Select Committee on Defence Minutes of Evidence


Examination of Witness (Questions 440 - 459)

WEDNESDAY 4 DECEMBER 2002

AIR CHIEF MARSHAL SIR MALCOLM PLEDGER, KCB OBE AFC

Mr Jones

  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 time lines.

  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 transition.

  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 company?

  (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 team—I was going to say a small team of civil servants but I doubt whether that will be a small team at all—a 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 point.

Rachel Squire

  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 in today.

  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.


 
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