Opportunities for Efficiency
12. The two agencies each have budgets and performance
targets. These include efficiency improvement targets and standards
for performance in meeting requests for imagery and mapping products
within particular timescales.[30]
The latest Annual Reports for each agency, published in December
1999 and January 2000, indicate that all targets have been met
for the last three full years,[31]
including efficiency targets of at least 2.5% a year.[32]
Indeed, they were two of only ten (of the 44) defence agencies
to meet all their targets in 1998-99—on average 78% of all
agencies' targets were met.[33]
The form of some of JARIC's targets for 1999-2000 was changed,
with the success rates for meeting a raft of seven different priority
tasks swept up into two broader indicators.[34]
We obtained the assurance of JARIC's chief executive, however,
that this represented a simplification of performance reporting
rather than a reduction in the level of performance required of
the agency.[35]
13. We examined the opportunities for greater efficiency
identified by the MoD that would be presented by the merger, both
in terms of cost rationalisation and output enhancement. On outputs,
there are signs of pressure building up which may make it more
difficult to meet performance targets in future. In some ways
the improved quality and timeliness of the agencies' outputs,
made possible as a result of the new 'softcopy' digital technology,
has put pressure on the agencies as customers' demands have grown
even faster. Air Vice-Marshal French, their 'owner', told us that
there had already been a step-change in the speed and timeliness
with which information was produced. Customers had suddenly realised
that they could get the products much faster, and demand had risen
almost exponentially.[36]
JARIC's latest Annual Report notes that operational imagery intelligence
tasks placed on the agency rose from nearly 450 in 1997-98 to
around 700 in 1998-99,[37]
and we ascertained during our visit to JARIC in November 1999
that demand had continued to be very high during the current financial
year, partly as a result of the operations in the Balkans. The
additional workload of the Kosovo campaign meant that for a brief
time JARIC could not meet one of its non-operational 'priority-three'
targets, but it was likely to achieve that target for the year
as a whole and to satisfy its more important 'operational' targets
throughout the year.[38]
JARIC's 1998-99 report notes, however, that 'customer expectations
and demands ...appear to be almost insatiable, necessitating repeated
periods of 24-hour working on a 7-day basis for many agency personnel'.[39]
Overstretch of the forces has been much in the news, and we
expressed our concerns in our recent report on the MoD's Annual
Reporting Cycle.[40]
It is clear that the burden falls too in support areas like
Military Survey and JARIC, which make a no less important contribution
to frontline operational effectiveness.
14. The pressures are compounded by staff shortages.
Both agencies reported shortages,[41]
though these were more severe in JARIC which had 34 vacant posts
out of its complement of around 500.[42]
JARIC's chief executive also aired with us his additional concern
about the challenge in retaining the brightest imagery analysts
as the lucrative market in commercial satellite imagery develops
further in the years ahead.[43]
Although the commonality in tasks performed by staff of the two
agencies is currently relatively small, the agencies' owner did
envisage scope for some interchangeability of staff once they
merge.[44]
The benefits already being gained from staff from each agency
working in the other (particularly in JARIC's 'Digital Imagery'
and Military Survey's 'Photographic Interpretation' flights[45])
could be extended further with a convergence of the agencies.[46]
To some extent the long-standing staff shortages and overstretch
experienced by Military Survey and JARIC represent a failure of
their agency status, which perhaps ought to have conferred on
them (or their owner) an ability—similar to that of private
sector organisations—to adjust resource levels and organisational
structures to meet customer requirements cost-effectively. The
reorganisation now made possible with the belated merger of the
two agencies presents an opportunity to evaluate the manpower
requirements of the new agency, and to establish a clear strategy
to remedy remaining staff and skills shortages. Such a strategy
should address explicitly the terms and conditions necessary to
retain staff with vital skills and experience, and to banish overstretch.
