Defence Advisers Council Presentation

1. Defence Advisers Council Presentation “The times, they are a-changing” Tips from the experts for achieving procurement excellence

2. The Defence Advisers Council

3. DAC Services • Planning Expertise • Legal Services • Financial support and advice • Funding advice and backing • Risk Mitigation

4. Defence Advisers Council - 9 October 2012 The Future - right balance between complexity and effectiveness MOD Key Strategic Issues Procurement / Commercial model International dimension • International partners – keep informed and enable them to support our proposal Conflicts of interest • Conflict of Interest - address issues in a robust but pragmatic way Legislation • Legislation - Ensure appropriate legislation is in the 2013-14 Parliamentary Session Engagement • Stakeholders - engage all stakeholders in developing and testing our ideas

5. Rationale? Contribution made by the Aerospace & Defence sector to SW region’s GDP: • £2.3bn directly to the economy • supports 41,000 jobs • Supply Chain provides another £3.2bn • and 59,000 jobs …in the South West alone

6. The Defence Advisers Council • AIM: • Streamline the “provision” of products and services for client companies where “defence” is end-user. • Help simplify the approach to MOD procurement. • Enable contracts to be agreed more swiftly. • Ensure long term fiscal stability of the contract.

7. The Defence Advisers Council So you want to do business in the aerospace, advanced engineering, defence and/or security sectors?

8. Acquisition Operating Framework “The AOF is the authoritative source of policy and good practice for all members of the MOD and our Industry partners concerned with acquisition” www.aof.mod.uk • Strategy Considerations • Invitation To Tender • Tendering And Contract Award • Contract Administration • Alliancing • Conflicts of Interest • Due Diligence • Influencing the Supplier Network • More Effective Contracting • Partnering • Private Finance Initiatives • Public Private Partnerships

9. Quick Test So you know the language? Please translate - Conops? - Defstans? - Defcons? Is your system at TRL level 3 or 5? (Technology Readiness Level)? Will you pass the ASEMS standards? (Acquisition Safety and Environmental Management System) Where do you get advice for WOME (Weapons, Ordnance, Munitions & Explosives) development? ….. Answer: DOSG (Defence Ordnance Safety Group) You have ISO 15288, but are your Enterprise Processes in date?

10. Specialist Advice • Funding– get advice on funding for working capital, fixed assets and other sources of finance • Risk Management – we help customers assess, manage and develop strategic risks, business continuity and succession planning • Industry participation – we support and host “industry” events for our clients, with sector based experts • Collaboration– we use our national and global supply chain contacts to help support SMEs

11. Planning Tips • Have you prepared and planned strategically? • Is it veryclear why MOD should buy from you? • Would MOD have confidence in your organisation? • Are you clear which ‘routes to market’ are best? • Have you identified your funding options? • Do you communicate clearly through ‘Strategy Reviews’?

12. Banking Tips • Funding –get expert advice on funding for working capital, fixed assets and other sources of finance • Financial Information – sector based experts regularly support industry events/briefings and liaise with customers • Collaboration – throughits national and global supply chain contacts the bank helps WEAF and DAC to support Aerospace and Defence SMEs in the South West and wider afield Key Areas

13. Banking Assistance An Example: NatWest is helping to promote and support excellence in the South West Aerospace & Defence sectors with the launch of: “WEAF award categories for 2013”. * Successful implementation of business improvement * Using innovation and technology for growth * Growing business through new markets and products

14. PwC Tips Key messages • Be prepared for change: defence spend will be less but still high value, commercial aerospace will see ramp up of volumes. • Innovate: MoD and Primes are looking for financially sound, innovative, and competitive suppliers. • Financial efficiency:make the most of tax and other financial opportunities. • Grant funding: still available BUT requires planning egRegional Growth Funding in excess £70m secured by Aerospace and Defence companies in the South West, last year • Review your strategy: seek opportunities to partner, strengthen your position through acquisition, sell non- core business ….. Get your due diligence/advice right!! • Sustainability: ensure you have a robust financial plan, with genuine contingency.

