Defence procurement reform
The government spends billions of pounds each year on defence equipment. This briefing explores how successive governments have approached defence acquisition.
The Ministry of Defence (MOD) spends billions each year buying new equipment and supporting existing equipment for the armed forces.
It has allocated £288.6 billion on equipment procurement and support over the ten years from 2023 to 2033.
However, successive governments have struggled to deliver key equipment capabilities within agreed costs and timescales.
There have been many reviews and reforms of procurement over the years.
In 2021 the Conservative government set out a new approach in the Defence and Security Industrial Strategy. In 2022 the government introduced new legislation that will reform the regulations that oversee defence procurement.
In 2024, the new Labour government indicated it intends to bring forward a new defence industrial strategy. The government launched a new strategic defence review, which will examine the approach taken to acquisition, in July 2024.
This paper explores the challenges of defence procurement, tracks the reforms introduced since 1997, discusses the new policy and the regulatory framework.
The challenges of defence procurementBuying equipment for the armed forces brings a unique set of challenges.
Historically there have always been certain capabilities that the MOD has sought to retain a domestic industrial base. This may be for national security reasons or to ensure critical supply chains are not dependent on allies or vulnerable to embargoes.
Major equipment programmes can take years or even decades to come to fruition. This means governments may inherit programmes begun under very different financial circumstances. Requirements may change, which can inflate costs and extend delivery times.
Historically the MOD has allocated a significant proportion of contracts to single source suppliers. Over a third of contracts (39%) in 2022-23 were awarded without competition, amounting to £13 billion.
The Defence and Public Accounts Committees, and the National Audit Office, have repeatedly criticised the MOD’s management of major programmes, identifying budget overruns and the late delivery of major programmes in reports dating back decades.
Equipment plans have been “unaffordable”Since 2012 the MOD has published an annual equipment plan outlining its planned expenditure on equipment and support over a rolling ten-year period.
In January 2021 the National Audit Office (NAO) said “for the fourth successive year, the equipment plan remains unaffordable”. In February 2022, the NAO said that the multi-year spending review settlement “gives the Department a rare opportunity to break old habits and set the plan on course to be affordable.”
In 2023 the MOD acknowledged that its equipment plan is unaffordable, which the NAO said reflected a “a marked deterioration in the financial position since the previous plan”.
A new policy approachIn 2021 the MOD adopted a new approach to defence procurement in the Defence and Security Industrial Strategy (DSIS). This replaced the former policy of “global competition by default” with a “more flexible and nuanced approach”.
The MOD will use competition “where appropriate” but will also consider other approaches. As with other central government departments, the MOD will include social value in procurement (above the threshold). The MOD will pilot a revised industrial participation policy and will “encourage and support defence suppliers, whether headquartered here or overseas, to consider carefully what can be sourced from within the UK.”
In early 2024 the MOD unveiled a new Integrated Procurement Model to embed the changes set out in the refresh of the Defence Command paper, published in mid-2023. Intended to “drive increased pace” into acquisition, the MOD committed to delivering equipment programmes in a maximum of five years and digital programmes in three years. It also set out plans to make spiral development the default, which it described as “Delivering a minimum deployable capability quickly, and then iterating it in the light of experience and advances in technology.”
A new governmentThe Labour government (July 2024 onwards) has indicated it intends to bring forward a new defence industrial strategy. The government also launched a new strategic defence review, to report in the first half of 2025. The review will consider, among other themes, the “approach to be taken to acquisition and support in order to deliver the required capabilities in a timely way, and how to secure the best possible value for money and rapidly changing technology”.
The regulatory frameworkDifferent regulations apply depending on how the contract was awarded.
Contracts that are competed will be regulated by the new public procurement framework set out in the Procurement Act 2023. This replaces the Defence and Security Public Contracts Regulations (DSPCR).
Contracts that are not competed are regulated by the Single Source Contract Regulations 2014, established by the Defence Reform Act 2014.
Not all contracts fall into these two frameworks. Several types of contracts are exempt, including government to government sales and contracts placed as part of an international agreement.
About this briefingThis briefing was first published in June 2022 to replace Library briefing An introduction to defence procurement. It has been updated to reflect developments since that time.