(2006) Decline and Fall of Defence Research

8/14/2019 (2006) Decline and Fall of Defence Research

1/6


2/6

by Bill Kincaid

Bill Kincaid is the author of the Dinosaur

series of books on UK defence equipment

procurement: Dinosaur in Whitehall,

Dancing with the Dinosaur andDinosaur

in Permafrost. He wonders why we are so

determined to eat our seed corn, thereby

undermining our ability in the future to

design and develop defence equipment.

he UK MoD, in common with

other Western countries with the

exception of the US, spends a pitiful

amount on defence research and

technology (R&T).1 The following are

illustrative:

The annual US Government spend on

directed energy weapons over the last 30

years is of the same order of magnitude as

the UKs annual spend on generation of new

technology across the whole of defence.

The annual MoD spend on the generation

of new defence technology is not much

more than 1/2 % of the defence budget.

The UKs recently-published Defence

Industrial Strategy illustrates its words on

R&T with figures only of research and

development (R&D) which are, of course,

of a different order of magnitude. Whos

fooling whom?

Funding has decreased sharply since the fall

of Communism. Figures are difficult to

compare but, in terms of the percentage of

the total defence budget, it has more than

halved. Compare that with the US, where the

research share of the total defence budget has

risen. Compare it, too, with some of the

major European countries (and here we

unfortunately have to compare R&D

spending): in a period when UK R&D

spending dropped by 25%, France increased

hers by 24% and Germany by 35%.

In 1995, the Labour opposition criticisedConservative R&D spending in the

following terms:

Decline in government sponsored R&D has

not been compensated for by an increase in civil

research, which has indeed decreased at an even

faster rate Fears that the erosion of Britains

defence capability will become irreversible, and

that the UK industry will become no more than

an offset graveyard with only a minor

manufacturing role in off the shelf orders

placed abroad, have been voiced repeatedly.2

So what did they do when they came to

power in 1997? They reduced spending on

research further, excluded research from the

Smart Procurement Initiative, privatised the

bulk of the research establishments and

tried to camouflage the damage with trendy

ideas of Towers and Carpets and

Technology Centres.

The result is an even steeper decline in

the amount of money actually spent on the

generation of new technology. Industry sees

the importance of research funding:

Its no great secret that getting access to the

US research and development spending budget is

the only way to survive in the global defence

industry.3

I expect that would be endorsed by

BAE Systems.

Perhaps the diminished research spend

would not matter so much if what we did

spend produced major benefit in the defence

equipment programme. But it doesnt. The so-

called valley of death the drop or complete

cessation in expenditure once the research is

completed and before the relevant equipment

programme starts means that research is

rarely industrialised before the project gets up

a head of steam. Just as importantly,

downstream competition usually leads to the

selection of proposals which have no UKgovernment-funded technology, the

investment in which is therefore wasted. No

wonder MoD bean-counters see little reason to

spend more on research. Its just not delivering.

But it has got to deliver. Leaving aside the

argument that we should abandon support for

our defence companies and buy American

(and there is quite a strong case here),

generation of cutting-edge technology is

essential if industry is to compete on the

world export stage and thereby produce

equipment for the UK Armed Forces at

reasonable prices. Without it, we shall

continue to slide into industrial irrelevance.

The recent Defence Industrial Strategy seems

to recognise this, albeit rather belatedly, but

will its implementation make much difference?

But there is another reason of much

greater importance as to why research and its

pulling through into products has got to

prosper. We have a procurement policy that

makes us highly dependent on procuring

equipment or upgrades for imminent

operations through urgent operational

requirements (UORs) we cannot afford

those requirements without a major hike in

the defence budget. But successful

procurement of UORs is dependent on three

things: an expert MoD, a strong research base

Decline and Fall of Defence Research

T

This issues contributors - Bill Kincaid, David Lynam, Francis Tusa, JimIronside, Dr Jeffrey Bradford.

1 6 RU SI DE FE N CE SY STE MS S PR IN G 20 0 6

content ion@rusi .org

This section is aimed at stimulating debate on a subject of wide interest. In thisissue, we look at the low, and declining, priority of defence research andtechnology in European countries, leading to an ever-growing gap with UStechnology and, in the future, with certain Asian countries. Is it as bad as itseems, and what needs to be done?

