Examination of Witnesses (Questions 438
- 459)
WEDNESDAY 12 JANUARY 2000 (Afternoon)
SIR ROBERT
WALMSLEY, KCB, GENERAL
SIR SAM
COWAN, KCB, CBE AND
MR NICK
WITNEY
Chairman
438. Thank you very much for coming, gentlemen.
We are bit thin on the ground for the moment, obviously the issue
engaging the military is exercising the minds of a number of our
Committee. When the statement is over no doubt they will troop
in here. I understand there have been a few casualties en route
to the Committee room.
(Sir Robert Walmsley) I think only one,
Chairman. Vice Admiral Jeremy Blackham has the influenza. Mr Nick
Witney, who is Director-General Equipment, will answer questions
on the requirement and will help both myself and General Sir Sam
Cowan out on anything that we need help with.
439. Thank you so much. This is the second of
our public sessions on our White Paper inquiry. We had a lengthy
session this morning on financial aspects and now we are on to
the subject of procurement equipment matters. We will be undertaking
further research into the subject shortly but in relation to the
White Paper this forms a very important part. May I say I do not
believe any of my questions can be directed to one person specifically,
please do not feel shy, if you wish to join in then I am sure
you will do so. The first question probably applies to you all,
certainly to two of you, and it relates to smart procurement.
We were told in the SDR that smart procurement would deliver some
£2 billion worth of savings. Is it possible to estimate the
value of the overall smart procurement savings which have been
achieved so far or is it too early?
(Sir Robert Walmsley) I think the word "achieved"
gives me a little bit of difficulty, Chairman. The reason is that
we tend to assess savings against the budget we have planned for
an equipment. Now we have not yet spent the budget at the time
that we assess those savings and the way that savings are often
scored is by reducing the allocated budget. Because that is done
with the agreement of the Integrated Project Team leader, who
used to be the project manager, it sort of puts him on the spot
if he is being too optimistic. He is absolutely charged with delivering
the programme for the resource that is in the budget so if he
agrees to a reduction, and we think it is totally respectable,
and is the only practical way of scoring a saving. The big difference
of course now, and why it is that General Sir Sam Cowan and I
sit together side by side in so many circumstances including this,
is that there is this huge emphasis now on managing equipment
on a through life basis. What that often means is some of the
savings may occur quite a long way downstream and therefore outside—beyond—our
normal budgetary planning period. The first point I would emphasise
is that when we talk about the £2 billion savings that refers
to money in the budget in the period up to 31 March 2008. That
is because that is precisely ten years beyond the publication
of the Strategic Defence Review when that figure was first quoted.
We are making progress against that but I have to say that is
my rather long explanation as to why "achieved" really
refers to forecasts of expenditure often as reflected in budget
adjustments. We have to be very careful to differentiate between
those that are within the planning period as at the time of the
SDR and those which reflect through life cost savings expected
on equipment, for which of course General Sir Sam is largely responsible.
On that note, Chairman, and echoing your earlier remarks, you
may want to ask more questions or you may want him to come in
with his point of view.
440. I can understand why the word achievement
is so strange but I understand your explanation. What you are
saying is some 40 year old civil servant who will have to come
before us in 2010 to properly answer the question or even beyond
will want a much longer timescale before he is in a position to
quantify in any way. That will safely see you out of the way,
Sir Robert. There is no need to worry too much about your final
answer. General, is there anything you would like to add?
(General Sir Sam Cowan) No, I think CDP has covered
it as far as new equipment, equipment in the design stage is concerned.
Of course I am charged, and by 1 April this year I shall have
50 Integrated Project Teams working for me, with making certain
that we can drive down the support costs of all the legacy systems,
some of which of course have been in service for ten, 15, 20 years.
