02/04/2019
On 29th March the Ministry of Defence (MOD) published its Small and Medium-Sized Enterprise Action Plan 2019-2022. Intended to improve access to business opportunities with MOD, the plan details how the department intends to increase its procurement spend with SMEs and means to work with its major suppliers to remove barriers to supply chain participation. That MOD has chosen to set out this detail now is both timely and welcome - since the last update to these policies in 2016 a number of high-level strategies have been published that firmly established the intention of increasing SME participation without detailing how it would be done. These include the Modernising Defence Programme, an updated Defence Industrial Policy, and both the National Shipbuilding Strategy and the Combat Air Strategy. NDI therefore welcomes a plan to deliver against this ambition and its acknowledgement, which we have consistently reiterated, that SMEs are vital to delivering ‘efficient, effective and affordable’ service to the Armed Forces.
It is also refreshing that this latest action plan acknowledges for the first time the critical role that SMEs, and those working in the defence sector in particular, play in sustaining and growing the UK economy. MOD has traditionally been reluctant to use its budget to in support of macro-economic outcomes for fear that this could only be achieved at the expense of capability objectives. Philip Dunne’s excellent 2018 report on the value of defence to national prosperity set out a bold and different approach to this, whereby economic and national security objectives can be mutually supportive as opposed to exclusive. This is something NDI has consistently lobbied for.
There are four sub-sections to the plan which cover the strengthening of supplier engagement, improvement to procurement policy and process, making it easier to do business with defence and encouraging innovation. Some of the more eye-catching commitments within these include an intent to balancing wider economic factors in procurement decisions, the development of a policy to take account of a prospective suppliers’ approach to subcontracting, and the improvement of the provision of advance notice of procurement opportunities to enable supply chain innovation. The action plan also details how MOD will work with its newly-appointed SME Champions in each of its 19 key suppliers; a process that NDI has offered to support, thereby ensuring this new grouping is put to best use of the defence SME community.
Of course, the 2016 SME Action Plan set an ambitious target of 25% of MOD procurement spending going to SMEs by 2020 (both direct and indirect spend). It is regrettable that in this latest plan achieving that target has been postponed until 2022. How far short MOD finds itself is not detailed, though I understand privately that the challenge is considerable. In 2016 it was reported that MOD spend with SMEs equated to 19.4% of the procurement budget and that figure is thought to have regressed despite the target having being established. For this reason it is critical that the SME agenda remains one of MOD’s priority issues and the commitment to this at Ministerial level is particularly welcome. However, it is delivery against this plan by which MOD will be judged and, as it stands, the targets for measuring delivery look ill-defined in places. As members of the MOD’s SME Forum, a sub-committee to the Defence Suppliers Forum, NDI will continue to press the Defence Procurement Minister on delivery of the action plan and the commitments contained within it, and we look forward to working with him in support of these outcomes.