PROGRESS WITH SMART ACQUISITION, AND THE
ROLE OF THE CENTRAL EQUIPMENT CAPABILITY CUSTOMER
123. In this final section of our report, we examine
further the outlook that Sir Jock Stirrup brings to his new appointment,
and how that fits with the direction of the smart procurement/smart
acquisition initiative four years after its launch.
124. Sir Jock is the second Deputy Chief of Defence
Staff (Equipment Capability), succeeding Sir Jeremy Blackham.
The post was created as part of the 'smart acquisition' (formerly
'smart procurement') initiative, introduced with the SDR in 1998.
Under smart acquisition, responsibility for delivering equipment
programmes within budgets and deadlines is concentrated in the
hands of 'integrated project team' leaders situated in
the Defence Procurement Agency (DPA) until the equipment is acquired,
and then in the Defence Logistics Organisation (DLO) once it is
in service. In the first of a series of inquiries on the progress
of the smart acquisition initiative, the NAO recently examined
the implementation of integrated project teams, and commented
that they had been introduced rapidly and successfully.
But a second, and perhaps just as important, strand of smart acquisition
was the establishment of a clearer 'customer' for equipment provided
by the 'suppliers' in the DPA and DLO.
125. As the MoD's central 'customer' for equipment,
Sir Jock's organisation is responsible for determining what equipment
'capabilities' need to be satisfied (and their relative priorities),
without specifying what sort of equipment or 'platforms' might
best satisfy those capabilities. Indeed, some capabilities may
be provided by several platforms operating together, and some
platforms may provide several different capabilities. It was this
that made us focus much of our examination of the Sea Harrier
withdrawal on Sir Jock. The structure of his organisation reflects
capabilities rather than platforms. Around a dozen Directors of
Equipment Capability (shown in the figure below) manage 'Capability
Working Groups' to identify possible equipment concepts to fill
capability gaps. These Groupssome 50 overallinclude
staff from integrated project teams, the prospective Service end-user
of the equipment, and industry.
Capability Managers within the DCDS (EC)
organisation, showing where our monitored equipment programmes
|Command, Control & Information Infrastructure.
||Direct Battlefield Engagement.
- Sea Harrier/RAF Harrier
- TRACER (FRES)
- Tactical UAVs
|Indirect Battlefield Engagement.|
|Deploy, Sustain & Recover.
|| ||NBC Defence.
|| ||Special Projects.
|| ||Combat Service Support.
126. In a recent speech
Sir Jeremy Blackham emphasised that a flexible and incremental
approach to acquisition was important, and the equipment customer
needed more freedom to change its mind about requirements and
their solutions. There was inevitably a tension with the Defence
Procurement Agency (the 'supplier'), however, whose focus is on
meeting measurable and stable targets which are mostly about timeliness
and cost. The result, he indicated, is a risk-averse approach,
and an unwillingness to change publicly announced targets. There
needed to be a greater understanding that better value
may mean spending more on some equipments to get what is really
needed "What you measure is what you get, and so
it is 'customer value' that we must learn how to identify and
127. As our predecessors reported last year, it has been easier
to measure performance against cost and timeliness criteria; a
point echoed in Sir Jeremy's observations above. Our predecessors
had monitored the progress of the smart acquisition initiative,
and sought in particular to assess its achievements against its
aims of delivering equipment 'faster, cheaper, better'. When launched,
smart procurement was expected to save £2 billion over the
10 years to 2008, and in the last Spending Review (in 2000) the
MoD anticipated savings of £750 million for the three years
to 2003-04; £50 million in excess of the savings previously
profiled to deliver the £2 billion longer term savings. In
our predecessors' report on the MoD's annual reporting cycle,
however, they noted the difficulty of determining conclusively
the benefits achieved 
even on just cost and timeliness grounds.
Achievements against targets for 'Major Projects Report'
|Achieving 'core requirements' of the equipment
|Average cumulative ISD slippage||19.9 months
||21.8 months||23.1 months
||23.6 months||11.4 months
|Average in-year ISD slippage||-
||1.8 months||0.5 months
|Average cumulative cost variation||5.7%
|Average in-year cost variation||-
128. In the most recent Major Projects Report
the NAO reviewed the development of performance indicators to
capture more fully the achievements of smart acquisition. They
noted that the £2 billion cost reduction target was an input
measure that does not capture the full impact of smart acquisition
on equipment capability and project duration, and that the MoD
will not therefore be able to demonstrate comprehensively...
that the cost reductions have actually been used to deliver the
planned capabilities at the end of the 10 year period within the
envisaged budget, or that project timescales also reduced in that
period. This is because cost reductions identified on projects
may be balanced by additional costs elsewhere on the same project
or in other parts of the defence equipment programme, and additional
costs may be traded-off against time or capability.
