The guillotine and defence procurement cost inflation?

The Chilcot inquiry has now heard about the massive cut to defence funding shortly after operations in Iraq started.  At the same time there is a lot of criticism of MoD for the cost escalation of various programmes, in particular the big expenditure around the future aircraft carrier and other similar scale initiatives.  The cut in question happened during Gordon Browns tenure as Chancellor.  Last week Tony Blair was also asked about funding to defence and the impact of reductions in defence expenditure, although I think that the question was misdirected, it was too detailed and easily deflected.

The Brown defence appears to be that Treasury funded the Urgent Operational Requirement procurements, fairly typically not answering the charge by answering a completely different question.  To me the UOR process appears to be for requirements that emerge outside of the normal procurement cycle, or are for requirements that aren’t going to be persistent and need a fully understood support infrastructure for a protracted period.  From what we’ve seen in the last couple of weeks it looks as if most of those UORs were for things that should have been adequately funded beforehand.

A general point in procurement is that indecision and delay ends up adding to the overall cost of the system being procured, whether ICT or vehicles.  So just how much did the guillotine in 2004 contribute to the cost escalations by 2010?  Suppliers invest in winning the projects, they carry costs as the client struggles to make a decision, if they’ve already made capital investments then the cost of financing that all mounts up.  These costs are going to be recovered at some point. At the same time technology moves on, so there may be cost in reworking the solutions to update them, system integration has to be reworked to account for development.

It appears that the focus is turning on Gordon Brown as an individual, but his actions were as part of a whole government system.  Yes he has some responsibility, but he acted under the leadership of Tony Blair and as part of a Cabinet that has a collective responsibility to the nation.  Notwithstanding that I’m not convinced that things would have been better under any other regime at the time.

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