LETS EAT OUR SEED

CORN!


3/6

and a thriving defence industry. We have

steadily been eroding the first and we are

now trying to stem the collapse of the third.

As for the research base, we are starving

it of money, selling off research personnel

and facilities, getting rid of expertise and

placing all sorts of impediments in the way

of bringing research to satisfactory outcomes.

We are just not taking it seriously.

Oh, they will say. We just dont have

the money. But of course they do. The

amount spent on technology generation is

so tiny (much less than 1% of the defence

budget) that it could be doubled or trebled

without much difficulty. If we then ignored

downstream competition and entered into

serious research partnering arrangementswith the most innovative companies, we

could double or treble it again. And if we

are really serious about the final value-for-

money outcome, we could easily find ways

of mandating the best technology for

winning projects.

All this would revitalise our industrial

base without wasteful handouts to protect

jobs. It would show we are serious about

innovation. We would have something to

sell in the marketplace. Above all, we

would cease to eat our fast-diminishingseed corn. And all within the current

defence budget. Attractive?

I fear MoD thinks not. For the want

of a nail ?

As a nation, we have a proud record of

invention and innovation, but a dismal one

of production and marketing. So, why on

earth are we starving our innovators and

bolstering our heavy-metal producers who

cannot compete with those elsewhere in

the world?

1 Not to be confused with research and development

(R&D), the vast bulk of which is spent on development

of equipment programmes, rather than on generating

new technology. Even the majority of R&T funding is

spent on too many paper studies, technical advice to

the equipment capability staffs and the Defence

Procurement Agency (DPA), and maintaining customer

awareness (I hesitate to use the term intelligent

customer status), rather than on technology generation.

2 Labours Approach to the Defence Industry,

Strategy for a Secure Future, October 1995.

3 Sandy Morris,Analyst at ABN Ambro, The Times,

31 January 2001.

David Lynam

David Lynam is Director Corporate Business

Development for Information Superiority and

Horizontal Integration at Lockheed Martin UK

Ltd. His last appointment in the UK MoD before

he retired from the Army was Director of

Equipment Capability (Command,Control

and Information Infrastructure) in the rank

of brigadier.

welve Research Directors, seven

Output Owners, six Towers ofExcellence, four Defence

Technology Centres, and a

NITEWorks within a Defence

Experimentation Centre is not so much a

Christmas carol to be sung with great glee,

but more a recipe for stodgy Christmas

Pudding with very few shiny sixpenny pieces!

The panoply of terminology, organisations

and initiatives requires a PhD to understand

our current defence research programme, and

yet despite all of the good intentions it is

widely recognised that the UK has slippeddown the league in Research and

Development (R&D).

The most obvious culprit is the inadequate

spending on research in this country. The

MoDs 400M+ defence research budget

certainly pales into insignificance against many

major individual industry R&D budgets, let

alone that of the US which swamps it by over

eight times. There are those who rightly claim

that the UK can never match the US and that

Europeans must do more collectively with

their individually meagre funding. However,

international defence research is even more

fraught with bureaucracy, national agendas

and hence lack of progress than even

international acquisition.

There are others who opine that defence

only needs to undertake minimal research to

keep intelligent customer status, as industry

will largely provide the product as off-the-shelf

entities for the much wider export market. It is

this latter group that has largely held sway

since the end of the Cold War and this has led

to the research budget being repeatedly

eroded. Whilst intelligent customer status maybe the way ahead for much of the commercial

technology now used in defence, it ignores the

fact that most off-the-shelf military solutions

are only available because overseas

governments have funded the research within

their industries, often on a sole source basis.

Then there are those who blame the spin-

off of QinetiQ (formerly the bulk of the

government-owned defence research and

development establishments) and the way that

research is now competed as a further

bureaucratic nightmare, wasting the little

precious resource we have. There is no doubt

that, as I said in my opening statement, we do

have far too many organisations and initiatives

for too little money.

So, whilst more money is the standard

clarion call, it is most unlikely to be

forthcoming in the current fiscal climate of

no new money. We must, therefore, look at

how to spend the money allocated moreeffectively and the shift required in the balance

of investment.

