IMPROVING DERA'S HUMAN RESOURCES
81. DERA directly employs nearly 11,600 staff.
Including contract staff and military personnel attached to DERA,
the total exceeds 13,000.
DERA's scientists and engineers have a high reputation, both nationally
and worldwide. The trade unions have highlighted concerns, however,
about some aspects concerning the staffing of DERA, including
relatively modest salaries in DERA compared with the private sector
(the average salary of DERA staff is some £24,000,
though a broad average is not very illuminating) and the prevalence
of fixed-term (rather than 'permanent') contracts as factors putting
off would-be new recruits and encouraging high staff turnover.
82. The proportion of DERA's directly employed staff
in the professional and technical gradesthose most closely
associated with its research workhas now risen to three-quarters
(Figure 10). While overall 7% of those science and engineering
staff are not on permanent contacts,
the figure is higher for newly-recruited staff.
Staff turnover in DERA was 10% in 1998-99, with 1,168 of the 11,593
staff leaving in that year,
up from 8% the previous year.
Part of the wastage has come from cut backs in some areas of activity
which are in less demand: 300 posts were cut in 1998-99 in the
mechanical sciences and land range areas, resulting in 174 staff
being made redundant or retiring early. In other areas, however,
DERA has had difficulty recruiting as many graduates as it wished,
and specialists in the new technologies. Sir John Chisholm told
us that there were areas of DERA's business which had been 'black
holes' in its technology coverage. Though they had in the last
few years managed to fill vacancies in some of these areas, in
otherssuch as communications technologies, software, and
biotechnologyit was still hard to keep up.
The proportion of staff in professional and technical
grades has risen from 44% in 1991-92 (when it was the Defence
Research Agency) to 75% in 1998-99 (when DERA).
Source: HC 411, page 29; and DERA Annual Accounts
1997-98 and 1998-99
83. Although tied to the civil service remuneration
system, DERA has been able to employ some flexibility in the pay
and conditions of its staff. In 1995 it reformed its pay and grading
system to provide greater incentives for rewarding individuals,
and the reformed structure does not have rigid grades to which
particular jobs are tied.
DERA staff may be able to benefit financially from any income
derived from inventions not directly related to their main work10%
of income between £150,000 and £300,000, and a smaller
percentage of more lucrative inventions.
DERA also encourages further professional qualifications for its
staff (1,000 staff have PhDs)
and has introduced a DERA Fellowship scheme to show recognition
for its most senior scientists and engineers.
84. Despite these developments, DERA still has to
operate within the overall Treasury guidelines on pay settlements
in the public sector.
As a private sector organisation, DERA's senior directors could
perhaps expect a much higher salary. DERA's 1998-99 Annual Report
notes that the Chief Executive and Finance Director, for example,
were paid £170,000 and £125,000 respectively last yeara
level exceeded in many defence companies. The chief executive,
however, sought to assure us that he was not developing the proposed
public-private partnership for personal gain,
and drew our attention to the greater flexibility that he sought
for rewarding DERA's scientific staff
In order ... to make [DERA]
a success, I need the oxygen to be able to go out and do things
which are quite difficult for us to do at the moment. I need the
ability to recruit staff, to pay them more, to give them perhaps
rather more imaginative reward schemes. ... There is no question
that the people who really count in our organisation are the scientists.
They are the people that really lead this organisation forward.
Having a scheme which properly rewards them is the thing that
The trade unions were less convinced of the need
for radical change
We have spent some time arguing
... that there were recruitment and retention difficulties ...
Over the last five or six years, we have been as flexible and
cooperative in bringing about changes in the employment
conditions as anywhere in the public sector. Not only do we have
performance pay but we have moved away from the previous system
of grading which operated. It is not exactly individual pay, we
conduct the negotiations about the pot and the individual awards
within parameters, but it does give a significant degree of flexibility
which allows people to be paid exceptional amountssome
people get into double-digit increases where that is justified
by their particular position. So there is a considerable degree
of flexibility in the package.
DERA [also] have ... flexible entry packages to meet
particular needs [with enhanced starting salaries to help recruitment
in key areas in which there is strong competition from the private
sector, such as IT and communications technologies].
We think that process could be continued, particularly if you
remove ... one of the elements of inflexibilitythe need
to clear pay remits and some of the detail [with] the Treasury.
85. Sir John Chisholm was sanguine about the prospects
for DERA's personnel retaining public sector values under the
regime he envisaged
We demonstrated that [as
a trading fund] you can do research for a profit and still keep
values which are to do with objectivity, impartiality and integrity
because the maintenance of those values is what gives you your
comparative advantage in making that money. So you can set up
a regime, I do assure you, which both has the objective of making
money and has the objective of providing the kinds of integrity
and public sector values that we have at the moment. I am absolutely
convinced we can do that. I believe my record of leading DERA
to date is a good demonstration of that. The public-private partnership
is exactly designed to provide that environment.
Again, however, the trade unions have yet to be convinced
Scientists and technologists
work [in DERA] because they like that kind of work, ... [but another
factor] for a lot of people is the public service ethos and the
fact that they are working for the good of the country. A lot
of us would have grave doubts about doing some of the activities
we do if we felt they were being done for the sake of profit rather
than ... for the general good ... Also, the DERA scientists have
a very great feeling of being part of a team with the MOD and
with the MOD servicemen whose needs they have to elicit and have
to satisfy, and that feeling of being part of the overall team
is quite an important one.
86. One of our industry witnesses noted that "it
does seem strange that we are tearing the whole [DERA] thing up,
just to solve the salary problem".