Part of my job is to make certain that we can apply smart procurement
acquisition techniques to all the spares and commodities that
are necessary to keep these systems running. Like CDP I can say
that the IPTs that I have got up and running in this area are
making good progress. They are identifying interesting ideas,
many of them novel, which will take us into new territory, some
of which we have covered in this submission, very much under the
heading of lean support, driving down the totality of support
costs and increasingly as the Defence Logistic Organisation moves
through this foundation year—we are ten weeks away now from
setting up our new unified structure—targets will be placed
on Integrated Project Team leaders progressively in order for
them to be encouraged to deliver the sort of savings which we
believe are there to be delivered.
441. What techniques would you apply to the
legacy systems? I presume the VC10 you class as a legacy system.
(General Sir Sam Cowan) I think the VC10 is quite
a good example. That IPT has been up and running for quite a few
months. The empowered IPT leader has all the contract, technical
staff, engineering staff now under his hand for the first time
rather than being split up around about the place. The first thing
he did was to take a total view of the support costs: what was
happening at first line, what was happening at second line, what
was happening at third line, what was our plan to bring in industry?
Having reviewed the totality of it he then came up with a total
plan that would optimise the support. He engaged with the customer,
obviously to say how many of these do we need available at any
one time, how can we actually come to a better arrangement so
we can ensure the service we have stated can be achieved but at
a lower level of cost? By a combination of methods he has come
up with proposals which significantly drive down the number of
spares that we need to support the VC10 in the future by a streamlining
of the whole overhaul and repair programme as envisaged for the
future.
442. Can the methodology and technique be applied
that might lead to a termination of projects?
(General Sir Sam Cowan) I am not certain what you
mean—
443. By termination I was thinking of systems
which are elongated and the point arrived where you say enough
is enough?
(General Sir Sam Cowan) Certainly one of the advantages,
and I think you might have gone into this this morning, Chairman,
on resource accounting and budgeting is that we have now got for
the first time in defence a much better grasp of the cost of these
programmes. Indeed this is fundamental to all the ideas that I
am running with because the balance sheets which we have now expose
the totality of spares, assets, commodities that we need to support
these systems and therefore for the first time senior people like
me are able to put middle management and their subordinates under
pressure in a way that was not possible before resource accounting
and budgeting in order to make certain that the costs that are
being declared as necessary to keep this capability going in future
are properly based on some proper basis of calculation rather
than just some rough estimate. In answer to your question directly,
clearly if we get to the point where the cost of supporting this
capability is becoming prohibitive because we understand now the
totality of it, the interaction with the requirement staff, the
different customer arrangements we now have within the MoD could
say: there must be a better way of doing this; we have to step
back from this and make a new investment because that is clearly
going to give us better value for money in those terms.
Mr Colvin
444. I hear what you say about resource accounting
and budgeting but is there not a danger here? You have just referred
to one of the benefits which is a leaner inventory.
(General Sir Sam Cowan) Yes.
445. And cutting down on surplus stocks of spares
and so on. Are you going to be able to maintain the sort of degree
of spares and supplies you require for urgent operations? If we
do have to deploy at short notice, which is going to be much more
the scene in the future, you have to be able to move very fast
with great flexibility. Will you keep, for instance, a master
list of spares and supplies you require for those sorts of operations
which you are more likely to be engaged in in the future?
(General Sir Sam Cowan) Very fair point, an area of
major concern, of course, we must not be caught short at any stage.
Of course we are now marching to new orders, as enunciated in
the Strategic Defence Review last year. We should only hold all
the spares and commodities which cannot be made available in the
readiness times that have been specified. This whole business
of moving the armed forces for this country on to a graduated
readiness basis is something which I think is probably not as
well understood as it should be in the wider public and it is
something in defence which we are still trying to come to terms
with in terms of saying: "right, in output terms for this
amount of readiness or for that support for an aircraft at that
amount of readiness what outputs do we have to have available
to us in commodity terms in order to support that capability and
make certain that it is there on the day". The answer to
your question is that I believe that resource accounting and budgeting
as well as better information technology, as well as better visibility
of actual consumption, gives us a better chance than we had in
the past of making certain that we do not fall into the trap that
you quite rightly specified as being possible, a better chance
than simply, as in the old days, piling up a lot of stock, some
of which of course—I can assure you I have done a complete
check of my inventory—is extremely slow moving and indeed,
in many cases because of errors in the distant past, some of the
stock does not move at all and therefore we should never have
bought it in the first place. I think lean support does not mean
you are going to be caught short come the day when the demand
is there, it means you are going to get more effective use of
the resources available.