15. PwC Answers Be competitive: Tax and financial efficiency = cash savings Be efficient: Tax planning to save cash: • R&D tax claims can return cash and reduce corporation tax. • Registered patents offer opportunities to pay tax at 10% rate. Be Sustainable: • Buyers look for robust company processes, finances and compliance systems. • Use experts to review your systems, conduct a financial audit and help you ensure compliance. • Without sustainability you can miss out by failing at the tender stage.

16. Crossing the Legal Minefield • Liability for defects • Liquidated damages • Liability for delays • Cancellation rights • Ownership of intellectual property • Fixed prices • Payment terms THE MINES….. • Understand the contract you sign • Some DEFCONS are negotiable, some are not…. • 534: Prompt payment • 566: Change of control • 703: Intellectual property rights • 649: Passing of ownership • And many others!

17. Crossing the Legal Minefield • Defence buyers want more collaboration • What does that mean? • What is you best legal solution? COLLABORATION IS THE KEY TO SUCCESS….. • Legal contracts are changing • Risks are being shared • You need to protect your business SO WHAT HELP IS AVAILABLE

18. IP Tips If you value your proprietary technology then protect it! • Own your IP - once captured, it is an asset adding significant value to your business. • Get trade mark protection for your brands / company name. • Your technology or “innovation” is potentially valuable& it may be patentable. • Paying UK corporation tax? A granted patent in the UK could reduce your tax bill (“Patent Box”). • IP rights are legal rights providing the owner with the right to exclude third parties from doing something: • IP rights are exclusory – but do not necessarily create a right to commercialize/use. • Be aware of the IP rights of others. Can you/ should you guarantee that your offering is free of any IP infringement risk? • To survive long-term, SMEs need to get IP and make use of it.

19. WEAF WEAF can help you: • Link collaborations/clusters/companies into Government funded R&D drives • Develop supply chains with accredited business improvement programmes • Help with the formation of collaborative ventures/joint-venture companies • Up-skill workforces through proven and recognised training programmes • Support sales and business development through networking & “meet-the-buyer” events throughout the year + Senior Management Briefings from the Primes • Provide marketing platforms at major industry events e.g. FIAS & DSEI • Deliver the ultimate regional networking opportunity - WEAF annual conference • Link with academic partners (universities at Bath, Bristol, Bournemouth, Exeter, & Plymouth & the Knowledge Transfer Network to exploit emerging technologies). • Promote innovation through a prestigious annual “Excellence in Innovation” Award

20. SUMMARY Our approach means we: • Share your ambitions – we learn to understand our clients business, not just the numbers. • Deliver expertise –we aim to bring benefits to you before you get desperate. • Make things simple –we enable you to get on with running your business and spend less time worrying about ‘our’ specialities. • Provide a dedicated sector team –our expert team aims to support our clients to realise their aspirations by pooling our common knowledge for your benefit.

21. Defence Advisers Council Key messages for today • “Preparing for Change” means working collaboratively with other aerospace, defence suppliers and security suppliers and customers • Get your: • planning right, • your collaboration right, • your contracts right • and of course – GET YOUR FINANCES RIGHT Avoid the mines in the minefield!

22. QUESTIONS? DEFENCE ADVISERSCOUNCIL Abel & ImrayJim Pearson jim.pearson@patentable.co.uk01225 469914 WEAF: Barry Warburtonbarry@weaf.co.uk 01275 872 353 Nat West: Paul Severs paul.severs@natwest.com07795 644 891 VWV: Richard Brown rbrown@vwv.co.uk 0117 314 5222 AugMentor: James Shortjames.short@augmentor-uk.com 01275 848 991 PwC: Duncan Stratfordduncan.d.stratford@uk.pwc.com 0117 928 1006