Examination of Witness (Questions 480
WEDNESDAY 4 DECEMBER 2002
KCB OBE AFC
480. Sir Malcolm, the Strategic Plan has a target
for "a supplier base optimised by December 2004". Can
you tell us what that means and how will you know when you have
achieved it? It is page 19 of your bible.
(Air Chief Marshal Sir Malcolm Pledger) One of the
products, shall we say, of the McKinsey review was an observation
that we could leverage much more value out of reducing the supplier
base and concentrating our efforts more efficiently not only across
the DLO but also with the DPA. That makes obvious sense having
heard earlier about the through life regime initial procurement
coming across with a contract to logistic support or whatever.
481. For "optimise" read "reduce"?
(Air Chief Marshal Sir Malcolm Pledger) For us it
will be reduced but it will also give us what I will call the
tools then to exploit and manage and measure the performance of
that supplier base better.
482. All the stuff you procure is pretty small
(Air Chief Marshal Sir Malcolm Pledger) Okay. If I
may, in commodity and general use items, we already have a solution
called the Non-Project Procurement Organisation which, again,
the individual IPTs use to procure those broad based commodities.
This is much more orientation of the larger aspects of maintainability,
capital spares and so on and so forth.
483. You might optimise your supplier base but
you also talked a moment ago about leveraging the MoD's position.
If you were to reduce that supplier base you might find yourself
in a rather difficult situation in terms of security of supply.
How are you going to balance that out? Can you answer my question
about when you think you will achieve this key target?
(Air Chief Marshal Sir Malcolm Pledger) In terms of
optimise we must not then compromise subsequent secure arrangements,
what I will call industry opportunities in this country but also
reduce the opportunity for competition. We are setting off on
this deliberately with certain outcomes in mind, it is not just
reduce to whatever. We are going to decide where that supply base
should lie and, as I say, then create a different relationship
with that supply base, to come back to one of my difficulties,
which management consultants tell me is a very good way of leveraging
value across not only my organisation, spending those large numbers,
but also the Defence Procurement Agency.
484. I am sure they have valuable advice to
offer but I hope your people will not forget the lessons of the
past from practical experience in terms of ensuring that you maintain
competition and maintain security of supply.
(Air Chief Marshal Sir Malcolm Pledger) If I may respond
to that, some of the examples I was talking about earlier, legacy
arrangements, already provide us difficult choices in the supplier
485. In December 2005 how will you know when
you have "all procurement activity aligned with a strategic
framework for procurement"? I have to confess I do not know
what it means, so perhaps you can tell me what it means first.
This is the key target three, page 19.
(Air Chief Marshal Sir Malcolm Pledger) Again, what
we have learned, if you like, in the early years of Smart acquisition
and the empowerment of the IPTs is that whilst there are great
gains, unless you set that framework properly you get one IPT
dealing next to another IPT in a completely different way and
if you put the two together you can, of course, create better
opportunities. What we also have to do is change the competencies
and the experience and the skill levels of our commercial staff
such that they can better exploit the size and shape of, again,
our very large expenditure. These are more intelligent, better
focused, broader responsibilities for those commercial staff in
place against that new policy.
486. Do you accept that if you are going to
reduce your role as a provider and increase your role as a decider,
and you said earlier that you would be much more a decider than
a provider, you are going to have some pretty bright people in
your team who are going to be able to monitor the actual providers
who themselves will not be doing anything within your organisation
and could be seen to be supernumerary when actually they are going
to be critical in monitoring the suppliers?
(Air Chief Marshal Sir Malcolm Pledger) I do not think
they will be supernumerary at all.
487. They could be perceived to be supernumerary.
(Air Chief Marshal Sir Malcolm Pledger) Again this
is educational, but I think you will also see in here what I call
the people strand and the development requirements and the different
competencies. Deliberately this looks at five areas and it is
not just process, people are in there and information management
is in there. We recognise that those people are going to have
to have different competencies. The development plan, the subordinate
HR strategy, puts that very definitely in place. Those discussions
are already going on with some of those organisations that may
help us do thatthe Defence Academy for example.
488. The National Audit Office might be able
to help. Sir John Bourn is coming to talk to us in January so
hopefully we will be able to take the weight of his advice into
consideration at that stage.
(Air Chief Marshal Sir Malcolm Pledger) I think the
other thing that we are going to have to do of course is create
greater secondment and employment of some of these people into
industry such that they can come back understanding the modus
operandi and motivation and therefore help us make those intelligent
decisions. So, yes, there is going to be a different way of developing
these people and we are going to have to be able to retain them,
but also to go to this diversity I have talked about across the
smart acquisition community.
