – display "no single customer dependency culture" because they are "sustained by multiple income streams".

What makes manufacturers competitive is open competition. If we want efficient procurement, shouldn't that be the model to follow?

The primary purpose of defence procurement is to keep this country safe. At the moment, it's failing. The corporate contractor cartel needs to be broken. Read our paper – Rethinking Defence Procurement – to find out how.

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