446. Can we be reassured that this new system
will be put to the test in military exercises?
(General Sir Sam Cowan) Yes.
447. We heard this morning some very worrying
statements about the number of military exercises that have been
cancelled for reasons of overstretch. It is very important that
when exercises are carried out that the supply line is as tested
and as well as front line troops.
(General Sir Sam Cowan) We must certainly do that.
Certainly what I am doing, in terms of putting together my budget
for next year, I am working in output terms on whatever exercises
have been declared as being necessary for me to support.
Mr Hancock
448. Just a small point on this, is there not
a natural inevitability with smart procurement that you end up
having even smarter defence salesmen who will sell you something
believing this is what you want to satisfy your requirements of
defence procurement and in the end you end up paying more for
it because they know you are not holding enough of the product
to satisfy the product's demand for replacement parts, et cetera,
and you end up getting screwed in the long-run? Is not smart procurement
in itself a vicious circle?
(General Sir Sam Cowan) It should not necessarily
follow. Smart procurement should lead you to more efficient provisioning
methods. I do not think any smart defence salesman is going to
get very far with me as a result of resource accounting and budgeting
and a knowledge of total cost, which simply was not available
to us in defence before. I, as a new appointment, a new Chief
of Defence Logistics in charge of a new defence logistics organisation,
do get quite a lot of very senior smart defence salesmen from
all the major companies coming to my door, and we always have
a very frank, open discussion because central to smart procurement
is a better relationship with industry but it has to be based
on an open and trusting understanding with a full exposure of
all the information. Providing we do business in that way, and
we must, then I do not think there is any high danger of the situation
being portrayed developing.
(Sir Robert Walmsley) Perhaps I could come in there
on the acquisition side because in my opening remarks I think
I mentioned our emphasis on through-life costs. That emphasis
is precisely to attack the problem you mention. When we make an
initial acquisition we try to tie in the initial provider of the
equipment more and more to paying support costs. That is why when
we closed the contract for ASTOR, the new airborne ground surveillance
system, not only are we buying aeroplanes with radar against the
performance specification but bundled up in that contract is ten
year support. They will collect the consequences, if the thing
is not as reliable as it should be, in financial terms.
449. Do you think it is possible for that to
be built into the mentality of the MoD long-term, so it is not
a one-off for that product, so that when the General goes at some
time in the distant future he is replaced with somebody who comes
in with the same attitude he has? Can you yourself instil that
sort of mentality within the MoD which ensures that is in all
these contracts, no matter how big? That was a remarkably big
contract and there were some significant deals, I am sure, about
who got that contract and that was probably part of why they got
it. Can you be assured that that is going to be the norm?
(Sir Robert Walmsley) It is certainly something we
look at with every new equipment acquisition, what will be the
support implications of this acquisition. That is what through-life
costing is about. I have to say when you look too far downstream
it is quite difficult to get hard numbers. We are working hard
on that—and Sam is the champion of through-life costing
in the Ministry of Defence—to try to work out a better way
of doing the estimating, but my basic thesis is that we do start
by tying in the initial provider to the support. We did it with
the Astute class submarines, and that was probably not ground-breaking
but in terms of the size of the contract to wrap up eight submarine
years-worth of support with an attack submarine build contract
was unprecedented.
450. We did not do it with Ocean.
(Sir Robert Walmsley) No, we did not.
451. And we have paid the price.
(Sir Robert Walmsley) We placed the Ocean contract
before we placed the Astute contract.