489. Do you second a lot of people at the moment
into your supplier base?
(Air Chief Marshal Sir Malcolm Pledger) We do some.
490. You envisage doing more?
(Air Chief Marshal Sir Malcolm Pledger) We envisage
definitely doing more. Interestingly, we have a couple of our
major suppliers sitting on our decision-making fora.
491. To make sure you make the right decision
in their favour?
(Air Chief Marshal Sir Malcolm Pledger) No, I said
they were sitting on our fora, they did not take part in the decisions.
492. I was being a bit facetious. Air Marshal,
a couple of quick ones if I may. Again going to your key targets
on page 19, the first one is that you should define your core
activities and your industrial logistics footprint by March next
near. That is just three or four months away. How is that work
shaping up? Are you finding particular areas that will no longer
be considered "core activities" of the MoD?
(Air Chief Marshal Sir Malcolm Pledger) The work is
on-going. Part of that you will see farther on is to develop strategies
for DARA and ABRO as trading funds.
493. We are coming to that in a moment I think.
(Air Chief Marshal Sir Malcolm Pledger) They are currently
in existence and we are hoping for a decision in January so that
we can then develop that particular area. We are already engaged
with the front-line commands not only on CSAs but to discover
what, in their view, are core activities where we must remain
as providers. We must be ready, I am afraid, such is the next
step in terms of urgency and momentum to publish the answers to
those questions by 1 March. As I say, the exchanges are going
on as we speak.
494. So you will let us know the outcome of
that by one mechanism or other?
(Air Chief Marshal Sir Malcolm Pledger) If you would
like me to.
Mr Howarth: I think that would be helpful.
495. We have got very little time to quickly
kick around issues on ABRO and DARA. Can you start off by giving
us your vision for the long-term future role and status of those
two trading funds?
(Air Chief Marshal Sir Malcolm Pledger) Again, if
I can constrain my statements to a DLO view. I have said already
that we need to move to different contractual arrangements that
deal with outputs and availability. I have said that we want to
maintain competition wherever possible and practicable as a means
to show value for money, but we also have to recognise some of
the constraints that I described earlier about earlier procurement
decisions which do give considerable advantage already to some
aspects of the private sector. My bottom line in this is that
I obviously have to come back to you and show you the benchmarks
that will support my value for money decisions and in especially
the air environment I think I am going to need some opportunity
into the future for DARA to be able to show that not only are
they competitive but they can win in that new environment and
that will also help me drive down the costs associated with some
of those monopoly providers.
Jim Knight: We had a very impressive visit to
ABRO at Bovington a week or so ago. As providers of maintenance
support for land and air equipments, what is the rationale for
their current MoD ownership when those undertaking sea systems
maintenancethe dockyardsare in private hands?
496. It is a good question, is it not?
(Air Chief Marshal Sir Malcolm Pledger) I think it
is so good a question that I have to take note of it because it
is something that I inherit, shall we say, rather than was involved
in that decision. I would only say that of course it is relatively
recent that both DARA and ABRO moved to trading funds.
497. Eighteen months and six months respectively.
(Air Chief Marshal Sir Malcolm Pledger) Before that,
of course, DARA was already an agency. The dockyards have been
privatised for a considerable length of time.
498. I would hazard a guess that the answer
is somewhere around the competitive nature of the number of private
sector contractors that can effectively provide that service in
land and air are not the same as in sea and the industry needs
to develop. My question that follows is whether you are going
to be able to give those two trading funds the space and the time
to be able to develop with industry so that the MoD in the end
has the choice about whether or not they move from trading fund
status into privatisation.
(Air Chief Marshal Sir Malcolm Pledger) There is a
deliberate answer to that in that the time lines of our support,
and there is currently MoD support to the development of those
trading funds, are set and at that stage we have to determine
whether or not they are still a strategic asset directly to the
Ministry of Defence or whether or not their purpose is in that
competitive environment and we would be prepared to see that be
removed by virtue of
499. Within that time are you going to increase
the amount of freedoms that they have? For example, with ABRO
their shop floor workforce can negotiate variations on standard
terms and conditions but it is not the same for their office staff
where they are dictated to on MoD contracts.
(Air Chief Marshal Sir Malcolm Pledger) Again, the
transitions are going on, and DARA is more mature in this, and
DARA already has many more of those delegations by virtue of its
maturity over time.