Ladies and Gentlemen, good morning.
I’m delighted I was asked to open this conference for at least three important reasons.
First, I always take great pleasure in promoting the work that the Centre for Defence Enterprise does in support of our Armed Forces and SMEs.
Second, I want to say a few words about our wider plans for Equipment, Support, and Technology going forward, and how I see both the CDE and SMEs playing a vital role in that.
And third, today’s event is actually about success.
It’s about the innovation and hard work of SMEs who have won contracts using the CDE process, and done their bit to keep our Armed Forces safe and at the cutting edge.
Indeed, I want to say a very big thank you to all those companies who work to support our Armed Forces, much of it unheralded I know.
I also know that this is business, and the bottom line for you has to be profitability.
But the bottom line for us is getting the right kit for our Armed Forces, at the right time, and at the right price.
These two aims are obviously not the same, but the good thing about the CDE process is that we have proved that these two aims are far from mutually exclusive.
And I also know that all of you working in the Defence and Security sector, as well as the country as a whole, care deeply about our Armed Forces and the job they do on our behalf.
That’s why today is so important as well.
This is a difficult time for the country, and indeed for Defence, as we work to put the public finances back on a sound footing.
We have had to make the sort of tough decisions in the Defence Programme that I know all of you who work in the SME sector will understand.
I’m sure you need to make those kinds of decisions regularly -where best to direct your efforts, how many that will require, how much risk you can take.
So let’s not disguise how difficult it’s going to be and how tough the competition for contracts will be.
But statistics released this week by the British Chambers of Commerce reveal that the manufacturing sector is growing very strongly - led by exports - which shows the importance of manufacturing to our recovery.
And over the next four years - despite the reductions MOD have had to make - we will be spending around £50 billion on equipment and support.
That’s a lot of money by anyone’s standards.
This is money that hard-working people and companies large and small have entrusted to us through their taxes, so that Britain can be more secure.
They expect us, and you as a taxpayer, to spend their money wisely and properly, and enter into contracts with industry that will deliver the equipment that we need, when we need it, while protecting the taxpayers’ interests and sustaining the skills we need to maintain our security.
So the long-term prosperity of the British Defence industry depends on it doing three things - and those three things I can see happening here today;
- investing wisely and effectively in R&D - which cannot solely be a government responsibility;
- offering the right equipment while delivering better value for money to the British taxpayer;
- and being competitive and market sensitive so that the prospects of successful exports are maximised - and I’m pleased to see that our colleagues from the Small Business Unit in UKTI DSO are exhibiting here.
And while implausible scenarios, future weapons, ingenious gadgets, are the stock-in-trade of any James Bond film, and are all very exciting, we must ensure that ingenuity translates into combat edge in the field.
That’s exactly what I have just seen in the exhibition hall, and I am extremely impressed by it.
That’s why having an organisation like the CDE is immensely valuable, particularly when there isn’t the money there was before.
It’s valuable to the MoD because it provides a route into the ground-breaking work being done in other fields and adapt it to our needs; it provides a one-stop-shop for innovators to engage with us, and for us to broaden our supplier base; and it increases the potential for shared research funding.
It’s valuable to industry I hope because it gives greater visibility of MoD requirements and challenges; it’s a potentially quick route into the Defence market; and doing so can increase market awareness of a particular capability.
And the CDE is valuable to academia because it’s a way of exploiting the tremendous innovation on campuses and universities around the country, and getting the message across that Defence needs should be considered too.
The statistics speak for themselves.
In the last 30 months, the CDE has attracted over 1600 proposals; assessed 90% of those proposals within 15 working days; and funded over 200 Open and Themed proposals.
Of particular interest to me, and many of you here today, the CDE has placed about 60% of those funded proposals with SMEs, many of whom are new to Defence, and some of whom as I have just seen are new to defence and are here today.
With approximately 4.8 million SMEs in the UK, this shouldn’t come as a shock.
Indeed, I’m aiming to make it even higher, as these 4.8 million SMEs account for 99.9% of all British businesses, and over half of our private sector employment.
Let’s be clear: their prosperity is our prosperity.
They are a massive lever for recovery and growth, and are at the centre of the Government’s Growth Strategy that will lead us out of recession.
But SMEs are even more than that.
They represent a hugely important source of research and innovation, as well as offering flexibility, adaptability, and niche capabilities.
These qualities make small businesses particularly important suppliers for Defence and Security, where it is vital that we respond with maximum agility to varied and often rapidly-changing threats.