There is an acceptance that some research

funding must be allocated to maintaining

intelligent customer skills, and the argument

further runs that this can only be achieved by

undertaking actual research. But research to do

what? Because if it is only to build a body of

knowledge, then this is a high premium indeed.

In a similar vein, research must be conducted

into novel, potentially disruptive technologies

such as the life sciences and nanotechnology,although I see little of this in either the Dual

Technology Centres or the Towers of

Excellence. Surely, though, the main value of

research is to provide innovative, cutting-edge

equipment for our front-line forces.

However, technological invention is,

as Sir Digby Jones (Director General of the

Confederation of British Industries) says,

only half the story, because what really

counts is developing that technology into a

viable product and bringing that product to

market. Kevin Smith from GKN also states:

The Defence Procurement Agency must

realise that innovative products are the ones

that sell abroad and enable us to keep ahead

of our competitors. The policy of buying

cheapest and off-the-shelf does not encourage

R&D . It is this inability of research to be

exploited that is the major problem, due in no

small part to the Defence Procurement

Agencys risk-averse, competitive approach to

acquisition. It will be interesting to see how the

recent Defence Industrial Strategy affects

research, but what is clear is that, if we are

moving away from major platform purchase

to a sustained capability, there must also be

a fundamental change in the way research

is handled in order to facilitate the insertion

of technology.

T

S PR IN G 20 0 6 R USI D EF ENCE SYSTEMS 17


NOTES

RESEARCH:WHERE

NOW?


4/6

It requires industry, therefore, rather than

the MoD, to undertake the bulk of research

and be responsible for developing it into a

piece of military equipment funded in part

through a proper allocation of the prescribed15% spend before Main Gate. But industry

must be incentivised and rewarded to do so,

rather than penalised by aggressive, repeated

and, in many cases, unnecessary competition.

Similarly, companies who are maintaining

capability must be held responsible for

undertaking or facilitating research on

insertion of new technologies, funded

through a properly resourced through-life

technology insertion plan.

by Francis Tusa

Francis Tusa is Editor ofDefence Analysis, London.

He argues that the UKs low spending on Blue

Skies research is undermining the ability of UK to

stay at the forefront of key military technologies.

he arrival of the UKs Defence

Industrial Strategy ought to be

bringing greater clarity to the role,

and size, of research anddevelopment (R&D) within the broader

defence picture. Well, that is the hope. But the

concern is that the emphasis is going to

continue to be on cutting funded R&D, with

vague hopes that a new environment can be

created in which industry picks up the slack.

The UK MoD research budget has been

under constant pressure through the 1990s. It

has fallen from 700M in 1994 to around

450M in 2005 some 30% overall. And the

trend looks set to continue. In fact, the National

Audit Office (NAO) suggests, in its March 2004

report on Defence Research and Technology,

that the funding slide will continue.

But the situation as regards what is done

with that 450M is actually worse than might

seem to be the case. According to the NAO,

more than 75% of the money devoted to

research and we must separate this from

development, which receives somewhere

around 2.2Bn annually is spent on advice-

related activities. That is, not on Blue Skies

research looking for the technology for the

future, but on activities much more related to

the procurement of equipment (51% of the

research budget is allocated to the Equipment

Capability branch). And, again, the NAO

seems to suggest that the split between

fundamental research and advice will

continue to grow in favour of the latter.

Is it wrong to be spending money on

making sure that the right equipment is

procured for the forces, and that what is being

selected is deliverable? No. But the concern is

that the emphasis on the very tangible

assessment phases and so forth is taking

away from the longer term. In effect, it can be

argued that too much research funding is

being spent on todays affairs, when it should

actually be being spent on tomorrows.

And this could well mean that theoptions open for future governments and

commanders will be much more limited.

If the UK does not keep quite a firm grip

on Blue Skies research something that the

country has been not unsuccessful about in

the past then it will arguably lose the ability

to even adapt commercial technologies to

military usage, something that is seen as the

Holy Grail for the future.

As a point of comparison, what might

be termed fundamental research in the

UK accounts for some 0.3% of the defence

budget. But the nearest equivalent figure in

the USA is 2.5%, a significant difference.

When people bemoan the growing gap

between the USA and others, they should try

to think about this figure, rather than the

broader and more amorphous R&D figures.

This figure shows that even with the growing

trend towards dual-use technologies, there is a

need to increase the amount of spending on

pushing the defence technology envelope.

