Select Committee on Defence Minutes of Evidence

Further Information following the Evidence Session from the Ministry of Defence on DARA becoming a Trading Fund (27 February 2001)

Q 20—When was the interim or temporary status of the Headquarters' location at St Athan first made public?

  The interim status of the Headquarters has been communicated to the workforce through Mass Briefings by the Chief Executive, Monthly Team Briefings and through recruitment literature. The policy has always been that the Headquarters would remain at St Athan until Trading Fund status was achieved. After Trading Fund it would be reviewed but any final decision will be subject to a full Investment Apprisal, Trades Unions consultation and ultimately, approval from Min (AF).

Q 24—What is the current level of manpower in the Aircraft Business Unit at St Athan and how does that compare with the manpower likely to be required under each of the options being considered for its work—status quo, refurbish at St Athan, new-build at St Athan, and relocate to a greenfield new-build?

  A 24—As at 15 February 2001, the level of manpower in the Aircraft Business Unit at St Athan was as follows:

    Service Staff = 545

    Civilian Staff = 1157

    Contractors = 155

    Total = 1857

    Source: HRD

  The manpower numbers likely to be required under each of the options being considered for the furture of the Aircraft Business Unit Work at St Athan will not be greatly affected and any reductions will be achieved through natural wastage. Clearly if we were able to join all of the Aircraft Business Unit functions into a single entity there would be some potential cost savings in terms of manpower. In this case we would anticipate the future size of the Aircraft Business Unit at St Athan to be around 1400 personnel.

QQ 80/81—With the launch of Trading Fund status, what is the value of work that will be allocated to DARA without competition, and for how long? What proportion of the MOD's aviation deep repair work does this represent?

  AA 80/81—The Trading arrangements between MoD and DARA are set out in the Terms of Business Agreement (TOBA) and makes reference to indicative values that are protected for a three year period.

  DARA prepared a Financial Projection for the purpose of the Trading Fund approval process and the turnover numbers contained therein were endorsed by MoD. Such Turnover numbers are however, subject to some variation until pricing is finally agreed. At least 90% of the value of the Turnover is allocated. The relevant indication is therefore as follows:

Turnover for Year Projected £M
Assumed Commercial Content £M
Deemed allocated by MOD £M
Value of 90% allocated £M

  During the three-year period DARA will seek to convert the allocated order book to other longer-term contractual arrangements, and where appropriate through competition.

  Some 50 per cent of Aviation Deep Repair work is currently placed with DARA by the Defence Logistics Organisation (DLO).

Q 82—How many Service Personnel were included in DARA at 1 April 1999 and currently and how many are likely to be included at 1 April 2002 and subsequently when any envisaged reductions have been completed?

  A 82—The total number of Service Posts in DARA as at 1 April 1999 was as follows:

    Almondbank = 0

    Sealand = 400

    Fleetlands = 6

    St Athan = 1400

    Total = 1806

    Source: Corporate Plan 1999

  The current number of Service Personnel as at 31 December 2000 was as follows:

    Almondbank = 0

    Sealand = 167

    Fleethlands = 13

    St Athan = 644

    Total = 824

    Source: HRD

  Note: The Service Numbers have reduced significantly because we have transferred 132 from the GRSC Sealand to DCSA and 315 to the RAF Support Unit at St Athan. The remaining difference is because the actual complement when the Agency commenced business on 1 April 1999 was higher than the actual strength. We have now taken action to align the complement with the strength.

  The number of Service personnel employed in April 2002 will depend on the business needs of the RAF and DARA. Work is currently underway in this area.

Q 95—The Committee would like an explanation of the 11% under-funding of DARA's budget referred to in answer to Q 95; including its rationale, its originator, the years involved and its implications for MoD expenditure, DARA's output achieved and any operational implications?

  A 95—In common with general MOD (and Industry) working practice, DARA has, historically, balanced their consideration of Customer Requirements with the need to produce taut, realistic forecasts within a strict financial framework. An element of risk or "underfunding" has thus always been required to place a financial value on the amount of programmed work which may not, in the event, be completed due to contractual or physical progress delays or other unforeseen occurrences.

  The introduction of financial (cash) risk has been an important tool in injecting greater realism into the aggregate cash requirement of subordinate budget holders. It has been used for many years at many levels in the Ministry of Defence as a means of constructing taut budgets and to offset a historical propensity, demonstrated in some areas, for over-optimistic forecasts of project completion and payment. Experience has shown that such risk management mechanisms do not impact adversely on operational activities or the delivery of MoD Final Outputs. A risk level of 11% entirely within acceptable norms.

  At the end of the FY00/01 financial planning exercise DARA was allocated resources to a level such that risk over the period 2000/01 to 2002/03 was no higher than 9.5%. Further resources were made available during FY 2000/01 such that DARA are currently forecasting an underspend of £1m (circa 0.4%). This very small forecast variation against budget FY 2000/01 suggests the risk assessments and judgements made during the previous planning round and in-year will have contributed to successfully engineering full utilisation of the final budget allocated.

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Prepared 13 March 2001