These strengths are really valuable whether MoD is procuring direct or through a prime contractor.
That leads me on to the Green Paper on how the UK Government should:
- acquire the Defence and Security equipment it needs;
- support that equipment and its users;
- and invest in or acquire the necessary technologies to secure these objectives, both now and in the future.
I am aware that many of you are familiar with it by now.
I encourage you all to contribute to the formal 12 week consultation period which runs until 31 March.
We will publish our White Paper later in the year which will formalise our approach until the next SDSR.
As we started work on the Green Paper, we invited SMEs and their representative bodies to tell us the good, the bad, and the all to often ugly about the MoD’s relationship with small businesses.
Based on the responses we received, we are getting things right in many areas already.
And I was happy - but not surprised - to see a great deal of positive support and appreciation for the work of the CDE, not least the CDE portal which allows SMEs and academia to follow progress of their proposals online, and makes the whole process extremely efficient.
But there is clearly a lot of room for improvement.
I think there are five clear priorities:
First, as we initiate new projects, we must engage (and engage early) with industry to allow space for innovation and possible new approaches.
In March, the Government’s single “Contracts Finder” portal will go live, offering a free-to-access “one stop shop” for public sector opportunities over £10,000.
But don’t give up on the MoD Defence Contracts Bulletin as we’ll still be using that, including for larger requirements over £100,000, until next autumn.
And we’ll continue to use it to advertise ‘Industry Days’ and briefing events on current and up-coming programmes - I’ll come back to these in a moment.
But the Contracts Finder portal is the future for advertising contract opportunities.
The Second area of improvement, we will explore whether we can take steps to help SMEs access larger contracts normally placed with major prime contractors.
This will be important where we look to ‘bundle’ our requirements to improve efficiency.
We also want our primes to make greater use of the innovation and talent that’s on offer.
I don’t want to distort the market or undermine our primes.
And there is no need to if we can all keep a genuinely open mind to what SMEs may be able bring by way of innovation, value for money, and competitiveness.
Why would we not want to tap into that resource?
Third, I don’t think anyone contests that Government needs to smarten up its procurement processes.
Adopting a standard pre-Qualification Questionnaire and standard templates for lower-value requirements are important steps in the right direction.
We might also look to involve SMEs more in the development of certification standards.
Fourth, a message we received loud and clear is the importance of rapid payment - not just the billing itself (which we are actually very good at), but more importantly the “paper-chase” which precedes that stage, which, I am beginning to realise, is reminiscent of Dickens’ circumlocution office.
We were recently asked how many invoices the MoD had processed in the past 12 months.
The answer?
4,697,676…!
Which is quite a lot by anyone’s standards.
We need primes to pay their suppliers promptly too.
The Prompt Payment Code should represent a minimum standard, not an aspiration, and should cascade all the way down the supply chain.
If a company’s suppliers are stable, then the company they are supplying is stable, which means the economy is stable.
Fifth, we have to make sure that our requirements are seen by those with an interest in supplying or contributing to possible scenarios and solutions.
We hold “industry days” where all interested companies can hear about new requirements before we initiate formal procurement, and we advertise these events in the Defence Contracts Bulletin.
And our Defence Suppliers’ Service - who have a stand here today - is dedicated to helping prospective new suppliers through a help desk and an active “outreach” service.
Many are directed to the CDE, showing the importance of the Centre as a gateway for innovation.
Which brings me back to the CDE and the point I made at the start - that today’s event is all about success.
I’m delighted to announce that, as an extension of a contract secured in August last year, Cosworth Group will investigate the use of motorsport accident data recorders to improve the safety of British Armed Forces’ vehicles in combat, which is a really interesting example of one industry coming into to another one.
They will also identify new technologies that could monitor the effect that IED blasts have on our vehicles.
Additionally, we’re in the process of awarding nine contacts worth more than £500K in total as part of the recent CDE fast track to the frontline call.
And do take the time to visit our exhibitors and discuss the new technology being explored for use on the frontline.
The Secretary of State has made the point that successful countries are not those who look inward or backward, but those who look outward and forward to resolve threats and seize opportunities.
SMEs must be in the vanguard of that effort.
It will not be plain sailing - as I have often said, we would like to provide certainty in Defence in an unstable world, but we can’t.
But as I regularly say to industry, with your help and perseverance, we can create an environment with a high level of customer focus, agility, and increased competition.
These are just the qualities we need to respond to fast-moving military threats, to drive better value for money, and increase business opportunities.
Just the qualities I have seen demonstrated in this exhibition.