(General Sir Sam Cowan) Could I just come in to complement
what the CDP has said, because I think your question demands as
much assurance as we can give you? Fundamental to smart procurement
is not just forming integrated project teams and techniques but
we have to change the whole culture of everybody involved in acquisition
and procurement across the whole of the Ministry of Defence, and
that is why we have put a lot of effort into the training of the
IPT leaders, tremendous investment in a change programme to ensure
that the culture moves to a state where there can be no regression
and everybody believes in what we are doing in a way which will
ensure absolutely no back-tracking to where we have come from.
(Mr Witney) If I might add, Chairman, just to reinforce
that from the perspective of the Ministry of Defence headquarters,
I know if Admiral Blackham were here he would emphasise that this
issue of taking proper account of the whole life costs of new
acquisitions in setting the capital equipment programme for which
he is the customer within the Ministry of Defence headquarters
is something which he regards as fundamental to his new post and
something which he takes very seriously.
Chairman
452. One of the essays in the SDR talked of
the need for the training of a team of specialist acquisition
personnel. How far down the road have we got to that? Where are
these people trained? Are they trained in-house or are consultants
coming in or are they going out to universities?
(Sir Robert Walmsley) Consultants are coming in. We
are doing it in-house by and large. A few courses are taken outside
with the assistance of contractors, but it is an enormous programme.
We have tried to call it the acquisition stream. The idea is that
the people who work for Admiral Blackham, who work with Mr Witney,
the people who work for me and the people who work for General
Cowan, are all part of the acquisition profession, if you like;
we call it the acquisition stream. We think there may be as many
as 18,000 people therefore who need some form of training in smart
procurement. Now, of course, only a very small number, most obviously
the integrated project team leaders, need real, in-depth training,
and that is very much why rolling out the integrated project teams
is taking us a year because delivering that training to the integrated
project team leaders is a hugely resource-intensive operation
involving the most senior people in the Ministry of Defence who
have spent time with them. The course lasts a week and it is absolutely
blowing the whistle to kick off the integrated project teams'
life. Thereafter it is supported by consultants for a process
which lasts about ten weeks, called the break-through, and after
that they are expected to come up with their hard and stretch
savings targets. So it is a big operation, we are on the case
but we have by no means completed the whole job.
453. Thank you. The memorandum to the Committee
gives examples of savings of particular projects and some of the
achievements look quite remarkable. For instance, the five year
reduction in the time frame of the future offensive air system
and then the £400 million saved from Challenger 2's in-service
support. Can you tell us how these improvements were secured and
then what classifies these achievements as smart procurement savings
rather than just good luck or what was planned to take place earlier?
(Sir Robert Walmsley) If I may, Chairman, I will answer
it for the future offensive air system. The integrated project
team for Challenger 2 now falls to General Sir Sam, so I will
kick off with the future offensive air system. One of the observations
of the smart procurement study teams, those inside the Ministry
and the consultants whom we employed, was that the Ministry of
Defence spends a lot of time in decision-making mode during the
lifetime of an acquisition programme. You have heard the phrases
pre-feasibility study, feasibility study, project definition,
full development and production. Quite often, each one of those
activities requires a separate pause while the Ministry of Defence
decided whether to commit itself to the next stage; a perfectly
reasonable discipline except that we ended up spending more time
deciding than acting. So the first thing that smart procurement
did was to reduce the number of decision points essentially to
two, an initial gate and a main gate. What that means is that
instead of the main investment decision on the future offensive
air system being in 2003, which it would have been had we had
to allow for all these subsequent decision points, it has been
able to be put into the future to about 2008. Although it seems
a long way away, 2017 is the in-service date planned to replace
Tornado aircraft, and a very sophisticated system, whether it
is a missile carried on another aircraft or whether it is an autonomous
aircraft itself, does take a long time to do, but under these
arrangements with the fewer decision points we will make the main
investment decision in 2008 and that means the technology when
it comes into service will be newer, and it means actually the
plane, I think, will be a great deal better.
