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Industrial and MOD capabilities

• Overly prescriptive or ambitious capability requirements can set the scene for poor performance delivery down the track.
• Production efficiencies are hard to achieve, hampering industry's ability to drive learning economies and maximise return on investment.
• Workforce and skills constitute critical enablers for effective programme delivery and conversely, lack of the right types of skills can undermine effective delivery.

Contracting, incentives and supplier performance

• While assumptions underpinning any capability delivery plan or acquisition strategy are difficult to get right, it is important that they shared by both the MOD and industry.
• Understanding sources of risk in defence equipment programmes is a prerequisite for effective risk management and division of responsibility for risk between customer and supplier, but this understanding is often lacking.

Programme management approach

• Imbalance and divergence between Services and domains in weapon system acquisition requirements and approaches hampers the use defence equipment budgets for modernisation across the Armed Forces.
• Frequent adjustments to programme delivery undermine its overall effectiveness.
• Budgeting sufficient contingency for risk is appreciated in theory but not implemented in practice.

Cross-cutting issues

• A culture of optimism permeates defence equipment programme decisionmaking, distorting assumptions and planning outcomes.
• Lack of institutional memory means that lessons from the past are not learnt as quickly and efficiently as they could be—or not learnt at all.
• The UK defence acquisition system is prone to moral hazard whereby poor delivery results in only limited negative consequences

Equipping the Armed Forces to deliver their outputs is one of the most important, challenging and complex tasks faced by the UK Government. The National Audit Office (NAO) has been monitoring and evaluating the performance of defence acquisition programmes to identify reasons behind poor performance.

The NAO requested external, independent input from RAND Europe on these matters, to help shed light on the underlying causes of equipment procurement problems and the reasons why they persist. This discussion paper, which is based on decades of RAND research on these topics, focuses on three broad drivers of cost, schedule and other performance problems often encountered in defence programs. These include: industrial and Ministry of Defence (MOD) skills and capabilities; supplier performance, incentives and contracting; and programme management, budgeting and delivery.  In addition, the paper captures some overarching, cross-cutting factors and outlines measures and initiatives that will allow the MOD to improve programme delivery. Finally, it identifies examples of measures that could help address these inefficiencies going forward.

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