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By Howard Wheeldon, Senior Strategist at BGC Partners

13 Aug 10. U.K. Secretary of State for Defence Liam Fox took yet another giant leap forward today challenging decision making and operational processes of the Ministry of Defence that for far too long have been taken for granted. Not only is the intended shake up of the MoD process radical but in both the method and approach of achieving procurement and operational process change we see the proposals as nothing short of revolutionary. Set within an overall review process the proposals laid out by Dr. Fox today should not in our view be seen as mere options for change. Be in no doubt that these changes will be forced through the MoD and ultimately they will lead to large numbers of jobs being lost. The point though is that they should achieve greater efficiency and the bottom line is that the process of UK defence should be all the stronger for them. Welcome to the long term view of defence procurements and operation then, welcome to a world in which the government will no longer allow the MoD to contemplate short term thinking and short term ideals. Welcome to ideals that will hopefully lead to a better thought out acquisition process and one that brings to an end the huge waste of resource that we have so often seen. Indeed, welcome to a world in which the original specification is the only one to be followed through the whole procurement process.

Launching a full review of how the MoD is run and of how the Armed Forces will be reformed to produce a more efficient provision of Defence capability plus generation and sustainment of operations Dr. Fox laid out a three pillar structure that will in our view totally reform how the Ministry of Defence operates. These proposed structural reforms take the form of two broad principles to be followed within a separate review process based upon the MoD being reorganised into three units – policy and strategy, the Armed Forces and Procurement and Estates. Secondly there will be major cultural shift that is intended to create a leaner less centralised organisation combined with one in which the devolved processes carry greater accountability and transparency. Following a principle that foreign policy leads defence policy the aim is to create a structure and process in which identified capability gaps lead to specific program identification ahead of physical procurement.

One of many aspects that the proposed three pillar structure is designed to achieve is removal of the constant over specification and later, re-specification of programs which in the recent past have led to so many cost overruns and are partly behind the ten year £37bn unfunded liability legacy left behind by the Labour government and of which £20bn is accountable to equipment that they have either planned or ordered without any of this being funded. To ensure proper oversight Dr. Fox is proposing to set up what is being called the Defence Reform Unit to be chaired by Lord (Peter) Levene. Leven is well known in the defence fraternity having previously held a number of top level government defence posts surrounding procurement. The DRU will also include the highly respected Baroness Sheila Noakes and others. Speed is of the essence of course but for all that Dr. Fox is allowing the MoD implementation team one year to complete the blueprint for final reforms.

The government also intends to challenge many of the fundamental assumptions that drive force generation such as tour lengths and intervals and to that end has asked the First Sea Lord, Sir Mark Stanhope, Chief of the Air Staff, Sir Stephen Dalton and Chief of the General Staff, Sir Peter Wall to conduct a review following completion of the SDSR process in October. They are to report in Spring 2011.

The United Kingdom National Defence Association (UKNDA) has welcomed Defence Secretary Liam Fox’s speech setting out his vision for a mo

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