(General Sir Sam Cowan) On Challenger 2 perhaps the
Committee would like to be reassured that the introduction of
Challenger 2 into service continues to plan and that by the end
of this year all the armoured regiments will have Challenger 2.
Of course they will not all be operational at that stage, they
will have to have a complicated work-up programme to make sure
they are operationally ready to do the job. As at today, contrary
to some recent press reports—and I did check—90 per
cent of Challenger 2s can be made available within 24 hours, which
is exactly the availability target we have for the programme.
I must acknowledge the little sub-coda in your question. Of course
a lot of these ideas which are now bracketed together in smart
procurement did not all start life just like that. I have the
list of the aggregation of the £200 million of Challenger
2 in front of me obviously but, just to take a couple of examples,
there is £70 million to be saved with a new track. Track
for armoured vehicles is extraordinarily expensive, and unless
you have been involved in buying it you would not believe how
expensive track is, and therefore if you have a longer-lasting
track, a more efficient track, you will save a lot of money. We
are at the stage of having three potential suppliers come up with
a new track which across the life of the programme will certainly
save at least £70 million. I was in at the start of its life
when I was Quartermaster General and even beyond that, but it
is now an idea we have more confidence in and, quite rightly,
the integrated project team leader is bracketing it up as savings
which he can make. For example, there is £20 million to be
saved by completely new arrangements for PDS with the people who
make the Challenger, the system design authority, and we are at
quite an advanced stage of discussing with the design authority
how he, through using a third service provider, can take responsibility
for about 2,400 lines of Challenger 2's inventory, manage it,
ensure guaranteed delivery to our secondary depots to conditions
which we can absolutely specify; and then of course you save a
lot of money, not just in terms of the amount of storage you have
to hold, but you save a significant amount of money because it
is a more efficient provisioning process. If that all goes well,
we can extend that to other sub-contractors. So there are two
examples, one which very much starts life with all the new ideas
we have in terms of the relationships which we have with our suppliers,
and one which pre-dates that but which is an extremely good idea
and which I think quite rightly can be claimed under the general
heading of smart performance.
454. You must feel quite strange having a good
tank in your inventory after so long, General. Using the word
that Sir Robert is reluctant to use, "achievement",
I think if Challenger 2 can go 20 miles without breaking down,
it is an achievement over Challenger 1. So we are really elated
and I just hope the international market will be as enthusiastic
about Challenger 2 as we are. One last question before I pass
the questioning over to my colleagues, you have mentioned integrated
project teams, has anything been learnt since the concept was
originally conceived?
(Sir Robert Walmsley) Very much so. We had, as I think
you are well aware, Chairman, ten pilot integrated project teams—I
think in the end it might have been nine, I am never quite sure—but
those ten pilots were launched in October 1998. What we learnt
most obviously I think is that it was a good idea, it confirmed
it was a good idea. The whole concept of getting all the Ministry
of Defence people involved in equipment acquisition, pulling on
the same rope, has produced remarkable results. The second point
we have learnt is that open but tough relations with industry
can pay dividends. It is something we are continually alert to
turning into a cosy relationship. That has not happened so far
and part of the discipline for making sure it does not happen
is these hard and stretch targets which the integrated project
teams themselves agreed after the training and breakthrough process
which I mentioned. The training has been tougher than we expected.
455. Is there any difference in the way in which
the teams operate in terms of those engaged in new projects and
those engaged in mature projects?
(Sir Robert Walmsley) Not in principle but of course
the types of activities they are undertaking are different. From
my perspective, introducing new systems with very major technological
leaps is something that we have to learn to manage better in the
Defence Procurement Agency than perhaps we have done in the past.
That involves a huge depth of relationship with bodies like the
Defence Evaluation and Research Agency. It often involves trying
to find satisfactory ways of generating competition when there
simply is not an industrial base to do that. I think there are
different ideas for different phases of projects. I will let Sam
speak for himself. The principles are the same but the activities
are bound to have a different emphasis.
456. You will not provoke me into asking you
a question on DERA, tempted though I may be.
