Series Introduction

On 8 September 2025 the Government published the Defence Industrial Strategy (DIS) with the objective of strengthening the UK’s industrial capability to deliver upon the Strategic Defence Review (SDR). The strategy sets out its plan across six priority outcomes:

  • Making Defence an Engine for Growth – read here
  • Backing UK Based Business – read here
  • Positioning the UK at the Leading Edge of Defence Innovation – read here
  • Developing a Resilient UK Industrial Base – read here
  • Transforming Procurement and Acquisition Systems
  • Forging New and Enduring Partnerships

Members can read ADS’ initial briefing on the DIS here, which provides an overview of the strategy.

Introduction

If the UK is serious about rebuilding its defence enterprise, procurement reform is where the real battle begins. The DIS is direct in saying: “to fix the broken system, Government must deliver root-and-branch reform of MOD procurement and industry delivery.” It finally echoes what industry has long argued; that sluggish contracting and risk-averse habits throttle innovation before it reaches the frontline.

Transforming Defence Procurement

The DIS rightly recognises that procurement reform is not purely an administrative process, it is the backbone of national competitiveness. The DIS’ other promises of new factories, innovation pipelines and resilience plans, will not matter if the UK cannot buy, adapt and field capability at the pace modern threats now demand. Crucially, the system must also deliver genuine value for money for the taxpayer; an imperative in today’s tight fiscal environment.

The MOD has acknowledged that over-specification and long sign-off chains have been stifling delivery for years. As a result, the new approach treats time, clarity and adaptability as strategic assets in their own right.

Much of this comes through the move to portfolio-driven delivery, grouping related programmes under clear strategic objectives. By empowering Portfolio Directors with faster decision-making authority, the MOD hopes to cut duplication and offer industry a steadier sense of what contacts may be on offer.

The Strategy falls short of incentivising the requirement-setters, who fail to engage with commercial expertise early enough. ADS had advocated for stronger incentives, but it now appears that the more fundamental challenge is resourcing the commercial teams who remain overstretched, regularly hit by recruitment freezes, and constrained by a slow, cumbersome hiring process. The Accredited Development Centre route adds further friction, offering salaries that barely compete with industry and no civil service pension, risking long-term damage to commercial capability.

Even so, the Defence Supply Chain Capability Programme will expand early market engagement before and during requirement-setting, while the National Armaments Directors Group maintains its commitment to involving industry sooner. ADS also encouraged Government to draw on partners such as the UK Defence Solutions Centre to map industrial and export strengths; another omission, though the direction of travel is broadly positive. Furthermore, by embedding a culture of early collaboration through structures such as the Defence Industrial Joint Council (DIJC), the MOD is at least signalling that industry insight should shape procurement from the outset, reinforcing the long-overdue link between procurement reform and national supply-chain resilience.

Implementing the 2023 Procurement Act

The commencement of the Procurement Act 2023 on 24 February 2025 marks a significant milestone in the reform of defence procurement, aligning closely with ADS’s long-standing call for full implementation backed by a clear, resourced delivery plan. The Strategy acknowledges this need, and it is encouraging to see explicit accountability assigned to the National Armaments Director (NAD), supported by the Director Generals for Commercial & Industry and Options & Commissioning. However, the level of resourcing required to deliver meaningful change remains only partially defined. This is an area where ADS believes further clarity is essential.

The Act introduces reforms that will benefit suppliers of all sizes, with a central digital platform, mandated by March 2026, allowing companies to register once, reuse their details across bids and view all opportunities in one place. Importantly, the Act includes defence-specific provisions reflecting operational realities: the ability to make Direct Awards, modify contracts for technology refresh or to avoid capability gaps, apply exemptions from certain transparency rules, use longer-duration frameworks, adopt e-invoicing, and rely on tailored research and development, threshold and national security exemptions.

Taken together, these measures provide a more adaptable, responsive and secure procurement framework. Although for the Act to work as intended The Treasury has to allow for a budget that firstly considers false starts or failures; the plans for spiral design will particularly need this as current budgeting unreasonably assumes it will be right first time. Secondly the budget cycles for longer programmes need to be longer to stop funding droughts delaying progress, the Act alone won’t solve the MOD procurement problems.

Defence Contracting Reform

ADS has long argued that Single Source contracting reform is essential to maintaining competitive profit rates and better value for money, but while the DIS strikes the right notes, the MOD’s appetite for real change remains questionable.

A consultation on baseline profit rates is under way and a Competition and Markets Authority (CMA) supported review of defence contracting is progressing. This will include the publication of the Defence Reform and Efficiency Plan alongside the review of the Single Source Contract Regulations (SSCR), the work should eventually meet wider consultations by March 2026. ADS has been working closely with the MOD and the Single Source Regulations Office (SSRO) to respond to significant consultations. ADS has also met with MOD to review a Thought Leadership paper on methods to make Single Source regulations effective, efficient and fair.

The scope of the review is broad: alternative contracting approaches, a planned reduction in the use of Cost-Plus contracts, measures to encourage new market entrants, and new competitive models designed to incentivise economic growth. All of this reflects ADS’s call for a more dynamic and commercially confident procurement environment. However, the DIS may have said the right things but industry is viewing this as simple tinkering rather than steps towards the generational shift in regime that the DIS implies.

Crucially, reform cannot stop at Single Source regulations. A barrier remains within the wider contracting ecosystem of DEFCONs, DEFSTANs and the standard terms that govern defence business. Onerous obligations on IPR, cyber security and contractor liability consistently deter SMEs and slow timelines for primes. It is not yet clear how, or even whether, the MOD intends to modernise these frameworks to create contractual relationship that reflects a genuine partnership, incentivises innovation and reduces the burden of working with the MOD.

ADS had also asked for new risk-sharing models between government and industry models to overcome the entrenched risk aversion that slows delivery and discourages innovation. While the DIS acknowledges the need to shift these old behaviours and move away from a “fail safe” culture, it offers no concrete model or mechanism for doing so. For industry, the ambition is welcome, but until these principles are translated into practice, the cultural change required to unlock genuine collaboration remains incomplete.

Conclusion

As ever, the proof is in delivery. How quickly contracts move, how confidently requirements evolve, and how effectively industry is brought into the room will determine whether this strategy becomes transformation or remains aspiration. The direction is right, though clarity alone won’t guarantee better-value procurement for the taxpayer.