Examination of Witness (Questions 440
WEDNESDAY 4 DECEMBER 2002
KCB OBE AFC
440. Can I ask about the DLO's New Strategy.
I think to quote it it is to become an intelligent decider rather
than a provider. First question: are those tasks easily split?
(Air Chief Marshal Sir Malcolm Pledger) I think the
immediate answer to that is I would not have thought so, but if
you are seen (which we currently are) as an intelligent provider,
then the nature of the organisation is to sustain activity in
those provider regimes rather than to determine how best to prosecute
an outcome. That is a very significant change in mind-set and
indeed in purpose. If I am charged or challenged today to defend
or support the way that we do business in certain areas, I will
be very hard-pressed to show you why that is the best optimum
solution for doing so. The whole purpose of this is therefore
to provide me, and therefore you, with the evidence in future
that what we do will be at an acceptable operational risk and
will, by testing the options, be at best value for money.
441. I do not want to open the debate about
targets again. If you are an intelligent decider, does that not
mean therefore you have got to have some control, for example
over setting your own targets and budgets rather than being given
arbitrary targets to meet by the MoD or others?
(Air Chief Marshal Sir Malcolm Pledger) I would actually
say to you that I do set the organisation's targets and I submit
a budget each year that represents that forward plan. I would
rather hope, as I say, that by becoming that intelligent decider
I will have the evidence subsequently to argue my corner.
442. Yes, but if you are going to be an intelligent
decider you have got to have some freedom, have you not?
(Air Chief Marshal Sir Malcolm Pledger) But surely
we do have that freedom in terms of the processes we own, the
relationships with our customers, and indeed the relationships
particularly with our suppliers.
443. If you have got an arbitrary figure plucked
out of thin air of 20% being set by the Treasury somewhere else
and people are saying to you all the time, "You need to meet
this target", that is obviously going to influence the way
you make decisions, is it not?
(Air Chief Marshal Sir Malcolm Pledger) As I say,
at the moment my plan and therefore my bid for the budget is actually
informed by this process which in due turn, I believe, will achieve
the target that was set three years ago.
444. We will not go round that again because
we are into the actual figures. In terms of logistics activity
what do you see predominantly being done by industry and predominantly
being done by the DLO?
(Air Chief Marshal Sir Malcolm Pledger) In terms of?
445. In terms of what we see provided by industry
as opposed to the DLO directly?
(Air Chief Marshal Sir Malcolm Pledger) Again in here
is a staircase that tries to show the relationship that we can
develop. It starts off with the traditional arrangements of yesteryear
that are still prevalent in many areas of my organisation, not
surprisingly because of course we are supporting the legacy, moving
up through to spares inclusive to things like contracting for
availability. Again I have said that we see the opportunities,
applying the 80:20 rule, for much of the efficiency to be achieved
in particular areas, so we prioritised our endeavour. We are then
looking across the whole panoply, what I have talked about as
the end-to-end, and in the requirement of deciding, planning,
programming and executing we are not going to do what we have
done in the past against a provider regime which is to say, "This
is an activity we are looking to outsource or keep in-house."
We are looking for a partnership then that will incentivise both
sides and place risk management properly in that relationship.
It will be different, in different environments, against different
446. The split in provider and decider in other
organisations has always been seen as a prelude to ultimate privatisation
of the organisation. Do you see that is the road we are going
down here in terms of logistics?
(Air Chief Marshal Sir Malcolm Pledger) No, and I
come back to the earlier comments. This is an organisation that
is very close to the front-line and where the risk associated
with that relationship has to have a military overview. That does
not mean to say that you have to necessarily do it all yourself.
So you need deliberately to change the competencies in the organisation
but make sure in future you can maintain the competencies that
will be able to manage the operational risk associated with that
447. That is very strange because in earlier
evidence we have taken from the MoD one of the comments made was
if it was not going directly to front-line fighting it could be
looked at for privatisation. What is so different about the DLO?
Could management of spares or war stocks not be run by a private
(Air Chief Marshal Sir Malcolm Pledger)
I seriously think that takes me straight back to what I call the
risk associated with the business I am responsible for. It takes
me back to something I said earlier about that being a different
risk to that that exists in the DPA with Customer-1 in pure procurement
terms. You can manage risks against time, you can even manage
risks against costs within the MoD as an entity because you currently
have a capability that you can then continue to use. My point
about this is if the arrangements that we put in place with industry
subsequently fail at this proximity to front-line capability,
we increase the risk of our losing, and that is not a point to
which I think we should be going.
448. With no disrespect to your good self, you
are a helicopter pilot from a military background and you are
now being asked basically to do what I think Jim referred to as
management speak and something which, no disrespect to you as
an individual, surely would be better placed in the hands of somebody
who comes from that management background, would it not?
(Air Chief Marshal Sir Malcolm Pledger) I simply say
that I do not think the skills set then is consistent with the
position of this organisation in that military capability envelope.
449. What, managing, for example, stockpiles
of baked beans?
(Air Chief Marshal Sir Malcolm Pledger) Not just the
managing, it is the consequences of getting that solution wrong.
450. I accept there is a military overview of
what you actually need. For example, managing war stocks of baked
beans or uniforms, etc., why is that a military expertise?
