Advances in digital technology, including software, increase the means by which national security may be compromised. They also offer abundant opportunities for the UK and its allies to employ the same technology to meet the scale of today’s security challenges. This article offers a high-level view on the readiness of the UK’s procurement agencies to facilitate the rapid acquisition of software-defined capabilities for Defence in the digital age. It discusses the two key areas which – in the author’s opinion – warrant the highest degree of UK Government focus in delivering against this objective, namely the underlying policy needed to enable innovation, and the enterprise approach needed to deliver at pace.
Why now?
As requirements become increasingly software-defined, the ability of the armed forces to iterate and adapt at pace will determine who gains operational advantage in highly contested environments, e.g. the underwater battlespace. The challenge facing the UK and its allies today is not whether they can develop the technology to be ‘first on the moon’, but how they mobilise government institutions and leverage the tech sector to innovate faster, and keep iterating faster to maintain their leading technological edge.
The US achievement putting a man on the moon by the end of the 1960’s was achieved through an extraordinary mobilisation of talent and technology. Fast forward to today, and facing a challenge of arguably even greater significance, we must not underestimate the importance of forearming procurement agencies with equivalent purpose and agency.
The UK has a strategic advantage, if we can seize it. Recent research has shown the UK has the second-highest number of defence and security start-ups in the world, second only to the US.1 Understanding this new market capacity – both its capabilities and capacity – will be vital to achieve the quality of public-private partnerships needed to innovate and then scale the digital technologies at the heart of today’s operational advantage. The benefits of this approach will be felt quickly, from increased interoperability across allied nations to the deployment of autonomous technology in leaps and not increments.
Allied governments are thinking proactively about industrial resilience in hardware-defined capabilities, moving to secure in-country supply and stockpiles, as well as by investing in secure logistic systems. However, the deteriorating geopolitical context necessitates equivalent attention on the resilience of the digital supply chain, on which we are now so dependent for our increasingly software-defined systems.
It is the unglamourous legwork of shaping our digital industrial base that will ensure we remain fighting fit for the challenges ahead. The first steps are establishing more flexible acquisition processes, providing clarity on incentives and boundaries for contracting, and promoting digital core skills in those military personnel who are the ultimate users and therefore focus of our efforts.
The Current Procurement Landscape
Direction published under the previous UK Government signalled the need to speed up acquisition of digital and software-defined capabilities, a sentiment likely to be carried forward.
The new single source rules as part of the Procurement Act 2023 (PA23) take into account previously agreed pricing, allowing suppliers to deviate from the pricing formula for Qualifying Defence Contracts under Single Source Contracting Regulations (SSCR) 2014. This shift will be especially relevant for procurement of defence software where there is precedent for agreed licence pricing. There is also a revamped Direct Award regime under PA23 which provides for award of direct agreements based on justifications contained in Schedule 5 of the Act.
Additionally, the new ‘Competitive Flexible’ procedure, forming part of simplified rules under the PA23, is intended to provide greater flexibility to procurement agencies to design multi-stage processes that allow for continuous innovation.
Under extant plans, it will be the Integrated Procurement Model (IPM), that will translate this direction into procurement reality. The aim of the UK Ministry of Defence (MoD) is to engage with innovative companies leading on digital and software-defined capabilities far earlier in the capability development process.
On paper it sounds encouraging, but the question remains as to whether such initiatives will go far enough, and provide sufficient clarity, in laying the groundwork for scaling software-defined capabilities into operation. The reception amongst commentators has been lukewarm, with scepticism that the PA23 can do much in practical terms to actively promote innovation.2 In largely re-using the provisions of the existing regime for justifying direct award, the PA23 is reiterating the intent for speedier procurement to plug urgent capability gaps while still maintaining it as an exception to be used in limited circumstances, rather than the rule for routine procurement of software-defined capabilities.
This places the interpretive burden on procurement professionals who may be used to navigating multi-year procurement strategies to contract award for hardware, but not necessarily continuously evolving digital and software-defined capabilities. The reliance on traditional contracting arrangements designed for complex hardware procurement has deep roots.
This is not to say there is cultural resistance within Defence procurement agencies and there is no shortage of excellent procurement professionals in the UK MoD. The problem with greater flexibility on paper is that it can only be translated into practice when those responsible for its delivery have a clear idea where the boundaries lie.
The IPM, or its intended manifestation under the new UK Government, ought to clarify the intent of the PA23 direct award regime for defence and security purposes. A good example may be where suitably mature software capabilities can be deployed within a defined and short timeframe based on operational need. Such an emphasis on shorter-term contracts, delivering value through software quicker, would create a dynamic marketplace for quickfire contracting where opportunities come around often enough to dispense with drawn out ‘winner takes all’ competitions.