15. New technology will provide some help in keeping
pace with demand. JARIC's chief executive flagged up the need
for further investment 'to satisfy escalating customer demand
for near-continuous imagery intelligence cover, without further
risking staff morale'.[47]
While the planned investment in new technology is essential for
improving intelligence capabilities, it may however have limited
long term benefit in easing the burden of rising workloads because
of its already apparent tendency to drive up the expectations
of customers. The real solution lies in managing customers' demands.[48]
The owner of the two agencies told us that mechanisms had had
to be found to get customers to understand the changes in product,
and how the agencies would have to prioritise demands.[49]
In setting up the new Defence Geographic and Imagery Intelligence
Agency and its systems and procedures, he said, customers would
have to be fully involved.[50]
16. We also examined the scope for efficiency savings
from the merger being explored by the MoD. These included opportunities
for savings from estate rationalisation. The decision to merge
the agencies was taken back in 1994, as part of the MoD-wide Defence
Costs Study.[51]
Subsequent studies within the Department had examined the way
that this might be done, including the question of collocating
the agencies' main establishments. Modest savings—£1.45
million[52]—have
already been taken out of the agencies' budgets in anticipation
of the savings the merger might produce.[53]
JARIC has been involved in three estate rationalisation studies
in the last four years, examining options which included moving
to Defence Intelligence Staff or Military Survey sites, or a collocation
at a greenfield site. The high costs of relocation, however, prompted
the decision for JARIC to remain at its current Brampton site.[54]
Within Military Survey, there are plans to rationalise on two
of its current four sites during the next 15 years.[55]
In the longer term, the Military Survey's main Feltham base is
one of the 'pegs in the ground', but the future of JARIC's Brampton
site (as a lodger unit at RAF Logistics Command HQ) depends on
the consequences of a wider reorganisation of RAF headquarters
flowing from the creation of the Defence Logistics
Organisation.[56]
We welcome the stability that there will be for the staff of
JARIC and Military Survey as a result of retaining for the time
being the agencies' main locations. If, once the new agency beds
down, physical collocation were to be shown to offer significant
operational benefits, then we would hope that the one-off costs
of bringing staff together would not prevent such a course being
followed.
17. At a practical level, a very real benefit of
the merger will be to allow some rationalisation of JARIC's and
Military Survey's agency overhead functions.[57]
The two chief executives were positive about the benefits already
being realised from operating as executive agencies,[58]
but for JARIC, as a somewhat smaller agency (see table), one of
the advantages of the merger was seen as an opportunity for them
to ease the perceived disproportionate burden of the accounting
and other administrative overheads of operating as an agency.
The two agencies already had a shared owner, a common budgetary
chain and the same Management Board[59].
| The difference in scale of the two agencies, 1998-99
|
| | JARIC[60]
| Military Survey[61]
|
| Number of personnel
| 504 |
1,150 |
| Fixed assets (net value)
| —(£18m, excluding
land and buildings)
| £129m(£37m, excluding
land and buildings)
|
| Annual gross running costs
| £27m
| £88m
|
| Number of sites
| 1 |
6 |
18. Military Survey, the first Defence Agency established
in the Army in 1991, received its Accounts Direction in October
1994.[62]
JARIC, on the other hand, has had difficulty in producing accounts
that would stand up to external audit. Its chief executive told
us that with a merger with Military Survey in sight, it would
serve little purpose directing effort in the agency's last year
to secure an Accounts Direction, when work might be better directed
in preparing accounting systems for the new unified agency. As
JARIC's chief executive told us—
The main sticking point over
an Accounts Direction being given remains with the issue of communicative
costs[63]. The NAO have
not been satisfied by those who deliver services to me that the
figures are resilient enough. They are more than content with
the work ...within the control of the agency. We are now in line
with their requirements and we have produced appropriate information
to support that. It is the external problem that remains, the
net result. In concert with the NAO ...we discussed whether it
was pertinent to continue with seeking an Accounts Direction historically
for JARIC, or whether it was better to focus our attentions on
the new agency ...We agreed that it would be wiser to sort out
the communicative costs issue now, rather than chasing an Accounts
Direction for the sake of it, so that we can get the books in
order for the converged agency from 1 April [2000]. We are optimistic,
at the moment, that we can get to that situation.[64]
19. The MoD selected JARIC as one of its pilot sites
for output costing—part of the wider move to Resource Accounting
and Budgeting. Its chief executive told us that, given its difficulties
with its accounts, early implementation of output costing had
been seen as an opportunity to accelerate the pace at which it
could get its books in order.[65]
The system delivered did not live up to its specification, however,
and—
... the net result is that
we spent a lot of our time as an early implementer—which
in hindsight was possibly a mistake— fighting this system,
and that took us a fair amount of time when we should have been
sharp-pencilling the books a bit more ... It did not help us.[66]
20. In the circumstances, the selection of JARIC
as a pilot for output costing was perhaps not the best decision.
