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The true cost of time

General Sir Michael Jackson and David Walters
Defence Management Journal
May 2010

It is widely acknowledged that the Strategic Defence Review (SDR) will have to take some tough decisions to rebalance the equipment programme to match the level of ambition with resource provision. However, the SDR must not be viewed as a one-off rebalancing exercise.  Bernard Gray’s independent review of acquisition[1] was critical of the practice of slowing down projects to defer costs, arguing that any short-term savings were outweighed by long-term cost growth. Intentional delays to certain projects reduce funds for others and, if left unchecked, the problem grows exponentially. The report estimated that currently between £1Bn and £2.2Bn is lost per year in frictional costs as a result of the overheated equipment programme, suggesting that there is a cost of time element within the current practices which is not well understood.

Following the SDR, changes will be required to ensure defence acquisition does not revert back to ways of working which, through indecision and delay, creates ever increasing levels of friction and cost growth. The UK’s recent UOR experience provides us with some valuable insights into how these changes might be achieved, particularly the relationship between time and operational risk, stability of requirement and quality of outcome.

The UOR process
The UOR process has been a success story, proving itself capable of delivering with the speed and agility needed to respond to rapidly changing operational environments, most recently in Afghanistan and Iraq. The UK Ministry of Defence (MOD) has approved over £3.5Bn of UORs for Afghanistan since operations began and over £2Bn for Iraq [2], including protected mobility vehicles and equipment such as hand-held detectors to counter the improvised explosive device (IED) threat.  The Defence Committee noted in its 2009 report[3] that, ‘The Urgent Operational Requirement (UOR) system remains highly effective in enabling vital equipment to be provided quickly to the two theatres to meet rapidly changing threats’.
Arguably one of the most important lessons from the UOR experience is recognition of the opportunity cost of time, which is embedded at the very core of the UOR approach. It is this implicit recognition that fundamentally drives the UOR behaviours.  Time is the key factor, with decisions taken on the basis of what can be available for operations now rather than what might be achievable later.

Reducing operational risk
Underpinning the UOR process is a willingness to accept more procurement risk in order to minimise operational risk – delivering with speed and agility to fill identified capability gaps. The UOR process acknowledges where the risk is ultimately held; it is not with the MOD or industry teams resulting from well or badly written contracts, but with soldiers, sailors and airmen on operations who either have the right equipment or are having to make do without. 

UORs have in the past tended to concentrate on the equipment element which has resulted the fielding of sub-optimal capabilities.However, more recently, UORs have become increasingly sophisticated in their approach to capability integration, suggesting that it is possible to adequately address all of the Defence Lines of Development (DLoDs) even in rapid procurement environments.

But is this the whole story?  If the MOD is accepting procurement risk to meet operational timescales, a greater number of UOR failures when compared to more traditional procurements could be expected. Yet this does not appear, at least on the surface, to be the case. Perhaps the UOR process, through an understanding of the opportunity cost of time, is also unwittingly showing a path to addressing some of the other challenges facing more traditional procurement activities. ‘Time is money’ is a well-used phrase but there are other costs of time which need to be better understood.                           

A stable requirement is key
The mantra for UOR procurements is just ‘good enough and available now’. With short timescales between project inception and delivery, the requirement set is well-defined and tangible, both in terms of the capability required and the environment within which it will be operating. It is this stable requirement that allows the decision making to remain coherent and consistent and, where appropriate, capability can be traded to maintain delivery timescales.

However, this is often not the case in more traditional procurements. The military landscape of the 1990s was dominated by Iraq and the Balkans, and the first decade of the 21st century by Iraq and Afghanistan. The next decade will also have an Afghanistan focus but other, as yet ill-defined threats, will no doubt emerge. Maintaining a stable requirement across a number of decades can be extremely problematic.  

Perhaps a good example of this is the FRES programme, which was labelled ‘a fiasco’ by the Defence Committee in its 2009 Report[4]. The MOD’s first approach to meeting the medium-weight vehicle requirement was through collaborative programmes with other nations; firstly TRACER in 1998 with the US and later MRAV (Boxer) with Germany and the Netherlands. In 2001, the MOD commenced the FRES programme and finally, in March of this year, awarded the development contract for the Specialist Vehicle. The Tracer and MRAV programmes alone were estimated to have cost the MOD a combined total of £188M[5].  

UORs deal with the current operation rather than potential future ones, and it is therefore easier for the MOD to determine what equipment it actually needs rather than what it might need at some point in the future. Having programme timeframes which are measured in years rather than decades allows delivery teams and end users to agree and articulate what ‘good enough’ looks like and to work together with a common purpose. There is of course a real risk with this approach that the equipment procured is not suitable for future conflicts, with the Snatch vehicle providing a contemporary example of this. However, the opportunity cost of having a capability for future conflicts may well be not having it for the current one and the imperative must always be to win the current one. 

Improving the outcome
With UORs, the time taken from deciding the need, which is the generation of a Urgent Statement of User Requirement (USUR), through to the fielding of a capability is much reduced. Depending on complexity, UORs typically deliver in a six to 18 month timescale following approval. While this is in part due to a reduced level of process and scrutiny, it can be mostly attributed to the wide employment of military-off-the-shelf (MOTS) and commercial-off-the-shelf (COTS) products.  The UOR approach has challenged an implicit assumption that off-the-shelf products are not sufficiently tailored to the needs of the UK's armed forces.  

As the UOR process has matured, integration has become increasingly important. Recent and more complex UORs have taken an approach of selecting appropriate COTS/MOTS products and then investing effort to effectively integrate them to optimise installed performance. It is not about the Bowman radio, remote weapon station or electronic counter measures working to manufacturer’s specifications but each working well enough to meet the operational need.

With long delivery timescales, particularly in the rapidly advancing technology areas such as communications and intelligence, there is a real risk that what was achievable when the equipment solution was defined is yesterday’s technology at the point of delivery. The UOR approach provides evidence that reducing the time to market improves confidence in the quality of outcome. Even with large platform programmes it may be possible to delay setting detailed equipment specification as not all systems and sub-systems need to have requirements set to the same level of granularity at the same point in time.

Recognising the true cost of time
Similar to the  armed  forces on sustained periods of operations, a procurement organisation in ‘close contact’, as the UK’s has been through its more recent UOR activities, adjusts structures and refines processes to focus on what is essential; there are tactical lessons that can and must be learnt from UORs. However, at the core of UOR business is the recognition of the opportunity cost of time. This recognition drives decision-making behaviours, enabling faster and more agile acquisition. By understanding the ‘why’ rather than the ‘how’, the UK’s recent UOR experiences can help to shape the future of defence acquisition and contribute to the maintenance of a balanced and affordable plan in the post-SDR era. Going forward there must be much better recognition of the true cost of time.  

General Sir Mike Jackson
Senior advisor, PA Consulting Group and former Chief of the General Staff

David Walters
Senior defence expert, PA Consulting Group

 [1] Review of Acquisition for the Secretary of State for Defence – An independent report by Bernard Gray, October 2009.

[2] – MOD Top Level Messages, February 2010.

[3] House of Commons Defence Committee, Third Report of Session 2008-2009.

[4] Ibid.

[5] House of Commons Defence Committee, Seventh Report of Session 2006-2007.

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