A 'joint performance task force' is bringing together the range
of performance indicators on equipment acquisition and support
performance from the Defence Procurement Agency, the Defence Logistics
Organisation and the Equipment Capability Customer,
and developing indicators to demonstrate at a corporate level
whether performance is improving.
To assist that work, the MoD will track progress on 11 large equipment
programmes, covering 60% of the expected smart acquisition cost
reductions, to establish whether forecast reductions actually
129. Against the background of Sir Jeremy's comments on the MoD's
still strong focus on cost and time measures, we sought the views
of his successor. We would not expect Sir Jock, new in post, to
express himself in Sir Jeremy's forthright terms. He clearly shared,
however, Sir Jeremy's desire to ensure that the procurement system
is responsive and delivers 'valuable' capabilities
During the Cold War, our primary aim was deterrence and, to
an extent, deterrence was more about what was in the shop window
than what was on the store shelves in the back. Since the Cold
War, we have been employed on military operations extensively
and we continue to be so. We send our young men and women to do
difficult and dangerous things in often unpleasant circumstances,
and we have to give them the wherewithal for them to go out and
win and come home safely. That means support as well as the shop
window equipment. We cannot afford to be hollow because we would
not succeed. The changing strategic environment has had a significant
impact. Equally, the pace of technological advance and the sort
of technological advance that is available relatively easily to...
potential adversaries has become quite widespread. The sort of
asymmetric threats that we face are relatively easily available,
and we need to be able to respond to those. That presents us with
a particular challenge ... [so] we need short term agility in
terms of delivering equipment capability. 
130. More generally, Sir Jock considered that the MoD had reached
a critical stage in the development of the equipment capability
If I can use a metaphor here, we have reached the position
where the first stage is now separated and the second stage has
to ignite. Otherwise, as ever with these sorts of changes, there
is a danger that the thing will descend back into institutionalism.
What we are about is achieving success on the battlefield and
that requires us to take a look at our equipment capability much
more as a whole rather than as a set of different projects. The
Directors of Equipment Capability are not equipped to do that
... [We have] to continue the process of giving them the appropriate
strategic guidance and making sure ... that the projects which
come out at the end can be used synergistically as a whole rather
than as a set of largely unrelated capabilities, and that is the
key area where we now have to move forward.
131. It seems to us that at such an opportune juncture, there
needs to be a new focus on integrating the perspectives and priorities
of all of the key players in the MoD who will have to work closely
to make smart acquisition a successand a success not just
on cost and timeliness fronts, but in a way that delivers what
the equipment user really needs and "values". To bring
that about will require a sharper focus on measuring value in
the MoD's procurement programmes. As a first step, the MoD should
consider the value of including the central Equipment Capability
Customer on the new 'Investment Appraisals Board', which was set
up to replace the Equipment Approvals Committee.
Although the Vice Chief of Defence Staff already represents the
Service equipment user on the IAB,
a place also for the Equipment Capability Customer would help
give greater weight to the sorts of capability trade-offs and
'values' that Sir Jeremy referred to, and the responsive procurement
organisation and synergistic approach that Sir Jock wants to see.
Report by the C&AG, Implementation of Integrated Project
Teams, Session 2001-02, HC 671 Back
At the Driving Down Equipment Costs conference, Abbey Wood,
30 January 2002 (Reproduced in RUSI Journal, April 2002). Back
Eighth Report, Session 2000-01, The MoD's Annual Reporting
Cycle 2000-01, HC 144, para 83 Back
Report from the C&AG, Major Projects Report 2001, Session
2001-02, HC 330 Back
ibid, para 3.8 Back
ibid, para 3.12 Back
ibid, para 3.2 Back
ibid, para 3.7 Back
Q 179 Back
Q 156 Back
Q 157 Back
Ev 120 Back
VCDS commands both the Service equipment-user commands ("customer
2") and the DCDS (EC) ("customer 1") Back