Some additional flexibility on staffing matters would no doubt
help DERA to recruit and retain the staff it needs, including
those needed for the critical technologies where skills are heavily
in demand. A public-private partnership however is not the only
way, or the most cost-effective way, to achieve this.
IMPLEMENTING SMART PROCUREMENT
87. Smart procurement, one of the most discussed
policy initiatives of the Strategic Defence Review, was the third
driver for change identified by the MoD in its consultation document.
It is designed to change fundamentally the way defence equipment
is acquired., and involves a greater degree of partnership with
industry in finding technical solutions and delivering them much
more quickly and cheaply. Among other things, it involves a shift
in emphasis towards the initial research and early technology
demonstration work needed to put equipment projects on the right
lines. General Burton, then Deputy Chief of Defence Staff (Systems),
told us that
The context for applied research
and corporate research is now very much developing the thinking
on smart procurement, which places a premium on early and carefully
directed appliance of science and technology ... so that we trap
those technological lines of development that are most likely
to deliver success and operational benefit at a price that is
affordable ... A fundamental [new] step is that the originator
of the requirement is not defining the answer. He is actually
defining the question, and smart procurement postulates that ...
industry will team themselves with ... partners to deliver the
capability that has been defined. [We] look at our research programmes
as providing the knowledge, the tools and the technologies that
we can access before the first [MOD] approval has to be given
for any particular project, so that we are confident ... of which
technologies are going to deliver success.
88. We heard some fundamental concerns about the
impact that a privatised DERA might have on the smart procurement
initiative. The initiative seeks a closer relationship with industry,
but the SBAC were concerned that a privatised DERA 'would not
be motivated to support smart procurement because it would not
be in the partnership between the supplier and the customer; and
it would not be a source of impartial advice because it would
have its own agenda for gain'.
GKN Westland, for example, considered it questionable whether
its previous partnership with DERA in developing rotor technologies
would be possible if DERA were transformed into a hard-nosed competitor
for the MoD's R&D business.
Smart procurement should speed up the translation of technical
innovation into products but the question was raised whether,
with initial concept work done in DERA and industry perhaps removed
from it, the traditional slowness of MoD procurement would return.
The onus for ensuring that any work placed with DERA does not
produce 'unacceptable conflicts of interest'
is placed by the consultation document on the Integrated Project
Team leaders. We heard doubts expressed however about whether
individual IPT leaders would have the time or sufficient awareness
of all of DERA's activities to be able to exercise this responsibility.
89. Smart procurement anticipates significant savings
for the MoD (£2 billion over 10 years). Industry argues that
some of the savings anticipated should be used to bolster expenditure
on the research undertaken in the early stages of equipment programmes,
which is intended to help drive the initiative's emphasis on cutting
delays and cost over-runs.
The SBAC were concerned that without adequate public investment
in technology demonstration and defence research in general, the
disciplines of the smart procurement initiative will drive UK
equipment procurement off-shore,
as the required technology and equipment might only be acquired
cost-effectively from overseas suppliers. They summed up their
misgivings about the DERA privatisation, thus
It is difficult to perceive
of any other change to MoD's R&D system that could be more
disruptive to the development of a closely coupled innovation
process which depends for its effectiveness on the degree of seamlessness
achieved. Industry is very concerned by what it perceives is planned
for DERA, and is convinced that better ways can be found to improve
effectiveness. Indeed, the MoD is in danger of developing mutually
opposing policy strategies by positioning DERA as a privileged
entity with its own commercial agenda within the innovation process,
whilst at the same time seeking to benefit from best practice
processes embodied in the smart procurement initiative. We would
strongly urge that further thought be given to the future of DERA.
90. The public-private partnership proposals for
DERA could disrupt the partnership between the MoD and industry
needed for effective technology transfer and the implementation
of smart procurement. After privatisation the Agency's relationships
with both the MoD and industry would be compromised. A public-private
partnership for DERA puts at risk the achievement of the streamlining
of the acquisition process sought by the smart procurement initiative.
156 Cm 2250 op cit, para 4.9 Back
Framework Document Back
621 op cit, Ev p 1, para 7 Back
RARDE, ARE and RSRE Back
establishment drew together the DRA and the Test and Evaluation
Organisation, the Chemical and Biological Defence Establishment
and establishments undertaking high level operational analysis. Back
Defence Evaluation and Research Agency: Review of Performance,
Report by the C&AG, HC 411, 1997-98, page 28 Back
Corporate Plan 1997-2002 Back
p 110 Back
Deb, 24 April 1998, c715w Back
press release 3.3.99 Back
671 op cit, page 10 Back
883 op cit, page 31 Back
671 op cit, page 10 Back
p 77 Back
of DERA's 11,647 staff (HC Deb 13 July 1999, c95w) Back
Defence Weekly, 28 July 1999, page 17 Back
the 'Public Sector Borrowing Requirement' Back
p 82 Back
671 op cit, page 69 Back
page 69: £283.5m (excludes social security and other pension
costs)¸11,593 staff Back
p 100 Back
671 op cit, page 69 Back
p 139 Back
p 100 Back
671 op cit, pages 42, 69 Back
Reporting Cycle: MoD Performance Report 1997-98,
Minutes of Evidence 1998-99, HC 241 (i), page 20 Back
671 op cit, page 42 Back
p 74 Back
p 76 Back
671 op cit, page 42 Back
192 ibid Back
328, Ev p 88 Back
p 117 Back
p 133 Back
Document, para 18 Back
p 136 Back
p 107 Back
p 112 Back