But, so the argument goes, it is going to

be possible to get industry to take up the slack

in far-reaching, fundamental research. But

unfortunately, the argument starts and stops at

this level, with precious little thought about

how this is to be achieved.

The real problem with trying to

outsource Blue Skies research is that if

government shows that it has no interest in

keeping research under way in a particular

area, where is the interest for industry to pick

up the slack? If the MoD doesnt see the need

to do it, why should industry do it? There is

obviously no return. The problem is that Blue

Skies research is, by its nature, inherently risky,

so there have to be exceedingly pressing

reasons why industry would want to do it.

The talk within the MoD seems to be more

favourable to industry making profits: but will

the walk match the talk, and will the returns

make it worth industrys while to work on long-

term research programmes? And if the profit

levels needed to get industry involvement are

rather high, then wouldnt it be cheaper to havekept the capability in-house in the first place?

This argument could well go into the

thorny topic of the partial and possibly total

privatisation of QinetiQ, and then why the

UK seems to see a smaller and smaller role for

in-house research capabilities. And that debate

will still rage in many quarters. But perhaps

what needs to be considered is how the UK

can raise its Blue Skies research funding to a

level that will keep the UK defence system in

some official quarters now being called Team

Defence at the forefront of key militarytechnologies, both today and tomorrow.

by Jim Ironside

Jim Ironside is Chief Scientist of General

Dynamics, UK. Here he describes the advantages

of a UK process that links MoD, industry and

academia in identifying new ideas and concepts

and carrying these through into industrial

products, to the advantage of all.

ew knowledge is an expensive

commodity. The high return

potential, with high failure risk,

conflicts with risk-averse industrial

cultures. Industries must overcome distaste

for risk to pursue new knowledge, but

paradoxically with the lowest possible risk

to outcome and cost.

Few industry research and development

(R&D) departments carry out true research,

in the Cambridge dictionary sense: detailed

study of a subject, especially in order to

N

1 8 R USI D EF ENCE SYSTEMS S PR IN G 20 0 6

T


PAYING THE R&D PRICE?

AMPLIFYING INDUSTRIALRESEARCH ANDDEVELOPMENT


5/6

discover (new) information or reach a (new)

understanding. Relatively near-term concerns

drive industry culture meeting tight

schedules, controlling costs, preventing stock

prices from being adversely affected by

unfounded rumours of doom generated by

misunderstanding and industrial rivalry.

Research requires going where no one has

gone before, and thus is neither predictable in,

nor comfortable with, a process- and results-

driven industrial mentality. Mega-

corporations or specialist R&D companies

can view it as an acceptable risk if 20 out of

1000 ideas are successful. A moderate-size

company may have trouble betting the

future on none out of ten. Start-up

companies usually productise bright ideasthat their founders have identified in prior

lives, but still with high failure rates.

Development, when something grows

or changes and becomes more advanced,

turns laboratory proof-of-concept into

saleable items. Development has both a

product at the end and a programme to get

there; appropriate processes help, although

whether customer orinternally funded, the

process is much the same.

A Model Transition ProcessIf industry is not great at research, whence

the killer ideas? Fortunately, there are large

institutions anxious to generate new ideas and

concepts the universities. Traditionally not

driven by near-term corporate imperatives

(although this advantage could well be

destroyed by moves to Full Economic Costing),

the daily passion of their innovative staff is to

understand and push intellectual frontiers.

However, university ideas cannot generate

competitive advantage until extracted from

academia through processes ensuring that, in

real as well as in university life, they work

better than competitive alternatives.

Furthermore, it is usually a synthesis of new

ideas rather than a single idea that provides

that killer app. We must bridge the yawning

gap between brilliant idea and product sale.

Industrial and Government stakeholders

can support academia developing new ideas

breaking bonds with the past. The Defence

Technology Centre Programme for which

General Dynamics UK Limited leads the

Data and Information Fusion theme (DIF

DTC) spearheads a novel process for this

transition. The DIF DTC comprises three

industrial (GD UK, Qinetiq, and BT) and

eight university (Bristol, Cardiff, Cranfield,

de Montfort, Surrey, Southampton, Imperial

College London and Cambridge) partners.

