Introduction

There is no question the last few years have been challenging for our SME members. Whether it is accessing finance, navigating procurement processes, trying to identify opportunities, or dealing with regulatory and compliance complexities, the underlying challenge remains the same: SMEs need greater certainty, more clarity, and lack the cash flow, continuously reducing both their number and strength.

Defence procurement must become faster, more transparent, more predictable and easier to navigate. Against that backdrop, the MoD’s SME Action Plan is a welcome step in the right direction. It reinforces ambitions set out in the Strategic Defence Review (SDR) and Defence Industrial Strategy (DIS), and recognises the critical role that SMEs play in delivering innovation, resilience, skills and growth across the UK’s defence sector.

The current challenge, however, is not identifying the problem. We have collectively been discussing it with Government, the Ministry of Defence and our SME membership for years. The real challenge remains implementation and lack of tangible progress. While this SME Action Plan contains several positive commitments, there remains limited detail on how they will be delivered, how they will be measured, how they will be reported against, and what resources will be made available to deliver it.

Overview of SME Action Plan

The MoD has consistently recognises the important role SMEs play across the UK’s defence sector. However, the MoD’s target of directing 25% of procurement spend to SMEs has remained elusive, with spending levels falling shorter year on year despite repeated commitments. Concurrently many SMEs continue to report significant barriers to engage with defence, while business failures across sector remain stubbornly high.

The SME Action Plan, if delivered effectively in partnership with industry, could make a meaningful contribution towards wider objectives of the SDR and DIS.

Policies & Entry Points

Businesses frequently tell us they struggle with limited visibility of opportunities, lengthy and often delayed procurement processes, increase in MoD single source of opportunities away from SMEs, fragmented entry routes and inconsistent feedback following unsuccessful tenders.

Whilst the commitment to simplify and consolidate entry points into the sector is welcome, the reality is that resource limited SMEs operate across a landscape that includes JOSCAR, Defence Sourcing Portal, Find a Tender, the Central Digital Platform, and an incredible range of MoD and Governmental framework-specific systems and the associate compliance requirements. Adding new routes could prove very beneficial but contradicts the intent to reduce clutter and burden.

Spend & investment

The proposal to introduce portfolio-level SME spending targets, alongside greater leadership accountability, is a significant commitment. If implemented properly, it has the potential to positively influence procurement behaviours and outcomes across Defence.

Whilst the SME Action Plan addresses investment, finance, growth and venture capital, it does not address barriers such as the continued ‘valley of death’ conundrum facing SMEs and new entrants into defence. SMEs secure seed funding, innovation and concept opportunities, but there is little cohered exploitation pathways to pull through into core programme level participation, leaving SMEs with limited cash flow after initial ‘success’ and costing defence innovative SMEs and capabilities, as well as valuable jobs and skills.

Direct Suppliers & Prime Contractors

The Action Plan recognises that most SMEs interact with defence through the supply chains of larger UK strategic suppliers. As such, positive relationships and growth of opportunity between primes and SMEs will be critical to achieving the MoD Plan’s objectives.

Initial discussions around the potential introduction of an industry-wide ADS SME Charter have also been positively received by Minister for Defence Readiness and Industry, and the UK National Armaments Director. Such an initiative could help promote greater consistency, collaboration, responsibility and best practice across the sector.

Conclusion and recommendations

Overall, ADS welcomes the publication of SME Action Plan and recognition that SMEs are central to the future success of UK defence. The direction of travel is encouraging, but experience tells us that success will ultimately be judged not by the ambitions set out in a document or public addresses, but by the outcomes delivered in practice.

To help ensure that this plan is successful, we are calling for 6 crucial recommendations to be made:

  • Publish a detailed implementation roadmap with clear ownership and accountability for delivery
  • Introduce biannual public reporting against measurable SME performance indicators
  • Improve demand certainty through coherent multi-year acquisition pipelines
  • Accelerate procurement reform by improving procurement tempo, transparency, payment performance and commercial capacity
  • Establish a permanent Government-Industry SME Advisory Group to help oversee delivery and maintain momentum, and inform DIJC
  • Support and sponsor an ADS SME Charter initiative, to ensure consistent application of mutually agreed standards, cultures and approach

Our full response and list of recommendations can be found in our ADS members area and I would encourage you all to read it.