As we said in our recent report on the MoD's annual reporting
cycle,[67]
Resource Accounting and Budgeting should provide an invaluable
management tool,[68]
but its success depends on staff at all levels seeing it as
a boon rather than a burden. The MoD must take care to ensure
JARIC's bad experiences, which were avoidable, are not repeated
elsewhere.
Conclusion
21. Reconnaissance, intelligence, surveillance and
target acquisition are already important force-multipliers, and
their significance will increase still further in the warfare
of the information-age. JARIC and Military Survey provide crucially
important, though distinct, aspects of such support for the frontline
forces of the UK and her allies. It is clear that operations of
the future, exploiting all aspects of information and intelligence
in increasingly shorter timeframes, will require the outputs of
JARIC, Military Survey and others[69]
to be more closely integrated. Agencies are intended to provide
a clear focus on internal customer-supplier relationships, and
the outputs required by their customers. Provided customer-supplier
relationships are carefully reviewed and properly subsumed in
the procedures and objectives of the new Defence Geographic and
Imagery Intelligence Agency, the merger of Military Survey and
JARIC can therefore only serve to facilitate the effective delivery
of intelligence. With the merger having been under consideration
for the last six years, however, the logical conclusion is that
for some time the services provided by these two agencies cannot
have been structured as well as they might have been to deliver
that support. The merger also clearly brings potential for
efficiency improvements by reducing the overhead burden of administering
the agencies, and in the longer term from possible collocation.
22. There has been some turbulence among defence
agencies more generally in the last few years, with further adjustments
to follow in the years ahead. The Strategic Defence Review identified
a requirement for the merger of aviation repair agencies,[70]
a new transport and movements agency,[71]
and ultimately a single joint agency in the storage and distribution
area,[72]
and the establishment of the Defence Logistics Organisation may
also have further ramifications for logistics agencies. While
flexibility has to be retained to continue to reflect the requirements
of agencies' customers, such reorganisations involve significant
work and upheaval for agencies' staff which for a time may detract
from the very benefits sought by the changes. There needs soon
to be a period of stability in which the benefits of operating
as agencies can be fully realised.
23. In some respects, merging agencies risks moving
away from part of the spirit of the agency programme which sought
to devolve decision-making to local management. Care needs
to be taken in merging agencies, therefore, to avoid a loss of
focus on the outputs required by MoD customers, and on allowing
local managers to control effectively the resources and activities
needed to deliver them. The Department should not follow the current
mania in the commercial world for mergers without a clear-headed
assessment of the potential disadvantages.