Under a 50%50% MoD to Industry/

University cost-sharing formula, and with

most research done in lower-overhead

University environments, the risk/payoff

balance tips towards research. Both MoD and

industry benefit from multiplication of

shared funding and shared intellectual

property rights (IPR).

Forty individual true research projects in

eclectic areas have been initiated, mostly in

partner universities, but some at industrial

partners. After almost three years, the

industrial partners are anxious to take

individually promising approaches further

towards exploitation. Currently, over 50

potential military and civil exploitationopportunities are being pursued.

For the next three years of the DIF DTC

contract, emphasis includes ideas to practise

pull-through. Clusters will link several

research projects into a coherent potential

application. Clusters will be industrially led,

to ensure a view to eventual delivery, and

because industry has resources and

experience to lead such a team to a common

goal. About half of the second-phase DTC

resources will go to new ideas; the other half

will further the evolution of current ideaswithin a cluster framework. We expect

research efforts, while still pushing the

boundaries of knowledge, to be tested against

each other within this unifying cluster, and will

strive to answer real questions posing most

downstream risk. Clusters will not result in

immediate product, but they will result in

complementary and synergistic ideas that can

be carried forward, under normal industrial

development processes, to deliverable systems

for end-users.

Conclusion

Industry is weak at basic research, but good

at pulling research results through to products

or systems. Understanding differences and

linking players can engage the national intellect

in creating solutions today to the problems of

tomorrow.

The maturing DTC concept is linking

the best characteristics of university research

environments with the best of industrial

development environments, forming a

synergistic relationship, developing genuinely

new ideas and concepts and taking them

forward to industrial exploitation. This model

can enable industries, even of modest size, to

influence and exploit research in a positive and

profitable way.

Jeffrey Bradford

Jeffrey Bradford is Group Business Development

Manager at Babcock International Group plc. He

looks at the civil sector for models that could

influence the UK MoDs approach to research and

development.

If we knew what it was we were doing, it would

not be called research, would it? Einstein

he UK defence acquisitioncommunity has been engaged in

understanding how other industries

approach the process of integrating

research & development (R&D) and

harnessing innovation to best effect. For

example, a recent report by the UKs National

Audit Office looked beyond the defence sector

to identify lessons in best practice. In R&D

there is a wide variety of experience of how

different industrial sectors approach the

challenge. Further, the large numbers cited

serve to obscure the debate such as, forexample, the declining $2Bn spend in R&D by

the Oil majors or the $62.8Bn spend on R&D

by the US DOD.

A look at trends of R&D spending by the

UK MoD offers a starting point for looking at

the approach and resources devoted by other

industrial sectors. As a percentage of total

spending, R&D investment equates to an

average of 9.9% over the decade 1993/94

2002/03, or some 2.5Bn per annum (adjusted).

Whilst a positive effort, the percentage does

not account for the drag of central costs such

as pensions (cf. a private sector organization

would bear the full costs of these).

In the decade considered, R&D funding

was split 25:75 between research and

development. This identifies that pure research

funding equated to some 670M across all lines

of development, across all environments

land, sea and air per annum. Potentially, this

division could be beneficial as defence

acquisition moves away from a platform-

centric acquisition model towards a platform-

enhancement-centric model as a result of the

Defence Industrial Strategy. Scarce resources

can be tailored to identifying those things that

enhance existing capability for upgrade and

adaptation a process that would fit well with

the UKs historical experience.

S PR IN G 20 0 6 RU SI DE FE N CE SY STE MS 19


T

DEFENCE R&D:

POINTERS FROM THE

CIVIL SECTOR


6/6

The Department for Trade & Industry

(DTI) recently released its latest R&D

scoreboard reviewing investment by

several hundred companies. Utilising this I

will consider three sectors automotive,

pharmaceuticals and mobile

telecommunications.

Automotive Shared Challenge:Project ManagementThe DTI identified automobile industry

R&D investment as 1.1Bn in 2004, below

half the Departments 2.6Bn.

However, in comparison to the leading-

edge research underpinning defence

requirements, much of the basic

technology underpinning the motor car isover a century old the Model-T

produced by Ford was made in 1910.

