The Relationship Between Prime Companies and Small and Medium Companies
Many governments have ambitions to undertake more work directly with small and medium companies on the premise they’ll provide greater access to diverse technology options, greater innovation, different commercial models and greater agility – all at a reduced cost. By contrast, prime companies have a reputation for being slow, not being innovative and reducing access of small and medium companies to government customers – while also being expensive.
Yet, the partnership across government and industry is more nuanced than what appears on the surface.
Lockheed Martin UK, for example, has a supply chain of over 500 companies, 75 percent of which are small and medium companies. Advanced defence capability requires governments, prime companies and small businesses to work together to be successful.
So, what does a good relationship look like?
The Small and Medium Perspective, by James Crowley, Business Development, 4GD
Cash and time are the lifeblood of small and medium companies. Primes can help address bureaucratic and often delayed procurement processes with their capability, capital and experience in three ways:
In any business, the ability to make good decisions is paramount and requires access to the best information possible. To facilitate this, primes should be transparent in their interactions with smaller companies. Having, for example, a clear understanding of available and funded opportunities will allow a smaller company to decide on the best way to allocate its limited resources. Understanding the approval process and timelines also helps smaller companies develop a good, collaborative plan.
- Process Navigation
The defence and security industry is highly regulated for a reason. Not all smaller companies will be comfortable navigating defence and security industry regulations, or know which do not apply. If primes are pragmatic about whether a smaller company needs the same insurance cover or quality system, they’ll help reduce costs and allow smaller companies to focus on the job at hand.
- Access to Funding
Reliable payment terms help smaller companies focus on delivery, not cashflow. If primes were comfortable paying upfront or on agreed milestones, it would further help build stability and mutual trust. Beyond this, providing investment as well as access to more complex financing is a must, particularly when working internationally and with different currencies.
The Prime Perspective, by Chris Harrison, Business Development, Lockheed Martin
Primes have a consistent focus on the performance, quality, value for money and productivity of their partners. Establishing and qualifying a supply chain is a significant investment, so primes will support suppliers to help them continuously improve in each of these areas. But continuous improvement comes from collaboration, and smaller companies can be receptive to this support in two ways:
Primes want their supply chains to evolve and have access to new technologies and innovations. By creating a dynamic ecosystem of suppliers, enabled by open architectures, with opportunities for new entrants at any point, companies can be more agile in meeting customer needs.
For example, Lockheed Martin has funded research and development efforts in cyber and electromagnetic warfare in advance of and during defence procurements. By accelerating almost £1 billion since 2020 to the UK supply chain – ahead of commitments from the government, and providing access to patient growth capital through investments, the company has enabled suppliers to be more innovative.
- Reducing Single Points of Failure
Siloes can be addressed when primes help smaller companies scale, by giving them access to global programmes of record. Transparent relationships are paramount here to understanding and approaching risk, especially when establishing alternative sources of supply.
Collaboration in Action with ‘Alliance’
These relationship principles have been adopted and furthered in support of ‘Alliance,’ a collaboration launched in June 2023 for the Army’s Collective Training Service (ACTS) procurement. The team comprises seven organisations of different sizes, different industries, different specialisms and different business models with 40 people working in a single location. The aim is to deliver a diverse and transformative approach to future training, based on collaborative behaviours.
Recognising the value that primes and smaller companies bring to each other, Alliance are consistently working to improve engagement. For Alliance, this is all about meaningful collaboration: providing real transparency, making the organisation accessible and pointing towards real business and innovation opportunities for partners.
Since August 2022, the team has undertaken over 14,000 hours of joint development activities, including engagements to better understand the risks and opportunities from the supplier perspective, provide coaching and mentoring, and identify new potential partners. Alliance has worked together all over the UK and overseas, from Reading, Warminster, Belfast, Bristol, Orlando, Kenya and California, to exhibit authentic, collaborative partnering options, including new business models and technologies to meet the needs of the Army.
SME Unite is a dedicated supplier ecosystem for UK companies that couples due diligence from the established industry-wide JOSCAR collaboration tool with Lockheed Martin’s own system to allow tender communication requests for pricing and capability mapping. This means that a clear articulation of small and medium company capabilities and value are met with clear lines of business opportunities and connections within the prime. To supplement this ecosystem, partners are invited to an annual conference where medium-to-longer-term roadmaps, lessons learned, customer insight and business overviews are shared. Success provides a platform for partners to highlight joint success and to highlight their capabilities.
It is incumbent on the entire defence enterprise to foster a collaborative, meritocratic, competitive, diverse and resilient supplier base and partnerships. Part of that is recognising the symbiotic and mutually beneficial relationship that can exist between primes and smaller companies. Alliance are a practical example of that from Lockheed Martin.
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