British defence firms "find it easier to land contracts with Nasa than the MoD"
"We must open up more opportunities for SMEs to contribute to our defence and innovation in that sector," MP demands.
British SMEs have an easier time landing contracts with Nasa than the Ministry of Defence, an MP has warned.
In a Commons debate held just before the Christmas adjournment, Alan Strickland, Labour MP for Newton Aycliffe and Spennymoor, slammed the MoD over its failure to support UK businesses.
Strickland's constituency is home to NETPark - North East Technology Park - which is located just outside the village of Sedgefield. It is home to "incredible businesses" including Durham University spin-outs creating satellite technology and radiation detection equipment that has been deployed in Ukraine, Strickland told the House.
However, despite "making a huge contribution to the defence of the UK and our allies", these companies often have a better time selling their products to America's space agency than the government department tasked with the defence of the realm.
"Some of those businesses, because they are small and medium-sized enterprises, have said they sometimes find it easier to contract with NASA than with the Ministry of Defence," Strickland said.
"There are real opportunities in the defence sector and in defence-adjacent companies to make sure we can provide more support, more opportunities, and more chance for innovation.... I am very grateful for the work of Defence Ministers in looking into this but we must open up more opportunities for SMEs to contribute to our defence and innovation in that sector."
The MoD's big problem with small businesses
In 2022, the Ministry's Defence SME Action Plan set out a goal of spending 25% of its procurement budget with SMEs.
When announcing the Plan, co-chairs of the Defence Suppliers Forum SME Working Group Andrea Hough, CEO at Atec Engineering Solutions, and Andrew Forzani, the MoD's Director General Commercial, said it was "vital" that plans to support SMEs succeeded.
"Our aim... is to ensure that we remove the unnecessary barriers to SMEs fully participating in the advanced, sustainable and world-beating defence industry that we want to develop for the UK," they wrote.
This call was backed by Jeremy Quin MP, Minister for Defence Procurement, who said: "We want cutting-edge and innovative suppliers to see defence as a priority market, enabling us to exploit the latest technological advances to maintain the UK’s world-class Armed Forces’ battle-winning edge.
"Key to this aim is making sure that SMEs have a fair opportunity to contribute to UK defence and security, and the ability to compete successfully in international markets."
However, these big dreams have not yet come to pass. Recent figures published in October 2024 show it has managed only a paltry 5% spend with SMEs (although this only includes direct expenditure and does not account for indirect spending).
The MOD Core Department placed 576 new contracts with SMEs in 2023/24 with a collective value of £1.1 billion - a decrease of 175 contracts and a reduction of £0.1 billion compared to the previous year.
In total, it inked 2,332 new contracts in 2023/24 with a collective value of £15.7 billion - an increase of £2.5 billion compared to the previous year despite there being 50 fewer contracts in number. In other words, the Ministry is spending more money on bigger contracts - whilst still leaving small businesses out in the cold.
One giant leap for small businesses in the US
In the US, the situation is radically different. In Fiscal Year 2023, Nasa spent more than $3.7 billion dollars on procurement from small businesses, as well as an additional $4 billion subcontracted to SMEs from its large prime contractors.
"That’s nearly $8 billion dollars awarded to small businesses, and over a quarter of our annual budget," wrote Pam Melroy, Nasa Deputy Administrator. "Small businesses bring a rich reservoir of diverse ideas, approaches, and capabilities and stimulate healthy competition that nurtures a culture of continuous improvement."
The US Small Business Administration sets out strict SME procurement targets for all government agencies, including Nasa, which smashed its goals six years in a row, investing $3.6 billion in more than 1,700 small businesses and beating its target by 18%.
In 2023, Farooq Mitha, the US Department of Defense (DoD) Small Business Programs Director at the DoD Industrial Policy Office, also said: "Small businesses make up 99% of all businesses in the United States and are a critical contributor to our national security. Last fiscal year, the department spent $85.2 billion on small business prime contracts, and nearly 25% of the department's prime contracts go to small businesses."
We have written to the MoD for comment.
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