A set of slides summing up an internal report from Britain’s Ministry of Defense on defense procurement have found their way to the BBC. The slides make for damning reading, and though the Ministry denies they are authentic, they accord with Britain’s experiences over the past decade. In a nutshell, the slides conclude that the Ministry “does not really know the price of any kit and project management does not exist in the Department.” The result is pervasive over-optimism about procurement, regular and costly reprofiling of major programs, and a procurement budget that will only come into balance in 2028 – assuming nothing else is ordered in the interim.
What the slides do not do is place these serious criticisms in context. In 2008-09, Britain will spend about 46 billion pounds on defense. Of that, about 8.6 billion(pdf) will be capital spending. If the leaked slides are correct that annual waste in the procurement process may reach 2.5 billion pounds per year, this means that up to 30% of procurement spending may be wasted. But as capital spending is only 20% of the total defense budget, this implies that the wastage is no more than about 5% of defense spending.
Now, we at the Heritage Foundation never excuse government waste. The Ministry of Defense, like all government, has an obligation to carry out its business as efficiently as it can: the real scandal the slides reveal is not the amount of money the Ministry is wasting, but the fact that it is so bad at project management and so self-satisfied that it denies there is a problem. But while the Ministry’s failings cannot be defended, they can be explained.
First, the concept of efficiency is difficult to define where the defense of the nation is concerned: is money spent on defense necessarily wasted if the equipment it buys is not used in a war? On the contrary: if the equipment helped to deter aggression, it saved money, not wasted it. Second, it is regrettably true that a certain amount of inefficiency is to be expected in defense procurement: designing and building an aircraft carrier is inherently a difficult job, and it is unfair to punish the Ministry, or industry, for not getting everything right the first time.
Third, the fact is that procurement is Britain is only partly about the forces: it is at least as much about buying equipment (such as the Eurofighter) to satisfy ‘partners’ in Europe or to save jobs in marginal constituencies in Britain. When a former procurement official can say, as one did in 2004, that procurement in Britain is “as much intent on ensuring the UK’s defence industrial base, as securing very best value for money,” it is not entirely fair to criticize the Ministry for not securing the very best value for money: it is only doing what it was ordered to do by 10 Downing Street.
And there is one further relevant fact. In 1997, according to the UK’s official Office for National Statistics, defense spending accounted for 15.1%(pdf) of the government’s total expenditures. In 2007, it accounted for 11%. It has, similarly, fallen as a percentage of total GDP. The reason why the Ministry’s budget is under so much strain is not, basically, because it wastes money on procurement – though it certainly does do that. It is because the Labour Government has for the past ten years been eager to spend money on everything except the national defense, which is why the constant reprofiling of major programs is necessary.
And that, in turn, is why these stories about defense inefficiency are so damaging: by revealing the incompetence that Labour has aided and abetted, they offer Labour another excuse for spending even less.
