UK Defence Acquisition Process for NEC: Transaction Governance within an Integrated Project Team

Abstract

Using a 3-tier framework for a study of the acquisition of an Advance Military Vehicle (AMV), we explore the shaping of the buyer-supplier relationship in the context of the UK defence acquisition process. This relationship encompasses the Ministry of Defence (MoD), a monopsonist, partnering with a monopolistic defence industry. The transition from an oligopolistic to monopolistic defence industry is a result of a number of government policies that have created a consolidated defence industrial base. Defence industry relationships have historically been adversarial, making defence acquisition in the past inefficient. We identify Integrated Project Teams (IPTs) as being central to the institutional level aims of creating a collaborative industrial relation. IPTs characterise relational contracting practices at the governance level, which demands communication, collaboration and trust. However, difficulties at the process level in utilising relational contracting because of a lack of definition, communication and mutual gain within the day-to-day business of the IPT limit the benefits of this approach. This failure to create an effective partnership between the MoD and its prime contractors highlights the major challenge facing the UK defence sector in its transition towards capability acquisition, such as Network Enabled Capability (NEC). NEC demands a more collaborative, through-life approach to defence acquisition.