7 See the Committee's First Special Report, Session
1999-2000, Annual Report of the Committee for Session 1998-99,
HC 219, p xxi Back
8 Ninth
Report, Session 1998-99, Defence Research, HC 616; and
in the preceding session the Committee's Sixth Report, Session
1997-98, The Defence Evaluation and Research Agency, HC
621 Back
9 We
have examined the DPA's work in connection with a number of inquiries
including: Seventh Report, Session 1997-98, Aspects of Defence
Procurement and Industrial Policy, HC 675 and our Eighth Report,
Session 1998-99, Major Procurement Projects Survey: The Common
New Generation Frigate, HC 544 Back
10
For much of its early life it was part of a more general mapping
organisation which included the Ordnance Survey, which was split
off in 1870. Back
11 Q
75 Back
12 HC
Deb, 10 May 1999, c19w Back
13 Seventh
Report, Session 1994-95, Reconnaissance, Intelligence, Surveillance
and Target Acquisition, HC 319 Back
14 We
took some evidence in private session-from Q 42 onwards Back
15 Q
1 Back
16 Ev
p 1,para 4 Back
17 Q
1 Back
18 Q
1 Back
19 Q
15 Back
20 JARIC
Annual Report & Accounts 1998-99,December
1999, page 6 Back
21 Ev
p 2, para 12 Back
22 Ev
p 2, paras 12, 13; Military Survey Annual Report & Accounts
1998-99, HC 152, p27 Back
23 HC
152, p5 Back
24 Ev
p 1, para 4 Back
25 JARIC
Annual Report & Accounts 1998-99,
p 27 Back
26 HC
152, Accounts, p xv Back
27 Q
2 Back
28 Ev
p 1,para 1 Back
29 HC
152, page 11 Back
30 Ev
pp 4-6 Back
31 HC
152, pp 6-7; and JARIC Annual Report & Accounts 1998-99,
pp 12-13 Back
32 Targets
were 2.5%, except for JARIC in 1998-99 (3.2%). In the current
year, the target for both agencies is 3%. Back
33 MoD
Performance Report 1998-99,
Cm 4520, Table 20 Back
34 Targets
1 and 3 were changed in this way (Ev pp 4, 5) Back
35 Q
120 Back
36 Q
24 Back
37 JARIC
Annual Report & Accounts 1998-99,
p 10 Back
38 Q
121; and Ev p 21, para 7 Back
39 JARIC
Annual Report and Accounts 1998-99,
p 10 Back
40 Second
Report, Session 1999-2000, Ministry of Defence Annual Reporting
Cycle, HC 158, paras 88-97 Back
41 Q
113 Back
42 Ibid Back
43 QQ
113, 119 Back
44 Q
118 Back
45 JARIC
Annual Report & Accounts 1998-99,
page 14 Back
46 Q
1 Back
47 JARIC
Annual Report & Accounts 1998-99,
p3 Back
48 The
tasking of JARIC and Military Survey is determined by the 'Collection
Coordination and Intelligence Requirements Management' process
undertaken by the Chief of Defence Intelligence's organisation,
after assessing and prioritising demands for the agencies' services Back
49 Q
24 Back
50 Q
16 Back
51 Ev
p 1, para 2 Back
52 Modest
in relation to running costs of £114m a year for both agencies Back
53 Ev
p 1, para 7 Back
54 Ev
p 3, para 20 Back
55 Ev
p 3, para 21; QQ 3-5 Back
56 Q
5 Back
57 Ev
p 1, para 4 Back
58 Q
18 Back
59 JARIC
Annual Report & Accounts 1998-99,
page 14 Back
60 Data
from JARIC Annual Report & Accounts 1998-99 Back
61 Data
from HC 152 Back
62 HC
152, Accounts, p xx Back
63 Communicated
costs are costs borne by other budget holders within the MoD for
services that are provided to JARIC, without the agency transferring
funds to pay for them. Back
64 QQ
33, 34 Back
65 Q
41 Back
66 Q
41 Back
67 Second
Report, Session 1999-2000, op cit Back
68 ibid,
para 37 Back
69 Such
as those providing 'signals intelligence' and 'human intelligence' Back
70 The
Defence Aviation Repair Agency drew together previously separate
agencies for fixed-wing and helicopter repair Back
71 The
Defence Transport and Movements Agency drew together the Defence
Transport and Movements Executive and other transport organisations. Back
72 This
will bring together, by 2004-05, a number of agencies, including
some newly created by the SDR itself such as the Defence Storage
and Distribution (Non-Explosive) Agency. Back