Development of the automobile is

evolutionary in nature although the vast

sums involved in designing, development

and marketing a relatively simple product

require strong project management skills

failure to meet promised launch dates will

harm or even destroy a companys

prospects as certainly as failure to deploy a

combat system in time for an urgent

operational need will put forces at risk.The result of falling R&D investment

by the automotive majors has pushed R&D

efforts further down the supply chain. One

report suggests that suppliers share of

R&D activity is likely to increase from 40%

to 60% by 2010 against a backdrop of a

rapid increase in importance of electronics

in automobiles (from 10% in the 1970s to

40% by 2010) and low R&D spend by the

majors (4% of sales since 1998).

Pharmaceuticals Shared challenge:Harnessing R&DThe pharmaceutical sectors challenge

differs from the automotive sectors. The

DTI identified that GlaxoSmithKline alone

invested 2.7Bn in R&D more than the

entire MoD investment.

The pharmaceuticals sector is

comprised of several massive corporations

(Glaxo-SmithKline has a market

capitalisation of 87Bn) that have global

manufacturing and distribution networks.

Whilst they perform some R&D, the

pharmaceutical giants could be seen as

being conservative licensing or acquiring

smaller companies that are performing

research into breakthrough therapies and

having the mass to apply industrial scale

research processes to the making of a

product from the innovative idea.

Mobile Telecommunications SharedChallenge: Product Life Cycle

As in the defence environment, the mobile

telecommunications field is grappling with

very fast rates of technological change,

driven by electronics and software

development cycles of less than two

years mirroring Moores law.

The response within the mobile

telecoms field has been to invest

simultaneously in multiple R&D pathways,

while also bringing many different products

to market some of which will be

commercially less successful than others

relying on a rapid refresh rate and

mirroring, in certain ways, the concept

of spiral development.

However, the mobile operators

spend relatively little on R&D, favouring

marketing. The DTI R&D scoreboard

cites Vodafone as investing 171M in R&D

less than 5% of that by the MoD, despite

possessing a market capitalisation

comparable to GlaxoSmithKline.

The mobile telephone manufacturers are

making a capability trade-off with their

customers to incrementally provide

progressive improvements in technology

more quick ly, and convincing consumers

to upgrade their telephones faster to take

advantage of advanced functionality such as

picture messaging, Bluetooth and cameras.

Models for Defence R&DIn terms of defence R&D, the heavier

weighting on development favours, at first

glance, the automotive model. However,

the requirements for refreshing platforms

in order to maintain the customers interest

in their utility sit at odds with the lengthy

in-service dates planned for legacy and

future platforms.

Considering the high science issues, it

could be suggested that the impending

privatisation of part of the defence research

establishment could lead to a division of

labour as witnessed in the pharmaceuticals

sector. However, in pursuing this model the

MoD would have to develop robust

processes for handling intellectual property

rights (IPR) and understanding the market

value for ideas that conform to the

requirements of public sectoraccountability.

It is clear that defence research, as with

research in other industries, has reacted to

short-term pressures coupled with changing

commercial models to push responsibility for

the conduct and resourcing of defence

research elsewhere into the value chain. The

challenge for defence, as in other industries, is

to ensure access to the devolved research

when it counts it could be suggested that

commerce can rely on supply to get access,

but the more complex field of internationalsecurity politics might require more careful

consideration.

National Audit Office, HC30, Driving the Successful

Delivery of Major Defence Projects: Effective Project

Control is a Key Factor in Successful Projects, The

Stationery Office, London, 2005.

Cut in R&D spending poses threat to world oil

supplies, The Times, London, 23 September 2005.

R&D in the FY2004 Department of Defense Budget,

Kei Koizumi, AAAS Report XXVIII: Research and Development.

Defence Statistics (editions 1998 through 2005),

Table 1.7, MoD Research & Development Expenditure

Outturn, The Stationery Office, London.

The 2004 R&D Scoreboard: The Top 700 UK and

700 International Companies by R&D Investment,

Department for Trade & Industry, London. Note: For

consistency the original numbers have been modified

using the HM Treasury Historical CPI prices data set.

PR Newswire,Roland Berger study says cost pressure

on automotive R&D will increase, www.prnewswire.com 21

July 2005.

2 0 R USI DEF ENCE SYSTEM S S PR IN G 20 0 6


SOURCES

Documents

(2006) Decline and Fall of Defence Research