Similarly, the new Competitive Flexible procedure – when early R&D activity identifies a proven capability and there is appetite to procure the ‘end result’ – should provide assurance that project teams can simply continue, rather than having to start an entirely new procurement procedure and all the hurdles that entails.
Ultimately, success will be measured on whether both the Direct Award regime and Competitive Flexible procedures provide working-level procurement professionals with the practical processes to continuously iterate within clear boundaries.
Enterprise Approach to digital procurement: Looking further afield
It is true that the UK MoD has successfully implemented such an approach before. The 2022 Heavy Lift Challenge, launched by DE&S and the Royal Navy, adopted a competitive framework for testing of Uncrewed Aircraft Systems (UAS) aimed at quickening the procurement process from prototype to production. However, rather than simply hailing individual endeavours as successes of innovation, we should strive to make them ‘business as normal’ for procuring software-defined capability.
We can look to our allies for examples. In recent years the US has used its Commercial Solutions Opening (CSO) Contracting route to significantly ramp-up scaling of innovative technologies, including software-defined capabilities. This is a competitive process aimed at closing capability gaps, finding new capabilities that fulfil requirements and advancing existing technologies. Since its enactment, the US military has used this mechanism to procure $70Bn worth of technology.3
Fiscal regulations direct the US Defence Secretary to acquire innovative commercial products and services at least four times each year. This authority has been used to issue CSO calls in excess of what is mandated on behalf of procurements agencies across the Army, Air Force and Navy. It is also worth noting that innovative technologies can be scaled using CSO Contracting within a $100m cap.
There are clear lessons for UK implementation of such a ‘Competitive Flexible’ procedure. Even scaled down to account for a comparatively modest Defence budget, this mechanism gives a clear purview for procurement professionals and capability sponsors to flex within, rather than having to re-enter the approval process, incurring further cost and delay.
Similar to CSO Contracting, the UK MoD should seek the flexibility provided under the Competitive Flexible procedure by issuing a minimum number of calls linked to critical capability gaps that cannot be addressed by traditional hardware-defined capability. Such calls are expressed as outcome-based ‘exam questions’ that allow for a diverse range of industry to respond quickly and with the right levers to scale proven capability with surety of funding and without delay.
This chimes with the adoption of ‘pathfinder’ approaches under the IPM to contract for and deliver against spiral development of specifically prioritised software-defined capabilities by the end of 2025.
Another valid lesson of CSO contracting in the US is the explicit legislative cover it provides procurement agencies. Unlike the UK PA23, the CSO provides procurement agencies of the US Department of Defense (DoD) unambiguous permissions for follow-on production contracts to be placed without the need for further competitive procedures.4 The UK’s IPM aspired to rethink its relationship with industry, but this requires such levers to be in place for procurement professionals to innovate, as well as pragmatic support from senior defence leadership.
This also involves getting out into the market to proactively seek opportunities. Valuable lessons can be learned from outside Defence, such as the Oil & Gas sector, where it is common to address capability gaps by sending procurement professionals and technical leads on fact-finding missions to learn more about non-traditional technologies to identify companies with which they may wish to partner.
Adopting such a genuine ‘enterprise approach’ to partnering with software defence companies will only strengthen the UK Government’s ability to respond in times of crisis. Just as the UK has historically relied on sovereign assets such as shipyards in crisis scenarios, so too must it build the sovereign digital and software-defined infrastructure it will need to address the national security challenges to come.
As part of enabling these public-private partnerships, UK procurement agencies can also play a significant role in shaping the digital industrial base for defence technology by striking up direct relationships with strategic software companies. This also provides the feedback loop between operators and procurement officials to ensure the incremental knowledge exchange of the digital and software-defined capabilities that will be vital to honing requirements.
Conclusion
Procurement agencies should be given clear operating parameters at an enterprise level to give them a fighting chance of rising to the challenge being asked of them. They also require bandwidth to form direct partnerships with those software companies that cut the middleman out of the route to becoming an intelligent customer quicker.
Addressing both key areas as part of a sustained effort to enact meaningful procurement reform for rapid scaling of software-defined capabilities is long overdue. This requires no less a national endeavour, attracting the best talent and demanding fundamental organisational reform, than those who harnessed the latest technologies of their day and took mankind to the moon. Let us embrace the same ambition in our work to protect democracies today.
References
1 ‘Production of British-made ‘super-drone’ min limbo after MoD spending squeeze’, Cahal Milmo, inews, September 22, 2024.
2 ‘Reimagining Procurement for the AI Era’, Tony Blair Institute, 15 August 2024.
3 ‘Unit X: How the Pentagon and Silicon Valley Are Transforming the Future of War’, Kirchhoff. C, Scribner, 2024.
4 Defense Authorization Act 2016, s.815.