(General Sir Sam Cowan) Taking up the CDP's point,
of course when we move downstream on this and start to get the
benefit of the cultural change which will follow an integrated
acquisition stream, we will get the benefit of people in the CDP's
area who will have worked in my area on the support side of life.
People will be working for me who have much greater experience
on the new product side of life and that will all be of benefit.
The vision which we are really starting to see implemented is
that the Integrated Project Team will move across from the Defence
Procurement Agency on acceptance into service into the Defence
Logistics Organisation, so we will have that continuity which
we did not have in the past. That is a very powerful guarantor
of a proper consideration of whole life cycle costs in addition
to all the other measures that we are putting in place. I think
it is tremendously encouraging to talk to these IPT leaders. I
have my 50 IPTs in three clusters, three equipment support areas
facing, if you like, Land Strike and Fleet, supporting the in
service equipment, in three front line commands. There is a great
sharing of knowledge, a great sharing of ideas, a proper and reasonable
competitive edge in terms of coming up with ideas and sharing
them. Those can be spread now across the Defence Logistics Organisation
in a more rapid, more aggressive way than was possible when we
had three separate service logistic systems.
Mr Colvin
457. The DLO is at the moment, according to
your memorandum, planning to take forward 42, in all, separate
projects to improve the supply chain efficiency. I wondered how
your new, unified organisation is going to be able to bring into
effect savings which were not foreseen by the single service organisations
that they succeed. Does it mean that we have been slipping up
as a committee in not addressing this before and hauling the services
over the coals, because how do you account for the fact that the
savings were not available before and just combining the three
is going to be so much more effective? Perhaps you could give
a figure for the sort of anticipated sum that you think is going
to be saved as a result of this and compare it with the figure
that the three services combined spent before.
(General Sir Sam Cowan) It might be interesting for
the Committee to tell you where we are with the Defence Logistics
Organisation. It came into existence on 1 April of last year but
into a foundation year phase. In other words, from that point,
I became responsible for the new, top level budget, which was
the aggregated sum of the three budgetary areas of Quartermaster-General,
Chief of Fleet Support and Air-Member for Logistics. During this
year, those three principal administrative officers remain in
existence with their headquarters as my three key subordinates
responsible for delivering the current outputs, which means that
during this year—with ten weeks to run we are nearly through
this year—I am responsible for running the budget. They
are my principal subordinates. I am responsible for managing the
transition, so when we arrive on 1 April in ten weeks' time and
move on to the new, unified structure everything is properly catered
for. I realised at the outset of my appointment that I simply
could not sit down and sort out organisation and, when we got
organisation sorted out, then I would think about ideas about
how to exploit the authority which I now have. Answering your
question very directly, for two and a half years I was the Quartermaster-General
of the British Army and, like the Chief of Fleet Support and the
Air Member for Logistics, I would resent any suggestion that I
was sitting there, doing nothing, not thinking about new ideas.
Therefore, as a new guy, I have an organisation of 40,000 people.
