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Leading the defense
Much is made of the “special relationship” that exists between the UK and the US and indeed the theme of last year’s conference co-hosted by BritishAmerican Business and the Royal United Services Institute (RUSI) was “The evolution of the British-American special relationship in the 21st century and its implications for the defense industry”. Differing views were presented during the proceedings of this conference, but most agreed that the relationship was forged in the Second World War and that it is against the backdrop of alliance in conflict that the relationship has been tested and proven.
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The transatlantic trade in defence and aerospace has mirrored this relationship and has produced some examples of collaboration that have been unique. The Polaris nuclear submarine programme is perhaps the most striking example and since then there have been many others, not so prominent but equally ground-breaking. The UK’s participation as the largest non-US contributor to the Joint Strike Fighter (JSF) program is perhaps the latest example of collaboration at both an inter-government and an industrial level. Some of the largest UK defense and aerospace corporations are truly transatlantic in their operations. There have also been some notable recent successes for UK companies in US programs, such as selection of the Agusta Westland’s Merlin helicopter for the US Presidential helicopter program.
Similarly, there has been much activity in the UK industrial scene, as US companies expand and consolidate their presence, to enable their full participation in some of the large MoD procurement programs. Many US-headquartered corporations have pursued strategies to strengthen their UK industrial presence, thus allowing participation in some key MoD projects. The requirement for this has been brought to the fore by the publication of the UK Defence Industrial Strategy (DIS) at the end of 2005 and its sister policy document, the Defence Technology Strategy (DTS), a year later.
The situation is now very clear. In order to be a player in the UK defense industrial base, it is necessary to either own or collaborate closely with UK entities, which can contribute design and manufacturing capabilities. The key phrase is “UK operational sovereignty”, that is the ability of the UK government to control the through-life capability and support of a weapons system, without constraint by US export laws. The International Traffic in Arms Regulations (ITAR) of the US have long been seen as an obstacle to full participation in UK defense programs and the call for “minimum ITAR” solutions has been taken up by both the UK MoD and British primes. Trade associations and lobby groups such as the Defence Manufacturers Association (DMA) in the UK and the US Aerospace Industries Association (AIA) have been pressing for relaxations in the ITAR regulations for the UK.
Although individual export approval cases are invariably approved, it is unlikely that a full “blanket” waiver will ever be given. It is certainly essential for any company in this market to have a thorough understanding of both US and UK defense export laws. Therefore, industry must continue to operate within the export regulations and determine how best to grow in this environment. There are many organizations and associations that are able to assist US companies seeking to grow their business in the UK defense market. The Society of British Aerospace Companies (SBAC) is able to provide a wealth of information and many companies traditionally thought of as American are now firmly part of that association.
The UK Trade & Investment (UKTI)
organization would be a good place for any offshore company
to start to get a feel for the UK industrial scene, and they can be
accessed at:
https://www.uktradeinvest.gov.uk/ukti/appmanager/ukti/splash.
The other good starting point is the Office of Defense Cooperation (ODC) in the US embassy in London at: http://london.usembassy.gov/odc/odc10.html.
To quote one of their primary objectives, the ODC acts “As the contact point for miscellaneous defense equipment, the ODC identifies the proper location for small program defense inquiries. Liaison is primarily with the UK Defense Export Services Organisation (DESO) and the US Small Business Administration.” While industry-sector-specific trade associations can be extremely useful, the discriminator for BritishAmerican Business is its transatlantic trade focus. It has strong links back into the US, as the UK Chapter of the British American Business Council (BABC). It also has a very productive and positive relationship with both the UKTI and the ODC. It is thus in an excellent position to encourage dialogue and put forward points of view to both governments.
When the US Under Secretary of Defense for Acquisition, Technology and Logistics visits the UK, his staff is able to contact BritishAmerican Business and ask for briefing meetings to be set up with member companies, where private and focused dialogue can take place.
So, what does all this mean, particularly for a smaller US company who wants to do business in the UK defense and aerospace sector? The key is first to study the DIS and DTS (available online by accessing the appropriate links at the MoD website at www.mod.uk) and understand the aspirations of the UK government, with respect to the UK industrial base and participation of offshore players. It is then necessary to have a clear understanding of which key products and services are in demand by the MoD and to focus on providing these in a “DIS compliant” manner. It is worth remembering that the driving force for importing US know-how and technology into UK defence programs is technology risk reduction. If US offerings can reduce program risk and preserve value for money, then means can usually be found to incorporate them, in a DIS-friendly manner.
The other key outcome is interoperability, which should always be considered as a crucial outcome of US sales into the UK. From a political viewpoint, interoperability is paramount in the context of the expeditionary operations in which the UK and the USA are engaged in the Middle East and Afghanistan. Indeed, the UK/US alliance in fighting the Global War on Terror is a key enabling factor in the continuation of the “special relationship” and one which facilitates the transatlantic trade.
In order to play in this market, it may mean partnering with a UK systems integrator or prime, or licensing of technology to an onshore manufacturer, or perhaps even acquiring capability. As in everything, local knowledge is a key discriminator and US companies should use all of the help available from the respective government offices and trade associations. This will assist in meeting the right people, to get a feel for the ground, before making important investment and strategic decisions.
While the defense industry must necessarily be regulated and controlled on both sides of the Atlantic, that does not mean that it is closed to new players. If there is a UK need and a US company can offer something that reduces risk, improves value for money and enables interoperability, then paths can be found to enable UK participation. This will probably mean working closely with a UK company, either in a loose alliance or a more formal JV. Wherever the relationship sits in the “partnership spectrum”, government, trade associations and BritishAmerican Business are able to use their respective strengths and expertise in transatlantic trade growth to assist US companies to contribute to the UK defense industrial base.
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