(Air Chief Marshal Sir Malcolm Pledger) But, of course,
what we are describing is that particular management that you
are saying that could be sourced and done differently will be
by virtue of this scrutiny. Those areas where you can do it in
that way and manage that element of the supply line, I am sure
is exactly where we will end up.
451. So ultimately you will have a system of
very lean and mean DLO where you will be at the head of it with
a small teamI was going to say a small team of civil servants
but I doubt whether that will be a small team at alla small
team of management really managing a group of private sector suppliers.
Is that the ultimate aim?
(Air Chief Marshal Sir Malcolm Pledger) If I may play
back one of your earlier comments, that is one person's vision
and it could be an outcome in due course. My point is at the moment
in moving this forward there will be a transformation but we will
determine just how far to go in that transformation in balancing
the operational risks associated with those solutions. I think
my contribution to that, if I may, is an important one as well
as my relationship with my customer, and I honestly believe that
a uniform helps considerably in that respect.
452. You are new in your job, what is your vision?
(Air Chief Marshal Sir Malcolm Pledger) I said it
at the beginning.
453. Where will we end up in ten years' time?
(Air Chief Marshal Sir Malcolm Pledger) Where are
we going to end up? We will move almost certainly farther along
the spectrum of partnered supply arrangements, so the current
in-house provider regimes will almost certainly be reduced, but
I do not know how far we will go along that spectrum. Indeed,
I would want to avoid suggesting I did. We need to look at each
element of this very carefully and balance that operational risk
and value for money argument and have both sides understand and
agree to it.
454. Have MoD ministers or the Treasury set
a timescale of where you have got to get to in terms of this?
(Air Chief Marshal Sir Malcolm Pledger) I think you
should ask that question, if I may, of ministers. What I have
set out in here is the time lines of this Strategic Plan.
455. It is a question I could ask of ministers
but you are being asked to manage the process. Have you been told
that there is a certain timescale that you have got to meet to
get to? They have clearly set you targets in terms of 20%, which
you have no control over. Have they actually set you targets saying
that at a certain time the organisation has got to meet them?
(Air Chief Marshal Sir Malcolm Pledger) The answer
to that is no. The outcome of this process, as yet, is not set.
456. So it is totally yours?
(Air Chief Marshal Sir Malcolm Pledger) I do not doubt
that other stakeholders, not just ministers, will want to contribute
to that final decision. I have said, if I may, that this is a
relationship that has to mature with our customer, our supplier
and the other stakeholders involved in the Ministry of Defence.
Chairman: A good line of questioning
but I do not want to see Eddie Stobart in your job, Air Chief
Marshal. For a while we will leave it to the military. A good
457. Can I say, Air Chief Marshal, what you
are describing, or the way you are describing it, is on the ground
just going to create further uncertainty and insecurity amongst
the DLO workforce who have been subject to constant change. My
understanding is that in moving to become an "intelligent
decider" rather than a "provider", you have set
some kind of target of 2007 for that. What I would like to ask
you is in 2007 what size do you think the DLO will be as compared
to the size it is today?
(Air Chief Marshal Sir Malcolm Pledger) Can I share,
first of all, your concerns in creating uncertainty among the
workforce. I think that is inevitable but I think it is a characteristic
of the real world today.
458. It has been a constant characteristic,
I would say, for about two years.
(Air Chief Marshal Sir Malcolm Pledger) I think it
will continue to be a constant characteristic. We have to live
in that real world. I am very conscious of that, having put this
together and deliberately having done it in consultation with
many of the stakeholders and, indeed, with representatives of
the workforce. I have been at great pains since then to go around
my organisation and others to explain the underlying philosophy,
to explain the need to create the evidence and to reinforce the
fact that this is about giving these people the reputation and
the recognition that I think currently they deserve because this
is a means to show what is happening and give that kind of visibility.
I am also at pains to say that I do not know what the outcome
will be in terms of size and shape. What we have to do is apply
these principles and these processes, and we will deliberately
do it in the area of greatest potential first. This has been prioritised
and the changed programme that supports it has been made visible
to them and their reaction is that they have been grateful for
that understanding because it has given them what I will call
the strategy and the peg in the ground such that they can contribute
to development, not have it inflicted upon them. That single line
of sight that is in here is also designed to give them that assurance.
I do not guarantee that Mr Smith, who is currently in the registry
in Wyton, will still be there in five years' time, I just do not
think that is a feasible proposition in the world that we live
459. Can I just come back to asking you some
of the plain direct questions that I am sure you have been asked
in your contact with the workforce. In five years' time, how big
do you see the DLO being compared to what it is today and what
will the implication be for jobs? Do you see a 20% further reduction
or are you just saying that you really do not have any idea at
all of how the organisation will look and how many people it will
employ in five years' time?
(Air Chief Marshal Sir Malcolm Pledger) The only answers
that I have been able to give because of the nature of this transformation
is it will almost certainly be smaller with a greater involvement
of the private sector in the end-to-end logistics process in all
respects, but that each element and each decision will be done
incrementally against that process evaluation, and that we are
starting in these particular areas because that is seen to be
the area that will gain greatest benefit. I am at pains to say
therefore I do not have a 20, 30 or 40% target. I am trying desperately
not to fall into an earlier comment of "why on earth was
that said?" What I am trying to create is an understanding
that that outcome will be such that everybody can understand how
we got there.