I spend a lot of time going round, talking to people in existing
PAO areas, giving them my vision for the future and engaging their
enthusiasm in what I had been charged to do. I must speak five
or six times a week on this and the first thing I always start
with is to pay tribute to what has been achieved within the three
service logistic areas, particularly since the end of the cold
war. The figures are very impressive in terms of the numbers that
have been reduced, the number of depots which have been closed
down, the rationalisation programmes which have been run. I am
at pains always to pay tribute to that and to say that anything
we are trying to do in the future has to be based on building
on that success. Nevertheless, the judgment that was made in setting
up my post was that, in terms of delivering further efficiency
and effectiveness, the three single service organisations had
run into the buffers within that context of delivering further
changes; and that we could accelerate the process again by forming
a unified structure. So there were good ideas, there was some
very good practice in individual areas of the services, but it
was not being exported quickly enough. It is only when I got into
the job of Chief of Defence Logistics and had full exposure to
what was going on on the air side and the sea side that I saw
ideas that were impressive that I would like to have known about
when I was QMG. I do not think that there was anybody holding
anything back; it is just that people were much more orientated
to working in a single service. In tackling how we were going
to use the office which I have at four star level, and therefore
the ability to make decisions which might cut across single service
interests, always making certain that they were going to enhance
support to the single services, the first thing I did was to carry
out a review of all the ideas which all the PAOs were running
with, to make certain that we had total visibility of all the
ideas that people were running with. Not surprisingly, a number
of those ideas were being run with simultaneously, across the
three areas. The first thing to do was to assess the value of
those ideas. Then we carried out a comprehensive programme of
work, looking at the inventory. We split the totality of the new
inventory up into mechanical, hydraulics and electrical as a section
of the inventory; general stores as an issue; vehicles and vehicle
support as an issue; avionics and electronics and mechanical structures,
engines and structures. We carried out an analysis saying, "What
is the diversity of this section of the inventory? Where are the
industry trends? What is best practice in the commercial world
for handling the spares and commodities for this section of the
inventory? What is the nature of the inventory? How much stock
are we holding to support this spectrum of the inventory? What
is the state of movement of this stock? How much of it is fast
moving? How much of it is slow moving? How much of it is not moving?"
We have come up after a very wide consultation exercise with these
42 projects which I have declared, which I am running under my
lean support banner, all of which of course have to be properly
structured. You cannot suddenly start 42 new ideas. They are running
in tranches. If I give you an example of one of my flagship projects,
it is to bring together all general stores provisioning across
all three services under one non-project procurement organisation.
This has been looked at to my certain knowledge over the last
five years. Very little progress has been made, although there
are very attractive financial benefits to be gained. Under the
old arrangements, a great deal of the debate took place about
who was going to do it, rather than what was going to be achieved
by doing it. Therefore, I was able, as a straightforward example
of a case which has some impact, to make a decision that we were
going to go for this and all the arguments about who was going
to do it would be solved by setting up a new, non-project procurement
organisation that would not just be responsible for buying general
stores as previously defined, but would widen the definition of
"general stores" to those items in our inventory that
are commonly available off the shelf commercially. We are making
good progress with that. That is one of the 42 ideas. The second
of my flagship programmes is that we have very good experience
of what we have done with the white fleet in terms of getting
the commercial world in to run the white fleet for us, in terms
of spares and making certain we always have available modern vehicles
to move administrative tasks around. We are at quite an advanced
stage of consulting industry to see whether we can have at some
lease and buy-back arrangement for the fleet which we bought from
Land Rover over the last few years. There is advantage there in
terms of potential for cash injection but much more attractively
there is the significant advantage of driving down costs and also
making certain that we never, ever, with this particular part
of our inventory, get into a state where we just run old vehicles
beyond the point where it is not economic to maintain them in
service. That is at the viability/feasibility stage.
458. I think that is enough to reassure us as
to how you are hoping to achieve it.
(General Sir Sam Cowan) Summarising a number of the
rest, they are very much involved in the prospect, taking advantage
of the expanding world of electronic commerce, electronic business,
of trying to drive down all the paperwork which dogs, and adds
a lot of expense to, the provision of spares and of course fundamentally
on a new relationship with industry to make certain that we can
do all this on a much more partnering type basis.
459. Your total budget is £4.6 billion
which is one fifth of the total defence budget or thereabouts
and about half the total procurement budget. Out of the £4.6
billion, how much is actually administration of the DLO and how
much is the cost of the services and the things you are going
to be purchasing?
(General Sir Sam Cowan) There is a £2 billion
for procurement which is for buying stocks and making certain
that we have the right sorts of spares to keep the tanks running
and the ships sailing. There is about £1 billion on repair
programmes because there is a very substantial programme. At a
later stage in these proceedings, I could give you the exact figure
for what it takes to pay for the 40,000 people I employ. It is
dominated mainly by what we used to call programme costs, what
we buy from industry and what is the cost of the actual repair
programme to keep all the vehicles running.
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